Ongaro & Abadzhiev
[2024] FedCFamC1F 653
•27 September 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Ongaro & Abadzhiev [2024] FedCFamC1F 653
File number(s): DNC 306 of 2022 Judgment of: BERMAN J Date of judgment: 27 September 2024 Catchwords: FAMILY LAW – PROPERTY – Where the parties have been married for 23 years – Where the husband is aged 70 and the wife is aged 56 – Consideration of contributions – Adjustment made on account of the wife’s greater initial contributions – Where neither party seeks an adjustment for s 75(2) factors – Consideration of addbacks – Where the husband seeks for legal fees to be added back – Where the legal fees have been paid from joint property – Legal fees added back – Where the wife asserts the parties owe their adult daughter $115,000 – No evidence presented regarding an oral or written loan – Alleged loan excluded – Orders.
FAMILY LAW – PROPERTY – Superannuation – Where the husband has an interest in a pension – Where the pension is in the payment phase – Where no splitting order is sought by the wife – Where the wife seeks for the pension to be treated as property – Where the husband seeks for it to be treated as a financial resource – Consideration of the treatment of the pension – Consideration of Russo & Wyley (2016) FLC 93-47 – Where it is just and equitable to treat the pension as a financial resource
Legislation: Family Law Act 1975 (Cth) ss 75, 79. Cases cited: Bevan & Bevan (2013) FLC 93-545
Biltoft & Biltoft (1995) FLC 92-614
Chorn & Hopkins (2004) FLC 93-204
Clifford & Lodge [2000] FamCA 1666
Crawford & Crawford (1979) FLC 90-647
Cunningham & Cunningham (2005) FLC 93-212
Dickons & Dickons (2012) FamCA 154
Gartner & Gartner [2000] FamCA 793
Ferraro & Ferraro (1993) FLC 92-335
Finlayson v Finlayson and Gillam (2002) FLC 93-121
Jabour & Jabour (2019) FLC 93-898
Lee Steere & Lee Steere (1985) FLC 91-626
Mallet v Mallet [1984] HCA 21
Manolis & Manolis (No 2) [2011] FamCAFC 105
Money & Money (1994) FLC 92-485
Pierce v Pierce (1999) FLC 92-844
Russo & Wyley (2016) FLC 93-47
Stanford & Stanford (2012) 247 CLR 108
Vass & Vass (2015) 53 Fam LR 373
Way & Way (1996) FLC 92-702
White & White (1982) FLC 91-246
Division: Division 1 First Instance Number of paragraphs: 208 Date of hearing: 22 & 23 August 2024 Place: Heard in City LL, delivered in Adelaide Counsel for the Applicant: Ms Horsley Solicitor for the Applicant: AFL Withnalls Lawyers Counsel for the Respondent: Mr Gardiner Solicitor for the Respondent: Story & Associates ORDERS
DNC 306 of 2022 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MR ONGARO
Applicant
AND: MS ABADZHIEV
Respondent
ORDER MADE BY:
BERMAN J
DATE OF ORDER:
27 SEPTEMBER 2024
THE COURT ORDERS THAT:
1.Within sixty (60) days of the date of these orders, (“the payment date”) Ms Abadzhiev (“the respondent”) shall pay to Mr Ongaro (“the applicant”) the sum of SEVEN HUNDRED AND EIGHT THOUSAND NINE HUNDRED AND TWENTY-NINE DOLLARS ($708,929) (“the settlement sum”).
2.Within sixty (60) days of the date of these orders, the respondent shall do all acts and sign all documents required to refinance the existing mortgage and credit facilities so as to secure the release of the applicant from all guarantees and securities previously provided by his associated with:
(a)B Bank Loan Account ending #...940;
(b)B Bank Loan Account ending #...740;
(c)Any mortgage encumbering the respondents’ interest in real estate; and
(d)Any other liability held by the respondent or C Pty Ltd (whether as Trustee for the Abadzhiev Family Trust or in its own right), or the deregistered entity D Pty Ltd.
3.The applicant shall retain for his sole use and benefit to the exclusion of the respondent his interest in the following:
(a)All funds standing to his credit in the following bank accounts:
(i)CBA Smart Access Account ending #...59;
(ii)CBA Account ending #...12; and
(iii)ANZ Account ending #...95.
(b)Any household contents, personal possessions and jewellery in his possession.
(c)Motor Vehicle 1 .
(d)E Company Shares.
(e)All member entitlements held in the Super Fund 1 (“the SMSF”).
(f)All member entitlements held in the superannuation funds known as Super Fund 2, Super Fund 3 and Super Fund 4.
(g)All member entitlements held in the Super Fund 5 pension entitlement.
(h)The settlement sum as provided for in paragraph 1 of these orders.
4.Subject to compliance with paragraphs 1 and 2 of these orders, the respondent shall retain for her sole use and benefit to the exclusion of the applicant her interest in the following:
(a)F Street, Suburb G, NT more particularly described as (“F Street”).
(b)H Street, City LL (“H Street”).
(c)J Street, Suburb K, more particularly described as (“J Street”).
(d)L Street, Suburb M (“L Street”).
(e)Motor Vehicle 2.
(f)All funds standing to her credit in any bank account in her sole name.
(g)Any household contents, personal possessions and jewellery in her possession.
(h)Subject to paragraph 6 and 7 of these orders, the Abadzhiev Family Trust.
(i)All member entitlements held in the superannuation fund known as Super Fund 6.
5.Within thirty (30) days of the date of these orders, the respondent shall exercise her power as appointor for the Abadzhiev Family Trust to:
(a)Remove C Pty Ltd as Trustee for the Abadzhiev Family Trust; and
(b)Appoint herself as Trustee for the Abadzhiev Family Trust.
6.The respondent in her capacity as Trustee for the Abadzhiev Family Trust shall:
(a)Within fourteen (14) days of the date of these orders, and on or before six (6) months thereafter, seek written expressions of interest from the three other unit holders in the N Unit Trust as to purchasing the 25 per cent unit holding held by the Abadzhiev Family Trust;
(b)Immediately accept any offer to purchase the unit holding at or above the sum of $170,000;
(c)Within fourteen (14) days of receipt of any payment for the purchase of 25 per cent unit holding held by the Abadzhiev Family Trust in the N Unit Trust, transfer:
(i)To the respondent or her nominee by way of trust distribution a sum equal to 52 per cent of that payment;
(ii)To the applicant, by way of trust distribution a sum equal to 48 per cent of that payment.
(d)Pending the sale of the 25 per cent unit holdings held by the Abadzhiev Family Trust in the N Unit Trust or 1 O, 2 O or 3 O Street, City LL owned by N Pty Ltd as Trustee for the N Unit Trust and P Pty Ltd as trustee for P Trust (“the O Street units”);
(i)The Abadzhiev Family Trust shall be liable for any tax arising for that entity for the payments received from the N Unit Trust;
(ii)The applicant and the respondent (or the respondent’s nominee as the case may be) shall each be separately liable for any tax arising for them as individuals as a result of the distributions received from the Abadzhiev Family Trust;
(e)In the event of the sale of the 25 per cent unit holdings held by the Abadzhiev Family Trust in the N Unit Trust occurs prior to the sale of any of the O Street units;
(i)The applicant and the respondent (or her nominee as the case may be), shall jointly instruct Q Accountants to undertake a calculation of:
a. The tax payable by the Abadzhiev Family Trust, as a consequence of the sale of the unit holding in the N Unit Trust;
b. The combined tax payable by the applicant and the respondent (or her nominee as the case may be), as a consequence of the distribution to be received from the Abadzhiev Family Trust (the combined tax payable);
(ii)The respondent shall (as Trustee) ensure that she brings to account the tax payable by the Abadzhiev Family Trust before making any calculation as to the percentage based distribution as may be required by these orders;
(iii)The applicant shall be responsible for making payment of 48 per cent of the combined tax payable making payment firstly towards the liability incurred in his name and secondly paying the excess (if any) over and above of that amount to such account as may be nominated in writing by the respondent;
(iv)The respondent shall be responsible for and make payment of 52 per cent of the combined tax payable, making payment firstly towards the liability incurred in her name and secondly paying the excess (if any) over and above that amount to such account as may be nominated in writing by the applicant;
(v)The applicant and the respondent shall each be responsible for one half of the costs associated with Q Accountants undertaking the necessary calculation hereof;
(f)In the event that the sale of the unit holding held by the Abadzhiev Family Trust or the N Unit Trust does not occur prior to the sale of one or more of the O Street units, then following the sale of any of the O Street units:
(i)The applicant and the respondent (or her nominee as the case may be), shall jointly instruct Q Accountants to undertake a calculation of:
A.The tax payable by the Abadzhiev Family Trust as a consequence of the payment received from the N Unit Trust following the sale of the O Street unit(s);
B.The combined tax payable by the applicant and the respondent (or her nominee as the case may be), as a consequence of the distribution to be received from the Abadzhiev Family Trust (the combined tax payable);
(ii)The respondent shall as trustee ensure that she brings to account the tax payable by the Abadzhiev Family Trust before making any calculations as to the percentage based distribution as may be required hereof;
(iii)The applicant will be responsible for and make payment of 48 per cent of the combined tax payable, making payment firstly towards the liability incurred in his name and secondly paying the excess (if any) over and above that amount to such account as may be nominated in writing by the respondent;
(iv)The respondent will be responsible for and make payment of 52 per cent of the combined tax payable, making payment firstly towards the liability incurred in her name and secondly paying the excess (if any) over and above that amount to such account as may be nominated in writing by the applicant; and
(v)The applicant and the respondent shall be responsible for one half of the costs associated with Q Accountants undertaking the calculations as required hereof.
