Patrice & Patrice and Ors
[2009] FamCA 669
•20 May 2009
FAMILY COURT OF AUSTRALIA
| PATRICE & PATRICE AND ORS | [2009] FamCA 669 |
| FAMILY LAW – PROPERTY – Distribution of property – whether distributions by one party as “alter ego” of a trust is money owed by that party or by the trust (in either legal or equitable terms) – effective distinction of different business valuations conducted on either a “net assets” basis or “maintainable earnings” basis – effect of “maintainable earnings” basis valuation was to render certain transactions outside of the property pool. FAMILY LAW – PROPERTY – ADD‑BACKS – whether legal fees of either party should be added‑back – distinction drawn between treatment of husband and wife’s legal fees because of the sources of funding relating to those fees – whether tax debts of one party should be included as liability where evidence about tax debts not established by evidence. FAMILY LAW – EVIDENCE – where attempts by one party to value wine collection thwarted by other party through effective sale process – inclusion of whatever proceeds already obtained or to be obtained in the future to be distributed according to relevant proportional distribution of property |
| Family Law Act 1975 (Cth) ss 75(2), 90AC, 90AD, 90AE(1)(c), 90AE(2)(b) |
| IABH & HRBH [2006] FamCA 379 Chorn & Hopkins [2005] FamCA 864 Clives & Clives (2008) FLC 93-385 Farnell & Farnell (1996) FLC 92-681 Pastern & Pastern [2007] FamCA 620 Pierce & Pierce (1999) FLC 92-844 Rosati & Rosati (1998) FLC 92-804 Steinbrenner & Steinbrenner [2008] FamCAFC 193 Townsend & Townsend (1995) FLC 92-569 TWN & PAQ [2005] FamCA 677 Williams & Williams [2007] FamCA 313 |
| APPLICANT: | Mr Patrice |
| RESPONDENT: | Ms Patrice |
| SECOND RESPONDENT: | T Pty Ltd |
| THIRD RESPONDENT | K Pty Ltd |
| FILE NUMBER: | CAC | 1076 | of | 2008 |
| DATE DELIVERED: | 20 May 2009 |
| PLACE DELIVERED: | Canberra |
| PLACE HEARD: | Canberra |
| JUDGMENT OF: | Faulks DCJ |
| HEARING DATES: | 11 – 14 May 2009 10 June 2009 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Maurice |
| SOLICITOR FOR THE APPLICANT: | Mr Moore |
| COUNSEL FOR THE RESPONDENTS: | Mr Farrar |
| SOLICITOR FOR THE RESPONDENTS: | Ms Keenan |
Orders
That the Husband and the Second Respondent do all acts and things and sign all necessary documents to cause to be transferred to the Third Respondent, in its capacity as Trustee of the K Family Trust, all of the plant and equipment, fittings and fixtures currently owned by the Second Respondent in its capacity as Trustee of the Patrice Family Trust.
The Third Respondent indemnify and keep indemnified the Husband, the Second Respondent, and the Patrice Family Trust, against all and any liability howsoever existing or arising with respect to:
a.Commonwealth Bank loan account number …1400;
b.Commonwealth Bank loan account number …1304;
c.Commonwealth Bank loan account number …3929;
d.Any debt incurred by the Third Respondent in operating the business known as K Business.
The Husband assign to the Wife any debt owed by the Third Respondent to the Husband and the Wife. IT IS DECLARED THAT there is no debt owed by the Husband and the Second Respondent to the Third Respondent.
The H property, ACT
The Husband and the Wife forthwith do all acts and things necessary to undertake a tender process with respect to the property known as H property, ACT being Section … in Deposited Plan … (“the [H] property.”)
That for the purposes of the tender process the following shall apply:
a.Within 21 days after the date of these orders on a date and at a time agreed between the parties or in default of agreement on the 21st day after these orders (“the date of the tender”), at 10:00 am the parties shall attend at the office of Farrar Gesini & Dunn for the purposes of tendering for the purchase of the H property.
b.The only bidders will be the Husband and the Wife.
c.The solicitors for each of the parties are to be present at the Tender.
d.The Husband and Wife shall remain in separate rooms.
e.The Husband’s solicitor and the Wife’s solicitor shall procure written bids from their respective clients and provide them to the other party’s solicitor. The bids shall state the gross value of the property for the purpose of the calculation of the amount that the highest bidder will pay to the other party to acquire the interest of that party in the property pursuant to these orders.
f.Each party may only make a total of five bids. The parties shall take it in turns to make their first four bids, with the Wife to have the first bid. Each bid shall be signed by the party making it. Bids shall be in increments of not less than $1,000. Each party shall make their fifth bid simultaneously.
g.Any bid must be made to the other party within 10 minutes of a prior bid being received. If no bid is made within 10 minutes then the highest bidder at that time is the purchaser for the purposes of these orders.
h.Whoever makes the highest bid shall purchase the interest of the other party in the H property based on the amount of the highest bid (“the price”) and shall be “the Purchaser.” The other party shall be the “Seller.”
i.In the event that the party who successfully bids for the H property does not complete the purchase in accordance with these orders within 90 days after the date of the Tender (“the defaulting party”) and that failure to complete is not due to the failure of the other party to comply with any provision of these orders, the other party shall have the option to acquire the H property based on a gross value of $1,240,000 and shall become “the Purchaser.” The defaulting party shall pay any costs incurred by the other party as a result of their failure to complete.
j.On the Due Date, which shall be a date not later than 90 days of the date of the Tender (“the Due Date”):
i.the Seller shall do all things necessary to transfer to the Purchaser (at the expense of the Purchaser) all of their interest in the H property, and to that end will sign, execute and deliver up to the Purchaser, or their solicitor, a Memorandum of Transfer to give effect to this order.
ii.The Purchaser shall do all things necessary to cause to be repaid all debts outstanding with respect to housing loan account number …5009 secured by mortgage over the H property and discharge mortgage registered number …. The Seller will sign any discharge of mortgage documents necessary to enable the discharge of the mortgage within seven days of being requested to do so.
iii.In the event that the Purchaser is the husband the following provisions shall apply:
A. The Husband shall pay to the Wife 42.5 per cent of the difference between the price and the amount outstanding on Commonwealth Bank of Australia Housing Loan Account Number …5009;
B. If the rates are in credit in relation to the H property, the Husband shall pay to the Wife such amount as equals the unexpired credit.
C. If the rates are in arrears, the amount payable under order 5(j)(iii)(A) will be reduced by those arrears up to the date of payment.
D. The Wife will vacate the H property within 14 days of the Due Date.
E. If the Husband has settled the sale of any of the properties (other than the H property) identified in the Consolidate List of Assets and Liabilities in the Judgment, of which title is in his name (“the investment properties”) within 12 months of the date of these orders, each of the parties will either pay to, or receive from, the other in accordance with the proportions as found in the Judgment in this matter (namely the Husband 57.5 per cent and the Wife 42.5 per cent), such amount as is calculated in accordance with the following formula:
o The difference between the values found in the Judgment for the investment properties and the actual sale price, being the price realised after the reasonable costs of sale (which includes agent’s commissions and lawyer’s fees for conveyancing, if any). IT IS NOTED THAT the effect of this order is that if after sale expenses a property sells for more than the value in the Judgment, the Husband will be liable to pay to the Wife 42.5 per cent of that increased value. If after sale expenses a property sells for less than the value in the Judgment, the Wife will be liable to pay to the Husband 42.5 per cent of that decreased value.
o Any money due to the Wife under the previous paragraph will be paid to her at the time of settlement of the sale from the sale proceeds.
o If the Husband receives a taxation assessment in respect of the financial year or years in which the sale of the properties referred to above are settled and have consequently incurred a net liability for Capital Gains Taxation (after offsetting any capital losses) in respect of the investment properties, the Wife will, within 30 days of notification in writing of that assessment, pay to the Husband 42.5 per cent of such liability. IT IS NOTED THAT the intent of this order is that the Wife will be liable for 42.5 per cent of the Husband’s increased tax liability by reason of the Capital Gains incurred consequent upon the sale of any of the invested properties. The Husband will provide documentation to the Wife evidencing the Capital Gains Taxation assessment for each of the sold investment properties.
iv.In the event that the Purchaser is the Wife:
A. The Wife shall pay to the Husband 57.5 per cent of the net equity of the H property.
B. The Husband will do all things necessary so that by the Due Date the property is not security for any debt other than the mortgage over the H property, and the debts referred to in orders 2(a), 2(b) and 2(c).
