Milstead and Richards and Anor
[2016] FCCA 2191
•31 August 2016
FEDERAL CIRCUIT COURT OF AUSTRALIA
| MILSTEAD & RICHARDS & ANOR | [2016] FCCA 2191 |
| Catchwords: FAMILY LAW – Property settlement – remitted – conduct of parties to voluntary administration of second respondent company – issues of credit – post-separation contributions. |
| Legislation: Family Law Act 1975 (as amended) |
| Cases cited: Bonnici & Bonnici (1991) FLC 92-272 Re F (litigants in person) [2001] FamCA 348 Kowali & Kowali (1981) FLC 91-092 Omacini & Omacini (2005) FLC 93-218 |
| Applicant: | MR MILSTEAD |
| First Respondent: | MS RICHARDS |
Second Respondent File Number: | (OMITTED) PTY LTD AS TRUSTEE FOR THE (OMITTED) DISCRETIONARY TRUST LNC 481 of 2010 |
| Judgment of: | Judge McGuire |
| Hearing dates: | 26 & 27 November 2015 3 & 4 December 2015 |
| Date of Last Submission: | 3 May 2016 |
| Delivered at: | Melbourne |
| Delivered on: | 31 August 2016 |
REPRESENTATION
| Counsel for the Applicant: | Mr Boland |
| Solicitors for the Applicant: | Chris Boland |
| Counsel for the First Respondent: | Mr Fitzgerald |
| Solicitors for the First Respondent: Counsel for the Second Respondent Solicitors for the Second Respondent | Fitzgerald Browne No appearance No appearance |
ORDERS
That within sixty (60) days of the date of these orders the respondents, jointly or severally, make a lump sum cash payment to the applicant of $289,661 and for these purposes the director of (omitted) Pty Ltd or, if necessary, the administrator of (omitted) Pty Ltd be and is hereby directed to authorise such payment.
That should the respondents fail to make the cash payment referred to in paragraph 1 hereof, then the real property known as “Property M” situate at Property M in Tasmania be sold on terms as agreed between the applicant and the director of (omitted) Pty Ltd or, if necessary, the administrator of (omitted) Pty Ltd with the proceeds of sale being distributed as follows:
(i)To the reasonable costs and disbursements of the sale;
(ii)The discharge of the registered first mortgage held by (omitted) Bank;
(iii)As to a sum to the applicant so as to provide him with forty per cent (40%) of the property pool pursuant to the findings in the reasons herein; and
(iv)As to the balance to (omitted) Pty Ltd.
That within sixty (60) days of the date of these orders the respondents transfer all their right, title and interest in the following to the applicant absolutely:
(i)The assets of (omitted) Pty Ltd including but not limited to the (omitted) lease and bank account balance of (omitted) Pty Ltd;
(ii)Any shareholdings in the name of the applicant at the date of these orders;
(iii)Ford (omitted) motor vehicle;
(iv)All personalty and chattels in the procession of or under the control of the applicant as at the date of these orders including work tools and artworks;
(v)The balances of any bank accounts or like investments in the name of or to the benefit of the applicant as at the date of these Orders;
(vi)(omitted) and (omitted) Bank ((omitted));
(vii)Any superannuation policy or benefit of the applicant as at the date of these orders; and
(viii)The benefit of taxation credits accrued to the applicant.
That the first named respondent be solely responsible for and indemnify the applicant in respect of the following:
(i)Any and all liabilities incurred by the first respondent since separation in either her name alone or in joint names;
(ii)Any credit card liabilities in the name of the first respondent; and
(iii)And all liabilities attaching to any assets retained by the first respondent pursuant to these orders.
That the second named respondent be solely responsible for and indemnify the applicant in respect to the following:
(i)(omitted) Bank mortgage secured by the property “Property M”;
(ii)The second mortgage held by Ms R or the beneficiaries of his estate and secured by “Property M”;
(iii)Any personal loan liabilities to Mr R or his estate;
(iv)Any and all liabilities attaching to any of the assets retained by the second respondent pursuant to these orders; and
(v)And all liabilities incurred by the second respondent since the separation of the applicant and the first respondent.
That contemporaneously with the payment in Order 1 hereof the applicant transfer all his right, title and interest in the following to the first respondent absolutely:
(i)Mercedes Benz motor vehicle registered in the name of the first respondent;
(ii)All personalty and chattels in the possession of or under the control of the first respondent as at the date of these orders including jewellery and artworks;
(iii)The balances of any bank accounts or like investments in the name of or to the benefit of the first respondent as at the date of these orders;
(iv)Any superannuation policy or benefit of the first respondent as at the date of these orders; and
(v)Any benefit accrued or to accrue to the first respondent from the estate of Mr R (deceased).
That contemporaneously with the transfer and vesting order in order 4 hereof, the applicant transfer all his right, title or interest in the following to the second respondent:
(i)All the assets of the (omitted) Trust including but not limited to the property known as “Property M” and all farm, plant, equipment and stock; and
(ii)The balance of any bank accounts or like investments in the name of or to the benefit of the second named respondent.
That the applicant be solely responsible for and indemnify the first and second named respondents in respect of the following:
(i)Any and all liabilities attaching to any of the assets retained by the applicant pursuant to these orders;
(ii)Any and all liabilities incurred by the applicant since separation from the first named respondent in either his name alone or in joint names; and
(iii)The applicant’s (omitted) Bank credit card liability.
That the parties, any of them, or the administrator of (omitted) Pty Ltd have liberty to apply in respect of the sale of the property at Property M in Tasmania.
That any application for costs be filed with supporting affidavit material within 28 days from the date of these orders.
IT IS NOTED that publication of this judgment under the pseudonym Milstead & Richards & Anor is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
LNC 481 of 2010
| MR MILSTEAD |
Applicant
And
| MS RICHARDS |
First Respondent
And
(OMITTED) PTY LTD AS TRUSTEE FOR THE (OMITTED) DISCRETIONARY TRUST
Second Respondent
REASONS FOR JUDGMENT
The substantive applications before me are for property settlement under the provisions of section 90SM of the Family Law Act 1975 (“the Act”). The primary parties were in a de facto relationship from about late 1999 until March 2010.
This matter has a convoluted history. It now comes before me after a successful appeal in respect of orders made by me on 21 February 2014, but remitted specifically to me by their Honours for rehearing. That first hearing occupied nine days of Court time. During the period of my judgment being reserved, the second respondent was placed into voluntary administration by its director. The Full Court found error in the making of orders contrary to ss440D of the Corporations Act 2001 (Cth) which effectively stayed proceedings, without leave being afforded the applicant to continue.
The administration process of (omitted) Pty Ltd (“(omitted)”) was completed by a Deed of Company Arrangement as long ago as 27 May 2015. Nevertheless, the company remains in external administration although it is clear on the evidence that control of the company has long since returned to the director and the continuing involvement of the administrator on his reluctance to terminate the administration is problematic in its reasoning.
At the commencement of this second hearing leave was given pursuant to s440D of the Corporations Act to continue the application of Mr Milstead for property settlement orders.
