NASH & NASH
[2015] FCCA 1359
•1 June 2015
FEDERAL CIRCUIT COURT OF AUSTRALIA
| NASH & NASH | [2015] FCCA 1359 |
| Catchwords: FAMILY LAW – Property – cohabitation/marriage of nearly 19 years – asset pool of about $4m – whether the court should add back and treat as notional assets items retained by each party post-separation which no longer exist – where the husband received about $8m five years prior to separation following the sale of a business but subsequently engaged in share trading and lost a substantial amount of it – assessment of contributions in light of this loss – where the wife has the care of the four children of the marriage – where the wife seeks a 15% adjustment of a pool augmented by notional assets for s.75(2) matters – whether disproportionate in light of the size of the pool. |
| Legislation: Family Law Act1975 (Cth), ss.75, 79 |
| Chapman & Chapman [2014] FamCAFC 91 Cromwell & Cromwell [2006] FamCA 1454 Watson & Ling (2013) 49FamLR 303 Wimborne & Wimborne (unreported) Appeals No. EA27/92 & 15/93 judgment date 28 April 1994 |
| Applicant: | MS NASH |
| Respondent: | MR NASH |
| File Number: | NCC 2097 of 2012 |
| Judgment of: | Judge Terry |
| Hearing dates: | 12, 13 & 25 November 2014 |
| Date of Last Submission: | 25 November 2014 |
| Delivered at: | Newcastle |
| Delivered on: | 1 June 2015 |
REPRESENTATION
| Counsel for the Applicant: | Mr Tregilgas |
| Solicitors for the Applicant: | Taperell Rutledge Lawyers |
| The Respondent: | In Person |
ORDERS
The parties shall forthwith do all acts and things and execute all documents required to cause to be paid to the wife:
(a)The proceeds of sale of Property S held in trust by Peter Corcoran, Solicitor on behalf of the parties up to a total amount of $787,383.00;
(b)The funds held in Penmans Trust Account on behalf of the husband up to a total amount of $762,306.00 being:
(i)Distributions from the Nash Partnership and
(ii)Proceeds of the Supreme Court proceedings between the husband and the husband’s siblings and Mr R and others;
(c)$129,403.15 of the funds held in Penmans Solicitors Trust Account on behalf of the husband being the balance of the proceeds of liquidation of the husband’s interest in the (omitted) Trust.
If the amounts in either of the funds in (1) (a) & (b) are more than the figures above the amount, the figure shall be paid as to 55% to the wife and 45% to the husband.
The parties shall forthwith do all acts and things and sign all documents required to cause to be paid to the husband the balance of the funds held in Penmans Solicitors Trust Account on behalf of the husband being the balance of the proceeds of liquidation of the husband’s interest in the (omitted) Trust.
If the amounts in the funds in (1) (a) & (b) are less than of the figures above the husband shall contemporaneously with the release to him of the funds referred to in Order (3) pay to the wife 55% of the difference between the amount in the funds referred to in (1) (a) & (b) and the amounts specified in orders (1) (a) & (b).
If the amount in the fund referred to in Orders (1)(c) and (3) is more than $218,140.00 the additional amount shall be paid as to 55% to the wife and 45% to the husband.
If the amount in the fund referred to in Orders (1)(c) and (3) is less than $218,140.00 the husband shall contemporaneously with the release to him of the funds referred to in Order (3) pay to the wife 55% of the difference between $218,140.00 and the amount in the fund.
The parties shall forthwith call and hold a meeting of (omitted) Pty Ltd and at that meeting pass such resolutions, execute such documents and do all other acts and things as may be reasonably necessary to do the following:
(a)For the wife to resign as a director of (omitted) Pty Ltd; and
(b)For the wife to transfer the whole of her shareholding in (omitted) Pty Ltd to the husband.
The wife is declared the owner to the exclusion of the husband of:
(a)Property L;
(b)The Toyota (omitted);
(c)The (boat omitted) runabout;
(d)Her jewellery;
(e)Her savings;
(f)Her household contents;
(g)Her superannuation;
(h)All other assets in her possession or under her control.
The husband is declared the owner to the exclusion of the wife of:
(a)His interest in the Nash Partnership;
(b)The Holden (omitted);
(c)His savings;
(d)His household contents;
(e)His superannuation;
(f)All other assets in his possession and under his control.
Paragraph 11 of the Short Minute of Consent Orders identified and marked with the letter “A” in Order 1 of the Interim Order made on 20 September 2012 is discharged.
If either party refuses or neglects within 14 days of a written request to do so to sign any documents necessary to give effect to these orders the Registrar of the Newcastle Registry of the Federal Circuit Court of Australia is hereby appointed pursuant to s.106A of the Family Law Act 1975 to execute such documents on behalf of such party.
IT IS NOTED that publication of this judgment under the pseudonym Nash & Nash is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT NEWCASTLE |
NCC 2097 of 2012
| MS NASH |
Applicant
And
| MR NASH |
Respondent
REASONS FOR JUDGMENT
Introduction
Ms Nash and Mr Nash seek property settlement orders after the end of their 18 year cohabitation/marriage.
About 13 years into the marriage the husband received $8m following the sale of a business in which he had an interest as a result of a family connection. He managed to lose a lot of it share trading but the pool is still substantial; it is worth $4m without add-backs and around $4.7m if notional assets are added to the pool as the wife’s counsel contended they should be.
The wife’s counsel submitted that the pool augmented by add-backs should be divided 65% to the wife and 35% to the husband.
He submitted that contributions should be assessed as equal notwithstanding that a very large part of the pool derived from the money the husband received, because this was a way of taking account not only of what had come in but also of what had been lost.
He submitted that the wife should receive a 15% adjustment for s.75 (2) matters as she had the care of the children, could expect little child support or assistance with the care of the children from the husband in the future and had become used to living a particular kind of lifestyle.
In dollar terms this would mean that the wife would receive real assets to the value of $2.84m and the husband real assets to the value of $1.17m.
The husband represented himself and did not initially make a proposal in percentage terms about contributions and s.75(2) matters. In the outline of argument he filed on 6 November 2014 he said that he should receive cash of $1,768,828.00, a property in Property L, his motorbike and his superannuation which totals in value $2,038,637.00 and is equivalent to a shade over 50% of the pool.
During final submissions the husband still proposed that he receive Property L but said that it would be better if he kept his interest in the Mr Nash partnership and received $180,000.00 cash to allow him to pay off his post-separation debts. This totals about the same but when asked about percentages the husband said that he considered that he should receive 65% of the pool and the wife 35% because of the contribution which came in as a result of his family connection.
The evidence
The wife relied on her amended initiating application, affidavit and financial statement filed on 24 October 2014. She also relied on the oral evidence of Mr P, a jeweller.
The husband relied on his affidavit filed on 27 October 2014. He prepared a document headed “Consent Orders, Balance Sheet Summary and Argument Case” which although not strictly set out as an affidavit contained a jurat at the end and from which I have taken the orders he sought at the commencement of the hearing. He did not file an updated financial statement which was the fault of the court because by an oversight one was not ordered and he relied on his financial statement filed on 18 September 2012.
The wife’s affidavit was very detailed but she did not set out her evidence chronologically and possibly as a result the fact that she gave differing evidence about certain matters at different places in her affidavit seems to have escaped her notice. Examples are the date on which the husband started share trading, when he started using a company called (omitted) Pty Ltd to do so[1] and the value of the Nash Partnership.
[1] Cf paragraphs 39, 40, 56 & 90
The wife gave confusing evidence about the cruiser boat. She said that the husband owned it at separation which she said occurred on 18 October 2011 but earlier she asserted that the husband sold the boat on 14 September 2011.[2]
[2] Cf paragraphs 203.5 and 154
The wife provided a lot of detailed financial information but there were gaps in the evidence which in my view could have been easily filled by information obtained as a result of searches or the issue of subpoenas. A notable example was the lack of information about when the husband became a shareholder in (omitted) Pty Ltd).
The husband could also have provided this information and it was in his interests to do so but he was unrepresented at trial and had been for some time and each party has an obligation to make sure that the court has sufficient information to assist it to make a decision. I was left with a sense of unease about whether the wife had failed to provide some information for tactical reasons.
The wife complained in a broad general sense about the husband’s failure to make disclosure but no submission was made that he had failed to comply with any court order about disclosure or had failed to produce documents in response to a Notice to Produce.
On a number of occasions in her affidavit the wife used phrases such as “I believe” or “may have done” or similar. I cannot elevate the information which follows such phrases into evidence on which I can place weight.
The husband’s affidavit was of little assistance. Some of it was struck out on the application of the wife’s counsel but the parts which remained largely consisted of self-pitying complaints by the husband about his pre and post-separation woes and he provided little coherent and consistent information about factual matters.
There were occasions during cross-examination when the husband was not initially forthcoming about the true manner in which he had used assets post-separation and concessions had to be extracted from him. On other occasions he made frank admissions about having lost large sums of money share trading but nevertheless I need to treat his evidence with a degree of caution.
Background
The parties met in (omitted) 1990 when they were 20 and 22. They commenced cohabitation in (omitted) 1993 and married in (omitted) 1996 and they have four surviving children, W born on (omitted) 1999 (15), X born on (omitted) 2000 (14), Y born on (omitted) 2002 (13) and Z born on (omitted) 2003 (11). Their oldest daughter A was stillborn.
When the parties met the wife was working as a (occupation omitted) and the husband was working for (business omitted) which manufactured (omitted). The company had been started by his grandparents in the 1950’s and the husband commenced working for the company in 1987 and was made a director in 1989.[3]
[3] Wife’s affidavit paragraph 25
It was the husband’s case that he had an interest in the company prior to the commencement of cohabitation, a claim which the wife ultimately seemed to accept.
About a year before the parties met the husband had purchased Property D and the parties commenced cohabitation there in (omitted) 1993.
In 1996 a property at Property L was purchased in the wife’s name and in (omitted) 1997 a property at Property S was purchased in joint names. Property L was rented out throughout the relationship. Property S became the parties’ matrimonial home after renovations were carried out to it.
In (omitted) 1999 the Property D property was sold and the parties purchased Property H as an investment property. In 2003 they sold Property H and put the profit into Property S.
In (omitted) 2006 (business omitted) contracted to sell its business to an American company for $25,618,617.46. The husband’s parents had retired from the business in 2000 and the husband and his siblings were the beneficiaries of the sale.
