Narkis and Narkis (No 6)
[2017] FamCA 226
•13 April 2017
FAMILY COURT OF AUSTRALIA
| NARKIS & NARKIS (NO 6) | [2017] FamCA 226 |
| FAMILY LAW – PROPERTY – where application proceeded on undefended basis – where the husband’s evidence was vague and incomplete – where husband was given opportunity to reopen the evidence to clarify issues but declined to do so – where the evidence supports some orders for alteration of property interests |
| Family Law Act 1975 (Cth) s75, 79, 102Q, 102QB, 117 Family Law Rules 2004 (Cth) Chapter 1, Chapter 13 Evidence Act (Cth) 1995 s 55, 56, 59, 65, 109, 190, |
| Weir and Weir (1993) FLC 92-338 |
| APPLICANT: | Mr Narkis |
| RESPONDENT: | Ms Narkis |
| FILE NUMBER: | MLC | 210 | of | 2014 |
| DATE DELIVERED: | 13 April 2017 |
| PLACE DELIVERED: | Melbourne |
| PLACE HEARD: | Melbourne |
| JUDGMENT OF: | Cronin J |
| HEARING DATE: | 20, 27 March 2017 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Dixon SC/ Ms Cantwell |
| SOLICITOR FOR THE APPLICANT: | Cantwell Family Lawyers |
| THE RESPONDENT: | No Appearance/ In Person |
Orders
By 30 June 2017:
(a)the wife pay to the husband $56,000; and
(b)provide to the husband a discharge of the mortgage encumbering the real property at O Street, Suburb P (“O Street”) (or evidence of it being refinanced in the name of the wife alone),
and thereupon, the husband transfer to the wife all of his interest in O Street.
If by 30 June 2017, the wife has failed to comply with paragraph 1 (a) and (b) hereof, the husband have the sole right of occupation of O Street thereafter and upon taking possession and preparing it for sale in accordance with the recommendations of the selling agent, immediately thereafter place it on the market for sale on the following terms:
(a)The husband shall appoint the selling agent, determine the agent’s commission and the reserve price for the sale;
(b)The husband shall appoint the conveyancers in respect of the sale;
(c)An auction date be appointed as soon as practicable.
That the wife be apprised of the matters in paragraph 2 hereof by the solicitors for the husband.
That upon the settlement of the sale of O Street, the proceeds be applied:
(a)First, to pay the conveyancing costs, agents commission and advertising expenses of the sale;
(b)Secondly, to discharge to mortgage encumbering O Street;
(c)Thirdly, to divide the balance thereafter in such proportions as will give effect to the reasons for judgment this day.
That by 30 June 2017, the wife make available for collection by the husband or his appointed agents, all of his personal chattels in the possession or control of the wife including watches and tool kit.
That the husband forthwith place the real property at M Street, Suburb N (“the Suburb N properties”) on the market for sale on the following terms:
(a)The husband shall appoint the selling agent, determine the agent’s commission and the reserve price for the sale;
(b) The husband shall appoint the conveyancers in respect of the sale;
(c) An auction date be appointed as soon as practicable.
That upon the settlement of the sale of the Suburb N properties, the proceeds be applied:
(a)First, to pay the conveyancing costs, agents commission and advertising expenses of the sale;
(b)Secondly, to discharge the mortgage encumbering the Suburb N properties;
(c)Thirdly, to pay any capital gains tax and land tax outstanding in respect of O Street or the Suburb N properties;
(d)Fourthly, to divide the balance thereafter in such proportions as will give effect to the reasons for judgment this day.
That forthwith, the wife withdraw any caveat lodged by her or on her behalf over O Street or the Suburb N properties.
That if by 4 pm on 30 June 2017, the wife has failed to remove any items stored by her at Q Street, Suburb R, the remaining property shall be deemed to be that of the husband for the purpose of its disposal as he sees fit but any money arising from such disposal shall not be deemed to be part of the calculations arising from the reasons for judgment this day.
That, on short notice to the wife, the husband has leave to seek an order under s 106A of the Family Law Act 1975 from a Judge of this Court, that a registrar or other person sign such documents as may be necessary in the name of the wife to give effect to these orders.
That upon the sale of the later of O Street and the Suburb N properties, the necessary adjustments to give effect to the orders this day shall include the deduction from the wife’s entitlement (if any), such orders for costs that have been previously made or are made by these orders.
That save as to issues of any superannuation entitlement, each party otherwise retain to the exclusion of the other, all other property in that person’s name as at this date.
That the wife pay the husband’s costs of and incidental to all of the hearing dates in December 2016 and February 2017 in an amount to be agreed and failing agreement as assessed.
That the wife pay the costs of the Independent Children’s Lawyer of and incidental to the hearings in December 2016 and February 2017 in an amount to be agreed and failing agreement as assessed.
That the applications be otherwise dismissed.
Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Narkis & Narkis (No 6) has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).
| FAMILY COURT OF AUSTRALIA AT MELBOURNE |
FILE NUMBER: MLC 210 of 2014
| Mr Narkis |
Applicant
And
| Ms Narkis |
Respondent
REASONS FOR JUDGMENT
These reasons concern the property dispute between Mr Narkis (“the husband”) and Ms Narkis (“the wife”) and should be read in conjunction with the reasons of the 20 March 2017 where I refused the wife’s informal application for an adjournment in her absence. They should also be read with the parenting orders and reasons for them, published on 27 March 2017.
The reason that all judgments have to be read arises because of the wife’s failure to be responsive to orders relating to the filing of material. The husband was permitted to proceed with his application for property orders on an undefended basis but that in itself did not mean that he obtained the orders he sought by default.
Much of the evidence the husband presented was vague, inadmissible or unhelpful and as a consequence, I had the matter relisted on 27 March 2017 (the same day as the publication of the parenting orders) to give the husband an opportunity to explain some of the inconsistencies set out in the “balance sheet” he provided in the outline of case document. At that hearing and to save costs, the husband’s solicitor told me that senior counsel had not been briefed and doing the best I could to bring to her attention the problems as I saw them of the evidence, she told me that the husband had instructed her not to seek to reopen the case but the court was to do the best it could with the evidence that was made available. That is how I have approached the matter.
