P and K
[2007] FCWA 30
•15 MARCH 2007
| JURISDICTION: | FAMILY COURT OF WESTERN AUSTRALIA |
| ACT: | FAMILY LAW ACT 1975 |
| LOCATION: | PERTH |
| CITATION: | P and K [2007] FCWA 30 |
| CORAM: | CRISFORD J |
| HEARD: | 30, 31 JANUARY & 1 & 2 FEBRUARY 2007 |
| DELIVERED: | 15 MARCH 2007 |
| FILE NO/S: | PT 5869 of 2005 |
| BETWEEN: | P |
Applicant/Wife
AND
K
Respondent/Husband/
Catchwords:
Property settlement - initial contributions - s 75(2) factors
Practice & procedure - husband's failure to comply with obligation to make full, frank and complete disclosure - effect
Legislation:
Family Law Act 1975, s 75, s 79
Category: Not Reportable
(Page 2)
Representation:
Counsel:
| Applicant | : | Mr P Dowding SC |
| Respondent | : | Mr R Hooper |
Solicitors:
| Applicant | : | Carr & Co |
| Respondent | : | O'Sullivan Davies |
Case(s) referred to in judgment(s):
Black and Kellner (1992) FLC 92-287
Briese and Briese (1986) FLC 91-713
Cromwell & Cromwell [2006] FamCA 1454
De Angelis and De Angelis (2003) FLC 93-133
Hickey and Hickey and Attorney-General for the Commonwealth of Australia (Intervener)
(2003) FLC 93-143
Kannis and Kannis (2003) FLC 93-135
Kowaliw and Kowaliw (1981) FLC 91-092
Oriolo and Oriolo (1985) FLC 91-653
Pierce v Pierce (1999) FLC 92-844 at 85,881
Reynolds and Reynolds (1985) FLC 91-632
Smith and Smith (1991) FLC 92-261
Tate v Tate (2000) FLC 93-047
Townsend and Townsend (1995) FLC 92-569
Weir and Weir (1993) FLC 92-338
(Page 3)
1 [Ms P] and [Mr K] the wife and husband, accumulated substantial assets during
the course of their marriage. Despite the ongoing need to care for their two children and both experiencing some ill health, they will continue to enjoy a high standard of living. This fact has not made it any easier for them to resolve their financial matters.
Brief background facts
2 The wife is 53 years of age and the husband is 52 years of age.
3 The parties started living together in January 1990. They married on
1 September that year. Their son, [R], was born June 1992. He is 14 years of age and a student at [a private school]. Their daughter, [A] was born February 1994. She is 13 years of age and a student at [a private school].
4 Both parties had acquired [professional qualifications] prior to their marriage.
The wife was working [in her profession]. The husband had undergone post-graduate studies and in 1988 set up [the business]. He earned a high income from his employment [in his profession].
5 The parties separated on 9 July 2005. On 31 October 2005, the wife commenced
proceedings in this Court. By trial the issues to be dealt with were property settlement, spousal maintenance, child support and children’s issues. Orders were made by consent at the start of the trial for the children’s issues.
6 [R] lives predominantly with the husband but spends time with the wife on
alternate weekends and on occasions mid-week. [A] lives with the wife and spends
time with the husband on alternate weekends.
Credibility
7 I found the wife to be a generally credible witness. There may have been some
understatement by her about the husband’s role generally in the home and with the children. Even if this is the case it had little, if any, bearing on my overall assessment on contributions.
8 Unfortunately, the same cannot be said for the husband. Counsel for the wife,
during an illuminating cross-examination, proposed to the husband that he had sought to construct a mechanism to deceive the Family Court and the wife. The husband accepted this was mostly true – not an unexpected answer given the course of evidence. Later in his evidence he accepted he had conspired with a work colleague to deceive his wife.
9 The husband had failed, despite invitation and opportunity, to disclose material
documents and the content of discussions that had the obvious potential to change the financial landscape of these parties. He undertook a calculated course of conduct designed to hide from the wife and this Court his business plans.
10 There is a clear obligation under the Family Law Rules 2004 to make a full, frank and complete disclosure of financial circumstances in a timely fashion. This
(Page 4)
need for parties to make such disclosure in financial matters is not in doubt. (See Oriolo and Oriolo (1985) FLC 91-653; Black and Kellner (1992) FLC 92-287; Weir and Weir (1993) FLC 92-338 Tate v Tate (2000) FLC 93-047) and Kannis and Kannis (2003) FLC 93-135). Smithers J in a seminal passage in Briese and Briese (1986) FLC 91-713 at 75,180 said :
“I believe that a person in the position of the husband in this case has a positive obligation to set out at an early stage his financial position in a clear and comprehensive manner. The Regulations, and now the Rules, are not intended as a vehicle to mask the true position, or as an aid to confusion, complexity or uncertainty. They are not intended as the outer limits of the obligation of financial disclosure, but as providing avenues towards disclosure. The need for each party to understand the financial position of the other party is at the very heart of cases concerning property and maintenance. Unless each party adopts a positive approach in this regard delays will ensue with the consequent escalation of legal, accounting and other expenses, always assuming that a party has the strength to continue the struggle for information and understanding …
In my view it is fundamental to the whole operation of the Family Law Act in financial cases that there is an obligation of the nature to which I have referred. Livesey v Jenkins makes it clear that mere compliance with rules of court or practice directions does not alter the basic principle of the need for full and frank disclosure by the parties.”
11 In this matter, the husband failed to disclose his interest in a proposal by [a firm
of investors] for his [business] to corporatise. I find this to be a significant omission. Despite his attempt to explain the non-disclosure as a mistaken belief that it impacted only on future matters and thus irrelevant and outside the ambit of the Court hearing did not ring true. Contemporaneous documents and his own admissions are at odds with this.
12 There were some other matters that arose during the course of the husband’s
evidence which showed a certain mean spirited attitude. His behaviour towards the wife in relation to [the boat] was one example of this. Even taking into account the emotional upheaval that inevitably spills over after an acrimonious separation, I formed the view that a number of the husband’s sharp manoeuvres prior to and since separation had been calculated to maximise his position.
