MEDBERRY & KALLOWAY
[2013] FamCA 991
•12 December 2013
FAMILY COURT OF AUSTRALIA
| MEDBERRY & KALLOWAY | [2013] FamCA 991 |
| FAMILY LAW – PROPERTY – Application by the wife for property settlement orders pursuant to s 79 of the Family Law Act 1975 (Cth) – Whether just and equitable to alter property interests and rights – Stanford v Stanford [2012] HCA 52 considered – Consideration of factors under s 79 and s 75(2) of the Family Law Act 1975 (Cth) – Where the parties’ net pool of assets was small – Where the parties had spent considerable sums in legal costs – Where the post-separation financial events brought about by the husband warrant a contribution finding in favour of the wife – Where the parties’ contributions, as at the date of trial, are assessed at 60 per cent to the wife and 40 per cent to the husband – Where an adjustment, pursuant to s 75(2), of 15 per cent in the wife’s favour is appropriate. FAMILY LAW – CHILD SUPPORT – Where the wife sought child support departure orders – Where the wife was unable to provide evidence or submissions to satisfy the requirements pursuant to the legislation – Where the wife’s evidence as to the expenses incurred to support the children was insufficient to enable a determination regarding her application in accordance with the requirements of the relevant legislation – Where the orders sought by the wife with respect to child support departure are dismissed. |
| Family Law Act 1975 (Cth) ss75(2), 79 |
| Stanford v Stanford (2012) HCA 52 |
| APPLICANT: | Ms Medberry |
| RESPONDENT: | Mr Kalloway |
| FILE NUMBER: | SYC | 7494 | of | 2009 |
| DATE DELIVERED: | 12 December 2013 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Stevenson J |
| HEARING DATE: | 12, 13 August 2013 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Schonell SC |
| SOLICITOR FOR THE APPLICANT: | Barkus Doolan |
| COUNSEL FOR THE RESPONDENT: | Mr Lloyd SC |
| SOLICITOR FOR THE RESPONDENT: | Paul & Paul Lawyers |
Orders
That the husband pay to the wife, within 2 (two) calendar months of the date of these orders, a sum of $191,500.
That the husband pay, or cause to be paid:
2.1the wife’s 2012 income tax liability, including Medicare levy, interest and penalties arising on the lodgement of her 2012 income tax return
2.2the wife’s Compulsory Higher Education Loan Repayment arising upon the lodgement of her 2012 income tax return
2.3the amount the wife is required to pay to Centrelink and/or the Family Assistance Office by way of refund for any pension, allowance or benefit received by her.
That the husband, in his own right and in his capacity as trustee of the L Trust and the L Holding Trust, provide an irrevocable authority to:
3.1Barkus Doolan directing payment of funds held in their trust account pursuant to order 6 of 8 November 2011 of approximately $5,786 to pay any amount owing by the wife as referred to in order 2.3 and any balance to the wife and
3.2E Firm directing and authorising the payment of funds to the wife in accordance with orders 1 and 2.
That the husband indemnify the wife against any liability of whatever nature arising at any time in respect of:
4.1 K Pty Limited and
4.2 the L Trust and
4.3 the L Holding Trust
whether from her position in the company; receipt or allocation of any money from the company or trusts or any liability of the company or trusts, including but not limited to income tax and any debt of the wife to Centrelink and with the husband to pay or cause payment of any such liability in a timely manner.
That the husband:
5.1forthwith do all things and execute all documents necessary to remove the wife as an eligible beneficiary as to capital and income of the L Trust and the L Holding Trust and
5.2is restrained from establishing any trust which nominates the wife as a beneficiary and
5.3 is restrained from distributing any income to the wife as a beneficiary.
6.1That the husband continue to make payments in accordance with the interim child support departure order made on 8 November 2011 until the Child Support Agency issues an assessment of child support in respect of the children:
H born on … 1999
V born on …2003
M born on … 2005
on 1 March 2014, whichever is the earlier date, whereupon such interim order stands discharged.
6.2That the wife’s application for a child support departure order is otherwise dismissed.
That all material produced on subpoena be returned.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Medberry & Kalloway has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| FAMILY COURT OF AUSTRALIA AT SYDNEY |
FILE NUMBER: SYC 7494 of 2013
| Ms Medberry |
Applicant
And
| Mr Kalloway |
Respondent
REASONS FOR JUDGMENT
the proceedings
Ms Medberry (“the wife”) and Mr Kalloway (“the husband”) are parties to litigation concerning property settlement and child support departure orders. The matter proceeded to trial, notwithstanding that the net pool of assets and superannuation has a value of $364,398, or $175,280, according to the wife and the husband respectively. Each of the parties was represented by senior counsel and, at the time of the trial, their estimated total legal costs were in the range of $308,757 to $324,757 for the wife and $268,496 for the husband.