Notwithstanding her absence on the previous occasion, the wife also appeared on 27 March 2017 and apart from making observations that she had been denied procedural fairness, made no application for permission to reopen the case nor did she proffer any evidence that might assist in a determination of the property matter.
Documents relied upon
In his outline of case document filed 27 February 2017, the husband relied on his trial affidavit, his financial statement and what was described as an “Accounting Report” of a Mr HI. He also relied upon a I Health Services report relating to the property at 1 O Street but that did not assist much in relation to the property matter.
The “Accounting Report” of Mr HI was an affidavit filed on behalf of the husband by his solicitors on 4 May 2016. It was prepared on the basis of the 2015 financials of the entities which appear below. Notwithstanding the document was filed in May 2016, and sworn in March 2016, relating only to the financial year ended 30 June 2015, the husband wanted to rely upon it. Having done so, in my view, he then “cherry picked” parts of it to indicate the value of various assets that were within his control.
The Evidence Act
Evidence that is relevant is that which if it were accepted, could rationally affect (directly or indirectly) the assessment of the probability of the existence of a fact in issue in the proceeding (s 65 Evidence Act (Cth) 1995. Except as otherwise provided by the Evidence Act, evidence that is not relevant is not admissible (s 56(2) Evidence Act).
Evidence as to the value of various assets and liabilities is therefore admissible if it meets s 55 of the Evidence Act.
The act also provides that if the opinion rule applies, the evidence of an opinion is not admissible to prove the existence of a fact in issue. The same must be said of hearsay evidence (s 59 Evidence Act). Both of those problems immediately arise in circumstances where the husband has not had access to a variety of assets for valuation purposes and, in the case of the various entities, has a different view to Mr HI.
There is no evidence from the wife responding to that of the husband but that does not amount to a waiver of any objection as to admissibility.
Section 190 of the Evidence Act provides that various provisions of the Act may be waived by consent unless s 190(3) applies. Section 190(3) provides that opinion evidence for example may not be subject to the rule if the evidence is not genuinely in dispute or, the application of those provisions would cause or involve unnecessary expense or delay. In determining admissibility, the court is obliged to take into account the importance of the evidence, the nature of the cause of action or defence, the probative value of the evidence and the powers of the court to adjourn the hearing to make another order or give direction in relation to that evidence. The evidence about value here is critical because it affects the entitlement of each of the parties to an alteration of property interests. Because of that, the court gave the opportunity to the husband to endeavour to clarify some of those matters and that opportunity was declined.
Valuation of assets in family law proceedings, if not the subject of agreement, is a fact in issue. The Australian Law Reform Commission in its report which led to the enactment of the Evidence Act said that the expression “fact in issue” should be interpreted as extending the facts to be proved in undefended or ex parte proceedings. Thus, when contemplating whether evidence is relevant, the court is obliged to consider whether the evidence establishes a fact required of a party. A fact in this case must relate to the value of the assets that each party seeks to have the court alter.
Undoubtedly, in a case in which the wife has been uncooperative in assisting to determine the value of assets as well as what assets exist, the onus still falls to the husband to establish both. It is not satisfactory to point to lack of cooperation by the wife and then assert that an estimate will suffice because that is the best that one can do. In this case, the wife was obstructive about the valuer having access to the former matrimonial home. That left the husband in a position where the best he could obtain was an appraisal from an estate agent. The wife’s obstructive behaviour in that case permits the court to use that estimate on the basis that it is most likely that the property will have to be sold because all of the evidence suggests the wife has no capacity to maintain the home or retain it. The value from the estate agent is simply a guide for the purposes of the ultimate sale. Where the ultimate proceeds can be divided on a percentage basis.
The wife has always had an obligation to make full and proper disclosure of her financial circumstances as had the husband. Where the court is satisfied that there has been non-disclosure by a party, the court is entitled to be less cautious about making findings in favour of a party who has complied (see Weir and Weir (1993) FLC 92-338). With those matters in mind, I approach the various problems.
The parties’ existing legal and equitable interests
The plurality of the High Court of Australia in Stanford v Stanford [2012] HCA 52; (2012) 293 ALR 70 (at [37]) said:
First, it is necessary to begin consideration of whether it is just and equitable to make a property settlement order by identifying, according to ordinary common law and equitable principles, the existing legal and equitable interests of the parties in the property. So much follows from the text of s 79(1)(a) itself, which refers to “altering the interests of the parties to the marriage in the property”. The question posed by s 79(2) is thus whether, having regard to those existing interests, the court is satisfied that it is just and equitable to make a property settlement order.
Notwithstanding the wife’s constant complaints in various interlocutory hearings that the court has not been provided with an adequate picture of the assets of the husband but that he also has interests of many millions of dollars that he has not disclosed, there is no such evidence. On previous occasions, I have observed that the wife has had ample opportunity to pursue discovery and litigation funding but has failed to do so. On the contrary, the husband’s evidence is plausible. For example, the wife asserted that the husband did not live in the house he maintained was his residence but he gave oral evidence about it being owned by the trust, how he is indebted to the trust and how close it is to the proposed school for the child E. All of that has a plausible ring about it.
The wife’s assertion of commercial interests is inconsistent with the evidence of Mr HI. The husband’s evidence supports that even if untested.
Thus, the only evidence which I have to make the determination upon is the evidence of the husband and his witnesses. It is relevant that he does not dispute that it is just and equitable to make an order altering existing legal and equitable interests in the property of the parties.
The husband asserts that the assets are well known; their value is a different problem.
In his outline of case document, the husband provided details of both the assets and ownership of them but his estimates and assertions about values cannot be accepted and ascertaining values was not simple.