13 In relation to non-disclosure of assets, the Full Court in Weir and Weir (1993) FLC 92-338 stated at 79,593 as follows:
“… once it has been established that there has been a deliberate non-disclosure, …, then the Court should not be unduly cautious about making findings in favour of the innocent party. To do otherwise might be thought to provide a charter for fraud in proceedings of this nature.”
14 The husband’s conduct which did not reflect well on him will be taken into account when I determine this matter.
| (Page 5) | |
| 15 | The fact of non-disclosure is dealt with here. The consequences will be dealt with later in the Judgment. |
Property settlement
16 The approach to be taken in relation to an application for property settlement
pursuant to s 79 of the Family Law Act 1975 is a four step process. Hickey and Hickey and Attorney-General for the Commonwealth of Australia (Intervener) (2003) FLC 93-143. Those steps are:
• to make findings as to the identity and value of the assets and liabilities of the parties; • to identify and assess the contributions made by the parties within s 79(4)(a), (b) and (c); • to identify and assess the s 75(2) factors, together with any matters relevant pursuant to section 79(4)(d)-(g); and • consider whether the proposed orders are just and equitable.
Assets and liabilities
17 The parties were substantially in agreement about what the pool of assets would
comprise. The parties have various structures and corporate vehicles to manage their financial affairs. For the purpose of this judgment, it is unnecessary to detail these as little in that respect was in contention. The matters in contention I will deal with now.
| (a) | Values |
[The Business]
18 The husband’s proposition was that his [business] had no value. He argued that
as a specialist [business] it had no good will. If he ceased to [operate], there would be no process for him to receive payment for handing over his office and staff. As a specialist he was reliant on referrals to him from other [operators]. This basic proposition was not subject to any great attack. However, there were a number of matters that changed the face of the basic proposition as to the [business] having a value.
(i) corporatisation of [the business]
19 In February 2006 [Mr D], an investment director of [QRS] and (in conjunction
with the investment firm) gave a power point presentation to the [business partners]
[of the firm] in relation to corporatisation.20 [QRS] is attempting to establish Australia’s largest [specialist business] network.
[Other operators] in the eastern states had been approached. Given the high standing [of the business] in the profession, its [partners] were approached. The power point presentation explained the concept.
| (Page 6) | |
| 21 | The proposal for corporatisation involves [partners] “selling” a proportion of |
| their future income in return for cash and shares. [The investments firm] would provide the cash and would become the [operators’] financial partner. An initial public offering of shares could reasonably be expected some two years after the scheme commenced. It was anticipated there would be a vesting of 90% of the shares some four years later. | |
| 22 | The [partners] would retain full [operational] control with [the investment company] providing financial support and strategic input. |
| 23 | The group which is to be called [XYZ] would grow by acquiring other |
| [businesses] and capturing ancillary revenue streams. [The investment company] would pay [the business] seven times the earnings sold into [XYZ]. | |
| 24 | There would be an ongoing requirement for [the partners] to keep working for |
| a number of years and to produce their designated income and level of profit, including relevant CPI increases. If the income could not be generated by [the partners], then penalties would apply. | |
| 25 | The husband and his associates signed a confidentiality agreement with [the |
| investment company] after the presentation in March 2006. There are currently eight [partners] in the group. | |
| 26 | Six of the husband’s associates signed a document entitled “Heads of Agreement”. Five [partners] signed on 6 June 2006 and one signed on 15 June 2006. The husband and the most junior [partner] did not sign. It was described as a proposed acquisition of [the business] and the [individual businesses] by [XYZ] with cash funding provided by [the investment company and [QRS]. |
| 27 | [Mr D] explained the overall gist of what was on offer. The plan was to access |
| the underlying earnings before interest and tax (EBIT) of the [partners]. Firstly, one would calculate the revenue less the costs associated with the [operations] and then nominate a gross wage. On the basis a [partner] earned EBIT of $1 million, and he chose to receive a salary of approximately $400,000, the difference between the $1 million and the salary would form the basis of the [business] group “value”. The [partner] would receive seven times that figure which would be split equally between cash and shares. Thus the proposal was the [partner] would receive seven times his EBIT less an agreed gross salary amount. | |
| 28 | To date the proposal has not advanced as originally hoped. This is due to a need |
| to amend what was put as a technical difficulty presented by [a section of the legislation]. Mr D’s group had legal advice, it had approached the [professional body] and legislation to amend the section was before Parliament. | |
| 29 | The evidence of Mr D at trial is the project is still alive. The project had been |
| initially undertaken by a group of [Eastern states specialists] under [a specific brand name]. As a result of the corporatisation, each of the [specialists] had earned a considerable amount of money. The husband accepted they had earned in the vicinity of $15.9 million over four years. | |
| (Page 7) | |
| 30 | There were differences between [the two specialisations]. There was a |
| difference in some of the benefits that would flow from the corporatisation of [the business] as opposed to the corporatisation of the [the Eastern states operators] who had operated independently prior to the corporatisation. [The business] has already had the benefit of operating from the same premises and being in a position to utilise and share administration costs. As a group it already had bulk buying power and other such mooted benefits. | |
| 31 | Be that as it may, the evidence suggests that at the worst the [partners’] financial |
| position would remain the same. At best, they could, on the basis they maintained their earnings and were prepared to continue working for, in the husband’s case, some eight or so years, reap substantial benefits. | |
| 32 | The evidence made it clear that the corporatisation of the ophthalmologists had |
| been extremely successful. In part that was to do with a buoyant share market and the circumstances peculiar to [Eastern states operation]. Even if it was not as attractive for [the local partners], it certainly was more than simply “blue sky”. The husband’s colleagues, on what was before the Court, are still keen and interested in this proposal once it is in a position to proceed. | |
| 33 | The husband said having heard [Mr D] he was even more convinced that the |
| project was not for him. The issue of ill health or a reduction in income could impact on the benefits of the scheme. The husband conceded, however, that the proposal might be of considerable financial advantage to him. | |
| 34 | There are uncertainties about this proposal. One already mentioned relates to the |
| current [legislation]. It is likely this difficulty will be overcome. It is not known when. The proposal is, however, still in its formative stages and the husband may or may not go ahead with it. He took steps to ensure the way was clear for him to go ahead on favourable terms if he chose after his matrimonial matters had been dealt with by the Court. | |
| 35 | Having carefully considered the evidence in relation to corporatisation, I am |
| satisfied that a value, even a broad value cannot presently be attributed to the husband’s [business]. I do not accept the evidence of [Mr D] as evidence of the value of the husband’s [business]. | |
| 36 | The first step in an application for property settlement is to identify the property. |
| It is not necessary to determine the value of every piece of property at the time of hearing (Smith and Smith (1991) FLC 92-261). |
37 However, it is a matter that will fall for consideration under s 75(2) of the
Family Law Act and it is in that context it will be further dealt with.