There was no documentary evidence which established how much the husband received. The wife said that he received about $8,454,133.00 which is close to an arithmetical one third share of the larger figure. At trial the husband said that there was no evidence that he had received $8.454m but in an affidavit filed in September 2012 his own evidence was that he received about $8.2m although he said that this was received over a period of time.
The husband and his siblings took advice from an accountant on how to distribute the money and declare it in their tax returns.
After the business was sold the husband and his brothers Mr C and Mr E set up three entities. The first was (omitted) Pty Ltd into which they each put $3m and their sister Ms K put $1m. The second was the Nash Partnership which purchased real estate and the third was the (omitted) Trust which also purchased real estate.
The husband was out of a job after the sale of the business and at some point he began share-trading. In 2008 he found himself in trouble and needing cash his brothers bought him out of (omitted) Pty Ltd for $3.3m. He continued to trade in shares after this and it was the wife’s case that his share trading developed into an obsession and became tantamount to gambling.
The husband agreed that at some point his share trading became riskier and he blamed this on the fact that in September 2010 the ATO demanded that he pay tax of $3.2m on the amount he had received in 2006. The ATO sent similar demands to his siblings and in 2011 it commenced legal proceedings to recover the debt. The husband said that in the face of this he became desperate to make money so that his family’s lifestyle would not be affected if he had to pay a substantial sum to the ATO.
During 2011 the wife became increasingly concerned about the husband’s trading and unsuccessfully tried to curb it. The parties’ relationship deteriorated leading to the husband leaving the former matrimonial home on 18 October 2011.
The husband returned to the home at Christmas 2011 with the wife’s consent and the parties lived under one roof until 21 June 2012 when the wife moved out with the children. The husband maintained that the parties were reconciled between late December 2011 and June 2012. The wife said that it was not a reconciliation and that she had agreed to the husband staying for a couple of days over Christmas and he had then refused to move out forcing her in the end to move out herself.
Some of the text messages the wife attached to her affidavit suggest that the situation between December 2011 and June 2012 may have been more nuanced than the wife is now willing to admit but as the wife insisted that she regarded 18 October 2011 as the date of final separation I will go with that.
The ATO eventually reduced the amount it sought from the husband and his siblings but they still considered it too much and in April 2012 they commenced legal proceedings against their accountant seeking damages for the advice they had received which they claimed had led to them incurring the tax bill.
In August 2012 the wife filed an application for a property settlement. The husband filed a response in October 2012 and various injunctions were subsequently made restraining the husband from dealing with assets but the property proceedings could not progress until the ATO action against the husband and the husband’s action against his accountant were resolved.
In June 2013 Property S was sold and the net proceeds were placed into trust.
On 21 November 2013 the litigation with the accountant was settled. The husband wanted either this money or the money from the sale of Property S to be made available to allow him to broker a settlement with the ATO but the wife would not agree and insisted on these monies remaining in trust.
Eventually in June 2014 a Deed was entered into between the husband and the ATO in which the ATO agreed to accept $800,000.00 in settlement of the tax bill which then stood at over $2m plus interest. At the same time an order was made by consent for the husband’s interest in the (omitted) Trust to be liquidated. The husband received $1,020,360.00 and on 28 July 2014 $800,000.00 was paid to the ATO and the balance of $220,360.00 was placed into trust.
This cleared the way for the property proceedings between the parties to be listed for final hearing.
The assets and liabilities
Non-superannuation assets
The non-superannuation assets of the parties are as follows:
Description
Ownership
Value
Funds in trust with Peter Corcoran Solicitor & Conveyancer from the sale of Property S
Joint
$787,382.00
Funds in trust with Penmans Solicitors being the balance of the proceeds of sale of the husband’s interest in the (omitted) Trust
Husband
$218,140.00
Funds in trust with Penman’s Solicitors being principally the net proceeds of the husband’s litigation with his accountant
Husband
$763,306.00
One third interest in the Nash Partnership
Husband
$1,691,700.00
Holden (omitted)
Husband
$6,500.00
Property L
Wife
$250,000.00
Toyota (omitted)
Wife
$60,000.00
(omitted boat)
Wife
$5,000.00
Jewellery
Wife
$12,000.00
(omitted) Bank
Wife
148,905.00
(omitted) Bank
Wife
11,161.00
TOTAL
$3,954,094.00
Property S was sold for $1.75m in June 2013 and the net proceeds of $767,933.69 were placed into the trust account of Peter Corcoran Solicitor & Conveyancer. Interest has been earned on this amount since then and I was informed that there was $787,382.00 in the account at the date of the hearing.
The husband’s interest in the (omitted) Trust was liquidated in July 2014 and he received $1,020,360. $800,000.00 was paid to the ATO on 28 July 2014 to settle the husband’s ATO debt and on 29 July 2014 an amount of $220,360.00 was deposited into trust with Penmans Solicitors. After payment of a tax invoice and receipt of some interest from investment the balance in the account as at 5 November 2014 was $218,140.06 (rounded to $218,140.00).
On 21 May 2015 an order was made by consent that the husband receive $10,000.00 from this account by way of partial property settlement. I will take this into account when making orders.
There is second trust account with Penmans Solicitors. When the hearing commenced it contained $763,306.16 (rounded to 763,306.00).
This money came from diverse sources.
Between 30 July 2012 and 15 October 2014 $305,317.75 consisting of $93,743.75 from (omitted) Pty Ltd as trustee for the (omitted) Trust and $211,574.00 being distributions from the Nash Partnership was deposited into this account.
Between 30 July 2012 and 7 November 2014 all but $2,628.77 of this was disbursed. $216,390.38 was disbursed to or on account of costs incurred by the wife and $101,749.83 to or on account of the costs incurred by the husband. Payments were also made to Penmans, to (omitted) accountants and to other smaller miscellaneous creditors.
On 10 November 2014 $764,489.00 being the proceeds of the litigation with the accountant was deposited into this account. An amount of $3,811.61 was subsequently paid to the wife and at the commencement of the trial this account contained $763,306.16.
At the conclusion of the hearing on 24 November 2014 it was agreed that the husband be paid $1,000.00 from this account by way of partial property settlement. I will take this into account when making orders.
At the date of trial fortnightly payments of $1,000.00 to the husband and $1,500.00 to the wife were being made from this account. If this has continued since trial and if further monies have been paid from this account for the children’s school fees and extra-curricular activities then the amount in the account may now be different and other things such as investment of the money could also mean that the balance is now different.
The Nash Partnership owns a number of real properties which are registered in the names of the husband and his brothers Mr C & Mr E as tenants in common.
Both parties attributed a value of $1,691,700.00 to the husband’s interest in The Nash partnership.[4] This causes me unease because the partnership owns real estate which was valued in May 2013, 18 months before trial and further the value the wife attributed to the husband’s interest in the partnership at the date of trial was the same as the value she suggested it was worth at separation.[5]
[4] See also paragraph 184 of the wife’s affidavit where the figure of $1,786,031.00 appears. However when identifying the assets for trial the wife relied on the figure of $1,691,700.00.
[5] Wife’s affidavit paragraph 203.11
The wife complained in her affidavit that the husband had not disclosed recent financial information about The Nash Partnership but there was no evidence that she had tried to obtain information about it from alternative sources such as by issuing subpoenas. The wife and in the end the husband both asked me to include this asset in the pool at $1,691,700.00 and both were happy in the end to take it at this value as part of their entitlement. Therefore despite my unease I have no option but to include it in the pool at this amount.
Property L was valued at $250,000.00 on 11 November 2014.
There was a dispute about the value of the Toyota (omitted).
The wife initially asserted that it was worth $50,000.00 and the husband that it was worth $65,000.00. Prior to final submissions I was handed a document obtained from the Redbook internet site which gave an estimate of value of between $64,830.00 (private sale) and $57,330.00 (trade-in) for a vehicle in fair condition.
The parties refused to agree on the value and their respective positions during final submissions where that the wife claimed that the vehicle was worth $60,000.00 and the husband that it was worth $65,000.00.
I cannot make a definitive finding about the value of the vehicle in the light of a plethora of opinions and a lack of admissible evidence. Doing the best I can to rationally resolve the dispute I intend to include the vehicle at a value of $60,000.00 which is slightly under the median point between the two Redbook figures even though the Redbook figures do not constitute admissible evidence.
The husband alleged that the wife’s jewellery was worth $70,000.00. The wife said that her valuable jewellery was one ring and she produced a “valuation for resale” prepared by Mr P a Jewellery Manufacturer and Wholesaler who valued the jewellery at $12,000.00.
The wife did not obtain an affidavit from Mr P but she was permitted to call oral evidence from him. He said that he was asked to value the jewellery for re-sale and valued it at $12,000.00.
Mr P has the necessary expertise to value the jewellery and he was not successfully challenged in cross-examination. This is the only evidence I have about the value of jewellery and I intend to place it in the pool at a value of $12,000.00.
The wife’s counsel included the savings of both parties in the balance sheet he relied on at the commencement of the hearing. The amount in the husband’s accounts was small as was the amounts in one of the wife’s accounts but in the other two accounts the wife had $160,066.00 in total.
During final submissions the wife’s counsel submitted that this amount should be left out of the pool on the basis that except for an amount of about $23,283.00 it represented post-separation savings.
The problem for the wife is that on 25 November 2011 she unilaterally removed $410,000.00 from the parties joint account and one take on the matter is that the $160,066.00 represents part of that amount and if this is so it should be included in the pool.
The wife had several sources of income available to her post-separation (the rent from Property L, her salary and distributions from The Nash Partnership) and it was her case that the $160,066.00 should not be treated as the residue of the $410,000.00 but should be treated as her savings.
The wife maintained that she had spent all but $23,283.00 of the $410,000.00 on living costs or the payment of legal fees. She proposed that the $221,520.00 she had spent on legal fees be added back as a notional asset but that the $165,000.00 she had spent on living expenses should be ignored. The wife’s counsel’s position seemed to be that the $23,000.00 which the wife was unable to account for should also be ignored.
However this is simply a reconstruction by the wife. There was no evidence that she kept the $410,000.00 separate and dipped into it to pay living expenses and legal fees until it had nearly run out and saved her income from the other sources. It is equally possible that the wife was to retain $160,066.00 of the $410,000.00 because she was able to pay her living expenses from her other sources of income.
I intend to include the wife’s savings in the pool but I will consider when dealing with s.75(2) matters that the wife has preserved this money post-separation despite having the care of the children while the husband lost further money share-trading post-separation.