Wastage
From the husband’s “summary of argument” which does not define the issues to be determined, it can be seen that he asserts the wife has failed to make proper disclosure. He goes on to say:
7.1.10The husband seeks an adjustment commensurate with his overwhelming initial contributions to the current asset pool. The husband also seeks an adjustment based on the Wife’s post separation wastage to the asset pool.
In Omacini& Omacini [2005] FamCA 195 the Full Court referred to three specific circumstances where “addbacks” may occur: where the parties have expended monies on legal fees; where there has been a premature distribution of assets; or, where there has been “waste” (Kowaliw and Kowaliw (1981) FLC 91-092).
It is a matter for the judge exercising a discretion by reference to what is considered just and equitable, as to whether some consequential “addback” should be made. It may be considered more appropriate to make an adjustment pursuant to s 75(2)(o) to take account of the loss if it can somehow be quantified. I proposed to do that here.
O Street
The husband valued 1 O Street (“O Street”) on the “midpoint of market appraisal” at an estimated $3.25 million. As I have said, I anticipate it will have to be sold.
O Street is a house in the husband’s name which is encumbered by a mortgage for which the husband has been responsible. The mortgage is said to currently stand at $1.12 million. The house has been locked up and made inaccessible for many months now and the wife has not permitted the appointed valuer access to it despite an order to the contrary.
The husband seeks an order that the wife have the property if she can pay the appropriate price in this determination and also reduce his indebtedness by $600,000 in the mortgage failing which, it be sold. For the reasons below, I reject this proposal.
There is no evidence from the wife as to future ownership or her intention to dispose of the property. She is not living in it yet the mortgage debt continues to accrue. The husband makes the repayments but has no way of ameliorating his obligation. There is no evidence that the wife could support a mortgage of $1.1 million or any other amount. As the husband seeks the order that he transfer O Street to the wife and I anticipate it will be sold, I see no prejudice to the wife in accepting the value asserted by the husband and accepting his known mortgage debt.
M Street
There are three real property units owned by the husband. They were valued in January 2017 at $4.25 million but they are encumbered to the extent of $2.58 million. The husband seeks that these be sold and anticipating capital gains tax accordingly, obtained advice as to the taxation consequences which have been estimated at $315,000. I therefore propose to allow the mortgage, the estimated sales costs and the anticipated taxation as liabilities.
Motor cars
Both parties have motor cars and none of them has been valued by way of admissible evidence. In respect of the two in the possession of the husband, he estimated their values. There is no admissible evidence of value and his opinion is, at best, a guess in circumstances where one of the cars was a “kit” project and substantial sums of money were spent on it. The husband’s view was that the current value did not correlate with the amount of money spent but gave no evidence about his expertise or method of calculation.
The wife also has or had, possession of two motor cars. The husband estimated their values based on the “Red Book”. Again, the husband is not an expert valuer and it remains unclear whether he used the correct criteria even if the “Red Book” could be used as a method of valuation bearing in mind, the evidence was hearsay. That methodology also does not take into account the condition of the cars and in this case, could not, because the husband did not have possession of them.
The evidence does not permit a finding concerning the ownership of the two cars in the wife’s possession. The evidence shows that they were bought by the husband and two were retained. Possession is not good enough to determine ownership. The husband said that one of the cars in the possession of the wife had been given to her daughter.
The wife had access to the husband’s affidavit sometime around the end of January 2017 and has not taken exception to his specific claims. It is not suggested by the husband that he wants the vehicles sold or transferred to him. It would be unjust to the husband to ignore the vehicles in the wife’s possession or control in the same way that it would be unjust to ignore those in his possession even in circumstances where the wife has made no effort to value them.
The values of these vehicles however, as a portion of the total assets, are modest and as they are of similar value, I consider the most efficacious and just way of dealing with them is to leave each vehicle where it lies. I propose to ignore them in the further division other than to take into account that each has (or could have) two vehicles.
Goods in storage, furniture, chattels and personalty
There are goods in storage which the husband said were under the control of the wife and that she had at some stage estimated them to be worth $400,000. I have been unable to ascertain how that came about and for the reasons earlier outlined, even on some basis of an admission against interest, as the wife is not represented, it would be inappropriate for the court to simply adopt that figure.
The husband chose not to reopen his case when given the opportunity to do so on 27 March and accordingly, I propose to ignore those chattels save that I propose to take into account (in the Weir sense) that the wife has retained the possession of a significant amount of chattels.
The husband does not seek a return of, a sale of, or a division of the chattels in a storage facility. He is responsible for the storage cost and wants to ameliorate that position. That is only appropriate to give the parties a clean break so the wife will have to clear that facility. If she fails to do so, it is reasonable to conclude that she has no desire to maintain that material or those chattels. The husband can then dispose of the items without account to the wife.
So too, there are goods in the O Street property about which the wife has failed to co-operate. The husband has not been able to have access to the property and the wife’s position about access to the property by a valuer has already been mentioned. However, to again rely upon an estimate of the husband is fraught with difficulty. The same must be said of the property described as “Artwork”. I have no idea what that description means or indeed who is the legal owner. The husband assessed the value of the artwork at $150,000 but that is not based on anything other than an estimate. I can only deal with that on the basis that under s 75(2)(o) of the Act, I will take into account that the wife ought not be permitted to profit from her own refusal to co-operate.
Watches
The husband said that there was a variety of watches all of which he considered to be of value but also of some sentiment to him. He made specific reference to his father’s gift to him and to the fact that the wife retained them in storage somewhere. Although he put a value on those as a bundle, the same valuation problem arose. These were specifically known to be brands with which he was familiar but no endeavour was undertaken to have a jeweller estimate their value sight unseen in the same sense as the O Street real estate agent appraisal.
I have not been told of any request being made of the wife to produce them for valuation (as distinct from returning them to the husband). As the husband has sought that they now be specifically returned to him and the evidence supports the conclusion that they are still in the control of the wife, I intend to make an order that they be ignored for valuation purposes but that they be returned to the husband as his personal property as part of the justice and equity of any division. In this case, it is not suggested by the wife that she has any equitable interest in that property and as such, does not seek an alteration of those interests. As the unchallenged evidence of the husband is that this is his personal property, the court can make an order that it be returned.