C. Any amount payable by the Husband to the Wife under order 7(b)(i) will be deducted from the moneys payable by the Wife to the Husband under this order.
k.That from the date of the payment, the Purchaser indemnify the Seller against all rates, land tax (if any), and other outgoings with respect to the H property.
l.That until the Due Date:
i.The Wife have the sole right to occupy the H property.
ii.The Wife pay the loan instalments that fall due with respect to the Housing Loan Account Number …5009, and any instalments that fall due with respect to house insurance rates and land tax (if any) with respect to the H property.
iii.Neither party shall mortgage, encumber or otherwise offer the H property as security.
a. In the event that the successful bidder defaults, and the other party does not acquire the property pursuant to these orders, then the parties shall do all things necessary to cause the property to be sold. They have liberty to apply in relation to the manner, terms and conditions of the sale.
b.The Husband and Wife do all things necessary to cause the proceeds of the sale of the H property to be distributed as follows:
i.To pay all costs commissions and expenses of the sale.
ii.To pay the usual rates adjustments.
iii.To pay the amount required to repay the Housing Loan Account Number …5009, to discharge the Mortgage.
iv.To pay the balance as to 42.5 per cent to the Wife and 57.5 per cent to the Husband.
a. In this order, the “Payment Date” is the Due Date under order 5(j) of these orders.
b.On the Payment Date:
i.The Husband pay to the Wife the sum of $461,678, less the sum of $86,346 being money due by the Third Respondent to the Husband for the 2008 trust distribution of the K Trust.
ii.The Wife do all things necessary to cause the discharge of any mortgage on the title of any real estate registered solely in the name of the Husband (“the Husband’s property”), which is security for the debts referred to in orders 2(a), 2(b) and 2(c) (“the loans.”) Nothing in this order shall render the Wife liable for any debt secured by mortgage over the Husband’s property in excess of the amounts due on the loans (“the excess”). The Husband shall indemnify the Wife with respect to the excess.
iii.If the Wife fails to comply with order 7(b)(ii) above then:
A. The moneys due under Order 7(b)(i) above shall be paid towards the amount outstanding on the loans.
B. The Wife do all tings necessary to sell Unit 30, C, ACT (“the Wife’s [C] property”) and cause the net proceeds of the sale of the Wife’s C property to be paid towards the loans.
C. The Payment Date provided in Order 7(a) is postponed to the date of settlement of the sale of the Wife’s C property.
D. Any balance outstanding on the loans after the payments referred to in order 7(b)(iii)(A), 7(b)(iii)(B) and 7(b)(iii)(C) above shall be recoverable by the husband from the Wife and Third Respondent or either of them by way of enforcement proceedings, and any amount recovered will be paid off the remaining balance of the loans.
c.In the event that the Husband fails to pay all moneys due under this order by the Payment Date and his failure is not due to the failure of the Wife to comply with a provision of these orders, then:
i.Interest shall accrue on the amount outstanding at the rate prescribed by section 117B of the Family Law Act 1975 (Cth), and Rule 17.03 of the Family Law Rules 2004.
ii.The Wife shall have liberty to seek orders for enforcement of payment, including orders for costs.
a. The Husband transfer to the Wife the whole of his interest in the contents of Commonwealth Bank account number …7868 being the rental bond security deposit for the premises occupied by K Business, and to that end within seven days he do all things necessary to cause the balance in that account to be paid into an account nominated by the wife.
b.Thereafter the Wife indemnify the Husband against liability for, and keep him indemnified against liability for, any liability howsoever existing or arising out of the lease of the premises occupied by the K business.
c.Within 28 days the Wife provide to the Husband:
i.A release of any guarantee that he and/or the Second Respondent have given to the landlord of the premises.
ii.A release of any guarantee that he and/or the Second Respondent have given to the Commonwealth Bank of Australia for the rent or bond provided by the Commonwealth Bank of Australia as security for the lease.
Within 7 days of the date of these orders the Husband and the Second Respondent do all acts and things to transfer to the First Respondent:
a.Ownership of the ACT motor vehicle number plate ... “[K].”
b.All rights owned by them with respect to the domain name or URL www…., including any password, register key or other information necessary to enable her to control and operate that domain name.
The wine
a. The Husband provide to the Wife, within 14 days, a list of all bottles of … (“the wine”) removed by him at separation, such list to show the vintage and other particulars necessary to identify the wine.
b.The Husband cause to be sold all bottles of the wine which he removed from the family home after separation.
c. The Husband provide to the Wife copies of documents evidencing the sale of the wine to date and pay to her within seven days an amount equal to 42.5 per cent of the proceeds of those sales that he had received.
d. The Husband provide to the Wife within seven days documents evidencing the balance of the wine which is yet to be sold or which has been sold but the proceeds of which the Husband has not received.
e. Upon the receipt of the balance of the proceeds of the sale of the balance of the wine the Husband provide to the Wife documentary evidence of the amount received for the sale and pay to her with seven days of receipt of the proceeds of those sales an amount equal to 42.5 per cent of those proceeds.
Division of goods and chattels
a. Within 21 days of the date of these orders the parties shall do all things necessary to attend a mediation for the purposes of, and make a bona fide effort to agree upon, the division of the goods, chattels and furniture in their respective possession
b.In the event that the parties do not reach agreement at Mediation then each party shall prepare two lists of all of the goods, chattels and furniture in their possession with each list to be approximately equal as to the value of their content.
c. Each party shall then provide a copy of their lists to the other party.
d. Within 7 days of provision of the lists each party shall allow the other party to attend at their respective residences for no longer than 2 hours for the purposes of verifying the contents of the list.
e. Each party shall then choose one of the lists provided to them to be the list of items which that party shall keep.
f. The parties shall do all things necessary to make available for collection by the other within 14 days the goods, chattels and furniture contained in the list which the other party has chosen.
g.The list of items shall not include their respective clothing and shoes, children’s clothing and shoes, children’s furniture, parties’ personal effects, crockery, cutlery, linen, jewellery, food, groceries, perishable items, books, alcoholic drinks, stationery, toys, games and puzzles.
Pursuant to the provisions of clause 7.2 of the Deed of Settlement made 27 September 2005 under which the K Family Trust was created (which deed is Annexure F to the affidavit of the wife on 1 May 2009 in these proceedings), the Husband forthwith sign all documents and do all things necessary to relinquish his position as appointor of the K Family Trust, and cause that notice to be delivered to the Wife’s solicitor.
Pursuant to the provisions of clause 7.2 of the Deed of Settlement made 27 September 2005 under which the Patrice Family Trust was created (which deed is Annexure G to the affidavit of the wife on 1 May 2009 in these proceedings), the wife forthwith sign all documents and do all things necessary to relinquish her position as appointor of the Patrice Family Trust, and cause that notice to be delivered to the Husband’s solicitor.
Subject to these orders, as against the Husband, the Wife is declared to be the sole owner of:
a.Any money in any account in her name with any bank or other financial institution.
b.All benefits accrued or to accrue to her pursuant to her membership of any scheme or fund providing superannuation benefits.
c.Any property transferred to her pursuant to these orders.
d.The assets of the K Family Trust.
e.Any interest in real estate registered in her sole name.
f.Any other chose-in-action or property of whatsoever nature in her possession or ownership.
Subject to these orders, as against the Wife, the Husband is declared to be the sole owner of:
a.Any money in any account in his name with any bank or other financial institution.
b.The Holden HSV Senator motor vehicle registration …
c.All benefits accrued or to accrue to him pursuant to his membership of any scheme or fund providing superannuation benefits.
d.Any property transferred to him pursuant to these orders.
e.The assets of the Patrice Family Trust (other than those transferred to the wife or the Third Respondent pursuant to these orders).
f.Any interest in real estate registered in his sole name.
g.Any other chose-in-action or property of whatsoever nature in his possession or ownership.
If either party refuses, fails or neglects to execute any document necessary to put these orders into effect within 14 days of being requested to do so by the other party, and any such refusal, failure or neglect is proven by affidavits filed and served by or on behalf of the party alleging this, the Registrar of the Family Court of Australia at Canberra be and is hereby appointed pursuant to section 106A of the Family Law Act 1975 (Cth) to execute such document in the name of such party.
The parties have liberty to apply in relation to the implementation of these orders.
IT IS NOTED that publication of this judgment under the pseudonym Patrice & Patrice is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| FAMILY COURT OF AUSTRALIA AT CANBERRA |
FILE NUMBER: CAC 1076 of 2008
| MR PATRICE |
Applicant
And
| MS PATRICE |
Respondent
And
| T PTY LTD |
Second Respondent
And
| K PTY LTD |
Third Respondent
REASONS FOR JUDGMENT
Background
This was a case about the division of property between a husband and wife who had been married for about six years at the time of the hearing (the divorce was dealt with on one of the days of the hearing) but had lived together since about April 2000. This meant that their period of cohabitation was about eight years.[1]
[1] The parties separated either on 28 March 2008 or on 2 June 2008. The later date was the date on which the husband finally left the family home.
The Orders that each of the parties seeks in relation to the division of property appear as Endnote 1[i] and Endnote 2[ii] respectively for the husband and the wife (and the Second and Third Respondents.)