Secondly, this matter was transferred to the Family Court of Australia during the interlocutory process, but transferred back to this Court by Benjamin J by orders of 13 August 2015 thereby requiring this Court to exercise the jurisdiction under the rules of the Family Court Act, noting that s58AA of the Corporations Act provides that the Family Court of Australia is a competent Court to grant leave pursuant to s440D.
The orders of their Honours in the Full Court set aside all of the orders of 21 February 2014 including an order made by me joining (omitted) Pty Ltd as trustee of the (omitted) Discretionary Trust as second respondent. (omitted) has been again joined as a party.
Prior to the taking of evidence at the second hearing it was agreed that, given the somewhat unusual remitting of the matter by the Full Court to me, any findings of fact and credit made by me in the first hearing should properly stand subject, of course, to new evidence given or adduced to disturb such findings. To this end, it is proper that my reasons for judgment of 21 February 2014 be read together with these reasons so as to save unnecessary repetition.
The Issues
The relevant issues are set out at [24] of my first reasons.
A major issue was whether the assets of the (omitted) Trust/(omitted) should be brought into account in the asset pool for consideration between the applicant, Mr Milstead and the first respondent, Ms Richards, on the basis of whether or not Ms Richards had control or effective control of the trust? This remains an issue although, on my understanding, now on the basis that Ms Richards claims no control of the trust by reason of the voluntary administration together with the appointment (during the first trial) of Mr J as an independent director of the company and appointer of the trust. Put simply, Ms Richards again argues that the assets of (omitted)/the Trust should not be included in the relevant pool of property.
Secondly, there are issues in respect of the property pool itself and specifically:
(i)The status of a (omitted) debt to Mr R of $342,000 secured by a second mortgage and found by me in the first reasons to be a liability to be included in the property pool. Mr R passed away in August 2015. His Will (probate not yet proven) provides inter alia that Ms Richards receive the benefit of:
All the principal of the money owing to me under the terms of the mortgage loan due to me by (omitted) Proprietary Limited and (omitted) (Aust) Proprietary Limited as due on the transfer of mortgages document number (omitted) (registered with the Land Titles Office, Tasmania on 21 December 2000), together with any other amounts subsequently advanced by me on this mortgage loan…for her personal use and benefit.
On my previous finding that Ms Richards had constructive and functional control of the Trust, the effective result of this bequest would be to extinguish the liability secured under the second mortgage. This, of course, raises issues of contributions and, as will be set out below also as to the property pool itself in the sense of the principles discussed by the Full Court in Bonnici & Bonnici.[1]
(ii)The status of a new debt now owing by (omitted) to its director, Mr J, in a sum of $360,000 being funds provided by Mr J to satisfy the Deed of Company Arrangement.
(iii)Remaining issues as to the valuations of stock and plant and equipment on the farming property “Property M” which is the primary asset of (omitted) and on which Ms Richards has habitually resided.
(iv)There remain general differences between the parties as to the value of their contributions and the relevance of considerations under S90SF (3) of the Family Law Act 1975 (“the Act”).
(v)The focus of dispute at the second hearing before me and by far the majority of time was taken with the complaint and assertions by the applicant and his solicitor/advocate that the first respondent, the second respondent and the administrator of the voluntary administration (Mr G) had conspired (perhaps with a Tasmanian accountant who was not called by any party to give evidence) to defeat Mr Milstead’s claim under the Family Law Act by way of the voluntary administration. That is, it is argued that the primary, if not sole, rationale of the voluntary administration was for this purpose. To this end, it was variously asserted that the administration was a sham or a fraud or a perverting of the course of justice. The applicant’s solicitor/advocate urges the Court to ignore or set aside the Deed of Company Arrangement (the power to do so being dubious) and/or refer the relevant alleged conspirators to the Australian Securities and Investments Commission (ASIC) for investigation. For their part, Mr J and Mr G consistently assert that the motivation for the voluntary administration was a debt to a solicitor in a quantum of approximately $156,000 being in relation to the lawyers costs of (omitted) and Ms Richards incurred prior to the first hearing of this matter. They each emphatically and consistently deny that a defeat of Mr Milstead’s claim was a motive in any form. Ms Richards, who attempted to distance herself from the administration, made like denials.
[1] (1991) FLC 92-272
The Parties
The applicant and first respondent were both represented at the hearing by solicitor-advocates. The second respondent company was not represented. Mr J as sole director was given leave to appear on the company’s behalf. He therefore effectively assumed the role of a litigant in person. This was practical and beneficial on a number of levels including the position taken and submissions vigorously made by Mr Boland for the applicant that the Court consider the referrals to ASIC. Mr J being effectively a “party” rather than simply a witness was then able to have complete involvement in the matter including the opportunity to cross-examine contrary witnesses.
Time was taken to advise Mr J as to the procedure in Court with an invitation to seek assistance from the Court at any time in respect of matters of procedure.[2]
[2] Re F (litigants in person) [2001] FamCA 348
It has always been the case that the interests of Ms Richards and (omitted) have not been contrary and in this sense cross-examination of each of Ms Richards and (omitted) was not permitted by the other although they were permitted each to cross-examine the professional witnesses and Mr Milstead.
It is proper to confirm the evidence of the first trial that Mr J was appointed as a director of (omitted) during the course of that first hearing. He is in that sense a successor of Ms Richards, albeit the line being punctuated by Ms Richards’ own daughter filling that role.
Mr J had given evidence on affidavit at the first hearing and was subjected to cross-examination. This was prior to his appointment as director of (omitted) and appointer of the Trust. He is indisputably a long-term acquaintance of Ms Richards and her family. My previous reasons at [45] note Mr J being partisan to Ms Richards in respect of her dispute with Mr Milstead and him being “extremely critical of Mr Milstead’s character…”.
There is also some ambiguity and continuing confusion for Mr J in his professional relationship with Mr Fitzgerald, a solicitor, who acts for and appears as advocate for Ms Richards. Indeed, my recollection is that Mr Fitzgerald initially announced his appearance for (omitted) (Mr J) when he entered the first hearing partway through. He quickly turned to acting for Ms Richards. Significantly, at various stages of his evidence in the second hearing, Mr J seemed to be of the view that Mr Fitzgerald continued to act for him and hence for (omitted). Any significance is perhaps limited to the allegation that Ms Richards was a co-conspirator in the sham or fraudulent voluntary administration and whilst Mr Fitzgerald was acting for her and where it is clear that there was, in fact, correspondence from Mr Fitzgerald to the accountant/administrator during the course of my judgment being reserved and contemporaneously with the placing of the company into voluntary administration. It is perhaps pertinent to note, at this stage, that Mr J on behalf of (omitted) did not see fit to bring the matter back to Court during the period of my reserved judgment on the fact of him placing the company into voluntary administration. Nor did Mr Fitzgerald, who is, of course, a lawyer familiar with the practices and obligations of the Family Law Act, did not see fit to relist the matter on the happening of the voluntary administration in what would seem to have been an obvious and important change of financial circumstances during the course of consideration of the s90SM issues. I can only assume therefore that he was instructed, by Ms Richards, for whatever reason, not to bring this fact to the Court’s attention although, of course, Mr Fitzgerald’s duty to the Court unambiguously overrides any duty to his client.
The Voluntary Administration
The evidence at the first trial closed on 16 August 2013 after nine days of hearing. The final witness submissions were to be provided by October 2013. The judgment was reserved accordingly.