Tool kit, train and documents
The husband says that there was a tool kit that he wanted returned but the wife was unresponsive. There are also other personal items all of which the wife has apparently said to him were in storage. It has not been suggested in any case management hearing before me that they needed to be valued. For the reasons just mentioned, this is personal property about which no alteration of interests is sought by the wife and accordingly, it should be returned.
Business entities
The husband has interests in a variety of companies. These have been the source of contention with the wife. She had maintained in interlocutory hearings that he had “millions’ in these assets. The evidence does not support such an assertion but neither does it support the assertion of the husband that the court can extrapolate figures from the expert’s report on the basis that it was just a methodological piece of evidence about values.
The HI valuation
Mr HI is the forensic accountant who was appointed as the single expert to value “the Narkis Group of entities”.
I am unsure what the wife’s position has been in relation to the opinion of Mr HI but the appointment was made under an order of the court at a time when the wife was not represented. The evidence of Mr HI was contained in an affidavit attached to which was his forensic report. He also attached the letter of instructions from the solicitors for the husband which noted that the wife had refused to pay her share of the relevant fees. It would seem that at some point, the wife has had legal representation but in any event, no application was made for the appointment of an adversarial expert.
There is no reason for me to doubt the evidence of Mr HI; it is unchallenged and the wife has provided no material to suggest where the error (if any) is. In his outline of case document the husband relied on the HI affidavits.
Mr HI examined four entities after being provided with documents that he sought. He made reference to the fact that he had what seems to be, ASIC searches.
No attempt was made to update the details of the entities including the 2016 financials. More importantly, the solicitor for the husband said that the husband’s evidence was that the husband had no interest in the family trust examined by Mr HI even though the expert noted the names involved were that of the husband and his former wife. The solicitor conceded that I could not go further than reading the instructions given to Mr HI.
Mr HI included real property as well as research entities in the United States but he removed items from the balance sheets such as a loan to (presumably) the wife’s late father and another loan to “Mr H” deemed uncollectible. Although it was not stated, I have presumed that references to names such as Mr SS and Mr H which have been mentioned in the evidence of the husband, are associated with the wife. The balance sheet for the “group” was then reconstructed by Mr HI.
Mr HI concluded that the value to the parties of the “group” was $2,843,987. That calculation encompassed 5 entities:
a)The Narkis Trust $2,382,368
b)X Nominees $ 484,055
c)Y Pty Ltd $ 129,287
d)Y Pty Ltd (US) (loss) ($1,315,976)
e)Z Pty Ltd (loss) ($30,205)
But herein lies a problem. The husband’s outline of case asserts that X Nominees is valued at $32,373 and he goes on to say “Amount calculated from Mr HI report.”
Self-evidently, the most significant asset value lies in the trust. At [49] of his affidavit, the husband said that the trust arose from his first marriage (the present marriage being his third) and to maintain the children of that marriage, the family trust was maintained for that purpose. His first wife is the appointor and AA Pty Ltd is the trustee. There were two other directors besides the husband. In July 2015, the appointor removed AA as trustee. The letter of instructions to Mr HI required him to “value our client’s interest” in inter alia AA Pty Ltd. It is not suggested that Mr HI knew what the husband now asserts in his affidavit because, consistent with his instructions, he said:
I have proceeded on the approach that the Parties (sic) are in full control of [AA] and [X] Nominees.
To my knowledge, no application has been made to set aside the various transactions or instruments. No application was made in relation to the trust under Part VIIIAA of the Act. To add to the confusion, the husband says that he is a beneficiary of the trust and that he “accepts the Trust assets are a financial resource to me”. He does not explain what he means by a “financial resource” nor how, if he is simply a beneficiary, he is entitled at law to more than the due administration of the trust.
The solicitor for the husband made a valiant attempt to explain that I could take figures from Mr HI’s valuation after reading the husband’s assertions about what has happened to the family trust and conclude that the figure $32,373 is the value of the husband’s interest in X Nominees. The difficulty is that various inter-entity loans were removed by Mr HI for whatever reason and I remain uncertain what he would do if he knew that the husband now maintains he has nothing to do with the trust other than as a beneficiary. I do not draw an inference that because Mr HI had the various company searches, he should have picked up that the trust was nothing to do with the husband.
X Nominees
At [148] of his affidavit, the husband said that X Nominees was a company commenced in 1973 and was purchased by he and his former wife in 1989 for a nominal amount from his then father in law. He said that he is now the sole director and the shareholder is the trust. He explained the purpose of the company was to consult with another entity and then more recently, for he and his son to provide services. Those latter services he said were stopped in about 2005.
The rather vague evidence of Mr HI is that $403,300, a liability of the trust to the company, should be removed presumably because it is an inter-entity loan. If the husband has no interest in the trust other than as a beneficiary, then X Nominees Pty Ltd presumably has a right to claim that money back from the trust. It is not suggested that the trust does not have the necessary capital to fund it. In my view, having regard to the fact that the husband did not desire to reopen the case, I should accept the figure of $484,055 being the net assets as at 30 June 2015 calculated by Mr HI rather than removing the loan which was shown in Mr HI’s calculations as $454,161. Accordingly, for the purposes of ascertaining a value of X Nominees Pty Ltd, I consider the proper figure is $484,055. However, the shareholder is the trust according to the husband but there is no evidence to support that. How the trust became the holder of the shares, is not mentioned. The husband’s attempts to use valuations arising out of his estimations or the figures of Mr HI, are unhelpful. Thus, absent some indications to how these shares came to be held by the trust when no mention is made by Mr HI, escapes me.
Loan to children
At [161] of the husband’s affidavit, he said that he had made a loan to his children. Each was to be lent $375,000 but $150,000 has been repaid. There does not seem to be any dispute that that $600,000 should be added to the husband’s assets notwithstanding there is no evidence as to where the money came from. There is no suggestion that the money is not to be repaid. Accordingly, $600,000 should go into the list of assets of the husband.