Both parties have furniture and household items. The wife’s are in her possession and the husband’s are in a storage unit.
There was no evidence about the value of these items. During final submissions the wife’s counsel suggested that a way through this might be to include each party’s household contents in the pool at a value of $10,000.00 but this is too arbitrary. In my view the better way to deal with these items given the absence of any evidence about value and given the size of the pool otherwise is to omit them from the pool.
Finally there is a company (omitted) Pty Ltd in which both parties have an interest but it was agreed that the company had no value.
The add-back argument
The wife’s counsel submitted that the pool should be augmented by a number of add-backs namely:
i)$308,000.00 which the husband received from the sale of a cruiser boat in September 2011 and paid into the (omitted) line of credit before withdrawing $274,850.00 of it and placing it into his share trading account;
ii)$221,520.00 being the wife’s paid legal fees;
iii)$19,640.00 withdrawn by the husband from the wife’s credit card in retaliation for her taking the $410,000.00 from the joint account;
iv)$61,000.00 removed by the husband from The Nash Partnership account in June 2012 and $140,000.00 given to the husband by his brothers from The Nash Partnership account in August 2012;
v)$153,000.00 received by the husband post-separation from the sale of a fishing boat and dock, (omitted) motor vehicle, (omitted) caravan and (omitted) dirt bike.
Add-backs became very popular following the decision of Townsend & Townsend[6] and a consideration of the enhanced outcome for the wife in that case when the Full Court dealt with the sale of a taxi in this way compared to the outcome when the trial judge gave the wife an additional percentage of the existing assets to take account of the loss of the value of the taxi from the pool explains their popularity and the fact that this manner of proceeding was often felt to lead to a fairer outcome than just dealing with loss of assets from the pool as a s.75(2) matter.
[6] Townsend & Townsend (1995)FLC 92-569
It was particularly common in the years prior to the decision of Stanford & Stanford[7] for amounts paid by one party for legal fees using money which would otherwise have been in the pool to be added back.
[7] Stanford & Stanford (2012) 247 CLR 108
Since Stanford there has been a debate about whether it is appropriate to proceed in this way.
The wife’s counsel urged me to make use of add-backs and referred me to Chapman & Chapman,[8] a post-Stanford decision in which the Full Court dealt on its merits and without demur with an argument that the trial judge should have added certain money back and that her failure to do so was an apellable error.
[8] Chapman & Chapman [2014] FamCAFC 91
I tend to the view that there is still a place for add-backs and a place for giving full dollar weight to assets which one party has unilaterally disposed of after separation in order to ensure, as in Townsend, that the ultimate outcome is just and equitable. However since Stanford it has to be open to question whether this tool should be used when identifying the pool or whether its use is more appropriately to be considered at the stage of determining pursuant to s.75(2)(o) whether there is any other fact or circumstance which the justice of the case requires the court to take into account.
In any event the Full Court in Chapman & Chapman while not disowning add-backs said that:
This case provides a timely opportunity to repeat- yet again – what was said in Cerini, namely, that “add-backs” are the…”exception rather than the rule….”
I do not accept that it is appropriate to consider adding back the amount of $308,000.00 or alternatively $274,850.00. The cruiser boat was sold during the relationship albeit toward the end of it and the money placed into the (omitted) line of credit before being taken by the husband for share trading. I intend to deal with this in the context of assessing contributions.
In my view the appropriate course is not to add any of the remaining amounts back but to consider the loss of those monies from the pool pursuant to s.75(2)(o).
Liabilities
There are no relevant liabilities.
In her financial statement the wife said that he owed $1,700.00 on a (omitted) Mastercard and $19.00 on an (omitted) Mastercard. The parties have been separated for three years and these are not debts which the husband should be required to share.
The husband alleged that he owed $180,000.00 odd to various people. He said that he had borrowed $100,000.00 from his mother and $10,000.00 from his father. He alleged that he still owed $25,000.00 to a lawyer and that he also owed $40,000.00 on his (omitted) Credit Card which had accrued “over the last couple of years.” He said that some of the money had been used for trading.
During cross-examination the husband said that 30-40% of the money he received from his mother had gone on share trading and the rest on living costs. He also said that he owed a friend $10,000.00 which he had borrowed for trading.
The husband said that he owed $12,000.00 to a person named Mr S which he would not be required to repay.
I will take the husband’s indebtedness into account when considering s.75(2) matters but there is no justification for including his post-separation liabilities at the stage of identifying the pool.
Superannuation
The parties have the following superannuation:
Description
Ownership
Value
(omitted)
Wife
$43,310.00
Nash Family Superannuation Trust
Husband
$19,809.00
TOTAL
$63,119.00
The wife’s counsel submitted that the superannuation should be left out of contention as it was only a relatively small amount. I do not accept even in a pool this size that I should simply ignore $63,000.00.
Conclusion about the pool
The asset pool consists of non-superannuation assets of $3,954,094.00 and superannuation of $63,119.00, a total of $4,017,213.00.
Whether it is just and equitable to consider making property settlement orders
S.79 (1) of the Family Law Act 1975 empowers the court to make such orders as it considers appropriate altering the parties’ interests in property. S.79 (2) provides that the court shall not make an order under this section unless it considers that it would be just and equitable to do so.
The parties had a long marriage and the bulk of the property acquired over the term of the relationship is in the husband’s name. Both parties seek an adjustment of interests in property and this case clearly falls within the following situation described by the High Court in Stanford & Stanford:
In many cases where an application is made for a property settlement order, the just and equitable requirement is readily satisfied by observing that, as the result of a choice made by one or both of the parties, the husband and wife are no longer living in a marital relationship. It will be just and equitable to make a property settlement order in such a case because there is not and will not thereafter be the common use of property by the husband and wife. No less importantly, the express and implicit assumptions that underpinned the existing property arrangements have been brought to an end by the voluntary severance of the mutuality of the marital relationship. That is, any express or implicit assumption that the parties may have made to the effect that existing arrangements of marital property interests were sufficient or appropriate during the continuance of their marital relationship is brought to an end with the ending of the marital relationship and the assumption that any adjustment to those interests could be effected consensually as needed or desired is also brought to an end. Hence it will be just and equitable that the court make a property settlement order. What order, if any, should then be made is determined by applying s 79(4). [9]
[9] Stanford & Stanford (2012) 247 CLR 108
I intend to take the usual steps to resolve the question of what particular alteration of interests would be just and equitable and those steps are:
i)to assess the contributions of the parties under s.79(4)(a), (b) and (c) and to express those contributions as a percentage;
ii)to consider the matters in s.79(4)(d), (e), (f) and (g), which include the matters in s.75(2) so far as they are relevant, and determine whether any adjustment should be made as a result to the contribution based entitlements;
iii)to consider the effect of those findings and resolve what orders are just and equitable in all the circumstances of the case.
Contributions
I intend to assess contributions globally. Some assets in the pool such as the husband’s interests in The Nash Partnership have a particular attribute in that they came in as a result of the husband’s family connection and the wife’s superannuation was at least partially acquired by the post-separation efforts of the wife but these matters can be taken into account in a global assessment of contributions.
Initial contributions
The wife said that at the commencement of cohabitation she owned motor vehicle and personal effects and had savings of $10,000.00 and superannuation of $5,000.00. She produced no documents to verify this and it is always troubling when parties who have had a long relationship make assertions of having had exact amounts such as these: it has the appearance of “best guess” evidence.
The husband owned the Property D property. According to the wife he also had savings of $5,000.00, personal effects and superannuation.
The wife’s evidence was that the Property D property was worth $70,000.00 and was subject to a $50,000.00 mortgage. The wife did not provide any foundation for this assertion but something similar appears in an earlier affidavit of the husband’s and as I have no other evidence about these matters on which I can place weight I will accept it as likely to have been the case.
The husband said during cross-examination that he had an interest in (business omitted) prior to cohabitation.
The issue of when the husband became a shareholder and when his shareholding changed could easily have been clarified by an ASIC search. It would have been in the husband’s interest to clarify this but the wife’s failure to clarify it when she could so easily have done so carries its own message and during final submissions her counsel accepted that the husband had a pre-cohabitation interest in the family company.
The wife said that between 1991 and 1992 she and the husband renovated the Property D property. She said that she did such things as sanding, painting and general labouring work and that some of her savings were used for the renovation work. I have no reason to disbelieve this evidence.
Contributions during the relationship – paid employment from 1993 to 2006
Between 1993 and 1998 the wife worked as a (occupation omitted) and from then until 2004 she worked part time at (employer omitted) with some time off in connection with her pregnancies and child care obligations. She ceased work in 2004 after her youngest child Z was born and remained out of the paid workforce until (omitted) 2010. She then returned to work part time as a (occupation omitted).
The husband worked for (business omitted) from the commencement of cohabitation until the business was sold in February 2006. The wife made no complaint about his financial contribution or financial behaviour during this 13 year period indeed she commented that during her pregnancies the husband’s salary was used to pay all household bills and meet all financial obligations.
Acquisition of property between 1993 and 2006
Property L was purchased in 1996 in the wife’s name. The fact that it was purchased in her sole name is irrelevant for the purposes of these proceedings. Property L was thereafter rented out for the remainder of the relationship.
The wife said that she also carried out physical work renovating Property L after it was purchased. She was silent as to any contribution the husband made to this but she is not a handyman and it is difficult to believe that the husband had no involvement in this work.
Property S was purchased in (omitted) 1997. The parties renovated it and the wife said that she did some physical work on the Property S rebuild prior to the parties first occupying the property.
The wife made some limited admissions about the husband also having a role in the work on Property S. She said that she had a greater role as homemaker and parent following the birth of the parties second child because the husband was working long hours at (business omitted) and spending his spare time working on the construction of the house.
In (omitted) 1999 the parties purchased Property H. The wife said that she provided physical assistance in improving Property H and that she did painting, supervision of tradesman and cleaning among other tasks. She said that she had a role in the ongoing leasing of the Property H property. The wife was silent about the husband’s contributions but I consider it inevitable that the husband would have also been involved in renovating Property H. It was sold in 2003 and the profit went into Property S.
The wife said that in (omitted) 2000 the husband acquired a 33% shareholding in (business omitted) and that a document was drawn up indicating that he had was required to pay $65,000.00 for the shares in 10 yearly instalments. She said however that to her knowledge no money changed hands.