Some time after October 2013 (presumably so given that the written submissions of none of the parties made reference to the fact or potential of the voluntary administration) Mr J sought the advice of a Tasmanian accountant, Mr B. Mr J says that his sole concern was an outstanding liability of (omitted) in its own right and/or as guarantor to a Ms M, solicitor. Ms M had represented both (omitted) and Ms Richards in respect of these family law matters until immediately prior to the commencement of the first hearing. She had obtained a costs assessment of $156,466.62. This amount was apportioned as to $30,666.08 against (omitted) and $125,771.63 against Ms Richards although (omitted) had “guaranteed” Ms Richards’ liability.
Mr J claims that (omitted) was unable to meet Ms M’s demand. He says he therefore took advice from Mr B to place (omitted) into voluntary administration. Mr G was appointed administrator on 13 December 2014. There followed at least two meetings of creditors. Interestingly, the Deed of Company Arrangement was not entered into until 20 May 2015.
Each of Mr G, Mr J and Ms Richards were cross-examined intrusively, vigorously and at some length by Mr Boland for the applicant as to the general conduct and utility of the administration and consistent with the applicant’s assertion that the administration was a sham, a fraud, or a perverting of the course of justice with its primary rationale being to defeat Mr Milstead’s claim in this Court. Allegations of involvement, at least by implication, were made in respect of Mr B and Ms Richards’ solicitor, Mr Fitzgerald. Neither gave evidence. In support of his argument Mr Boland relied inter alia upon the following evidence:
(i)That (omitted) Pty Ltd’s personal liability to Ms M was only $30,666.88. The total liability, inclusive of the guarantee, was $156,446. Nevertheless, there had been evidence given by Ms Richards during the first hearing that she had received (or had available to her) an amount of $200,000 by way of further loan from Mr R specifically to meet “legal costs” Indeed, the final submissions of her counsel at the first hearing indicated the actual receipt by Ms Richards of the $200,000 which was duly considered as a liability for the pool of assets although ultimately left out of the poll by me as being a “post-separation liability”. Mr Boland argues that it follows that the company had the ability to meet its liability to Ms M. Mr Boland asks the court to note that this “mistake” in Mr Fitzgerald’s written final submission was not rectified to this court during the period of the reserved decision during which time it was argued as an actual liability to reduce the net value of the property pool whereas it was quickly noted as “not received” for the purposes of the administration which was, on the evidence, primarily to deal with the Ms M debt. The implications by Mr Boland’s argument is that there was no “mistake” in Mr Fitzgerald’s written submissions and that Ms Richards conspired with Mr J to give false or opportunistic evidence in respect of the $200,000.
(ii)Further to (i) above, there is evidence that advice was received which may have cast doubt on the validity of the guarantee thereby potentially leaving (omitted) obligated to Ms M in a sum of only $30,666. There is no indication that the administrator or the director pursued this possibility with the implication being that the primary intention of the voluntary administration was other than to address the Ms M debt;
(iii)There is evidence that Ms M had offered to stay the prosecution of her demand for repayment pending the handing down of my judgment (which, of course, noted the availability to Ms Richards or (omitted) of $200,000 specifically to meet this liability). That offer was refused. In any event, Mr Boland poses the rhetorical question as to why there should be a voluntary administration because of a debt to Ms M in an amount of $156,446 when Ms Richards and (omitted) had at least an approved loan from Mr R of $200,000 specifically for legal costs?
(iv)The administrator clearly on notice as to the reserved status of the family law proceedings did not bring the voluntary administration to the notice of the Court where similarly Ms Richards and Mr J did not notify the Court and where, in particular, Ms Richards was represented by an experienced family lawyer where, as an officer of the Court who might be expected to understand an obligation to the Court to notify of such a significant change in financial circumstance and where that solicitor was clearly appraised of the process and fact of the voluntary administration;
(v)That the statement of affairs for the purposes of the administration referenced alleged liabilities of (omitted) that were not claimed in the contemporaneous proceedings in this Court and where a number, and perhaps the majority, of such liabilities related to family members and/or associated entities of Ms Richards and Mr J. Further, Ms Richards herself presented as a creditor of (omitted) and in circumstances where Mr J, under cross-examination and with some reluctance, eventually conceded that there was never any expectation of recovery of such debts which he had always considered to be only “book debts”;
(vi)That the company was placed into voluntary administration by Mr J at a time when the evidence in respect of Mr Milstead’s application for property settlement had finished and where Mr J himself had given evidence partisan to Ms Richards and where he was personally critical of Mr Milstead’s character and of any claim that he might argue in this Court;
(viii)The continuing refusal or reluctance of Mr G to terminate the administration where a Deed of Company Arrangement was made some 15 months ago. Mr G gave evidence on two occasions during the second hearing. In November 2015 he justified his remaining role due only to some minor taxation matters such as finalising BAS statements. In his evidence some months later, Mr G’s justification was on the basis that Mr Boland was arguing that Mr G, along with others, be referred to ASIC for conspiracy to pervert the course of justice and/or fraud. (To this end, I have informed the parties and Mr G that, for purposes of natural justice, I would relist the matter and hear submissions if my inclination on the evidence was to refer the matter for consideration);
(ix)Mr J’s revelation to the Court during his evidence that the external administrator intended to again appeal to the Full Court should Mr Milstead obtain a favourable award from this Court. Mr Boland relies on this evidence as to Mr J’s alleged primary intention in placing (omitted) into voluntary administration being to defeat Mr Milstead’s claim;
(x) Email communications tendered in evidence (exhibit A6) evidencing Ms Richards offering to fund, for the duration of the administration, instalment payments on assets of (omitted) which should properly have been brought into account in the administration and in a context where Ms Richards gave sworn evidence to this Court that she had no involvement in the placing of (omitted) into administration. Further in support of this allegation is a copy of a letter from Mr Fitzgerald to Mr Boland dated 30 June 2015 being clearly a response to a set of questions and seemingly at odds with exhibit 6 where in the last paragraph appears the following:
No moneys paid by Ms Richards to the administrator of (omitted) Proprietary Limited. Ms Richards is not aware of the details of any moneys paid to the administrator of (omitted) Proprietary Limited on behalf of (omitted) Proprietary Limited. That information is not within the possession, custody or control of Ms Richards;
(xi)A document tendered in evidence (exhibit A7) being an email dated 25 February 2014 from Ms Richards to Mr J with copy to Mr G which states inter alia:
Mr J
A suggestion:
…
(3) Appeal Mcguire’s decision. ((omitted) believes we have a strong case on this which he will advise us in writing, the cost would be around two half days in Court and prep., we are waiting on his estimate). This could take up to a year to be heard which enables us to build up funds to pay him or we go back into voluntry (sic) admin again at that point depending on the judges (sic) decision. Funds can be built up over the next year from a (omitted) crop payable in feb 2015, stock sales, advance from (omitted) in sep 2014 of 35k, (around 115k) (my emphasis).
