O’Cleary & Vukasin (No 2)

Case [2024] FedCFamC1F 660

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA

(DIVISION 1)f

O’Cleary & Vukasin (No 2) [2024] FedCFamC1F 660

File number: SYC 4005 of 2020
Judgment of: CAMPTON J
Date of judgment: 30 September 2024
Catchwords: FAMILY LAW – MAJOR COMPLEX FINANCIAL PROCEEDING – EQUITABLE RELIEF – ACCRUED JURISDICTION – Property adjustment pursuant to s 79 of the Family Law Act 1975 (Cth) – Where the intervener seeks that the Federal Circuit and Family Court of Australia (Division 1) exercise its accrued jurisdiction to determine his claim in the s 79 proceeding – Where the husband made significant direct financial contributions at the commencement of cohabitation, including by way of an interest in a prosperous trading enterprise – Where the intervener claims a 30 per cent interest in that enterprise as recorded in two written agreements made between he and the husband, one of which was entered years before the marriage – Where the husband concedes the claim of the intervener – Where the wife contends that the two written agreements made between the husband and the intervener purporting to allocate 30 per cent of the husband’s interest to the intervener were “fabricated and not genuine” – Claim of the intervener established – Where the nature of the relationship between the husband and the wife was to some extent commercial and characterised by arm’s length dealings, including the clear maintenance of separate financial identities – Where the wife has attempted to machine aspects of her case, including evidence, to obtain a forensic advantage – Where homemaking contributions do not loom large – Where the wife has failed to adhere to her disclosure obligations – Where the wife will have the first opportunity to retain a real property in specie – Orders made adjusting the property of the husband and the wife 83.5 per cent to the husband and 16.5 per cent to the wife.
Legislation:

Corporations Act 2001 (Cth) s 1274B

Evidence Act 1995 (Cth) s 140

Family Law Act 1975 (Cth) ss 75, 79

Income Tax Assessment Act 1936 (Cth) Div 7A

Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) ch 6, r 7.26
Cases cited:

Barboutis v The Kart Centre Pty Ltd (No 2) [2020] WASCA 41

Briginshaw v Briginshaw (1938) 60 CLR 336; [1938] HCA 34

Embedded Claims Pty Ltd v Litigation Finance (Australia) Pty Ltd [2023] FCAFC 30

Edgehill & Edgehill [2007] FamCA 1102

Galati v Deans & Ors [2023] NSWCA 13

Hatziminas v Hatziminas [2024] VSC 513

Horrigan & Horrigan [2020] FamCAFC 25

Jabour & Jabour (2019) FLC 93-898; [2019] FamCAFC 78

Koprivnjak v Koprivnjak [2023] NSWCA 2

Laird v Vallance [2023] VSCA 138

Pierce v Pierce (1999) FLC 92-844; [1998] FamCA 74

Rose v Watson (1864) 10 HLC 672

Shepherd v Doolan & Ors; Shepherd v Doolan & Anor; Est. Doolan [2005] NSWSC 42

Stanford v Stanford (2012) 247 CLR 108; [2012] HCA 52

The Queen v Australian Broadcasting Tribunal; ex parte Hardiman (1980) 144 CLR 13; [1980] HCA…

Continue reading O’Cleary & Vukasin (No 2)

Sign in free to access the full text

Details
AGLC
O’Cleary & Vukasin (No 2) [2024] FedCFamC1F 660
Case
[2024] FedCFamC1F 660
Decision Date

CaseChat Overview and Summary

Ms O’Cleary and Mr Vukasin’s marriage was the subject of a property adjustment proceeding under s 79 of the Family Law Act 1975 (Cth). Mr Passerini intervened in the proceeding claiming an interest in Vukasin Pty Ltd, the husband’s business. The wife contested Mr Passerini’s claim, contending that any agreements made between the husband and Mr Passerini were fabricated and not genuine. The husband conceded Mr Passerini’s claim. The court had to decide whether the wife’s contentions were credible and whether Mr Passerini was entitled to the claimed interest in Vukasin Pty Ltd. The court found that the wife’s evidence was unreliable and her contentions were not credible. The nature of the relationship between the husband and Mr Passerini was commercial and characterised by arm’s length dealings. The agreements between the husband and Mr Passerini were genuine and the wife had failed to discharge the onus of establishing otherwise. The court found that Mr Passerini was entitled to 30 per cent of the husband’s interest in Vukasin Pty Ltd and ordered the husband to transfer the shares to Mr Passerini. The court also made orders adjusting the property of the husband and the wife 83.5 per cent to the husband and 16.5 per cent to the wife. The wife was to pay the husband $3,679,350 within 56 days. If she failed to make the payment, the husband could elect to require her to transfer her interest in the G Street property to him. If the husband made the election, he would pay the wife $2,420,650 and she would transfer her interest in the G Street property to him. If the wife failed to make the payment and the husband did not make the election, the G Street property would be sold and the proceeds applied according to the court’s orders. The court further ordered that the husband discharge the mortgage secured over the G Street property within 28 days.