As previously mentioned I consider it troubling that no company search was provided to establish the history of the husband’s shareholding in (business omitted) but I consider it significant that the wife had no knowledge of any money changing hands for the acquisition of the shares. The husband and wife worked closely to acquire assets during the first thirteen years of their marriage and I am confident that if any money had changed hands for the shares during this period the wife would have known about it.
The only thing the husband said relevant to this in his affidavit was as follows:
My brothers joined the business 8 years after me and ended up almost the same percentage shareholding as i got, was something my mother and father wanted their 3 boys to have equal shareholdings and my sister got 10% for doing nothing.
The money received from the sale of the business
The wife said that on or about (omitted) February 2006 (business omitted) entered into a contract to sell the (omitted) brand and business to an American company for $25,618,617. The wife asserted that the husband received one third of the sale price being a little under $8.5m.
The husband disputed that he received this amount and the best he would agree to at trial was that he received “many millions.” However it was pointed out to him that in the affidavit he filed on 18 September 2012 he said that he received 33% of the sale price or $8.25m although he said that it had been paid in increments over the years.
The husband worked for the company from the age of 17 and worked in it from the commencement of cohabitation in 1993 until the sale thirteen years later but he was paid for his work and the fact that his brothers received the same shareholding as himself despite starting work 8 years later than him and that his sister received a share for “doing nothing” strongly suggests that his family relationship and not his work for the company was the reason he obtained an interest in it.
The fact that the husband remained working for the business rather than wandering off and striking out on his own might have had some relevance to the amount he received and to that extent perhaps the wife made an indirect contribution to the husband receiving this money but cases such as Gosper & Gosper [10] make it clear that money which comes to a party because of a family relationship should be treated as a contribution by that party and nothing in the facts of this case suggest that the money received by the husband in 2006 should be treated differently. The wife’s very experienced counsel while not conceding this point skirted around the issue, suggesting that he was well aware of how the receipt of this money by the husband was likely to be treated but did not want to be seen as making the husband’s case for him.
[10] Gosper & Gosper (1987) FLC 91-818
An acceptance that the husband is entitled to credit for the introduction of the $8m is also implicit in the wife’s counsel’s submissions that contributions should be assessed as 50/50. It was his case that the husband’s loss of a good part of the money he initially received together with unmatched contributions by the wife post-separation to the care of the children justified this outcome and this can only be the case if it is accepted that absent this the husband would have been entitled to a much larger amount based on contributions.
Following the receipt of the money the husband and his brothers each put $3m into a company called (omitted) Pty Ltd which acquired real estate and his sister Ms K contributed $1m to that company. The brothers formed the Nash partnership which acquired a commercial real estate portfolio and set up the (omitted) Trust which did the same.
The parties thereafter began receiving income from the Nash Partnership and the (omitted) Trust.
In paragraph 93 of her affidavit the wife said that the husband used $1.1m of his share of the (business omitted) money to purchase a (omitted) boat. She said that he later sold it at a loss and then spent money several times buying and selling boats at a loss. However earlier in her affidavit, in paragraph 39, she said that on or about 1 July 2007 the husband purchased an interest in (omitted) Pty Ltd which ran a business selling boats and fishing and boating equipment. I do not know what to make of the evidence about the purchase and sale of boats.
The wife also said that the husband “continued his involvement with (omitted) Pty Ltd which was (business omitted)...” but without more I do not know what to make of this evidence.
The wife gave contradictory information about the date on which the husband started share trading. In paragraphs 39 & 40 of her affidavit she said that the husband purchased an interest in (omitted) Pty Ltd on or about 1 July 2007 and started using it as a vehicle for share trading “in or about 2007”. In paragraph 59 however she alleged that in approximately 2006 the husband began describing himself as a self-employed share trader and in paragraph 90 she said that the husband started trading on the stock market in or about 2006 using (omitted) Pty Ltd.
In paragraph 116 of her affidavit the wife said that “after (omitted) P/L ceased trading [the husband] announced that he would be ‘setting up full time share trader’ [sic]. The wife may know the date on which this occurred and what the significance of (omitted) Pty Ltd ceasing to trade was but I do not.
The wife could easily have cleared this up at least to some extent by providing a company search and I cannot be sure when the husband commenced share trading.
The wife said that she was informed that the husband also traded in his own name but did not say who told her this and when and I do not know what use to make of that evidence.
On 18 September 2008 the husband sold his interest in (omitted) Pty Ltd to his brothers for $3.3m to meet debts associated with his share trading.
The wife said as follows:
I am informed and believe that Mr Nash sold his interest in (omitted) Pty Ltd because he had overstretched his market position and needed funds to trade out of difficulty.
I understand that Mr Nash lost the entire $3,300,000 on high risk trades.
The husband alleged that his trading woes at this time were not because of high risk share trading but because of the global financial crisis and that he needed the money to meet margin calls.
The wife provided no foundation for her “understanding” as to why the husband got into difficulties or what happened to the $3.3m and I cannot place weight on this evidence simply because the unrepresented husband did not take objection to it.
The husband’s evidence that his need to obtain money in September 2008 was to fund margin calls because of the impact of the GFC is credible. This court does not operate in a vacuum. I cannot pretend not to know that the GFC was a significant financial world event which occurred in 2007 and 2008 and had a dramatic effect on the value of shares.
The wife did not suggest that she objected to the husband engaging in share trading prior to 2008 but said that:
Mr Nash and I started to argue in 2008 over his use of matrimonial funds for trading on the stock market in high risk trades such as derivative trading and option calls.[11]
[11] Wife’s affidavit paragraph 16
I accept the wife’s evidence that after the sale of the husband’s interest in (omitted) Pty Ltd and the loss of money which this involved she was concerned about his share trading activities which she began to regard as tantamount to gambling and that she tried to monitor his activities.
I accept the wife’s evidence that as time went by the husband became obsessive and later secretive about his trading and began taking risks because this was confirmed to a degree by the husband’s own evidence. He maintained that he sometimes made profits but agreed that he also lost money and he blamed his behaviour on the extreme stress created by the ATO demand in September 2010 which was followed by legal action.
It is easy to accept that the husband would have been consumed with worry about the ATO proceedings but he was very prone to blame everyone but himself for his poor decisions and monetary losses and he did not accept the help which the wife desperately tried to both give him and get for him at the end of the marriage.
I accept that the husband made as well as lost money on the share-market. He did not declare a tax loss in the 2010 financial year and the wife attached to her affidavit a note written in February 2011 in which the husband stated that he had a total of $1.52m in 3 trading accounts and that he absolved the wife from any further losses from these accounts but would keep the profits. However the husband agreed during cross-examination that he lost an additional $1.5m after accessing his (omitted) Pty Ltd entitlement in 2008, and all of the evidence points to the likelihood that his trading behaviour deteriorated after the ATO demand in September 2010.
The only losses apparent in the pool save for the loss of the $3.3m are:
i)the (omitted) line of credit which stood at $930,000.00 at separation;
ii)the diminution in the wife’s superannuation in the Nash Family Superannuation Fund; and
iii)the loss of $274,850.00 from the sale of the cruiser which was sold for $308,000.00 in October 2011 shortly before separation.
Property S was unencumbered in 2006. Subsequently the parties’ secured a (omitted) line of credit over the home which was eventually increased to $950,000.00. It was the wife’s case and the husband did not dispute that the husband used this money for share trading.
The wife alleged that the husband admitted that he had impersonated her in 2010 and persuaded (omitted) Super to roll her superannuation of $56,161.22 out of (omitted) Superannuation into the Nash Family Super Fund.
The husband agreed that this rollover occurred but said that it was done with the wife’s consent. I have no reason to doubt the wife’s evidence however.
The wife gave evidence that as at 30 June 2011 she had $126,165.00 in the Nash fund but that by 26 May 2014 it had dwindled to $20,987.00. She said that at this point she rolled her entitlement out into the (omitted) Superannuation Fund.
Later in her affidavit the wife alleged that $162,631.00 of her superannuation had been “recklessly lost by Mr Nash” but this figure is a combination of the amount rolled out in 2010 and the difference between her entitlement in June 2011 and her entitlement in June 2014 and it may well involve some double counting of any loss.
To compound the problem of what to do about this issue of the loss of the wife’s superannuation the wife’s counsel did not refer to this matter at all in the summary of position he handed up during final submissions.
The third matter is the sale of the cruiser boat. The husband sold the boat and deposited the proceeds into the (omitted) line of credit but he withdrew $274,850.00 soon afterwards and placed it into his share trading account and lost it.
The (omitted) line of credit and loss of money from the sale of the cruiser total $1,204,850.00. The loss of the value of the wife’s superannuation is at least $15,000.00 (the difference between the amount withdrawn in 2014 and the amount accessed in 2010). It might be higher if money in the fund was otherwise lost in reckless share trading because the difference between the high point and the low point of her entitlement in the fund is about $100,000.00 but there was a lack of evidence to establish that this loss in value was attributable to any fault or misuse of the money by the husband.
I will defer until the section in which I assess contributions overall a consideration of the significance of the share trading losses, because it is trite to say that the mere fact that money is lost from the pool as a result of the actions of one party does not necessarily mean that they alone have to bear the weight of the loss.
Financial contributions from employment between 2006 and June 2012
The wife returned to work part time in 2010 and contributed income from her employment between then and the parties separating on 18 October 2011.
The husband did not obtain paid employment after the sale of the business but it important to remember that the Nash partnership and the (omitted) Trust provided income for the parties after 2006. The husband therefore continued to contribute to the financial support of the household during this period regardless of his share trading losses.
Homemaker and parenting contributions
The wife said that she was the primary homemaker and parent throughout the relationship. She said that she took maternity and sick leave of about 6 weeks around the time of the birth of the older children and stayed out of the workforce altogether between 2004 and 2010.
The wife made limited concessions about the husband’s parenting contributions save that she conceded that he was involved in coaching Y’s soccer in 2008 and (hobby omitted) in 2009.
The husband said that he was extensively homemaking and parenting contributions especially after 2006 when he ceased to work for (business omitted).
The fact that a marriage has broken down can sometimes influence parties recollections of the past and cause them to focus only on the bad things and I consider that on this issue the following findings are open to me:
i)The wife was the primary homemaker and parent during the relationship. She took maternity leave, she had some years out of the workforce and the husband’s employment between 1994 and 2006 limited his availability to provide care for the children and help at home;
ii)The wife made no complaint about the husband’s involvement with the family between 1993 and 2006 and I consider that he was likely more involved with the children during this period than the wife is now willing to concede;
iii)I consider it likely that the husband continued to be involved with the children to a greater extent than the wife was willing to concede between 2006 and him leaving the home in October 2011 although his involvement in the latter part of the marriage may have been increasingly overshadowed by the way he reacted to threat to the parties lifestyle posed by the ATO.
