Pascall and Pascall
[2016] FamCA 985
•18 November 2016
FAMILY COURT OF AUSTRALIA
| PASCALL & PASCALL | [2016] FamCA 985 |
| FAMILY LAW – PROPERTY SETTLEMENT – long marriage – where the parties were married for twenty-six years – where each party was a health professional – where the wife was made bankrupt by sequestration order after judgment was reserved – where the property pool is modest. |
| Bankruptcy Act 1966 (Cth) Family Law Act 1975 (Cth) |
| Baglio & Baglio [2013] FamCA 105 Brandt and Brandt (1997) FLC 92-758 C and C [1998] FamCA 143 Clauson and Clauson (1995) FLC 92-595 Dougherty v Dougherty (1987) 163 CLR 278 Ferraro & Ferraro (1993) FLC 92-335 Gollings & Scott (2007) FLC 93-319 Harper & Harper [2013] FamCA 528 Hickey & Hickey (2003) FLC 93-143 In the Marriage of Weir (1992) 16 Fam LR 154 at 58 Jones & Jones (1990) FLC 92-143 Kowaliw and Kowaliw (1981) FLC 91-092 Lee Steere & Lee Steere (1985) FLC 91-626 Lovine & Connor and Anor (2012) FLC 93-515 Mallet and Mallet (1984) 156 CLR 605 Pastrikos & Pastrikos (1980) FLC 90-897 Stanford v Stanford (2012) 247 CLR 108 Steinbrenner & Steinbrenner [2008] FamCAFC 193 at [234] per Coleman J Townsend and Townsend (1995) FLC 92-569 Waters & Jurek (1995) FLC 92-635 Watson & Ling (2013) FLC 93-527 |
| APPLICANT: | Ms Pascall |
| RESPONDENT: | Mr Pascall |
| FILE NUMBER: | BRC | 6696 | of | 2010 |
| DATE DELIVERED: | 18 November 2016 |
| PLACE DELIVERED: | Brisbane |
| PLACE HEARD: | Brisbane |
| JUDGMENT OF: | Hogan J |
| HEARING DATES: | 2 September 2013, 30 & 31 October 2013, |
REPRESENTATION
| APPLICANT: | In person on 2 September 2013, 30 & 31 October 2013, |
| COUNSEL FOR THE APPLICANT: | Ms Carmody on 21 May 2015 and 3 June 2015 |
| SOLICITOR FOR THE APPLICANT: | Craig Ray & Associates on 21 May 2015, 3 & 12 June 2015 and 11 March 2016, 21 March 2016 and 24 March 2016 |
| COUNSEL FOR THE RESPONDENT: | Mr Looney QC on 2 September 2013, 30 & 31 October 2013, 15 November 2013, 16 December 2013 |
| SOLICITOR FOR THE RESPONDENT: | Hopgood Ganim on 2 September 2013, 30 & 31 October 2013, 16 December 2013 |
| RESPONDENT: | No appearance on 21 May 2015; |
Orders
IT IS ORDERED BY WAY OF FINAL PROPERTY SETTLEMENT ORDER THAT
Save as is provided for in this Order, all previous orders are discharged.
Except as otherwise provided for in this Order, the wife receive and/or retain the following:
(a) her professional practice and all associated entities; and
(b)any furniture, furnishings, chattels and personal effects in her possession; and
(c) jewellery in her possession; and
(d) any motor vehicle currently in her possession; and
(e) all funds in all bank accounts held in her name; and
(f) her entitlement to super.
Except as otherwise provided for in this Order, the husband receive and/or retain the following:
(a)all furniture, furnishings, chattels and personal effects in his possession; and
(b) any motor vehicle or motorbike currently in his possession; and
(c) the credit balance of any bank account in his name; and
(d)any balance in the parties’ joint St George Savings Account number …116; and
(e)AXA life insurance policies numbered …686, …103 and …679 and Tower Australia Limited policy numbered …; and
(f) the loan owing to him by F Pty Ltd; and
(g) his interest in E Pty Ltd; and
(h)his interest in F Pty Ltd as trustee for the F Trust trading as F Practice; and
(i) the P Family Trust; and
(j)his interest in V Holdings as trustee for the V Trust; and
(k)the loan owing to him by V Holdings as trustee for the V Trust; and
(l) his member entitlement with the P Super Fund.
Unless otherwise agreed between the parties in writing, the husband shall, within six months of the date of this order, do all things necessary to cause any capital gains tax liability incurred by either party as a consequence of the sale of real property at G Street, Suburb X and R Street, Suburb Y to be paid from the monies received from the sale of those properties and held on trust pursuant to the Order made on 12 June 2015, which order shall remain in force until the payment/s referred to in this Clause are made or caused to be made by the husband.
Unless otherwise provided for in this Order, the wife shall indemnify the husband and keep him indemnified in relation to any liabilities of whatsoever nature incurred by him as a consequence of his involvement in or association with any entities to be retained by her pursuant to this Order.
Unless otherwise provided for in this Order, the husband shall indemnify the wife and keep her indemnified in relation to any liabilities of whatsoever nature incurred by her as a consequence of her involvement in or association with any entities to be retained by him pursuant to this Order.
Unless otherwise agreed between the parties in writing, the husband shall, within six months of the date of this order, at his expense, do all things necessary to cause the winding up of V Holdings Pty Ltd and O Pty Ltd.
The wife shall, within seven days (7) of a written request by the husband to do so, provide any relevant information or documents and sign all relevant documents necessary to facilitate the winding up of the entities as referred to above.
The wife shall, within seven days (7) of a written request by the husband to do so, sign all relevant documents necessary to facilitate the closure of the parties’ joint St George Savings Account number …116.
In the event that either party refuses or neglects to do any act or sign any document required to be done or executed in compliance with the provisions of this Order, then, pursuant to s106A of the Family Law Act 1975 (Cth), a Registrar of the Family Court of Australia at Brisbane is hereby appointed to execute all deeds and documents in the name of the defaulting party and do all acts and things necessary to give validity and operation to the said order and the affidavit by the non-defaulting party shall be sufficient evidence of such non-compliance.
All outstanding applications are dismissed.
Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Pascall & Pascall has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).
| FAMILY COURT OF AUSTRALIA AT BRISBANE |
FILE NUMBER: BRC 6696 of 2010
| Ms Pascall |
Applicant
And
| Mr Pascall |
Respondent
REASONS FOR JUDGMENT
The wife was born in 1955 and is 61 years of age. The husband was born in 1959 and is 57 years of age. Both parties are professionals: each specialises in a particular field within their profession.
The parties met in 1983. At that time, both were working in Brisbane: the wife having graduated in 1978 and the husband in 1982. The wife was then employed in a more senior position and the husband was employed in a junior position. They commenced cohabitation in late 1983. They married in 1984 and separated finally on 14 January 2010. A Divorce Order was made on 24 June 2012.
Their 26 year relationship produced five children:
a)J, born 1989 – 27 years;
b)K, born 1991 –25 years;
c)L, born 1994 – 22 years;
d)M, born 1996 – 20 years; and
e)N, born 1997 –19 years.
The wife completed her specialist training in 1988. The husband completed his specialist training in 1990. After this, he became a partner and director in a professional business.
From early 1993 until about mid-1995, the parties lived overseas. They both undertook further training in their respective specialities during this time. After they returned to Australia in about September 1995:
a)the husband returned to work in the professional business which, later that year, merged to form Q Clinic; and
b)the wife worked in her specialty until about November 1997, when she closed her practice to enable her to be a full-time parent to the parties’ five children who were, then, all under 10 years of age.
In March 1998, the parties purchased land at Suburb R. Whilst they intended to build on this and spent money on design costs, landscaping and drilling a bore, no building work was ultimately undertaken.
In about May 1999, the husband resigned from Q Clinic. From late November 1999 onwards, he operated his practice/business under the registered name F Practice.
In late December 1999, the parties purchased real property at Suburb Y as tenants in common as to 99 per cent to the husband and one per cent to the wife.
In December 1999, the husband’s former Q Clinic partners commenced proceedings against him alleging a loss of revenue and future earnings arising out of an alleged unfair use by him of his former position to successfully obtain work by tender.
The wife recommenced private practice in 2000. She incorporated Z Pty Ltd, through which she operated her practice, and practiced from premises at Suburb A.
In June 2000, the parties purchased real property at Suburb X as tenants in common as to 99 per cent to the husband and one per cent to the wife.
In 2002, the wife relocated her practice, which was both busy and lucrative, from Suburb A to the Gold Coast.
In July 2003, the litigation between the husband and his former business partners was resolved on the basis that the husband paid them $500,000.00.
In mid-2006, the wife decided to relocate her practice. In order to do so, she terminated the lease she had in respect of the Gold Coast premises: there were financial consequences associated with this decision and costs associated with the physical relocation of her practice. She purchased real property (from which she planned to operate her practice) but, soon after, sold this because it was not suitable for professional premises. Later that year, the wife[1] purchased real property at Town S for use as a branch office for her practice. She also purchased[2] real property at the Gold Coast, from which she operated her practice.
[1] via ZZ Securities Pty Ltd as trustee for the ZZ Securities Trust.
[2] via ZZ Pty Ltd as trustee for the ZZ Trust.
All of these purchases of real property by the wife – whether personally or via entities under her control – were obviously related to her practice. The husband made no direct financial contribution to the acquisition of any of these and the wife – or entities under her control – was the sole legal owner of each of them.
In late 2006 / early 2007, the wife[3] purchased real property at Suburb U. She rented this property out and subsequently relocated her practice to it.
[3] Via ZZ Securities Pty Ltd as trustee for the ZZ Securities Trust.
In late 2006 / early 2007, the wife[4] purchased real property at Town CC to use as a weekend retreat and as a place to keep her horses.
[4] In the name of VTrust.
On 1 July 2007, the husband restructured F Practice. This restructure involved the sale of the business from the F Trust[5] to F Pty Ltd and was intended to facilitate the future inclusion of shareholders.
[5]A discretionary trust, the corporate trustee of which was F Pty Ltd (which was formerly P Pty Ltd).
On 30 July 2007, the wife[6] purchased further real property at Suburb U. Having rented it out for a period of time, she later relocated her practice (from the first purchased U property) to this property sometime in or about May 2008 and then, in December 2008, from this property to premises within the U Shopping Centre. This relocation required ZZ Pty Ltd to enter into a lease - both parties later[7] executed a deed of guarantee and indemnity for the same.
[6] Via ZZ Securities Pty Ltd as trustee for the ZZ Securities Trust.
[7] On 9 February 2009.
In September 2007, the parties realised about $400,000.00 from the sale of the Suburb R land.
In October 2007, the parties[8] purchased real property at Suburb BB for $2,000,000.00. They used the $400,000.00 obtained from the sale of the Suburb R land and borrowed the remaining $1,600,000.00. They, and the children, moved to live in this property in about December 2007 and, thereafter, funded significant improvements to it.
[8] Via V Holdings Pty Ltd as trustee for the V Trust.