Orders

Orders of the court

SYC 4005 of 2020

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)

BETWEEN:

MS O’CLEARY

Applicant

AND:

MR VUKASIN

Respondent

MR PASSERINI

Intervener

ORDER MADE BY:

CAMPTON J

DATE OF ORDER:

30 SEPTEMBER 2024

THE COURT DECLARES THAT:

1. Mr Vukasin (“the husband”) holds 30 per cent of the share capital (“Shares”) and any dividends and/or distributions associated or connected with those shares of Vukasin Pty Ltd (currently, 150 ordinary shares) on trust for Mr Passerini.

THE COURT ORDERS THAT:

2. The husband delivers up or transfers the Shares to Mr Passerini or his nominee at a time as agreed in writing between the husband and Mr Passerini no later than 31 December 2026.

3. The husband and Mr Passerini in their capacity of director and/or shareholder of Vukasin Pty Ltd will do all things and sign all documents required to assign to the husband the choses in action constituted by all loans and said to be owing to Vukasin Pty Ltd by Ms O’Cleary (“the wife”) and/or F Pty Ltd and the husband shall:

(a) Pay and indemnify the wife and F Pty Ltd in respect of any such liability, to the intent that they not pay any monies under or by reference to such loans; and

(b) Release and discharge the wife and F Pty Ltd from all liability under or by reference to such loans or any other loan he claims is otherwise due to him.

4. On or before 28 October 2024 the husband shall do all things to cause the mortgage secured over the property at G Street, Suburb H (“the G Street property”) to be discharged and indemnify the wife in relation to same, and the wife shall sign all such documents as are necessary to facilitate the husband’s compliance with this order.

5. On or before 25 November 2024 the wife shall pay to the husband sum of to $3,679,350.

6. Pending compliance with Orders 5, 8, 9, 10 and 11, whichever is the earlier, the wife:

(a) Is restrained from doing any act or thing to transfer, encumber, mortgage, or adversely affect her interest in the G Street property save as to facilitate compliance with Order 5; and

(b) Is to do all things as are necessary to keep and maintain the G Street property in good order and condition.

7. In the event the wife fails or neglects to comply with Order 5, the husband may elect by notice in writing to the wife to be served within seven days of such default to require the wife to transfer to him all her interest in the G Street property.

8. In the event the husband makes the election in writing pursuant to Order 7 then:

(a) On or before 23 December 2024, the husband shall pay to the wife the sum of $2,420,650; and

(b) Simultaneously upon receipt of such sum, the wife shall execute all documents prepared by the husband at his expense for the wife to transfer to the husband all her interest in the G Street property and the wife shall provide the husband with vacant possession of the G Street property.

9. In the event the wife fails to comply with Order 5 and the husband does not exercise the election pursuant to Order 7, the husband and wife shall do all such things as are necessary to list for sale the G Street property on terms they agree in writing or failing to so agree in writing for more than 14 days, on the following terms:

(a) To list for auction with an agent agreed upon by them in writing within 14 days and failing agreement the agent be appointed by the President of the Real Estate Institute of New South Wales or his or her nominee;

(b) Give such instructions to a solicitor to act on the sale of the property agreed upon in writing within 14 days, and failing agreement as to the identify of the solicitor, the solicitor be appointed by the President of the Law Society of New South Wales or his or her nominee;

(c) Market the G Street property for sale by public auction to be held on-site within six weeks of the date this order comes into operation at a reserve price to be agreed by them in writing seven days prior to auction and failing such agreement at a reserve price determined by single real property valuation expert who opined as to the value of the G Street property for trial;

(d) Attend the auction and in the event that the reserve price set for the auction is not reached negotiate with the highest and second highest bidder and accept any offer to purchase that is the highest made within five per cent of the reserve price set for that auction unless the parties otherwise agree in writing; and

(e) Execute the contract for sale and in the event they fail to agree on the terms of the contract for sale, the terms recommended by the solicitor acting on the sale shall be adopted.

