Morrigan & Hilma
[2024] FedCFamC1F 155
•19 March 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Morrigan & Hilma [2024] FedCFamC1F 155
File number(s): SYC 179 of 2022 Judgment of: SCHONELL J Date of judgment: 19 March 2024 Catchwords: FAMILY LAW – PROPERTY – Assessment of contributions – Where the parties had a relationship of 14 years – Where there are no children of the relationship – Where the husband has three children from a prior relationship who lived with the parties for half the time – Where the initial contributions of the husband exceeded the wife’s – Where during the relationship, both parties used their best endeavours and applied their energies toward the relationship – Where interests that the husband had in various corporate entities at the commencement of the relationship provided significant financial benefits to the parties – Where after separation, the companies ultimately failed – Where the wife submitted that the Court should consider this when weighing contributions – Where there was no suggestion put to the husband that he was reckless or acting in other than what he perceived to be in the best interests of the companies – Where this is a matter of history rather than fault or conduct – Where the failure of the companies did not diminish the husband’s contributions.
FAMILY LAW – PROPERTY – Addbacks – Paid legal fees – Where the husband contended that the Court should exclude his paid legal fees from the Balance Sheet, apart from an amount allegedly sourced from capital, as the funds were allegedly derived from his post-separation income – Where the wife submitted that the Court should either include or exclude all paid legal fees – Where it is artificial to draw the distinction sought by the husband – Where the husband was able to pay his legal fees from post-separation income because he retained the benefit of income from his businesses and his earning capacity, to which the wife contributed – Where other paid legal fees are excluded from the Balance Sheet.
FAMILY LAW – PROPERTY – s 75(2) adjustment – Alleged uncrystallised liability – Where the husband asserts there should be an adjustment in his favour because of the likelihood he will be pursued by the ATO in consequence of the liquidator seeking to recover allegedly unfair preference payments – Where there is no evidence before the Court as to the quantum of the amount that may be pursued – Where there is no evidence that the liquidator will actually seek to recover the payments – Where there is no evidence of the husband’s potential defences – Where it was within the husband’s purview to adduce such evidence – No adjustment made.
FAMILY LAW – PROPERTY – s 75(2)(o) adjustment – Where the wife submitted there should be an adjustment made in her favour for her contributions toward the care of the husband’s children from his prior relationship – Where it was found that the wife’s contribution was a significant and substantial contribution – Adjustment made in the wife’s favour – 6 per cent adjustment to the wife for 75(2) factors.
FAMILY LAW – PRACTICE AND PROCEDURE –Where there are a number of entities in the asset pool – Where the parties’ proposed orders were complex – Where the Court wishes to ensure that its orders give effect to the various mechanical provisions contained in the parties’ proposed orders – Reasons for judgment delivered without corresponding orders to effect that division – Parties directed to provide the Court an agreed Minute of Order, or respective Minutes of Orders, which reflect the Court’s reasons and percentage determination.
Legislation: Corporations Act 2001 (Cth), ss 588FGA(2), 588FGA(3)
Family Law Act 1975 (Cth), ss 75(2), 79
Cases cited: Adamson & Adamson (2014) FLC 93-622
AJO & GRO (2005) FLC 93-218
Biltoft and Biltoft (1995) FLC 92-614
Bonnici v Bonnici (1991) FLC 92-272
Browne v Green (1999) FLC 92-873
Coldham-Fussell & Ors v Commissioner of Taxation (2011) 82 ACSR 439
Dickons v Dickons (2012) 50 Fam LR 244
Fletcher v Anderson (2014) 292 FLR 269.
Hickey & Hickey & Attorney-General for the Commonwealth of Australia (intervener) (2003) FLC 93-143
Horrigan & Horrigan [2020] FamCAFC 25
Jabour & Jabour (2019) FLC 93-898
NHC & RCH [2005] FamCA 334
Robb and Robb (1995) FLC 92-555
Rodgers and Rodgers (No 2) (2016) FLC 93-712
Singerson & Joans [2014] FamCAFC 238
Stanford v Stanford (2012) 247 CLR 108
Trevi & Trevi (2018) FLC 93-858
Whisprun Pty Ltd v Dixon (2003) 200 ALR 447
Division: Division 1 First Instance Number of paragraphs: 148 Date of hearing: 26, 27, and 28 February 2024 Place: Sydney Counsel for the Applicant: Ms Vohra SC, Mr Richardson Solicitor for the Applicant: Lander & Rogers Counsel for the Respondent: Mr Lethbridge SC Solicitor for the Respondent: Blanchfield Nicholls ORDERS
SYC 179 of 2022 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MR MORRIGAN
ApplicantAND: MS HILMA
Respondent
ORDER MADE BY:
SCHONELL J
DATE OF ORDER:
19 MARCH 2024
THE COURT DIRECTS THAT:
1.Within seven days, the parties are to confer and submit to Chambers an agreed Minute of Order, in the format of Exhibit 26, that reflects the percentage division in, and otherwise accords with, these Reasons for Judgment.
2.In the event the parties are unable to reach agreement in accordance with Order 1 above, they are to submit a Minute of Order to Chambers within a further seven days, in the format of Exhibit 26, which they contend reflects the percentage division in, and otherwise accords with, these Reasons for Judgment and which clearly identifies the areas of dispute.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Morrigan & Hilma has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
SCHONELL J:
These are proceedings for financial adjustment following the breakdown of the parties’ marital relationship after 14 years of cohabitation.
The applicant husband (“husband”) asserted the Court should find the contribution assessment favours him as to 65 per cent, with a 5 per cent adjustment pursuant to s 75(2) of the Family Law Act 1975 (Cth) (“Act”) to the wife to recognize her contributions towards the care of his children, and a 5 per cent adjustment to him for the risk that he might be pursued by the Australian Tax Office (“ATO”) in circumstances where a liquidator determined that various payments to the ATO were unfair preference payments. Overall, the husband sought a 65 / 35 percentage split of the parties’ assets in his favour.
The wife’s senior counsel submitted the Court should find contributions favour the husband in the range of 57.5 per cent to 60 per cent. The wife further submitted that there should be a s 75(2) adjustment in favour of the wife, of between 5 per cent and 7 per cent to account for the disparity between the parties as to income and earning capacity, the wife’s age, the wife’s state of health, and her contributions to the care of the husband’s children from a previous relationship. The effect of this submission would give rise to an overall result in the range of 50.5 per cent to 55 per cent in favour of the husband. That said, the wife’s alternate Minute of Order (Exhibit 26, Wife’s Alternate Minute of Order dated 27 February 2024) sought a 52.5/47.5 percentage split in favour of the husband.
For reasons that will become apparent, I am not satisfied that either party’s position is just and equitable.
BACKGROUND
The husband was born in 1964. The wife was born in 1968. Both parties are 56 years old.
The parties commenced cohabitation in 2004. They separated on 1 August 2018. This was a relationship of 14 years.
According to the wife, in 2003, prior to the commencement of cohabitation, B Pty Ltd was incorporated. The husband was the sole director of B Pty Ltd, and C Pty Ltd as Trustee for (“ATF”) the Morrigan Family Trust was the sole shareholder. These entities, amongst others, are referred to in more detail in these Reasons for Judgment.
The wife deposed that in 2004, she relocated from Melbourne to live with the husband at his home in Sydney, situated at 1 D Street, Suburb E, NSW (“1 D Street property”). The husband’s former partner lived at 2 D Street (“2 D Street property”).
The husband and his former partner have three children. At the commencement of cohabitation, the children were aged ten, seven, and five, and they lived between the husband and his partner on an alternate-night basis. The husband and her were assisted in their care of the children by a nanny.
The parties agree that, at the commencement of cohabitation, the husband had the following assets, liabilities, and/or financial resources:
(a)Units in the F Unit Trust. This trust was established in 1999. The units were held equally by G Pty Ltd, an entity associated with the husband’s business partner, Mr H, and C Pty Ltd;
(b)Interest in C Pty Ltd, ATF the Morrigan Family Trust. This entity had a 48.5 per cent interest in J Pty Ltd;
(c)Interest in the Morrigan Family Trust No 2; and
(d)Interest in the Morrigan Family Superannuation Fund, a self-managed super fund.
The parties agree that, at the commencement of cohabitation, the wife had the following assets, liabilities, and/or financial resources:
(a)K Street, Suburb L, Victoria (“Suburb L property”), subject to a mortgage;
(b)A business, M Company, purchased shortly before cohabitation;
(c)Cash at bank;
(d)A credit card account; and
(e)Superannuation with Superannuation Fund 1.
At the commencement of cohabitation, the husband worked full-time at J Pty Ltd. The wife operated M Company from the 1 D Street property, which was owned by the F Unit Trust, subject to a mortgage.