The matter involved a number of items of property which included the investments of the parties[2] and the business that the parties had conducted known as K Business. This business was operated through two corporate trustees of family trusts, but had for all practical purposes been conducted by the wife alone since November 2007.[3] That situation bears upon some of the decisions I am obliged to make in this my judgment.[4]
[2] I will continue in this judgment to refer to the parties as “husband” and “wife” although I acknowledge that they have now obtained a decree nisi of divorce. I mean no disrespect, nor do I seek to offend with these references. Further, when I refer hereafter to the “parties” I mean the husband and the wife unless the context or the express terms of the reference make it clear that I am including the corporations which are the Second and Third respondents.
[3] Affidavit of the wife, filed 1 May 2009, paras [45] & [48].
[4] The parties agreed that I should regard the trusts, trustees and their activities as the “alter egos of the parties” and as if the parties themselves had carried out the actions. This is not as straightforward as it sounds!
When the parties first began to co-habit the husband was an Information Technology (IT) consultant earning in excess of $80,000 a year. He also engaged in both share trading and property investment. In the end, there was little controversy about the extent of his pre-cohabitation portfolio of investments.[5]
[5] A summary of which appears at paras [5] & [6] of the written submissions of Mr Farrar, handed up in Court 14 May 2009, 3, which I am satisfied accurately reflects the evidence before me.
After a relatively short time from when the parties began to live together, the husband ceased remunerated employment. This is recorded somewhat laconically in the wife’s chronology as “husband retires 31 January 2001.”
The husband then began to manage his investments full-time, buying and selling real estate and trading shares.
In addition, at the end of 2003, the parties consolidated an earlier partial purchase of some land at H[6] and commenced a project for developing the H block. Although I have used the term the ‘parties’ the extent to which each of the parties participated is and was in dispute.
[6] They had bought this property in conjunction with others in July 2002.
What is not in dispute is that the task was primarily carried out by the husband as owner/builder. The value of the savings accomplished by his involvement was not in evidence before me, but it is reasonable to assume that the project was completed for less expense than would have been the case if the parties had employed a professional builder.
As with this project so with virtually every other project entered into by the parties, the husband consistently displayed a dismissive and, in some cases derisory, attitude to the wife’s contributions. The wife for her part tended to emphasise particular tasks that she had undertaken without necessarily contextualising them in the overall work undertaken. I will deal with this matter more comprehensively in the section of my judgment relating to contributions.
There is no doubt the H house was a massive undertaking. The value of the property in its current form was agreed but the size of the valuation itself comments on the uniqueness of its quality and size in the area in which the construction occurred.
The approach that the parties, the lawyers and I take to these proceedings
The parties and their lawyers progressively both before the hearing and during the hearing consulted, confirmed and substantially agreed about the values of the property constituting the pool of assets of the parties. This has meant that there are few determinations for me to make about what constitutes the pool of property. However, I propose to make these determinations as a preliminary matter after I have identified the property that has been agreed. I will then proceed to consider the contributions that each of the parties has made of a financial and non-financial nature initially, during the course of cohabitation and after cohabitation ceased.
At the end of the proceedings, counsel for each side submitted to me that there should be no adjustment to the division of property occasioned by the provisions of s 75(2) of the Family Law Act 1975 (Cth).
There were, however, some considerations which I was asked to take into account in relation to the so-called fourth step of the proceedings, namely to ensure that the orders that would be dictated by consideration of the parties respective contributions would in the circumstances be “just and equitable.”
The situation is somewhat complicated by the fact that both parties began the proceedings seeking that the former family home in H and K Business should be part of his or her share of the division of property. By the end of the proceedings (although somewhat reluctantly it appears) the husband had given up on seeking to have the business transferred to him. He did, however, continue to seek that the house be part of his share in part because “he poured his heart and soul into the project and it was very precious to him.”[7]
[7] Mr Maurice’s submission from the Bar Table on 14 May 2009.
The wife’s affiliation with the former family home (in which she is still living) is more pragmatic. It seems, although no specific evidence was led about the matter, that her prospects of refinancing the business would be enhanced if she had additional real estate in the form of the family home. In fact, Mr Farrar for the wife went so far as to suggest that if the family home were not to be part of the wife’s share, then she would probably be unable to retain the business.
But wait, there’s more! Additional preliminary matters
The husband remains a full-time investor. The wife was during the course of cohabitation, and remains now, a Commonwealth Public Servant, who is earning approximately $93,132.00 gross per year from that employment. In addition, as I mentioned previously, it has been she who has effectively run K Business since November 2007.
It should be noted that the parties’ four children, all born during the course of their cohabitation, are shared equally in time between their respective parents on a week about basis.
It should also be noted that since separation the husband has re-partnered and bought another house in an adjoining suburb, N. He financed his purchase in part by the sale of some of his investment portfolio and in part by borrowing.
It was suggested the wife had also re-partnered but I am satisfied from the evidence before me that although she has what appears to be a romantic relationship with “B,”[8] this does not fall within the ambit of consideration of s 75(2)(m) of the Family Law Act 1975 (Cth). I am satisfied that, at least at present, the wife and B do not cohabit in a way which would bear upon the financial arrangements that the wife has made or could make. I make this finding conscious of the fact that there have been loans exchanged between the wife and B and that, in fact, the wife at present on her evidence still owes B some $4,000 from an advance he made to her.
[8] I apologise for referring to this gentleman unnecessarily mysteriously as “B”, but I do not recall his surname being given in evidence.
There is no suggestion that the husband does not still have a capacity for gainful employment other than as an investor and it was acknowledged by counsel for the husband that if in fact he were to receive the H property as part of his share of the division of property it may be necessary for some of his investments (or possibly all) to be sold to provide the capital for the discharge of the existing mortgage or its substantial reduction.
This undoubtedly provides a difficulty in that the husband’s taxable income (as appears in Endnote 3[iii]) has always been relatively low since he gave up his employment. Mr Maurice for the husband argued that this was part of a general tax minimisation arrangement and that more revenue was available to the husband than was represented by his taxable income. The extent to which this is so and the general ability of the husband to service a substantial mortgage (such as that which presently is on the H property) remained an area of assertion, rather than of evidence.
In summary, neither party have put before me evidence about their capacity to financially service the arrangements about the division of property that each sought.
The pool of property and assets
Set out hereunder is a list of the assets and liabilities of the parties as agreed between them by the end of the proceedings.
| Item | Value | Currently Held By |
Assets: | ||
H property | $1,240,000.00 | Joint tenants |
N property | $795,000.00 | Husband |
Household Contents | $48,900.00[9] | Husband |
Household Contents | $56,803.00 | Wife |
K Business | $752,000.00 | Business comprises different components retained by both the husband and the wife |
| Commonwealth Bank Term Deposit “…7868” | $26,321.00 | Husband (notionally) |
D property | $280,000.00 | Husband |
Unit 35, C | $320,000.00 | Husband |
S property | $220,000.00 | Husband |
P property | $380,000.00 | Husband |
Unit 8, C | $135,000.00 | Husband |
Unit 21, C | $135,000.00 | Husband |
Unit 23, C | $140,000.00 | Husband |
Unit 30, C | $330,000.00 | Husband |
CommSec Shares | $18,620.00 | Husband |
Macquarie Gateway Shares | $289,952.00 | Husband |
Commonwealth Bank Account “…7383” | $276.00 | Wife |
Commonwealth Bank Account “…5856” | $4,021.00 | Husband |
Commonwealth Bank Account “…6507” | $4,643.00 | Husband |
ANZ Bank Account “…7543” | $26,020.00 | Husband |
Loan to husband’s father | $64,795.00 | Husband |
| Total superannuation interests of husband | $68,448.00[10] | Husband |
| Total superannuation interests of the wife | $79,382.00[11] | Wife |
Liabilities | ||
Mortgage H property | $694,047.00 | Joint |
N property | $467,238.00 | Husband |
| Loan secured by floating charge on all properties (K Business) Account “…1304” | $31,000.00 | Joint |
| Loan secured by floating charge on all properties (K Business) Account “…3929” | $239,000.00 | Joint |
| Loan secured by floating charge on all properties (K Business) Account “…1400” | $429,499.00 | Joint |
T Pty Ltd Cheque Account | $7.00 | Husband |
| Total mortgages held with Commonwealth Bank for investment properties | $643,825.00[12] | Husband |
Mortgage Unit 30, C | $136,096.00 | Wife |
Loan for Macquarie Gateway Shares | $339,703.00 | Husband |
[9] Omission of $3,250.00 as agreed between the parties in relation to a Toyota Camry vehicle.
[10] The husband sought orders that each party retains their own superannuation entitlements: Refer Below to Endnote 1, Applicant husband’s proposed Minute of Orders Sought O14 & O15.
[11] The wife sought orders that each party retains their own superannuation entitlements: Refer Below to Endnote 2, Respondent wife’s proposed Minute of Orders Sought O8(c) & O9(c).