7.Pending compliance with the preceding paragraph hereof, the respondent shall be restrained from:
(a)Exercising any power she may have under the terms of the Abadzhiev Family Trust Deed to appoint or remove the Trustee of the Abadzhiev Family Trust (unless in accordance with these orders or as may be agreed between the parties);
(b)Resigning as the appointor/principal of the Abadzhiev Family Trust; and
(c)Appointing another appointment/principal of the Abadzhiev Family Trust until the effective winding up of the N Joint Venture and the distribution of distributions to the N Unit trust and then the Abadzhiev Family Trust.
8.The applicant shall within seven (7) days of these orders, inform the two other directors of N Pty Ltd that any and all amounts payable to the Abadzhiev Family Trust as a unit holder of the N Unit Trust are to be transferred directly to the CBA Business Transactions Account ending #...13 held in the name of C Pty Ltd as Trustee for the Abadzhiev Family Trust.
9.The applicant shall indemnify the respondent against all claims, actions, suits and demands arising out of or in connection with him having been at any time a director, secretary, employee, beneficiary, appointor and/or shareholder of the Super Fund 1 or the Trustee of the Super Fund 1.
10.The respondent shall indemnify the applicant against all claims, demands, proceedings and judgments in respect of liability pursuant to the mortgage(s) encumbering F Street, H Street, J Street and in relation to all rates, taxes (including Capital Gains Tax) and other outgoings which may be incurred with respect to those interest in real property or any other assets being transferred to or retained by the respondent of whatsoever nature and kind.
11.In the event the respondent fails to make the payment of the settlement sum either in whole or in part then default interest shall commence to run on so much of the settlement sum is outstanding at the rate prescribed by the Federal Circuit and Family Court of Australia (Family Law Rules) 2021 (Cth) and F Street shall be listed for sale in the terms as set out in order 13 herein.
12.In the event the respondent fails to secure the release of the applicant from all guarantees and securities provided by him by the release date, the F Street property shall be listed for sale in the terms as set out in order 13 herein.
13.In the event that the respondent fails to comply with order 11 or 12 then the parties shall list the F Street property for sale by private treaty for a period of sixty (60) days and the following orders shall apply:
(a)F Street shall be listed for sale with a real estate agent as may be agreed between the parties;
(b)F Street shall be listed at a listing price of ONE MILLION AND FIFTY THOUSAND DOLLARS ($1,050,000) or as otherwise recommended by the sales agent;
(c)The parties shall co-operate in every way with the sales agent in relation to the marketing of F Street;
(d)The parties shall make the keys readily available, allowing inspections of F Street at all times reasonably requested by the sales agent;
(e)The respondent shall ensure F Street is clean, neat and in good order at the time of inspection;
(f)The condition of any contract of sale with a purchaser shall be that there be paid by the purchaser a deposit of not less than 10 per cent unless agreed otherwise;
(g)The F Street property is to be sold “as is”; and
(h)The contract of sale shall provide for completion within sixty (60) days of the date of contract unless agreed otherwise by the parties.
14.In the event F Street is not sold by auction or private negotiation at the reserve price as recommended by the auctioneer, the parties shall do all acts and sign all documents necessary to list F Street for sale by second auction on the following terms and conditions:
(a)The auctioneer shall be nominated by the sales agent;
(b)The auction shall take place within fourteen (14) days of the first auction, unless agreed otherwise;
(c)There will be no reserve price; and
(d)The respondent shall pay and be responsible for the payment of all auction expenses.
15.Following the sale of F Street, the net proceeds are to be applied as follows:
(a)Firstly, to pay costs of sale;
(b)Secondly, such sum as is necessary to discharge the respondent’s obligation to make the payment of the settlement sum (and accrued default interest); and
(c)Lastly, the balance to the respondent.
16.In the event of a failure by either party to comply with any provisions of these orders such that enforcement action is required, the procedure for enforcement shall be as follows:
(a)The party who seeks to enforce the relevant provision of the order shall give the other party fourteen (14) days’ notice of their intention of their compliance demand; and
(b)Should the party who seeks to enforce the relevant provision of the orders that deemed enforcement action appropriate after giving the other party fourteen (14) days’ notice detailed above take enforcement.
17.Each party shall do all acts and things reasonably required by the other including the signing or execution of all necessary documents to give effect to the provisions of this order within fourteen (14) days of being requested to do so.
18.If either party refuses or neglects to sign or execute or return a document within fourteen (14) days of a written request to do so then the Judicial Registrar or Senior Judicial Registrar of the Federal Circuit and Family Court of Australia (Division 1) is hereby appointed under s 106A of the Family Law Act 1975 (Cth) to sign or execute such document on behalf of that party upon lodgement of such document and the filing of an Affidavit of the solicitor on behalf of the requesting party as to the said neglect or refusal.
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.
IT IS NOTED that publication of this judgment by this Court under a pseudonym has been approved pursuant to subsection 114Q(2) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
BERMAN J
GLOSSARY OF TERMS
·Mr Ongaro (“the applicant”)
·Ms Abadzhiev (“the respondent”)
·Ms R (“Ms R”)
·D Pty Ltd – (“the company”). The company operated a retail business trading under the name of “S Company”. The respondent was the sole director, secretary and shareholder of the company. The company was deregistered in early 2024.
·The S Company. The business ceased to operate in mid-2022.
·C Pty Ltd – (“the Trust Company”). The trust company is the corporate trustee for the Abadzhiev Family Trust (“the Abadzhiev Trust”). The respondent is a co-director with Ms R and is the sole shareholder.
·The respondent is the appointor and a named beneficiary of the Abadzhiev Trust.
·N Pty Ltd. (“N Pty Ltd”). The applicant is a director and secretary of N Pty Ltd together with Mr T and Mr U. The applicant holds personally and beneficially one fully paid ordinary share which equates to one quarter of the issued shares. N Pty Ltd is the corporate trustee of N Unit Trust.
·The N Unit Trust – (“the N Unit Trust”). The N Unit Trust is a Joint Venture that holds real estate at O Street, City LL. The Abadzhiev Trust holds units equating to a 25 per cent interest in the N Unit Trust which equates to a 10 per cent interest in the Joint Venture.
·Super Fund 1 – (“the SMSF”). The applicant and the respondent were both Trustees and beneficiaries of the SMSF. The SMSF owns real property being 1 V Street, 2 V Street, 3 V Street and 4 V Street, City LL.
·Ongaro Pty Ltd (“Ongaro Pty Ltd”) is the corporate Trustee of the SMSF.
INTRODUCTION
The applicant and the respondent are unable to reach agreement in relation to property settlement and division.
The applicant relied upon the Further Amended Initiating Application filed 20 July 2024 however, at trial he seeks orders as set out in a Minute of Order dated 23 August 2024 (exhibit “12”) with further amendments to paragraphs 5 to 8 as set out in a supplementary Minute of Order (exhibit “16”).
The orders sought by the applicant are summarised as follows:
(1)That the respondent retain her interest in the property situate at F Street, Suburb G (“the Suburb G property”).
(2)That the applicant retain for his sole use and benefit:
(i)All funds standing to the applicant’s credit in bank accounts in his name.
(ii)Personal possessions held by the applicant.
(iii)E Company shares.
(iv)All member entitlements in the SMSF.
(v)All member entitlements held in the Super Fund 5 pension entitlement.
(3)That the respondent shall retain for her sole use and benefit:
(i)All funds standing to the credit of the respondent and any bank account in her sole name.
(ii)The property situate at H Street, City LL.
(iii)The property situate at J Street, Suburb K.
(iv)The property situate at L Street, Suburb M.
(v)The Abadzhiev Trust.
(4)That within 30 days of the date of these orders the respondent shall pay to the applicant a settlement sum calculated on the basis of an equal division of the combined net value of the parties’ superannuation and non-superannuation assets.
As will be discussed, the orders sought by the applicant are predicated upon the following considerations:
(1)That given the age of the parties but in particular the applicant, the entitlements of the members in the SMSF should be treated as property.
(2)That despite a value having been attributed to the applicant’s entitlement held in the Super Fund 5 pension, it should be treated as a financial resource and not property.
(3)That the interest held by the Abadzhiev Trust in the N Unit Trust should be retained by the respondent given her control of the trust as Appointor.
(4)That the legal fees paid by each of the parties should be treated as an addback.
The respondent relies upon the Amended Response to Initiating Application filed 8 August 2024 wherein she seeks orders summarised as follows:
(1)That in her capacity as sole director of the trust company for the Abadzhiev Trust, the respondent shall transfer to the applicant the shares in N Unit Trust and following transfer, the applicant shall indemnify the Abadzhiev Trust with respect to any Capital Gains Tax Assessment (“CGT”) or any other liability associated with the N Unit Trust share.