According to the wife, at the end of the school year in 2004, the nanny advised that she would not be returning the following year. The wife contended that the parties chose not to hire another nanny and that the wife, with the husband’s assistance, undertook the majority of the care of the children while they were staying at the 1 D Street property. The wife deposed that she often collected the children from school, supervised them in the afternoons, and prepared their school lunches. For the remainder of the time, the wife said, the children were taken care of by their mother. The husband deposed that he was a very involved parent, and that housework and administrative matters were shared between the parties. He gave evidence that he and the wife worked together, depending on their individual daily commitments, to wake the children, get them breakfast, and pack their school bags. He deposed that the wife prepared the children’s school lunches, and that he attended to other household tasks.
The wife deposed that in 2005, the children started to live with the parties from Wednesday to Saturday each week, and later, from Sunday to Wednesday each week. They spent the rest of their time with their mother. At this time, the wife said, she began to employ staff at M Company, which freed up her time to attend to the husband’s children. The husband, on the other hand, deposed that between 2004 and 2011, the wife worked extensive hours for her business.
In 2005, during the parties’ cohabitation, the share structure of J Pty Ltd changed. An additional 100 shares were issued, resulting in G Pty Ltd and C Pty Ltd each holding 47 per cent of the shares respectively, and an entity known as N Company holding the remaining six per cent.
In 2006, the husband purchased a property at 1 P Street, Suburb Q, NSW (“1 P Street property”) in his sole name for over $1,300,000. The purchase was funded by a Westpac loan of $1,056,000. The wife then started to operate M Company from the P Street property.
In 2008, J Pty Ltd changed its name to R Pty Ltd.
In 2008, the husband and the wife married.
The wife deposed that from about 2009, she became more involved in keeping and maintaining financial records of the parties.
In 2009, the entity S Pty Ltd was registered. The husband and wife were the shareholders and directors of S Pty Ltd. At this time, C Pty Ltd retired as the trustee of the Morrigan Family Superannuation Fund, and S Pty Ltd was appointed in its place. The wife then rolled her Superannuation Fund 1 entitlement of $38,382.81 into the Morrigan Family Superannuation Fund.
In 2009, B Pty Ltd purchased, on trust for S Pty Ltd, unit T Street, Suburb U (“T Street property”) for $500,000. The wife started to operate M Company from that property, and paid rent for her occupation. The wife deposed that the husband fitted out the top floor of the T Street property with his office, and utilized that space.
In 2010, the parties jointly obtained a NAB Portfolio Facility (“NAB Portfolio Facility”) with a limit of $1,728,000, secured over the 1 D Street Property and the Suburb L property.
The NAB Portfolio Facility initially had the following three sub-accounts, with a total debit of $932,595:
(a)#...17 in the name of C Pty Ltd ATF Morrigan Family Trust (“NAB account #...17”): debit balance of $705,867.59. The husband used this account to pay for his children’s school fees and to regularly loan money to R Pty Ltd;
(b)#...32 in the wife’s sole name (“NAB account #...32): debit balance of $214,435.62, being the amount that was required to discharge the mortgage secured against the Suburb L property by the Commonwealth Bank of Australia (“CBA”).
(c)#...91 in the parties’ joint names (NAB account #...91): debit balance of $12,292.29.
According to the wife, by early 2011, M Company was being overtaken by technology advances. Consequently, the parties agreed that she would sell the business, and would use her time to look after his children, the Suburb Q property, the parties’ parents, and their personal financial affairs. The husband puts much of this asserted agreement in issue.
In early 2011, the wife sold M Company for $40,000, and entered, via C Pty Ltd, a 12‑month consulting contract with the purchaser. Between early 2011 to early 2012, the wife worked part-time pursuant to this contract.
From early 2011, the wife started to receive distributions from the trusts referred to above.
In mid-2011, G Pty Ltd agreed to sell 306 ordinary shares and one preference share in R Pty Ltd to C Pty Ltd. C Pty Ltd paid $500,000, and also facilitated the repayment of two debts of $76,500 and $57,626.04.
According to the wife, in 2013, the husband’s children started to live with the parties on a full‑time basis. They had dinner with their mother three nights a week. The wife contended that she remained primarily responsible for the homemaking and caring duties. The husband deposed that from 2011, the children were aged 17, 15, and 13, and were independent.
In mid-2013, the parties applied for a further loan facility with NAB, as they wanted to purchase a property at 2 P Street, Suburb Q, NSW (“Suburb Q property”). NAB approved the parties’ request for new bridging funding of $1,450,000, for a purchase of up to $1,800,000.
In mid-2013, the parties purchased, in the wife’s sole name, the Suburb Q property for over $2,000,000. Upon the settlement of the sale of the Suburb Q property in mid-2023, the parties rented it out.
The husband deposed that in mid-2013, in order to help fund the purchase and subsequent renovation of the Suburb Q property, the husband sold his shareholdings with V Company, worth approximately $105,000.
In mid-2013, the parties sold the 1 P Street property for $1,500,000. Net proceeds of $441,509.81 were deposited into the NAB account #...91 and applied to the purchase of the Suburb Q property.
In mid-2013, the wife sold the Suburb L property for over $650,000, and upon its settlement the mortgage was discharged and the balance of the proceeds applied to the Suburb Q property.
From 2014 onwards, the parties commenced the design phase of their plan to knock down and rebuild the Suburb Q property. In 2015, they obtained developmental consent from the council for the demolition of the existing residence and the construction of a new two-storey residence.
In late 2014, a company known as W Company, which later became part of X Ltd, an ASX listed company, acquired 60 per cent of R Pty Ltd. The remaining 40 per cent was held by C Pty Ltd. The proceeds of this sale to W Company were received in tranches over several years. The first two tranches were paid to the NAB account #...17 as follows:
(a)mid-2014: R Pty Ltd dividend payment of $296,890; and
(b)late 2014: $4,453,596.
These sale proceeds were largely applied as follows:
(a)$300,000 was transferred to the husband’s former partner, to the loan account associated with the 2 D Street property;
(b)$1,166,000 was credited to the NAB account #...45; and
(c)$2,150,000 was placed into term deposits to accrue interest.
The husband deposed that the net sale proceeds were, in part, applied in the construction of the Suburb Q property.
In late 2014, R Pty Ltd advised the husband that he would continue in his position as Managing Director and would be remunerated at a base salary of $350,000 per annum.
Between 2015 and 2017, the parties demolished the existing home on the Suburb Q property and constructed a new home.
In mid-2016, an R Pty Ltd dividend of $2,243,641.60 was paid to NAB account #...17. The following month, W Company made a further payment of $3,750,000 to this same NAB account.
In 2017, the parties moved into the Suburb Q property. The parties rented out the 1 D Street property.
In early 2018, an R Pty Ltd dividend of $1,794,046.40 was paid to NAB account #...17.
On 1 August 2018, the parties separated on a final basis. They continued to reside under the same roof at the Suburb Q property.
Both parties deposed to the other party expending joint funds post-separation, at times without the consent of the other. While these Reasons do not set out the entirety of the history of the parties’ use of funds post-separation, I have considered the evidence of each party on this issue.
In late 2018, the husband moved to a three-bedroom unfurnished property in Suburb E. The husband deposed that his rent was initially $1,600 per week and increased to $1,800 per week in mid-2023. According to the parties’ Joint Chronology filed on 23 February 2024 (p 9), the husband’s children who were then aged 24, 21, and 20, elected to continue to live with the wife at the Suburb F property. However, the parties depose in their respective affidavits that two of the three children lived with the wife until May 2019, and then they both moved out. The wife was exclusively responsible for the maintenance and repairs of the Suburb F property from this time.
In mid-2019, the wife and her sisters purchased a property at Y Street, Suburb Z, City AA (“Y Street property”) for $399,000, as tenants in common with equal one-third shares. Each of the wife and her sisters paid about $140,00 toward the purchase price and associated costs. In order to pay for her portion of the purchase price, the wife drew funds from the BB Family Trust, with the husband’s agreement.
In September 2019, the mortgage secured against the 1 D Street property was discharged.
In October 2019, the mortgage secured against the Suburb F property was discharged.
In about mid-2020, the husband purchased a property at CC Street, Town DD (“Town DD property”), as tenants in common with his then partner, Ms EE, for $1,700,000. The purchase was funded by a loan, secured by a mortgage of $1,360,000. The husband deposed that he applied approximately $424,014 from his savings account toward the purchase and associated costs.
The husband gave evidence that he separated from his former partner, Ms EE, in late 2020.
In late 2020, a divorce order between the husband and the wife was made by this Court.
In early 2021, the wife rolled out her interest of $629,000.18 in the Morrigan Family Superannuation Fund to an account with Superannuation Fund 2. She also resigned as the director of S Pty Ltd and transferred her interest in this entity to the husband.