In April 2008, the wife was injured and, having travelled to Sydney, was later hospitalised there. Initially unable to work, she returned at a reduced capacity. The husband accepts that the fact her income diminished at this time placed the parties under financial pressure. In order to ease this pressure, V Holdings Pty Ltd borrowed $100,000.00 from F Pty Ltd and $120,000.00 from the husband’s father.
In May 2008, the parties separated for a period of about four weeks. After they reconciled, the wife sought access to the husband’s financial information.
On 30 June 2009, the husband agreed to sell 45 per cent of F Pty Ltd to Mr WT, a colleague, and 10 per cent of F Pty Ltd to Ms SS, a practice manager. It was also agreed that those parties be entitled to share in the company assets as at 30 June 2009 and in profits derived from that date, irrespective of the date from which the share transfers were completed.
In August 2009, a ‘discussion paper’ relating to the partial sale of F Pty Ltd issued.
In September 2009, the parties separated for several weeks.
In either October or November 2009, the parties convened a meeting of their respective accountants in order to address the wife’s request for financial information about the husband’s practice, and to discuss her financial position. It was decided that the V Trust would lend the wife $125,000.00. The husband says the wife’s accountant advised her to reduce her spending. He also says she was provided with financial information about F Pty Ltd and/or F Practice, that there was discussion about the sale of shares to his colleague and Ms SS and the August discussion paper about the sale of the same was provided to her. The husband says that, after seeing the information, the wife said she did not intend to pursue a divorce. I accept the husband’s evidence in this respect.
In December 2009, ZZ Pty Ltd stopped paying rent for the premises at the U Shopping Centre. These payments had been guaranteed personally by the parties.
The parties separated finally no later than 14 January 2010 at which time the wife and the parties’ youngest child, N, moved to live in rented premises. Until late January 2010, the father and three of the children continued to live in the former matrimonial home at Suburb BB.
At the end of January 2010, the father moved to rental premises and was joined there by four of the children for at least periods of time.
In about April 2010, the wife terminated the lease held by ZZ Pty Ltd for the premises in the U Shopping Centre and relocated her practice to Town AA. Both parties were sued as a result of the termination. The wife and N moved to live in Town AA. L joined them until about mid-August 2010 when he returned to live with his father. L moved to live with his mother again between about March 2011 and early 2012, when he moved to live independently interstate. J and M continued to live with their father – K did so for about three months before moving interstate to further her career.
The wife was involved in a car accident in about May 2010. She sought to claim on an income protection policy from about 19 May 2010 on the basis that the anxiety and depression she had experienced as a result of the separation had been exacerbated by the accident.
On 2 July 2010, the wife filed an Initiating Application, by which she also sought interim orders for, amongst other things, spouse maintenance.
In early August 2010, the parties sold the BB property for $1,600,000.00 ($400,000.00 less than they had paid for it in October 2007). At this time, the debt secured by mortgage over this property was $1,618,740.35 and the debt secured by mortgage over the Y and X investment properties was $302,336.26. There was a shortfall of $299,539.00 owing to the bank after the sale of the BB property. The parties used about $180,000.00 paid by Mr WT in partial payment for his acquisition of the interest in F Pty Ltd so as to be able to effect settlement. That is, they used funds received as a consequence of the sale by the husband of an aspect of the practice he had created to meet joint debt.
On 17 September 2010, Mr WT and Ms SS signed a shareholders’ agreement in relation to their respective purchases of interests in F Pty Ltd. Their purchases, via their respective entities,[9] were completed by 30 September 2010. Mr WT was to pay $405,000.00 for his 45 per cent interest and Ms SS $55,000.00 for her 10 per cent interest.
[9] The WT Family Trust for Dr WT and the EE Holdings Trust for Ms SS.
On 19 October 2010, the parties agreed[10] that the husband require Mr WT to pay the remaining $225,000.00 due in relation to the share transfer agreement (in his capacity as trustee of the P Family Trust) to him within seven days. They also agreed that the husband would, thereafter, cause these funds to be paid into his then solicitors’ trust account and invested in an at call IBD account. They also agreed that each be paid $50,000.00 from this sum (before it was invested on their behalf) with this amount to be characterised at trial as a partial property settlement received by each of them.
[10] Consent Order made 19 October 2010.
On 20 October 2010, O’Reilly J ordered that, until further order, the husband pay the wife $1,630.00 per week interim spouse maintenance, with such payments to be paid from the balance of funds in trust ($125,000.00) in the at call IBD account maintained by his then solicitors. Her Honour also ordered that the total amount paid to the wife be characterised at trial as to whether it appropriately is regarded as interim spousal maintenance or partly or wholly as a partial property settlement.[11]
[11] Clause 6, Order made 20 October 2010.
On 10 November 2010, a letter of demand issued to the parties in relation to the $51,667.41 arrears of operating expenses and outgoings which had accrued on the U Shopping Centre lease.
During 2010, the wife accessed more than $106,000.00 from her superannuation entitlements to discharge unparticularised business debt.[12]
[12] Evidence given by the wife during cross-examination.
On 2 December 2010, the wife’s income protection payments were terminated on the basis that she was medically able to return to full time employment. The report prepared for the insurer noted she had decided to remain working on a part-time basis at that time.
On 10 December 2010, the parties were sued in relation to the failure of ZZ Pty Ltd to meet lease obligations in relation to the U Shopping Centre premises. Whilst these proceedings were subsequently discontinued against the husband, this only occurred after he had incurred costs relating to them.
On 13 May 2011, Registrar Kane ordered, by consent, that $14,123.13 be paid to each party from the funds held in the at call IBD account maintained by the husband’s former solicitors and that these funds be received by each party by way of partial property settlement.
In August 2011, MM Australia Pty Ltd (“MM”) obtained a Judgment for $887,982.44 against the wife. In September 2011, MM filed a creditor’s petition alleging that the wife owed it $930,877.16.[13]
[13] Being the total of the Judgment debt, costs and interest.
On 20 October 2011, the husband entered into an instalment arrangement with the Australian Taxation Office in respect of $74,072.52 income tax payable as a consequence of the capital gain on the sale of the Suburb R property (which had occurred before separation). Because the wife’s tax return was prepared on the basis of there being no capital gain, he was required to meet the entirety of this liability.
Sometime in 2010, the wife settled the LL Trust. In about August or September of that year, she established a professional practice in Town AA. The husband alleges that she earned approximately $500,000.00 per annum from this practice and has disposed of horses and jewellery for undisclosed amounts. The wife’s failure to provide full and frank disclosure of matters associated with her practice, earnings and overall financial affairs since separation has made the husband’s attempts to investigate her post-separation financial affairs and obtain evidence of her actual financial position almost impossible.
In December 2012, the wife swore that she had settled with MM on the basis of a payment to that entity of the amount of $150,000.00. She swore, at that time, that $144,491.47 remained owing to Investec but provided no further information about this. MM subsequently discontinued its proceedings.
However, it appears that another of her creditors subsequently presented a creditors petition. A sequestration order was made in relation to the wife on 26 May 2014.
After Orders were made in June 2015, the properties located at Suburb Y and Suburb X were sold for $456,000 and $500,000 respectively. Liability to St George Bank in the total amount of $812,210.87, secured by these properties, was discharged and the balance of the sale proceeds[14] (in the amount of $159,932.00 on the husband’s evidence) has been held on trust.
[14] after costs associated with sale.
In June 2014, the husband had borrowed $300,000.00 from St George Bank in order to meet outstanding legal costs. A condition of that facility was that he was to reduce the principal by $50,000.00 every six months. At the time of the sale of the properties, the sum of $209,126.91 remained outstanding.
Whilst the husband’s evidence is that, when he borrowed the $300,000, he thought this amount was not secured by either of these properties, the reality is that this additional borrowing was in fact secured over them. Consequently, the funds paid to St George upon the settlement of the sale of the properties included the outstanding $209,126.91 owing solely by the husband.
The wife’s approach to the duty of disclosure
It is, I think, necessary to comment upon the wife’s attitude to the disclosure of documents and information about her financial affairs after separation before embarking upon the familiar and well known approach[15] to the determination of property settlement proceedings.
[15]See, for example : Stanford v Stanford (2012) 247 CLR 108; Pastrikos & Pastrikos (1980) FLC 90-897; Lee Steere & Lee Steere (1985) FLC 91-626; Ferraro & Ferraro (1993) FLC 92-335; Waters & Jurek (1995) FLC 92-635; Clauson and Clauson (1995) FLC 92-595 and Hickey & Hickey (2003) FLC 93-143.
I consider that the wife’s evidence during cross-examination clearly established that she understood:
a)the obligation of ongoing disclosure imposed upon parties to litigation in this Court; and
b)that such obligation encompasses information and/or documents relating to both personal income, expenses, assets, liabilities and the income, expenses, assets and liabilities of entities controlled by a party.
I accept her frank admission of her failure to disclose various documents such as personal bank account statements and those related to the LL Trust. This is particularly relevant because it is through this structure (and not the entities valued by the single expert witness, Mr QQ) that she was operating her practice at the time of the trial.
I also accept her admission that she had had every opportunity to disclose documents and that she had chosen not to do so.
Had her approach to the discharge of the onerous obligations of disclosure imposed upon parties to litigation in this Court been other than that outlined above, I may well have been persuaded to accept that non-disclosure of certain specific and isolated documents occurred through oversight.
However, the combined effect of her frank – and, I consider, honest – admission that she had deliberately chosen not to disclose documents, the length of time over which full and frank disclosure was persistently sought by the husband’s solicitors and her failure fully to rectify any deficiencies in disclosure prior to the trial, compels the conclusion that she acted deliberately in failing to provide documents to the husband.
The consequence for the husband – and the Court – of the wife’s attitude to disclosure has been that it is not possible to ascertain the extent of the wife’s post separation income or the value of her practice at any given time since the single expert witness, Mr QQ, prepared his report.
In such circumstances, I accept, as submitted by Senior Counsel for the husband, that the following observations of the Full Court in In the Marriage of Weir[16] are apposite:
It seems to us that once it has been established that there has been a deliberate non-disclosure, which follows from his Honour’s findings in this case, 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.
These proceedings: is it just and equitable that orders altering the interests of the parties in property owned by either of them are made?
[16] (1992) 16 Fam LR 154 at 58.
The parties’ voluntary separation some years ago means that they no longer enjoy the common use[17] of property in which their existing legal and equitable interests were acquired during a lengthy cohabitation. Such separation has also brought to an end any “assumption that any adjustment to those interests could be effected consensually as needed or desired”.[18]
[17] In the sense of commonly held ideas as to the use to which such jointly owned property should be put.
[18] Stanford v Stanford (2012) 247 CLR 108.
Both parties contend, and I accept, that, in the circumstances where they previously owned real property jointly and were liable under jointly owing mortgages, it is just and equitable within the meaning of s 79(2) of the Family Law Act 1975 (Cth) (“the Act”) that, pursuant to s 79(1) of the Act, orders altering the interests in property owned by each of them are made.