[12] Comprising mortgages for the following investment properties: R property; S property; P property; Unit 8, C; Unit 21, C; Unit 23, C.
There were certain other items which were not agreed and to which I will now turn my attention.
Disputed items for possible inclusion in the pool of assets and liabilities
K Pty Ltd distributions
As at 30 June 2008, K Pty Ltd, the trustee for the K Family Trust, determined that there should be distributions to the husband ($86,346.00), the wife ($14,552.00), to various infant beneficiaries ($11,662.00) and to T Pty Ltd as trustee for the Patrice Family Trust ($10,764.00).
The wife conceded in the course of argument that the amount of $86,346.00, being the amount determined as the husband’s distribution under the trust deed, should be part of her payment to him. She made this concession on the basis that it would be an offset against money that was to be otherwise to be paid by the husband to her.
There is in this arrangement some confusion about the source of the funds and the way in which it was to be dealt with. Although there was a general concession that the trusts operated for all practical purposes as the “alter egos of the parties”, such a concession does not alter the legal or equitable characteristics of some payments. The money accepted by the wife as being due to the husband was not money owed by her as such. Rather, it was owed by the trustee as trustee for the K Family Trust. The wife’s determination that the money should be offset against the husband’s liability to her personally was predicated on the proposition that she would retain the business and would make whatever necessary internal adjustments might be required to ensure the payment was achieved.
In reality (or perhaps in legality or in equity), it is the trustee for the K Family Trust who owes the money and thereby the trustee’s funds or assets are diminished. The trustee is a party to these proceedings as is T Pty Ltd, the trustee of the Patrice Family Trust. Each counsel has submitted to me separately that there is no impediment to my making orders which would, in effect, provide for payments in lieu of distribution and orders which would have the effect of discharging debts due from one party or the other to one or other of the companies.
In his final written submissions, Mr Farrar identified the sections of the Family Law Act1975 (Cth) relevant to my power to do what I was being asked to do by both parties as sections 90AC, 90AD, 90AE(1)(c) and 90AE(2)(b). Mr Farrar submitted:[13]
There are no debts owed to third parties to anyone who is not a party to these proceedings. The two trusts of the alter egos of the parties.
If the Court remains uncertain about that situation the reality is that any debts to the third parties will be the liability of [K Business] and therefore effectively the liability of the wife. She proposes that the husband and the [Patrice] Family Trust be indemnified in relation to such liability.
[13] Written submissions of Mr Farrar, handed up in Court 14 May 2009, 30.
It is common ground that the wife will acquire the business as part of her share of the proceeds. I accept that the Court has the power to make the orders sought. I am somewhat concerned about the appropriate way of reflecting it in the books of the trust of the company. Nevertheless, this is a matter which need not necessarily concern me in proceedings under the Family Law Act1975 (Cth) for the division of property.
I note in this regard that the parties were agreed on the valuation of the business as appears from the table set out above and that they were also agreed that the business had been valued on a maintainable earnings basis.
This means, to some extent, that the state of the accounts of the corporate entities associated with the business as at the date of the hearing (or for that matter as at 30 June 2009) are irrelevant for the purposes of the inclusion of the business as an asset of the parties. If the business had been valued on a net assets basis then, of course, variation in the bank accounts and the debt situation both to and from the trustees would have been significant.
In this matter, the wife accepts that the money is due to the husband and it will be included as an asset of the husband and a debt payable by the wife.
It follows as a matter of logic that the amount due to the wife from the trust should also be regarded as an asset in her name and is included accordingly.
To some extent how the wife extracts the funds from the funds of the trust to make the relevant payments is a matter that I am not called upon to determine or to take into account.
It is otherwise, however, in relation to the distributions to T Pty Ltd as trustee for the Patrice Family Trust or to the various minors for whom distributions have been made as appears from the financial statements of the trustee.[14]
[14] Affidavit of the wife, filed 1 May 2009, Annexure “N”, 168 – 170.
Although there may be (as a consequence of those distributions) a legal (or at least equitable) right to enforce payment from the trustee to the beneficiaries, this is a matter which does not fall within the purview of these proceedings. If the person who finishes up with the trust is sued, the trust would have to make appropriate payments. This would be so whoever finished up with the trust as his or her asset.
I am conscious that the statement in the preceding paragraph is not strictly accurate, in that T Pty Ltd is a party to these proceedings. It could be said in this context, however, it is not a relevant party to the proceedings for the purposes of the division of property. Although there is a general concession that the corporate entities, whether in their own right or as trustee, were the alter egos of the parties, in the context of this distribution, in my opinion, the distribution to T Pty Ltd is more closely akin to the distribution to the minors than to the parties themselves. Accordingly, in my opinion, the distribution to T Pty Ltd (which may have been thought to have been the alter ego of the husband) ought to remain as an intra-famial or perhaps more accurately, an intra-corporate debt, which remains to be resolved within that context, and not reflected in the proceedings before this Court.
In summary, the distributions to the husband and the wife constitute assets in the hands of the husband and the wife because the wife conceded that was so, so far as the husband was concerned. Fairness would then prescribe that a similar arrangement should exist in relation to her distribution. Each of those distributions may generate a debt in due course which may require some accounting, possibly taxation and, in any event, consequential amendment to the books of the company or the trust or both. However, because K Business has been valued on a maintainable earnings basis, this will not affect that valuation. Accordingly, it should be disregarded. In essence, there has been the creation of an asset without the creation of a relevant consequential liability relevantly for the purposes of these proceedings.
Nevertheless, the value of the business will not be altered by this potential debt due from the trust to the unpaid beneficiaries.
This contrasts with the amounts due to the husband and wife because the husband and wife are parties and the amount that is due from the trust to them represents, in my opinion, an asset in their hands. The fact that there is a corresponding debit in the books of the trust is for these purposes irrelevant because of the way in which the valuation of the business was carried out.
Loans to the wife and the husband from K Buisness
This matter was not the subject of direct final address between the parties but was the subject of subsequent submission from the husband and wife as appears from Endnotes 4[iv] and 5[v] respectively. In essence, the argument on behalf of the husband is that the sum of $105,664.71[15] should be added back to the pool as it represents money that the wife received from the business. A smaller amount of $1,097.00 from K Business to the husband was also admitted by the husband.
[15] A corrected figure as appears in Endnote 4.
Mr Maurice contends that the advances post‑date the valuation of K Business and that the husband was entitled to say how those funds ought to be applied. He contends that “they are not unlike undistributed profit deposited into a company bank account that would have to be treated independently of such a valuation, for example.”
The counter argument to this proposition from Mr Farrar, with which I agree, is that the figures produced at this point remain draft figures only given that the profit and the allocation of items in the balance sheet will not be finalised until the end of the financial year.
Accordingly, again in part on the basis that the valuation of the business was obtained on maintainable earnings rather than on net assets, it seems to me that as a matter of principle there should be no add-back for these sums.
In addition, if the money were otherwise a potential add‑back, the proposition referred to by Mr Maurice in the Full Court of the Family Court matter of Clives & Clives[16] does not assist him. There is no evidence that the funds expended do not, in the circumstances, constitute reasonable living expenses. This is readily determinable in relation to the motor vehicle expenses and the mortgage on the H property, but it is less readily seen in relation to the loan shown on the balance sheet as admitted by the wife being for her own use. However, in this regard, the comments I made previously about the appropriate allocation of this amount in the balance sheet at the end of the financial year remains applicable.
[16]Clives & Clives (2008) FLC 93-385.
It follows that I should, equally, not add back the loan asserted to be due to the husband of $1,097.00.
Tax debts of the husband
In the balance sheet provided by the husband in these proceedings a claim was made for
i) Husband tax debt from sale of shares $15,164; and
ii) Husband tax debt from sale of P property $57,251.
The law relating to taxes directly applicable to the sale of property either in the near future to the resolution or the finalisation of the matter between parties or as a consequence of Court orders is well settled. If tax is an inevitable consequence of the sale then it ought to be an expense borne by the parties together not by the party necessarily effecting the sale.[17]
[17] See Rosati & Rosati [1998] FamCA 38 and IRBH & HRBH [2006] FamCA 379.
There is a singular lack of evidence in this matter about how the liabilities referred to are calculated. For example, the husband’s oral evidence was that as the end of each financial year approached he would ordinarily take the step of selling any shares that had dropped in value as to generate a capital loss. Frequently, it appears he repurchased the shares on the first day of the new financial year at presumably the figure he had sold them for and thereby reacquired the asset, but obtained the tax deduction.
So far as I can determine there is nothing illegal or improper in what he was undertaking and it had the consequence that if the shares were subsequently sold at a profit then the difference between their repurchase value and the new value would be the amount upon which he would be assessed for tax even if that were lower than the figure for which he bought them the first time.
Accordingly, it is difficult to know what liability, if any, the husband would incur as a result of capital gains achieved by the sale of shares which would be subject to any deductions that the husband might reasonably claim or bring forward from losses generated in previous years.