This is also within a context of Ms Richards giving sworn evidence to this Court that she had no active involvement in the placing of (omitted) into voluntary administration;
(xii)That creditors’ meetings took place substantially by way of proxy votes including a vote that the valuable asset of (omitted), “Property M” ($1,650,000), not be sold in order to satisfy alleged liabilities;
(xiii)The bald financial result where Mr G’s presentation of accounts and statements at 30 November 2015 (by which time control of (omitted) had returned to Mr J) shows:
(a) Dividends to creditors $ 89,569.17
(b)Costs and disbursements on the administration $272,043.89
$361,613.06
I accept the submission of Mr Boland that, given that funds were available to meet the legal costs of Ms Richards and (omitted) and/or that Ms M was prepared to delay prosecution of her demand, that the administration served to save (omitted) only $11,799.84 where the costs and disbursements on the administration were $272,043.89;
(xiv)Where the accountant, Mr B, was not called to give evidence with Mr J asserting (supported by Ms Richards) that it was Mr B’s advice to place the company into voluntary administration. Where Mr Boland for Mr Milstead alleges that the administration was a conspiracy to defeat Mr Milstead’s claim, it is put that the failure to call Mr B should cause me to draw a negative inference pursuant to the principal in Jones & Dunkel (1959) 101 CLR 298 that the truthful evidence of Mr B may not have assisted the respondents in their evidence as to the motivation for the voluntary administration.
In summary, therefore, Mr Boland asserts that Mr J, the sole director of (omitted), appointed Mr G for the “improper purpose” of defeating Mr Milstead’s claim in these proceedings and not because he had formed the view that (omitted) was insolvent or likely to become insolvent and that Mr G accommodated that purpose and that “the only conceivable reason for Mr G’s appointment, administration and continued appointment as external administrator is to pervert the course of justice seeking to thwart Mr Milstead’s claim in these proceedings, relying on s.440D of the Corporations Act.” Mr Boland argues that Ms Richards has always maintained control of (omitted) and the Trust in the sense of a “shadow director” and that she too was a party to this conspiracy are implicating Mr Fitzgerald and Mr B. Mr Boland says that any or all of the above factors together should cause this court to find on the balance of probabilities that such a conspiracy was perpetrated and that the court should refer the allegations for investigation by ASIC whilst the above evidentiary factors and arguments are seemingly persuasive, there is, however, evidence before me which argues against the assertion of a conspiracy. That evidence includes the following:
(i)Each of Mr J, Ms Richards and Mr G denied any conspiracy to defeat the claim of Mr Milstead by use of the tool of the voluntary administration. They did so consistently and without retreat or admission despite lengthy and robust cross-examination of each of them;
(ii)Mr J maintained at all times that the “trigger” for the voluntary administration was the debt to Ms M. Correspondence tendered in evidence during the second hearing contradicts the allegations of a conspiracy or intent to defeat Mr Milstead’s claim. Specifically, exhibit P1 being a letter from Mr B to Mr G of 6 December 2014 with copies to Mr J and Ms Richards is informative in noting Ms M’s statutory demand:
Hi Mr G,
Attached is the creditors statutory demand that will necessitate VA. (which I assume to mean “voluntary administration”)
(iii)In a letter of 2 December 2014 tendered in evidence being from Mr B to Mr S, solicitor, appears the following:
Ms Richards’s ability to apply for finance with banks and non-bank lenders is severely hamstrung until the family law judgment is finalised. When this is handed down then Ms Richards will be able to consider re-finance options that involve both settlement to Milstead and payment of Ms M… The objective of the defence is to buy some time until the family law judgment is handed down and then to consider re-finance options so that Ms M can be paid. Hopefully, you can assist with the setting aside application in getting the matter to mediation some time in late January or February. (my emphasis)
(iv)In a letter from Mr B to Mr G of 13 January 2014 appears:
Hi Mr G,
When do we need to have a DOCA offer? Would it be logical that a potential DOCA offer party ask you to extend the convening period, because it’s difficult to make an offer until the amount of the family law creditor is known. That is it makes a big difference is (sic) that the de facto is offered $50,000 or $300,000.
(v)In an email from Mr B to Mr J of 21 February 2014 appears:
Hi,
Have revisited DOCA analysis and inserted M (presumably Mr Milstead?) $259K as a “priority creditor”. That is third in line after (omitted) and Mr R, and not subject to cents in the dollar deals…
This means that under a DOCA you would have to come up with $58,000 to pay unsecured creditors, $50,000 for Mr G administration costs and DOCA costs and legal costs and $259,000 for M…
In terms of timing I will talk to Mr G and see if he thinks there is any capacity for him to seek an extension to 90 or 120 days re the $259K. (The statement of assets and liabilities annexed to exhibit P1 clearly notes a liability to “M” of $259,000).
It is well-established that a party making an assertion of fact carries an onus to prove such a fact on the balance of probabilities. On consideration of the evidence before me, I am not persuaded that there was a conspiracy between Mr J, Mr G, Ms Richards or any other person to defeat Mr Milstead’s claim under the Family Law Act. Certainly, there are coincidences in time and ample cause for suspicion and speculation. Certainly, a casual view of the result of the administration casts doubts on its utility and on the expertise and advice of Mr G and Mr B. Certainly, it is unfathomable that such a significant change in financial circumstances of a party to litigation should not have been brought to the notice of the Court seized of the matter where the evidence had ended and judgment reserved. In this respect, Mr J’s culpability is mitigated by the fact that he is not a lawyer and was not represented at the hearing (despite his own evidence as to an ongoing supportive relationship with Mr Fitzgerald who acted officially for Ms Richards). Exhibits tendered in evidence make it clear that Mr Fitzgerald himself was aware of the process of (omitted) being placed into voluntary administration during the period of the reserved judgment and as an experienced family law practitioner whose duty to the Court overrides any duty to his clients, Mr Fitzgerald’s failure to advise the court raises concerns as to his understanding of his professional responsibilities.
Nevertheless, the exhibits in evidence and particularly email communications between the various parties and Mr B suggest a prime motivation of the parties was to delay and then meet as beneficially as possible the liability to Ms M. Certainly, the abovementioned emails from Mr B are persuasive in their noting of the potential and actual liability to Mr Milstead and notable for the absence of any mention of an intention, directly or consequentially, to defeat Mr Milstead’s claims.
On the balance of probabilities, therefore, I am not persuaded that the applicant has proven the asserted conspiracy and it is therefore not my intention to refer this matter for investigation on the alleged improper purpose of the voluntary administration. It then remains for Mr Milstead to consider whether he makes an application to set aside The Deed of Company Arrangement and/or whether he makes a complaint to the relevant authorities which, of course, is his prerogative.
(omitted) liability to Mr J $360,000
I do, however, find some merit in Mr Boland’s submission that Mr Milstead should not bear responsibility for or impact of what proved to be an expensive and economically dubious exercise on a cost/benefit basis. Ms M was paid $76,815.88. Arguably, however, she retains the right to proceed against Ms Richards personally for $125,771.63. The remaining liabilities satisfied totalled only some $11,799. The costs of the procedure were $270,119.88 with, of course, Mr G not yet terminating the administration.