In early 2021, R Pty Ltd reacquired the 60 per cent stake that was held by X Ltd (formerly W Company). Consequently, the husband became the sole director of R Pty Ltd, and C Pty Ltd became the sole shareholder.
In late 2021, the husband commenced court proceedings for financial relief against his former partner, Ms EE. These proceedings were resolved the following month by consent orders which provided for the husband to pay Ms EE $60,000, and for Ms EE to transfer her interest in the Town DD property to the husband, amongst other orders.
In late 2021, the wife’s father passed away and she received an inheritance of $83,333.33 from her father’s estate.
In October 2021, the husband advised the wife by email that R Pty Ltd was operating under safe harbour provisions.
In January 2022, the husband commenced these proceedings, seeking a property adjustment.
In early 2022, the wife’s mother passed away, and the wife received the following by way of inheritance:
(a)12 October 2022: $99,600;
(b)29 November 2022: $39,948.74; and
(c)31 January 2024: $13,386.27.
In mid-2022, R Pty Ltd entered into voluntary administration.
In late 2022, FF Pty Ltd was incorporated. The wife and her nephew are the directors and equal shareholders of FF Pty Ltd. FF Pty Ltd is the trustee of GG Trust, which is a unit trust. The wife owns 30 units, and a trust associated with the wife’s nephew and his wife hold the other 30 units.
In late 2022, the husband, through his corporate nominee HH Pty Ltd, entered into a 12‑month contract with JJ Pty Ltd to provide contractor services to KK Company. Between 20 October 2022 and 23 October 2023, the husband received $777,304, inclusive of a KPI-based bonus of $390,500 paid to him on 23 October 2023.
In late 2022 FF Pty Ltd as trustee for GG Trust settled on the purchase of MM Street, Town NN for around $800,000. The wife contributed $194,933.33 to this purchase, from the following sources:
(a)$83,333.33 from her share of her late father’s estate;
(b)$99,600 from her share of her late mother’s estate; and
(c)$12,000 from her NAB account ending #...63.
On 20 December 2022, the creditors of R Pty Ltd resolved to wind up the group, and determined that two liquidators be appointed.
In early 2023, the wife and her sisters sold the Y Street property for around $600,000. The proceeds were provided to the wife’s sister in repayment of a loan.
DOCUMENTS RELIED UPON
The husband relied upon the following documents:
(a)Amended Initiating Application filed 21 April 2023;
(b)Affidavit of the husband filed 5 February 2024;
(c)Financial Statement filed 2 February 2024; and
(d)Case Outline document.
The wife relied upon the following documents:
(a)Amended Response to Initiating Application filed 19 January 2024;
(b)Affidavit of the wife filed 2 February 2024;
(c)Affidavit of Ms LL filed 2 February 2024;
(d)Affidavit of Mr PP filed 6 February 2024; and
(e)Financial Statement filed 2 February 2024.
Each of the husband and wife were cross-examined. The two witnesses in the wife’s case were not cross-examined.
An issue in the proceedings was whether the liquidator of the R Pty Ltd group of companies would seek to recover unfair preference payments made to the ATO. The husband, at the commencement of the hearing, sought leave to rely upon an affidavit of the administrator filed on the Friday before the hearing commenced, and outside of directions that required affidavits to be filed by 2 February 2024.
Senior counsel for the husband submitted, in explanation for why the affidavit was filed so late, that the administrator had until very recently been unwilling to swear an affidavit. The wife’s senior counsel opposed leave being granted, contending that its lateness denied the wife an opportunity to properly consider the evidence and obtain expert advice about its contents and ramifications. I ultimately granted leave to the husband to rely upon the affidavit, conditional on the wife having sufficient opportunity to obtain advice.
The administrator was initially not available for cross-examination. I was later advised he would be available for cross-examination at 9.30 am on the third day of the hearing. In the afternoon of the second day of the hearing, I was advised by senior counsel for the wife that she had not had sufficient time to obtain advice and consider the contents of the affidavit. I indicated that, in the event that the wife was not able to meet the affidavit, the matter may have to go part-heard and that I had available dates in August and September of this year.
The husband’s senior counsel then advised the administrator would be available to give evidence at 10.00 am on the fourth day of the hearing. The wife’s senior counsel indicated that this still did not provide her with sufficient time, and the matter would have to be adjourned. Following a short adjournment, the husband’s senior counsel indicated the husband would not seek to rely on the affidavit.
EVIDENCE AND CREDIT
I have read all of the evidence relied upon in the proceedings, including the Exhibits, but do not propose to repeat all of it in these reasons. As the High Court reminds in Whisprun Pty Ltd v Dixon (2003) 200 ALR 447:
62. … A judge’s reasons are not required to mention every fact or argument relied on by the losing party as relevant to an issue. Judgments of trial judges would soon become longer than they already are if a judge’s failure to mention such facts and arguments would be evidence that he or she had not properly considered the losing party’s case.
Each of the parties were cross-examined. I carefully observed them give their evidence and the way they each answered questions.
The husband was careful in the way in which he gave his evidence. On a number of occasions, he was at pains to ensure that his answer was comprehensive, and he often did not agree with the contentions put by the wife’s senior counsel. The mere fact that he did not make concessions is not illustrative of mendacity. Nor is a failure to concede a hallmark of a witness who seeks to mislead or obfuscate. It can equally be the mark of one who is assured of the correctness of their position.
Senior counsel for the wife urged that I make a credit finding in relation to the evidence of the husband and, where there is some disputed issue of fact, that I should prefer the evidence of the wife to that of the husband.
I am conscious of what the Full Court said in Adamson & Adamson (2014) FLC 93-622:
89.In Carlson & Fluvium [2012] FamCA 32 (“Carlson”) at [165] to [169] Kent J made the following observations concerning the making of adverse credit findings against a parent in a parenting case:
165.As a general proposition, civil courts usually refrain from specific adverse credit findings against litigants if the disposition of the case can legitimately be achieved otherwise. There are good reasons for that approach. For example, a specific finding that a litigant has misled the court might be tantamount to a finding of perjury. Further, it can be accepted as a given that human beings have the capacity to reconstruct or rationalise or even misconstrue past events or conduct, or to engage in self-justification, particularly in recounting events in highly emotive settings or in respect of highly emotive issues. This may make the distinction between an honest, although wrong, account on the one hand, and a deliberate and calculated obfuscation on the other, difficult to draw.
166.To deny significant limitations in the capacity to use assessment of the demeanour of a witness as an entirely reliable guide to his or her truthfulness would be to deny the existence of plausible liars; or those who may be timid, uncertain or unconvincing, but nevertheless truthful, in relating events.
167.Moderation in this respect is also called for when it is recognised that adverse credit findings in arriving at a decision at first instance may present a significant hurdle to legitimate rights of review of that decision on appeal.
Whilst these observations are made within the context of a parenting case, in my view, they are apposite to financial proceedings.
A credit finding must serve some purpose in proceedings. Commonly it is sought where some factual controversy requires determination to resolve an issues or issues as raised by the parties. When senior counsel for the wife was pressed as to what factual matter required a determination that could only be achieved through a finding as to credit, he responded by referencing the earning capacity of each of the parties. I am not satisfied that it is necessary to make a credit finding to resolve the issue of the earning capacities of the parties. There is no controversy as to their respective earning capacities. The earning capacity of the husband is made apparent by his income in the years of the relationship and subsequent to separation, compared to that of the wife who worked until 2011 or 2012 and not thereafter. These are matters about which there is no controversy. Further, senior counsel for the wife conceded that the wife had an earning capacity, it was just less than that of the husband.
I do not propose to make a general or specific credit finding, nor do I prefer the evidence of one party to that of the other.
I am satisfied that each party attempted to assist the Court in the determination that it was required to make, and gave their evidence truthfully. While each had, in some instances, a very different perception of their contributions relative to the other, that does not mean that they each did not tell the truth as they perceived it. It is ordinary human experience that two people can have a very different perception of the event.
FORM OF ORDER
By the time of submissions, each of the parties had formulated a final proposal for the distribution of their assets. In the case of the husband, he proposed to: pay the wife $500,000; retain the Suburb F property; sell the Town DD property and the 1 D Street property; realise the shares held by QQ Pty Ltd and for each party to receive 50 per cent of the net share sale proceeds; for a superannuation split to the wife; and for there to be an adjusting payment to give effect to an overall 65/35 per cent property division in his favour (Exhibit 16, Final Orders Sought by the husband, dated 28 February 2024). The intent of the husband’s orders, in seeking a sale of those assets, was to realise cash to give effect to a property settlement to the wife where he did not wish to retain those particular assets. Further, the shares in QQ Pty Ltd and the 1 D Street property were impregnated with Capital Gains Tax (“CGT”).