It was open to the husband, who is by nature a careful, if not meticulous person, to have provided evidence which would have established the extent of any liability that he may be likely to incur at the end of this financial year as a consequence of a balancing of all appropriate credits and debits for capital gains or losses. He did not do so.
Following the conclusion of the hearing, I had asked both Mr Maurice and Mr Farrar to comment as to whether or not there was agreement relating to these figures and what treatment should be given to them. Mr Farrar did not agree to these figures and submitted that there was no evidence proffered to the Court proving their existence (see Endnote 4).
Having received Mr Maurice’s submission (see Endnote 5) I reconsidered the matters set out above, in particular, I took account of the matter of TWN & PAQ. [18] There is nothing in Mr Maurice’s submission or in that case which causes me to change the view which I have expressed above.
[18]TWN & PAQ [2005] FamCA 677.
Although it is clear that a liability will be generated, the taxation and hence fiscal consequences to the husband are not identified or clear. This is, in effect, a retroactive application of the principle in Rosati & Rosati.[19] Although a liability may have been generated (aliter in Rosati where it was not clear whether there would be such a generation of liability and if so, when), the consequences of that generation of liability could have been clarified or quantified, but were not.
[19]Rosati & Rosati [1998] FamCA 38.
I accept that the husband attempted to tender, contrary to directions made before the hearing, material that would have perhaps gone some way to clarifying this matter. However, the potential evidence did not become evidence. As a consequence, there is no evidence before this Court which will enable me to make a proper determination about what the likely effect for the husband would be.
In such circumstances, it may have been appropriate to take account of this potential liability as a factor (though perhaps a vague factor) under s 75(2) of the Family Law Act 1975 (Cth). I concede I did not raise this possibility with counsel for the husband or the wife but both counsel did urge upon me that this was not a matter in which any adjustment should be made in favour of either party under s 75(2).
Accordingly, I decline to take into account the potential liabilities as set out from the husband in the list of assets and liabilities.
Further add-backs
There are two sums claimed by the wife as being appropriate to add-back to the pool on the basis that they represented money expended by the husband from property which would otherwise have formed part of the pool. These were an amount of $64,795.00 which had been lent by the husband to his father and which the father agrees should be added back to the pool, and a sum of $54,663.00, representing legal fees paid by the husband.
Husband’s legal fees
In “Annexure C” to his affidavit, the husband set out how he had disposed of $741,707.73 since separation. He instanced the deposits into the bank account as arising from the sale of some assets[20] which effectively were translated into the new property he brought to live in. He also sold the Toyota Camry and the house in P and those sums are represented in the “receipt side” of his balance sheet. The balance of funds which he applied towards the expenditure referred to in the preceding pages of his annexure were funds which came from margin loan draw-downs. These draw-downs had the effect therefore of increasing the amount of debt of the parties[21] in the overall balance sheet. The extent to which such debt would have the effect of diminishing the pool of property from the husband’s application of any such funds towards his legal fees, I find, did constitute a diminution of that joint fund. Accordingly, the amount of the fees should be added back into the pool.[22]
[20] Affidavit of the husband, filed 4 May 2009, Annexure “C”, 23.
[21] The debts were the husband’s but were included as “liabilities in the overall pool; quite properly of course.
[22] See Chorn & Hopkins [2005] FamCA 864; Farnell & Farnell (1996) FLC 92-681; Townsend & Townsend (1995) FLC 92-569.
If the husband had simply borrowed the money from a third party source and was himself the only one responsible for it then the reverse conclusion should be drawn. In that case the borrowing would not have diminished the pool.
I have little doubt that the money applied for legal fees was drawn from the marginal loans and, accordingly, should be added back. The total expended by the husband on his capital acquisition – his house – effectively exhausted the funds raised from asset sales and the figures do not support that the borrowings can be reasonably off-set against the asset (the house) brought into account.[23]
[23] See Affidavit of the husband, filed 4 May 2009, Annexure “C”, 16, 23 – 24.
The husband argued of course that to some extent what was sauce for the gander should also be sauce, in this case, for the goose in that any legal fees paid by the wife should be similarly treated. There is of course a symmetrical attraction in this proposition but it fails, in my opinion, to take account of the sources of the funds applied by the wife for the payment of her legal fees which appear to have been as listed in Exhibit “W14” at $83,788.12.
There was some debate about the amount of the husband’s legal costs which never reached its final conclusion as between the parties, but which was the subject of comment from me.
In the husband’s “Annexure C” to his affidavit, in which he set out how he disposed of the money that I referred to previously, he nominates a number of items as legal fees. These include a payment to Dobinson Davey Clifford Simpson Family Lawyers which he asserts to have been pre-separation on 5 August 2008. Otherwise, the sums referred to add up to $74,663.00.
Mr Maurice argued that it was only matters relating to the parties’ property litigation that should be added back if anything was. However, it seems to me that this fails to take account of the fact that it is the diminution of the pool that is significant, not the destination of the funds or the reason for their application. Accordingly, in my opinion the appropriate figure to be added back in is $74,663.00.
Wife’s legal fees
The wife’s evidence was that the funds in relation to her legal fees came from a mixture of sources. There was money advanced to her by her parents. Whether such funds were advanced by her parents as a gift or as a loan is, in this context, irrelevant. At no point could it be said that this liability diminishes the pool of assets of the parties and accordingly in my opinion to the extent that those funds were used for that purpose there should be no add-back.
In addition, the balance of funds were said to have been either paid for by the wife from her salary or alternatively paid for by credit card which was topped up or paid for by amounts from the trust.
To the extent that the legal fees were paid for from her salary, there is no reason for them to be added back. To the extent that they were paid for out of the trust, it is relevant to consider whether such an arrangement would have constituted something which diminished the value of the pool to be divided. As mentioned above, if the company/trust had been valued on a net assets basis then obviously the advancing of money to one party or the other would have diminished the value of the company. That was not the case here. It may well be that there is a debt owed to the company by the wife, but that is irrelevant for the purposes of determining the value of the items in the pool of property.
At the end of the day, the wife may have a debt due to the company, a debt due to her parents or could have had a debt due to a third party external altogether to the parties or any of their activities. This again might be a matter properly to be taken into account under s 75(2) of the Family Law Act 1975 (Cth), but I refer again to the comments I made above about the fact that neither party wanted any adjustment in favour of him or her by virtue of that provision.
Conducting the business on behalf of both parties?
A more subtle argument for the inclusion of some or all of the wife’s legal fees as an add-back to the pool is created by a consideration of whether the wife was in effect operating the K business as trustee for both of the parties given that she had taken steps to exclude the husband. Even if she had not been responsible for his exclusion,[24] the question remains why her conducting the business should have been done on behalf of both parties.
[24] She argued that she was not responsible, the husband having chosen not to be involved for that time.
The husband, for his part, conducted his investment operations without reference to the wife. For example, he received the rental from the properties that are included in the asset pool and applied them for his own purposes. There was nothing wrong about that. In the same context, it seems to me there is nothing wrong or inconsistent with the wife’s drawing on the income from the asset which is otherwise included in the pool of property for her own purposes.
Accordingly, in relation to this argument (that is that the income was effectively equitably shared even if not legally shared) it seems to me that the husband’s argument for inclusion as an add-back of the wife’s legal costs fails. Accordingly, I propose to add-back the husband’s costs but not those of the wife.
The company debt to Visa Card
This is a small amount in the overall picture. The Commonwealth Bank of Australia Visa Card No. “…8309” was a company account which had a debit of $9,117.00 as at 1 May 2009.[25] Although there is considerable confusion about which assets should be treated as independent and which should not, the reasons I have set out above regarding how K Business was valued on a maintainable earnings basis suggests that the amount outstanding for the Visa Card as at 1 May 2009 is irrelevant (and in fact as at any date is to some extent irrelevant.) In any event, by the end of the financial year the situation may have altered and so might any money in the bank account or money due to the company. Accordingly, in the course of discussion during financial submissions it was agreed that that figure should be removed from the balance sheet.
[25] Financial Statement of the wife, filed 1 May 2009, Item 51.
The wine
From almost the beginning of the proceedings, the wife claimed that the husband had in his possession the wine collection (it appears, principally, of a particular vintage) in magnum bottles, which she asserted to be of a value of approximately $45,000.00. A number of procedural orders were made to enable the valuation of the wine and various assurances were given that the wine would be made available for valuation.
I accept extensive correspondence was exchanged between the wife and the husband, primarily in which the wife made clear her purported assessment of the value of the wine and which reiterated requests to make the collection available for inspection in order to value it. Eventually, the wife unilaterally appointed a valuer and caused the valuer to attend for the purposes of valuation.
As it transpired (and there is no argument about this matter), shortly before the arrival of the valuer, the husband had sent the wine to an auction house for sale. Subsequently, some of the wine was sold.