(2)That the applicant shall retain all distributions received from N Pty Ltd and shall indemnify the Abadzhiev Trust in relation to any taxation or other liability associated with distributions made.
(3)That each party shall indemnify the other with respect to any CGT assessed on any asset being transferred or retained by each of them pursuant to orders made.
(4)That the applicant shall indemnify the respondent in respect of all and any liability arising out of the SMSF.
(5)That the respondent be solely responsible for paying to Ms R all monies held on her behalf by the respondent and shall indemnify the applicant in relation to any liability outstanding to Ms R.
(6)The applicant is to pay the respondent a settlement sum of $330,000.
(7)That other than as specified in orders sought by the respondent, each party shall retain to the exclusion of the other, property in their separate possession, power and control.
The orders sought by the respondent are predicated upon the following:
(1)That the superannuation entitlements of the parties in the SMSF shall be treated as property;
(2)That the applicant is to retain the interest in the N Unit Trust previously held by the Abadzhiev Trust;
(3)That the parties are indebted to Ms R;
(4)That the applicant’s interest and entitlement in the Super Fund 5 pension shall be treated as a valuable asset;
(5)That the contributions of each of the parties shall be apportioned as to 54/46 per cent in favour of the respondent with no adjustment pursuant to s 75(2) of the Family Law Act 1975 (Cth) (“the Act”).
BACKGROUND
The applicant was born in 1953 and is currently 70 years old. The respondent was born in 1967 and is currently 56 years old.
The parties were married in 1999 and separated in June 2022 with the respondent remaining in the Suburb G property until July 2022.
The parties have one adult child namely, Ms R, born in 2000. Ms R resides in Queensland and is currently undertaking post graduate studies. Whilst there has been a history of significant financial support by the parties to assist Ms R, she currently has part-time employment and has a level of financial independence.
Following the marriage of the parties, they lived at 2 O Street, City LL which they purchased in early 2000.
The contention of the applicant is that at the commencement of cohabitation in 1997 but in particular from the date of marriage, he held an interest in a property at W Street, Suburb X (“the Suburb X property”) which was subsequently sold in 1999 with net proceeds of sale in the sum of $35,000. In addition, the applicant had a substantial entitlement with the Super Fund 5 pension which he had contributed to since the age of 17.
The respondent contends that she had the following property at the commencement of the marriage:
(1)Savings of about $150,000 USD;
(2)A share portfolio of $41,000;
(3)An interest in a property situate at J Street, Suburb K (“the Suburb K property”) with equity in the sum of about $40,000;
(4)A motor vehicle to the value of $20,000; and
(5)Cash at hand in the sum of $25,000.
The respondent considers that during the course of the marriage she made the greater initial financial contribution but a superior contribution in her capacity as homemaker with emphasis on her primary care of their daughter.
As is evident from the construct of the respondent’s affidavit, she considers that through her entrepreneurial activities, she generated income from the following activities:
(a)Managing D Pty Ltd wholesale;
(b)Managing D Pty Ltd retail including “S Company” retail property;
(c)Managing the SMSF;
(d)Managing rental properties;
(e)Buying and selling real properties; and
(f)Investing in ASX Shares such that for the period from 2006 to 2023 the respondent generated total income as follows:
(i)Personal endeavour $1,125,424;
(ii)D Pty Ltd $1,230,345; and
(iii)Abadzhiev Trust $326,427;
For the same period, the respondent contends that the applicant generated income to the total sum of $979,347.
In addition, in 2011 the respondent commenced studying part-time at university and graduated in 2018.
The applicant concedes that the respondent was the primary controller of assets and liabilities such that she dealt with all banking, maintenance of financial accounts and financial investment strategy.
At the commencement of their relationship, the applicant was employed part-time as a professional with Y Organisation and held qualifications in that industry.
From 1983 until 1986, he was employed as a professional with a government authority in Country Z. The applicant has been a board member of a government authority since early 2019 and receives a modest honorarium of $300 per sitting.
The applicant does not agree that the respondent provided the primary care for Ms R nor that she was the primary homemaker.
The applicant considers that each of the parties contributed to the financial security of the family to the best of their respective abilities with the concession that the respondent was reasonably financially astute.
Currently, the respondent retains employment as a professional with a City LL based business. It is the respondent’s position that she only obtained her qualifications in order to supplement her property investment strategy and has never held an interest in pursuing a career in the industry that she studied for. At her election, the respondent does not consider that she will remain employed as a professional for any length of time.
The applicant has effectively stopped working on a full-time basis since 2015 and receives a Super Fund 5 pension. It is unlikely that the respondent will return to paid employment other than receiving modest remuneration from his continued involvement with a government authority and from some private consulting work.
DOCUMENTS RELIED UPON
The applicant relies upon the following documents:-
(1)Further Amended Initiating Application filed 20 July 2024.
(2)Affidavit of applicant filed 18 May 2024 (“the applicant’s trial affidavit”).
(3)Financial Statement filed 18 May 2024.
(4)Affidavit of Mr AA (“BB Company”) filed 6 June 2024.
(5)Affidavit of Mr CC (“DD Company”) filed 14 June 2024.
(6)Affidavit of Mr EE filed 3 July 2024.
(7)Affidavit of Mr FF filed 14 December 2023.
(8)Minute of Order (Exhibit “18”) and supplementary Minute of Order (Exhibit “16”).
(9)Costs Notice filed 13 August 2024.
(10)Outline of Case filed 16 August 2024.
The respondent relies upon the following documents:-
(1)Amended Response to Initiating Application filed 8 August 2024.
(2)Affidavit of respondent filed 5 August 2024 (“the respondent’s trial affidavit”).
(3)Financial Statement filed 6 August 2024.
(4)Affidavit of Mr GG filed 7 December 2023.
(5)Affidavit of Mr AA filed 6 June 2024.
(6)Affidavit of Ms R filed 17 August 2023.
(7)Costs Notice filed 13 August 2024.
(8)Outline of Case filed 20 August 2024.
IS IT JUST AND EQUITABLE TO PROCEED?
In Stanford & Stanford (2012) 247 CLR 108 (“Stanford”) the majority held:
35.It will be recalled that section 79(2) provides that “[t]he court shall not make an order under this section unless it is satisfied that, in all the circumstances, it is just and equitable to make the order”. Section 79(4) prescribes matters that must be taken into account in considering what order (if any) should be made under the section. The requirements of the two sub-sections are not to be conflated. In every case in which a property settlement order under s 79 is sought, it is necessary to satisfy the court that, in all the circumstances, it is just and equitable to make the order.
36.The expression “just and equitable” is a qualitative description of a conclusion reached after examination of a range of potentially competing considerations. It does not admit of exhaustive definition. It is not possible to chart its metes and bounds. …
(Footnotes omitted)
In Bevan & Bevan (2013) FLC 93-545 at [73], the Full Court considered that the decision of Stanford (supra) could be reduced to “three fundamental propositions”:
1.Determination of a just and equitable outcome of an Application for property settlement begins with the identification of existing property interest (as determined by common law and equity);
2.The discretion conferred by the statute must be exercised in accordance with legal principles and must not proceed on an assumption that the parties’ interests in the property are or should be different from those determined by common law and equity; and
3.A determination that a party has a right to a division of property fixed by reference only to the matter in s 79(4), and without separate consideration of s 79(2), would erroneously conflate what are distinct statutory requirements.
The parties both consider that it is just and equitable for there to be an order of property settlement made pursuant to s 79 of the Act and that the legal and equitable interests in their property will need to be adjusted.
Whilst there is not complete agreement, a consideration of the balance sheets comprising exhibits “14” and “15” highlight the legal and equitable interests of the parties in property. A consideration of the orders sought by each of the parties require orders to be made pursuant to s 79 of the Act.
LEGAL COSTS OF THE PARTIES
The notices as to the parties’ costs are comprised in exhibits “4” and “5”.
The applicant’s costs
As at 12 August 2024, the applicant’s total costs paid to date including legal fees, counsel fees and disbursements are in the sum of $123,523, comprised as follows:
Description Cost (inclusive of GST) Professional costs and disbursements $96,360 Counsel fees $4,545 Disbursements (expert witness expenses) $22,618 TOTAL COSTS PAID $123,523
In addition, the applicant has incurred a further sum of $72,495 billed and owing comprised as follows:
Description Cost (inclusive of GST) Professional costs and disbursements (invoiced) $69,113 Professional costs and disbursements (not yet invoiced) $3,383 Costs owing $72,495 TOTAL OF COSTS PAID AND OWING $196,018
The applicant’s estimated future costs for the final hearing, in addition to the above, are between $71,000 and $91,000.
The source of funds for the payment of the applicant’s solicitor’s legal costs, counsel fees and disbursements have been sourced from the applicant’s member entitlement in the SMSF.
The respondent’s costs
As at 20 August 2024, the respondent’s total costs paid to date including legal fees, counsel fees and disbursements paid to the respondent’s previous solicitors, are in the sum of $174,231.
In addition, the respondent has paid her current solicitors the sum of $15,048 with outstanding costs in the sum of $12,980.
The respondent’s future costs are estimated to be in the sum of about $75,000 with funds held in trust in the sum of $70,000.
The source of funds currently held in trust arises from the sale of shares by Abadzhiev Trust.