Whilst agreeing that it is just and equitable that orders altering their interests in property are made, the parties are in conflict as to the terms of the orders which are appropriate to reflect properly those matters which, by s 79(4) of the Act, must be considered.
Additionally, one of the aspects of this case which requires emphasis is the fact that the parties each managed their respective practices completely separately and, as a consequence, engaged in separate and individual ownership of real property and in other business and financial decisions associated with the same.
The parties’ proposals
The vast disagreement between the parties about matters such as those items which are to be included within the property under consideration, the value to be ascribed to the same and the manner in which monies spent both during and after their separation are to be taken into account finds reflection in the orders proposed by each. For example, the wife proposes[19] that the husband pay her $3,000,000.00 in cash. In contrast, the husband contends that the nett value of the property of the parties is about $235,000.00.[20]
[19] Amended Initiating Application filed 29 June 2012.
[20] Paragraph 6, Outline of Submissions of the Respondent Husband dated 13 December 2013.
Both parties seek orders to separate their financial interests in entities within the P Group structure.
Existing legal and equitable interests, the property of the parties and related issues
The wife’s affairs are now in the hands of her Trustee in Bankruptcy as a sequestration order was made on 26 May 2014. The Trustee was present when the matter was re-opened in early June 2015[21] but did not seek to be joined to the proceedings.[22]
[21] Having elected in writing to prosecute the action: s 60(2) Bankruptcy Act 1966.
[22] s 79(11) Family Law Act 1975 (Cth).
Upon the making of the sequestration order and subject to those exceptions provided for in s 116(2) of the Bankruptcy Act 1966 (Cth), the wife’s property vested in the Trustee.[23] The wife’s evidence, elicited during cross-examination, was that her entitlement to superannuation is about $700.00.
[23] s 58(1) Bankruptcy Act 1966.
Thus, upon the wife’s bankruptcy, the property of the parties may be regarded within the following categories:
a)the husband’s property; and
b)the property vested in the wife’s Trustee in Bankruptcy; and
c)any property of the wife which, as a consequence of the operation of s 116(2) of the Bankruptcy Act, has not vested in the Trustee in Bankruptcy.
It is, I think, useful to group the asserted property – and the asserted liabilities – into each of these categories. Such conclusion is further supported by the accepted reality, to which reference has already been made, that these two parties operated their respective practices separately and, save for loans made by the husband to the wife, each was solely financially responsible for expenses associated with the same.
Husband’s property[24] – prior to the sale of the X and Y properties
[24] as asserted by him.
| Item | Ownership | Description | Wife’s Value | Husband’s Value |
| 1. | 99% | G Street, Suburb X | $425,000.00 | $495,000.00 |
| 2. | 99% | R Street, Suburb Y | $410,000.00 | $451,440.00 |
| 3. | P Family Trust | $326,231.00 | ||
| 4. | F Pty Ltd (trading as F Practice) | Subsumed within P Family Trust | ||
| 5. | E Pty Ltd | Subsumed within P Family Trust | ||
| 6. | F Trust | |||
| 7. | PP Pty Ltd | |||
| 8. | FF Pty Ltd | wound up & deregistered[25] | ||
| 9. | Loan made to V Trust | $9,083.00 | ||
| 10. | Loan to FF Pty Ltd | $46.00 | ||
| 11. | Household contents | $40,000.00 | ||
| 12. | Motor bikes | $20,000.00 | ||
| 13. | Life and trauma insurance | $0.00 | ||
| 14. | Joint | St George mortgage reinvestment (…815) | ($305,098.33)[26] | |
| 15. | Loan from the husband’s father | NIL | $80,000.00 |
[25] Paragraph [98], husband’s affidavit filed 26 November 2012.
[26] Annexure “MKP2”, wife’s affidavit filed 11 November 2014.
The valuations by Mr QQ
Mr QQ was appointed by the parties as the single expert witness in these proceedings. He was provided with joint instructions at a time when the wife was represented by solicitors.
The wife does not accept the value ascribed by Mr QQ to the husband’s interest in F Pty Ltd. She makes the following specific criticisms of the valuation as part of her overall submission that I should not accept Mr QQ’s evidence – namely that:
a)the valuation was conducted on the basis of the husband’s 45 per cent interest in the company – rather than pursuant to the wife’s assertion that the company ought to be valued at its total value; and
b)the valuation of the plant and equipment was only approximately $400,000.00 when it was insured for $1,500,000.00; and
c)the valuation proceeded on the basis of the financial accounts presented by the parties and their respective accountants, rather than by Mr QQ (or someone else) first auditing the accounts; and
d)Mr QQ did not consider comparative data from sales of similar companies in his valuation process.
There is no other expert evidence to contradict Mr QQ’s valuation of the P Family Trust. Whilst Mr QQ accepted, during the wife’s cross-examination of him, that he had not had regard to extrinsic material such as that produced by the Australian Bureau of Statistics in arriving at his opinion, I am not persuaded that this casts any doubt on the opinions he expressed within his report.
The wife contends that, as a matter of “common sense,” the valuations Mr QQ provided are incorrect. In advancing this contention she asserted:
Whilst there are accounting records, bank statements and other documentation before the Court to support such a minimal matrimonial pool for settlement purposes, common sense helps one conclude that the current documents before the Court do not reflect the true quantum and identity of the matrimonial pool.[27]
[27] Page 4, wife’s written Submissions.
This assertion by the wife confirms the existence of a basis for a conclusion about the relative paucity of value of the property of the parties. However, the manner in which she has considered the ‘accounting records, bank statements and other documentation before the Court’ which ‘support such a minimal matrimonial pool for settlement purposes’ is clearly at odds with the expert opinion provided by Mr QQ.
I accept the submission made on behalf of the husband that nothing arose during Mr QQ’s cross-examination to cast doubt on the opinions as to value he expressed within his report.
Where the views of the wife and the opinion of Mr QQ are in conflict, I prefer Mr QQ’s opinion.
Other matters to be considered during assessment of the value of the property of the parties
In addition to the property summarised within the table above, a number of specific matters require further discussion.
Capital gains tax and realisation costs associated with the sale of the investment properties
The Y and X properties have now been sold. On the evidence, capital gains tax payable on the sale of these investment properties is about $160,622.00[28] (for which the wife is responsible for $1,606.00 and the husband $159,016.00 as a consequence of their legal ownership of the properties).
[28]the actual amount payable may well be different to this given that this figure was calculated using assumed costs of sale which may not in fact be as assumed.
Realisation and taxation costs associated with the winding up of V Holdings Pty Ltd and O Pty Ltd
The husband wishes to wind each of these entities up. The wife did not voice objection to this.
I accept that the costs and taxation implications associated with this course are as follows:
a)$4,975.00 realisation cost and $64,951.00 tax on the winding up of O Pty Ltd, an entity valued at $17,866.00 by Mr QQ; and
b)$4,565.00 realisation costs on the winding up of V Holdings Pty Ltd and/or the V Trust.
To do justice and equity to the parties in all the circumstances of this case, the only source from which such costs can realistically be met is the nett sale proceeds of the sale of the two investment properties.
Husband’s credit card debts and accounting liabilities
Senior Counsel for the husband submitted that, whilst the wife raised an issue as to whether the husband’s credit card and accounting liabilities should be included in the calculation of the nett value of the property, no challenge was mounted by her to them in cross-examination.
Whilst it is certainly accurate to say that the wife did not cross-examine the husband about his credit card liabilities, I am not persuaded that a failure to do so is necessarily determinative of the matter given the obligation to arrive at orders which are just and equitable in all the circumstances of the case.
In particular, I note that the husband’s evidence is that his liability pursuant to credit card facilities at separation totalled $45,858.00.[29] In such a circumstance, I consider it appropriate that this amount is used for the purpose of ascertaining the nett value of the property of the parties.
[29] Paragraphs [309]-[310], husband’s affidavit filed 26 November 2012.
The husband seeks that $13,442.00, which he describes as “accounting costs related to document disclosure”[30] is included as a liability for the purpose of determining the nett value of the property. Given his description of the basis on which these costs were incurred, I am not persuaded that this is appropriate.
[30] Item 54, husband’s Financial Statement filed 10 October 2013.
Husband’s overdrawn bank account
Whilst it may well be that the husband has overdrawn his bank accounts on occasion, I am not persuaded that, in circumstances where the parties separated in January 2010, it is appropriate to include this liability for the purpose of calculating the nett value of the property of the parties.
Funds lent to V Holdings Pty Ltd by the husband’s father
The husband’s evidence is to the effect that on 14 June 2010 – about five months after separation – his father entered into a Deed of Loan with V Holdings Pty Ltd by which he lent that entity $120,000.00.
The husband says these funds were then used to meet expenses relating to the sale of the former matrimonial home which was sold in early August 2010. Whilst others may disagree, I consider that the appropriate way to account for these funds is to regard them as constituting a further post-separation financial contribution made by the husband rather than including this familial liability in the determination of the net value of the property of the parties.
Funds lent to the husband by his father and used towards school fees
On 14 June 2010, 30 June 2010 and 28 June 2012, the husband’s father lent him a total of $80,000.00. These funds were borrowed by the husband’s father – in essence on the husband’s behalf – from a commercial lender. The husband has been paying the interest payments in respect of these borrowings on his father’s behalf. The wife did not really challenge that the husband had borrowed these funds but queried the necessity for him to do so.
The husband was not challenged in his evidence that he applied these borrowed funds toward meeting school fees of $98,186.41.
Given that the parties finally separated no later than about January 2010, that it was not suggested to the wife that she had agreed to these borrowings and the use to which the borrowed funds were put – namely, to meet an aspect of the children’s; support – I consider that the most appropriate manner in which these borrowings can be taken into account is by considering them to be a direct post separation financial contribution by the husband to the welfare of the children rather than including this further familial liability in the determination of the net value of the property of the parties.
Trustee in Bankruptcy - prior to the sale of the X and Y properties
| Item | Ownership | Description | Wife’s Value | Husband’s Value |
| 1. | 1% | G Street, Suburb X | $5,000.00 | $5,000.00 |
| 2. | 1% | R Street, Suburb Y | $4,560.00 | $4,560.00 |
| 3. | Z Pty Ltd | -$416,697.00 [31] | ||
| 4. | ZZ Pty Ltd as trustee for the ZZ Trust | -$46,610.00[32] | ||
| 5. | ZZ Securities Pty Ltd as trustee for the ZZ Securities Trust | -$64,168.00[33] | ||
| 6. | LL Trust | Unknown |
[31] Annexure “JB-02”, affidavit of Mr QQ filed 21 March 2013.
[32] Annexure “JB-02”, affidavit of Mr QQ filed 21 March 2013.
[33] Annexure “JB-02”, affidavit of Mr QQ filed 21 March 2013.
In light of the wife’s more recent evidence that she has ‘liquidated’ all of her assets, I am not persuaded that it is appropriate to include values for property such as horses previously owned by the wife.