The proceedings commenced with the wife’s application filed on 2 February 2010 in the (then) Federal Magistrates Court. On 8 November 2011 the proceedings were transferred to the Family Court of Australia. The proceedings were expedited and a Less Adversarial Trial First Day took place on 1 May 2012. Four days, commencing on 27 August 2012, were allocated for finalisation of the matter. On 23 July 2012 the trial was adjourned for twelve months to enable the husband to sell his interest in a professional firm known as “E Firm”.The matter ultimately proceeded to finalisation on 12 and 13 August 2013.
Background
The wife was born in 1968 and is now aged 45 years. The husband was born in 1969 and is currently 44 years old. The parties married in 1996 and first separated in 2005 or 2006. They reconciled and again lived together until a second separation in November 2008. According to the husband, the parties resumed their relationship in January 2009 and cohabited until their final separation on 27 June 2009. The wife seemed to suggest that the final separation took place in November 2008, when the husband moved out of the former matrimonial home and she changed the locks to the property.
At the commencement of cohabitation the wife was a registered health services professional who was employed as a regulatory affairs professional by S Pty Limited. From January 1997 until October 1999 the wife was employed in a division of the J Group in training, sales and project management roles. She has never worked as a retail health services professional.
In March 1973 the wife’s father, Mr Medberry, incorporated a company known as CC Pty Limited. The wife’s father and her mother, Mrs Medberry, are directors of this company. The wife holds shares in this entity.
In October 1977 the wife’s parents established the Medberry Family Trust. The trustee is a company known as O Pty Limited, of which the wife’s parents are directors. The wife is an eligible beneficiary of this discretionary trust.
At the date of the marriage the husband was employed by a firm known as W Firm and studying for qualifications as a financial professional. He then obtained employment as a financial professional at Z Firm and later at Y Firm. In late 2003/early 2004 the husband commenced work at E Firm as a salaried partner. He later acquired an interest in this firm as an equity partner, in circumstances referred to below in these reasons.
In June 1996 the parties purchased a property at Suburb C, for $211,000. There was a dispute as to the funding of this purchase, which was not explored in cross-examination and is of little relevance to the outcome of these proceedings. It was common ground that the husband’s mother made a gift to facilitate this purchase, which he said amounted to $20,000 and the wife $11,000. The wife asserted that she contributed $12,000 from the sale proceeds of a Ford Laser motor vehicle which she owned prior to the marriage and that a sum of $8,000 came from the parties’ joint savings. The husband contended that he contributed $12,000 from the proceeds of sale of National Australia Bank shares which he owned prior to the marriage. There was no issue that the parties took out a mortgage loan of approximately $180,000 to fund the purchase of this property.
The parties’ first child, H, was born in 1999 and is now aged 14 years. Their daughter, V, was born in 2003 and is presently aged 10 years. Their second son, M, was born in 2005 and is presently eight years of age. The parties had a daughter, I, who was still-born in 2002.
In September 2002 the wife left the paid workforce and concentrated on her roles as homemaker and primary carer of the children. In October 2005 she established a charity known as X Foundation, for which she worked on a voluntary basis until March 2010. She then began to receive a salary package consisting of $1,194 cash per month, payment of university fees and compulsory superannuation. From 1 February 2011 her net monthly payment has been $2,946.
In 2003 the wife’s father established the Medberry Property Trust, of which he is the appointer. The trustee is the company CC Pty Limited, of which the wife’s parents are directors.
On 30 June 2004 a sum of $50,000 was distributed notionally to the wife by the Medberry Family Trust. These funds were retained by her father or parents, who assumed responsibility for payment of the resulting income tax.
In March 2005 the parties sold the C property for a sum of $633,500. They applied the net proceeds of approximately $340,000 to the acquisition of a home at Suburb R. The purchase price of this property was $1,170,000, which was otherwise funded by two National Australia Bank loans in the sums of $500,000 and $434,000. The wife was the sole registered proprietor of this property.
On 24 June 2005 the husband established the L Trust, of which the parties and their three children are the principal beneficiaries. The trustee is a company known as EL Pty Limited. The parties are both directors and in which the wife holds two ordinary shares in this company.
On 4 July 2005 the husband acquired an interest in E Firm. According to the husband he acquired a 12.92 per cent share, plus a discretionary interest in the E Service Trust. He also acquired an interest in the E Unit Trust. The husband’s unchallenged evidence was that a 3.23 per cent interest is held by the L Trust.
According to the husband these acquisitions were funded by loans from the National Australia Bank of $354,000, EX (an entity associated with E Firm) of $277,449 and a vendor advance of $114,172. The wife’s father guaranteed the loan from the National Australia Bank.
On 13 June 2007 the husband incorporated a company known as K Pty Limited, which became a beneficiary of the L Trust. Each of the parties holds six ordinary shares in this company, of which they are both directors.
In 2008 the husband acquired an additional interest in E Firm. According to the wife he acquired a further 8 per cent in July 2008, using funds from sources largely unknown to her. The husband maintained that he acquired an additional 5.08 per cent of E Firm for $359,796 and a share in E SF Unit Trust for $3,307. The husband also provided additional funds which increased his working capital to $86,400. The husband claimed that he borrowed all of these funds.