10. Upon the completion of the sale of the G Street property, the husband and wife shall do all things to apply the proceeds of the sale in the following manner and priority:

(a) In payment of any outstanding land tax, council rates, and water rates;

(b) In payment of fees for the nomination of an agent or solicitor pursuant to these orders, if any;

(c) In payment of the valuers fees, if any;

(d) In payment of the real estate agent’s commission, selling expenses, and auction expenses incurred on the sale;

(e) In payment of conveyancing legal costs associated with the sale;

(f) In the amount of 60 per cent of the remaining balance to the husband; and then

(g) In payment of the balance to the wife.

11. In the event of the husband exercising the election pursuant to Order 7 and the husband failing to comply with Order 8(a), the G Street property shall be listed for sale and sold on the terms provided for in Order 9 and the proceeds of sale applied as provided for in Order 10.

12. As between the husband and the wife, each shall be responsible for and shall pay one half of the joint and several costs orders payable by them up until 2022 as made in the New South Wales District Court and New South Wales Court of Appeal and shall indemnify the other in respect of the remaining half balance payable pursuant to those costs orders.

13. Otherwise than as provided for in these orders, each of the husband and the wife be and is hereby declared to be the sole and absolute owner to the exclusion of the other of all items of property currently standing in his or her name or otherwise being in his or her possession custody or control.

14. In the event that the husband or the wife fails, neglects or refuses to sign or execute any document required by or to give effect to these orders, then the Registrar of the Federal Circuit and Family Court of Australia (Division 1), Sydney Registry, is authorised, empowered, and directed to sign and execute such document on behalf of the party in default upon being satisfied of such failure or neglect by way of affidavit evidence, and the signature of the Registrar shall thereafter be deemed to be the signature of such party.

15. Except as provided for by these orders, save as to costs, all outstanding applications and responses are otherwise dismissed.

16. Should any party wish to pursue or make an application for costs, they are to file and serve within 28 days of the date of these orders an Application in a Proceeding specifying the orders sought as to costs, and any affidavit in support thereof. In the event of the filing of such application, orders will be made in chambers as to the filing of material in response and as to the listing of the application.

17. In the event no application of costs is filed pursuant to Order 16, any outstanding applications as to costs are dismissed.

Note: The form of the order is subject to the entry in the Court’s records.

Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).

Part XIVB of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish an account of proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.

Background

Background to the litigation

The property interests of the husband in Vukasin Pty Ltd are the subject of the non-federal claim by Mr Passerini. Identification of the husband’s property interests is critical to the resolution of the federal s 79 claims made by each of the husband and the wife (Stanford v Stanford (2012) 247 CLR 108 (“Stanford”)). The determination of the interests of Mr Passerini in Vukasin Pty Ltd is hence a relevant consideration in a determination of the adjustment of property interests between the husband and the wife. Mr Passerini’s claim is wholly consumed in that same determination. A common substratum of facts spans both claims. The non- severable nature of the claims and the common substratum of facts identify a single justiciable controversy. This conclusion is reinforced by this forum having sufficient remedy to deal with both claims if accrued jurisdiction is attracted. I am satisfied that an accrued jurisdiction is engaged to determine the non-federal claim of Mr Passerini.BACKGROUND AND FINDINGS The husband was born in 1976. He is currently 47 years old. The wife was born in 1982. She is currently 42 years old. The husband and Mr Passerini met at school in 1983. In 1997 they commenced trading in a partnership as P Company. That partnership was dissolved in 2000. From 2000 they commenced importing goods from Country Q. This ceased in or about 2005. In 2000 the husband purchased R Street, Suburb K (“the R Street property”) for $317,000, with Ms S. The husband held 99 per cent of the property and Ms S held one per cent. The property was subject to a mortgage. In 2002 the husband purchased T Street, Suburb U (“the T Street property”) for $262,000, with Ms S. The husband held 99 per cent of the property and Ms S held one per cent. The property was subject to a mortgage. In 2004 Ms S transferred her interests in the R Street property and the T Street property to the husband for nil consideration. Vukasin Trading Pty Ltd was incorporated in 2006. The husband was, and remains, the sole legal owner of the 500 issued shares and is the sole director. In 2017 its name was changed to Vukasin Pty Ltd. Vukasin Pty Ltd operates a business across multiple online platforms in addition to the company’s own websites. It specialises in the import and sale of products. Vukasin Pty Ltd employs a number of staff across multiple departments. The husband is a senior executive. He is responsible for the overall management of the business. Mr Passerini is responsible for the day-to-day management of the business and leading the heads of departments. Both the husband and Mr Passerini travelled to Country V in 2006 for work with Ms W. The husband was then in a personal relationship with Ms W. Both the husband and Mr Passerini determined that a commercial opportunity presented to purchase and import products from Country V into Australia for resale. Mr Passerini and the husband said they entered an agreement, reduced to writing, in 2006 (Exhibit 26). The gravamen of the 2006 agreement is for Mr Passerini to make a one-off payment of $20,000 to the husband and for the husband to “immediately give” Mr Passerini 30 per cent ownership of Vukasin Trading (as it was then known). It provides for the husband to “handle selecting, purchasing and importing of products to sell [online]” and for Mr Passerini to “handle storage of stock, listing products [online] including […] customer service for those products.” In 2006 products ordered during the trip to Country V arrived in Australia. Vukasin Pty Ltd commenced trading online under the name “[X Company]”. The wife put into issue the fact of the 2006 agreement and its terms.