At [149] and [153], the husband makes reference to the trust as I have already indicated. He said that he has no interest in it. However, that overlooks the fact that he has a loan owing to him by the trust of $275,000 offset against which is his rent and $93,000 which the trust has apparently lost by way of loss of rental on the Suburb R warehouse wherein the wife has stored her goods. According to the husband, he is responsible for that liability and although he does not indicate how, he has made an arrangement with the trust. Although the evidence is at best vague, in my view, the appropriate way to deal with that is to accept that he has a trust loan owing to him offset against which must be the two sums just mentioned leaving a net figure of $161,000.
Other companies
AT [142] to [147], reference is made to three entities which Mr HI examined. Although some have credit balances in terms of net assets and others a significant shortfall, the evidence of Mr HI is that they are valueless. Those figures have been effectively written off by Mr HI and I see no reason to reject that evidence as there is no other assertion supported by any evidence to the contrary.
Liabilities
The husband anticipates a land tax bill of $21,000, sale expenses and a discharge of the mortgage on M Street. I propose to take those into account as liabilities to be offset against M Street.
The husband also claimed his rent and the money that he owed to the trust of $93,000 and I have dealt with both of those above. He also makes reference to loans of $135,000 and $37,000 but there is no evidence to support either of those. I propose to ignore those.
Non-superannuation assets
I am satisfied that the legal and equitable interests of the parties in assets are as follows:
O Street $3.25 million
less mortgage ($1.12 million) $2.13 million
M Street $4.25 million
Less mortgage ($2.58 million)
Less capital gains tax ($315,000)
Less selling costs ($100,000) $1.255 million
X Nominees $484,000
Loan to Children $600,000
Trust loan $275,000
Less outstanding sum ($114,000) $161,000
Sub total $4.63 million
Less land tax ($21,000)
Net $4.609 million
It will be self-evident that I have rounded figures down.
I have accepted that there will be capital gains tax on the M Street properties notwithstanding the hearsay evidence of the husband concerning a calculation by his accountant Mr IJ. Having criticised the way in which the evidence has been prepared, I can readily understand how a capital gains tax liability will apply in this case and although the evidence is unsatisfactory, it is clear as a matter of law that the debt will arise. The wife having filed no evidence to the contrary, it seems to me that the sum appears reasonable.
The same must be said in respect of the sale costs which the husband has corroborated and also the land tax liability.
In my view, the amount to be divided between the parties is approximately $4.61 million.
I have left aside superannuation on the basis that neither party is of a retirement age and the husband’s case has been prepared on the basis of the “two pools” concept.
Contribution
Section 79(4) of the Act requires the court to take into account the contributions of the parties both financial and otherwise but also the relevant factors in s 75(2) of the Act. The court is also obliged to consider the question of child support in that regard.
The husband has provided detail of what he owned when the relationship began; it was much more than the wife. He set out the various corporate structures under which he operated to fund the family’s lifestyle. He was the financial provider and the wife seems to have undertaken a traditional homemaker and parent role. Subsequent to the ending of the relationship, the husband’s contribution can be seen in his efforts to maintain the assets and avoiding mortgage default. The wife’s role has been to care for the child. Of those post-separation roles, the husband’s must be seen as the greater. First, he was denied a role in the child’s life so the wife cannot profit from her own conduct. Secondly, he has maintained all of the financial expenses unnecessarily and at a greater level than should be expected. I find his contribution exceeds that of the wife.
In this case, it is impossible to be prescriptive or precise about just what each of the parties’ contributions was. I find the husband brought into the relationship assets such as X Nominees Pty Ltd and finances that enabled the acquisition of M Street and O Street. I am unable to say how that can be quantified other than generally.
It is important to acknowledge that for the purposes of s 75(2)(o) of the Act, $500,000 has already been paid to the wife by way of a partial property settlement. I find on the evidence that that money was borrowed against M Street extending the mortgage facility out to its maximum. As such, the amount of money retained by the wife has been accounted for in terms of the liability but I have no idea what the wife has done with it. Much was made by the husband of the fact that the wife has lived a life including overseas travel, paying private school fees and no doubt funding some form of accommodation but she has never argued before the court that the money was used for living expenses. If it has been, her failure to provide evidence has been her own doing. Of the $500,000 paid to the wife, for inexplicable reasons, $100,000 was to be “categorized” by the trial judge. I have no idea why that was done or what it means. The husband acknowledged the wife was to get more than $100,000 and $500,000. All of the money was to be borrowed anyway. It is not necessary for me to “categorize” the $100,000 but rather take into account that the wife had it. More interesting is what she did with it because if it had been spent on living expenses presumably, the husband would not ask for it to be “taken into account”.
An additional factor in this case is the potential loss on any sale of O Street arising from both the condition of the property but also the mortgage which could have been less had the vacant property been sold much earlier. Because there is no evidence as to its current state let alone value, I am not in a position to be able to say that a specific amount should be attributed to the wanton behaviour of the wife. I have the evidence of the expert but I do not know how much of that is attributable to something the wife did or did not do.
In December 2013, the solicitors for the husband wrote to the wife requesting a sale of O Street because of the mortgages to which the husband was committed both in respect of O Street and M Street. The husband sought interim orders for the sale of properties to alleviate that debt but the wife refused to consent. The husband made an application for the sale of O Street on 15 April 2014 but the parties were referred to a private mediation. The mediation did not take place and the case came back before the court in December 2014. This time, the court ordered a conciliation conference take place but that too did not occur.
In March 2015, the husband attempted to seek the sale of M Street and also O Street bearing in mind that the wife was not then living in O Street. That hearing was apparently side-tracked by the husband’s contravention application in relation to parenting matters.
In 2016, the husband sought the sale of both of the properties and further contravention applications were before the court. For whatever reason, that hearing did not proceed.