On 1 September 2008 EL Pty Limited was removed as trustee of the L Trust and replaced by the husband. The wife executed the necessary documents but contended that she did so at the husband’s insistence and in ignorance of their effect.
In August 2009 the wife’s father informed the husband that he was no longer prepared to guarantee the National Australia Bank loan of $354,000. The husband refinanced this loan with XX Bank, which holds a registered Bill of Sale over the husband’s and the L Trust’s interests in E Firm.
In September 2009 the children began to spend time with the husband on alternate weekends, from Friday afternoon until Monday morning, and during school holidays. On 1 May 2012 the parties consented to final orders which provided that the children spend four nights per fortnight and half of all school holidays with the husband. The wife suggested that there are currently difficulties in the children’s relationship with their father but that matter was not explored in cross-examination.
In November 2009 the wife applied for an administrative assessment of child support and requested that the Agency collect payments. The husband was assessed to pay a total of $1,309.50 per month for the three children.
In 2010 the wife elected to cease her registration as a health services professional. She became the Chief Executive Officer of the X Foundation in November 2012 and has completed a degree of Master of Business Administration.
On 10 March 2010 Federal Magistrate Donald (as his Honour then was) made interim orders to the effect that the husband service payments of all loans secured on the title to the R property and pay to the wife spouse maintenance of $100 per week. The wife’s application for an interim child support departure order was dismissed, as was the husband’s application for a sale of the R property.
In the 2009, 2010 and 2011 years the wife included as income in her tax returns distributions from the L Trust of $71,861, $256,633 and $339,193 respectively. The wife maintained that she did not in fact receive these sums but the husband engaged in notional “income-splitting” with her for reasons of tax advantage.
In April 2011 the R property was sold for $1,185,000. According to the husband, the net proceeds of sale amounted to approximately $15,000, from which the wife paid $12,876 to her father. The wife maintained that she received $1,905 from the sale proceeds of this property. The settlement statement (annexure page 170 to the husband’s affidavit of 19 June 2012) showed that the net proceeds of sale amounted to approximately $14,780. A sum of $12,876 was paid to the wife’s father, for unexplained reasons, and she received $1,905.
On 22 September 2011 the husband established the L Holding Trust, which then assumed ownership of the interests in E Firm. According to the husband, at the time of this transfer the interests in E Firm were encumbered by the following liabilities:
· XX Bank - husband’s facility $354,000
· XX Bank (L Holding Trust) $440,000
· vendor’s loan $ 53,377
Total: $847,377
On 8 November 2011 the Federal Magistrates Court (as it then was) made interim orders by consent. These orders included provision for the husband to pay the wife’s tax, together with interest and penalties, for the 2010 and 2011 years. The orders required her to file an amended tax return for 2010 and a return for 2011, which would include distributions from K Pty Limited and the L Trust. On 23 July 2012 these orders were varied so as to make similar provision for the 2012 tax year.
In 2012 the parties’ son H commenced attending G College at Suburb R. Pursuant to the consent interim orders of 8 November 2011 the wife is responsible for payment of school fees. It seems that her parents have provided the necessary funds.
Following the sale of the R property, the wife and children moved into a town house at D Street. This property is owned as an investment by her parents. The wife pays notional rental of $1,000 per week to her parents, which money is in fact provided by her mother as an alleged loan. Ultimately, the wife did not press for inclusion of these funds as a liability in the Balance Sheet.
On 23 July 2012 the husband gave notice to the partners of E Firm of his intention to retire and dispose of his and the trust’s interests in the practice. This proposal was accepted at a meeting of E Firm equity partners on 27 May 2013.
The interests of the husband and the trust were disposed of in July 2013 and, after discharge of all associated liabilities, there remained a shortfall of $61,680. This amount is a personal debt of the husband.
The Evidence and Witnesses
The applicant wife relied on the following affidavits:
1.Ms Medberrry (the wife) sworn on 20 October 2011 and 31 July 2013
2.Mr Medberry (the wife’s father) sworn on 7 October 2011 and 11 July 2013
3.Mrs Medberry (the wife’s mother) sworn on 7 October 2011 and 25 July 2013
4.Financial Statement of Ms Medberry sworn on 31 July 2013.
The wife and her parents gave relatively brief oral evidence by way of cross-examination.
The respondent husband relied on the following affidavits:
1.Mr Kalloway (the husband) sworn on 19 June 2012, 31 July 2013 and 6 August 2013
2.Financial Statement of Mr Kalloway sworn on 31 July 2013
3.Financial Statement of Ms B (the husband’s partner) sworn on 21 June 2013.
The husband, too, gave brief oral evidence by way of cross-examination and Ms B was not required for that purpose.
Approach To These Proceedings
In Stanford v Stanford [2012] HCA 52 the majority of the High Court of Australia held as follows: (paragraph 35)
35. It will be recalled that s 79(2) provides that “[t]he court shall not make an order under this section unless it is satisfied that, in all the circumstances, it is just and equitable to make the order”. Section 79(4) prescribes matters that must be taken into account in considering what order (if any) should be made under this section. The requirements of the two sub-sections are not to be conflated. In every case in which a property settlement order under s 79 is sought, it is necessary to satisfy the court that, in all the circumstances, it is just and equitable to make the order.