Exhibit “5” provides a detailed breakdown of the source of funds used by the respondent to pay her previous solicitors in the sum of $174,231. The respondent advises that the source of funds to pay her previous solicitors and her current solicitors was her income.
Exhibit “5” includes B Bank Portfolio Loan Account Statements for the period 29 July 2022 to 31 March 2024. During that period, the respondent received by way of net salary from her employment as a professional, the total sum of $50,392.40.
In addition, the respondent annexes a Commonwealth Bank Business Transaction Account Statement for the period 22 May 2023 to 21 August 2023 which discloses a transfer into the account from a E Company Share Account of $6,442 which then corresponds with a debit payment to Q Accountants.
The applicant seeks to bring to account as an addback his legal fees paid to his solicitors in the sum of $123,523 and the respondent’s legal fees in the total sum of $192,795 together with the sum of $70,000 that remains in her solicitors’ trust account.
The respondent’s case is that the legal fees incurred and paid by each of the parties should be excluded.
The joint table of assets is set out as follows:[1]
JOINT TABLE OF ASSETS
Assets
[1] Exhibits “13” and “15”.
Asset Owner Applicant’s Value Respondent’s Value F Street, Suburb G Respondent $1,050,000 $1,050,000 J Street, Suburb K Respondent $675,000 $675,000 L Street, Suburb M Respondent $675,000 $675,000 H Street, City LL Respondent $600,000 $600,000 Household contents Respondent $20,000 $5,000 Household contents Applicant $10,000 $10,000 Jewellery Applicant Nominal $10,000 Jewellery Respondent $10,000 NIL Shares in D Pty Ltd Respondent NIL NIL Shares in C Pty Ltd Respondent NIL NIL Interest in N Unit Trust Respondent (held by Abadzhiev Trust) NK $600,340 Abadzhiev Trust Shares Respondent $85,972 $85,972 Abadzhiev Trust Bank Accounts Respondent $65 $65 Motor Vehicle 2 Respondent $3,500 $3,500 Motor Vehicle 1 Applicant $45,000 $50,000 CBA Bank Account ending #...59 Applicant $1,168 $1,168 CBA Account ending #...12 Applicant $8 $8 ANZ Bank Account ending #...95 Applicant $1,017 $1,017 B Bank Loan Account ending #...40 Respondent $49,096 $49,096 E Company Shares Applicant $21,384 $21,384 TOTAL $6,494,420 $3,837,550 Liabilities
Liability Owner Applicant Respondent CBA Visa Credit Card ending #...24 Respondent $142 $142 Bond –H Street, City LL Respondent $13,755 $13,755 Bond –J Street, Suburb K Respondent $2,720 $2,720 Bond – L Street, Suburb M Respondent $2,400 $2,400 ATO Tax associated with winding up of D Pty Ltd Respondent $222,767 $242,162 2024 Income Tax re: Div 293 Respondent NIL $1,331 Ms R’s funds Joint NIL $115,190 Addbacks
Asset Owner Applicant Respondent Legal fees paid to AFL Withnalls or held in trust Applicant $123,523 Exclude Funds removed from the SMSF Applicant Exclude $232,930 Distribution from N Unit Trust Applicant NIL $25,000 Legal fees paid to Murdoch Lawyers Respondent $177,648 Exclude Legal fees paid to City LL Family Law Respondent $15,147 Exclude Monies held in Story & Associates Trust Account Respondent $70,000 Exclude from sale of Abadzhiev Trust shares Superannuation
Fund Owner Applicant Respondent Super Fund 6 (as at 6 August 2024) Respondent $44,483 $44,483 SMSF Applicant $1,271,778 $1,271,778 Super Fund 4 (as at 30 June 2024) Applicant $67 $67 Super Fund 2 Applicant $4,683 $4,683 Super Fund 3 (as at 30 June 2024) Applicant $1,221 $1,221 Super Fund 5 Pension ($1,222.92 per fortnight net) Applicant Financial resource $423,322
Whilst not attempting to be comprehensive of all issues in dispute, the significant areas of disagreement are as follows:
(1)The value of the household contents in the possession of the respondent.
(2)The value and whereabouts of the jewellery in the possession of the applicant.
(3)The value and whereabouts of the jewellery in the possession of the respondent.
(4)The value and treatment of the Abadzhiev Trust 25 per cent unit holding in N Unit Trust which holds 40 per cent interest in N Joint Venture.
(5)The value of the Motor Vehicle 1 in the applicant’s possession.
(6)GST payable for rent by the respondent.
(7)Tax associated with winding up D Pty Ltd.
(8)2024 Income Tax re: Div 293.
(9)Funds held on behalf of or money owing to Ms R.
(10)Treatment of legal fees paid by each of the parties.
(11)Funds withdrawn from SMSF by the applicant.
(12)Distribution paid by N Unit Trust to the applicant.
(13)Treatment of the applicant’s Super Fund 5 pension.
Household contents – Respondent
The respondent concedes that she retains household contents to the value of $5,000. The applicant considers that the contents held by the respondent has a value of $20,000.
No valuation evidence has been presented as to the value of furniture and effects in the possession of the either party and as such, the only evidence available is the amount as recorded in the respondent’s Financial Statement filed 6 August 2024. I propose to accept the respondent’s assessment that she holds household property to the sum of $5,000.
Stock in the applicant’s possession
The respondent’s evidence is that in mid-2022 she closed down the business trading as “S Company”. She states that she sold the remaining stock for a gross amount of $80,000 but retained some unsold remnant stock.
In answer to a claim by the applicant that the respondent retained stock to the value of $250,000 and personal stock to the amount of $10,000, the respondent delivered all of the remaining stock to the applicant’s solicitor. The applicant concedes that some stock was delivered but considers that it was of no significant value and not the actual stock.
The parties remain in dispute as to both the quantity and value of stock that remained following the closure of the business. There is no evidence as to value or the whereabouts of the stock and accordingly, I do not propose to bring to account stock in either the possession of the applicant or the respondent.
N Unit Trust
On 19 May 2023, Mr FF, Chartered Accountant, received a joint letter of instruction signed by the solicitors for each of the parties instructing him to prepare a forensic valuation of the parties’ interest in the N Unit Trust including its 40 per cent interest in the N Joint Venture. As discussed, the Abadzhiev Trust holds a 25 per cent interest in the N Unit Trust which equates to a 10 per cent interest in the N Joint Venture.
Mr FF was assisted by the following documents:
(1)N Joint Venture Financial Statement for year ended 30 June 2022.
(2)The N Unit Trust Financial Statement for year ended 30 June 2022.
(3)Joint Venture Agreement dated late 2007 for the N Joint Venture.
(4)Deed of N Unit Trust for the N Unit Trust dated late 2007.
(5)Email from Mr T to the respondent for the offer of purchase of the interest of the parties in the N Unit Trust in August 2022 in the amount of $110,000.
(6)Email from Mr T to the respondent for the offer of purchase of the interest of the parties in the N Unit Trust in March 2023 in the amount of $170,000.
Mr FF adopted a “market value approach” being the price that he considered a prudent investor would be prepared to pay to receive the expected future earnings having regard to the risk attached to the investment.
Of significance is that Mr FF had available to him the independent valuation reports for the properties at 1 O, 2 O and 3 O Street, City LL held by the N Joint Venture.
Mr FF adopted the market value of the three remaining units and taking into account liabilities of the N Joint Venture, the value of the net assets is in the sum of $6,659,664. The N Unit Trust has a 40 per cent interest and given that this constitutes a minority interest a further consideration was whether there should be a discount for minority holding based upon:
(1)The lack of control; and
(2)The lack of marketability.
Mr FF considered that the other party to the N Joint Venture had a 60 per cent interest and as such, the range of potential discount would be between 0 and 10 per cent. Ultimately, Mr FF adopted a minority interest discount of 0 per cent because it was his expectation that the value of the N Joint Venture will be realised upon the eventual sale of the Units.
As such, and in the absence of any discount, the 40 per cent interest of N Unit Trust is $2,663,866.
Whilst no discount was considered appropriate for the involvement of N Unit Trust in the Joint Venture, Mr FF considered that a 10 per cent adjustment in respect of the Abadzhiev Trust 25 per cent interest was reasonable to compensate for the risk that market conditions would fluctuate between now and when the units would eventually sell.
On that basis, the entitlement of the Abadzhiev Trust was calculated as follows:
·25 per cent interest (of $2,347,953) $586,988
·Less discount for minority interest (10 per cent) ($58,699)
·Value of unit holding $528,289
·Add loan owing to Abadzhiev Trust $72,051
·Net indirect interest $600,340
The valuation methodology adopted by Mr FF was in reality an asset backing valuation entirely dependent on the value attributed to the three remaining real estate units.
The respondent does not wish to retain the interest in N Unit Trust currently held by Abadzhiev Trust. The respondent contends that the applicant has not made full and frank disclosure in respect of the financial circumstances of the N Joint Venture. The applicant is a Director and Shareholder of one share in N Pty Ltd and as such, she does not receive any minutes of meeting nor is she able to have input as to how any money may be distributed.
For his part, the applicant does not wish to retain the interest that the Abadzhiev Trust has in the N Unit Trust and therefore, the N Joint Venture.
