May & Peter
[2022] FedCFamC1F 765
Federal Circuit and Family Court of Australia
(DIVISION 1)
May & Peter [2022] FedCFamC1F 765
File number(s): SYC 1472 of 2021 Judgment of: ALDRIDGE J Date of judgment: 11 October 2022 Catchwords: FAMILY LAW – PROPERTY – Application in a Proceeding – Where the husband seeks a partial property settlement – Where the parties have significant wealth – Where the husband seeks to use the proposed sums to pay the interest on a loan and pay a tax debt – Where it is likely that the husband will receive a further settlement at the final hearing – Where consent orders provided for the husband to object to the general interest charge on the tax debt and he did not – No orders made in respect of the sum to pay the tax debt as the consent orders were not complied with – Orders for a sum of $3 million to be paid to the husband to meet the loan repayments. Legislation: Family Law Act 1975 (Cth) s 79 Cases cited: Harris and Harris (1993) FLC 92-378
Strahan & Strahan (Interim Property Orders) (2011) FLC 93-466
Zschokke and Zschokke (1996) FLC 92-693
Division: Division 1 First Instance Number of paragraphs: 29 Date of hearing: 23 September 2022 Place: Sydney Counsel for the Applicant: Mr Muddle SC with Mr Bennett Solicitor for the Applicant: Coleman Greig Lawyers Counsel for the Respondent: Mr Kearney SC Solicitor for the Respondent: Barkus Doolan Winning Lawyers ORDERS
SYC 1472 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MR PETER
Applicant
AND: MS MAY
Respondent
order made by:
ALDRIDGE J
DATE OF ORDER:
11 October 2022
THE COURT ORDERS THAT:
1.Within twenty-eight (28) days of the date of these orders, the wife do all acts and things and sign all documents necessary to pay a sum of $3,000,000, for the purposes of assisting in paying down the mortgage secured over the property situate at and known as B Street, Suburb C NSW, being all of the land in folio identifier …, to the husband.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under the pseudonym May & Peter has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
ALDRIDGE J:
On 23 September 2022, an Application in a Proceeding seeking a wide variety of interim injunctions and property orders that had been filed by Mr Peter (“the husband”) was listed for hearing. For a variety of reasons most of the issues raised in the application fell away because they were either resolved or not pressed. These reasons deal with the husband’s application that Ms May (“the wife”) pay him, as a partial property settlement, the sums of $3 million and approximately $5.9 million. Such an application requires the consideration of the terms of s 79 of the Family Law Act 1975 (Cth) and relevant authorities such as Strahan & Strahan (Interim Property Orders) (2011) FLC 93-466; Zschokke and Zschokke (1996) FLC 92-693 and Harris and Harris (1993) FLC 92-378.
The parties have significant wealth which is held by a variety of entities under the wife’s control. She annexed a balance sheet to her affidavit of 21 March 2022 which sets out her understanding of the assets and liabilities of the parties and related entities and the value of them. The document must be used cautiously; it is not agreed and the major assets have yet to be valued. In relation to one of those assets, a commercial property at Suburb D, its leasing arrangements are in a state of flux. This adds to the uncertainty of its value. However, the balance sheet will suffice for present purposes.
The total net assets are identified as being just under $84 million. The major assets, two commercial properties, are described as having a net value of nearly $30 million and over $23 million respectively. The wife lives in a property which is given a net value of over $11 million. There are two bank accounts holding $19 million and $3,500,000 respectively, although the balance sheet also points to $9.1 million estimated in costs of repair for one of the commercial properties and $1,600,000 tax to be paid from the second bank account.
According to the wife, the parties commenced cohabitation in 1998, married in 2001, separated in 2016 and were divorced on 26 April 2021. Thus, they had a relationship of at least 18 years. They have a daughter born in 2015 who lives primarily with the wife.
Senior counsel for the wife submitted that at the final hearing, the husband would receive no more than 25 per cent of the net property available for division.
Given that statement, the duration of the relationship and the fact that all of the desirable assets are under the control of the wife, it is inevitable that there will be a property settlement order in favour of the husband of at least 25 per cent. It was not suggested otherwise.
The proposed partial property settlement sum of $3 million
The background to the husband’s claim for a payment of $3 million is as follows.
In late 2021, the husband borrowed $3 million so as to enable him to buy a motor vehicle, paintings, a boat, repay loans and to pay a deposit on the purchase of a home in the sum of $1 million.
The husband had earlier, in early 2021, entered into a contract to purchase a property at Suburb C in the sum of approximately $10 million. He took possession of the property pursuant to a licence because he was unable to complete the purchase at that time (Husband’s affidavit filed on 15 February 2022, paragraph 129).
In mid-2022, he secured funding for the purchase of the Suburb C property, borrowing $13,265,000 in total. The purchase was completed in mid-2022 and required a total payment of $10,500,000. The balance of the borrowed funds was used for the payment of costs, pre‑payment of interest owing under the loan for six months, fees and repayment of loans to friends and relatives.
The husband is due to repay this borrowing of $13,265,000 by 2 December 2022. He proposes to use the sum of $3 million to pay the interest component of the loan which, according to his Case Outline, will enable him to pursue an extension of the loan or a refinancing.