Significantly, however, the deed of company arrangement was settled by way of a contribution by the director, Mr J, of $360,000 which both respondents now claim as a liability of (omitted). Leaving aside the fact that Mr J himself gave evidence that he expects to receive the benefit of some $301,000 in (omitted)’s tax credits, it is problematic that this claimed liability of $360,000 should be brought into account in the proceedings against Mr Milstead. Firstly, it is irresistible that Mr Milstead played no role in the placing of or process of the voluntary administration. It was a decision made without his input. The effect of the process might therefore attract consideration under the principles in Kowali & Kowali[3] as to whether the administration was of such poor judgment that the respondents alone should bear the losses. Most significantly, however, is the fact that the voluntary administration on the evidence of Mr J and Ms Richards themselves and supported by Mr G, was triggered only to address the Ms M debt which was, of course, solely post-separation legal costs incurred by (omitted) and Ms Richards. This is not a matter generally where argument as to the “add back” of the legal costs was, or should have been, mounted. This entire process was in response to the respondent’s legal costs. It follows, therefore, that Mr Milstead should not bear the responsibility for the result of a voluntary administration which incurred a post-separation liability of $360,000 to its director and particularly where any benefit to Mr Milstead by way of debt‑satisfaction in relation to the liabilities exposed at the first trial and being pre‑separation liabilities is minimal or nil. As such, the claimed liability of (omitted) to Mr J of $360,000 will not be included in the property pool.
[3] (1981) FLC 91-092
Mr R Bequest to Ms Richards – Second Mortgage
At the first hearing I was persuaded, despite argument to the contrary, that a liability of the parties be included in the pool as $342,000 being a registered second mortgage over Property M in favour of Ms Richards’ uncle, Mr R. Mr R has since died. His last Will leaves Ms Richards the benefit of the principal owing under the said mortgage loan to (omitted). On my findings that Ms Richards maintains actual control of the (omitted) Discretionary Trust and hence (omitted), the practical effect of the bequest is to extinguish the loan liability.
There remains, however, an issue as to how the Court deals with this post‑separation event in the context of the property pool and Mr Milstead’s entitlement. It is indisputable that this is a contribution by or on behalf of Ms Richards. That contribution is post‑separation. Whilst I previously found that Mr Milstead contributed to an extent by his labours and other contributions to the property at “Property M”, these contributions were and will continue to be taken into consideration. Nevertheless, a contribution of $342,000 by Ms Richards after the separation must be seen within the context of the value of the property pool being substantially less than two million dollars ($2,000,000) and the Court should be careful to give it full and proper weight within that context so as to provide proper justice and equity. Consequently, and whilst fully appreciating the general rule that the Court should consider the property of the parties as at the date of the hearing,[4] following the principles in the Bonnici (supra) I propose to proceed as if the second mortgage liability remains which of course it does technically to the benefit of Ms Richards. Within a context where I have previously found Ms Richards to have contributed 80 per cent to the property pool and where this liability amounts to $342,000. I consider this to be the proper way to give adequate weight to Ms Richards’ post-separation contributions where Mr Milstead has made no contribution to this windfall. It will remain for me, however, to consider the benefit of the bequest as a resource of Ms Richards. To do otherwise and treat the liability as extinguished would give a net property pool of around $2,200,000 in circumstances where this “contribution” alone would constitute some 15.5%.
[4] Stanford v Stanford [2012] HCA 52
(omitted) Pty Ltd – as Trustee for the (omitted) Discretionary Trust
Mr J is the sole director of the trustee company, (omitted). My discussion in respect of the control of the trust is set out in my first reasons at [64-88]. Despite prior apparent concessions, Ms Richards now argues that she does not have control of the trust. She cites the voluntary administration and what she says is the sole management role of Mr J as director. In my previous reasons at [88] I was satisfied on the balance of probabilities that the assets of (omitted) Pty Ltd as trustee for the (omitted) Discretionary Trust should be included in the asset pool as being effectively the property of Ms Richards. I am persuaded that this should remain the case. I am not persuaded by the denials of both Mr J and Ms Richards in their evidence at the second hearing that Ms Richards plays no role in the decision‑making of (omitted) or the Trust. I repeat that Mr J was initially a witness in the dispute between Ms Richards and Mr Milstead and was one partisan to Ms Richards. He was appointed to his roles in respect of the company and the Trust during the course of the first hearing. Ms Richards’ denials of involvement in the placing of the company into voluntary administration are contrary to the evidence and in my view untruthful. The example in evidence at exhibit A7 set out above is worthy of repetition and it is demonstrative of what I am satisfied is Ms Richards’ continuing role as a “shadow director”. In an email of 25 February 2014 to Mr J, Ms Richards says:
...appeal Mcguire’s decision. ((omitted) believes we have a strong case on this which he will advise us in writing, the cost would be around two half days in court and prep., we are waiting on his estimate) this could take up to a year to be heard which enables us to build up funds to pay him or we go back in to volantry [sic] admin again at that point depending on the judges [sic] decision...
The evidence disclosed that Ms Richards had met with Mr J who on Mr J’s evidence is the accountant who advised the voluntary administration. There is evidence before the Court that Ms Richards offered and made instalment payments for assets of (omitted) during the course of the administration thereby excluding them as creditors for consideration. Ms Richards remains resident on “Property M” and the evidence adduced suggests that her rental obligations have not been met pursuant to the terms of the life tenancy or, at the very least, have not been consistently met. Ms Richards instructed Mr Fitzgerald to liaise with the administrator and perhaps Mr B during the process of placing the company into voluntary administration. When challenged in cross‑examination as to her alleged continuing control of the company, I observed Ms Richards to be vague, selective and prevaricating in her responses. She was not generally, in my view, a witness of the truth.
I am not persuaded, therefore, that I should interfere with my findings in the first judgment, being satisfied that the assets of (omitted) Pty Ltd as trustee for the (omitted) Trust should be included in the asset pool as being effectively the property of Ms Richards.
I am satisfied that I can proceed to deal with Mr Milstead’s claim under the Family Law Act against (omitted) and despite the administration not being formally terminated. Orders were made pursuant to s.440 (1) of the Companies Act. Management of the company has been returned to the director. The Corpus of the Deed has been finalised. Mr G’s own evidence is that he remains an external administrator only to deal with minor taxation matters and to defend any personal charges of conspiracy to pervert the course of justice. Mr G and Mr J strenuously deny any relevance of Mr Milstead’s claim whatsoever in their decisions to place the company into voluntary administration. To argue otherwise now against Mr Milstead’s claim and entitlement would be disingenuous and seriously bring into question the honesty of their sworn evidence to this court.