Whilst not set out with any clarity in the trial affidavits, it appears that the parties each share the same concern namely, that they consider there has been a substantial downturn in the market in City LL and that despite the best of endeavours, the last three of the Units in the N Joint Venture have not been able to be sold without resorting to a substantial discount. It is self‑evident from the offers that have been made from Mr T on 11 August 2022 and then again on 27 March 2023 that his offer of $170,000 for the interest held by the Abadzhiev Trust in the N Joint Venture was significantly below the valuation of Mr FF.
Exhibit “7” comprises an email from Mr T to the respondent dated 27 March 2023 in the following terms:
Hi [Ms Abadzhiev]
Noting I offered to purchase your unit quite some time ago at a reasonable price, the amount can no longer be achieved.
My offer below is based on:
1. We all still own 3 floors
2. Only 1 floor is tenanted
3. The other 2 floors are on the market for sale or rent
4, At this point in time there has been no interest in either rent of sale
5.Income from the 1 floor tenanted is only barely sufficient to cover the costs of the loan, and will not cover any costs of repairs should any be needed – which could mean a cash injection by shareholders.
6.I made […] a very low offer in July 2022 which was made during the middle of fighting the lawsuit […] and we were at the time unsure of success – hence the low offer
My offer to you is $170,000
Regards
[Mr T]
Irrespective of the accuracy of the assertion by Mr T as to the lack of market interest for sale or rent, it is understandable that neither party would wish to retain the interest.
Whilst there are a number of options that are available to the parties, the viable options are as follows:
(1)That the respondent retain the interest in the N Joint Venture arising from her retention of the Abadzhiev Trust;
(2)The interest in the N Unit Trust and therefore the N Joint Venture is transferred to the applicant; or
(3)Neither party is required to keep the interest in the N Joint Venture in the hope that eventually the units will sell.
This is not a case where each of the parties vie to retain the interest in the N Joint Venture. The exact opposite is the position. Each of the parties are concerned, and perhaps with some justification, that there is a downturn in the City LL real estate market in particular, in respect of commercial properties and as such, the valuation determined by Mr FF is overly optimistic and suspect.
To some degree, Mr FF’s valuation confirms some risk arising from the uncertainty in the real estate market by the adoption of a 10 per cent discount for adverse marketability.
I do not consider that there is any basis to require either of the parties to retain their current interest in the N Joint Venture. As such, the orders sought by the applicant are likely to lead to an outcome that is just and equitable and would prevent one party from becoming unjustly enriched if the market is more robust than their current consideration but equally, neither party would be disadvantaged if their concerns as to the current state of the market prove accurate.
The orders sought by the applicant in exhibit “16” have merit however, there is also some merit in the second alternative orders sought by the respondent that consideration should be given to seeking written expressions of interest from the other unit holders in the N Unit Trust for an amount at or above the sum of $170,000 which presumably is based upon the offer of Mr T on 27 March 2023.
Tax associated with winding up D Pty Ltd
In mid-2022, the respondent closed the retail shop. As a result, D Pty Ltd was no longer required and was deregistered in 2024. Exhibit “8” sets out the 2024 Tax Estimate and Summary for the respondent. The taxable income for the 2024 year was in the sum of $1,113,220 including a dividend from D Pty Ltd of $695,100.
A consideration of the tax payable upon the respondent’s 2024 income is comprised as follows:
Tax on taxable income after all nonrefundable tax offsets $471,278 Less franking credit offset $231,700 BALANCE $239,578 PLUS Medicare Levy $22,264.40 BALANCE $261,842.40 LESS PAYG Credits and other entitlements ($19,680) TOTAL BALANCE $242,162.40
The respondent seeks the full amount of the ATO Tax Assessment. The applicant concedes $222,767. The difference between the parties is the extent to which the tax estimate includes a tax component arising from the respondent’s salary in her paid employment as a professional and income rental retained by her from the investment properties.
Whilst there is some component of the Medicare Levy that is based upon the dividend distribution from D Pty Ltd, the balance of the levy relates to other income received by the respondent.
I propose to bring to account the lesser sum of $222,767 as determined by the applicant but also to accept the amount sought by the respondent for taxation payable for Div: 293 Assessment in the sum of $1,331.
Ms R’s alleged funds
The respondent seeks to bring to account the sum of $115,190 as a joint liability in favour of the parties’ daughter, Ms R. The initial position of the respondent was that the amount retained on behalf of Ms R was $318,858.
The purported savings derive from the following:
(a)The respondent’s family and relatives who gave money each year to Ms R since her birth, gifts of money and investment returns including “good luck” money.
(b)Money for Ms R’s birthdays, Christmas and religious holidays.
(c)Investment funds.
(d)Investment returns from the managed funds.
(e)Ms R’s income from part-time employment.
The respondent concedes that there is no clear accounting in the sense that some of the gifted money is represented as a promise to provide her money at a later date as she may need. Funds were also purportedly kept in a Credit Account with B Bank which had the dual purpose of reducing the liability for the property at F Street.
The respondent’s contention was that a review of historical bank accounts in August 2023 enabled the amount owing to Ms R to be calculated at $318,858.
The issue of Ms R’s entitlement was the subject of a court ordered single expert to audit funds allegedly held on account for Ms R. Q Accountants, in their capacity as a jointly appointed expert, identified transactions that might be relevant in the amount of $115,190.37.
Notwithstanding that the respondent considers the amount to be significantly in excess of that which was potentially determined by the single expert, the claim is now for the lesser sum.
The applicant denies that the parties have any joint or several liability to Ms R in the sum now claimed. The respondent was supportive of financial support for Ms R during her tertiary studies. The applicant does not deny the respondent’s assertion that monies were provided to Ms R to assist her with her day-to-day living expenses together with rent in the sum of $750 per fortnight. Whilst no issue was taken, the applicant asserts that Ms R may have been paid as an employee of the business even though she did not provide any employment services.
The difficulty is that there is no common ground as between the parties to the extent to which there is any liability in favour of Ms R.
Ms R was not called to give evidence. Other than the respondent’s assertion that she considers the parties have a joint or several liability to Ms R, there is no claim by her.
There is no written agreement nor is there evidence that could be considered on the balance of probabilities that would support a concluded oral arrangement either as between the parties and/or between the parties and Ms R.
The figure of $115,190 arises from the following findings of the single expert:[2]
1.Cash deposited to [B Bank] from [Ms R]’s accounts. We can confirm that [Ms R] transferred the money the [respondent] contended she did in her affidavit. This amounted to $68,933.00.
2.Cash deposited to [B Bank] from [HH Investment] sale. The payment advice for both shows [Ms R] as the recipient of the benefit. As such, we can attribute this to [Ms R]. This amounted to $20,009.80.
3.Cash deposited to [B Bank]from [JJ Company]. The statement provided to us in relation to the investment lists the owner as “[D Pty Ltd] <On behalf of [Ms R]>. This shows the intention of the investment being for [Ms R]. This amounted to $26,247.57.
[2] Affidavit of Mr EE filed 3 July 2024, page 14.
The single expert could do no better than the integrity of the information provided to him by the parties.
Whilst it is likely that there have been a multitude of financial transactions from the parties both jointly and severally in favour of Ms R, and possibly some money that may have been returned, the essential aspect that is missing from the evidence is any agreement as between the parties and Ms R.
It could not be said that Ms R has not enjoyed significant financial support from the parties. Her living expenses and HECS fees have been paid. It is likely that she will continue to receive support from the parties until she has completed her course enabling her to gain appropriately qualified employment.
I do not ignore that there may be a liability or some obligation on the parties or either of them to make financial reparation in favour of Ms R.
In Biltoft & Biltoft (1995) FLC 92-614 the Full Court said at p 82,124:
A general practice has developed over the years that, in relation to applications pursuant to the provisions of s.79, the Court ascertains the value of the property of the parties to a marriage by deducting from the value of their assets the value of their total liabilities. In the case of encumbered assets, the value thereof is ascertained by deducting the amount of the secured liability from the gross value of the asset…
However, this is not a fixed rule and at p 82,127, the following is said:
Notwithstanding the general practice which has developed, the Court has indicated that it may properly determine not to take into account or to discount the value of an unsecured liability in certain circumstances. Such liabilities would include but are not limited to a liability which is vague or uncertain, if it is unlikely to be enforced or if it was unreasonably incurred.
As discussed, I am not able to find that a liability exists and if it does, the extent to which it can be quantified.
It is a relevant consideration that Ms R did not participate in the proceedings and as such, there is no direct claim or demand from her for the repayment of a sum certain.
Whilst I have found that it is likely that some money may have been retained for and on behalf of Ms R, the extent to which that money may or may not have been offset by the financial generosity of the parties towards their daughter is uncertain.
Moreover, Ms R did not seek to participate in the proceedings either as a witness for the respondent or by way of joinder seeking a claim for payment. I do not consider that I can be satisfied that the sum, as claimed by the respondent on behalf of Ms R, should be brought to account as either a joint liability or even as a s 75(2)(o) factor.
The rejection of the respondent’s claim does not in any way affect the ability of Ms R to pursue an action against the parties or either of them for monies held on her behalf to be quantified and then paid to her.
I do not have the jurisdiction to compromise or restrict the genuine rights as may be held by Ms R.
I propose to exclude any component being a purported liability in favour of Ms R from further consideration.