Wife
| Item | Ownership | Description | Wife’s Value | Husband’s Value |
| 1. | Wife | Household contents | $2,000.00 | |
| 2. | Wife | Jewellery | $500.00 |
The wife gave evidence[34] about the following debts said to be owed to various people and organisations:
[34] Paragraph [117], wife's affidavit filed 21 October 2013.
a)$120,000.00 – to Ms KK; and
b)$18,000.00 – to Ms DD (wife’s sister); and
c)$10,000.00 – to Mr and Mrs NN; and
d)$30,000.00 – additional overdraft owing to Bank of Queensland; and
e)$31,500.00 – outstanding legal fees owing to various lawyers; and
f)$32,000.00 – owing to accountants; and
g)$22,000.00 – owing to National Australia Bank for credit card purchases; and
h)E $20,000.00 – outstanding 2010 tax liability; and
i)E $100,000.00 – outstanding 2011 tax liability.
Save as is provided for in the Bankruptcy Act, after the wife became a bankrupt, it is not competent for any creditor to enforce any remedy against her or her property in respect of a provable debt or, except with the leave of the Court on such terms as it thinks fit, to commence any legal proceedings in respect of a provable debt or take any fresh step in proceedings.[35] Consequently, these debts – and any others which predated her bankruptcy - will be subsumed or taken up in the wife’s bankruptcy.
[35] s 58(3) Bankruptcy Act 1966.
Additionally, whilst there is no evidence in any of the wife’s affidavits as to what became of the “ZZ” branded companies, they no longer form part of the husband’s balance sheet as contained in the submission proffered on his behalf - in any event, her interest in them will now have vested in the Trustee in Bankruptcy.
It appears that, since 1 July 2012, the wife conducted her practice through the LL Trust. I accept that, as a consequence of the wife’s failure to disclose relevant documents about this Trust, the husband has been unable to ascertain whether any value should be ascribed to it and, if so, the amount of the same.
Add backs asserted by each party
Add backs sought by the wife
The wife asserts that the Court should notionally add back the following sums:
a)$800,000.00 – asserted in her written submissions, without further detail or particularisation in any evidence, to be distributions from the V Trust to the husband throughout the course of the relationship (with the implication being that such sums were also not distributed to the wife); and
b)$500,000.00 – arising from proceedings commenced by the husband’s former business partners, in which the husband was involved between about December 1999 and mid-2003; and
c)$unknown – which represented the legal fees of the husband and Ms SS which were allegedly paid from matrimonial property; and
d)$unknown – 55 per cent of the value of the husband’s professional practice in circumstances where the wife asserts the husband disposed of the same during the proceedings in a deliberate attempt to reduce the matrimonial pool.
Asserted distributions to the husband from the V Trust
The wife seeks to have distributions made by the V Trust to the husband during the relationship notionally added back to the property available for consideration in these proceedings on the basis that the same payments were not made to her.
Whatever the quantum of the distributions made to the husband by this Trust, there is nothing to suggest that he has retained such funds or applied them in any way other than for the benefit of the family unit. There is no suggestion by the wife that he acted wantonly or recklessly in respect of any distributions he received. Given these conclusions, I am not persuaded that it is appropriate to notionally add back any such distributions.
The $500,000.00 settlement sum
The wife knew that the husband and Ms SS had been sued by one of the husband’s former colleagues and that the million-dollar claim was settled by the payment of approximately $500,000.00[36] in July 2003 – about six and a half years before the parties finally separated.
[36] Paragraph [58], wife's affidavit filed 30 May 2013.
I accept the husband’s evidence to the effect that, in compromising the action, he made a commercial decision based on the information available to him at the time and because of his concern that ongoing involvement in litigation may have impacted adversely on the operation (and, presumably, therefore, the profitability) of F Pty Ltd.
There is no dispute that F Pty Ltd paid the legal costs associated with this action.
I accept that the husband sourced the funds necessary to compromise the action by borrowing:
a)$200,000.00 from his father; and
b)$50,000.00 from Ms SS; and
c)$250,000.00 against the investment properties.
I also accept that these borrowings were re-paid within three years.[37] That they were demonstrates the extent of the husband’s capacity to generate funds (by which I mean all monies available to him from whatever source and howsoever characterised for whatsoever purpose) in the three year period after the payment of the same in about July 2003.
[37] Paragraph [99], husband's affidavit filed 26 November 2012.
In such circumstances, there is no basis for notionally adding back the monies repaid by the husband to discharge borrowings undertaken to meet liabilities arising from litigation commenced by his former colleagues.
Legal fees of the husband and Ms SS in relation to the litigation which commenced in late December 1999 and was compromised in July 2003
The wife submits that an unknown sum of money was paid from the “matrimonial pool” to meet the legal fees incurred by the husband and Ms SS in defending the action brought against them by HH Partners.[38]
[38] Wife’s submissions, page 9.
Her affidavit material contains no quantification of this sum. However as noted above the husband accepts that F Pty Ltd paid the legal fees associated with the litigation.[39]
[39] Paragraph [98], husband's affidavit filed 26 November 2012.
Even if the amount was quantified, in circumstances where the litigation occurred as it did and the costs were paid as they were, I am not persuaded that it is appropriate to notionally add back funds spent in defending it.
Alleged diminution of the value of the property as a consequence of the husband’s decision to divest himself of 55 per cent of his interest in F Pty Ltd
In contending that the Court should be persuaded that the husband’s decision to divest himself of 55 per cent of his interest in F Pty Ltd was designed to reduce the property available for distribution between the parties, the wife appeared to place particular significance upon Mr QQ’s emphasis that this disposal occurred whilst these proceedings were on foot.
It is certainly true that Mr QQ emphasised this fact in his report. However, it seems to me that it is highly likely he did so for the purpose of identifying this as a potential issue – understandably and quite properly, he certainly did not express an opinion about any conclusions which should be drawn from the fact of the husband’s disposition of his interest.
Additionally, Mr QQ accepted that a decision by a person, such as the husband, to dispose of part of his interest in F Pty Ltd had both positive and negative consequences including, as positives, stability of key employees, maintenance of the reputation of the business and a reduced risk to its operation if one professional left the practice.
I accept the husband’s evidence in relation to the disposition of 55 per cent of his interest in F Pty Ltd. In particular I accept that:
a)one of the reasons for this decision was to increase the prospects of Mr WT and Ms SS (who the husband regarded as key personnel) continuing their association with the business; and
b)funds received from the sale of his interest were used to meet existing matrimonial liabilities (namely, the shortfall associated with the sale of the former matrimonial home); and
c)the price was equal to that which was suggested by the accountant of the company as representing an indicative value of the business; and
d)the husband disclosed the fact of the proposed sale to the wife before it occurred.
I record that the wife conceded during cross-examination that, in September 2009 she was aware of the husband’s proposal to dispose of some of his interest in F Pty Ltd.
Whilst she denied that her knowledge extended to the form the ultimate disposition took,[40] she conceded she had received a copy of the “Discussion paper” (which contained the information that what was proposed was the sale of 55 per cent for $460,000.00) no later than 10 September 2009.
[40] Exhibit 12.
In addition, the wife appeared to accept the merits of the proposition that the husband (as a sole trader) may benefit from the sale of an interest in the business to Mr WT, a person with whom he shared his profession. Her real difficulty appeared to be with the sale of 10 per cent to Ms SS. Whilst she certainly did not accept that this was reasonable - and was emphatic in stating that it was not a decision she would have made - the mere fact of differences in opinion about the desirability or otherwise of enjoining Ms SS, the practice manager, into the practice does not mean that a decision to do so was unreasonable or inappropriate or wanton, reckless or made with the intention of diminishing the property available for distribution between the parties.
Whilst Mr QQ’s evidence was to the effect that he applied a discount to his assessment of the husband’s interest in F Pty Ltd in consideration of his status as a minority shareholder - such that the value of the husband’s interest was reduced from $554,889.00 to $377,325.00 - he also indicated that the arrangement ultimately entered into between the husband, Mr WT and Ms SS was reasonable to reduce risk and secure key employees.
I am not persuaded that the husband’s decision to sell 45 per cent of his interest in F Pty Ltd to his colleague Mr WT and 10 per cent of his interest in F Pty Ltd to Ms SS was anything other than a commercial decision arrived at after considering the potential benefits of such a course. I am not persuaded that such decision was wanton, reckless or designed to reduce the property available for distribution between the parties. In fact, the wife received the direct benefit of the following from the funds paid by Mr WT to acquire 45 per cent of the husband’s interest in the practice the husband had created:
a)the reduction of $180,000 of joint debt owing to a commercial lender after the sale of the jointly owned former matrimonial property at Suburb BB; and
b)$50,000: paid to each party by consent; and
c)$14,123.13: paid to each party by consent; and
d)$107,782.00: paid to her by way of spousal maintenance by virtue of the Order made in 2010.
Add backs sought by the husband
The husband’s affidavit material contains assertions that funds paid to the wife in November 2009[41], funds said to have been spent by her on the ownership and maintenance of horses,[42] funds withdrawn by her from one of his accounts and said to have been spent on legal fees,[43] and the allegedly erroneous payment by him of child support for N[44] ought to be notionally added back to form part of the property of the parties amenable to orders in these proceedings. However, sensibly, no submission was made by Senior Counsel who appeared for the husband that such amounts should be notionally added back.
[41] $125,000.00 : paragraph [272], husband's affidavit filed 26 November 2012.
[42] Estimated by him at $250,000.00:
[43] $6,000.00: paragraph [277], husband's affidavit filed 26 November 2012.
[44] $11,385.82: paragraph [272], husband's affidavit filed 26 November 2012.
Schedule A (the list of assets contended for by Senior Counsel for the husband during the course of his submissions)[45] does not include the interim distribution totalling $64,123.13[46] made to the husband or the interim distribution totalling $64,123.13 made to the wife. Given that each party received the same by way of partial property settlement, such an approach is, I think, eminently sensible.
[45] Outline of Submissions of the respondent husband dated 13 December 2013.
[46]$50,000.00 (pursuant to an Order made by consent by O’Reilly J on 19 October 2010) and $14,123.13 (pursuant to an Order made by consent by Registrar Kane on 13 May 2011).
Additionally, Schedule A does not include the amount of $107,782.00 - being the total of the spousal maintenance payments made by the husband to the wife pursuant to the Order made by O’Reilly J on 20 October 2010. Given that her Honour’s order refers to the payment being made “by way of interim spousal maintenance”, this determination not to seek that these funds be notionally added back to the property available for consideration is both sensible and appropriate.
In any event, given that:
a)the payments were made pursuant to an order for spousal maintenance (which itself rests upon the Court being satisfied that the wife was then unable to support herself adequately and that the husband had the capacity to make such payments); and
b)the payments were made between October 2010 and January 2012; and
c)despite his contention that the payments were made at a time when the wife was also in receipt of income protection payments and, additionally, was engaged in at least part time employment which provided her with the capacity to support herself adequately, no application was made by the husband to discharge the interim October 2010 Order,
I would not have been persuaded to notionally add back these monies.