The wife submits that the “pattern of expenditure by him on high end vehicles, artwork and property, would not justify visiting upon the wife an obligation to fund him” (Wife’s Case Outline filed on 16 September 2022, paragraph 15).
The difficulty with that submission is that she accepts that at least 25 per cent of the net wealth controlled by her will, in due course, be paid to the husband. He has a need for some of those funds now, even if it can be considered that he acted imprudently, extravagantly and recklessly in incurring the obligation to pay for the Suburb C property when he had no means of repaying it and by arranging the short-term funding on what appears to be less than normal commercial terms.
The wife has sufficient cash assets available to her to make the payment, even taking into account the potential payments that have been earmarked to be made out of those accounts, as identified earlier. It was not suggested that the resources were not available to her to meet any consequences, including any tax effects, of the order.
The wife submitted that, as the husband has already received $8 million from the assets of the parties, any further settlement would see him draw near to the maximum of what he was likely to receive at the final hearing. This was identified as $15 million (25 per cent of a net pool of $60 million). Accepting that to be the case for the moment, a payment of a further $3 million would still leave a comfortable gap between that payment and what the wife submitted that the husband was likely to ultimately receive.
It follows that there will be no difficulty at the hearing in taking into account this payment and adjusting the outcome appropriately. As things stand at the moment, the much greater likelihood is that the husband will receive a further settlement.
The wife has had the benefit of all of the income of the assets for at least the last two years, subject to regular payments she has made to the husband.
I am satisfied that it is appropriate that an order should be made in the terms of paragraph 3.2 of the minute of orders proposed by the husband. Such an order is just and equitable.
The proposed partial property settlement sum of $5,900,000
For reasons that are unnecessary to explore on this application, none of the relevant entities or the parties’ lodged tax returns for the years ended 30 June 2006 to 30 June 2016. Returns were lodged in 2020, including a return for the husband for the year ended 30 June 2008 which resulted in a significant assessment. The circumstances under which this occurred are in dispute, but again, for present purposes, are not necessary to determine.
The assessed tax for the 2008 income year payable by the husband was paid by an entity under the control of the wife. In late 2020, the husband received an assessment of over $2,600,000 being debt and interest. That sum was not paid. It is subject to the general interest charge (“GIC”) and now stands in the sum of nearly $5,900,000. It will have to be paid at some stage.
In mid-2022, the Australia Taxation Office (“the ATO”) issued a warning notice to the husband, threatening a collection of the debt. The size of the debt is rapidly increasing.
In such circumstances, all other things being equal, where there was the capacity to make a partial property settlement for the repayment of the debt and it was likely that the sum ultimately to be received by the husband was greater than the debt, such a settlement would be favourably considered. However, all other things are not equal.
On 5 July 2021, each of the parties were represented when the following orders were made by consent:
THE COURT ORDERS BY CONSENT:
1. That on before 7 days from the date of this Order, the husband nominate one of the following to act as tax agent to review the Notice of Decision made on or about [mid-2021] by the Australian Taxation Office and to seek any required extension of time to file that Application:
(a) [Mr E (F Company)];
(b) [Mr G (H Company)];
(c) [Mr J (K Company)];
(d) [Mr L (F Company)].
2.That within 7 days of date of nomination, the husband provide all necessary instructions and supporting documents to the nominated tax agent to enable that person to take such legal proceedings as they advise to challenge the general interest charge imposed on the husband by the Australian Taxation Office which as at [early 2021] was in the sum of [approximately $2,300,000] but which has now increased substantially.
3. That the husband authorise and instruct the nominated tax agent to copy to the wife and her legal advisers all communications they have with him and the ATO in respect of the matter, and that the husband copy the wife and her legal advisers on all communications and correspondence that he has with the tax agent and the ATO in respect of the matter.
4. That the husband and wife are equally responsible for and pay as and when they fall due 50% each of the costs and disbursements of the tax agent in respect of the above matters.
Despite that agreement and the subsequent orders, the husband took none of the identified steps. Instead, he instructed Mr M who lodged an objection to the assessment of the primary tax assessed in 2008. That objection included an objection to the subsequent GIC, but only as a challenge ancillary to the primary assessment, and not as a separate stand-alone objection to the additional charge. In any event, the husband’s obligation was to commence proceedings if so advised.
There was no evidence that it is now too late to seek an extension or to commence proceedings as envisaged by the consent orders.
If there are prospects that the ATO debt can be removed or reduced, as the parties obviously considered could be the case, then those prospects should be explored.
This is sufficient to persuade me that it is not appropriate to make an order that a partial property settlement be made at this stage for the payment. I accept that GIC will continue to accrue but, on the balance the better course is to pursue the challenge to the debt.
If indeed, the ATO commences enforcement action against the husband, the matter can be reconsidered, but it is likely that any prudent creditor would await the outcome of the final hearing in February next year.
The application for paragraph 3.3 as it appears in the husband’s minute of order is dismissed.
I certify that the preceding twenty-nine (29) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Aldridge. Associate:
Dated: 11 October 2022
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