ADDBACK OF LEGAL FEES
Chorn & Hopkins (2004) FLC 93-204 (“Chorn & Hopkins”) considered the treatment of the legal fees of the parties where they may have been sourced from “matrimonial property” or borrowed funds.
Following a consideration of the authorities, at [50] of Chorn & Hopkins (supra), their Honours referred to the decision of the Full Court in Gartner&Gartner [2000] FamCA 793, where the following was said:-
47.Whilst the principle the (sic) emerges from Farnell (1996) FLC 92-681 is that where prepayment of legal costs has the effect of depleting the pool of assets available for division, it is usual to notionally include those prepaid costs in the pool, such a finding is normally dependant upon evidence as to the source of the prepayment. In the absence of any such evidence it would be entirely speculative of this Court to guess where the monies came from. If this was an issue that was important it should have been raised at the trial by Counsel so that the Judge could have dealt with it and made the necessary findings. It is too late to raise it on appeal. (Suttor v Gundowda Pty Ltd (1950) 81 CLR 418).
(Emphasis in original)
In Chorn & Hopkins (supra), their Honours referred to the decision of the Full Court in Clifford & Lodge [2000] FamCA 1666, where the following was said:-
52.It will be seen from the table of the parties’ assets and liabilities contained in his Honour’s judgment…that his Honour included as assets the legal fees already paid by each party. There seems to be no argument but that it was open to him to do this.
At [54] of Chorn & Hopkins (supra), their Honours’ also referred to the decision of Finlayson v Finlayson and Gillam (2002) FLC 93-121 wherein the Full Court said:-
345.If this were a payment of his legal costs of the proceedings from the husband’s own capital resources, it would be in accord with decisions of this Court, including Farnell and Farnell (1996) FLC 92-681 and Townsend and Townsend (1995) FLC 92-569 for the trial Judge to have included this as a “notional asset” in the hands of the husband for the purposes of the s.79 proceedings. If, on the other hand, this were a payment by the husband of his costs of the proceedings from funds borrowed by him from and still owing to a third party, the appropriate course would have been to disregard both the payment and the debt to the third party in calculating the total net property of the parties for the purpose of the s.79 proceedings. Alternatively, if the payment were brought to account as a “notional asset”, then the liability of the husband to repay the debt would also have to be taken into account in arriving at the net property of the spouses.
In Vass & Vass (2015) 53 Fam LR 373, the Full Court said:-
138.There is no error committed per se in adjusting the parties’ actual property interests by a calculation involving notionally adding back into the pool sums which have been dissipated by the parties. We reject any suggestion that the decision of Bevan & Bevan (2013) FLC 93-545 - or, more particularly, the decision of the High Court in Stanford v Stanford (2012) 247 CLR 108 - is authority for any necessary contrary solution. Some statements made by the High Court may lead to the conclusion that references to “notional property” as have been referred to in decisions of this court and at first instance may need to be reconsidered.
(Emphasis in original)
The applicant seeks to bring into account as an addback, legal fees paid by the parties. In that respect, his legal fees to AFL Withnalls are in the total sum of $123,523. The applicant concedes that the source of funds came from a drawdown of the SMSF.
The respondent resists the approach promoted by the applicant.
The respondent’s total legal fees paid to date is in the total sum of $192,795. In addition, the respondent has $70,000 from the sale of the E Company Share Portfolio held by Abadzhiev Trust standing to her credit in her current solicitor’s trust account to cover fees incurred up to and including the completion of the proceedings.
The respondent acknowledges that in addition to the legal fees paid to her solicitors, she has also withdrawn substantial sums from the SMSF and has retained distributions paid from N Trust.
The respondent concedes that arising from a complaint made by her to Police, a Domestic Violence Order (“DVO”) was issued in mid-2022 which had the consequence of the applicant being required to leave the F Street property but in addition, he was charged with three counts of assault.
The interim DVO was dismissed on or after late 2022 whereas the assault charges concluded with the applicant being found not guilty and the charges dismissed.
The applicant incurred legal fees in respect of his defence of the criminal proceedings in the sum of $45,557. Those monies came from a drawdown of the SMSF.
The applicant sets out the extent to which he had access to the SMSF. Initially, in the sum of $25,000 on 1 June 2022 and then a further $207,930 on 2 June 2022. The funds were released to him on 26 June 2022 in the sum of about $230,000.
In addition, a further sum of $30,000 was obtained from the sale of shares held by the SMSF.
The entirety of the monies drawn down by the applicant have been spent. A significant amount, in the sum of $62,000, was for the purchase of Motor Vehicle 1 which was made necessary by the applicant returning to the respondent a motor vehicle registered in the name of D Pty Ltd.
Further, as the interim DVO required the applicant to leave the F Street property, he was required to secure rental accommodation which he then spent $40,000 on furniture and fittings.
It is also likely that the payment for legal fees in defence of the criminal proceedings was also part of the drawdown.
Excluding Motor Vehicle 1, which has been brought to account as a separate item of property, the balance of expenditure save and except for the holidays, I consider is reasonable in all the circumstances. It is part and parcel of the exigencies of life that following separation a party may well be required to set up a new household. The expenditure by the applicant on furniture and other household items is both anticipated and reasonable.
The payment of legal fees in relation to the criminal proceedings could not be said to be either unnecessary, frivolous or a wanton diminution of the property of the parties. I do not have any evidence as to the nature of the allegations that initially supported the DVO proceedings and then the three counts of assault but given the DVO was dismissed and the applicant was found not guilty of the charge of assault, it could not be said that the expenditure was unnecessary frivolous or wanton.
I view the applicant’s travel in a different category. Whilst it could not be said that it was frivolous either in terms of destination and overall cost, it was unnecessary.
I propose to bring to account by way of an addback for and on behalf of the applicant his legal fees of $123,523 together with the further sum of $20,000 making a total of $143,000.
The respondent states that the payment of legal fees to her previous solicitors was sourced from her income. As discussed, a consideration of the exhibits but in particular the relevant bank accounts disclose that the income paid to the respondent from her employment as a professional is in the sum of $50,392 during the relevant period. The total legal fees of the respondent are in the sum of $192,795 not including the sum of $70,000 held in her solicitor’s trust account.
By necessary implication, the respondent has utilised to a significant degree, money that she received by way of rental income from the investment properties in her possession, power and control.
Whatever might be an argument in relation to contribution, it is apparent that the money used for the payment of legal fees has its genesis in the property of the parties.
Neither party considers that property identified and valued should be in some way quarantined and thereby excluded from the proceedings.
I am not able to determine the extent to which income received by the respondent from her employment as a professional could be traced to the payment of legal fees.
Doing the best that I can, I propose to addback the money paid by the respondent for her legal fees but with a reduction of $20,000 to represent a reasonable component that may properly have arisen from her salary.
In addition, I propose to addback the sum of $70,000 currently held in the respondent’s solicitors trust account. That sum is directly derived from the property of the parties and as at the date of trial, had not been expended. As such, it is not an addback but rather an inclusion of a valuable asset.
SUPERANNUATION
The parties are agreed as to the value of their separate superannuation entitlements save and except as to the treatment of the applicant’s entitlement to his Super Fund 5 pension currently in the net sum of $1,222.92 per fortnight. The parties jointly instructed a single expert to value the respondent’s Super Fund 5 pension entitlement which result in a capitalised sum of $423,322.
It is accepted that the valuation methodology adopted by the single expert incorporates the approved special methods and factors for valuing superannuation interests in the Super Fund 5 (in the payment phase) as approved by the Attorney General.
Even though the superannuation interest of the applicant can be the subject of a payment split or an interest split, such an outcome is not sought by either of the parties. Given that the Super Fund 5 pension is in the payment phase, it is not able to be commuted either in whole or in part by the applicant.
As such, whilst there is an obligation to start the process of considering the applicant’s benefit in the scheme by determining a value, in the absence of an application for a superannuation or interests split, the options available to the Court are as follows:
(1)That the applicant retains the benefit but that it is brought to account as property of the applicant in the sum of $423,322; or
(2)That the applicant’s entitlement is to be treated as a financial resource.