Of course, that is not to say that proper regard should not be given to the fact that the wife received these funds from part of the funds paid by Mr WT to the husband to acquire a 45 per cent interest in F Pty Ltd: that is, the wife was clearly supported by monies received from the sale of part of the husband’s interest in that entity. In addition, it appears that she received these funds during at least a period of time when her insurer had concluded that she was capable of retuning to paid employment on a full-time basis and she had asserted that she was capable of and intended to work on a part-time basis.
Additional potential addback: proceeds of sale used to meet the husband’s borrowings incurred to meet his legal expenses
As already noted, $209,126.91 of the funds paid to St George after the sale of the two investment properties referred solely to borrowing incurred by the husband in mid-2014 in order to pay his legal costs.
Consideration of the manner in which the sought add backs may be dealt with
Whilst delivered before Stanford, in Lovine & Connor and Anor (2012) FLC 93-515 the Full Court said, at [101]–[103]:
101. The judicial act here was the determination of just and equitable property Orders in the exercise of the discretionary jurisdiction conferred by s 79. Within the exercise of that overall discretion, when an issue of financial conduct conveniently described generically as a notional add-back arises, it is not determined by the application of fixed legal rules. Guidelines have been formulated over time in a number of well-known authorities concerning issues surrounding notional add-backs (see, for example, Omacini & Omacini (2005) FLC 93-218; DJM & JLM (1998) FLC 92-816; Townsend & Townsend (1995) FLC 92-569; Kowaliw & Kowaliw (1981) FLC 91-092; Browne & Green (1999) FLC 92-873; Chorn & Hopkins (2004) FLC 93-204; Cerini & Cerini [1998] FamCA 143; Polonius & York (supra)).
102. Undoubtedly such guidelines promote uniformity of approach and diminish the risks of inconsistency and capricious and arbitrary adjudication, but as the High Court made clear in Norbis & Norbis (1986) FLC 91-712 (“Norbis”), such guidelines do not constitute binding rules of law. Mason and Deane JJ said in Norbis at 75,166:
The nature of the issues which arise under sec 79 is such that there is either little or no scope for giving guidance in the form of binding rules of law.
103. Understood in this context, disposition of an issue concerning a potential notional add-back does not involve the application of a fixed rule to the facts on which its operation depends. Rather, the exercise is one of discretion within a discretion. That is, a discretion as to the manner in which the issue of notional add-back is to be treated within the overarching discretion of determining just and equitable orders under s 79.
In Watson & Ling (2013) FLC 93-527, delivered after Stanford, Murphy J, sitting at first instance, said as follows:
29. Where, but for the disposal of money or other property by one party, legal or equitable interests in it would have been part of those existing at trial, it may be possible to assert, in the particular circumstances of a case, that the money or property is nevertheless to be considered as part of the existing legal or equitable interests of the disposing party (sham transactions and circumstances where it can be established that the property is held, for example, on trust by another for the disposing party are examples). The investigation of issues of that type might be seen to be part of the establishment of the existing legal and equitable interests at trial – a task which the majority of the High Court in Stanford (at [37]) said should be the first step in considering, pursuant to s 79(2) (cf s 90SM(3)), whether it is just and equitable to make an order.
30.In many other cases, for example those which come within the convenient rubrics of “waste” (see Kowaliw & Kowaliw (1981) FLC 91-092) or “premature distribution” (see, for example, Townsend), legal and equitable title to the money or property will have passed. It could not be said that the money or property is part of the “existing legal or equitable interests” of a party or the parties. The notion that such money or property should be treated as a “notional asset” or “notional property” appears to run contrary to the thrust of the decision in Stanford: at issue is the consideration of two separate questions, the first of which is whether existing legal or equitable interests should be altered.
31. Yet, of course, unilateral actions of the type described might very well be a consideration – indeed, in an appropriate case, an important consideration – in deciding if any order should be made altering the existing interests of a party or parties.
32. Where the Court has determined that it is just and equitable to make an order pursuant to s 79(2) or s 90SM(3) and there is clear evidence that one party has engaged in conduct and, but for that conduct, the legal and equitable interests of a party or the parties (or the value of those interests) would have been significantly greater, justice and equity may require recognition of the unfairness inherent in those circumstances in the terms of the orders to be made.
33. How might that be recognised? First, consistent with existing authority, it can be recognised pursuant to s 75(2)(o) (cf s 90SM(3)( r) (see, for example, Omacini & Omacini (2005) FLC 93-218, Browne & Green (1999) FLC 92-873 and Cerini). Secondly, it might be contended that it might be recognised within the assessment of contributions. This Court has long eschewed the notion of “negative contributions” (see, for example, Antmann & Antmann (1980) FLC 90-908). Nevertheless, it might be argued that the “non-dissipating party” can be seen to have made a disproportionally greater indirect contribution to the existing legal and equitable interests (for example to their preservation) if it is established that, but for the other party’s unilateral dissipation, those existing legal and equitable interests would have been greater or had a greater value.
34. The assessment of the circumstances under discussion is, ultimately, a matter of discretion (see, for example, Cerini at [46] and Townsend at 81,654). Equally, however, authority dictates that it will be “the exception rather than the rule” (Cerini at [46]) that a direct dollar adjustment equivalent to the amount of the alleged dissipation of the pool is made to the otherwise entitlement of a party. It may be that aspects of the erstwhile treatment of legal fees pre-Stanford (see, for example, Chorn & Hopkins (2004) FLC 93-204) will require further consideration in an appropriate case.
35. Importantly, of course, as has been emphasised in many authorities including those cited above, not every dissipation by a party can be seen to involve an affront to justice and equity; again the circumstances of the individual relationship must be assessed.
In Bevan & Bevan (2013) FLC 93-545 the plurality said, at [79]:
We observe that “notional property”, which is sometimes “added back” to a list of assets to account for the unilateral disposal of assets, is unlikely to constitute “property of the parties to the marriage or either of them”, and thus is not amenable to alteration under S 79. It is important to deal with such disposals carefully, recognising the assets no longer exist, but that the disposal of them forms part of the history of the marriage – and potentially an important part. As the question does not arise here, we need say nothing more on this topic, save to note that s 79(4) and in particular s 75 (2) (o) gives ample scope to ensure a just and equitable outcome when dealing with the unilateral disposal of property.
In addition, Finn J said, at [160]:
These reminders that the jurisdiction under s 79 is a jurisdiction to alter individual interests in title to property and that there is no community of property in this country, might also call into some question the current practices in relation to the treatment of property which is no longer in existence but which one party has had the use of (the so-called “add backs”), and perhaps also of the unsecured liabilities of one or both parties. It may well be that these matters should more strictly be considered in making findings under s 79(4)(e)(i.e. s75(2)), or in an extreme case, when considering the question under s 79(2) as to whether it is just and equitable to make any order under s 79. But these questions do not arise in the present case, and are thus for another day.
Unsurprisingly given the view he expressed in Watson (supra), in Baglio & Baglio[47] Murphy J, in discussing the parties’ agreement that money spent on legal fees should be “added back” to the pool, said at [186]:
… In my view, the role of “add backs” or, more specifically, the concept of “notional property” in property proceedings may need to be revisited in light of Stanford. The emphasis on the predominance of existing legal and equitable interests raises concerns over the place of “notional” assets or a “notional pool” as a means of dealing with a finding of inequity or injustice arising from the use by one party of property or funds which, but for that use, would have been part of the legal and equitable interests of the parties at trial. In that respect, I repeat here what I said in Watson & Ling [2013] FamCA 57 at [27] – [35].
[47] [2013] FamCA 105
In Harper & Harper [2013] FamCA 528 (delivered 19 July 2013) Macmillan J stated at [63] and [64]:
The clear statement of principle in Stanford is that in order for the Court to determine whether it is just and equitable to make orders pursuant to s 79, it must first identify the existing legal and equitable interests of the parties in the property. As Murphy J said in Watson & Ling at paragraph 30, the concept of ‘notional property’ appears to run contrary to the thrust of the decision in Stanford”. Whilst justice and equity might require recognition of either the unfairness of the conduct of one of the parties, which arguably would apply to both the Kowaliw type situations or where there has been a premature distribution of property, as noted by Murphy J, that conduct could be taken into account pursuant to s 75(2)(o).
It is not yet clear how add backs will be approached as a result of Stanford. … It is quite possible that as a result of the decision in Stanford there will be little place for add backs in the assessment the Court must make of the parties’ legal and equitable interests. At the very least the decision in Stanford is likely to emphasise once again the exceptional nature of add backs.
I consider that the “overarching discretion” of determining just and equitable orders between the parties can best be met by declining to add back notionally those amounts sought to be so treated by each of the parties. I propose to have regard to any relevant matter pursuant to s 75(2)(o) of the Act.
The property within each of the categories referred to in paragraph 67 is susceptible to the power of the Court to make such order as it considers appropriate.[48]
[48] ss 79(1)(a), 79(1)(b), 79(1)(c) and 79(1)(d) of the Act.
Having regard to the findings specified above, the property of the parties and its values may be summarised as follows:
| Item | Description | Value |
| Assets | ||
| 1. | Remaining proceeds from the sale of the X and Y properties | $159,932.00 |
| 2. | P Family Trust | $326,231.00 |
| 3. | Loan made to V Trust | $9,083.00 |
| 4. | Loan to FF Pty Ltd | $46.00 |
| 5. | Husband’s Household contents | $40,000.00 |
| 6. | Husband’s Motor bikes | $20,000.00 |
| 7. | Wife’s Household Contents | $2,000.00 |
| 8. | Wife’s Jewellery | $500.00 |
| 9. | O Pty Ltd | $17,866.00 |
| Total assets | $575,658.00 | |
| Liabilities | ||
| 10. | O Pty Ltd – realisation costs and associated taxation liability | ($69,926.00) |
| 11. | V Holdings Pty Ltd – V trust – realisation costs | ($4,565.00) |
| 12. | Estimated CGT on sale of X and Y properties | ($160,622.00) |
| 13. | Credit Cards - husband | ($45,858.00) |
| Total liabilities | $280,971.00 | |
| Nett assets (excluding superannuation) | $294,687.00 | |
| Superannuation | ||
| 14. | Husband’s superannuation | $7,248.00 |
| 15. | Wife’s Superannuation | $700.00 |
| Total nett assets (including superannuation) | $302,635.00 | |
The s 79(4) considerations
In considering the relevant matters mandated by s 79 of the Act, it must be remembered that:
(a)that there is no presumption of equality of contribution between parties to a marriage, irrespective of the length of their union;[49] and
(b)the exercise of the discretion conferred 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.[50]
[49] Mallet v Mallet (1984) 156 CLR 605.
[50] Bevan & Bevan [2013] FamCAFC 116, [73].
Contributions of the parties
I accept that the parties bought a property at Suburb GG in joint names in late 1983 and started their cohabitation there. I further accept that, having moved from her Suburb JJ property to live with the husband in the GG unit, the wife rented that property and sold it in 1985.[51]
[51] Exhibit 18.