Their Honours further observed as follows:
42. In many cases where an application is made for a property settlement order, the just and equitable requirement is readily satisfied by observing that, as the result of a choice made by one or both of the parties, the husband and wife are no longer living in a marital relationship. It will be just and equitable to make a property settlement order in such a case because there is not and will not thereafter be the common use of property by the husband and wife. No less importantly, the express and implicit assumptions that underpinned the existing property arrangements have been brought to an end by the voluntary severance of the mutuality of the marital relationship. That is, any express or implicit assumption that the parties may have made to the effect that existing arrangements of marital property interests were sufficient or appropriate during the continuance of their marital relationship is brought to an end with the ending of the marital relationship. And the assumption that any adjustment to those interests could be effected consensually as needed or desired is also brought to an end. Hence it will be just and equitable that the court make a property settlement order. What order, if any, should then be made is determined by apply s 79(4).
I am satisfied that it is just and equitable to make an order altering property interests in the circumstances of these proceedings for a number of reasons. Firstly, each of the parties seeks orders which would alter their existing interests in property. Secondly, the parties’ relationship has broken down completely and there will be no future common use of property. As noted, the parties sold their former matrimonial home on 24 August 2013.
I do not accept the submission on behalf of the husband which I noted as follows:
The assets are so minimal that no order in favour of the wife is warranted on a just and equitable basis, when regard is had to who holds the assets.
As indicated above, the husband sought orders which would have the effect of altering the interests of the parties in property. For example, he sought that the wife indemnify him in respect of several liabilities. Further, he sought that he indemnify the wife in respect of any liabilities associated with the L Trust and the L Holding Trust and that she be removed as an eligible beneficiary as to the capital and income of those entities. It seems to me to be entirely appropriate that the wife’s involvement with these entities comes to an end, in circumstances where the parties’ relationship has broken down completely.
The Assets, Liabilities and Financial Resources
At the conclusion of the trial counsel for the parties helpfully provided a document headed “Final Balance Sheet”, which read as follows:
ASSETS
Ownership
Description
Wife’s Value
Husband’s Value
1
Husband
Rental Bond – [U Road]
3,300
3,300
2
Husband
Funds in St George Bank Account …196
4,480
4,480
3
Husband
St George Bank Account – …926
5,771
5,771
4
Wife
NAB Bank Account – …690
6
6
5
Wife
NAB Bank Account – …037
104
104
6
Husband
10,000 shares in [YL] Limited
850
850
7
Husband
20,000 shares in [YL] Limited
2,400
2,400
8
Wife
Shares in [CC Pty Ltd]
6,032
6,032
9
Wife
Unpaid entitlement – [Medberry] Family Trust
0
0
10
Husband
Direct share of [E Firm] undrawn profits (updated Schedule from [E Firm] dated 22.07.13)
225,122
225,122
11
Husband
Deferred [E Firm] settlement
59,410
59,410
12
Husband
[Volvo motor vehicle] (post-separation)
0
0
13
Wife
[Honda motor vehicle]
6,500
6,500
14
Wife
[D Street] (household contents)
18,935
18,935
15
Husband
[U Road] (household contents)
5,055
5,055
16
Wife
Jewellery
6,685
6,685
17
Husband
Guitars
6,880
6,880
18
Husband
Militaria
1,100
1,100
19
Wife
Funds held in Barkus Doolan’s trust account to pay Centrelink debt
5,786
5,786
20
Husband
Legal Costs – Legal Fees
0
0
21
Husband
Legal Costs – Expert Fees
0
0
22
Wife
Legal Fees
0
0
23
Husband
Funds held in Paul & Paul Lawyers trust account
0
0
24
Husband
Undisclosed funds
0
Total
358,416
358,416
ADDBACKS
Ownership
Description
Wife’s value
Husband’s Value
25
Husband
Interim property settlement payment
50,000
50,000
26
Wife
Interim property settlement payments
25,000
25,000
27
Husband
Arrears accrued and paid out on sale of former matrimonial home noting husband did not maintain the NAB loan facility in accordance with the Orders made on 12 March 2010
0
0
28
Husband
Shares in [K] Pty Ltd (valued by [Mr P] prior to husband deregistering the company)
0
0
Total
75,000
75,000
LIABILITIES
Ownership
Description
Wife’s Value
Husband’s Value
29
Wife
HECS/HELP Loan
20,560
NK
30
Wife
NAB Visa card
11,500
NIL
31
Wife
Centrelink debt
8,730
0
32
Wife
Loan from [wife’s father] to pay legal costs associated with these proceedings (E)
0
33
Wife
Loan from [wife’s mother] (rent paid on behalf of the wife) (E)
0
34
Husband
Motor vehicle lease – [Volvo] (post separation)
0
0
35
Husband
Balance of 2013 income tax – husband
0
168,748
36
Husband
Balance of 2012 income tax – husband
0
60,818
37
Husband
2012 income tax – wife (including Medicare levy, flood/cyclone levy and compulsory Higher Education Loan repayment)
58,082
42,254
38
Husband
Deficit following sale of [E Firm] ([XX Bank] debt – payout)
61,680
61,680
39
Wife
One half share of Experts Fees
0
16,170
40
Husband
NAB Visa Card
0
0
Total
160,552
349,670
SUPERANNUATION
Member
Name of Fund
Type of Interest
Wife’s Value
Husband’s Value
41
Husband
BT Superwrap Personal Super
Accumulation
11,710
11,710
42
Husband
Onepath Corporate Super
Accumulation
29,251
29,251
43
Wife
ING One Answer
50,573
50,573
Total
$91,534
$91,534
FINANCIAL RESOURCES
Ownership
Description
Wife’s Value
Husband’s Value
44
[Medberry] Family Trust
NIL
NK
45
[Medberry] Property Trust
NIL
NK
Total
$
$NK
In final submissions counsel for each of the parties indicated that items 35 and 36 in the Balance Sheet only were contentious, these being the husband’s alleged taxation liabilities for 2012 and 2013. It was agreed that the husband’s 2012 tax debt amounts to $60,818. The wife maintained, however, that this liability should be excluded because the husband has had access to substantial funds but failed to meet this debt.