TABLE OF ASSETS AND LIABILITIES
Bringing to account the determination in respect of the areas of agreement and disagreement, the total of assets and liabilities is as follows:
Assets
Description Ownership & value - Applicant Ownership & value - Respondent F Street, Suburb G $1,050,000 J Street, Suburb K $675,000 L Street, Suburb M $675,000 H Street, City LL $600,000 Household contents $5,000 Household contents $10,000 Valuable resources in the applicant’s possession NIL Valuable resources in the respondent’s possession NIL Motor Vehicle 2 $3,500 Motor Vehicle 1 $45,000 CBA Account ending #...12 $8 CBA Account ending #...59 $1,168 ANZ Account ending #...95 $1,017 B Bank loan ending #...40 $49,096 CBA shares ([…] at $139.77 at 20.8.24) $21,384 TOTAL $78,577 $3,057,596 Liabilities
Description Ownership & value - Applicant Ownership & value - Respondent CBA Visa Card ending #...24 $142 Bond held for investment properties (H Street, City LL; J Street, Suburb K; L Street, Suburb M) $18, 875 Tax associated with winding up D Pty Ltd $222,767 2024 Income Tax re: Div 293 $1,331 TOTAL NIL $243,115 Addbacks
Description Ownership & value - Applicant Ownership & value - Respondent Legal Fees paid to AFL Whitnalls (concerning property) $123,523 Travel undertaken by applicant $20,000 Legal Fees paid to City LL Family Law $15,147 Legal Fees paid to Murdoch Lawyers ($177,648 less $20,000) $157,648 Money in trust for respondent’s trial fees $70,000 TOTAL $143,523 $242,795 TOTAL NET NON-SUPERANNUATION ASSETS $222,100 $3,057,276 Superannuation
Description Ownership & value - Applicant Ownership & value - Respondent Super Fund 6 $44,483 Super Fund 1 $1,271,778 Super Fund 4 $67 Super Fund 2 $4,683 Super Fund 3 $1,221 TOTAL $1,277,749 $44,483 Treatment of the Super Fund 5 pension
Neither party seeks a splitting order in terms of the applicant’s Super Fund 5 pension. As discussed, the respondent considers that she has made a superior contribution to the acquisition and maintenance of the property of the parties to be reflected in a 54/46 per cent apportionment in her favour. Neither party seeks an adjustment for s 75(2) factors. The approach of each of the parties is different.
The respondent seeks to bring to account the gross value of the applicant’s Super Fund 5 pension in the sum of $423,322 in order to enhance her ability to retain property comprising mostly of real estate currently in her possession and control.
The applicant seeks to have the Super Fund 5 pension treated as a financial resource in order that he also maximise property held by him including a settlement sum that he seeks from the respondent.
Whilst neither of the parties are considering a superannuation splitting order, a valuation exercise was undertaken. The benefit is to be retained by the applicant with the focus on how it is to be treated either as a retained benefit of value by the applicant as promoted by the respondent or as a financial resource for the applicant which is opposed by the respondent.
Save as to the treatment of the applicant’s benefit, I have determined the adjusted list of assets and liabilities of the parties, noting that there is further agreement of the accumulation-based superannuation entitlements of the parties, as property.
In Manolis & Manolis (No 2) [2011] FamCAFC 105, the Full Court considered the relationship between s 79(4) and s 75(2) of the Act in the following terms:
66.Having regard to the nature and extent of the matters which had been evaluated pursuant to s 79(4) and s 75(2) of the Act prior to her consideration of s 79(2), the Federal Magistrate’s scope for varying the substance of the outcome resulting from that exercise would have been limited. It is difficult to discern specific matters impacting a consideration of s 79(2) which are not articulated in either s 79(4) or s 75(2) of the Act. The section does however oblige the court to “stand back” from its preliminary determination, and consider its impact. So doing may inform the terms of the orders appropriate to produce a just and equitable outcome in those terms. It may result in a re-consideration of s 79(4) and or s 75(2) factors, and a different outcome. Whatever the scope of s 79(2), the court’s determination with respect to it cannot be dependent upon findings or conclusions which are irreconcilable with those recorded in the context of a consideration of s 79(4) or s 75(2)…
The value of the applicant’s Super Fund 5 pension was calculated as at 15 May 2024.
The applicant entered Super Fund 5 when he commenced employment at the age of 17 years old in 1970. As at the date of the commencement of cohabitation in mid-1997, the applicant had been a contributing member for 27 years. The applicant’s pension commenced in early 2014. Whilst the calculation has not been undertaken, the evidence is that as and from early 1983, the applicant worked as a professional for a government authority in Country Z and thereafter in other locations including Country KK, City LL and Adelaide. As such, it is a reasonable finding that the overwhelming contribution by the applicant as a direct result of his employment that enabled a Super Fund 5 entitlement to accrue prior to the date of commencement of cohabitation and certainly prior to the date of marriage in 1999.
There are a number of options available in dealing with the applicant’s non-commutable benefit. As was considered by the Full Court in Russo & Wyley (2016) FLC 93-47 at [16] the following approaches were available:
•Making a final adjustment “when reviewing the orders”;
•Excluding the MSBS benefit from the general pool of assets with an appropriate adjustment under s 90SF(3)(r) of the Act; or
•Placing the benefit in a separate pool.
An overarching consideration is that the outcome triggered by the adoption of the preferred approach must be just and equitable.
The property of the parties is substantial and whilst it is impermissible to treat the income generated by the retention of various investment properties, whether held by the parties directly or indirectly, as a s 75(2) factor (see Cunningham & Cunningham (2005) FLC 93-212), I bring to account that a significant component of the current benefit to the applicant both reflected in the actuarially calculated value and the Super Fund 5 pension accrued prior to the commencement of cohabitation.
At trial, the applicant is 70 years of age and has been effectively retired since 2019 save for some minor remuneration arising from his continued board involvement, whereas the respondent, aged 56 years, is active in financial investment as well as full-time employment as a professional.
In that regard, the respondent’s evidence was that she did not ever seek further studies to become a professional but considered that it would be a useful qualification to assist her in her financial and entrepreneurial endeavours. The respondent stated that she was tired and doubted she would be able to continue as a professional for the foreseeable future. The respondent’s evidence was unconvincing. There was no suggestion that there was any physical or psychological ailment or impediment to her continued employment as a professional and whilst she may prefer to engage in other activities, no evidence was presented that would suggest it would be a reasonable approach for the respondent to give up her current employment.
The respondent’s current gross income from her employment as a professional is in the sum of $89,960. It is reasonable to assume that her income will increase over time.
It is also a fair assessment that there remains the opportunity for the respondent to retain her employment for the foreseeable future.
The applicant’s annual indexed pension is in the sum of $37,801. It is difficult to assess what the future will hold.
The applicant has the advantage of the certainty of receiving his indexed pension for life. The respondent will need to look to her property and other resources were she to reasonably consider retirement at the age of 65 years.
Evidence was not presented that would enable any calculation or comparison to be undertaken.
Broadly speaking, I am satisfied that a period of 10 years of future employment for the respondent will enable her to receive an income stream superior to that of the applicant.
Moreover, the respondent had the advantage of the applicant’s support during the period of her study. Again, it is a relevant factor that the significant component of the applicant’s Super Fund 5 pension was accrued prior to the commencement of cohabitation.
I do not consider that a just and equitable outcome is achieved by placing the applicant’s Super Fund 5 pension in a separate pool. To do so would invite an outcome that would reflect that the respondent has made little or no contribution to the applicant’s benefit and as such no adjustment would be made.
Subject to a final adjustment, I propose to exclude the Super Fund 5 pension from the pool of assets and to consider it as a relevant s 75(2) factor.
CONTRIBUTIONS
I am required to consider the direct and indirect financial contributions made by, or on behalf of the parties, to the acquisition, conservation or improvement of property (ss 79(4)(a)-(b) of the Act), and the contributions made by the parties to the welfare of the family in their capacity as parent or homemaker (s 79(4)(c) of the Act).
Mallet v Mallet [1984] HCA 21 is authority for the propositions as set out at 79,110-11:-
The Act does not indicate the relative weight that should be given to different circumstances, or how a conflict between opposing considerations should be resolved - those things are left to the court's discretion, which must, of course, be exercised judicially.
Quality of contribution is not a starting point. I am obliged to consider the separate contributions of the parties and the value that should be afforded must be considered by reference to the evidence.
In Ferraro & Ferraro (1993) FLC 92-335, the Full Court at 79,572 considered how the separate contributions of parties, where one is the breadwinner and the other is a homemaker, should be considered and they said as follows:-
…Firstly, it involves making a crucial comparison between fundamentally different activities, and a comparison between contributions to property and contributions to the welfare of the family. Secondly, whilst a breadwinner contribution can be objectively assessed by reference to such things as that party’s employment record, income and the value of the assets acquired, an assessment of the quality of a homemaker contribution to the family is vulnerable to subjective value judgments as to what constitutes a competent homemaker and parent and cannot be readily equated to the value of assets required. This leads to a tendency to undervalue the homemaker role.
I do not ignore the contention of the respondent that in addition to her assertion that she made the overwhelming financial contributions and the result of her “entrepreneurial” property investment endeavours, she also considers that she was the primary carer for their daughter and undertook the majority of homemaker duties.
In Jabour & Jabour (2019) FLC 93-898 at [64], the Full Court endorsed with approval the following remarks in Dickons & Dickons (2012) FamCA 154 as to the manner in which the different contributions of the parties should be considered:
21.Those same principles can be expressed as saying that the requirements of the section are met by approaching the assessment of contributions holistically and by analysing the nature, form, characteristics and origin of the property currently comprising that to which s 79 applies, and, in turn, analysing the nature, form and extent of the contributions (of all types) contemplated by s 79). That task is also undertaken by reference to the nature and form of the particular marriage partnership manifested by the particular circumstances of this particular marriage. Is it, for example, a relationship, as Deane J put it in Malley at 640-641 “...where the parties have adopted the attitude that their marriage constituted a practical union of both lives and property...” or is it, for example, a union where parties lived very separate domestic and financial lives?
At the commencement of cohabitation in mid-1997, the applicant states that he held an interest in the Suburb X Unit which he considers was purchased for the sum of $92,000 in 1986. That property was transferred into the applicant’s name in mid-1995 and at that time, recorded a mortgage securing a B Bank loan.