It is not disputed that, when the parties commenced cohabitation, the husband owned a car (which he values at $5,000.00 and the wife at $2,000.00) and some personal items. It is also accepted that the wife owned a car, personal items and real property at Suburb JJ (“the JJ property). What is in dispute is the value of the wife’s property at that time:
a)the wife asserts her car had a value of approximately $10,000.00 whilst the husband asserts that it had been purchased second hand three years before the parties’ relationship commenced; and
b)the wife asserts that she purchased the JJ property in 1981 using approximately $150,000.00 received by her from an inheritance and borrowings of approximately $30,000.00 whereas the husband asserts that she had only received an initial distribution of the inheritance at that time and received the balance of the same after 1985. [52]
[52] Husband’s affidavit filed 26 November 2012 at [23].
The husband does not accept as accurate any recollection or assertion made by the wife that she had substantial equity in the JJ property at the commencement of cohabitation. In circumstances where there is no independent evidence to substantiate or corroborate the wife’s recollections, I am not persuaded that she has discharged her onus of establishing the existence of significant equity in the JJ property at the time of cohabitation. It follows that I am not persuaded that the wife made any greater financial contribution to the parties’ joint purchase of their first jointly owned real property than the husband.
I therefore conclude that, at the commencement of their 26 year cohabitation, the property each party owned had little value and/or the value each party had in property they owned was modest.
If I am wrong in arriving at this conclusion, I accept the submission made on behalf of the husband that, given the length of the parties’ relationship, little really turns upon the determination of the parties’ initial financial contributions.
Financial contributions to acquisition, conservation or improvement of property
It appears likely that, as the husband recollected, the wife used whatever monies she obtained from the sale of the JJ property in 1985 to acquire shares. Unfortunately for the parties, these subsequently suffered a significant diminution in value as a consequence of the 1987 Black Monday share market event.
It is clear the husband does not accept the asserted quantum of the inheritance received by the wife after 1985. It is also clear that no documentary evidence of any nature has been provided by the wife to corroborate her recollection of the amount - which she asserts was $250,000.00. Whilst I accept that the wife inherited some monies during the parties’ cohabitation, in the absence of any corroborative evidence as to the quantum of the same, I am not persuaded that the wife has discharged her onus of establishing her receipt of such a significant sum of money during the course of the parties’ cohabitation.
Whilst it seems more likely than not that, at least initially, the wife earned a higher income than the husband – because she was employed in a more senior position at the time he was employed in a junior position – I am not persuaded that the difference in earnings was likely to have been as significant as the wife initially suggested. In arriving at this conclusion, I note that during cross-examination the wife conceded that she had approximated the difference.
In any event, even if I am wrong in arriving at this conclusion, the length of time during which any difference in income is likely to have persisted is likely to have been of relatively short compass when regard is had to the duration of the parties’ entire relationship.
The husband practiced as a specialist professional during the course of the parties’ cohabitation. In the period from 1997 (when the parties’ five children were under the age of ten years) until 2000, the wife remained out of the paid workforce to care for the children on a full-time basis. Save for this period, she practiced as a specialist professional, on either a full-time or part-time basis, during the parties’ cohabitation. In fact, the husband asserts she operated a lucrative and busy practice between 2002 and 2006.
I accept that, during their cohabitation, the husband’s income was used by the parties for their support and the support of the children. There is no dispute between the parties that, until about 2001, the wife’s income was similarly paid into a joint account and used by the parties for their support and the support of the children.
Whilst the husband asserts that after about 2001 the wife directed her income into accounts in her sole name, he acknowledges that she continued to contribute to the payment of joint expenses, including those associated with the support of the children. I accept that the wife paid household bills and family expenses, including the costs associated with the children’s attendance at private schools, from income she derived from her practice whilst the husband met mortgage and property insurance costs from income he derived from his practice.
I accept that, after the parties purchased the former matrimonial home in October 2007, the husband paid the mortgage repayments of about $10,300.00 per month (and insurance costs) from the income he derived from his practice whilst the wife paid the family’s day to day living expenses and the children’s school fees. A proper appreciation of the significance of the wife’s financial contribution can easily be gleaned from the fact that, on the husband’s evidence, when she was injured in about April 2008 and could not work to her previous full capacity, his income was insufficient to meet all of the household’s expenses – consequently, the parties caused the V Trust to borrow $100,000.00 from F Pty Ltd and also $120,000.00 from the husband’s father to meet ongoing interest repayments and costs.
After separation, the husband has been primarily responsible for the financial support of the children who remained living with him. Whilst the wife supported the parties’ children during the various times two of them lived with her, she did not pay child support as assessed to the husband.
As at November 2012, her liability in respect of unpaid child support stood at $13,018.53. By August 2013, this had increased to $40,102.17. Her current liability is for $78,000.00. Other than providing the husband with about $1,200.00 in the period from 30 June 2013, the wife has made no contribution to the financial support of the children. The consequence of the wife’s non‑payment of child support has obviously meant that the husband has borne almost the entirety of the financial needs of the children since separation.
The husband continued to apply the rental payments received from each of the Y and the X properties in meeting the borrowings related to those properties. Whilst he receives about $123.00 per week nett from those properties (about $6,396.00 per year), additional expenses like rates and insurance also need to be met. He has also met all of the mortgage repayments referable to the Suburb BB borrowings – in a total amount of $117,335.00.
As already remarked upon, the husband also paid nearly $100,000 toward the children’s school fees after separation and also met costs associated with the sale of the former shared residence at Suburb BB.
The husband’s superannuation entitlement
The husband is the only member of the P Superannuation Fund, which was established on 7 October 2008. At that time, his entitlement of $132,880.44 was rolled over from his previous fund.
In June 2011, Mr QQ valued the husband’s superannuation interest at $55,474.00. In doing so, Mr QQ discounted the value of a $95,000.00 investment in “XYZ Business” to ‘Nil’ because of the uncertainty about its ability to provide returns, given the losses incurred to date.
On 30 June 2011, 15 August 2011 and 20 September 2012 the husband made three additional investments in “XYZ Business” in amounts of $20,000.00 on each occasion. His Financial Statement filed on 8 October 2013 revealed that, by then, he had further increased the level of his investment in “XYZ Business” by utilising some of the $55,474.00 cash previously identified by Mr QQ as being held by the superannuation fund.
Having done this, the husband asserts that the proper value of his superannuation interest is $7,248.00 – a figure arrived at by deducting $4,104.00 (earmarked for tax, accountant’s fees and PAYG tax liabilities) from the (reduced) cash amount of $11,361.00. In arriving at this figure, he adopts Mr QQ’s approach of discounting to ‘Nil’ the investment in “XYZ Business”.
It seems to me that there is little option but to accept the husband’s figure of $7,248.00 as representing the value of his superannuation entitlement. However, I record my assessment that he appears to have embarked on a significant investment strategy in “XYZ Business” in the face of independent expert advice outlining the highly risky nature of this investment. Whether this decision is a masterful investment strategy or a demonstration of reckless decision-making will only be revealed in the fullness of time.
What can be concluded at this time is that the husband’s decisions to invest in “XYZ Business” has had the effect of significantly diminishing the value of his superannuation entitlement for the purpose of this proceeding. His decision has meant that the value of his entitlement for the purpose of this previously has fallen from $55,474.00 to $7,248.00 – a loss of $48,226.00.
Contributions other than financial contributions to acquisition, conservation or improvement of property
The husband submits that, given the length of the relationship and that each party made a non-financial contribution to the acquisition, conservation and improvement of real property during their cohabitation, little turns upon this issue.
Whilst I accept the wife’s evidence to the effect that she was the party responsible for organising matters and tradespeople when the real property owned by the parties required attention, I am not persuaded that this contribution means that the parties non-financial contributions were other than equal.
Contribution to the welfare of the family including in the capacity of homemaker or parent
I consider that both parties supported and encouraged each other to obtain advanced qualifications and engage in further training and professional development. In that sense, each contributed to the other’s income earning capacity.
It is clear the wife ceased paid employment for about three years between September 1997 and sometime in 2000 in order to be a full-time parent to the parties’ five children who were, at the commencement of this period all under 10 years of age.
Whilst the husband contends that the parties shared the homemaking and parenting responsibilities during their relationship, I consider it much more likely than not that these duties were, in fact, borne more substantially by the wife. She was the parent who engaged in part-time paid employment at various periods. I consider that the benefit of domestic assistance does not ameliorate the impost of the burden borne by the parent primarily responsible for managing and organising the children’s needs and those of the household.
I also accept that, after the parties separated, the husband was responsible for the care of the children who remained living with him. Authority supports the propositions that adult children are “children of the marriage” within the meaning of s 79 of the Act and that payments made to them – and, I consider, in support of them – can be regarded as contributions within the meaning of s 79 of the Act.[53]
[53]See, for example: Dougherty v Dougherty (1987) 163 CLR 278; Jones & Jones (1990) FLC 92-143; C and C [1998] FamCA 143; Gollings & Scott (2007) FLC 93-319.
I further accept that the parties’ youngest child lived with the wife for one year, during which she undertook the primary responsibility for his care.
Conclusions as to Contributions: s 79(4)(a)-(c)
The husband contends that financial contributions should properly be assessed at least as to 65 per cent in his favour. The wife simply submits that she should receive a cash payment of $3,000,000.00.
All contributions made by the parties must be considered and weighed. The contribution of any party as a homemaker and parent must be assessed, not in any “merely token way”, but in terms of its ‘true worth’ to the accumulation of property during the cohabitation.[54] I consider that, similarly, contributions which are not of themselves easily quantified in monetary terms – such as the support parties give each other during difficult times or by moving to ensure an opportunity for upskilling is taken - must be assessed in terms of their true worth to the accumulation of property or, I suggest, the acquisition and subsequent possession of an enhanced income earning capacity.
[54] Mallet and Mallet (1984) 156 CLR 605.
In assessing the contributions made by the parties the Court embarks upon a process involving the exercise of a broad discretion in respect of which reasonable minds may differ. Whilst this process is neither an accounting or mathematical exercise,[55] it does involve a movement from “a qualitative evaluation of contributions to a quantitative reflection of such evaluation” – that is, a “leap” from words to figures.[56]
[55] See: Norbis v Norbis (1986) 161 CLR 513 at 522; Brandt and Brandt (1997) FLC 92-758.
[56]Steinbrenner & Steinbrenner [2008] FamCAFC 193 at [234] per Coleman J.
I conclude that, in the period from the commencement of cohabitation until the parties separated in January 2010, the contributions of the parties, albeit different, were equal. Each contributed financially to the support of the family unit and each supported the other in the acquisition of qualifications. The wife supported the husband by moving with him overseas with two young children when he sought to upgrade his qualifications. The husband supported the wife taking the opportunity to undertake additional professional training during this period overseas.