I am satisfied that the husband has been endeavouring to sell the two properties for the best part of three years in circumstances where he was living in neither but paying the mortgages for both. In December 2016, the husband made a further application but this time for the sale of M Street to free up capital but I dismissed his application on the basis that the settlement of such a sale would not take place prior to trial and thus, the intended release of funds to both parties was pointless. That was in circumstances where there was a dispute about what assets the parties had.
At the moment, the husband has been meeting the mortgage repayments of approximately $8500 per month.
Any potential loss arising from the obfuscation by the wife has to also be offset by the fact that the court has not heard the necessary application but it is difficult to quantify such a loss. In my view it should be taken into account on the basis of the monthly payments that the husband has been making unnecessarily towards the mortgage. At least $100,000 or more has gone in that direction.
I take into account for the same reasons that the wife has chattels and artwork that she has not disclosed nor made any attempt to value.
I take into account also the fact that the wife is said to have interests in the XX Trust and in the interest of her late father’s estate. Orders were made in December 2016 for that information to be provided to the husband but it has not been. A copy of the father’s will and the correspondence associated with the estate were also ordered to be produced but the wife failed to do so. It is unclear how the wife has an interest in the XX Trust. The husband made the allegations and she has failed to respond in any way notwithstanding her obligation under Chapter 13 of the Family Law Rules 2004.
Section 79(4)(e) requires the court to examine the matters set out in s 75(2) of the Act.
Apart from factoring in the matters earlier mentioned, the other relevant matters relating to s 75(2) are that the parties are still of an age where they can be employed. The husband is currently 60 years of age and the wife 50. The husband has made a number of attempts to operate a business, but as Mr HI observed, some are successful and some are not. I have read the husband’s financial statement indicating he has the benefit of the trust facilities to which I have already referred. It is unclear to me what his financial position will be in the foreseeable future because he earns a modest salary of $626 per week but against that, he meets the shortfall on the mortgage on M Street. The other expenses he meets are covered by loans from the trust in which he acknowledges he has a financial resource.
The wife’s position is completely unknown. She is a qualified professional but has not practised in her profession. I do not know what her income position is. She has said to the court on previous occasions that she is impecunious yet she lives the life of overseas travel including late 2016 where she told the court that she had been in the Middle East. How that was afforded, remained unsaid.
I have already made orders in relation to the child living with the husband. There is therefore no reason why the wife cannot endeavour to obtain employment other than perhaps for medical purposes. She has maintained, as part of her applications for adjournment, that she is suffering from post-traumatic stress disorder but that is not something that has just arisen. She has asserted that it arose out of an assault by her own lawyer. No mention of the trauma symptom arose until a year or more later. I do not know whether there is medical evidence to prove what she asserts. I am unaware of how that impacts upon her working capacity bearing in mind that she has maintained that she is capable of caring for the child notwithstanding that disability.
Despite all of the assertions about her incapacity to conduct the proceedings, the wife at no stage has filed material that would enable the court to get a true sense of her financial position. As such, she has been the author of her own dilemma. She has consistently said that she needed funds for legal representation to be engaged yet, as will be evident from the matters to which I have earlier referred, she declined to agree to a sale of properties that would have freed up capital to enable her to do just that.
The absence of legal representation has placed an obligation upon the wife personally to fulfil the obligations of the court in completing necessary documents. One example of the dilemma for the court was that the wife was given an opportunity to do that late in 2016 but she chose to travel overseas and take the child with her rather than fulfil those obligations.
Accordingly, I am satisfied that the wife’s financial position is a matter within her own control. I do not know what funds she has from sources such as her late father. I know nothing about the circumstances under which she lives. As such, and doing the best I can, I have presumed that her claims for impecuniosity cannot be supported. If it were otherwise, she would have produced some evidence.
I take into account also for the purposes of s 75(2) that the husband has the benefit of the trust to enable him to support the child and he has the necessary accommodation which is owned by the trust. The trust has clearly been flexible in terms of demanding payment back from him.
Contrary to assertions by the wife made orally at various interlocutory hearings, I do not find that the husband has millions of dollars at his disposal and the only evidence about the parties’ financial position is as I have portrayed it above.
Having regard to the matters in s 75(2) and in particular those relating to the obfuscation of the wife about selling the property which in turn caused in excess of $100,000 in mortgage payments to be made unnecessarily, the absence of any evidence as to the use to which she made of the $500,000 provided to her by way of borrowings against M Street, the possible damage caused to O Street by it being simply locked up and unused, it is just and equitable to make an overall adjustment as to 55 per cent of the assets to the husband and 45 per cent to the wife. A 10 per cent differential reflects almost $460,000.
It must be said at this stage that that was not the position adopted by senior counsel for the husband but he was working on entirely different figures to those that I have had to address by virtue of the state of the evidence. In my view, where there are assets of about $4.6 million; where there is a lengthy relationship into which the child was born; and where adjustments can best be made on a percentage basis, care must be taken to ensure that the ultimate gap between what the parties receive by way of distribution of assets, is reflective of a fair outcome. I am satisfied that this is a much fairer outcome than that proposed.
The husband’s proposals
The husband seeks orders that the wife have O Street providing she can refinance the existing mortgage into her name alone failing which, it be sold and the following be paid:
(a)Husband be reimbursed for preparation of the property for sale;
(b)The costs and commissions associated with the sale;
(c)Discharging the mortgage and any other encumbrance affecting the property;
(d)The payment to the Australian Taxation Office for half of the capital gains tax associated with M Street; and
(e)The balance be paid to the wife less amounts otherwise owing under orders.
There is no evidence in this case that the wife will be able to take possession of the property on those sorts of conditions but I propose to give her an opportunity over the next few weeks to enable that to occur failing which, the property should be sold. If it is sold at the anticipated value, a 45 per cent entitlement would mean that the wife would receive about $2.074 million. The present net equity of the husband in O Street only taking into account the mortgage is approximately $2.1 million. In the event of a sale therefore, an adjustment would have to be made in favour of the husband. That would leave the wife with somewhere in the vicinity of $2 million in cash together with motor cars but otherwise, she would be debt free.