On the part of the wife, she sought orders in the alternative. By her Amended Response to Initiating Application filed 19 January 2024, she sought, amongst other orders, the sale of the Suburb F property, and a division of the proceeds of that property (after allowance for the payment of CGT on its sale) and the other assets so as to effect an overall distribution of 55 per cent to the husband and the balance to the wife, and for the husband to retain the Town DD property, the 1 D Street property, and QQ Pty Ltd, in addition to the entities and trusts. The effect of the wife’s Response would be to compel the husband to retain assets that he did not wish to retain, and leave him with assets that had a significant CGT impost, while denying him the opportunity to retain the Suburb F Property in circumstances where the wife did not wish to retain it.
I indicated to the parties that I did not consider it to be just and equitable to compel parties to retain assets they did not want, and to seek a disposal of others, in circumstances where a party wished to retain them. I am satisfied that it would be unjust and inequitable for the Court to impose retention upon a party of a particular asset if they clearly indicate they do not wish to retain it, and where there is no suggestion that the intention of disposal is other than bona fide.
Having raised this with the parties, no party sought to contend that it would be just and equitable to sell the Suburb F Property and impose upon the husband the retention of assets that he clearly did not wish to retain. In those circumstances, the wife proposed an alternative Minute of Order (Exhibit 26, Wife’s Alternate Minute of Order dated 27 February 2024) that mirrored, in large terms, the orders proposed by the husband save for a slightly different wording for the basis of any tax calculation, did not involve a superannuation split to her where she did not want one, and was based upon a different percentage division. The husband’s senior counsel agreed with the amendments to Exhibit 26, other than in respect of the superannuation split and percentage division.
I am satisfied that the husband’s proposal and the wife’s alternative proposal are a fair way of allocating the parties’ assets between them, save for the percentage division set out in those proposals. Consistent with that approach, I do not propose to impose upon the wife a superannuation split in the amount that the husband seeks. To impose it upon the wife would be to impose upon her a transfer of property which she does not wish to receive, in circumstances where I have acceded to the husband’s request that he not be forced to retain assets he does not want to keep. It would be unfair to favour the husband’s approach but to deny the same to the wife.
The orders the parties agree upon have some complexity to them. To ensure that the Court makes orders that give effect to the various mechanical provisions contained in Exhibit 26 but reflect its ultimate determination, I propose to direct the parties to file an agreed Minute of Order, in the format of Exhibit 26.
BALANCE SHEET
The parties produced, in submissions, a Joint Balance Sheet that recorded the assets and liabilities with the values they attributed to each (Exhibit 23). It records as follows:
Ownership
Description
Applicant Husband's value
Respondent Wife's value
ASSETS
Real property
1
Wife
2 P Street, Suburb F, NSW
$6,250,000
$6,250,000
2
Husband
CC Street, Town DD NSW 2574
$2,050,000
$2,050,000
Furniture and Effects
3
Joint
Furniture located at Suburb F property
Exclude on the basis same are divided between parties in specie
Exclude on the basis same are sold and proceeds divided subject to either party seeking specific items
4
Husband
Furniture and effects in Husband's possession
$20,000
$20,000
5
Wife
Personal effects in Wife's possession
$15,000
$15,000
Motor Vehicles
6
Wife
Motor Vehicle 1
$30,000
$30,000
Bank Accounts
7
Wife
RR Bank Everyday Account ending #...19
$115
$115
8
Wife
NAB Transactional Account ending #...63
$101,965
$101,965
9
Wife
RR Bank account ending #...43
$18
$18
10
Wife
NAB trading account #...51
$6,173
$6,173
11
Husband
Westpac Choice Account ending #...84
$200,506
$200,506
12
Husband
Westpac Choice Account ending #...92 (1/2 interest)
$1,000
$1,000
13
Husband
NAB Classic Banking Account ending #...02
$499,077
$499,077
Shares
14
Wife
NAB Trade Share Portfolio Account number …37
$44,776
$44,776
15
Husband
SS Investments Account number …55
$7,950
$7,950
Other
16
Wife
Balance of inheritance to be received
$13,000
$13,000
17
Wife
Funds held in solicitors trust account for legal fees not yet paid
$104,650
$104,650
18
Husband
Funds held in solicitors trust account for legal fees not yet paid
$220,000
NIL - accounted at Item 37
19
Wife
Owing from Ms LL
$1,408
$1,408
Companies and Trusts
Wife
FF Pty Ltd
20
Wife's interest
$401,000
$401,000
Husband
C Pty Ltd ATF TT Unit Trust
21
1 D Street, Suburb E, NSW
$3,150,000
$3,150,000
22
Westpac Cheque Account ending #...55
$17,542
$17,542
Husband
C Pty Ltd ATF Morrigan Family Trust
23
NAB Classic Banking Account ending #...17
$30,168
$30,168
24
Shares in UU Pty Ltd
$55,854
$55,854
25
225,000 shares in VV Ltd
$2,925
$2,925
WW Pty Ltd ATF BB Family Trust
26
XX Bank Cash Management Account ending #...40
$17
$17
27
100,000 shares in YY Pty Ltd
$54,000
$54,000
Husband
B Pty Ltd
28
NAB Cash Manager Account ending #...81
$3,057
$3,057
Husband
HH Pty Ltd
29
Motor Vehicle 2
$52,613
$52,613
30
Motor Vehicle 3
$36,000
$36,000
31
XX Bank Cash Management Account ending #...59
$81,753
$81,753
Joint
QQ Pty Ltd
32
XX Bank Cash Management Account ending #...92
$32,320
$32,320
33
Shares
$625,042
$625,042
34
ZZ Investments Fund
$205,149
$205,149
35
ZZ Investments High Conviction Fund
$218,448
$218,448
Joint
AB Pty Ltd ATF AC Family Trust
36
XX Bank Cash Management Account ending #...96
$11,127
$11,127
Total
$ 14,542,653
$ 14,322,653
ADDBACKS
37
Husband
Legal fees not met from income.
The Husband notes that the figured asserted by the Wife includes paid legals and the $236,000 currently held in the trust account of the Husband's solicitor for legal fees not yet paid.
$16,441
$415,769
38
Wife
Legal and Accounting Fees paid from capital
The Husband notes that the figure asserted by him includes legals paid by the Wife. The funds presently held in the Wife's solicitor's trust account are represented at Item 17.
$250,806
$217,605
39
Wife
Lump sum drawings - from WW Pty Ltd ATF BB Family Trust – XX Bank Cash Management Account #...40
NIL
NIL
40
Husband
Funds drawn from QQ Pty Ltd and BB Family Trust
NIL
NIL
41
Husband
Payment to Ms EE
NIL
NIL
Total
$ 267,247
$ 633,374
LIABILITIES
Credit Cards
42
Husband
Westpac Mastercard Account ending #...61
$0.00
nil
43
Husband
American Express Card Account ending #...01
$0.00
nil
44
Wife
NAB Visa Account ending #...75
NIL
nil
Mortgages
45
Husband
National Australia Bank Home Loan Account ending #...11 - Secured by mortgage over CC Street, Town DD NSW
$1,323,000
$1,323,000
Tax
46
Husband
Capital gains tax on sale of Town DD
$0.00
TBA
47
Wife
Capital gains tax on sale of Suburb F
$0.00
TBA
48
Husband
Capital gains tax on sale of D Street if required to be sold
$792,100
$792,100
Total
$2,115,100
$2,115,100
SUPERANNUATION
Member
Name of Fund
Type of Interest
Applicants value
Respondents value
Husband
S Pty Ltd ATF Morrigan Family Superannuation Fund
Self-Managed Superannuation Fund
49
XX Bank account ending #...67
$6,694
$6,694
50
NAB Bank account ending #...18
$114,501
$114,501
51
Shares: 2,125 units in AD Ltd
$7,862
$7,862
52
T Street, Suburb U NSW
$1,300,000
$1,300,000
54
Wife
Superannuation Fund 3 (Member Number …)
Accumulation
$795,241
$795,241
Total
$2,224,298
$2,224,673
NETT TOTAL ASSETS (including Superannuation)
$14,919,098
$15,065,225
(As per original)
I note that there is an error in the calculation for the “total superannuation” under the wife’s column above. The total should be $2,224,298, as set out by the husband.
The parties agreed as to the composition of the Balance Sheet, other than in respect of how the Court should deal with funds held in their solicitor’s trust accounts and paid legal fees (Items 17, 18, 37, and 38).