(ii) plant and equipment
38 Midway through the trial the wife sought to include an amount of $50,376 in the
schedule of assets and liabilities. This was said to represent the value of plant and equipment used by the husband in his [business]. This figure had been taken from his taxation returns. The inclusion was objected to by the husband who argued the figures
(Page 8)
were for a particular purpose and did not reflect the true or real value of which there was no evidence. The wife argued it was a reflection of the real value and should be included.
39 There was no expert evidence of the value of the plant and equipment. Given
the way it was sought to be included, including the timing, I do not intend to incorporate it in the schedule of assets. The value of the husband’s [business] has always been an issue. No attempt was made to identify and value this plant and equipment earlier and it could easily have been. However, as with the issue of corporatisation, I will deal with this in a general sense in considering s 75(2) of the Family Law Act.
| (b) | Assets held in the name of or on behalf of others | |
|
40 The husband held a [HP] portfolio of shares for each of the children. Each
portfolio was valued at $35,550. Additionally, there were two Macquarie Bank accounts the husband said were held by him on behalf of the children. The account for A had a balance of $673 and the account for R had a balance of $2,329. The husband’s position was that as he held them all for the children and they should be excluded from the pool of assets. They had been established prior to separation. The wife’s position was that unless they were jointly held on behalf of the children, they should be returned to the pool of assets. There does not appear to be an issue that the monies can or should go to the children. I find it prudent given my findings on credibility that the [HP] portfolios and the Macquarie accounts for the children be held jointly by the parties. On that basis, the value of the asset pool will be reduced to that extent.
(ii) NAB Account No. 7
41 The husband had an account in his name containing $8,793. He sought to have
the amount held in that account excluded from the pool of assets. The money in that account represented the difference between the sum he had voluntarily paid towards child support each month prior to the formal assessment by the Child Support Agency and the amount he was presently assessed to pay. The husband had previously paid the wife $2,000 a month for the children. He is now paying $1,312 a month. He said the money is intended for payment of future and adhoc expenses for the children.
42 It is money that the husband would otherwise have paid to the wife if not for the
assessment. I see no justification in not including the amount in this account in the husband’s name in the pool of assets. Both parties can use it for the children if they so desire.
(c) [The Boat]
43 This boat had been acquired 18 months prior to separation. It has been retained
by the husband for his sole use since separation. The parties agree its present value at
$350,000. This does not take into account any sales commission if it is sold. The(Page 9)
husband wants it sold and he has said it needs money spent on it in order for it to be put in a fit state for sale. The wife says that any lack of maintenance since separation has been solely at the husband’s hands.
44 The evidence shows that since separation, the husband has refused the wife use
of the boat, despite the fact he has failed to utilise the boat in any real way himself. The husband obtained a skippers certificate late in 2006. Whilst this will be included in the pool of assets available for division, it is appropriate that it be to the husband’s account. He can then do as he pleases in relation to its sale or otherwise.
| (d) | Addbacks – fees paid to children’s private schools |
45 In early September 2006 the husband corresponded with each of the children’s schools. He sought to pay their school fees to the end of Year 12.
46 In his correspondence to [the son’s private school] he outlined his situation thus:
“I am now nearly 18 months down the road of divorce, which unfortunately has proved relatively vindictive and as a consequence I am going to full trial in the next three months in order to try and resolve issues. At the present time and almost certainly for the foreseeable future, I am going to remain responsible for the ongoing education of [R] and I am very keen to make sure that nothing will get in the way of his schooling. As a consequence therefore I will be interested in paying his school fees until the end of his school career in Year 12 and as I currently have the financial means to do this, I would be pleased to do it within the next few weeks and certainly before the final accounting process for trial.
…
I would also be happy to agree that in the event that [R] does not reach Year 12 that any fees paid up until that point may be kept by the school and used for whatever purpose you deem reasonable.”
47 The husband paid $51,419 to [the son’s private school] and $73,620 to [the daughter’s private school].
48 It has never been a real issue that the husband would pay all the school fees for
the children from his own funds. The effect of the prepayment has been to reduce the
asset pool. The wife was never consulted about the use of the funds in this way.49 Counsel for the husband opined that the effect of the payment is that the husband
will be relieved of an expense in the future. An expense that is for the benefit of the children of the marriage. This of course is true, but he will be relieved partially at the expense of the wife. This was not an intended result between the parties when it was agreed that the husband would pay the children’s secondary school tuition fees.
50 I am of the view that this is best described as a “premature distribution” of the
parties’ property (Townsend and Townsend (1995) FLC 92-569). The husband, from
the tone of his letter, has used monies in which the wife has a legitimate interest to(Page 10)
reduce an obligation it was always understood since separation that he would meet
solely.51 There was no evidence and it was not argued that this payment related to the husband’s post-separation earnings as opposed to capital.
| (e) | Children’s beneficiary accounts |
52 There was a paucity of evidence in relation to these beneficiary accounts. [R’]s
account is $8,000 and [A’]s account is $7,600. This represents monies owned to them by the [K-P] Trust. As far as I am aware, the parties intend that the husband will retain that Trust. There is nothing to suggest that if called upon, he will act inappropriately in respect of the children’s entitlements. The wife, on the other hand, is of the view that there will be no call or claim by the children in relation to the money when they attain their majority and they should be excluded as liabilities of the parties.
53 I intend to exclude the beneficiary accounts from the pool of assets and liabilities
but there will be a provision in the orders that the wife should indemnify the husband in relation to half of the present amount should it eventuate that the monies are called upon.
| (f) | Characterisation of assets |
54 On 10 January 2006 the wife received $25,000 from the husband. It appears that
these funds were agreed to be provided on the basis the wife placed the family home on the market for sale. She would then relocate to their [investment] property. She also needed funds for the summer holidays as pre-existing arrangements had been made to take the children to [a resort] and then to the Eastern States for a holiday with her family. Funds were required for legal fees.