Evidence

Evidence Before The Court

The 2013 agreement has a heading “INTENT”, under which it provides: The intent of the 2006 agreement by [the husband] to give [Mr Passerini] 30% ownership of The Company was to transfer 30% of the shares in The Company to [Mr Passerini] and the right to 30% of all profits, dividends and capital gains generated by The Company since the company was registered in […] 2006. This agreement has not changed, and will not change unless agreed by both [the husband] and [Mr Passerini] in writing.(As per the original)The wife’s case and evidence as to Mr Passerini’s interest in Vukasin Pty Ltd Throughout the proceeding the wife wholly rejected the assertion of both the husband and Mr Passerini that 30 per cent of the shares in Vukasin Pty Ltd are held by the husband for Mr Passerini, and that the husband is contractually obliged to transfer a 30 per cent interest in the shares in Vukasin Pty Ltd to Mr Passerini. She pleaded putting the husband and Mr Passerini “to proof” as to the fact and terms of any agreement at any time between them. Her position was absolute. The wife pleaded that she denied that $20,000 had been paid by Mr Passerini for the shares of the husband, and further:(c) says that in […] 2013, the [husband] orally advised the [wife] that [Mr Passerini] did not pay any start-up capital for the Company, and that [Mr Passerini] did not have ownership of the Company; and (d) says further that the [husband] has been the sole director and beneficially held 100% shares of the Company since […] 2006 to date. The wife additionally pleaded the serious allegation that both the 2006 agreement and the 2013 agreement were “fabricated and not genuine”. It emerged during the trial that, in reality, the wife alleged a fraud was being occasioned by both the husband and Mr Passerini. She directly put to each Mr Passerini and the husband that each of the 2006 and 2013 agreements were created during the currency of this proceeding. They each denied the assertions. On 6 September 2024, being the last business day prior to the hearing, the wife filed an affidavit in which she said:27.I first met the Second Respondent, [Mr Passerini], in late 2012 when [the husband], [Mr Passerini] and I had a dinner at [a] Restaurant. [The husband] referred to [Mr Passerini] as a close business partner. I recall that he said to me with the words to the effect: “[Mr Passerini] is my closest friend. He has helped me a lot in many aspects. That’s why he is the only friend I would not mind sharing the same safe with at the bank. He is a trustworthy and good friend of mine.”28.[A date in] 2013 was my birthday. I celebrated with my mother, [the husband] and [Mr Passerini] at a restaurant […]. I recall that after [Mr Passerini] left, I had a conversation with [the husband] with the words to the following effect:I said: “You and [Mr Passerini] are really close. Does [Mr Passerini] have any shares in your company?”[The husband] said: “I am the sole director. [Mr Passerini] did not pay any money for the start-up capital of [Vukasin] Trading Pty Ltd and he does not have any shares in the company. However, he is my closest friend and helped me a lot in my business. I will give him 30% of the net proceeds of sale if my company is sold.”