On behalf of the wife it was alleged that the husband’s alleged 2013 tax debt should be excluded because he has not lodged a return and accordingly there exists no assessment. On behalf of the husband it was submitted that his alleged 2013 tax debt should be included in the list of liabilities, as he has a known income stream and is able to carry out the necessary calculations with his experience as a financial professional.
I understood that the husband took no objection to the inclusion of the wife’s 2012 tax liability in the Balance Sheet. That stance is unsurprising, since he proffered consent to an order that he pay this debt. In her oral evidence the wife said that she had not lodged a tax return for 2012 and that she has delayed doing so. She said that she obtained the figure of $58,082 from her accountant and that she did not know whether that sum included penalties and interest.
I see no justification for excluding the 2013 tax liability of the husband solely because he has not lodged a return and there exists no assessment, yet to include a similar debt of the wife in the same circumstances. The fact is, however, that both the 2012 and 2013 tax debts of the husband are post-separation liabilities and he has had access to substantial funds yet failed to arrange payment.
The husband’s own evidence was that his available income in 2012 and 2013, from all sources, amounted to $657,082 and $467,903 respectively (Annexure page 91 to the husband’s affidavit of 6 August 2013). Another figure which he provided for his 2013 taxable income was $581,183 when $358,292 was received by the L Holdings Trust in the same year. The husband thus had available an amount of $939,475 in the 2013 tax year (Annexure page 126 to the husband’s affidavit of 31 July 2013).
Of course, the husband incurred legitimate and relatively substantial expenditure in both 2012 and 2013. Nonetheless, he did not appear to have made proper provisions for payment of tax on income which benefitted him rather than the wife. I recognise that the husband contributed to the financial support of the children and paid spouse maintenance. The reality is, however, that he derived far greater benefit from these funds than did the wife. For all of these reasons, I am not prepared to include the husband’s 2012 and 2013 income tax liabilities in the Balance Sheet.
The wife’s Centrelink debt arose due to the notional income splitting carried out by the husband. She is required to refund money which she received on account of benefits and allowances paid in 2010 and 2011. The husband proffered consent to orders that a sum of approximately $5,786, which is currently held in the trust account of the wife’s solicitor, be applied to payment of the Centrelink debt and that she receive any balance. The husband also consented to an order that he meet any shortfall between the money held in trust and the Centrelink debt. That arrangement would result in a debt of the husband in an amount of $2,944.
It seems to me that the most practical course is to omit the money held in trust from the list of assets, as these funds will go directly to a third party. I will include the shortfall of $2,944 as a liability of the husband.