55 An order was made on 15 March 2006 that the husband pay the wife $20,000.
56 A further court order of 31 May 2006 divided the proceeds of sale of the family home equally between the parties. Each party received $1,224,257.
57 I am satisfied that the funds received by the wife and the husband on an interim
basis have been used to fund litigation, obtain valuations, support the parties and the children and to provide necessary funds to renovate the properties the parties now live in. These renovations have been necessary to ensure that the parties and the children live in circumstances commensurate with those they were in before separation. There was no evidence which I accept to suggest money was spent irregularly.
58 Where it has been appropriate to addback those amounts, whilst I was not
addressed specifically on this, I have formed the view they have already been included
in the asset pool. Other amounts have been used as stated, in a reasonable manner.59 The net effect of this is that I do not intend to make any adjustment to the pool of assets insofar as it relates to those amounts.
| (Page 11) |
60 The schedule of the present assets and liabilities is:
Assets Owner Value Wine collection Joint $186,304 Furniture and contents located at home of Wife 61,665 wife 2005 Honda Odyssey motor vehicle Wife 35,000 Jewellery Wife 49,200 Artworks located at home of wife Wife 50,950 Wine Wife 6,692 Monies owed by G Wife 4,100 Westpac accounts no. 6 Wife 5,808 Westpac account no. 1 Wife 884,746 Wife’s refund 05/06 Wife 11,648 NAB Visa account 4 Wife 3,815 Monies in Carr & Co trust account Wife 1,550 Home of husband Husband 2,100,000 Furniture and contents Husband 34,090 Artworks located at home of husband Husband 22,000 Imported motor vehicle Husband 110,000
(Page 12)
50% interest in boat pen Husband 20,000 Deposits concerning H /R Husband 41,408 M shares Husband 11,206 Macquarie IM account 3 Husband 249 NAB account no. 7 Husband 8,793 NAB flexi + cheque account no. -2 Husband 7,984 NAB account no. 5 (business account) Husband 18,043 Wine located at husband’s home Husband 6,000 Business debtors –fees Husband 185,277 Funds held in trust by architects Husband 3,431 Tax refund 2006 Husband 84,348 Agribusiness projects (grower interests) Husband 352,776
Agribusiness projects (shareholders Husband 107,826 interests)
Jewellery Husband 120 Funds held in trust by O’Sullivan Davies Husband 4,496 Solicitors SPL as K-P Trust The home of the wife Trust 2,550,000 Investment property A Trust 1,450,000 Investment property B Trust 775,000 The boat (husband to retain) Trust 350,000
(Page 13)
Cash at Macquarie bank account no. 6 Trust 20,658 Other Debtors and trade debtors Trust 34,837 Loans on Call – Trust 51,653 [The business] Building Trust – interest in Trust 354,742 property Share portfolio with HP Trust 626,388 Interest in holiday home - Unit Trust Trust 213,936
Total assets 10,846,739 Liabilities Wife
NAB Flexi account no. 0 Wife 429 AMEX account 7 Wife Nil Liabilities (Wife) 429 Husband Diner’s Club account 6 Husband 3,874 Commonwealth Visa account 1 Husband 12,444 Diner’s Club account 2 Husband 0 NAB Mastercard account 9 Husband 1,760 NAB Mastercard account 1 Husband Nil NAB account 9 (VP) Husband 216,970 NAB account 1 (APT) Husband 225,000
(Page 14)
LIPL (No 1) Husband 178,852 T Finance Husband 230,700 C Finance – I Project Husband 183,277 Trade creditors Husband 15,677 Accrued charges Husband 92,310 SPL as Trustee for K-P Trust Husband NAB cheque account no. 8 Trust 26,502 NAB loan account 0 (Building Trust) Trust 111,967 NAB loan account 7 (Home of wife) Trust 875,000 NAB loan account 6 (Unit Trust) Trust 150,682
NAB flexi loan account 8 Trust 598,657 (Shares/Investments)
Accrued charges Trust 8,404
Liabilities (Husband & Trust) 2,932,076 Total liabilities 2,932,505 Addbacks
Valuation and Expert Fees Wife 12,924 Legal Fees (inc Counsel) Wife 114,246 Fees paid to [son’s school] Husband 51,419 Fees paid to [daughter’s school] Husband 73,620 Valuation and Expert Fees Husband 12,924
(Page 15)
Legal fees (inc Counsel) Husband 93,579
Total addbacks 358,712 Total net assets 8,272,946 Superannuation assets (Wife)
K-P Superannuation Fund Wife 157,704 K-P Superannuation Fund – undeducted Wife 42,419 GESB Wife 435 Superannuation assets (Husband) K-P – Super Fund – withdrawal benefit Husband 488,283 K-P – Superannuation Fund – undeducted Husband 205,571 AXA Policy Husband 50,308
Total superannuation assets 944,720 Total net assets and superannuation
assets9,217,666
Contributions of the parties
| (a) | Initial contributions |
61 The wife has [qualification] from Melbourne University. She also has [another
related degree] from the University of Tasmania. At the time she and the husband commenced living together in January 1990 she worked on a full-time basis [in her profession]. She was a capital partner in [a business in the suburbs]. She was working a 13 day fortnight.
62 In 1987 she had purchased a property in [the northern suburbs]. The estimated
net worth of that in November 1990 was $170,000. She also owned a share in the [business], a motor vehicle worth approximately $20,000, jewellery worth $2,000 and items of furniture and household contents. The wife’s interest in the [business] was sold in early 1992 and she received $55,000. Her initial contribution I estimate to be approximately $250,000.
63 The husband obtained specialist qualifications [in his profession] in 1987. Thereafter, he took post-graduate positions [overseas] from January 1988 to June
(Page 16)
1988. In July 1988 he returned to Perth. He set up [the business] and started with [a
small area of specialisation].64 The husband’s assets included a property in [the suburbs], equity in his
[business] along with debtors, plant and equipment and an interest in premises in [another suburb], [an imported car], an investment, savings, life policy and superannuation. He had a corresponding tax liability of $50,000.