The Suburb X Unit was sold in late 1999 for sale price of $193,500 and following the discharge of the mortgage in the sum of $150,000 the applicant received about $35,000 in net proceeds.
In addition, the applicant held his benefit in the Super Fund 5 pension to which he had been contributing to for 23 years prior to cohabitation.
The applicant was not aware of the property held by the respondent at the date of commencement of cohabitation.
The respondent considers that at the commencement of marriage she had the following property:
(1)Savings of approximately $150,000.
(2)A share portfolio worth $41,000.
(3)Equity in a property at J Street, Suburb K.
(4)Motor Vehicle 3 worth about $20,000.
(5)Cash of about $25,000.
The respondent did not provide any supporting evidence as to the extent of her pre-cohabitation property.
I note that the applicant does not speak against the respondent’s assertion that at the commencement of cohabitation he had an outstanding child support debt of about $20,497 which was paid by the respondent from her savings.
There is scant detail available to establish the extent of the respondent’s savings or to verify her assessment of the value of the share portfolio. It is also difficult to accept that she held the sum of $25,000 in cash.
Whilst the respondent does not provide any real assistance in terms of establishing the extent of her pre-cohabitation property, it is a relevant consideration that the Suburb K property remains in the respondent’s current possession and has a freehold value agreed at $675,000.
I am also inclined to accept in general terms that over and above the Suburb K property, given the respondent presented as astute in her financial dealings, careful with money and presenting with a high level of attention to detail, it is likely that she held cash savings, cash money and a share portfolio of a value significantly exceeding that of the applicant.
During the course of the marriage, the respondent considers that she was the primary income earner. The applicant rejects that contention and considers that whilst significant income was generated by D Pty Ltd and the Abadzhiev Trust, it would be an error of application to consider that those entities were understood by the parties to be in effect the alter ego of the respondent.
It could not be said that the applicant did either very little, or nothing. He remained in constant employment until his effective retirement from public service in or about 2019 whereupon he then received a pension benefit.
Whilst the parties were unable to agree the extent of the applicant’s involvement in the retail business, I accept that the applicant had significant involvement in the years prior to the sale of the business.
As an indication of the level of co-operation and mutual endeavour by the parties, the relationship enabled the respondent to undertake part-time studies which she commenced in 2011 and completed in 2018. Her university fees were paid by D Pty Ltd.
As has been highlighted, there is little doubt that the respondent considers that the parties maintained separate endeavours and by a simplistic comparison of income generated, the respondent finds support for her contention that her contributions during marriage were overwhelming.
The applicant readily acknowledges that the respondent was skilled and demonstrated financial aptitude and business acumen in her various dealings. He does not accept the overarching assessment of him by the respondent that he did not assist in the parenting of their daughter nor contribute as a homemaker.
To a substantial level, the respondent’s assessment of the applicant’s contributions is heavily influenced by her evidence that categorises the applicant as having contributed little to the relationship both financially and domestically, not possessing any business acumen or skill and on a more personal note, she also considered that the applicant exhibited a poor skill level in his area of expertise as a licenced valuer.
I have carefully noted the history of acquisition of real estate during the course of the relationship together with the role played by the various business entities. It is likely that the applicant deferred to the better business judgement of the respondent. However, the evidence does not support a finding that the parties kept their financial lives separate, and I am satisfied that each of the parties contributed to the best of their abilities taking into account skill set and opportunity.
I consider it likely that the respondent provided the primary care for Ms R but not to the total exclusion of the applicant.
Whilst I do not seek to quarantine any particular aspect or item of property, it is a matter relevant to contributions that recognition be given to the retention of the Suburb K property now included as property of the parties.
In Pierce v Pierce (1999) FLC 92-844 after a consideration of the decisions in Way & Way (1996) FLC 92-702, Lee Steere & Lee Steere (1985) FLC 91-626, Money & Money (1994) FLC 92-485 and White & White (1982) FLC 91-246, the Full Court summarised the treatment of an initial superior financial contribution made by one of the parties in the following statement:
28.In our opinion it is not so much a matter of erosion of contribution but a question of what weight is to be attached, in all the circumstances, to the initial contribution. It is necessary to weight the initial contributions by a party with all other relevant contributions of both the husband and the wife. In considering the weight to be attached to the initial contribution, in this case of the husband, regard must be had to the use made by the parties of that contribution. In the present case that use was a substantial contribution to the purchase price of the matrimonial home: …
(citations omitted)
In Crawford & Crawford (1979) FLC 90-647, the Full Court considered that an original contribution should not be carried forward as a mathematical proportion.
Whilst the assessment of the respective contributions of each of the parties is a difficult exercise, it must be approached holistically and informed by the nature of the relationship between the parties and a recognition that the period of cohabitation and marriage was 25 years.
In all the circumstances, I consider that there is a basis to exercise my discretion in favour of the respondent to reflect the separate contributions of the parties.
In order to assess the extent of any apportionment, it is necessary to consider the net pool of property. The total net property of the parties (including superannuation entitlements) is $4,601,608. A 2 per cent adjustment equates to $92,032 which must then be considered as a differential between the parties in the sum of $184,064. I consider that the quantification of the differential amount does not speak against the exercise of my discretion.
Accordingly, the contributions of the parties are to be reflected as 52/48 in favour of the respondent.
SECTION 75(2) FACTORS
Neither party seeks an adjustment pursuant to s 75(2) of the Act.
To the extent however that there needs to be some consideration given particularly as there was no agreement as to the treatment of the applicant’s Super Fund 5 pension, I have regard to the ages of the parties, their current employment status or opportunity for employment and the financial resource available to the applicant via the Super Fund 5 pension.
A significant factor is the difference in age of the parties. The applicant has retired but for minimal remuneration by way of board positions held whereas the respondent is in full time employment as a professional, as considered, I do not accept that there is any impediment to the respondent continuing in her employment if she chooses to do so.
The parties will each be possessed of significant property noting that the pool of property to be retained by the applicant contains an addback of $143,523 and of the respondent an addback of $242,795.
The superannuation entitlement for the applicant is significant however, given his age, it is appropriate that his entitlements be treated as property. The applicant has satisfied a condition of release and is able to access his superannuation benefits at his election.
Whilst the respondent has not satisfied a condition of release, the amount of superannuation standing to her credit is relatively modest and I do not consider that its inclusion as property distorts the pool nor is the amount of such magnitude that it will adversely affect the ongoing financial circumstances of the respondent.
The Super Fund 5 pension received by the applicant is modest but will be ongoing until the date of his death. In addition to the Super Fund 5 pension, the applicant will retain property held by the SMSF which generates some income.
For her part, the respondent is able to receive an income superior to that of the applicant and will be able to do so for at least the foreseeable future.
I do not ignore that at some point, the valuable interest retained by the parties in the N Unit Trust and its interest in the N Joint Venture will be crystalised. Given that there is no indication or benchmark as to what would be a reasonable figure to be attributed to the N Joint Venture irrespective of the value placed upon the parties interest by Mr FF, I propose to exclude any notional value from further consideration.
I do not consider that there is any basis to deviate from the expressed position of the parties namely that there should be no adjustment for factors pursuant to s 75(2) of the Act.
CONCLUSION
The total property of the parties is $4,601,608. At 48 per cent, the applicant is entitled to $2,208,771. He retains total property to the sum of $1,499,842. The applicant is entitled to be paid a settlement sum of $708,929.
The orders sought by the respondent do not contemplate the payment of a settlement sum to the applicant.
The applicant seeks that any settlement sum be paid in 30 days and in default, that the F Street property be sold.
At present, it is not immediately apparent that there is a ready source of funds to pay the applicant the settlement sum as ordered. As such, and in bringing to account that the F Street property may need to be sold given that in doing so it will not attract CGT as might be the case in respect of Suburb K, Suburb M or City LL, I propose to require the settlement sum to be paid within a period of 60 days from the date of this order.
I propose to incorporate in the orders that relate to the N Unit Trust and the N Joint Venture an order that would enable the parties to explore a purchase of the 25 per cent unit holding held by the Abadzhiev Trust by the three other unit holders in the N Unit Trust, but if after six months an offer has not been able to be negotiated, then the parties will be obliged to abide the event namely, that at some point in the future, the remaining units will be sold and the net proceeds available following the winding up of the N Joint Venture, if any, will be available to the parties and divided as to 52 per cent to the respondent and 48 per cent to the applicant.
ARE THE ORDERS JUST AND EQUITABLE?
I do not consider that there is any need for further adjustment to the orders.
The parties will be advantaged by retention of significant property of value and whilst incorporated into the value, nonetheless the properties held by the SMSF on behalf of the applicant and the investment properties held on behalf of the respondent are income producing.
For her part, the respondent also has the capacity for a reasonable level of income from her employment as a professional.
The applicant has the advantage of a modest pension receipt.
I do not bring to account what is likely to be significant amounts used by the parties but in particular, the respondent for the benefit of Ms R and her tertiary studies.
I am of the view that the applicant’s entitlement to an ongoing pension is properly treated as a financial resource rather than an item of property with the value sitting with the applicant.
I make orders as appear at the commencement of these reasons.
I certify that the preceding two hundred and eight (208) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Berman. Associate:
Dated: 27 September 2024
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