I thus find that the assets, superannuation, liabilities and financial resources are as follows, omitting from the Balance Sheet entries with an agreed nil value:
ASSETS
Ownership
Description
Value
1
Husband
Rental Bond – U Road
3,300
2
Husband
St George Bank Account …196
4,480
3
Husband
St George Bank Account – …926
5,771
4
Wife
NAB Bank Account – …690
6
5
Wife
NAB Bank Account – ..037
104
6
Husband
10,000 shares in YL Limited
850
7
Husband
20,000 shares in YL Limited
2,400
8
Wife
Shares in CC Pty Ltd
6,032
9
Husband
Direct share of E Firm undrawn profits
225,122
10
Husband
Deferred E Firm settlement
59,410
11
Wife
Honda motor vehicle
6,500
12
Wife
D Street household contents
18,935
13
Husband
U Road household contents
5.055
14
Wife
Jewellery
6,685
15
Husband
Guitars
6,880
16
Husband
Militaria
1,100
17
Husband
Interim property settlement payment
50,000
18
Wife
Interim property settlement payments
25,000
Total
$427,630
SUPERANNUATION
Member
Name of Fund
Type of Interest
Value
19
Husband
BT Superwrap Personal Super
Accumulation
11,710
20
Husband
Onepath Corporate Super
Accumulation
29,251
21
Wife
ING One Answer
50,573
Total
$91,534
LIABILITIES
Ownership
Description
Value
22
Wife
HECS/HELP Loan
20,560
23
Wife
NAB Visa card
11,500
24
Husband
Centrelink debt shortfall
2,944
25
Husband
2012 income tax – wife
58,082
26
Husband
Deficit following sale of E Firm (XX Bank debt – payout)
61,680
Total
$154,766
Contributions
At the commencement of cohabitation neither party possessed assets of any significant value. On behalf of the wife, it was submitted that three contributions made by her parents warrant a finding in her favour. These contributions were said to be:
·the wife’s father’s guarantee of the National Australia Bank loan taken out by the husband when he acquired his interest in E Firm
·a gift to the wife by her mother of $10,000 in 2005
·a gift of airfares to the United Kingdom for the parties and children, together with $10,000 spending money in 2007
In my view, it should be remembered that it was common ground that the husband’s mother made a contribution to the purchase price of the C property. As noted, there was a dispute as to whether the amount was $20,000 or $11,000, which I cannot determine on the available evidence
In my view the contributions of the wife’s parents, when balanced against the husband’s mother’s gift and the overall contributions of the parties, do not warrant a finding in her favour. Otherwise, neither counsel made submissions as to any specific findings which I should make as to contribution.
On behalf of the wife, attention was focussed on the large amounts of money which came into the husband’s hands after the separation and his alleged failure to explain satisfactorily the fate of these funds. I have referred above to the husband’s own evidence of his income and the fact of his failure to meet his 2012 and 2013 tax liabilities. By way of further example, the wife suggested that the husband stopped paying the mortgage in respect of the R property and the net equity on sale was a mere $1,000.
As recorded above, however, the net sale proceeds of the R property amounted to $14,780 and the wife’s father received $12,876 from those funds. The sale price was $1,185,000 and the amount required to discharge the mortgage was $1,143,000.
In cross-examination the husband admitted that he stopped making mortgage payments approximately five months after the orders of 12 March 2010. Accordingly, there was a period of some nineteen months between August 2010 and April 2012 when the husband failed to make mortgage repayments. On the other hand, it appears that there was a very substantial mortgage encumbrance on the property before the husband stopped making repayments. The wife’s evidence (paragraphs 50 and 51 of her affidavit sworn on 20 October 2011) was that the payout figures of the mortgage were $1,033,942 and $1,090,000 as at November 2008 and the date of separation. The reality thus is that there was relatively little equity in this property before the husband stopped servicing the mortgage.
There was no evidence as to the increase in the payout figure of the mortgage which was occasioned by the husband’s failure to make repayments between August 2010 and April 2012. As a matter of logic, however, it must follow that a default of that duration would have increased the payout figure. Similarly, the husband’s failure to make proper provision for payment of the wife’s tax has resulted in the imposition of penalties and fines. The husband’s notional income-splitting with the wife brought about her debt to Centrelink. These matters brought about a reduction in the value of the net pool of property.
The wife made no complaint as to the husband’s financial conduct prior to the separation. She contended, in essence, that the husband embarked deliberately on a course of conduct designed to ensure that she receives little or no benefit from these proceedings. She maintained that he made threats to that effect. Her suspicions perhaps are understandable but, in my view, the evidence fell short of supporting a finding that the husband did embark on such a course of conduct.
During the marriage the parties assumed traditional roles of breadwinner and primary homemaker and carer for the children. They commenced their relationship with little property and, ultimately, they found themselves at trial with only about $283,000 in real net assets and superannuation. That round figure excludes the total of $75,000 which they received by way of interim property settlement.
The parties cohabited for approximately twelve years, during which they largely assumed traditional roles of major breadwinner and primary carer for children and principal homemaker. They have three living children and endured the loss of their daughter I.
Ultimately, it seems to me that post-separation financial events brought about by the husband warrant a contribution finding in favour of the wife. I assess the parties’ contributions as at the date of trial at 60 per cent to the wife and 40 per cent to the husband. I digress to observe that it is most regrettable that the parties chose to deplete their asset base substantially by payment of such large sums on account of legal fees.
Section 75(2) Factors
In my view, there can be no doubt that section 75(2) factors favour the wife. She has primary responsibility for the care of the parties’ children, who are aged 14, 10 and eight years, and there was no reason to speculate that this situation may change in the future. In fact, the wife gave unchallenged evidence that there are difficulties in the relationship of H and V with the husband.
In his Financial Statement of 31 July 2013 the husband deposed to a gross weekly income of $3,846, on which he pays tax of $1,145. In cross-examination he said that his net weekly income is approximately $2,700. The husband’s partner, Ms B, deposed in a Financial Statement of 26 June 2013 that she receives a gross income of $1,935 and pays tax of $514, leaving a net weekly amount of $1,421. The husband’s household thus has available a net weekly income of $4,121.
According to her Financial Statement of 31 July 2013 the wife earns a gross salary of $1,153 and pays tax of $167. She thus has a net weekly income of approximately $986, as was submitted by her counsel. Since the separation the wife has received significant financial assistance from her parents.