65 I estimate the husband’s assets as at the date of cohabitation based on the schedule of his accountant to be approximately $950,000. early 1990.
66 There is a disparity of $700,000. This is significant now and was more so in
67 In assessing the weight to be attached to the initial contribution of a party, the
Full Court has made clear that regard must be had to the use the parties made of that contribution (Pierce v Pierce (1999) FLC 92-844 at 85,881). Both parties had a residential property which was sold and the proceeds of sale were used by them variously for their mutual benefit. The wife’s interest in her [business] was sold early in 1992. However, the interest that the husband had in his [business] is of significance. It was, and still is the basis for the family’s substantial wealth. It has been the foundation of their wealth and the vehicle by which their assets and income have increased.
| (b) | Other financial contributions |
68 The wife worked full-time in her [business] until the birth of their first child.
She returned to work in the [suburbs] when R was 10 weeks old. Initially she worked two half days each week in addition to some relief work. This continued until R was approximately eight months old.
69 Six months after her second child’s birth she worked on a part-time basis in
a business the couple ran. This business was run by the wife for a couple of years during school hours. After the sale of the business, the wife recommenced working [in her profession]. She worked four half days a week in tandem with caring for the children.
70 In 1999 she commenced employment on a sessional basis at [a business]. This
was closer to the children’s schools. From 1999 until June 2004 she worked in the [business] during school hours and on alternate Saturday mornings. She then worked each Saturday morning.
71 The wife gave up full-time work after October 2003 when she was diagnosed
with a small benign tumour at the base of her brain. She ceased work completely in
June 2004. The wife did not return to work until after separation.72 All the money earned by her went into the family or to the acquisition of the
parties’ assets.
(Page 17)
73 In 1994 she received a gift of $250,000 from her parents. This money went into the family trust and was used to retire debt.
74 In approximately 1998 the parties received from the wife’s parents an interest
free loan of around $150,000. This was applied to purchase the [investment property
B] and to pay tax. The loan was repaid about five years later.75 The husband has always worked as a [specialist]. He has always earned a high
income. He has a very busy and extensive [business]. Historically, his hours have been demanding and involved some weekend work. He has attended interstate and overseas conferences and meetings. It is accepted that the [business] group established by him is the leading group in this State. [Mr J], a colleague, deposes to it having grown into one of the premier [business] groups in Australia.
76 The substantially unchallenged evidence is that the husband is both a gifted
business man and [specialist] of some prowess. He is innovative and has looked for better ways of [performing]. This has allowed him to pioneer many innovations in the [business]. He changed the face of procedures [in the business].
77 Throughout the marriage, the husband has utilised his exceptional skills and
business acumen to develop his [business] such that the parties have reaped substantial
financial benefits.78 His income in recent years has been somewhat reduced due to his wish to be
more involved in the children’s lives. This has coincided with the separation. However, his income had increased up to the year he separated, despite the fact there had been some reduction in his working hours from about 1997 or 1998. I am not satisfied the separation has or need have any great effect on his income and that he is able to earn in the vicinity of a million dollars per annum.
79 During the course of the marriage, the parties made various financial
investments. Their investments in real estate have been very successful and are reflected in the schedule of assets. Unfortunately, not all their investments were so successful. A joint investment into [agribusiness] was unsuccessful and the parties lost approximately $500,000.
80 On another occasion the husband without the wife’s knowledge or consent
invested some $600,000 in what the parties termed the [the scheme]. The money was lost in its entirety. There was no evidence, however, to suggest the husband acted recklessly, negligently or wantonly with the matrimonial assets. This investment was not “designed” to reduce the assets (Kowaliw and Kowaliw (1981) FLC 91-092).
| (c) | Non-financial contributions and contributions to the welfare of the family |
81 The wife has made a substantial contribution in her capacity as homemaker and
parent. There can be no doubt that given the husband’s long working hours and the very nature of his work that she has been the party primarily responsible for the care and supervision of the children. This extended post-separation for a number of months. [R] now lives predominantly with the husband and he has taken on more of the associated parental responsibility for his son.
| (Page 18) | |
| 82 | The parties adopted fairly traditional roles within the marriage. Although the |
| wife was primarily concerned with the day to day care and supervision of the children, I accept that the husband was also involved outside his work hours. The wife was employed most of the time. | |
| 83 | The wife was the party charged with overseeing a number of requirements |
| associated with the parties’ moving residences and selling and buying property. As she was most likely to be home she was the point of contact in that regard and more available to do the many and varied tasks involved in their living arrangements. The husband was involved but to a much lesser extent. | |
| 84 | Of course this enabled the husband time to pursue his career and increase his earning capacity from which the entire family benefited. |
| 85 | Both parties had their own leisure activities which gave them a balance with |
| their work and family life. I have no criticism of either in that regard. The wife took time out to exercise with a personal trainer, participate in a book club and attend to her beauty requirements. The husband on the other hand enjoyed cycling. | |
| (d) | Assessment based on contributions |
86 The parties were together for 15 years. They have worked very hard during that
period of time, both in a work related and domestic sense. It cannot be suggested that
either has not given their all to the partnership in that respect.87 However, I am of the view that given the husband’s initial financial contribution
and the use to which that initial contribution has been put, there is a disparity in their respective contributions. The difference in the initial contribution coupled with the husband’s talent as a [professional] and businessman with its attendant high income warrants some adjustment. I say this even having taken into account the $250,000 received by the wife in 1994 and the interest free loan the parties were able to access. Apart from the husband’s initial contribution and the talented use to which it has been put throughout the marriage the parties would otherwise be on an even footing contribution wise. I would assess contribution in the husband’s favour as 57.5%.
Section 75(2) factors
88 Both parties are in their early 50s. The wife deposes to each having good health. This does require some clarification.