The husband contended, consistent with the Full Court’s observations in NHC & RCH [2005] FamCA 334, that the Court should, in the exercise of its discretion, exclude his paid legal fees in the amount contended for by the wife at Item 37. The husband sought only to add back an amount of $16,441, submitting this amount had been sourced out of capital. In relation to the wife’s legal fees at Item 38, the husband’s submission was that the funds were sourced from various amounts of capital that the wife had access to in the period after separation, and should be included on the Balance Sheet as an addback.
The wife’s senior counsel submitted that the Court should either include, or alternatively exclude, all paid legal fees. The wife’s senior counsel submitted that there was a degree of fluidity in relation to the husband’s access to capital and income, and the Court could not confidently discern what capital the husband had access to, and what income had been applied toward the payment of legal fees. In that respect, the wife’s senior counsel referenced a letter from the husband’s solicitor dated 18 November 2022, that referred to the husband withdrawing from various corporate bank accounts the sum of $1,018,000. The letter included the following sentence: “Our client has done so for the sole purpose of ensuring the preservation of those funds” (Exhibit 12, Letter from wife’s solicitor to husband’s solicitor dated 16 November 2022, p 2).
Notwithstanding the content of that letter it became apparent, during the husband’s cross-examination, that the funds were not all preserved. At best, the amount preserved for the purposes of the final hearing totalled the amounts in Items 11, 13, 29, and 30 in the Balance Sheet, leaving approximately $229,000 of the funds expended by the husband. The wife’s senior counsel submitted this is an example of how the husband has shifted money around and that the Court should not, in the exercise of its discretion, exclude the husband’s paid legal fees in circumstances where he has otherwise had resort to capital to meet other expenses. In essence, where the husband has had access to large sums of capital and income, it is highly artificial to draw the distinction the husband seeks.
The authorities on the question of addbacks make clear that whether something is added back is ultimately a matter of discretion. In AJO & GRO (2005) FLC 93-218, the Full Court said:
30.To date, three clear categories of cases have emerged where the Court has determined that it is appropriate to notionally add back to the pool of assets, that is, assets that no longer exist. They are:
(a) Where the parties have expended money on legal fees. In DJM and JLM (1998) FLC 92-8l6 the Full Court said at 85,262:
“11. 6 For reasons set out in Farnell, s 117 provides that each party to proceedings under the Family Law Act shall bear their own costs unless the Court otherwise orders. Failing to add back monies expended by parties on costs frequently has the effect of defeating the policy of s 117 by permitting the pool of available assets for distribution between the parties to be diminished by any monies that either of the parties have managed to spend on their costs up to the date of trial. We are of the view that the normal approach ought be to add costs already paid back into the pool. Whilst there may be cases where that approach is inappropriate, the reasons why it is not taken ought normally be spelt out.”
(b) Where there has been a premature distribution of matrimonial assets. In Townsend and Townsend (1995) FLC 92-569 Nicholson CJ as he then was with whom Fogarty and Jordan JJ agreed, said at 81,654:
“In my view, what occurred in this case, as I said during the course of argument was, in fact, a premature distribution of a proportion of the matrimonial assets. What the husband did was to distribute to himself an asset in which the wife had a legitimate interest. In such circumstances I consider that it would be unjust in the extreme to simply treat such conduct by the husband as a matter to which regard should be had under section 75(2). It seems to me that the husband has had the benefit of that money. Had he retained, for example, the taxi licence instead of selling it, that would have been brought into account as an item of property which would have been dealt with in the same way as the remaining items of property in this case. Accordingly, I am of the view that the correct way in which to deal with the husband's receipt of those moneys is to bring them into the pool of assets on a notional basis and make a distribution accordingly.”
(c) In the circumstances outlined by Baker J in Kowaliw and Kowaliw (1981) FLC 91-092 at 76,644:
“As a statement of general principle, I am firmly of the view that financial losses incurred by parties or either of them in the course of a marriage whether such losses result from a joint or several liability, should be shared by them (although not necessarily equally) except in the following circumstances:
(a) where one of the parties has embarked upon a course of conduct designed to reduce or minimise the effective value or worth of matrimonial assets, or
(b) where one of the parties has acted recklessly, negligently or wantonly with matrimonial assets, the overall effect of which has reduced or minimised their value.
Conduct of the kind referred to in para. (a) and (b) above having economic consequences is clearly in my view relevant under sec 75(2)(0) to applications for settlement of property instituted under the provisions of sec 79.”
In Trevi & Trevi (2018) FLC 93-858, the Full Court observed:
27.The Full Court held in [AJO & GRO] that addbacks fall into “three clear categories”: where the parties have expended money on legal fees; where there has been a premature distribution of matrimonial assets; and “waste” or wanton, negligent, or reckless dissipation of assets.
28.However, the Full Court also made it clear that an addback does not necessarily occur whenever “a party has expended money realised from the disposition of assets that existed as at the date of separation”, the Full Court describing such a proposition as “unduly simplistic”. An earlier Full Court made the same point, saying that adding back is “the exception rather than the rule”.
29.The fundamental precept that addbacks are exceptional, reflected in the decisions just referred to, also mirrors what has been said in earlier decisions of the Full Court that, for example, “the Family Court must take the property of a party to the marriage as it finds it” at trial. An important parallel proposition is that the parties do not “go into a state of suspended economic animation” after separation. Thus, reasonably incurred expenditure does not usually come within accepted categories of addback.
30.Two fundamental premises emerge from [AJO & GRO] and the authorities preceding it. First, “adding back” is a discretionary exercise. When the discretion is exercised in favour of adding back, it reflects a decision that, exceptionally, in the particular circumstances of a case, justice and equity requires it. The second premise is its corollary: in cases that are not “exceptional” justice and equity can be achieved, not by adding back, but by the exercise of a different discretion – usually by taking up the same as a relevant s 75(2) factor. Indeed, it has been said that the latter is “a course which is, perhaps, technically more correct” than adding back to the list of existing interests in property.
(Footnotes omitted)
In relation to paid legal fees, the Full Court in NHC & RCH [2005] FamCA 334 observed as follows:
56.In summary, we consider that the above mentioned decisions of the Full Court establish that, while the treatment of funds used to pay legal costs remains ultimately a matter for the discretion of the trial Judge, in determining how to exercise that discretion, regard should be had to the source of the funds.
57.If the funds used existed at separation, and are such that both parties can be seen as having an interest in them (on account, for example, of contributions), then such funds should be added back as a notional asset of the party, who has had the benefit of them.
58.If funds used to pay legal fees have been generated by a party post-separation from his or her own endeavours or received in his or her own right (for example, by way of gift or inheritance), they would generally not be added back as a notional asset; nor would any borrowing undertaken by a party post-separation to pay legal fees be taken into account as a liability in the calculation of the net property of the parties. Funds generated from assets or businesses to which the other party had made a significant contribution or has an actual legal entitlement may need to be looked at differently from other post-separation income or acquisitions.
I propose to include, in the Balance Sheet, the amounts that are held in each of the solicitor’s trust accounts. If these monies were not in the respective solicitors’ trust accounts, they would exist as monies in their bank accounts which are otherwise included in the Balance Sheet.
In relation to paid legal fees, I am not satisfied that the justice and equity of the case warrants those amounts being added back. The husband contended, in part, that his funds have been met from income. On the part of the wife, there seems little doubt that the funds have come from joint assets realised by the wife after separation.
The husband has been able to pay his legal fees from post-separation income because he has retained the benefit, post-separation, of the income from the businesses as well as his earning capacity, to which the wife has undoubtedly contributed. The parties chose to deal with their assets post-separation in a particular way, which included allowing the wife to access various sums of money. The husband otherwise retained his income, as well as accessed the parties’ capital. That was how the parties chose to deal with their assets, subject to intervention of the Court. There is not a principled reason why, in those circumstances, a sum of money which does not now exist should be added back against one party.
The parties also included, as a liability, CGT arising on the sale of the 1 D Street property. In circumstances where it is proposed, to give effect to the ultimate property division, this property will be sold and the CGT accounted for, it seems appropriate, in determining the pool of assets for division, to remove this liability. A failure to remove the liability could give effect to a double-counting.