It may well be that the wife is presently underutilising her qualification as a Master of Business Administration. On the other hand, she has secured employment which allows her flexibility to cater to the needs of the children. It seems to me that there can now be no reasonable expectation that the wife should renew her registration as a health services professional. She gave unchallenged evidence of new registration requirements introduced on 1 July 2010 (annexure 3 to the wife’s affidavit sworn on 20 October 2011). In particular, the wife’s uncontradicted evidence was that she would be unlikely to satisfy the relevant professional accreditation body that she is eligible for registration despite her not having practised for 450 hours in the last three years.
The husband will continue to contribute to the financial support of the children, either pursuant to a departure order or an assessment by the Agency. I deal below with the wife’s application for a child support departure order. The husband sought the dismissal of that application, which presumably would result in the wife’s making an application for an administrative assessment.
For all of these reasons, it seems to me that an adjustment of 15 per cent in favour of the wife is warranted on account of section 75(2) factors. In real terms, that adjustment amounts to approximately $43,400.
Conclusion As To Settlement of Property
I thus find that the net pool of assets and superannuation should be divided in the ratio of 75 per cent to the wife and 25 per cent to the husband. I am satisfied that this outcome is just and equitable, in the context of the modest net pool of assets and superannuation.
The value of the net pool of assets and superannuation is $364,398, which is calculated as follows:
Non-Superannuation Assets
$427,630
Superannuation
$91,534
$519,164
Less Liabilities
$154,766
$364,398
75 per cent and 25 per cent of that amount equate to $273,299 and $91,100 respectively.
The wife holds or will take the following assets and superannuation:
1.
National Australia Bank Account
$6
2.
National Australia Bank Account
$104
3.
CC Pty Ltd Shares
$6,032
4.
Honda Motor Vehicle
$6,500
5.
Household Contents
$18,935
6.
Jewellery
$6,685
7.
Interim Property Settlement
$25,000
8.
ING One Answer Superannuation
$50,573
$113,835
She has the following liabilities:
10.
HECS Debt
$20,560
11.
Visacard
$11,500
$32,060
Accordingly the wife holds net assets and superannuation to the value of $81,755, which falls short of her entitlement of $273,299 by $191,544.
The husband holds the following assets and superannuation:
1.
Rental Bond
$3,300
2.
St George Bank Account
$4,480
3.
St George Bank Account
$5,771
4.
10,000 YL Limited Shares
$850
5.
20,000 YL Limited Shares
$2,400
6.
Direct Share of E Firm undrawn Profits
$225,122
7.
Deferred E Firm Settlement
$59,410
8.
Household Contents
$5,055
9.
Guitars
$6,880
10.
Militaria
$1,100
11.
Interim Property Settlement
$50,000
12.
BT Superwrap Superannuation
$11,710
13.
Onepath Corporate Super Superannuation
$29,251
$405,329
He has or will assume the following liabilities:
14.
Balance of Wife’s Centrelink Debt
$2,944
15.
Wife’s 2012 Tax Debt
$58,082
16.
E Firm Sale Deficit
$61,680
$122,706
and accordingly will take net assets and superannuation to the value of $282,623. That figure exceeds his entitlement of $91,100 by $191,523.
I propose to order that the husband pay to the wife a sum of $191,500 within two calendar months of the date of these orders. Otherwise I will make orders which will bring about an end to any involvement of the wife in the trust entities and K Pty Limited.
The Child Support Departure
At the end of the trial I was unclear as to the amount of any current assessment of child support. Exhibit 6 was a letter dated 16 November 2009 to the parties from the Child Support Agency, which advised that the husband’s total monthly liability for the three children was $1,309.50 for the period 10 November 2009 to 9 February 2011. Exhibit 28 to the wife’s affidavit of 20 October 2011 was a Notice of Decision dated 9 July 2010 which set the husband’s and wife’s income at $341,162 per annum and $25,362 per annum respectively.
In her affidavit of 20 October 2011 the wife deposed:
177. A new assessment has been issued based on [the husband] having an income of $141,504 which excludes the funds he has received the benefit of from [K]Pty Limited and the [L] Trust. The amount he is to pay is $1,908 per month for the three children.
I was not provided with a copy of this assessment.