89 The wife has a benign acoustic neuroma at the base of her brain. It was
diagnosed [some time ago]. This causes mild deafness and tinnitus and may require
neurological removal in the future – likely to be after age 60.90 She deposes to suffering from headaches, neckache and shoulder and arm pain,
all of which are secondary to facet joint arthropathy in the cervical spine. She is having treatment for this and expects her current pain to be ameliorated by the treatment.
| (Page 19) | |
| 91 | She also suffers depression and has been prescribed medication by a consultant |
| psychiatrist, [Dr H]. [Dr H] had seen the wife on two occasions. The wife is responding to the medication. | |
| 92 | [Dr H] said that the wife had a pre-existing vulnerability to stress. She is |
| currently exposed to a number of stressors, including the present court proceedings, the need to move house, the separation from her husband and the need to return to work. She cautioned against an immediate increase in work hours beyond 20 hours per week. | |
| 93 | She accepted that people with depression can work more than 20 hours a week |
| but given what the wife had explained as her symptoms she felt this may be imprudent at this time. She saw a recovery taking 12 months or more. At that stage the wife would be in a position to return to the work hours she was able to cope with prior to separation. I took this to mean when she was actually working. This, most recently, was at the [business] almost daily, albeit for reduced hours. I calculate this, taking into account Saturday mornings, to be in excess of 30 hours. | |
| 94 | In December 2006 the husband was diagnosed with coronary atherosclerosis. |
| He had experienced left pre-cordial pain and was treated. A stent was inserted. He had a further episode of pain on 23 December 2006 and further tests were done. He is otherwise to be reviewed by his cardiologist, [Dr B], in December 2007. | |
| 95 | The husband also has a history of migraine dating back to his childhood. He has |
| been reviewed on and off over the years by [Dr W], a neurologist. He has various medications to try and prevent or suppress the migraines. Since separation, [Dr W] reports that there have been occasions when the husband has had to take time off work and cancel [meetings] as a result of the severe headaches. | |
| 96 | The husband deposes to suffering from spherocytosis which has been palliated by a splenectomy. He suffers from viral infections which require time off work. |
| 97 | The husband has also been treated for right renal colic. He was treated by |
| [Dr T], a urological surgeon in late 2005. It is likely that he will experience further renal colic in the future given the presence of calculi in his right kidney. | |
| 98 | Without suggesting in any way that the various difficulties of each party are of |
| little consequence I accept that what the wife deposes to as their good health to be substantially accurate. | |
| 99 | The husband has maintained an extremely viable income protection policy |
| throughout the course of the marriage. His evidence suggests that he is insured at a high level and that should he have any difficulties, his position is covered at least to a major extent. A draft due diligence report prepared by KPMG in relation to corporatisation, in remarking on the quality of earning adjustments for the husband, noted that historically his earnings do not appear to have been significantly impacted upon by his leave which includes sick leave. | |
| 100 | Both parties are engaging in appropriate gainful employment. Both have commitments to care for the children. The wife more so than the husband. Despite |
| (Page 20) | |
| some need and desire to reduce his working hours, the husband has the ability to earn a substantial income. It will always outstrip the wife’s income by far. | |
| 101 | At present, I find the husband is not at the limit of his employment capacity. |
| Even given his need and desire to care for [R], I find his reduction in income to also be as a result of his desire to minimise his financial position for the purpose of these proceedings. He had sought legal advice about the separation from early 2005 and timed the separation to coincide with the new financial year. | |
| 102 | It can only be of benefit to the children that the husband is more available to |
| them. However, given there is no week and week-about arrangement as originally envisaged and the wife is available at least presently to assist with [R] if needs be, there is no reason to suggest with the finalisation of the proceedings his income will not stabilise upwards to at least some extent. | |
| 103 | At present, the wife is at the limit of her employment capacity given her |
| psychiatrist’s evaluation. However, things should change in the future. The wife was optimistic about her ability to increase her hours and expressed surprise at the consultant psychiatrist’s limitation on her work. Be that as it may, it is unrealistic to expect her to increase her hours greatly in the short term. | |
| 104 | She is currently working 16 hours a week. She said her hours are flexible. She |
| has worked longer hours at times either to assist [other staff] or when she has been able to if the husband has had the children. I anticipate she could increase her work hours to 30 a week after the next 12 months. She accepted she could earn an income in the vicinity of $50,000 per annum. She also accepted it was possible for her to earn an income of around $1,600 each week. | |
| 105 | The wife is also a member of [a government board]. Since her appointment in |
| January 2005 she has sat infrequently. She remains a member. She has also provided opinions on issues for [her profession]. However, she deposes to not being in a position to take up such work, even if it was offered to her now, due to her increased commitments [in her daily work commitments]. | |
| 106 | I find that the wife will be in a position to increase her present income. Given |
| the evidence and her acceptance of what she could earn, I find she has the capacity to earn an income between $50,000 and $80,000 per annum from her work as [a professional]. | |
| 107 | Prior to separation, the parties enjoyed a very high standard of living. There is |
| nothing to suggest that they have not continued and will not continue in the future to enjoy this standard of living. | |
| 108 | The wife has contributed to the income earning capacity of the husband by |
| ensuring that she was the parent available to care for the children when the husband worked long and arduous hours, including attending work related seminars, meetings and conferences. There were times when she accompanied him on his travels, both overseas and interstate. There were times when she remained at home but allowed him that opportunity to travel freely. | |
| (Page 21) | |
| 109 | The wife is not cohabitating with any person. The husband has recently re- partnered and is living with his new partner who [works in a related business]. |
| 110 | The husband is currently paying the amount he has been assessed to pay by the |
| Child Support Agency. He pays over $300 per week and meets the majority of the children’s school and incidental expenses. He pays a considerable amount for them generally. | |
| 111 | Whilst I am satisfied that the schedule of assets and liabilities reflects what the |
| wife and the husband have at the present time, it is difficult to ascertain the likely worth of the husband’s [business] in the future. This is an issue given the evidence and “a circumstance which the justice of the case requires to be taken into account.” | |
| 112 | On 6 June 2006 at 10.54 pm, [Mr D] received an email from a colleague and |
| friend of the husband’s, [Mr J]. The email said whilst the husband was interested in the corporatisation proposal, as a result of his involvement in a very bitter divorce, he did not want it made known that the deal was in progress. It suggested that the husband was happy to sign the Heads of Agreement but was not in a position to proceed with the formal contract until a later date. It said that the husband was anxious to know that if he did sign later, then he would be able to avail himself of the same terms on offer presently to the other partners [of the business]. | |
| 113 | A reply was received early the next morning from [Mr D] who indicated that |
| verbal confirmation by the husband would be acceptable and that the terms offered to him would be the same as to the other partners. Later that day, [Mr J] replied to [Mr D] indicating that the husband would forward emails to [Mr D] confirming his position. | |
| 114 | On 11 June 2006 [Mr J] again emailed [Mr D] and he attached to his email what |
| he described as the husband’s “unofficial” notification. The husband’s notification, sent by his secretary and entitled “Induction into [XYZ]”, read: |
“… I have read your recent messages and essentially, I am happy with the conditions. Given that I am currently involved in a divorce and given that this is a complicated situation, I am in no position to consider joining [XYZ] at this time. However, I would be pleased to receive formal notification confirming your verbal agreement that should I wish to join the group following settlement, then I could be taken in on the same agreements and conditions as other members of this [business].