The husband would be left with $1.25 million roughly from the sale of M Street, his two motor cars and the loans which he could collect from his children and from the trust. Those net outcomes reflect what I consider to be a just and equitable circumstances having regard to all of the matters including the fact that there is a shortage of evidence provided by both parties. In my view that is a robust approach taking into account the paucity of the evidence but it is the best I can do in the circumstances of what I have been presented.
As there has been no specific evidence provided to the court about personal items and as ownership has not been denied by the wife, I propose to also make orders that the wife make available for collection by the husband of those items.
Superannuation
In his outline of case document, the husband sought that the wife resign from the self-managed superannuation fund and “rollover all her member entitlements” to the husband. He maintained in this outline that the effect of the order in his favour was $1,323,556.
The evidence of the husband was that the trustee of the self-managed superannuation fund is Narkis Superannuation Pty Ltd and that it was formed in August 2000. He is the sole director and shareholder for the fund. A curious sentence then appears as follows in his affidavit:
The wife is a member and has an account in this Fund?
I am not entirely sure why the issue was questioned.
It was the husband’s evidence that all of the contributions to the fund had been made by him and that he had established the fund prior to commencing living with the wife. He asserted that the three properties purchased in the fund were all acquired in 2011 from his earnings. The various properties were then rented to one of the entities which as I have already observed, is valueless.
He then obtained a valuation of those entities and that is how the figure of the value of the fund was determined. There is no evidence as to what entitlement as a member, the wife has. Accordingly, I am unable to determine the legal and equitable interests of the parties in that fund. Even if I could, all the husband’s affidavit says is that the fund is owned jointly. That is an odd statement having regard to the fact that the trustee is presumably the owner of the funds and the parties have member account entitlements subject to the provisions of the relevant trust deed.
To compound matters, even though the husband makes reference to the fact that he made the contributions to the fund, that is only part of the assessment process imposed upon the court if it determines that it is just and equitable to make an order. One of the considerations in that first step is to decide whether, as a result of what the parties have done, their entitlements are appropriately reflected in the existing legal or equitable interests. The fact that the husband made the contributions from his earnings is only part of the issue. I do not know what the trustee has done with those funds.
Accordingly, I decline to make any order in relation to the self-managed superannuation fund.
Costs
In the husband’s outline document no specific order for costs was sought but reference was made at paragraph [157] of the husband’s affidavit to “50 percent” of various expenses incurred by way of disbursements. I have concluded that the husband says that the wife has not made any payments. Various costs orders were also said to be owed by the wife and if that is the case, there is no need for the court to make a further order in relation to those costs. No specific order was sought by way of enforcement in the outline of case document but orders were made on 12 March 2015 by Johns J staying the costs until the trial for the Independent Children’s Lawyer and various days were lost for which costs were claimed by the Independent Children’s Lawyer.
Costs applications by the Independent Children’s Lawyer are governed by s 117(4) of the Family Law Act 1975 (Cth) (“the Act”). That mandates that the court must not make an order under s 117(2), even if there are circumstances to justify it if the court considers that a party to the proceedings would suffer financial hardship in bearing a proportion of the costs of the Independent Children’s Lawyer. The first step therefore is to determine whether there is a justifiable circumstance for making an order. Having regard to the fact that I adjourned the trial on a number of days because of what I was then satisfied was the illness of the wife, I find that there is no reason to depart from the principle in s 117(1) of the Act that each party bear their own costs. The circumstances in this case do not justify an order for costs.
To the extent therefore that any extant orders stayed costs already ordered, the completion of this trial crystalizes those payments.
The husband sought costs on an indemnity basis. It was submitted on his behalf that the wife had no intention of complying with orders relating to discovery, the filing of material or indeed, defending the matters. Notwithstanding orders were made for the extension of time for obligations to be met, the wife did nothing. It was on that basis, it was submitted that there were justifying circumstances to depart from the principle that each party pays their own costs (s 117(1)).
For the same reasons as I just set out in relation to the Independent Children’s Lawyer, I do not find that the wife deliberately obfuscated for the three days earlier mentioned because there was sufficient evidence to show that she was incapacitated. The dilemma is that her incapacity would not have made much difference because of the fact that she had not prepared documentation in any event notwithstanding she had ample time prior to that period of time. That said, I could not find in the circumstances that those three days were thrown away as a result of some conduct of the wife. Section 117(1) of the Act must therefore apply.
The same argument cannot be considered in relation to the hearings in December and February wherein much time was wasted because of the fact that the wife had not prepared documentation that the husband had anticipated would be prepared and her misguided approach exacerbated the problem. Her absence overseas during the holiday period and her indication that she had to care for the child because the husband would not take the child, thereby disenabling her to prepare documents, has no merit. Unashamedly, she wasted the court’s time and the costs of the husband. Notwithstanding the provisions of s 117(1) of the Act, this is a circumstance justifying a departure from that principle.
When one considers the financial circumstances of each of the parties as is required by s 117(2A) of the Act, the orders that I am proposing to make in respect of the property proceedings indicate that neither party is impecunious. Whilst the husband will clearly have more in both resources and the capacity to earn more than the wife, that disparity alone is not a basis not to make an order for costs. The conduct in relation to the proceedings is a clear indication that the legislature intended the court to look at the conduct of a person as a litigant and in this case, for the reasons just set out, the wife has done nothing to contribute towards the efficacious resolution of either the parenting or the property proceedings. As I understand the situation, there are no legal aid considerations nor is there any other reason why the wife should not bear the costs of the husband for the dates thrown away. It would not be appropriate to make an order for costs generally including in relation to the preparation of trial documents because the husband was desperately in need of a resolution of the matter and that has now occurred. In my view, he should be entitled to the costs thrown away at the various hearings which did not advance the matter much at all.
The husband sought those costs on an indemnity basis. Indemnity costs are the exception rather than the rule and there must be exceptional circumstances to justify such an order. A number of opportunities were given to the wife not just to advance the litigation to a resolution but to deal with the issues about which she vociferously complained. No doubt the obfuscation of the wife having made those complaints, frustrated the husband enormously. He was required to have legal representation at the hearings that should not have otherwise been necessary other than because the wife failed to produce the applications for orders that she had so vociferously demanded.