On 8 November 2011 interim orders were made by consent which provided, inter alia, as follows:
8. That as and by way of departure from the Administrative Assessment of Child Support for the children, in respect of the child support period from 1 September 2011 to 9 May 2012 and from time to time thereafter and continuing for each child support year pending termination of the proceedings:
8.1The husband pay by way of periodic child support for each child the sum of $1666 per month per child, first payment to be made on 7 December 2011 of the date of this Order and then monthly thereafter to the Child Support Agency or otherwise as agreed in writing between the parties;
8.2The amount payable by way of child support pursuant to the above sub-paragraph should be adjusted annually commencing on 1 July 2012 to such sum as shall be determined by multiplying the child support being paid on the review date by the fraction N/B where “B” is the consumer price index for Sydney (all groups) published by the Australian Bureau of Statistics (“CPI”) in respect of the quarter year ended on the day 12 months prior to the review date (namely 31 December) and “N” is the CPI in respect of the quarter ending on the day immediately preceding the review date;
8.3That the husband pay as and when they fall due all costs of premiums for private health insurance for the children with Medibank Private Health Fund at its current level;
8.4That the periodic and non-periodic child support payable by the husband is to account for 100% of the annual rate of child support payable by the husband under any Administrative Assessment and the annual rate of child support under any Assessment for each year from the date of this Order to termination of this Order is to be reduced by that amount;
8.5That the periodic and non-periodic child support payable by the husband pursuant to these Orders is to be credited against the husband’s liability under any administrative assessment of child support payable by the husband to the wife in respect of each of the children for the period from the date of the making of these Orders until the happening of a terminating event within the meaning of the Child Support Assessment Act; and
8.6That the parties forthwith shall do all acts and things necessary to cause a copy of these Orders to be lodged with the Child Support Registrar.
Section 116 of the Child Support (Assessment) Act 1989 provides as follows:
Application for order under Division
(1) A liable parent or a carer entitled to child support may, in respect of an administrative assessment of child support for a child, apply to a court having jurisdiction under this Act for an order under this Division in relation to the child in the special circumstances of the case if:
(a) all of the following apply:
(i) the Registrar has, under section 98E or 98R, refused to make a determination under Part 6A in respect of the administrative assessment;
(ii) an objection to the refusal has been lodged;
(iii) the Registrar has disallowed the objection; or
(aa) all of the following apply:
(i) a decision has been made in respect of the administrative assessment;
(ii) an objection to the decision has been lodged;
(iii) in making a decision on the objection, the Registrar has, under section 98E or 98R, refused to make a determination under Part 6A in respect of the administrative assessment; or
(ab) the SSAT has, under section 98E or 98R, refused to make a determination under Part 6A in respect of the administrative assessment; or
(b) both of the following apply:
(i) the liable parent or carer entitled to child support is a party to an application pending in a court having jurisdiction under this Act;
(ii) the court is satisfied that it would be in the interest of the liable parent and the carer entitled to child support for the court to consider whether an order should be made under this Division in relation to the child in the special circumstances of the case; or
(c) in the case of a liable parent--the administrative assessment of child support payable by the liable parent for the child is made under subsection 66(1).
(2) An application may be made by the carer entitled to child support, or the liable parent, in relation to the child.
(3) Subject to section 145 (Registrar may intervene in proceedings), the parties to the application are the liable parent and the carer entitled to child support.
There was no evidence or submission that the requirements of subsections 116(1)(a), 116(1)(aa) or section 116(1)(ab) have been satisfied in the case for the wife. As to subsection 116(1)(b), it is clear that both the liable parent and the carer are parties to an application pending in a court which has jurisdiction under the Child Support (Assessment) Act. I was provided with no submission, however, as to why it is in the best interest of the liable parent and carer for the court to consider whether an order should be made, nor what “special circumstances” exist in this case.
The only suggestion that the wife contended that there were “special circumstances” was the following paragraph in her affidavit of 20 October 2011:
179. I am concerned that each year I will need to request the CSA to review the child support assessment due to manner in which [the husband] has set up the distribution of income derived from the [E] Group between himself and the [L] Trust and now the [L] Holding Trust which results in his taxable income not reflecting the funds available to him by way of dividends, distributions, drawings and/or loan accounts.
I had the benefit of no submission as to what evidence satisfied the provisions of section 117(1) in the circumstances of these proceedings. I was not informed as to what ground/s for departure were relied upon by the wife within the meaning of section 117(2).
A further difficulty with the wife’s application was that she conceded in cross-examination that her weekly expenses as set out in her Financial Statement of 31 July 2013 were “guesstimates”. In my view the wife’s evidence as to the expenses which she incurs to support the children was insufficient to enable me to determine her application for a departure order in accordance with the requirements of the relevant legislation.
The husband is now a salaried partner of E Firm and earns an identifiable income. Similarly, the wife earns a fixed income and, following the making of final orders in these proceedings, she will not be at risk of any further arbitrary income splitting on the part of the husband by way of notional distributions from the L Trust or K Pty Limited.
In all of these circumstances it seems to me that the preferable course is that I decline to entertain the wife’s application for a child support departure order. In my view the Child Support Agency will be in a position to issue an appropriate assessment following the conclusion of these proceedings.
I do not propose to allow the husband to escape responsibility for the support of the children by way of a discharge of the interim order made by consent on 8 November 2011. I will continue the operation of that order, pending an assessment on the part of the Agency. Equally, I will not allow the wife to refrain from making application for an administrative assessment and thus retain indefinitely the benefit of the interim child support departure order. I will make orders to the effect that this interim order stand discharged upon the earlier of the date of issue of an administrative assessment on 1 March 2014.
I certify that the preceding eighty one (81) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Stevenson delivered on 12 December 2013.
Associate:
Date: 12 December 2013
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