The Property Pool
In my first reasons at [125] I found the net value of the tangible property pool (excluding available tax credits of $602,656 as “financial resources” but including Mr Milstead’s superannuation entitlement) to have value of $827,520. Following the evidence at the second hearing, I make the following observations and findings:
i)At the first hearing, Mr Fitzgerald for Ms Richards had specifically argued for a liability of $200,000 to be included in the property pool, being a further advancement to Ms Richards/(omitted) from Mr R [92]. Mr Fitzgerald’s written submissions expressly claim that liability. It eventuated that I did not include the liability in the property pool but only because I found it to be a post‑separation liability incurred by the respondents and one not contributed to by Mr Milstead, and one expressly for the purpose of meeting the respondents’ legal costs. It is significant in my view as to the credit of the respondents that in the voluntary administration it eventuated that Ms Richards/(omitted) claimed that the $200,000 loan from Mr R had been “approved” but had never been advanced. It seems to me unfathomable that Ms Richards should allow her counsel to put written submissions which were factually incorrect and which, of course, served to decrease the value of the property pool by $200,000, without rectifying that situation. In any event, I now accept that the $200,000 approved by Mr R as a loan to (omitted)/Ms Richards for the purposes of meeting their legal costs in these proceedings was not paid over to the respondents. I comment only that this is one of a number of examples of inconsistency generally in the evidence of Ms Richards throughout these two hearings.
ii)At the first hearing the value of “Property M” was $1,370,000. The agreed value now is $1,650,000 representing an increase of $280,000. No evidence was forthcoming as to any recent improvements and I attribute the increase value down to a general market rise in value.
iii)“(omitted)” now has a liability of $360,000 to Mr J following the voluntary administration. As noted above and leaving aside the dubious financial merits of the administration, this liability has its genesis, on the evidence of Mr J himself, in a post‑separation legal costs debt incurred by the respondents. Following the principles in Bonnici (supra) it should not be included in the property pool for my consideration.
Motor Vehicle Loan
iv)In my previous reasons of February 2014 (omitted) disclosed a $32,000 liability to Mercedes Benz Finance in respect of a (omitted) motor vehicle of the same value. At or around the time of the voluntary administration, Ms Richards sold that vehicle. Mr J, as company director, was unable to give any explanation in his evidence at the second hearing as to why and how Ms Richards was able to legally dispose of a vehicle being the property of (omitted). Her actions, of course, are completely contrary to her own sworn evidence that she has no control over (omitted) or its assets. Ms Richards herself was unable to give any satisfactory explanation for her actions. The transactions resulted in Ms Richards now being the owner of a Mercedes Benz motor vehicle valued at $48,250 but subject to a liability of $83,000. These transactions themselves are demonstrative of the transparent control that Ms Richards retains over (omitted) and the Trust and its assets.
Mr Fitzgerald for Ms Richards claims that the Mercedes Benz at $48,250 and its liability of $83,000 should now be brought into the pool for consideration in respect of Mr Milstead’s claim although, interestingly, he is silent as to any contribution considerations. Frankly, such an argument is audacious and without merit. Put simply, Ms Richards has manipulated the asset arrangements between herself and (omitted) and done so post‑separation without any input by Mr Milstead. She has effectively removed an asset of (omitted) for consideration in the administration and allocated herself a personal liability. The resultant extra liability of $24,750 should not in any sense fall upon Mr Milstead. Given my findings in the 2014 reasons, I propose to simply exclude both the Mercedes Benz motor vehicle and its liability from the asset pool in the current consideration rather than attempt some convoluted contributions consideration.
(omitted) – Further Liabilities
v)My reading of the documents produced in respect of the voluntary administration show that (omitted) claimed numerous liabilities that were not disclosed to this Court at the first hearing. No satisfactory explanation has been forthcoming for this evidentiary discrepancy. They are set out in Mr J’s affidavit of 16 January 2014 at [5] and include the following:
a.Mr J himself – $5000 – which he says was paid to Fitzgerald and Browne for legal fees;
b.(omitted) Pty Ltd – $15,000 – also a creditor solely in respect of legal fees;
c.(omitted) Group – $2970 – for accounting fees post‑separation of Mr Milstead and Ms Richards;
d.(omitted) – $15,000 – rural supplies post‑separation (where Ms Richards has had the use and benefit of “Property M”);
e.(omitted) – $4015 – purchase of rams post‑separation and again where Ms Richards has had the benefit of the farm;
f.The (omitted) family – $390,962 – being a loan account balance of moneys allegedly contributed by the late Mr U or Ms Richards into the Trust and considered in respect of contributions and not further particularised; and
g.Ms A – $17,000 – being remaining balance of $25,000 loan from Ms A for payment of legal fees.
Mr Fitzgerald, for Ms Richards, properly in my view, does not in his final submissions claim that these liabilities be brought into account in these proceedings. Frankly, they either comprise of payment of legal costs post-separation or unparticularised amounts. Similarly, a claimed contingent liability of (omitted) in the administration, being a sum of $1,250,000 owing to Ms Richards is not relevant to my consideration. Mr J in cross‑examination, and despite some prevarication, finally conceded that this and the alleged liability to the (omitted) family were not liabilities that had been or would be pursued and, in his words, represented only “book debts” which I can only assume were produced for some purpose of expediency in the voluntary administration.
(omitted) Bank – first mortgage.
(vi) Mr Fitzgerald, for Ms Richards, and without dispute from Mr J, claims in his final submissions a current liability under this mortgage of $347,274. This figure is incorrect. I accept Mr Boland’s submission that the current mortgage liability is in fact $304,042. As with the mistaken and misleading final submission at the first trial in respect of a non-existent liability of $200,000, it is difficult to understand how counsel, properly instructed, at the end of the evidence, should make such a factually incorrect and ultimately misleading submission.
I accept, however, that Ms Richards has contributed the sum of $42,000 towards that mortgage liability from part proceeds of her bequest from the late Mr R although again the evidence and that of Mr J to the travels of those moneys through various accounts and claims for payment of “rental” are unconvincing and unnecessarily convoluted.
Stock – “Property M”
vi)The value of stock has been an ongoing issue throughout the two hearings. I deal with this matter in my previous reasons at [107]-[114] where on the evidence given and adduced I was unable to attribute any value to stock but took into account the continuing use and benefit of “Property M” for Ms Richards [114].
Exhibit A4 tendered in evidence is a letter from Fitzgerald and Browne to Mr Boland dated 30 June 2015 and clearly in response to a series of questions. At [5] appears the following:
No stock (apart from 8 pet rabbits which have since died) or plant and equipment purchased by Ms Richards between 30th of June 2013-2015.
Six Crossbred Ewes (pets), one dog (pet), two canaries – all located at Property M, two goldfish at (omitted).
I accept this as being a response to Mr Boland’s request for an inventory of stock on “Property M” which, after all, is claimed as a “hobby farm” or in her possession. Such a response is indicative, on my observations, of Ms Richards’ evidence in these proceedings which at times lacked veracity and proper disclosure and which on occasion tended towards the flippant or glib.
Ms Richards now adduces evidence in an affidavit of Mr D, sworn 24 November 2015. Mr D is a livestock representative. He values a total of 281 head of sheep at $17,815.
Counsel for Mr Milstead urges the Court to be dubious and cautious as to accepting this evidence against a background of non-disclosure by Ms Richards and where her evidence generally has been vague and misleading. Further, Mr Boland submits that the valuation was only forthcoming given his insistence upon disclosure of stock books which themselves were only reluctantly provided and perhaps not in full and where Mr Milstead gives some photographic evidence of his own observations of stock on the property. Mr Milstead says, at a time when Ms Richards was denying any substantial stock, that he counted 160 sheep. In this respect I easily prefer the evidence of Mr Milstead and share Mr Boland’s concerns as to Ms Richards’ evidence. Nevertheless, the best evidence that I have is that of Mr D and I will include the stock at a value of $17,815 whilst also taking into account and accepting that Ms Richards has had the ongoing use and benefit of “Property M”.