The husband attempted to put into evidence a report from the wine seller[26] about what the wine sold had brought and what was the value of the remaining wine. This tender was rejected as contrary to the directions that had previously been made prior to the hearing and also, because numerous attempts had been made (which were conceded) to have the wine valued at an earlier time when the information could have been readily made available.
[26] No pun intended.
This had the effect that I had no value that could be proved before me for the wine. The husband did not place a value on the wine in his financial statement and the wife eventually settled for the sum of $41,122.00. It is tempting, given the husband’s prevarication about the wine, to leave him with a valuation contended for by the wife on the basis that it lay within his hands to prove to the contrary if it were the case. Disregarding it completely would be totally unjust to the wife, who has done nothing to deserve such a fate in relation to the wine.
In the context, it seems to me that the appropriate order I should make given that the wine sale is already in process, that the sale should continue and the proceeds of the wine already sold, together with the proceeds of the wine to be sold, should be divided between the parties in the proportions that I determine that their general property should be divided into.
Consolidated list of assets and liabilities
Consequently, for the reasons set out above, I set out hereunder the consolidated list of assets and liabilities as I find them.
| Item | Value | Currently Held By |
Assets: | ||
H Property | $1,240,000.00 | Joint tenants |
N property | $795,000.00 | Husband |
Household Contents | $48,900.00[27] | Husband |
Household Contents | $56,803.00 | Wife |
K Business | $752,000.00 | Business comprises different components retained by both the husband and the wife |
| Commonwealth Bank Term Deposit “…7868” | $26,321.00 | Husband (notionally) |
R property | $280,000.00 | Husband |
Unit 35, C | $320,000.00 | Husband |
S property | $220,000.00 | Husband |
P property | $380,000.00 | Husband |
Unit 8, C | $135,000.00 | Husband |
Unit 21, C | $135,000.00 | Husband |
Unit 23, C | $140,000.00 | Husband |
Unit 30, C | $330,000.00 | Wife |
CommSec Shares | $18,620.00 | Husband |
Macquarie Gateway Shares | $289,952.00 | Husband |
Commonwealth Bank Account “…7383” | $276.00 | Wife |
Commonwealth Bank Account “…5856” | $4,021.00 | Husband |
Commonwealth Bank Account “…6507” | $4,643.00 | Husband |
ANZ Bank Account “…7543” | $26,020.00 | Husband |
Loan to husband’s father | $64,795.00 | Husband |
K Business distribution to husband | $86.346.00 | Husband |
K Business distribution to wife | $14,552.00 | Wife |
Husband’s legal fees | $74,663.00 | Husband |
Total Assets | $5,442,912.00 | |
Liabilities | ||
Mortgage H property | $694,047.00 | Joint |
Mortgage N property | $467,238.00 | Husband |
| Loan secured by floating charge on all properties (K Business) Account “…1304” | $31,000.00 | Joint |
| Loan secured by floating charge on all properties (K Business) Account “…3929” | $239,000.00 | Joint |
| Loan secured by floating charge on all properties (K Business) Account “…1400” | $429,499.00 | Joint |
T Pty Ltd Cheque Account | $7.00 | Husband |
[27] Omission of $3,250.00 as agreed between the parties in relation to a Toyota Camry vehicle.
| Total mortgages held with Commonwealth Bank for investment properties | $643,825.00 | Husband |
| Mortgage Unit 30, C | $136,096.00 | Wife |
| Loan for Macquarie Gateway Shares | $339,703.00 | Husband |
| Total Liabilities | $2,980,415.00 | |
| Total Net Assets (Total Assets – Total Liabilities) | $2,462,497.00 | To be divided in proportion as set out hereunder in my judgment. |
Contributions
This was a matter in which the parties had radically different views of the value of the contributions each of them made.
The husband clearly believed that his investment portfolio at the beginning of their relationship was a “platform.”[28] Subsequently, his organisation of the investments provided a basis for the creation of the family wealth. In addition, he argued that he had been at home and hence available to look after the children, perhaps no more, but certainly no less, than the wife. Further, he submitted that he had applied his efforts considerably to the construction of the H house. He was inclined to see the non-financial contributions of the wife as either irrelevant or so tiny as not to be significant. He maintained that the wife did no more house work than he did. (They did employ professionals to assist them.) He asserted that her efforts in organisation in relation to the investments or anything else were of such a minor nature as properly to be disregarded.
[28] I adopt the word used by Mr Maurice during the hearing.
For her part, the wife argued that in total she earned more money during the course of their relationship than the husband did (as appears in Endnote 6[vi]). A comparison of their respective taxable incomes for the relevant period confirms this view as a matter of objective fact. The husband while acknowledging that his taxable income may not have been as great, asserted (but did not prove) that it was not simply the taxable income that determined what revenue he had available to apply for family purposes. He pointed out that it was possible for such things as depreciation to be claimed as a tax deduction (hence diminishing his taxable income) but at the same time not needing to be expended.
This assertion (and it never became more than that) was firmly refuted by Mr Farrar. He pointed out that little if any claim had been made for depreciation so far as his researches would enable him to say. Importantly, even if it were claimed it did constitute a valid expense over a period because of the sorts of money that the husband (and possibly the wife) had had to expend in renovating, repairing and maintaining the various investment houses. This was the very substance of, or the reason for the Australian Taxation Office’s allowance of depreciation, so far as Mr Farrar submitted.
I accept Mr Farrar’s submissions on these matters. It was open to the husband, (a man of meticulous record-keeping as I had indicated previously) to have produced for the purposes of this hearing, if not otherwise, some account of how the money he had received on a year‑by‑year basis and which was available for family purposes was different from his taxable income. He did not do so. In the circumstances it seems to me that the only figure I can reasonably rely upon is that which he finally agreed with the Australian Taxation Office in each year as being his income.
On that basis, there can be no doubt that the wife earned more than he did as appears from Endnotes 3 and 6 respectively.
The husband’s “platform”
In his written submissions, Mr Farrar undertook an interesting analysis of the value of the husband’s initial contributions. I accept the contents of paragraphs 5 and 6 set out in his written submissions. This meant that the net value of the husband’s equity at the time of cohabitation in his real estate was $154,800.00. I further accept that the arguments advanced in paragraphs 8 and following in relation to his shareholding have force. Although there is no direct evidence and although the husband was not asked about it as such, it is a reasonable conclusion that whatever cash the husband had at the time of the commencement of cohabitation was expended on the purchase of his car.
Mr Farrar agreed that the wife had equity in a car but this was of little value and had been given $16,000 by her parents, had some furniture, and had a Commonwealth Higher Education Contribution Scheme debt which was in the order of $5,000 or $6,000.
Notwithstanding Mr Farrar’s best efforts, there is still a significant discrepancy between the initial contributions of the parties. Moreover, as Mr Maurice pointed out while not a short marriage this was not a long marriage either and, in the circumstances, it would be inappropriate to regard the superior initial contribution of the husband as having been “eroded” over the course of the parties’ cohabitation. He referred me to Williams v Williams,[29] and there was a fairly robust discussion about Pierce v Pierce.[30]
[29] Williams & Williams [2007] FamCA 313.
[30]Pierce & Pierce (1999) FLC 92-844.
Those decisions established the significance of the use made of an initial contribution and Mr Maurice argued with some force that in these proceedings it was the husband’s acquisition of property and his manipulation of the funding in relation to it which permitted the expansion of his property portfolio (and he certainly regarded it as his) and the acquisition of subsequent properties and the business. I accept that this is in part true.
It is also true that without the wife’s continuing contributions to the family from her salary and the other contributions, even if they were in the indirect sense not as great as those of the husband, the wealth of the parties would not have advanced either.
In the end, it is a matter of weight, but it is reasonable to say that proper weight should be given to initial contributions of the husband. For example, it would not be appropriate simply to reimburse him in present day dollars the amount that he brought in at the time of the commencement of cohabitation. This is so even allowing for the other contributions made by the wife.
Mr Farrar demonstrated also (and the husband conceded) that while the wife was not at work she was the primary carer for the children. This was a ready and proper concession made by the husband. Mr Farrar demonstrated in his submissions that in fact for almost a quarter of the period of cohabitation the wife was not at work but was on various forms of maternity, personal and annual leave.
The wife’s evidence about her contributions of a non-financial nature to the maintenance and establishment and acquisition of various properties appeared to me to be rather more generous than what would appear to have been her likely efforts.
That is not to say that I found the wife an unbelievable witness altogether. She was, however, in my opinion prone to exaggeration on some matters where she somewhat anxiously contemplated the superior claims for contribution made by the husband and his derogatory comments of her efforts. While it may seem trite, her efforts where less than she asserted and more than the husband asserted. I so find.