The wife’s constant refrain that she was unable to present the documents because she was not a lawyer and could not obtain a lawyer, do not assist her because she made no obvious attempt to get any legal assistance. If she had, she failed to indicate what it was.
To the extent that the wife consistently complained that there was not a level playing field, she had to point to evidence to indicate that the picture portrayed by the husband was grossly inaccurate. It is one thing to complain and another to establish the assertion by some proof. To the extent that she pointed to a private investigator’s affidavit, that did not advance her situation at all because it did not go to any fact that would have established that the husband’s affidavit now before the court, was grossly inaccurate. There is no evidence to support the assertions which have been consistently made that the proceedings advanced nowhere.
The husband therefore was entitled as a litigant to have the court determine his application if for no other reasons than the fact that his relationship with the child was being prejudiced by the wife and he was committed to significant mortgages in circumstances where he could not ameliorate his position because the wife would not assist in relation to the disposal of the relevant properties. All of that indicates that the wife was doing nothing about resolving the matter in the terms described in Chapter 1 of the Family Law Rules 2004.
In Prantage and Prantage [2013] FamCAFC 105 the Full Court confirmed that it is the law of Australia that indemnity costs are the exception rather than the rule. As Murphy J said at [152] indemnity costs are confined to an exceedingly rare situation in jurisdictions where the usual rule is that a successful party receives an order for costs, that is, in jurisdictions where costs follow the event. As his Honour observed, it is so much more difficult in a jurisdiction where the usual rule is that each party bears their own costs.
In my view, it is hard to consider a situation in which indemnity costs could be appropriate with those sentiments in mind. Accordingly, I decline to order that the costs be anything other than on a party and party basis.
The order will only relate to the days set out in the order at the commencement of these reasons.
Vexatious litigant order
In his outline of case document, the husband sought an order that the wife be declared vexatious and prohibited from instituting any proceedings under the Family Law Act 1975 (Cth) in a court having jurisdiction relating to that Act.
Section 102QB of the Act provides that if a court is satisfied that a person is frequently instituted or conducted vexatious proceedings in Australian courts or tribunals, the court may prohibit further institution of proceedings. The court must not make such an order without hearing the person or giving them an opportunity to be heard. The wife had the outline of case document and has known of the husband’s position.
The husband pointed to the fact that the wife has filed appeals on five occasions since December 2016 including three on the last occasion.
Vexatious proceeding has a very wide definition. Section 102Q of the Act simply gives some examples including an abuse of the process of a court, proceedings instituted to harass, annoy, cause delay or detriment, or “for another wrongful purpose”, instituting or pursuing proceedings in a court without reasonable ground and so forth.
Senior counsel for the husband brought to my attention the decision I made in Pedrana and Roberts (No 2) [2015] FamCA 231 and specifically paras 64 and 65 thereof. There, I said:
64.The first step therefore is to consider whether the father’s proceedings have been frequent. In my view, the endeavours since the middle of July 2014 have been an attempt to get the contact with the child going but without addressing any of the issues earlier mentioned. In my view, the limited number of applications albeit they may have been the same application and adjourned, could easily fall within the definition of frequent. Insofar as the application or applications have been pursued without reasonable ground, as observed above, that must be examined objectively. It is much easier to examine that objectively if the father has been warned of the necessity to obtain the evidence to overcome the major problem that is now clear, he has not addressed. It would be difficult to accept that the father’s application was baseless because it unashamedly seeks contact which the Court found in 2014 should occur because it was in the best interest of the child. However, it is the repetitious nature of the same approach which must be said to have been made without proper basis after being warned of the necessity of getting the proper evidence. What has now occurred however is that the father has filed material indicating that there is a pathway being adopted that might produce an outcome that is good for the child. As I observed earlier, counsel for the Independent Children’s Lawyer said that it was too late for that but I disagree. If the child is ever to benefit from a relationship with his father it has to be after all of the issues about which the father was criticised, have been addressed. I am not prepared at this stage to say that his application is baseless.
65.Having said that, I take into account that the overriding purpose of the Act is to stop the father bringing actions which are seriously and unfairly burdensome to the mother or which cause her unjustified trouble. On any objective view, that is exactly what has occurred. That would justify a finding that the proceedings have been vexatious within the definition in the Act. However, all of that simply enlivens the discretion of the Court. How the discretion is to be exercised is to be guided by the very protective purpose for which such an order was designed to achieve. Having regard to the fact that I accept that the father may have started something that he should have long ago undertaken and the control can be given over the litigation pathway to the extent that the mother does not have to incur the unjustified trouble and harassment, I would not exercise the discretion against the father at this time. That is not to say that if the continued pathway was, as the Independent Children’s Lawyer suspected and as the mother has predicted, another application could not be made. At this stage, the mother has not established to my satisfaction that there is a justification for a complete restraint but there is a justification for not permitting the matter to go further to trial without the father first establishing that he has evidence which justifies a reconsideration of the matter. There will be orders accordingly.
I have no doubt that the husband has been burdened by the various proceedings in this court and all of those have been associated with endeavouring to conclude both the parenting and property issues. Rather than instituting or continuing proceedings, the wife has been persistent in endeavouring to delay them or to avoid a conclusion. In the parenting reasons for judgment, I made reference to the wife’s constant approaches to the State Magistrates’ Court for family violence orders. In that court she has been extraordinarily proactive but almost entirely the opposite in this court. Now that the proceedings have been brought to an end, there should be no further proceedings in this court other than perhaps for enforcement purposes, a thing that will no doubt arise out of any appeal brought by the wife.
The powers set out in s 102QB are obviously discretionary and based upon the fact that it is hard to see how any further proceedings could be necessitated, I decline to exercise the discretion in favour of the husband.
I certify that the preceding One Hundred and Twenty (120) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin delivered on 13 April 2017.
Associate:
Date: 13 April 2017
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