However, in the period since separation, the husband’s contributions have significantly exceeded those made by the wife. He has been the party primarily responsible for the financial and physical care of the parties’ children, including by paying the non-insubstantial cost of their education. He has been the party who has met the mortgage repayments related to the debt outstanding in respect of the former matrimonial home. In the period from separation in January 2010 until November 2012, this amounted to $62,140.00. He has continued to make these payments in the amount of about $415.00 per week and has thus paid a further $55,195.00. In summary, the husband’s total post-separation financial contribution to the outstanding borrowings relating to the former matrimonial home amount to about $117,335.00.
Additionally, he has paid all of the capital gains tax liability arising out of the sale of the former matrimonial home (referable to the 2008 financial year) in the amount of $74,072.51 because the wife filed her tax return for that year without declaring any of this gain.
I consider that, the husband’s post separation contributions are such as to compel a conclusion that the assessment of the parties’ contributions in the period from separation until trial significantly favours the husband. I consider that the quantum of the property of the parties and the manner in which it is held is such that expressing this conclusion in percentage terms is unhelpful.
None of the orders proposed by either party will have any effect on the earning capacity of either party.
Section 79(4)(e) of the Act requires the Court to take into account and weigh, in the usual manner, those matters prescribed in s 75(2) which are relevant to the particular proceedings. No primacy is to be afforded to any particular section 75(2) matter and no priority afforded to the interests of either unsecured creditors or the husband (being the non-bankrupt spouse).
Relevant s 75(2) matters
The husband is 57 years of age and is in good health. He is engaged in secure employment in a practice operated by F Pty Ltd, of which he owns 45 per cent. There is nothing to suggest that he will not continue to engage in appropriate gainful employment as a professional into the future. He has no plans to retire early. He earns an income of $160,000.00 from the practice. Additionally, dividends are paid by F Pty Ltd to the P Family Trust. The aggregate of these payments is $244,000.00 per year. Senior counsel for the husband submitted that this amount is not “substantially” different to the allowance of $285,000.00 made by Mr QQ for the remuneration of the husband on a commercial basis. Whether the nearly 15 per cent difference is or is not ‘substantial’ is, it seems to me, somewhat relative and subjective. In any event, I intend to proceed on the basis of my acceptance of Mr QQ’s evidence and I conclude that the husband has the capacity to earn no less than $285,000.00 per annum.
As already noted, the manner by which he has discharged his liability for legal fees has meant that the funds taken by St George Bank at the time of the settlement of the sale of the X and Y investment properties increased by the amount of $209,126.91. Consequently, the nett sale proceeds from those properties which would have been available to the parties decreased by such amount. This has occurred against a background where the wife has already received significant support – as outlined earlier – via her receipt of funds received by the husband as a consequence of his disposition of an interest in the professional practice he created.
The wife is 61 years of age. She has no assets of any value save for household contents which she values at $2,000.00 and jewellery worth $500.00.[57] As at December 2014, she had a debt to the Department of Human Services (formerly the Child Support Agency) in the amount of $78,000.00. This debt will not be discharged by her bankruptcy.
[57] Paragraph [6], wife's affidavit filed 12 December 2014.
In the past,[58] she has earned in the vicinity of $400,000.00 to $480,000.00 as a professional operating her own practice. In light of my conclusions about her deliberate failure to disclose documents relating to her earnings after separation, I accept that, absent the effects of asserted ill health discussed below, the wife has the capacity to earn at least in this range in the future. Such conclusion is strengthened by her evidence that, on the basis of working on average two days per week, she earns about $10,000.00 gross per week.
[58] 2007 – 2009: paragraph [66], husband’s affidavit filed 26 November 2012.
Additionally, I note that the wife has previously admitted to a substantial earning capacity in the vicinity of about $500,000.00 per year, albeit as at about 2007.
Has the fact of the wife’s bankruptcy impacted upon her income earning capacity?
The wife asserts that her bankruptcy has limited her ability to carry on business as a professional in that she is unable to enter into leases in relation to premises. She also asserts that, for the first time in 35 years as a professional, she cannot obtain certain professional benefits.[59] Whilst the husband did not necessarily challenge this assertion, the answers given by the wife during cross-examination persuade me that given the manner she has historically engaged in practice, the impact of a refusal of professional benefits is not something which is likely to have a significant impact on her ability to practice in the future as she has in the past.
[59] Paragraph [8], wife's affidavit filed 11 November 2014.
If I am wrong in arriving at this conclusion, there is no evidence to quantify the potential financial impact to the wife from the absence of professional benefits.
Additionally, despite having been made bankrupt in May 2014, any inability to enter into a lease does not seem to have prevented the wife from engaging in lucrative paid employment on a part-time basis.
Has the wife suffered from a health condition which has impacted on her ability to work for remuneration?
The wife alleges she has experienced some health issues both historically and presently. She asserts that the matters such as the delay in the finalisation of this matter have resulted in a significant deterioration in her health and, consequently, her ability to work. The husband disputes the existence[60] and/or extent of these and also refutes that they are likely to impact upon her ability to work as a professional into the future.
[60] Paragraph [342], husband's affidavit filed 26 November 2012
The wife has sought assistance and support from her general practitioner Dr XZ and from Ms B, a psychologist. Ms B prepared two reports which were relied on by the wife. She was not required for cross-examination by the husband.
Even with the impact of the fact of her bankruptcy and the delay in the finalisation of this matter, the wife has continued in part-time practice. For example, as at November 2014, she was working approximately one day per week at the Gold Coast and two days every second week at Town AA in an attempt to re-establish her practice: in effect, she was working, on average, two days per week. Her evidence is that her gross income from this work, when considered on an average weekly basis before business expenses and tax was approximately $10,000.00. On her own evidence, then, her gross annual income (before expenses and tax) is in the vicinity $480,000.00[61] to $520,000.00 per annum. She said – without challenge really from the husband – that she received approximately $1,650.00 per week (or between about $79,200.00 to $85,800.00 per annum) from which to meet her personal and living expenses.[62]
[61] Allowing for four weeks annual leave per year during which no income is earned.
[62] Paragraphs [9] & [10], wife's affidavit filed 11 November 2014.
In a further affidavit filed on 11 December 2014, the wife affirmed that she continued to run her practice. Her evidence was that she earned around an estimated $7,000.00 per week. She asserted that her total expenses (exclusive of an allowance for tax) amounted to $6,631.00,[63] leaving a surplus of $369.00 per week.
[63]Being the total of the expenses said to be paid from her income, monies spent in assisting L and her general expenses.
Perhaps in a manner consistent with her overall attitude and approach to the duty of disclosure, the wife did not produce any documents - such as her practice books of account or bank statements - to verify her assertions.
I accept that delay in the delivery of this Judgment is likely to have contributed to the stress and anxiety of the wife – and, no doubt, the husband. I accept Ms B’s evidence – based on the wife’s recounting to her – that the wife’s main focus during the therapy undertaken between 10 July 2014 and 25 November 2014[64] was the relational, financial, psychological and professional impact on her arising from the lack of resolution of this matter.
[64] Four sessions.
The wife has now had significant time to accustom herself to the reality of life as a bankrupt. She has clearly engaged in supportive therapy. She is also clearly willing to seek out assistance if she considers it necessary. She has previously shown herself to be a person of significant resilience and fortitude – for example, she created and ran a busy and lucrative practice for a number of years whilst parenting five young children and commuting from her home to the Gold Coast.
I join with the wife in the hope she expressed to Ms B that the resolution of this matter may provide relief. I apologise sincerely to both parties for the delay and for the understandable uncertainty and stress that is likely to have arisen for both of them as a consequence of the same.
Ms B opined that the lack of resolution of this matter contributed significantly to the wife’s stress and impacted upon her inability to consolidate and plan her future, both personally and professionally. Given that there is now, finally, resolution, I am confident in concluding that it is more likely than not that the wife’s capacity to consolidate and plan her personal and professional future will improve. My confidence in arriving at this conclusion is bolstered by the wife’s own evidence.
Whilst Ms B’s most recent report records the wife’s recounting of increased stress and anxiety since November 2014 and the asserted impact of the same on her ability to engage in paid employment, I consider that the significant strain referred to will more likely than not resolve upon the determination of these proceedings. As Ms B opines, the wife will have a greater ability to move on from the emotionally debilitating effects of focusing on this key unresolved area of her life.
Whilst Ms B expressed the opinion that she did not believe the wife currently had the psychological resilience to work more than two days per week (a matter which she predicted would be the case for the next 12 to 24 months), the reality for the wife is that she has previously been able to generate significant income working two days per week.
I also consider that the wife’s commitment to undertaking work, in the manner outlined by Ms B, consistently to rebuild her resilience means that it is much more likely than not that, with the resolution of these proceedings, her capacity to undertake more paid employment will improve.
I must take into account the effect of any proposed order on the ability of a creditor of a party to recover the creditor’s debt, so far as that effect is relevant.[65] The reality of the wife’s financial situation is such that it is likely that the ability of any creditor to recover that person’s debt may only improve whatever orders are made.
[65] S 75(2) (ha) of the Act.
I must also take into account the terms of any order made or proposed to be made in relation to the property of the parties or vested bankruptcy property in relation to the wife.[66] The orders proposed to be made are intended, at the very least, to separate the parties’ financial position and to ensure that funds which remain following the sale of the X and Y investment properties are applied to meet the taxation consequences for both parties of these dispositions.
[66] S 75(2)(n) of the Act.
I take into account that the wife was liable to provide child support for the parties’ youngest child until his 18th birthday. A substantial child-support debt remains. Whilst the wife sought, in her written submissions, that a child support departure order be made, no such application was before the Court. There is no evidence that any formal notice was given to the husband prior to the commencement of the trial of any intention to seek such an order. Given this, the trial proceeded without consideration of this issue.
The Husband’s contention that the wife’s conduct diminished the property available for consideration in the proceedings
Alleged poor practice management
I am not persuaded that, even if accepted, any alleged “poor practice management” on the part of the wife during the parties’ lengthy relationship could be categorised as wanton or reckless[67] or as behaviour by which she sought to diminish the property available for distribution.[68] The husband’s assertions in this respect seem to me to be more about significant differences in management styles.
[67] Kowaliw and Kowaliw (1981) FLC 91-092.
[68] Townsend and Townsend (1995) FLC 92-569
Frequent relocations of practice with attendant costs
It is clear the wife relocated her practice on a number of occasions during the parties’ relationship. It is likely that these relocations resulted in the incurring of at least some costs that would not have been incurred had the relocations not been made. However, the mere fact that costs are incurred does not mean that a decision to incur them is wanton or reckless or behaviour by which the decision-maker has sought to diminish the property available for distribution between parties in property settlement proceedings.
I accept that the wife’s decision to relocate her practice from Suburb A to the Gold Coast in about 2002[69] was influenced by factors which included her view that the clientele in that area were not appreciative of her professional ability or billing and her feeling of professional isolation.
[69] See: paragraphs 41 & 43, husband's affidavit filed 26 November 2012.