The husband’s efforts in the construction of the H property were conceded by the wife to be significant. However, it has to be said that at the same time the husband was not engaged otherwise in paid employment (and while that does not diminish the significant nature of his contribution) it does mean that he was not otherwise earning income which may have, in fact, paid for a professional builder to have completed the construction. I had no evidence before me which would enable me to reach any satisfactory conclusions about these matters.
Conclusion as to proportional division of property
In all of these things, the end result is to some extent an intuitive synthesis of the contributions made by each of the parties. The determination of the value and weight to be attributed to contributions is not a matter of mathematics. As the Full Court of the Family Court has said in Pastern & Pastern:[31]
It is in the nature of a discretionary determination that there is necessarily a gap between identifying and considering relevant factors, and expressing a conclusion as to the cumulative effect of those factors…a point would necessarily have to be reached where [a Judge] move[s] from a qualitative discussion of those factors to a quantitative reflection of them in the form of a s 75(2) adjustment [under the Family Law Act 1975 (Cth)].
[31]Pastern & Pastern [2007] FamCA 620 [99].
His Honour Coleman J also observed in Steinbrenner & Steinbrenner[32] that “there will inevitably be a ‘leap’ from words to figures.”[33]
[32]Steinbrenner & Steinbrenner [2008] FamCAFC 193.
[33]Steinbrenner & Steinbrenner [2008] FamCAFC 193 [234] (Coleman J).
These contributions differ as to quality and to quantity and as to the nature and timeliness of the contributions themselves. In this matter, in my opinion, overall the contributions of the husband should be regarded as greater than those of the wife. I indicated previously that, in my opinion, it seemed to me that it would be inappropriate only to reimburse the husband in dollar terms for the amount that he brought in at the time of the commencement of cohabitation.
Given the overall pool of property, it seems to me that an appropriate differential between the parties should be that the husband should receive 57.5 per cent of the pool and the wife 42.5 per cent. That is a differential of approximately $369,375.00. In my opinion, that is a reasonable representation in the circumstances of the difference of their respective contributions.
Section 75(2) factors
The parties have submitted on both sides I should make no adjustment under s 75(2) and under the Family Law Act 1975 (Cth).
What is “just and equitable” in the circumstances?
The H house
Both parties want the H house. The husband because he “poured his heart and soul into it”; the wife because she says the children have lived principally there and that it is necessary as part of her overall portfolio of assets to support the borrowings she needs to keep the business. Other matters are raised in Mr Farrar’s written submissions which relate to this. None, however, is in itself a determinative factor. If the H property were to be sold each of the parties would to some extent be able to discharge the other debts which would otherwise form part of their respective share of the property and liabilities. They could then accommodate themselves in some other way.
It seems to me that it is somewhat unlikely that the husband would be in a position to finance the mortgages from his present investment income in any event both his capacity to repay and that of the wife were not the subject of any expert evidence before me or even any satisfactory individual assessments from either of them.
The husband does have another house which he acquired for the purposes of living in when he was excluded from the family home. The wife, if she were not to live in the H property, would be in a situation where she would have to purchase another home.
It may be that the children will have to change schools but there is no evidence that this would necessarily be so. It is not the case that the children will spend more time in the house if one parent or the other were to receive the house as part of his or her share. The children spend half their time with each of their parents anyhow.
I cannot find a compelling reason to direct the house be transferred as of right to either party on a primary basis.
It seems to me that the only fair way of proceeding would be to have the house sold and either by tender or by auction. Both of the parties could have the right to bid for it. The parties’ lawyers invited me to allow them to draw up minutes reflecting the sorts of commercial and tax and other consequences that might flow from the orders in a way that was most effective for their clients. I will accede to this request but part of my agreement would be that the lawyers include in their Minutes of Orders, arrangements which would permit a fair competition between the parties to be the acquirer of the H home.
Otherwise, the wife will have the business, because both parties agree that she should. If I had been left at large I may well have taken the view that it would be more appropriate for the husband to have the business simply because the wife is already in paid employment. However, that was not an option left open for me and to order its sale would in the circumstances be of little benefit to either of the parties and would not in my opinion constitute justice and equity.
Analysing the effect of the division of property in accordance with the proportions that I have set out above it means that the wife will have the business, the potential to acquire a home be it the H home or otherwise, as I said above, the wine sale should/will continue and the proceeds divided 57.5 per cent to the husband, 42.5 per cent to the wife. The husband will also have his property portfolio, his home in N, a capacity to earn which is conceded by his counsel and due recognition of the fact that his contributions in my opinion have been greater than those of the wife.
Orders should be drafted accordingly.
Chattels
The husband sought in this matter that certain items of personal property should be given to him as part of his share. There was no ready agreement about this and it appears that some of the items may well have disappeared. There is no accurate evidence of which I can make a determination about these matters, nor is it appropriate that a court should spend time dividing DVDs and associated minor items.
The Minute of Orders submitted by the parties should provide for an apportionment of the personal property of the parties. If such an apportionment is not readily agreed to between the parties, I require that one of the parties provide a list of all of the relevant personalty divided into two approximately equal parts. The other party gets to choose which of the two parts of that list would be his or hers.
I have not specifically included in this judgment reference to the photographs and other personal items such as sought on the assumption that the parties are both mature and reasonable enough to make a division about these things between themselves, either in kind or by duplication. If that were not to be so, then a similar arrangement should apply as in relation to the other chattels.
SUPPLEMENTARY REASONS FOR THE FORM OF THE ORDERS MADE (28 July 2009)
In this matter, upon completion of the hearing, the parties asked that I would give them an opportunity to agree upon the form of orders to implement the judgment.
This proved to be a more difficult process then was originally contemplated and when no agreement appeared to be possible I listed the matter again before me on 10 June 2009. On that day, submissions were made about the re‑opening of the matter to deal with a number of different issues. Mr Moore for the husband indicated his client would now have to sell some of the properties that he owned if he were the successful tenderer for the former family home at H.
This meant he wished to reopen the matter to introduce evidence about the costs associated with the sale of the properties which, he argued, should be shared in proportion to the way in which the property itself was to be divided as a whole. He further sought to present evidence relating to any Capital Gains Tax involved with such sales.
Mr Farrar, on behalf of the wife, suggested that as the husband had advertised one of these investment properties for sale at a higher figure then had been the figure used in the calculations for my judgment that his client should have leave, to re‑open to introduce further evidence about valuation.
Reluctantly I gave leave on that day for these things to occur. Subsequently, the matter was before me on 23 July 2009. It had become apparent by this point that the wife no longer sought to adduce further valuations (principally because of the cost associated therewith). It was also apparent that the evidence from the husband was now of a slightly different nature in that it was not all of the properties that he sought to sell and effectively the re‑opening involved a more complex question of additional evidence.
I determined that there was a further solution which would take account of some of the issues raised by the parties and I provided the parties with draft orders to implement the further suggestion.
This involved, in essence, the proposition that the closed tender process would occur in any event. If the husband were to be the successful tenderer, then he would be obliged to pay the money that was required in accordance with the terms of the orders to the wife by way of adjustment.
If either before that time or subsequently within a year the husband were to sell any of the properties in his name, such sale would crystallise the Capital Gains Tax liability (pending assessment) and also the costs of sale. In fact the Capital Gains Tax would not be realised until the husband submitted his tax return and all of the relevant offsets were appropriately attributed to the capital gain.
The orders that I had provided then permitted an adjustment inter partes depending upon the sale price of the property, the costs of the sale and ultimately the Capital Gains Tax (if any) payable.
This meant that it was unnecessary for me to re-determine whether the orders were just and equitable as the basis upon which they had originally been determined as essentially preserved in the form of the new orders.
I should perhaps mention that it was proposed at one point on behalf of the wife that the husband be obliged if he were the successful tenderer for the former family home at H to transfer to her the house he had bought in N, ACT after the parties had separated. The husband was unwilling to do this and I declined to make such an order absent his consent.
The parties were able subsequently to provide some variations to the orders as drafted by me to take account of minor differences which suited their convenience more appropriately and the orders in due course issued on 23 July 2009.
These reasons are supplementary to my reasons for judgment and are in explanation of the form of the orders. The matter is removed from the pending cases list.
I certify that the preceding one hundred and twenty eight (128) paragraphs are a true copy of the reasons for judgment of the Honourable Deputy Chief Justice Faulks.
Legal Associate:
Date: 28 July 2009
[i] Minute of Orders Sought by Applicant Husband (copied in Endnote 1 as presented in Court)
1.Definitions:
a.“[T]” means [T] Pty Ltd (the 2nd Respondent)
b.“[KPL]” means [K] Pty Ltd (the 3rd Respondent)
c.“PFT” means the [K] Family Trust
d.“[KFT]” means the [K] Family Trust
e.“the Home” means [H property] ACT being […] in the whole of the land referred to in Crown Lease Volume […] Folio […]
2.That within 42 days hereof the Wife and the 3rd Respondent cause to be transferred or assigned to such entity as the Husband may nominate all of the assets, rights, leases, lease entitlements, bank accounts, licences, employment contracts and any other commercial entitlements or contracts relating to the business conducted by [K Pty Ltd] or owned and/or held by [K Pty Ltd] as trustee for [K Family Trust].