The wife’s counsel submitted that the wife’s parenting contributions should be treated as something more than ordinary because they were made in the context of the children having special needs and the husband’s innate personality.
Dealing with these matters one at a time the husband disputed that the children had any extraordinary special needs and while the wife provided some documentation about historical assessments of some of the children there was no independent evidence that any of the children had special needs which made caring for them particularly onerous.
The wife provided a report about W prepared by the (omitted) Clinic on 4 February 2010, more than 4 ½ years before the hearing. The report stated that W then aged 10 had ADHD and had been prescribed Ritalin for use on school days. It said that he was not an impulsive or restless boy and was generally well-behaved, was happy and not prone to mood problems and was receiving learning support at school. He was said to be of average intelligence.
The wife said in her affidavit that W was still taking Ritalin.
The wife said that X had been diagnosed as having Asperger’s Syndrome but provided no report about him. She said that he was not taking medication but required behaviour management strategies which she had been required to introduce into his daily life. She did not say what those behaviour strategies were or how much time or effort from her was involved to implement them.
The wife said that she was receiving a carer’s pension for X making it somewhat odd that there was no report about him but a report about all the other children.
The wife provided a report about Y from the (omitted) Clinic also dated 4 February 2010. It stated that Y then aged 7 had difficulties with literacy and was easily distracted but was happy and reasonable at games and sport. He was described as a calm child who can become angry if provoked. He was described as a child with average intelligence who is responsive to Ritalin. The doctor who wrote the report said that he intended to see Y again in 6 months but no further reports were provided.
The wife said that Y was no longer taking Ritalin.
The report about Z from the (omitted) Clinic was dated 2 July 2009. Z then aged 5 and in Kindergarten was described as having poor concentration, restlessness and impulsivity. She was described as a child of excellent intellectual ability who was experiencing learning difficulties because she has ADHD (combined type). It was suggested that she would benefit from Ritalin and noted that she was to be reviewed in six months.
The wife said that Z was currently taking Concerta.
The evidence about the children is far too slight to support a finding that the wife has had a more difficult task than usual in parenting them. There was no evidence that any of the children displayed difficult behaviour at home or were ever in trouble at school. The wife referred in general terms to utilising behavioural strategies with X but provided no information about what that meant or how time consuming it was.
It is simply not open to me on the evidence to find that the wife was required to make an extraordinary effort as a parent because of any problems of any of the children.
The wife’s counsel did not explain what he meant by the submission about the husband’s innate personality. However the husband’s own evidence was that he was consumed by worry and despair from 2010 onwards as a result of the actions of the ATO. I accept that the wife was under strain in the last few years of the marriage when the husband was under this strain and was engaging in risky share trading and that the contribution she made to his welfare during this period was important and that her need to prop him up may well have made her job as homemaker and parent more onerous.
Post-separation matters
The wife has had the overwhelmingly responsibility for the non-financial care of the children since June 2012. The husband has spent very limited time with them. He remained living at Property S until June 2013 when it was sold but he did not spend extensive time with the children and after the sale of Property S he commenced living principally in the (country omitted).
Final parenting orders were made on 19 September 2013 which provided for the children to live with the wife and spend time with and communicate with the husband as agreed between the parties.
The husband complained at length in his trial affidavit and during the hearing that his lack of involvement with the children was due to the wife being obstructive about allowing him adequate funds to live on and after June 2013 to house the children. However he was very emotional at trial and the content of his affidavit suggested that he took a very emotional subjective view of his situation and had a strong tendency to blame everyone but himself for his situation. He blamed the wife, his brothers and the wife’s lawyer but I am satisfied that if the husband has not spent extensive time with the children it is because of his own choices and emotional state and not because the wife has been obstructive about him having a relationship with the children.
The husband has however contributed to the children’s financial support post-separation even though he has not paid child support in a formal sense because from 30 June 2012 to the date of trial the wife received substantial amounts from the Penmans Trust account into which distributions from (omitted) Pty Ltd and the Nash Partnership were deposited.
On my calculations the wife received $210,995.38 from the account between 30 July 2012 and October 2014 which took the form of payment for rates and outgoings for the Property L property ($4,527.46), various lump sum distributions ($141,272.73), reimbursement for private health insurance, payment of a rent subsidy ($9,526.30), fortnightly payments of $1,500.00 from 6 January 2014 to 30 October 2014 ($30,000.00) payment of the children’s school fees ($21,857.28) and an amount for expenses ($3,811.61).
The wife also received $160.00 per week rent for Property L in circumstances where some if not all of the outgoings for Property L were paid by distributions from the Nash Partnership, allowing her to retain the rent undiminished by the need to pay these outgoings
In her financial statement the wife said that the husband was making a contribution of $40.00 per week in the form of (omitted) Private Health Insurance (including children). The Penmans Trust Account statements suggest that the (omitted) payments have been coming from the Nash partnership distributions which suggests that the wife accepts that this is a contribution by the husband.
A final post-separation matter is that the wife made contributions to her superannuation post-separation even if they are not necessarily completely reflected in the amount in her (omitted) fund.
Conclusion about contributions
In order to arrive at an appropriate assessment of contributions in percentage terms (which is not mandated by the legislation but which provides a transparent pathway to determining a just and equitable outcome) I must weigh and balance all of the diverse contributions made by the parties during their 18 year relationship.
The following findings are open to me about contributions overall:
i)The husband introduced the Property D property into the relationship. The net equity in it exceeded the wife’s savings at the time whatever they might have been but probably not by a greatly significant amount especially when considered in proportion to the current pool and I accept that the wife put some money into renovations to the property. The Property D property when sold produced a modest amount which the parties used for other purposes.
ii)The parties contributed in different ways during the first 13 years of the relationship in the spheres of employment, parenting, homemaking and performance of other non-financial tasks associated with the conservation and improvement of real properties but there was no suggestion that either was lazy and overall their contributions in these regards were equal.
iii)The money received in 2006 should be treated as a contribution by the husband. On his own admission he received $8.2m which was an enormously significant financial contribution.
Some measure of the importance of this contribution is that $2,673,146.00 of the assets in the pool of just over $4m derive directly from this money, that is, the value of the Nash Partnership, the balance of the funds from the liquidation of the (omitted) Trust and the money from the litigation (because the husband’s interest in the (omitted) Trust was liquidated to pay the ATO rather than the money from the damages claim being used for this purpose which logically should have occurred).
iv)The wife continued to be the primary homemaker during the phase of the marriage from 2006 to 2011/12 and she also earned some income. The husband made some parenting contributions during this period and the parties derived income from the husband’s investments which allowed them to enjoy a somewhat higher standard of living than previously. This is implicit in the submission by the wife’s counsel at the end of the trial.
v)I cannot find that the wife’s homemaker and parenting contribution during the entire 2006-2011/12 period was made more difficult by the husband’s innate personality (whatever that might mean) or his state of mind and behaviour but the husband’s own evidence was that at least from 2010 when the ATO began their recovery action he was consumed by fear and worry and did engage in risky share-trading. I accept that the wife tried to help him with what she became convinced was tantamount to a gambling problem and that she made a considerable contribution to his welfare during this period and that to a degree her task as homemaker and parent may have been made more onerous by the husband’s state of mind and behaviour.
vi)The parties each contributed to the children’s financial support post-separation; the husband made a considerable contribution as a result of the flow-on effect of distributions from the Nash Partnership. However the wife made almost the sole contribution to the children’s non-financial care in the period of period of nearly 2 ½ years between June 2012 and the date of the hearing.
vii)The wife has made contributions to her superannuation since separation.
The remaining issue that I need to grapple with and it is by far the most difficult is what to do with the fact that the a significant part of the money introduced by the husband was lost as a result of his share trading.
The assets which remain in the pool as a result of the money received by the husband are still substantial; 68% of the pool is derived from that money and one possible approach to the matter would be to assess contributions to the pool without regard to what no longer exists and consider as a s.75(2)(o) matter whether and if so to what extent the husband should bear responsibility for the share trading losses. This would be in line with the approach in Kowaliw & Kowaliw where Baker J said as follows:
If a party has acted in the manner to which I have referred earlier either by:
(a) embarking upon a course of conduct designed to reduce or minimise the effective value or worth of matrimonial assets, or
(b) acting recklessly, negligently or wantonly with matrimonial assets the overall effect of which has reduced or minimised their value,
then such conduct in my view and the economic consequences which flow therefrom are clearly matters to which the Court may have regard pursuant to the provisions of sec. 75(2)(o).
If, on the other hand, losses of a financial kind have been suffered by the parties to a marriage in the course of the pursuit of matrimonial objectives, such as the gaining of income or the acquisition of assets whether the liability for such losses be joint or several then, in my view, such losses should be shared by the parties (although not necessarily equally) and taken into account when altering property interests. [12]
[12] Kowaliw & Kowaliw (1981) FLC 91-092
The wife’s counsel made no reference to Kowaliw in his submissions however. He submitted that the appropriate way to deal with the losses was to treat them as a factor relevant to the assessment of contributions.
In support of his contention that this was the appropriate way to deal with the losses the wife’s counsel referred me to Watson & Ling, a first instance decision in which Murphy J said as follows:
Where the Court has determined that it is just and equitable to make an order pursuant to s 79(2) or s 90SM(3) and there is clear evidence that one party has engaged in conduct and, but for that conduct, the legal and equitable interests of a party or the parties (or the value of those interests) would have be significantly greater, justice and equity may require recognition of the unfairness inherent in those circumstances in the terms of the orders to be made.
How might that be recognised? First, consistent with existing authority, it can be recognised pursuant to s 75(2)(o) (cf s 90SF(3)(r)) (see, for example, Omacini & Omacini (2005) FLC 93-218, Browne & Green (1999) FLC 92-873 and Cerini). Secondly, it might be contended that it might be recognised within the assessment of contributions. This Court has long eschewed the notion of “negative contributions” (see, for example, Antmann & Antmann (1980) FLC 90-908). Nevertheless, it might be argued that the “non-dissipating party” can be seen to have made a disproportionally greater indirect contribution to the existing legal and equitable interests (for example to their preservation) if it is established that, but for the other party’s unilateral dissipation, those existing legal and equitable interests would have been greater or had a greater value. [13]
[13] Watson & Ling (2013) 49FamLR 303
The wife’s counsel must be seeking to rely on the last part of this passage.