Accordingly, I find the Balance Sheet for division to be as follows:
Ownership
Description
Value
ASSETS
1
Wife
2 P Street, Suburb F, NSW
$6,250,000
2
Husband
CC Street, Town DD NSW 2574
$2,050,000
3
Joint
Furniture located at Suburb F property
Exclude on the basis same are divided between parties in specie
4
Husband
Furniture and effects in Husband's possession
$20,000
5
Wife
Personal effects in Wife's possession
$15,000
6
Wife
Motor Vehicle 1
$30,000
7
Wife
RR Bank Everyday Account ending #...19
$115
8
Wife
NAB Transactional Account ending #...63
$101,965
9
Wife
RR Bank account ending #...43
$18
10
Wife
NAB trading account #...51
$6,173
11
Husband
Westpac Choice Account ending #...84
$200,506
12
Husband
Westpac Choice Account ending #...92 (1/2 interest)
$1,000
13
Husband
NAB Classic Banking Account ending #...02
$499,077
14
Wife
NAB Trade Share Portfolio Account number …37
$44,776
15
Husband
SS Investments Account number …55
$7,950
16
Wife
Balance of inheritance to be received
$13,000
17
Wife
Funds held in solicitors trust account for legal fees not yet paid
$104,650
18
Husband
Funds held in solicitors trust account for legal fees not yet paid
$220,000
19
Wife
Owing from Ms LL
$1,408
Wife
FF Pty Ltd
20
Wife's interest
$401,000
Husband
C Pty Ltd ATF TT Unit Trust
21
1 D Street, Suburb E, NSW
$3,150,000
22
Westpac Cheque Account ending #...55
$17,542
Husband
C Pty Ltd ATF Morrigan Family Trust
23
NAB Classic Banking Account ending #...17
$30,168
24
Shares in UU Pty Ltd
$55,854
25
225,000 shares in VV Ltd
$2,925
WW Pty Ltd ATF BB Family Trust
26
XX Bank Cash Management Account ending #...40
$17
27
100,000 shares in YY Pty Ltd
$54,000
Husband
B Pty Ltd
28
NAB Cash Manager Account ending #...81
$3,057
Husband
HH Pty Ltd
29
Motor Vehicle 2
$52,613
30
Motor Vehicle 3
$36,000
31
XX Bank Cash Management Account ending #...59
$81,753
Joint
QQ Pty Ltd
32
XX Bank Cash Management Account ending #...92
$32,320
33
Shares
$625,042
34
ZZ Investments Fund
$205,149
35
ZZ Investments High Conviction Fund
$218,448
Joint
AB Pty Ltd ATF AC Family Trust
36
XX Bank Cash Management Account ending #...96
$11,127
Total
$14,542,653
LIABILITIES
37
Husband
Westpac Mastercard Account ending #...61
$0.00
38
Husband
American Express Card Account ending #...01
$0.00
39
Wife
NAB Visa Account ending #...75
NIL
40
Husband
National Australia Bank Home Loan Account ending #...11 - Secured by mortgage over CC Street, Town DD NSW
$1,323,000
41
Husband
Capital gains tax on sale of Town DD
$0.00
42
Wife
Capital gains tax on sale of Suburb F
$0.00
Total
$ 1,323,000
SUPERANNUATION
Member
Name of Fund
Type of Interest
Value
Husband
S Pty Ltd ATF Morrigan Family Superannuation Fund
Self-Managed Superannuation Fund
43
XX Bank account ending #...67
$6,694
44
NAB Bank account ending #...18
$114,501
45
Shares: 2,125 units in AD Ltd
$7,862
46
T Street, Suburb U NSW
$1,300,000
47
Wife
Superannuation Fund 3 (Member Number …)
Accumulation
$795,241
Total
$ 2,224,298
NETT TOTAL ASSETS (including Superannuation)
$ 15,443,951
APPROACH TO PROPERTY PROCEEDINGS
The approach to be adopted in a financial adjustment case under s 79 of the Act is to follow the well-recognised four-step process (see Hickey & Hickey & Attorney-General for the Commonwealth of Australia (intervener) (2003) FLC 93-143). Following such an approach, the Court identifies and values the assets and liabilities at the date of hearing for the purposes of division. Secondly, the Court assesses the contributions of the parties within the meaning of s 79(4) of the Act and determines a contribution based entitlement. Thirdly, the Court identifies the relevant matters under s 75(2) and determines such adjustment as is necessary to the contribution based entitlement. Finally, the Court considers the effect of the findings and determines whether the order as proposed is, in all the circumstances, just and equitable.
Consistent with Stanford v Stanford (2012) 247 CLR 108, I am of the view that it is just and equitable that an order be made adjusting the property interests of the parties. The parties are no longer living together, and there is no longer the common use of their property. The assumptions and undertakings that governed the use of their property ended with separation, and both parties sought that there be an adjustive order.
ASSESSMENT OF CONTRIBUTIONS
The assessment in a property case calls for the exercise of discretion, and a holistic value judgment of the respective contributions of the parties. The Court is required to consider all of the contributions of the parties, as the Full Court in Dickons v Dickons (2012) 50 Fam LR 244 makes plain:
24.… the task of assessing contributions is holistic and but part of a yet further holistic determination of what orders, if any, represent justice and equity in the particular circumstances of this particular relationship. So much is clear from the terms of s 79 itself and, in particular, s 79(2). The essential task is to assess the nature, form and extent of the contributions of all types made by each of the parties within the context of an analysis of their particular relationship.
25.Doing so is also consistent with the demands of authority that the ultimate assessment of contributions should be made without “giving overzealous attention to the ascertainment of the parties’ contributions” (Norbis v Norbis (1986) 161 CLR 513 at 524 ; 65 ALR 12 at 18 ; 10 Fam LR 819 at 825 ; [1986] HCA 17) and the well-established recognition in the authorities (acknowledged specifically by her Honour in this case) that the process required of the court by s 79 is the exercise of a wide discretion, not the performance of a mathematical or accounting exercise.
26.The necessarily imprecise “wide discretion” inherent in what is required by the section is made no more precise or coherent by attributing percentage figures to arbitrary time frames or categorisations of contributions within the relationship. Indeed, we consider that doing so is contrary to the holistic analysis required by the section and, in the usual course of events, should be avoided.
The Full Court in Horrigan & Horrigan [2020] FamCAFC 25 emphasised and reinforced that the proper approach to the assessment of contributions is:
35.… well established that an assessment of contributions is not a mathematical exercise, but rather involves the identification and assessment of all of the parties’ respective contributions, in a holistic way across the course of the relationship and in the post separation period to the point of assessment. …
I am also mindful of what the Full Court said in Singerson & Joans [2014] FamCAFC 238 at [66], namely that for the purposes of s 79 of the Act, there is nothing to suggest that any category of contribution needs to be quarantined and applied solely to particular assets. In my view, the authorities require evaluation of all contributions to the property of the parties. This view has been confirmed by subsequent Full Courts such as in Jabour & Jabour (2019) FLC 93-898, where their Honours observed that a primary judge should be cautious in emphasising the importance of an increase in value of a particular item of property at the expense of “the myriad of other contributions that each of the parties has made during the course of the relationship” (at [35]).
The consistent theme from the authorities is that the multifarious contributions throughout the relationship and subsequently, of all types, are to be assessed in a holistic way.
Guided by such Full Court determinations, I propose to assess the parties’ contributions.
There is no issue that, at the commencement of cohabitation, the husband’s assets exceeded those of the wife. It is not in issue that the husband’s interest in the Morrigan Family Trust had a value, for the purposes of the proceedings, of $590,850 (Exhibit 22, Expert Report of Ms AE dated 26 February 2024). In addition, the husband’s interest in the Morrigan Family Trust No. 2 had a value of approximately $35,000, and the husband’s self-managed superannuation fund, the Morrigan Family Superannuation Fund, had a member benefit of $144,390. Furthermore, the husband had shares in V Company (a public company) of unknown value, but such shares where ultimately realised in 2013 for $105,000. Thus, the husband’s initial contributions, excluding the V Company shares, had a value of approximately $770,000.
The wife, for her part, had superannuation of approximately $40,000 and equity the Suburb L property of $212,000. The wife’s assets thus had a value of approximately $252,000. The wife’s senior counsel submitted that the husband’s 2004 Income Tax Return identifies the husband had a margin loan for shares. In circumstances where there is no value assigned by either of the parties for the shares at the commencement of cohabitation, I can do no more than have regard to the fact that the husband had a liability. The Income Tax Return does not identify the quantum of the liability.
By this measure, the husband’s assets exceeded those of the wife at cohabitation.
I am satisfied that, throughout the relationship, both parties were in full-time employment until the wife sold her business. Thereafter the wife did not work whilst the husband continued to work on a full-time basis until late 2023. I am satisfied that both parties applied their income to the benefit of the relationship, albeit recognizing that the husband met costs for his children, including a not insubstantial amount by way of school fees.
The parties are at issue as to a conversation that took place in 2011. It is unnecessary to resolve the factual controversy as to what was said and by whom, and whether any agreement was reached, as the evidence is not controversial that the wife did not thereafter seek employment but continued to make homemaker and parenting contributions, as well as other financial and non-financial contributions, to the relationship. The reasons why are irrelevant to the final determination that I have to make. The irrelevance is demonstrated by the absence of any submissions as to whose version should be accepted.