Decision

Reasons for decision

Any adjustment to the contribution finding ought not be a vehicle for social engineering. A holistic consideration of the matters raised above warrants an adjustment from the contribution finding of 1.5 per cent in favour of the wife. In dollar terms, the value of this adjustment to the wife is $672,959, a difference of $1,345,918.CONCLUSION – JUSTICE AND EQUITY Accordingly, the property of the parties will be adjusted 16.5 per cent to the wife and 83.5 per cent to the husband. To achieve 16.5 per cent of the property of the parties identified in the balance sheet the wife ought to receive $7,402,545. The wife currently has in her possession or will receive the following by way of the proposed orders that she retain the G Street property: If she has the property in the table above, upon the basis that the husband discharges the mortgage on the G Street property, she achieves $11,081,912 of the property of the husband and the wife identified in the balance sheet. She therefore is required to make a payment to the husband of $3,679,367, rounded to $3,679,350, to achieve $7,402,545, being 16.5 per cent of that property. The husband’s overall entitlement to 83.5 per cent of the property of the husband and the wife identified in the balance sheet equates to $37,461,366. If the wife retains the G Street property and the husband discharges the mortgage on it, the husband has or will receive the following: The husband accordingly currently holds $33,782,000 of the property of he and the wife identified in the balance sheet. He ought to hold $37,461,366. Hence, he requires a payment from the wife of $3,679,367, rounded to $3,679,350, to achieve 83.5 per cent of their property. The wife will have the first opportunity to retain the G Street property. She has lived there since separation with her children. The husband now lives in a property owned by the Vukasin Family Trust at Suburb QQ. An order will be made requiring the husband to discharge the mortgage secured over the G Street property within 28 days, prior to the opportunities identified in [259] and [262] coming into operation. The value of the mortgage, when compared to the value of the adjusting sum to be paid to him by the wife, does not identify any prejudice if this course is adopted. That sequence maintains the justice and equity of the proposed orders adjusting property. The order is further indicated because the husband:(a)Sought to do so by way of his primary relief. He had the capacity to do so;(b)Agrees that the wife ought to have the first opportunity to retain the property; and(c)Is the sole borrower of the loan secured by the mortgage. An order will be made that the wife pay to the husband the sum of $3,679,350 within 56 days. In the event she makes that payment, she will retain the G Street property. If she does not, the opportunity to achieve the G Street property will fall to the husband. An order will be made that in the event the wife fails to pay the husband $3,679,350 within that specified time, the husband may elect, within seven days of the wife’s failure or neglect to make that payment to him, to serve written notice requiring her to transfer to him all her interest in the G Street property. In the event the husband makes that election in writing, within 84 days he will pay to the wife the sum of $2,420,650 and she will execute all documents prepared by him at his expense to effect a transfer of her interest in the G Street property to him.

Ratio Decidendi

Legal Principle Established

For these reasons I find the wife’s evidence about the Suburb TT business to be unreliable. I do not accept that the husband pressured her into purchasing the Suburb TT business. I prefer the husband’s evidence on this matter and find that it is more likely that the wife’s objective was to expand her export sales, and the husband assisted her in that endeavour as he asserted. I find that the wife attempted to machine her evidence on this subject matter to achieve what she perceived to be an advantage in the proceedings.Remuneration from Vukasin Pty Ltd Neither the husband nor Mr Passerini were paid a wage by Vukasin Pty Ltd from 2006 until 2016. The husband and Mr Passerini then each commenced to be paid $80,000 per annum from Vukasin Pty Ltd. In early 2024 the annual salaries received by the husband and Mr Passerini from Vukasin Pty Ltd each increased to $1.1 million. The renovation of the G Street property In 2016 a builder was engaged to undertake renovations on the G Street property. In late 2016 the husband and the wife relocated into the granny flat at the G Street property to facilitate the commencement of the works. The renovations were not completed. The works were substandard and non-compliant. The husband said he paid $800,000 to the cost of renovations. The wife did not challenge that evidence or assert otherwise. I so find.The re-build of the G Street property The cost of rectification to the defective works was estimated to be more than the cost of a demolition and re-build. In 2018 the husband contracted a business for the removal of the house. In mid-2018 the husband and the wife, together with the husband’s relative, Mr WW, relocated to a rental property at XX Street, Suburb H (“the Suburb H rental property”). The dwelling on the G Street property was demolished in 2018. The demolition cost $30,000 and was paid in instalments on behalf of the husband by Vukasin Pty Ltd. In 2018 the wife signed a contract to build a new residence on the G Street property. The rebuild was financed by a $1,369,628 loan from the NAB secured by mortgage on the G Street property (“the rebuild loan account”). The husband was the borrower. The wife was the guarantor. The husband commenced to make the periodic monthly instalments for the mortgage. The wife paid $66,275 to meet consultation and other relevant costs. The litigation about the G Street property renovation In 2019 the husband and the wife commenced proceedings in the District Court claiming the repayment of the funds paid to the builder. The wife said she was reluctant to commence proceedings as she did not believe they would be successful. Judgment was delivered in the matter in 2021. The husband and the wife were unsuccessful. They appealed. The wife asserts she was again reluctant to continue the litigation. Judgment in the appeal was delivered in 2023. The husband and wife were jointly and severally ordered to pay the defendant’s costs up to a specified date in 2022 and for the husband to pay costs after that date. The value of each of the costs order up to the specified date in 2022, currently unpaid, is agreed between the husband and wife to be $754,989. The costs payable by the husband after the specified date in 2022 also remain unpaid.