Even if I adopt this approach however the first thing I must do is to make findings about the husband’s culpability for the losses, because it is trite to say that the mere fact that money has been lost to the pool as a result of the actions of one party does not mean that that party will be held solely responsible for the loss.
In D & D (which interestingly involved a fact situation where among other things the wife had brought shares into the marriage but had been forced to liquidate them as a result of the dot com crash and had sustained a substantial loss) the Full Court said as follows:
By and large, marriage is a joint venture where parties can expect to buffer each other from the winds of misfortune that blow during the course of their relationship. The degree of the buffer may depend on how much individual sailing they do without consultation or indeed contrary to the wishes of the other.
The husband sailed off on his own as a share trader but there was no evidence that the wife was opposed to this activity from the start or that the husband began by engaging in risky share-trading. It is not open to me to find that the $3.3m which the husband obtained in 2008 by asking his brothers to buy him out of (omitted) Pty Ltd was lost as a result of risky share-trading or as a result of the husband engaging in an activity akin to gambling and as the husband rightly pointed out the wife would have expected to share in any profit from this activity.
It was the wife’s case that after the loss of this money she began to protest about the husband’s share trading activities and became concerned about the obsessive nature of his trading. She said that in late 2010 as a result of arguments about his trading, which she viewed as gambling, she made an appointment for him to see a psychologist. She said that in June 2011 she gave the husband an ultimatum to give up the stock market or lose his family but he continued to trade.
The husband’s own evidence about the effect on him of the ATO demand in September 2010 and the fact that he did not make a loss in the 2010 financial year but lost substantial amounts at times from 2011 onwards suggests that commencing in late 2010/early 2011 his trading became risky and there is some evidence that the husband may have eventually found himself in the grip of an obsession. The letter dated 31 January 2012 which is annexure Z to the wife’s affidavit is an admission of this and I do not accept that the husband wrote this letter in pursuit of a nefarious scheme devised by a now deceased lawyer.
Most of the money from the sale of the cruiser went quickly in and out of the (omitted) line of credit in late 2011 and was lost and the husband admitted that soon after separation he sold a fishing boat for $50,000.00 and lost the money on the stock market overnight. I will refer to that again later when considering s.75(2)(o) matters but it gives some insight into the husband’s behaviour and state of mind at this time.
There is considerable merit in the suggestion that this behaviour by the husband should be dealt with as a contribution issue rather than a s.75(2)(o) matter because the whole appearance of it is not that the husband deliberately set out to lose money or that he set out in any way to harm the wife but that at some point he lost his capacity to make rational trading decisions.
It is akin to the husband being in the grip of a gambling addiction. It is akin to an illness but nevertheless it means that it is just and equitable that it be taken into account in assessing contributions. I accept that the husband felt under pressure from the ATO but the fact that he reacted to the ATO action in this way is not a reason to entirely absolve him from responsibility for his actions.
Therefore I make the following assessment of contributions.
The parties had an 18 year relationship. The value of the husband’s initial contribution of the Property D property probably slightly exceeded any initial contribution of the wife’s but this is not of any great significance and the parties contributed equally during the first 13 years of the relationship ie for a little over two thirds of the relationship.
I cannot overlook the significance of the very large amount which is in the pool as a result of the husband’s family connection. Nearly 68% of the current pool derives from the amount the husband received in 2006 and the money he received had other benefits for the husband and wife including life-style benefits.
I do not consider that the husband should bear sole responsibility for the loss of the $3.3m when there was no evidence that he was engaged in risky trading initially, the GFC did affect share prices and as he rightly pointed out the wife would have expected to share in any gains.
However I do consider that the impact of the large financial contribution from the sale of the (business omitted) asset is ameliorated by his actions from late 2010 onwards which resulted in a loss of up to $1.5m from the pool during a period when the wife was desperately trying to curb his trading behaviour and avoid further losses.
The wife made a considerable contribution to the husband’s welfare during the difficult last couple of years of the relationship, a somewhat more onerous contribution as homemaker and parent during this period and an unmatched contribution to the non-financial care of the children’s welfare during the period from June 2012 to the date of the trial.
Absent the financial and non-financial impact on the husband’s behaviour in the last year of the marriage I would consider that a 65% assessment in favour of the husband was an appropriate outcome taking into account the size of the gift and his other contributions during the 18/19 year relationship balanced against the wife’s 18 or 19 years of effort and her post-separation contributions.
In the light of the impact of the husband’s behaviour however I assess contributions as 57.5% by the husband and 42.5% by the wife. I consider this proportionate given the fact that up to $1.5m disappeared from the pool as a result of the husband’s behaviour in the last years of the marriage and absent this loss the wife’s share of the pool would in monetary terms have been $500,000.00 more. A 42.5% rather than a 35% adjustment in favour of the wife gives the wife an additional $300,000.00 of the pool.
This entitles the wife to $1,707,315.53 and the husband to $2,309,897.47.
The s.79(4)(d) (e) (f) & (g) matters
S.79(4)(d)&(f) have no relevance in this matter. s.79(4)(g) refers to child support and I have considered the past payment of child support when assessing contributions and I will take the future payment of child support into account in assessing s.75 (2) matters.
As required by s.79(4)(e) I therefore turn to consider the matters in s.75(2).
The s.75(2) matters
The wife
The wife is 45. At the time of trial she was working 4 days a week as a (occupation omitted) at (employer omitted). According to her financial statement her salary averaged to $58,500.00 per annum. This is broadly consistent with the pay slips attached to her affidavit although slightly below her 2014 taxable income from employment of $61,195.00.
The wife qualified as a (omitted) in 1990. She improved her qualifications during the relationship and worked either full or part time for the majority of the relationship but the relationship and the need to care for the children has affected her income earning capacity to an extent. I accept that she may need to retrain in order to update her qualifications if she wishes to return to a specialised (omitted) role but she is capable of earning a reasonable income at present.
As well as income from employment the wife also receives income from the Property L property. The husband took issue with her claim that she was receiving $160.00 per week and alleged that the tenant was originally paying $240.00 per week but was now paying $270.00 but he produced no admissible evidence to establish this. I refused to receive documents the husband sought to tender in respect of this issue on 25 November 2014 and gave reasons for this at the time.
On the basis of contributions the wife is entitled to $1,707,315.53. If she keeps Property L, her savings, the Toyota (omitted), the dinghy, her jewellery, and her superannuation she will have assets to the value of $530,376.00 and will be entitled to an additional $1,176,939.50.
The wife has minimal post-separation debt and did not provide any evidence about any additional debt she might have for legal fees at the end of the hearing.
The wife has the care of the four children who are now aged between 15 and 11.
The wife is maintaining employment despite having the care of the children but I accept that she is only working four days a week as a result of this and that her child care responsibilities will continue to impact on her income earning capacity for quite a few years to come. If nothing else she will be the one responsible for making arrangements for holiday care and for leaving work if they are sick.
The wife alleged that the children all had special needs which meant that she might continue to have some financial responsibility for them even once they turned 18 but she provided no evidence which would allow me to find that this was likely to be the case.
Many parents continue to have some responsibility for their children once they become adults but it is difficult to predict how this will play itself out in any individual case and it is not open to me to find that these children are likely to require more support than other children based on the wife’s bare assertion that she “had been informed and believed” that this would be the case. The medical reports the wife provided about the children were all well over 4 years old the wife did not provide the smallest foundation for her claim that:
This additional support will require that they remain at home and financially dependent on me into their early adulthood.[14]
[14] Wife’s trial affidavit paragraph 233
The wife also provided no evidence about any additional costs she incurred as a result of the children’s disabilities at present or about any additional calls on her time as a result. She said that she was receiving a carer’s pension of E$59.00 per week for X.
It is very difficult to be sure about the extent to which the husband will have a relationship with the children in the future. He said that he wanted one and even said that he might take the parenting matter back to court but whether he will do so, the extent to which the children will want to spend time with him in the future and whether he will follow through with spending time with them if they do or whether these are just words I am simply unable to say. The one thing I can say is that there is no reason to doubt that the wife will remain the children’s primary carer.
The husband is supporting the children financially at the moment as a result of the money which is flowing from the Nash partnership but the extent to which the wife can expect to obtain assistance from him in the future is open to question and even if he does provide assistance in Clauson & Clauson the Full Court said as follows:
It should not be forgotten that the payment of child support in no way compensates the custodial parent for the loss of career opportunity, lack of employment mobility and the restriction on an independent lifestyle which the obligation to care for children usually entails: see Langford (16 January, 1995, Full Court, not reported). [15]
[15] Clauson & Clauson (1995) FLC 92-595.
There was no evidence that the wife had re-partnered.
During final submissions the wife’s counsel said that the wife was seeking sufficient funds to enable her to live in the style to which she was accustomed.
The relevant s.75(2) matter is s.75(2)(g) which requires the court to have regard where the parties are divorced to a standard of living that in all the circumstances is reasonable.
It is reasonable given the size of the pool for the wife should be able to obtain a home and be able to pay for some extras for the children such as private schooling and the extra-curricular activities they currently enjoy but it would not be reasonable to leave the husband with a very small entitlement simply to ensure that the wife was able to live in a home of the same opulence as Property S or to ensure that she continued to receive the sort of income which has been available to her while she has been able to supplement her income from employment with distributions from the Nash Partnership.
Property S which sold for $1.7m was an upmarket home on the water. The wife did not suggest that she hoped to purchase anything similar nor would it be reasonable for her to expect to do so and she provided no information about how much she thought that a home might cost her.
I know from the Penman’s trust ledger that the children are attending a private school and doing some extra-curricular activities and presumably the wife wishes those things to continue although she did not directly say so. She gave no evidence about the kind of capital in addition to her income which might be necessary to ensure that this should continue.
The husband
The husband is 46. He has not had paid employment since 2006. He claimed in his affidavit and during cross-examination that he had back and knee problems which limited his capacity to obtain paid employment and he gave evidence of some limited unsuccessful attempts to obtain work.
The wife said that the husband had done TAFE courses in (omitted), (omitted) and (omitted) but that would appear to have been many years ago and said that he worked as a (omitted) and (omitted) when young but there was nothing to suggest that he had any skills in these areas which would assist him to obtain employment.