I am satisfied that both parties, throughout the relationship, used their best endeavours and applied their energies to the benefit of the other party and the relationship. Each party made a significant contribution, in a home-making sense, to the other including management of household expenses, and the undertaking of repairs and maintenance to the home. I note the husband’s concession, by his senior counsel in written submissions, that the wife made a greater contribution as a homemaker, while recognizing the efforts the husband also made in this endeavour.
I accept the concession by the husband’s senior counsel that the wife managed the T Street property.
I also accept the evidence of the parties that they each contributed to the building of the home on the Suburb F property. The paucity of cross-examination on the issue does not permit me to make a finding that one made a greater contribution over the other, and I accept that both parties worked hard in their individual and joint endeavours in that regard. I accept, however, that the wife made many day-to-day contributions during its building, as set out in her affidavit, given the husband was at work making direct financial contributions.
During the parties’ relationship, the husband continued to steward the corporate entities that he had at the commencement of the relationship. There is no issue that those corporate entities provided significant financial benefits to the parties. The husband at paragraph 33 of his affidavit set out a table that recorded the various financial benefits received by the corporations over the course of the parties’ relationship, which totalled in excess of $20 million (Husband’s senior counsel’s written submissions, para 21). The wife submitted, correctly, that the table represented merely the inflow of money without regard to expenses and/or tax. That said, it is not in dispute that the wealth held by and generated from the husband’s shareholdings provided significant financial benefits to the parties, particularly upon the acquisition of R Pty Ltd by W Company.
It is not in issue that in mid-2014 following the W Company acquisition, R Pty Ltd received a dividend payment of $296,890 and in late 2014, a capital sum of $4,453,596. Of that amount $1,166,000 was used to discharge a mortgage of the parties, and $2,150,000 was placed into a term deposit.
In mid-2016, a further dividend of $2,243,641 was paid and in late 2016, a further capital payment was received from W Company in the sum of $3,750,000. It is not in issue that the funds received from W Company were utilised by the parties to discharge debt, fund the building costs of the Suburb F property, meet their living and lifestyle expenses, and make superannuation contributions for each of the parties (Affidavit of the husband filed 5 February 2024 paras 36, 38, 39, and 101(b)(iii)).
I accept the wife’s evidence of her contributions to assisting the husband in his work (Affidavit of the wife filed 2 February 2024, paras 95 to98).
The wife’s senior counsel submitted that the Court must have regard to the fact that this contribution, consequent upon the acquisition by W Company, is not solely a contribution by the husband. He submitted that the Court must recognise the fact that the business conducted by R Pty Ltd had employees who also worked in it. While there might be some force in that submission, it ignores the fact that the benefit from the acquisition by W Company flowed, as far as the parties are concerned, to the husband and shares held by him as a result of his endeavours.
The wife’s senior counsel also submitted that the Court should give some weight to the fact that the corporate entities no longer exist. He submitted that the Court should, in some way, weigh the contribution that was received by the husband against the costs of that contribution, in circumstances where a significant sum of money was applied when C Pty Ltd purchased the 60 per cent shareholding then owned by X Ltd for over $1,100,000, plus repayment of a loan of $2,250,000. Consequent upon entering into this agreement, the company continued to suffer difficulties with trading and entered a safe-harbour provision. Subsequently, in mid-2022, administrators were appointed to the R Pty Ltd group of companies. As best as I understand the wife’s senior counsel’s submissions, the Court must have some regard to the fact that the companies ultimately failed when it is giving weight to the benefits received from the initial sale to W Company.
The various factual matters referred to above are not controversial. It was not, however, suggested to the husband that he was reckless, or that he was acting other than in what he perceived to be the best interests of the company and the parties. Parties to a relationship take the good with the bad. As the Full Court in Browne v Green (1999) FLC 92-873 observed:
53.… There can be little doubt that had the Hayle project succeeded, the wife would have sought to share in the fruits of that success, and there would seem to be no reason why she would not have been entitled to do so. It is this last-mentioned consideration, being that parties generally expect to share the economic profits of a marriage, which, in our view, requires that there should be good and substantial reasons for departing from the principle that where there are economic losses incurred in a marriage, those losses should be shared, absent any negligence, recklessness or deliberate dissipation of assets by one party. No such good and substantial reasons are apparent to us in this case.
Whilst I recognise that the businesses failed, and funds were applied by the various businesses in the group to acquire the 60 per cent interest, it is a matter of history rather than fault or conduct. I am not satisfied that it diminishes the contribution that was made by the husband.
I take into account that post-separation, the husband continued to retain the income benefits from the corporate structure that had existed during the relationship, and also obtained remunerative employment with KK Company until late 2023. I recognize that some of the income from that employment sits in the Balance Sheet as funds in the husband’s solicitor’s trust account and other bank accounts and was used to meet his legal fees.
Likewise I take into consideration that, post-separation, the wife continued to occupy the Suburb F property while the husband has paid rent. I take into account the contributions made by her toward maintaining the Suburb F property.
I also recognise that, post-separation, the husband attended to and managed repairs to the 1 D Street property, acquired the Town DD property and attended to its repair and maintenance.
I further recognise that, post-separation, the wife received an inheritance, the value of which is brought to account in the Balance Sheet in the funds in the wife’s solicitor’s trust account and the company FF Pty Ltd. Clearly, the husband has not contributed to the wife’s inheritance (Bonnici v Bonnici (1991) FLC 92-272).
Each of the parties have had access to items of capital in the period after separation to meet living expenses, some of which they both used to pay legal fees recognizing that a more substantial amount was used by the wife, while the husband has had access to an income to which the wife has indirectly contributed.
Having regard to all the contributions referred to above, and as submitted by their senior counsel, I am satisfied that the contributions assessment overall favours the husband.
The husband submitted that his contributions should be found to be 65 per cent while the wife asserted that the husband’s contributions should be found to be somewhere in the range of 57.5 per cent to 60 per cent.
I am satisfied that a finding at 65 per cent overvalues the husband’s contributions and undervalues the wife’s contributions, whilst a finding at 57.5 per cent undervalues the husband’s contributions and overvalues the wife’s contributions. Having regard to all the above matters, I am satisfied that the husband’s contributions should be assessed at 63 per cent.
SECTION 75(2) ADJUSTMENT
Both parties contended for an adjustment to the contribution based finding. On the part of the husband, he contended that the contribution based finding should be adjusted as to 5 per cent to the wife, having regard to the parenting contributions that she made to the husband’s children. The husband also contended, however, that there should be a 5 per cent adjustment in his favour, having regard to the likelihood that the husband will be pursued by the ATO consequent upon the liquidator seeking to recover from the ATO allegedly unfair preference payments.
The wife’s senior counsel contended there should be an adjustment of between five per cent and seven per cent in the wife’s favour, recognising her contributions to the husband’s children, the age and state of health of the parties, their respective income and earning capacities, and having regard to the disparity in the contribution based findings.
The parties are both aged 56. The husband did not make a submission about matters relevant to his health in calling for a 75(2) adjustment, and the wife’s submission was that the parties were in good health relative to their age. I recognise the husband, in giving evidence, identified that he had suffered in the past from various health issues, but there is insufficient evidence before me to determine whether those historical health issues are such as to give rise to an adjustment under s 75(2) of the Act. Had they been so, then one would have expected some admissible evidence to have been led in the husband’s case. None survived objection or concessions at the commencement of the case, and accordingly the Court did not read various paragraphs of the husband’s affidavit.
Neither party is currently in receipt of income from paid employment. I am not satisfied that the parties’ ages, states of health, or incomes calls for any s 75(2) adjustment.
There is a clear disparity between the parties as to earning capacity. It is agreed that the wife has not been in paid employment since selling her business. The husband is critical that the wife has not chosen to utilise her earning capacity. There is some merit to the husband’s submissions that the wife has not utilised her earning capacity but, ultimately, that is a matter for her. As her counsel conceded, the wife does not dispute that she has an earning capacity. The husband did not submit what I should find her earning capacity to be. The fact remains however that, historically, consistent with the wife’s own unchallenged evidence, her income has been modest. The evidence reveals that between 2006 and 2011, her net business income at its highest was slightly less than $28,000, and at its lowest was approximately $7,700. Relative to the husband’s income in the same period and subsequently, it is clear that the husband’s income vastly exceeded the wife’s. The husband ceased employment in late 2023, conceding in cross-examination that his income was approximately $350,000 in that year excluding bonus and severance payments.
I am satisfied that the husband’s earning capacity vastly exceeds the wife’s, and that this is a factor that calls for an adjustment in favour of the wife.