(Page 22)
Could this letter be sent to [Mr J] only as he is keeping all documentation for this.
…
K”.
115 The “official” response from the husband was sent by [Mr J] to [Mr D] on
11 June 2006 two minutes after the “unofficial” response. The husband writes, by his
secretary and entitled “Invitation to Join [XYZ]”:“Thankyou for your invitation to join [XYZ] Group. At this point in time, I am not in a position to consider this offer and similarly given my significant reduction in work rate in the last year, my [business] is probably not assessable for this. My work load is unlikely to increase in the next couple of years because of responsibilities to my children and it may be therefore that in the longer term, I am best left outside the group, remaining as I am in [business].
Thankyou for your offer which I will consider in two to three years time, if it remains available and if my [business] has stabilised again.
K”.
116 Early in the husband’s cross-examination, prior to him being aware that these
emails were available, he had said words to the effect that his position was he was certainly not going to be in the corporatisation. It was “stone dead” for him since his salary had gone down.
117 He was asked whether he had ever told the group he was not interested. His answer to this question was “I never turn down an opportunity”.
118 The husband later wrote to [Mr D] on his letterhead. The date on that letter is 14 June 2006. It was disclosed to the wife’s solicitors on 21 December 2006 after numerous requests for information.
“Thankyou for your offer in regard to the proposal for corporatisation, which my partners are considering favourably. I have reviewed my current earnings, which are now down from previous years and I expect that this trend will continue for some time because of my increasing role as a sole parent. In addition, I am currently involved in the Family Court and there is no immediate end to this.
I can’t see there is any advantage in me joining my partners in corporatisaton and I have now reached the decision to categorically turn down your offer.
Thankyou again for taking the time and effort to discuss this project with me. I am sure for some of my partners there are distinctive advantages to this proposal but unfortunately I don’t believe that those advantages pass on to me because of my different circumstances.”
(Page 23)
119 The letter is signed
by the husband. He said in evidence this was his “firm position” after
reflecting on the matter.
120 On 17 July 2006 KPMG Transaction Services (Australia) Pty Ltd provided
a draft due diligence report to [Mr D]. The report was to provide assistance in respect
of the proposed acquisition of certain [business operations].121 The report relates to the interested [partners] including the husband. The
business overview and summary of the husband’s position shows for the year 2006 he generated revenue of $1.4 million with a normalised EBIT of $1 million. This took into account a change in his personal circumstances which according to the report:
“We have been advised by [Mr K] that due to a change in personal circumstances from September 2005 he reduced his working hours every second week to finish at approximately 2.00 pm (four days a weeks). This had the effect of decreasing [his business income] by $185,000 in the FYO6. [Mr K] expects to maintain his work schedule in the future, therefore we have adjusted normalised EBIT in FYO5 to reflect the lower actual earnings in FYO6 as follows:
– applied FYO5 normalised EBIT margin of 73% to reduction in [his
business income] of $185,000.
– annualised the impact of the 10 month reduction in EBIT in FYO6.”
122 On [date] 2006 there was a media release concerning [the investment company] and its new investments which included [XYZ].
123 There can be no doubt that the husband was aware of his duty of disclosure. His
failure to disclose commenced and continued after he had legal advice. The wife’s solicitors were agitating for documents to do with the [business] over an extended period of time and were met with a denial that anything relevant existed until very late in the day. Even then limited information was provided. It was only when documents produced by [Mr D] were inspected at the start of the trial that an inkling of the true position was revealed.
124 At the beginning of the trial, the husband’s failure to disclose might just have
been understandable, although not excusable, on the basis that any documentation or information related to future matters and was outside the ambit of the Court. However, given the content of the emails between [Mr D], [Mr J] and the husband, especially insofar as they relate to “official” and “unofficial” versions, this is simply not believable or acceptable.
125 The husband’s acceptance of his conduct in attempting to deceive the wife and
acknowledging the corporatisation could potentially increase his future income is only
one aspect of it.126 Putting aside the fact of non-disclosure and adverse findings on credibility, it is necessary to ascertain the significance of the non-disclosure and its consequences.
| (Page 24) |
127 There is a range of outcomes of the corporatisation even if it does go ahead.
128 If the proposal for corporatisation comes to fruition in the manner presented by
[the investment company] and as it has done for the [other business groups], then the husband will stand to significantly increase his financial position until he retires. Of course gains or losses will not be known in the short term. Indeed, if the husband was to join the project he would receive a substantially reduced ongoing salary and an immediate payment in the region of between $1.5-2 million upon joining. The balance would be paid in shares and any significant increases would depend on the share market at the relevant time.
129 It is simplistic to attempt to accurately predict what the future possibilities are
for this project, given the variables as outlined by [Mr D]. To notionally add $4 million onto the asset pool as suggested by the wife’s counsel is not appropriate given all the evidence.
130 The evidence is uncertain about how the corporatisation would impact on the
husband’s financial position in the foreseeable and even more distant future, but to ignore it completely would be unjust to the wife. Given this the husband must accept there are economic consequences to his conduct.
131 This is a man whose witnesses have attested to his business skills and prowess.
On his own evidence he has an eye for an opportunity. He is the leading [professional] in an otherwise imminent group [of professionals]. He and his colleagues have embraced the idea. The husband has flagged his interest albeit unofficially.