The husband tendered some medical records which confirmed that he had sought treatment on a number of occasions in the past in connection with his left knee and that he had sought treatment for back pain. However he did not provide a comprehensive medical report and it is impossible for me to make findings about the nature and extent of his knee problems and about his back problems if any (I say if any because there was a suggestion in the document referring to back pain that his problem might in fact be depression) or about the extent if any to which the existence of these problems impacted on his capacity to obtain employment.
Although there was no evidence that the husband had qualifications fitting him for any particular kind of employment or any particular aptitude for anything it is difficult to believe that he would not be able to find some sort of employment if he persisted in looking for it even if it was menial and he could always do some training and even leaving that aside the husband’s evidence at trial was that he was interested in going into business and he would expect to earn income from that. During cross-examination he agreed that he had been looking at investments such as (omitted) or (omitted) in (omitted).
Hopefully the husband will be successful if he goes down this path but events since 2006 make it difficult to be optimistic about his income earning future and therefore difficult to be optimistic that the wife will receive child support in future if this depends on the husband being in paid employment or operating a successful business.
At the conclusion of the trial the husband said that he would like to retain the Nash Partnership. This generates income which would enable him to continue to contribute to the children’s support but if he liquidates it to pursue other business ventures then this income will not be available.
On the basis of contributions the husband is entitled to $2,309,897.47.
If he retains his interest in the Nash partnership, his Holden (omitted) and his superannuation which was his preferred position at the end of the hearing he will be entitled to an additional $591,888.47.The husband has post-separation debts of about $180,000.00. Part of this is credit card debt of $40,000.00 which he will definitely have to repay. By implication he suggested that he would have to repay the $110,000.00 he borrowed from his parents but there was no independent evidence to confirm this and sometimes for one reason or another family members do not insist on repayment. Other personal debts to unrelated parties may well be repayable.
The wife’s counsel submitted that the husband’s tax losses to the end of the 2013 year totalling $4,805,937.00 were a financial resource available to the husband which should be taken into account in determining an appropriate property settlement.
Tax losses which can be offset against income are indeed a valuable resource and in Cromwell & Cromwell[16] Coleman J took the husband’s tax losses into account as a s.75(2) matter for this reason.
[16] Cromwell & Cromwell (2006) FamCA 1454
The husband in that case conducted a farming enterprise and had carried forward losses of $834,000.00 as a result of the operation of the business. It was common ground that the losses would be applied to income of $700,000.00 in the 2003/4 financial year with the result that no tax would be payable on that income and that after this the husband would still have tax losses of $125,000.00 to use in the future in the same way.
Coleman J said as follows:
Reference was made earlier in [this] decision to the husband's carried forward losses. The evidence is less than clear as to how that will impact upon the husband's income in the foreseeable or more distant future, but the reality is there is no doubt in such fashion and at such time as he is advised, consistent with the income tax laws of this country, the husband will reap the benefits of those carried forward losses in a tangible way. It is not without relevance that the losses appear to have been substantially accumulated during the years of cohabitation between the parties. In all the circumstances, to fail to have regard to this resource as it may be considered, would be unfair to the wife. This should feature in the determination of an appropriate section 75(2) adjustment in the wife's favour.
The husband appealed and his appeal focussed on the treatment of the tax losses. The Full Court was satisfied that Coleman J had appropriately dealt with the issue and dismissed the appeal.
Another case involving tax losses is Wimborne & Wimborne.[17] In that case the tax losses of a company were treated as property by Nygh J and the Full Court which heard an appeal in the matter did not criticise his decision to do so. However it is clear from the appeal decision that Nygh J had before him evidence from two accountants about the value of the losses and that the accountants in arriving at their opinions had regard to the taxable income the company was likely to earn in the future against which the tax losses could be offset and the benefits which the husband would be likely to derive from the tax losses having regard to his life expectancy and a particular section of the Income Tax (Assessment) Act.
[17] Wimborne & Wimborne (unreported) Appeals No. EA27/92 & 15/93 judgment date 28 April 1994
I refer to Wimborne as well as to Cromwell not because the wife’s counsel urged me to treat the tax losses as property but to illustrate the difference between the facts and the available evidence in those two cases and the facts and the available evidence in the case before me.
In both Wimborne and Cromwell there was clear evidence that the losses had been incurred in the operation of businesses which were continuing to operate and clear evidence that the losses would be able to offset against income which there was no dispute the company in the one case or the husband in the other had already earned or was likely to earn in the future.
The case before me is very different. The husband was an employee in his family’s business prior to 2006. He has had no paid employment since. He engaged in share trading over a period of about 6 years. He does not seem to have done much share trading in the last couple of years but that is probably because he has had no money to trade with.
If the husband goes back to share-trading using any entitlement he gets from these proceedings and if he is successful he will be able to offset any profits he makes against his tax losses, but while the first might possibly occur the second does not seem highly probable if the past is anything to go by.
The husband did not say that he intended to return to share-trading and said that he hoped to start a business after these proceedings were completed but when I asked the wife’s counsel what the tax losses could be offset against in the future (ie whether the share trading losses could be offset against income from an unrelated business) he said that he did not know and there was no evidence that the tax losses from share trading could be offset against income from paid employment should the husband go down that path.
There was no evidence that it was particularly probable that the husband would be able to make use of the tax losses in the future to achieve a higher disposable income and if I had to make an assessment of probabilities I would rate it as improbable.
I am not persuaded that the tax losses in this case are something I should take into account pursuant to s.75 (2).
The wife’s counsel made the following submission:
This court might well be cautious pursuant to s.75(2)(c) and (o) due to the husband’s recent utilisation of matrimonial property as to how the husband may deal with any property received as a result of the court’s property orders.
If I understand this submission correctly the gravamen of it is that if the past is anything to go by the husband may waste his entitlement while the wife who had the care of the children will not and that the wife should therefore receive a greater share of the assets. However the husband is not the subject of a Guardianship Order and while I accept that it will be galling for the wife if the husband loses the amount he receives by way of property settlement but I am not satisfied that I can give the wife a greater share of the assets simply because she may make better use of them than the husband.
s.75(2) (o) matters
S.75(2)(o) provides that the court must have regard to any matters which the justice of the case requires it to take into account and the following matters raised by the parties require consideration here:
i)The wife’s retention of $410,000.00 of joint savings;
ii)The husband’s withdrawal of $19,640.00 from the wife’s credit card;
iii)The husband’s unilateral sale of a number of chattels including one sale in breach of an injunction;
iv)The husband’s removal of $61,000.00 from a Nash partnership account in June 2012 and his receipt of about $140,000.00 from the Nash Partnership in August 2012;
v)The wife’s solicitors alleged actions in connection with the settlement of the litigation against the husband’s accountant and the prevention of these funds being used to settle with the ATO.
On 25 November 2011 the wife removed $410,000.00 from the parties’ joint account and deposited it into her own account. In her trial affidavit she said that she had used $221,520.00 to pay legal fees and had used the rest on living expenses.
The justice of the case requires that the amount the wife used to pay legal fees be taken into account in determining property settlement orders as otherwise the husband is being de facto required to make a contribution to the wife’s legal fees.
I am satisfied that the wife used the balance either to pay living expenses or alternatively saved it. Whichever is the case justice and equity does not require the amount to be taken it into account because if the wife used it to pay living expenses it is legitimately gone and if she saved it her savings have been taken into account as an asset.
In retaliation the husband drew an advance of $19,640.00 on the wife’s credit card of which he was an additional card holder. He deposited this into his share trading account and agreed that he lost it. This must be taken into account.
The husband unilaterally sold and retained the proceeds of the following items:
Fishing boat and floating dock 50,000.00
(omitted) caravan 34,000.00
(omitted) vehicle in December 2011 65,000.00
(omitted) dirt bike 4,000.00
Total 153,000.00
The fishing boat and dock was sold in breach of a court order restraining the husband from dealing with certain assets.
The husband initially said in cross-examination that he used the money from the sale of the fishing boat and dock for living costs but when shown an affidavit he had affirmed on 18 December 2013 he agreed that he had placed the money into his share trading account and had lost most of it overnight as a result of a trade in gold. This amount must be taken into account in arriving at a just and equitable property settlement.
The husband agreed that he used the money he received for the caravan and the (omitted) vehicle for share-trading and had lost the money. He agreed that he had sold the dirt bike but said that he had done so to obtain money for living expenses.
The husband was well aware when the parties separated in October 2011 that the wife was extremely concerned about his share trading. He sold the (omitted) caravan very shortly after separation to obtain money for share trading and promptly lost it and he sold the (omitted) vehicle in December 2011 and also promptly lost the money.
It is only fair that the husband be brought to account for squandering this money when the money in the wife’s bank accounts (as a result either of her preserving part of the $410,000.00 or being able to save as a result of having the $410,000.00 to help meet living costs) has been included in the pool.
On 27 June 2012 the husband withdrew $61,000.00 from the Nash Partnership account. He said that he did this because he had no money to pay for groceries and utilities. [18] I have some reservations about how this money was ultimately used however.
[18] Husband’s affidavit filed 18 September 2012 paragraph 43
On 23 August 2012 the husband’s brothers advanced him $140,000.00 from the partnership. None of this money now remains. He said that he used some to pay legal fees and some on living expenses and that he put $100,000.00 into his share trading account[19] and agreed during cross-examination that he had lost it.
[19] Husband’s affidavit filed 18 September 2012 paragraph 50
The difficulty with this issue is that no detailed evidence was provided about how the parties had arrived at the value they were both content to ascribe to the husband’s interest in the Nash Partnership. There was no evidence that absent the husband removing the money from the bank account or receiving the distribution from his brothers his interest in the partnership would have been of greater value. It’s disbursement may have affected the later post-separation distributions from the partnership (although there was no evidence of this) but even if this is so it did not result in either party being left in need.
I do not consider that I should take these disbursements into account.
The husband asserted that losses had been caused by the wife’s lawyers’ failure to co-operate in accepting a settlement offer in relation to the litigation with the former accountant the amount he ultimately received was $620,000.00 rather than $980,000.00 but there was simply no evidence to support this assertion.
The husband also claimed that $200,000.00 had been lost because the wife would not agree to the money from the litigation being used to settle the ATO debt which meant that the husband was forced to sell his interest in the (omitted) Trust and that due to an urgent need for the money the asset was sold at less than market value.
There was no evidence which would allow me to make a finding that this was the case.