Both parties submitted that there should be an adjustment in favour of the wife for her contributions to the husband’s children from his prior relationship. Consistent with the observations of the Full Court in Robb and Robb (1995) FLC 92-555, the wife’s contribution to the husband’s children during the relationship, and for a period after separation, is a matter that should be properly recognised under s 75(2)(o) of the Act. The husband conceded, in submissions, the wife’s contribution to the care of his children called for an adjustment. He contended, in submissions, that the wife’s contributions to the care of his children were equal to his, whilst the wife sought to portray her contributions, in relation to this aspect of the parties’ contribution history, as exceeding those of the husband. Given the limited cross-examination on this issue I am not able to resolve the conflict in the evidence but, even adopting the husband’s concession, the wife’s contribution was a significant and substantial contribution. It is appropriate that there be an adjustment in the wife’s favour for her parenting contributions to the husband’s children.
The husband called for an adjustment under s 75(2) of the Act because of matters arising from the administrator’s report to the creditors dated 8 December 2022 (“Report”). The evidence to support such an adjustment is found in the report where the administrator records as follows:
My preliminary investigations have identified significant payments made under a payment arrangement with the Deputy Commissioner of Taxation during the relevant period.
These payments may be considered [to] be unfair preference payments available for recovery by a liquidator. Such claims would only be recoverable should I be able to satisfactorily demonstrate that the Companies were insolvent prior to such transactions during the six months prior to our appointment.
My preliminary investigations have also identified payments to suppliers which may be preferential in nature, however our investigations are ongoing. For this reason ,we have not quantified the amount of these claims.
(Report to Creditors, Mr AF of AG Accountants, 8 December 2022, p 40)
Further, the administrator reports:
My preliminary investigations indicate that the Companies were likely to have been insolvent prior to the Appointment Date. I consider the likely date of insolvency to be some time after October 2020. I focus on this period as a likely date of insolvency as during this time the Companies first encountered significant financial distress after they were unsuccessful with the NBN tender (October 2020). I will need to conduct further investigations in order to confirm the precise date of insolvency.
(Report to Creditors, Mr AF of AG Accountants, 8 December 2022, p 41)
Senior counsel for the husband took the Court to various sections of the Corporations Act 2001 (Cth) (“Corporations Act”) identifying the source of power for a liquidator to make an application to a Court in relation to voidable transactions. The provisions also set out that if such an order is made, then a person who is a director of a company when the payment was made is liable to indemnify the Commissioner of Taxation (“Commissioner”) in respect of any loss or damage arising from such an order (Corporations Act, s 588FGA(2)) and, further, that any amount payable to the Commissioner is a debt to the Commonwealth (Corporations Act, s 588FGA(3)(a)). I was also taken to a decision of the Queensland Court of Appeal in Coldham-Fussell & Ors v Commissioner of Taxation (2011) 82 ACSR 439 and a decision of the New South Wales Court of Appeal in Fletcher v Anderson (2014) 292 FLR 269.
Senior counsel for the husband submitted that, because of the Report, the Court should make an adjustment in favour of the husband for this possible liability. Despite this submission there is no evidence, despite the reference to the word “significant” in the Report, as to the quantum of the amount that may be pursued by the liquidator. There is no evidence that the liquidator would seek to recover the payments. There is no evidence as to whether the husband, in his capacity as a director of the company, may have a defence to any such claim. It was entirely within the purview of the husband to adduce evidence in relation to these matters. He has elected not to do so.
In Biltoft and Biltoft (1995) FLC 92-614, the Full Court noted the distinction between secured and unsecured liabilities, observing at 82,124–82,125:
A general practice has developed over the years that, in relation to applications pursuant to the provisions of s. 79, the Court ascertains the value of the property of the parries to a marriage by deducting from the value of their assets the value of their total liabilities. In the case of encumbered assets, the value thereof is ascertained by deducting the amount of the secured liability from the gross value of the asset. See, Ascot Investments Pty Ltd v. Harper &Anor (l981) 148 CLR 337 where Gibbs J (as he then was) pointed out at p 355 that the Court “must take the property of a party to the marriage as it finds it. The Family Court cannot ignore the interests of third parties in the property, nor the existence of conditions or covenants that limit the rights of the party who owns it”. Where the assets are not encumbered and moneys are owed by the parties or one of them to unsecured creditors, the court ascertains the value of their property by deducting from the value of their assets the value of their total liabilities, including the unsecured liabilities. See Prince and Prince; General Credits Australia Limited (Intervenor); A-O for the State of Queensland (Intervening); A-G for the Commonwealth of Australia (lntervenor) (1984) FLC 191-501, Evatt CJ. At p 79,076 said:-
“… the outcome of the wife’s application will depend upon findings made by the Court as to the parties’ assets and liabilities, their contributions and their respective financial resources, means and needs. It would be necessary for the Court to determine so far as is possible the value of the property held by each party. Ln accordance with the usual practice this would be done by deducting the value of outstanding mortgages, debts, and other liabilities (e.g. Albany and Albany (1980) FLC 90-905, p. 75,717). The Court may have to determine. As between the parties, the existence of a particular liability (Af Petersens and Af Petersens (1981) FLC 191-095).
The assessment of debts and liabilities is not necessarily arrived at by a strictly mathematical or accountancy approach in all cases. While some liabilities are charges upon the property which can be accurately assessed at a certain date, others are at large, or have not been precisely determined, e.g. tax liabilities (Kelly and Kelly (No. 2) (1981) FLC 91-108 p. 76,801). In some cases the amount of the liability can only be estimated generally (Albany (supra), p. 75,717). The Court can make an allowance for a particular liability if appropriate to do so. In some cases there are sufficient uncertainties as to the alleged liability to lead the Court to disregard it entirely or partly (e.g. a loan from a parent of the party not likely to be enforced; Af Petersens (supra); Quirk (1983) unreported). In other cases, the Court may take the view that because of the circumstances surrounding the incurring of the liability it ought in justice and equity to be wholly or partly disregarded in determining the appropriate order to make under sec. 79 as between the parties to the marriage. Such a result could be reached where a spouse had incurred a liability in deliberate or reckless disregard of the other party’s potential entitlement under sec. 79 (Kimber and Kimber (1981) FLC 91-085; Kowaliw and Kowaliw (1981) FLC 9l-092; Antmann and Antmann (1980) FLC 190-908; Af Petersens (supra)). Complex issues can arise in regard to liabilities to third parties (see, e.g. Pockran and Crewes; Pockran (1983) FLC 91-311).
Of course, the Court cannot ignore the fact that there is or may be a liability; the effect is simply that it does not consider that the other spouse should be called upon to in effect ‘contribute’ to the liability by having that spouse’s fair share in the parties’ property reduced by virtue of its existence. The effect may be that the party who has incurred the liability will be left to meet it out of whatever funds remain to that party after satisfying the property order made under sec. 79 (Af Petersens (supra)).”
In Rodgers and Rodgers (No 2) (2016) FLC 93-712, the Full Court canvassed at some length the various authorities as to the treatment of liabilities, and observed relevantly for current purposes that:
40.… the manner in which a particular liability should be treated is, ultimately, dependent upon the nature of the liability, the circumstances surrounding the liability and the dictates of justice and equity shaped by each.
41.… in many cases, perhaps almost all, liabilities will be deducted from the “gross” value of the property because it will be clear (and even if not expressly stated, determined) that the justice and equity of the case demands that the liabilities should be met by the parties in the proportions in which the court determines the property is to be divided. Liabilities that are vague, uncertain, unlikely to be enforced and the like might be treated differently because those circumstances might, in the circumstances of the particular case, render it unjust and inequitable for liabilities to be deducted in that manner. Those so-called “exceptional cases” are but instances of the broader consideration of the justice and equity of the particular case.
(Footnote omitted)
Nothing in subsequent Full Court decisions has diminished the import of this statement.
I am not satisfied that the evidence is such that I could, in the justice and equity of the case, conclude that there should be a s 75(2) adjustment in favour of the husband. There is no evidence as to the amount of the alleged liability. The word “significant” does not assist in determining the quantum of the alleged liability. There is no evidence that the liquidator will act to recover the alleged liability. It was entirely within the control of the husband to adduce evidence as to the quantum and likelihood of attempts to recover the allegedly unfair preference payments. He ultimately elected not to do so. There must be a principled basis on which to make an adjustment of the type and, in the circumstances sought by the husband, there is none. I do not propose to make any adjustment in favour of the husband to account for this possibility.
Otherwise, in determining the s 75(2) adjustments, I have also had regard to the contribution based findings referred to earlier which favour the husband.
Having regard to all the above matters, I am satisfied that a 6 per cent adjustment in favour of the wife is warranted.
CONCLUSION
Having regard to my findings, both as to contribution and in relation to matters under s 75(2) of the Act, I am satisfied that a just and equitable result sees the assets of the parties divided in the proportions as to 57 per cent to the husband and 43 per cent to the wife.
I certify that the preceding one hundred and forty-eight (148) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Schonell. Associate:
Dated: 19 March 2024
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