Plant and Equipment
vii)Similarly, at the first hearing, there was simply no evidence in proper form as to the content or valuation of plant and equipment on “Property M” [103-106]. I now have valuation evidence of Mr M in an affidavit of 21 October 2015. He cites some 18 items at a total value of $20,800. My reasons of February 2014 left me to rely only upon the financial statements of the farming enterprise of 30 June 2010, being the latest available to me [106]. This evidence, although unusual in its methodology for matters before these Courts, did recite the plant and equipment at around the date of the parties’ separation.
Mr M said that he was instructed on his inspection by Ms Richards. I have not generally found Ms Richards to be a reliable witness. Mr M says she told him which items would be valued. Mr M agreed that there may have been items on the property that he was not directed to value although he could not be specific.
Again, the applicant did not adduce his own valuation evidence and, as such, I am left in this unsatisfactory situation of accepting Mr M’s evidence as being the best evidence on a valuation.
Ms Richards – Other Assets
viii)Considerable time was spent in both hearings in cross‑examination of Ms Richards as to her personalty including jewellery and works of art. Whilst I have some sympathy for Mr Boland in his difficulties in obtaining full disclosure and repeat my findings generally as to the veracity of Ms Richards’ evidence, I am left again to find on the balance of probabilities that she holds the following assets:
·Jewellery $5800
·Household contents $25,000
·Other personal property, including artworks $20,000
(ix)Ms Richards claims a number of credit card liabilities. I included them as unchallenged in the first hearing. The applicant now challenges whether such liabilities should be included in the pool being so long after separation and given the benefits received by Ms Richards from Mr R’s largesse. In her financial statement sworn for this Court on 18 November 2015 Ms Richards deposes to total weekly expenses of $2251 which I calculated to be $9754 per month. She claims credit card liabilities of at least $24,200. Nevertheless, in his Honours’ reasons in the Supreme Court of New South Wales of 14 October 2015 under the heading “Ms Richards' Current Circumstances” and on the hearing of Ms Richards’ application for an interim distribution of the late Mr R’s estate appears at [31]:
Ms Richards is now 55 years of age, unmarried and unemployed other than working on the hobby farm in Tasmania where she lives. She says she has no savings and no ability to obtain credit but has had to borrow funds from friends and family in the weeks following Mr R’s death. She has no particular qualifications.
And at [34-36] his Honour says:
Ms Richards lives on a 70 acre hobby farm in Tasmania which continues to be the subject of litigation with Mr Milstead. She is a life tenant of that property, which is owned by (omitted) Pty Ltd as trustee of a discretionary trust. However, her tenancy, according to her, requires her to pay $3000 per week in rent and the other costs of running the property.
Ms Richards’ affidavit discloses estimated monthly liabilities and expenses of between $35,000-$40,000. These were met entirely by payments from Mr R. That situation of dependency arose very soon after she regularly began to visit Mr R and when, as she puts it, her life became totally structured around her relationship with Mr R and her frequent visits to Sydney. During Mr R’s lifetime she was meeting her expenses both from money which he gave her directly and from the free access she had to his credit card (my emphasis).
In addition to what she received from Mr R, Ms Richards receives a disability support pension of $850 per fortnight. Mr R (sic) informed the Court that she had kept Centrelink informed about the money she received from Mr R but that this did not affect her entitlement to a disability pension. The Court was informed that Centrelink has taken the view that what Mr R was giving to her was to be categorised as gifts.
Earlier in his Honour’s reasons at [26-30] his Honour recites Ms Richards’ evidence to that Court as:
About a month after her aunt’s wake, Ms Richards made her first visit from Tasmania to see Mr R. He paid her costs of doing so. Very soon she began to visit Sydney every two to three weeks at the expense of Mr R. He would give her $1000 at each visit and pay for incidentals. She soon began to stay at Mr R’s apartment and began to occupy her aunt’s old room. Mr R’s residence comprises two adjoining units in (omitted). They began an intimate relationship which continued for many years. The frequency and regularity of Ms Richards’ visits to stay with Mr R rapidly increased. At one point in 2000 he increased the amount of money he would give her to $3000 for each visit. By 2008 she was visiting once a week. From 2008 the visits were twice a week.
Ms Richards quickly came to have a substantial wardrobe and other possessions kept in Mr R’s apartment in what came to be her room. She used Mr R’s address as her Sydney address and by 2007 says that she adored Mr R and had committed to ensure that “he was safe, happy, comfortable and well”. From about 2007 until his death Mr R required round the clock nursing care, which Ms Richards says she organised and, when in Sydney, supervised.
During the course of their relationship, Ms Richards and Mr R enjoyed many social occasions together and Ms Richards says that she was frequently assumed by others to be Mr R’s wife.
Mr R’s financial generosity to Ms Richards reflected his great wealth. He took over paying for her daughter’s education at (omitted) School. For a number of years for the four girls this involved a total cost of about $50,000 per year. He paid for holidays for Ms Richards and her daughters. According to her evidence, Ms Richards gave up much of her own life in order to be with and care for Mr R. Without suggesting that it is in any way comprehensive, Ms Richards provided a table attached to her affidavit which showed that between 2001 and 2011 Mr R had given her approximately $1.2 million towards her own expenses and the costs of the property (including making improvements) where she lived in Tasmania.
Ms Richards became completely financially dependent upon Mr R’s extraordinary largesse. For much of the period of their relationship Mr R paid for everything she required...
Leaving aside the Court’s incredulity that, in the light of this evidence to a Supreme Court, Ms Richards should continue to be entitled to a Centrelink benefit and one apparently means tested, it is difficult to accept that she should accrue credit card liabilities or not be able to meet those liabilities from the extraordinary generosity of her partner, Mr R, from whom she claims total dependency status.
I do not intend, in the interests of justice and equity, to include Ms Richards’ claimed credit card liabilities in the pool of property for consideration here.
Similarly, other claimed liabilities of Ms Richards are not, in my view, substantiated on the evidence as being other than post‑separation incurred liabilities and must be seen against the evidence given by Ms Richards to the Supreme Court of New South Wales which would indicate funds available to her to satisfy such liabilities.
Tax Credits
ix)At [97] of my first reasons I dealt with tax credits of $602,656 resulting from a former farming partnership between (omitted) and Mr Milstead. That partnership was dissolved in 2011 leaving a net loss and hence the tax credits for each partner in a sum of $301,328. In the 2014 reasons I determined to treat the tax credits as resources saying:
After hearing the evidence of Mr O, I am satisfied that these tax credits totalling $603,656 are properly financial resources to be included in the property pool. They are not, in my view, “assets” in the sense that they can be sold or transferred (even between the parties to this litigation). They are personal to each of (omitted) and Mr Milstead and dependent upon future income. They do however have some real value in the hands of each party and I will therefore include them as financial resources, respectively, of Mr Milstead and (omitted).
However, the evidence given at the second trial puts a different context to these tax credits. Firstly, Mr Milstead has “crystallised” a significant portion of his tax credits in the intervening period. This has quite simply resulted in a financial benefit in his hands. Secondly, Mr J says that he will utilise (omitted)’s tax credits personally or for his own companies in a form of a “set‑off” for his contribution to the corpus for the deed of company arrangement in a quantum of $360,000. Leaving aside any issue as to the propriety or legality of such a transaction, it is clear that, contrary to my previous reasons, the tax credits are capable of a transfer to Mr J and constitute, on the transaction, a crystallised benefit to (omitted). On consideration, therefore, I intend to include the tax credits in a quantum of $301,828 for each of (omitted) and Mr Milstead as assets. I include this figure for Mr Milstead whilst noting that he has utilised some of the credits for his own benefit following my previous reasons.