Conclusion about s.75(2)(o) matters
I am satisfied that the wife’s expenditure of $221,520.00 on legal fees and the husband’s receipt of $19,640.00 by a unilateral withdrawal from the wife’s credit card and $153,000.00 from the unilateral sale of assets are matters I should take into account in an overall assessment of s.75(2) matters.
As previously mentioned the wife’s counsel urged me to deal with the husband’s/receipt expenditure of $172,640.00 and the wife’s expenditure of $221,520.00 as straight dollar items by adding these amounts to the existing assets as notional assets in the hands of the respective parties and then applying percentages to the resulting pool.
While I can see no reason why this could not be done in an appropriate case the Full Court has repeatedly stated that treating losses such as these as straight dollar items is the exception rather than the rule and I do not consider it necessary to adopt that course in this case.
The amounts each party should bring into account pursuant to s.75(2)(o) are not that dissimilar and the loss in total from the pool does not mean as was the case in Townsend that a quarter of the pool has disappeared. The two amounts together represent less than 10% of the pool and I consider that taking them into account as part of an overall assessment with a view to determining whether a percentage adjustment should be made for s.75(2) matters is the appropriate way to deal with them.
Conclusion about s.75(2) matters
The wife’s counsel submitted that the wife should receive a 15% adjustment for s.75 (2) matters. On the pool as I have found it this would give her an additional $602,581.95 and create a differential of $1,205,163.90 between the parties. It would mean that instead of receiving $1,707,315.53 the wife would receive $2,309,897.48.
The husband would then be entitled to $1,707,315.52.
The wife’s counsel of course applied the 15% to a pool which included add backs of nearly $1m and in respect of which the wife was already entitled to 50%, with the result that the outcome he sought for the wife was that she receive assets to the value of $3m. On the pool as I have found it this could only be achieved by giving the wife 75% of the pool or an adjustment of 30% for s.75 (2) matters.
The s.75(2) matters certainly favour the wife because:
i)She has the care of the four children. There is a considerable risk that the husband may not have any greater involvement with them in the future than he has had since June 2012 and a considerable risk that the wife may have difficulty obtaining periodic child support. It will be seven years before the youngest child turns 18.
ii)The wife and children are used to living at a certain level of comfort. The children attend private schools and are engaged in extra-curricular activities such as dance and gymnastics.
iii)The wife has an income earning capacity which is adequate to support herself and adequate to ensure that the children do not starve but it would not stretch to paying private school fees or for extra-curricular activities.
iv)The wife will continue to be hampered in her ability to earn income for up to seven years while she continues to have responsibility for the children. The amount she is able to earn affects how much superannuation she can acquire and may well affect her ability to advance in her career.
v)The wife is likely to want to re-house herself. She owns the Property L property but it has always been a rental property and there was no suggestion that it was suitable or convenient as a home for the wife and the children.
I must have regard to the fact that the wife removed $221,520.00 from the joint account at separation which she used to pay her legal fees but because the husband disposed of $173,000.00 of money or assets in quick succession after separation and used some of this to pay his lawyers and wasted a good part of the rest of it on trading in circumstances where he had ample money to live on from other sources I do not consider that this should have any bearing on whether and if so to what extent an adjustment should be made in the wife’s favour for s.75(2) factors.
While the s.75(2) factors favour the wife that mere fact alone does not necessarily mean that an adjustment should be made in her favour. Regard must be had to the wife’s entitlement absent an adjustment. A party might have four children and a need to rehouse and be accustomed to a certain lifestyle but the amount they are to receive on the basis of contributions might be such that no further adjustment should be made.
The court cannot make an adjustment as some form of social engineering to ensure that the more frugal and perhaps worthy party receives a much more significant share of the assets than they would be entitled to on the basis of contributions and one of the difficulties I face is that the wife did not provide any detailed information about the costs of the children or about how much she expected to have to pay to purchase a home.
The wife did not even say that she wished to buy a home but she is currently living with her mother after having lived independently since she was 20 so it is reasonable to assume that she would wish to do so. However can I simply assume without evidence that the wife needs an adjustment of $602,000.00 in addition to the $1,707,315.53 she will receive on the basis of contributions?
It is relevant to bear in mind that the husband is not a high income earner who is likely to power ahead of the wife financially in years to come. The reverse could well be the case; the wife has preserved/saved $148,000.00 post-separation while the husband has lost further amounts share trading, and nothing the husband said at trial inspired confidence that he might take the money he receives by way of property settlement and establish a successful business.
But in the end this last sentence holds the key to the matter because there are four children; they have become used to attending private schools; the likelihood of the wife continuing to receive financial assistance for the children is low and the wife is not a high income earner and will need to rehouse.
In my view a 15% adjustment is too high but a 12.5% adjustment while also high in dollar terms can be justified when it is applied to the pool as I have found it and the contribution assessment I have made.
This will entitle the wife to 55% of the pool or $2,209,467.15 and the husband to 45% or $1,807,745.85. It will entitle the wife to cash of $1,839,157.15 in addition to the other assets she will be retaining from the pool and this does not seem too high in terms of ensuring that the children are properly housed and continue to enjoy a reasonable standard of living.
The orders
At the commencement of the hearing the wife was proposing that the husband retain his interest in the Nash Partnership and the husband was proposing that the wife should receive this interest.
At the conclusion of the hearing the wife’s proposal was that she be given 60 days to elect whether to take the husband’s interest in the Nash Partnership as part of her entitlement.
In the minute of order handed up on the wife’s behalf reference was made to the wife needing to gain the agreement of the husband’s brothers to being substituted for the husband in the partnership but during submissions the wife’s counsel also said that the wife wanted time to investigate whether there was “anything which could end up biting us.”
The wife proposed that if she elected not to be substituted in the partnership then she should receive all the money in trust and that the husband should retain his interest in the Nash Partnership subject to paying her an additional amount of $28,000.00 to which she would on her calculation be entitled.
In his final submission the husband said that he had reconsidered and now wished to retain his interest in the Nash Partnership.
The most appropriate outcome is for the husband to retain the Nash Partnership. This has two obvious attractions. First, it is simple, as no transfers of property or consent of any other parties are required to carry it into effect. Second, it will give the parties immediate certainty about the outcome rather than requiring them to wait for a further 60 days.
The result of this is that the distributions the wife is receiving from the Nash Partnership will cease immediately. She will be thrown back only her salary to support the children subject to applying for a child support assessment. This in my view reinforces why the 12.5% adjustment in the wife’s favour is justified.
On 24 November 2014 I made an order by consent that the husband receive $1,000.00 from the money in the larger Penmans Trust account by way of partial property settlement and on 20 May 2015 I made an order by consent that the husband receive $10,000.00 from the smaller Penmans Trust Account. It was agreed that these were advances on the husband’s property settlement and I will have to factor that in to the orders.
In this scenario the wife will retain the following:
Description
Value
Property L
250,000.00
Funds in trust – Peter Corcoran, Solicitor
787,382.00
Funds In Penmans Trust Account
762,306.00[20]
From Funds in Penmans Trust Account containing the proceeds of sale of the (omitted) Trust
129,403.15
Toyota (omitted)
60,000.00
(omitted boat)
5,000.00
Jewellery
12,000.00
(omitted) Bank Account No. (omitted) & (omitted) Bank Account
160,066.00
(omitted) Superannuation
43,310.00
TOTAL
2,209,467.15
[20] Amount actually in the fund after partial property settlement of $1,000.00 to the husband.
The husband will receive:
His interest in the Nash Partnership
1,691,700.00
Holden (omitted)
6,500.00
Nash Family Superannuation Fund
19,809.00
Partial property settlement 24 November 2014
1,000.00
Partial Property Settlement 21 May 2015
10,000.00
From funds in Penmans Trust account containing the proceeds of sale of the (omitted) Trust
78,736.85
TOTAL
1,807,745.85
I am conscious of the fact that this outcome leaves the husband with enough to immediately pay his credit card debt but not enough to immediately pay all of his post-separation debts if they indeed require immediate repayment but I am nevertheless satisfied that the outcome is just and equitable.
In drafting the orders I will make provision for the fact that the amounts in the trust accounts may be different today than they were at trial. They may be higher if money has been invested and interest earned and lower if fees or costs have been taken out. In the case of the trust account into which the Nash Partnership distributions have been paid in the past the amounts may be more because further distributions have been made or less because the parties have continued to receive fortnightly drawings or other expenses have been paid.
The husband may perceive it as unfair that he has to pay 55% of any decrease if it is the result of the wife having continued to draw more than him on a fortnightly basis from the money in trust or obtain payment of school fees or excursion costs. However the property settlement has been worked out on the figures used at trial and the wife is entitled to those amounts by way of property settlement. The money paid to the wife fortnightly and paid directly to schools or gyms or dance studios to meet the children’s expenses is equivalent to child support. If the wife has to bear the whole of any decline in the amounts in the funds then she will retrospectively be forced to bear a disproportionate share of supporting the children between the end of the trial and the current time.
I will make the order sought by the wife about (omitted) Pty Ltd. There was no suggestion that it had any value but the wife does not wish to retain an interest in it and this needs to be regularised.
The wife referred in her affidavit to two other companies, (omitted) Pty Ltd and (omitted) Pty Ltd, as being extant and it appeared to be her case that she and the husband were both either shareholders or directors of these companies.
The wife asserted and the husband did not dispute that they had no assets. (omitted) Pty Ltd may be a corporate trustee of the Nash Family Superannuation Fund. Neither party sought any orders about these companies and they will have to work out themselves what to do with them.
The wife sought a complex order about the husband indemnifying her from liabilities. I do not intend to make it because no evidence was given in the case about any potential liabilities and it is impossible for me to predict the effect of the order.
I do not intend to make an order giving the parties liberty to apply for consequential orders. Applications for machinery orders or enforcement can be made if necessary by a party filing an application in a case without me making a specific order giving parties liberty to apply.
Costs
The wife sought an order that the husband pay her costs on an indemnity basis of and incidental to the property proceedings. I do not have sufficient information to consider an application for costs. Pursuant to the Federal Circuit Court Rules the wife has 28 days from the date of the orders to make an application for costs and she may do so by filing and serving an application in a case and supporting affidavit.
I certify that the preceding two hundred and eighty-nine (289) paragraphs are a true copy of the reasons for judgment of Judge Terry
Associate:
Date: 1 June 2015
Key Legal Topics
Areas of Law
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Family Law
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Equity & Trusts
Legal Concepts
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Remedies
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Costs
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Res Judicata
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Fiduciary Duty
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