132 Whilst on one level there is risk and uncertainty about the corporatisation
proposals, on another level, there was a deliberate and concerted effort by the husband to keep knowledge of those proposals and the detail of those proposals out of the wife’s range.
133 If his true position was of little or no interest in the scheme, then the Court asks
itself why the subterfuge and concealment. This lends itself to the drawing of an inference that the risks and uncertainties associated with the corporatisation were outweighed by the potential financial benefits.
134 The major difficulty in determining whether a matter is a factor to be taken into
consideration under s 75(2)(o) lies in the certainty of the future financial gain coming to fruition. It is helpful, although not of course completely analogous to consider cases demonstrating how the Court has dealt with a variety of future interests.
135 The Court has not been reluctant to take possible future interests into account where appropriate. (See for example Reynolds and Reynolds (1985) FLC 91-632 valuation of shares, De Angelis and De Angelis (2003) FLC 93-133 prospective inheritances and Cromwell & Cromwell [2006] FamCA 1454 the carrying forward of tax losses). In the marriage of De Angelis Lindemayer & Finn JJ considered the situation where a wife, in a very short period of time, could well be the owner, through an inheritance, of two properties having a combined value of almost the same amount as the value of the parties’ property presently available for distribution. The husband
(Page 25)
had also spent time on maintaining and improving those properties. Their Honours considered it “unjust to the husband to ignore this matter (the prospective inheritance) even if it was categorised only as a possibility and not a probability.”
136 Therefore, although there are some hurdles to cross and some risks to be taken,
I find it highly probable that the scheme proposed by [Mr D] will proceed although exactly when is unknown. I also find that it is possible the husband will go ahead with the venture. I take into account the following:
• This proposal has potential for the husband to increase his financial position significantly. At worst, he has little, if anything to lose. • He has gone to great lengths to hide his interest from the wife and her legal advisors leading to the inference he wished to conceal his real or likely intentions. • His professional colleagues have all embraced the idea. Some are professional colleagues of longstanding with whom he has worked closely for over a decade. • KPMG have conducted due diligence on the proposal specifically for the husband. I find he provided or allowed KPMG to access the information to conduct such due diligence. The information generated coupled with the proposal paints a favourable picture for him. • The impediments to his involvement are of little substance. While he has [R] living with him most of the time, it need not impact and indeed has little impact on his income insofar as it relates to his being part of the corporatisation proposals. 137 Even apart from this, the husband’s present income outstrips the wife’s
substantially. He has at least a viable income stream with some business plant and
equipment.138 I am persuaded that overall an adjustment of 20%, taking into account all of the s 75(2) factors identified, is appropriate.
Adjournment
139 Despite objecting to the wife’s application at the beginning of the trial that the
proceedings insofar as they relate to the alteration of property interests be adjourned pursuant to s 79(5) of the Family Law Act pending any action by the husband to corporatise his [business], the husband’s position had changed by the end of the trial. He, through his counsel, was seeking such an adjournment. No doubt this was to confirm he would not be taking up any proposal having heard [Mr D’s] evidence.
140 His failure to further consider or pursue the corporatisation may in itself have
economic consequences for the wife. I find this is another attempt at a strategic
manoeuvre on the husband’s part.141 I am not persuaded by the husband’s counsel that it is appropriate to adjourn
| these matters. The outcome on the percentage division taking into account both the contributions and the s 75(2) factors is 62.5% in favour of the wife. |
| (Page 26) |
Just and equitable
142 The parties will each retain interests in real estate, superannuation entitlements,
personal assets and some monies. The disparity in the assets available to each of the parties will be remedied by the husband’s ability to presently generate an income far superior to that of the wife. If or perhaps indeed when the corporatisation takes place, the husband may well be in a position to remedy the inequality even sooner.
143 The percentage division is likely to require some payment being made to the
wife or otherwise the transfer to her of some assets. It was pointed out by counsel for the husband that the husband has a minority shareholding in some of the assets and other assets, for example, the agribusiness projects may be difficult to market. Given the total pool available and the composition of that pool, the Court holds the view that in the circumstances it is overall a just and equitable result.
Maintenance
144 Given my decision in relation to the alteration of the parties’ property, I do not
intend to make orders for the wife’s maintenance. The amount she will receive
coupled with her income will enable her to support herself adequately.
Child support
145 The wife has sought to have matters of child support determined by this Court at
the same time as her alteration of property interests and spousal maintenance. She has sought a departure from the administrative assessment to the extent that the periodic assessment be increased to an amount of $500 each week. This amount is split as to $350 a week for [A] and $150 a week for [R].
146 The husband does not oppose the making of orders insofar as those orders relate
to non-periodic child support. He does oppose the increase in the administrative
assessment.147 The wife’s claim in this regard was presented without any particularity. She has
sought simply to rely on the fact on the husband’s significant income and has not balanced that with the appropriate needs of the children. There has been a failure to identify the needs of the children and the wife relies on an expectation that the Court will define them for her.
148 On the basis of the evidence presented to me, there is no ground to vary the
administrative assessment. However, it appears that there is agreement in relation to non-periodic child support and I will allow the parties time to draft orders in that regard.
Conclusions
149 A considerable amount of this trial dealt with the issue of non-disclosure. It was
accepted by the husband and his counsel that there had been a deception. There is no
doubt that it was a deliberate deception. The purpose of the deception was to(Page 27)
quarantine financial information from the wife. The Court’s charter is to do justice between the parties in relation to their financial settlement. Justice can only be achieved when all the information is before the Court. To condone or fail to take action in relation to such behaviour may well lead others to assume there will be no consequences and court orders and obligations can be ignored with impunity. This Court needs to make it clear that such behaviour is unacceptable. I intend to refer this matter to the Director of Public Prosecutions for investigation.
150 Having arrived at an appropriate percentage division, the parties will, as agreed,
arrive at a form of orders to reflect that division. Any agreed orders can thereafter be dealt with in chambers, if appropriate. The only orders that will be made at this stage are:
1.
Both parties have liberty to relist this matter regarding the form of orders to be made.
2.
If there is disagreement about the form of orders, each party is to file a Minute setting out the proposed orders sought not later than the close of business three days prior to any listing.
I certify that the preceding [150] paragraphs are a true copy of the reasons for
judgment delivered by this Honourable Court
Associate
0