Mr Milstead - Superannuation
x)
On the material available to me after the first hearing, unsatisfactory as it was, I determined that Mr Milstead had superannuation entitlements of $55,000. He now says that his superannuation has been drawn down to a current value of $29,473 claiming to have made drawings on the basis of needs[5]. I do, however, now have more detailed evidence as to Mr Milstead’s earnings, both personally and through company structures, in the intervening period. On that basis I cannot be satisfied that his use of superannuation during that period was a necessary expenditure. Further, I accept the submission of Mr Fitzgerald for Ms Richards that there is now evidence before me of previous drawings by Mr Milstead from his superannuation on four separate occasions over a three month period in 2013 and totalling $50,000. In the 2012 financial year I am satisfied that his gross earnings were $141,300 and $46,425 in 2013.
[5] Omacini & Omacini (2005) FLC 93-218
I therefore accept Mr Fitzgerald’s submission that the appropriate value of Mr Milstead’s superannuation entitlement for the purposes of my consideration should be $79,473. Generally as to credit, I have no satisfactory explanation as to why this information was not forthcoming from Mr Milstead at the first hearing.
General Findings
xi)In all other respects the values of the parties’ assets are in accordance with my February 2014 reasons or otherwise agreed or not challenged on the evidence now before me. I intend to treat Mr Milstead’s superannuation as an asset given his age and current or soon to be availability. Consequently, I find the property pool for my consideration to comprise the following:
(omitted):
“Property M” $1,650,000
Plant and Equipment 20,800
Stock 17,815
Mazda Ute 7,859
Tax Credits 301,828
Subtotal $1,998,293Mr R – 2nd mortgage (342,000)
(omitted) Bank Mortgage (304,042)
Mazda Finance (not claimed
in counsel’s final submission)
Subtotal (646,042)
Total (omitted) Net Assets $1,352,251Ms Richards:
Mercedes Benz Equity (Post-Separation)
Household Contents $25,000
Jewellery 5,850
Other Personal Property 20,000
Benefit of Mr R Bequest (Post-Separation)
Total $50,850Mr Milstead:
Superannuation $79,473
(omitted) Lease 25,000
(omitted) Bank Account 25,000
(omitted) Bond 11,416
Ford (omitted) (financial statement) 2,000
Interest in (omitted) 2,416
Household Contents 2,000
Tools 1,500
Paintings and Sketches 2,000
Tax Credits 301,828
Total $452,633Total Net Assets of the Parties Inclusive of
Superannuation $1,855,734
Contributions
I deal with the parties’ contributions in some detail in my previous reasons [126]-[139]. On those considerations I allocated the property as to 80 per cent to Ms Richards (given her control of (omitted)) and
20 per cent to Mr Milstead. Mr Fitzgerald now argues that the property should be distributed 90 per cent to Ms Richards and 10 per cent Mr Milstead. He says that Mr Milstead withdrew $50,000 from his superannuation in 2013. I have, however, included this sum in the property pool itself. Secondly, Mr Fitzgerald alludes to Mr Milstead having crystallised the tax credits during the intervening period and after I had considered them as “financial resources”. This submission is dealt with by me now including the tax credits to the total value in the property pool as assets of both Mr Milstead and (omitted).
There has, of course, been a significant post‑separation contribution by Ms Richards by way of the effective satisfaction of Mr R’s loan of $342,000. She has been given full weight for this contribution by reason of the bequest not being included in the property pool.
I take into account that Ms Richards has made a further contribution by reduction of the (omitted) mortgage in the period since separation (although in her own evidence she at times referred to these monies being paid as “rent”). She has, however, had the continuing use and benefit of “Property M”. Consequently, and on consideration of all these factors, I remain of the view that on the basis of contributions, and given my findings in respect of the control of (omitted), that the property pool be altered as to 80 per cent to Ms Richards and 20 per cent to Mr Milstead.
Section 90SF(3) Factors
Although probate has not been granted on the late Mr R's Will and litigation continues in the Supreme Court of New South Wales, on a reading of the Will and its codicils and given his Honour’s comments and findings in the preliminary hearing, I am satisfied on the balance of probabilities that Ms Richards will benefit from Mr R’s estate considerably and probably to the extent of income of $500,000 per year together with some artworks and the use of the (omitted) apartment. I take into account that Ms Richards will now have “income” of $500,000 per year rather than the previous “gifts” as she claimed from Mr R and will therefore almost certainly lose the Centrelink benefit that she has enjoyed at least for the duration of these proceedings.
I generally accept the expert evidence as to Ms Richards’ unfortunate diagnosis of Parkinson’s Disease. Nevertheless, the state of her income is such that her health cannot be relevant to my consideration.
I am satisfied on the evidence now before me but not available in such detail at the previous hearing, that Mr Milstead has enjoyed a more lucrative income than I previously understood. Nevertheless, he is sixty-two years of age and I would reasonably anticipate him having limited worklife expectancy. In any event, and even given the updated evidence as to his income, that income will not approach that of Ms Richards whose income will not be dependent upon the vagaries of age and employment. Whilst Ms Richards’ income will be substantially greater than my finding as to the quantum of her benefits received in 2014, it is not for me to utilise the section 90SF(3) factors as a form of social engineering.
In summary, therefore, I consider the income discrepancy between the parties to have some considerable weight. I also give weight to the fact that Ms Richards will effectively have an ongoing benefit of the farm and what I see as the “resource” of the bequest from Mr R in extinguishing the mortgage. I take into account the parties’ ages and health issues. In all of those circumstances, I remain satisfied that there should be an adjustment of 20 per cent in favour of Mr Milstead on a consideration of these factors.
Conclusions
After consideration of the property pool, contributions and relevant section 90SF factors, I propose to alter the net property pool, inclusive of the assets of (omitted), as to 60 per cent to Ms Richards/(omitted) and 40 per cent to Mr Milstead. I calculate the net value of the property inclusive of Mr Milstead’s superannuation at $1,885,734. Mr Milstead’s entitlement in dollar value is therefore $742,294. He retains assets and superannuation to a value of $452,633, leaving him an entitlement of a cash adjustment from (omitted)/Ms Richards of $289,661. I note my comments at [153] of my previous reasons and which remain valid:
Given my findings as to Ms Richards’ control of the trust and hence (omitted)’s assets, these orders will obligate (omitted) given the limited personal position of Ms Richards outside of the Trust. Should the cash payment be unable to be made then inevitably Mr Milstead’s entitlement will be satisfied from the sale of “Property M” and my orders will provide accordingly.
I certify that the preceding forty-one (41) paragraphs are a true copy of the reasons for judgment of Judge McGuire
Date: 31 August 2016
Key Legal Topics
Areas of Law
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Family Law
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Equity & Trusts
Legal Concepts
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Remedies
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Costs
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Fiduciary Duty
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Constructive Trust
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