Given such reasons – which I consider to be reasonable – her determination to relocate her practice to the Gold Coast could not in any way be categorised as wanton or reckless. Additionally, the husband himself contends that she quickly built a lucrative and busy practice at the Gold Coast. Considered in the context of this evidence, her decision to relocate the practice there could not be regarded as behaviour by which she sought to diminish the property available for distribution.
On the husband’s evidence, over time, the wife told him that she was disenchanted with the owners of the premises in which her practice was situated and felt she could “do better” in her own establishment. Even on the basis of his evidence, whilst there may well have been financial ramifications which flowed from her decision to terminate her lease and, it appears, issues in relation to the ownership of fixtures, a decision to purchase a property in which to base her practice does not appear to me to be wanton or reckless or intended to diminish the property available for distribution between the parties. After all, the husband’s decision to leave Q Clinic at the end of 1999 and strike out on his own had its genesis in his view of the deficiencies in the manner in which that practice was progressing and the consequences of his decision to leave had its own significant financial ramifications.
Additionally, the fact that the wife relocated the practice to another location on the Gold Coast – one which was still proximate to the other professionals, with whom she had developed beneficial working relationships, located in her former Gold Coast location - does not seem to me to be the behaviour of a person seeking to undermine their own prospects of success or to diminish the property available for distribution between the parties.
In about April/May 2008, the wife decided to close her Gold Coast practice in order to establish a practice at Suburb U – closer to where the parties lived. Suburb U eliminated the necessity that she commute for 45 minutes each way between Brisbane and the Gold Coast. She had, after all, undertaken this commute since about 2002. Additionally, on the husband’s evidence, the travel from home to the Gold Coast provoked back/leg pain for the wife: an occurrence which must be regarded in the context that she had previously suffered a back injury. Additionally, if anything, I am left with the clear conclusion from the husband’s recounting of this period of time that the wife was desperate to return to paid employment as soon as possible after her accident - an attitude which seems to me to be more consistent with a desire to continue to make financial contributions to the support of the family than with a desire to erode or diminish the parties’ financial position.
Whilst, as the husband so accurately recounts, “in hindsight” it may have been more beneficial if the wife had simply waited until her income protection insurance “activated” than act to relocate her practice to Brisbane, I am not persuaded in all the circumstances that her decision to relocate her practice from the Gold Coast to Suburb U at that time was wanton, reckless or behaviour by which she sought to diminish the property available for distribution.
The wife’s decision to relocate her practice to Suburb U in fact resulted in two further relocations: namely, from the first Suburb U property to the second (because there were issues associated with wheelchair access to the first property) and from the second to leased premises in the U Shopping Centre building (because she received complaints about operating her practice from the second Suburb U premises).
These relocations may not have been undertaken in the manner thought by the husband to be prudent. He may well have undertaken further investigation and conducted more extensive “due diligence” than the wife did. Again, it seems to me, it is easy to be critical in hindsight. It is also easy, in the cold light of hindsight, to impose an unnecessarily critical view of the wife, who may well have been caught up in the process of attempting to establish a base from which to commence the task of establishing a new practice.
In April 2010 (the parties having separated in January 2010) the wife relocated her practice from the premises at the U Shopping Centre to Town AA.
Whilst the husband asserts, in general, that the wife’s decisions to relocate her practice had associated costs, including those associated with the physical relocation of the practice and a consequent loss of income - such that there were “significant” financial ramifications - there is no evidence as to the quantum of any such costs.
Purchasing investment properties and engaging in significant personal expenditure
The husband is clearly critical of the wife’s decisions, during their lengthy cohabitation, to purchase investment properties with minimal deposits and a property at which she could indulge her interest in horses.
On the husband’s own evidence, the wife was, at that time, successful and busy in her practice. Additionally, he saw her spend significant time “recalculating her finances” on an almost nightly basis and managing her accounts to meet her repayments. This description is, it seems to me, at odds with the assertion that, at that time, the wife was reckless or wanton in her management of her financial affairs.
The fact that a person who, at a time their business or practice was successful, purchases investment properties which ultimately result in financial loss does not, of itself, compel a conclusion that such person was acting wantonly or recklessly or to diminish the property available for distribution between the parties.
An analysis of the wife’s real estate investment record[70] reveals the following:
[70] Undertaken personally or via corporate entities or trusts under her control.
Property
Purchase Price (date)
Sale Price (Date)
Gold Coast property 1
$500,000.00 (17/7/06)
$540,000.00 (5/9/07)
Gold Coast property 2
$375,000.00 (23/10/06)
$550,000.00 (17/10/09)
Town S property
$475,000.00 (21/10/06)
$427,500.00 (20/10/2011)
Suburb U property 1
$395,000.00 (2/12/06)
$500,000.00 (28/1/2010)
Suburb U property 2
$447,000.00 (30/7/07)
$529,000.00 (10/5/2010)
Town CC property
$560,000.00 (2/12/06)
$650,000.00 (18/8/09)[71]
[71]Albeit that the husband asserts – without apparent contradiction by the wife – that there was a shortfall of about $16,600.00 after the sale.
I am not persuaded that, in buying and selling these properties, the wife engaged in conduct which was wanton or reckless or by which she sought to diminish the property available for distribution between the parties.
The husband also takes issue with some of the wife’s expenditure on motor vehicles. He does not seem to take issue with her purchase of a Holden vehicle at the time she transitioned from full-time mother back into the workforce. However, he is certainly critical of her subsequent decisions to lease two expensive Mercedes Benz motor vehicles (one, a “sporty” model and the other – described as a “marketing” vehicle – more suitable for transporting the parties’ children). He drives a leased Mercedes Benz motor vehicle.
He is also critical of the extent of her asserted expenditure arising out of her involvement with horses. He alleges that she spent over $200,000.00 buying horses and, in addition, met the cost associated with their upkeep. The wife rejects the contention that her expenditure reached this level and instead asserts that her hobby saw her spend about $100,000.00. When considered in the context of the wife’s very significant income, I am not persuaded that her expenditure on horses – in whatever amount – is particularly relevant.
Wife’s assertions about the husband’s cessation of mortgage repayments[72]
[72] S 75(2)(o) of the Act.
In her November 2014 affidavit, the wife asserted that the husband had stopped paying mortgage repayments in respect of one of the properties which was mortgaged in her name: she says this occurred despite the fact that he continued to receive the rental income from that property. She has received a foreclosure letter from the bank.
The husband did not take issue with this assertion during the re-opening. The properties have now been sold. Any increase in indebtedness which is causally related to the husband’s cessation of payments is more likely than not to be relatively minimal and must be seen in the context of his actions in meeting payments from separation in January 2010 until about June/July 2014.[73]
[73]Calculated on an estimated basis using the quantum of arrears shown in Annexure MKP-2, affidavit of wife filed 11 November 2014 and the husband’s evidence of the amount of the weekly repayments.
The impact on the wife of her bankruptcy[74]
[74] S 75(2)(o) of the Act.
Save as is provided for in the Bankruptcy Act, after the wife became a bankrupt, it was not competent for any creditor to enforce any remedy against her or her property in respect of a provable debt or, except with the Court’s leave on such terms as it thinks fit, to commence any legal proceedings in respect of a provable debt or take any fresh step in proceedings.[75]
[75] s 58(3) Bankruptcy Act 1966.
Subject to the operation of s 149A of the Bankruptcy Act, the wife will be discharged from bankruptcy at the end of the period of three years and one day from the date on which she filed her statement of affairs.[76] Subject to the operation of s 153 of the Bankruptcy Act, at this time (that is, when she is discharged from bankruptcy), the discharge will operate to release her from all debts provable in the bankruptcy.[77] The relevant consequence for the wife will be that she will be released from the debts she owes.
[76] s 149(4) Bankruptcy Act 1966.
[77] s 153(1) Bankruptcy Act 1966.
However, subject to any order made by the Court under s 153(2A) of the Bankruptcy Act, the discharge from bankruptcy will not release her from any liability under a “maintenance order”:[78] defined[79] to include an assessment made under the Child Support (Assessment) Act1989. Thus, she will retain the liability to pay the $78,000.00 which is currently outstanding.
[78] s 58(5A) Bankruptcy Act 1966.
[79] s 5 Bankruptcy Act 1966.
Closure of any joint bank accounts
So as to finally determine the financial relationships between the parties and to avoid further proceedings between them,[80] it is appropriate that orders be made requiring the parties to do all things necessary to close any remaining joint bank accounts. Given that I accept the husband’s evidence that the joint St George Savings Account number …116 is an account into which he has made small deposits since separation, it is appropriate that any balance in such account at the time it is closed be received by the husband.
[80] s 81 of the Act.
Winding up of corporate entities in which both parties are shareholders
The husband deposes to a wish to wind up both V Holdings Pty Ltd (the corporate trustee of the V Trust) and O Pty Ltd, the corporate beneficiary of the V Trust. The husband and wife are the shareholders in both V Holdings Pty Ltd and O Pty Ltd. Both parties are directors of O Pty Ltd.
So as to finally determine the financial relationships between the parties and to avoid further proceedings between them,[81] it is, I consider, appropriate that orders be made requiring the parties to do all things necessary to cause these entities to be wound up. The reality is that it is much more likely than not that the husband will be required to be responsible for this process and a further consideration I have taken into account in my consideration of those orders which do justice and equity between the parties is that it is highly likely that he will be left to meet the costs associated with the winding up of any entity and/or Trust.
[81] s 81 of the Act.
Conclusions as to s 75(2) factors
Senior Counsel for the husband submitted that a further adjustment of at least five per cent in the husband’s favour would properly reflect a consideration of the relevant s 75(2) matters. As noted during my consideration of the s 79(4) matters, I am not persuaded that it is useful in this case to describe my conclusions about the relevant s 75(2) considerations in percentage terms.
Rather, I consider it sufficient to record that both parties retain significant earning capacity and both will (for different reasons) apparently have eliminated or reduced their respective financial liabilities.
Justice and equity of the proposed orders
I consider that, as a consequence of the conclusions outlined above and having regard to the parties’ respective contributions to trial, the relevant s 75(2) matters, the financial benefits each party has received after separation following a long relationship, productive of five now adult children, (during which each party contributed fully and to the best of their respective abilities) and from which both retain a significant income earning capacity (which may be utilised to achieve substantial monetary return), justice and equity requires that, save for the use to which the remaining sale proceeds obtained from the sale of the Y and X properties are applied, each party should retain absolutely all property currently owned by that party or in that parties control or possession.
The remaining sale proceeds from the sale of the Y and X properties should be applied to meet the parties’ respective capital gains tax liabilities given that these liabilities have arisen as a consequence of the sale of these properties.
Having considered all of the matters referred to above, I conclude that it is just and equitable that orders are made in the manner set out at the commencement of these Reasons.
I certify that the preceding two hundred and twenty-six (226) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Hogan delivered on 18 November 2016.
Associate:
Date: 18 November 2016
Key Legal Topics
Areas of Law
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Family Law
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Equity & Trusts
Legal Concepts
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Remedies
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Fiduciary Duty
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Intention
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Constructive Trust
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Res Judicata
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