3.That simultaneously with the preceding order:
a.The husband discharge any Commonwealth Bank Loan Account numbers “…1400” and “…1304” and re-finance them so that the wife is no longer named as borrower and/or guarantor.
b.The wife pay out all outstanding wage, superannuation and leave entitlements relating to [K Business] and [K Pty Ltd] as trustee for [K Family Trust] and arrange for its staff to sign new employment declaration forms with the entity nominated by the husband in Order 1.
c.The wife shall transfer ownership of all copyright material and naming rights relating to [K Business] and [K Pty Ltd] as trustee for [K Family Trust].
4.That within 42 days hereof the Wife transfer to the husband the whole of her right title and interest in the Home.
5.That simultaneously with the preceding order the husband discharge any mortgage or loans presently encumbering the Home and re-finance it so that the wife is no longer named as mortgagor.
6.That within 42 days hereof the husband transfer to the wife free of all encumbrances the whole of his right title and interest in the property at [P] in the ACT.
7.That within 42 days hereof the husband pay to the wife an adjusting sum calculated as follows:
(25% * P) - $86,246.00 – WA
Where P is calculated by
A – L – CGT
A = Gross value of the assets of the husband and wife as found by the Court
L = Total liabilities of the husband and wife as found by the Court
CGT = Capital gains liability of the husband with regard to real estate sold since separation and to be sold in order to comply with these orders.
WA = Net value of assets wife will receive under these orders other than the lump sum referred to herein.
8.That within 14 days hereof the Respondent wife will cause to be delivered to the Applicant Husband the items identified in Schedule “A” attached hereto. (NB: Schedule A has not been included in this Judgment – generally, the items described fall into the description of “household effects”.)
9.That within 14 days hereof the Respondent wife will cause to be delivered to the Applicant Husband one half of the DVDs acquired during the relationship (approximately 400 in total).
10.That within 28 days hereof the Respondent Wife will cause to be delivered to the Applicant Husband all assets owned by the [Patrice] Family Trust in her possession and control as identified in Schedule “B” attached hereto. (NB: Schedule B has not been included in this Judgment – generally, the items described fall into the description of “plant and equipment”.)
11.That within 28 days hereof the Respondent Wife will cause to be transferred to the Applicant Husband ownership of the motor vehicle number plate styled “[K]”.
12.That within 28 days hereof the Respondent Wife will deliver to the Applicant Husband all original photographs in her possession for the purpose of the Applicant Husband copying same and the Applicant Husband will return the original photographs to the Respondent Wife within 14 days of the Respondent Wife having delivered them.
13.That within 28 days hereof the Respondent Wife deliver to the Applicant Husband half of the clothes previously worn by the children from birth and which have been stored or retained by the parties during the relationship for sentimental reasons.
14.That pursuant to sec 79 of the Family Law Act that the husband is entitled to be the sole legal and beneficial owner of all other property including superannuation currently in his possession and/or control free from any interest of the wife and shall indemnify the wife in relation to any and all debts attaching thereto.
15.That pursuant to sec 79 of the Family Law Act that the wife is entitled to be the sole legal and beneficial owner of all other property including superannuation currently in her possession and/or control free from any interest of the husband and shall indemnify the husband in relation to any and all debts attaching thereto.
16.That each party do all acts and things and sign all documents and give all consents as may be necessary to fully implement these orders.
17.That the husband and wife party have general liberty to apply in respect of implementation of these orders on giving at least 14 days’ notice.
18.That if either party fails or neglects to sign or execute any document, instrument or writing after seven (7) days of being required to do so, each party consents to any Application filed by the other party seeking Orders pursuant to Section 106A of the Act that the Registrar of the Family Court of Australia at Sydney be empowered to sign and execute such document, instrument or writing on behalf of either party as may be necessary to give full force and effect to orders herein.
19.
[ii] Minute of Orders Sought by Respondent Wife (copied in Endnote 2 as presented in Court)
1.That the husband and the Second Respondent do all acts and things and sign all necessary documents to cause to be transferred to the Third Respondent, in its capacity as Trustee of the [K] Family Trust, all of the plant and equipment, fittings and fixtures currently owned by the Second Respondent in its capacity as Trustee of the [Patrice] Family Trust.
2.The Third Respondent indemnify and keep indemnified the husband, the Second Respondent, and the [Patrice] Family Trust, against all and any liability howsoever existing or arising with respect to:
a.Commonwealth Bank housing loan account number “…1400”;
b.Commonwealth Bank home loan account number “…1304”;
c.Commonwealth Bank business loan account number “…3929”;
d.Any debt incurred by The Third Respondent in operating the business known as [K Business].
3.The following debts are declared to be extinguished:
a.Any debt owed by the Third Respondent to the Second Respondent;
b.Any debt owned by the Third Respondent to the [Patrice] Family Trust;
c.Any debt owed by the Third Respondent to the husband the wife
4.Order re [H property]:
a.The husband transfer to the wife the whole of his interest in the property known as [H property] being Block […] in the whole of the land referred to in Crown Lease Volume […] Folio […] (“the [H] property”); and
b.The wife indemnify, and keep the husband indemnified in relation to any liability with respect to:
i.The debts referred to in Order 2; and
ii. Any debt outstanding with respect to the housing loan account number “…5009” secured over the [H] property.
5.Payment by husband:
a.The husband pay to the wife, within 28 days, the sum of $472,500; and
b.In the event that the husband fails to pay that sum in the time specified in these orders then:
i.Interest shall accrue on the amount outstanding at the rate prescribed by section 117B of the Family Law Act, and Rule 17.03 of the Family Law Rules; and
ii. The wife shall have liberty to seek orders for enforcement of payment, including orders for costs.
6.The husband transfer to the wife the whole of his interest in the contents of Commonwealth Bank account number “…7868” being the rental bond security deposit for the premises occupied by [K Business].
7.The husband and the second respondent do all acts and things to transfer to the first respondent:
a.Ownership of the ACT motor vehicle number plate …”[K]”;
b.All rights earned by them with respect to the domain name or URL www…, including any password, register key or other information necessary to enable her to control and operate that domain name.
8.Subject to these orders, as against the husband, the wife is declared to be the sole owner of:
a.Any money in any account in her name with any bank or other financial institution;
b.All goods, chattels and personal property in her possession including the contents of the [H] property;
c.All benefits accrued or to accrue to her pursuant to her membership of any scheme or fund providing superannuation benefits;
d.Any property transferred to her pursuant to these orders;
e.The assets of the [K] Family Trust;
f.Any interest in real estate registered in her sole name; and
g.Any other chose-in-action or property of whatsoever nature in her possession or ownership.
9.Subject to these orders, as against the wife, the husband is declared to be the sole owner of:
a.Any money in any account in his name with any bank or other financial institution;
b.All goods, chattels and personal property in his possession;
c.All benefits accrued or to accrue to him pursuant to his membership of any scheme or fund providing superannuation benefits;
d. Any interest in real estate registered in his sole name; and
e.Any other chose-in-action or property of whatsoever nature in his possession or ownership.
[iii] Taxable income for the Husband between 01 July 2000 and 30 June 2008: 30.07.00 to 30.06.01 = $23,835.00 (Exhibit “W2”); 01.07.01 to 30.06.02 = $6,466.00 (Exhibit “W3”); 01.07.02 to 30.06.03 = $4,152.00 (Exhibit “W4”); 01.07.03 to 30.06.04 = $13,126.00 (Exhibit “W5”); 01.07.04 to 30.06.05 = $1,889.00 (Exhibit “W6”); 01.07.05 to 30.06.06 = $6,905.00 (Exhibit “W7”); 01.07.06 to 30.06.07 = $9,934.00 (Exhibit “W8”); and 01.07.07 to 30.06.08 = $13,808.00 (Exhibit “W9”).
[iv] Omitting salutations, the additional submissions of Mr Maurice as requested by me are as follows (dated 18 May 2009):
Loans to Wife from [K business] - Husband's Value = $103,744
This figure is made up of three entries all derived from Exhibit H19 the Profit and Loss Statement and Balance Sheet of the [K] business covering the period 1 July 2008 to 7 May 2009. The individual figures are:
a. Motor vehicle expenses $8,139.11 appearing under expenses in the P & L statement. The wife’s Financial Statement recorded that [K Business] paid her motor vehicle expenses and she agreed that it paid 100% of her expenses including maintenance, registration and insurance. The figure of about $8,000 for motor vehicle expenses was put to her in cross examination which she did not dispute.
b. Mortgage [G] $58,300.01. (Balance Sheet) The wife agreed under cross examination that the company had advanced this sum to her to pay the home mortgage over this 9 month period. It is recorded in the balance sheet as a negative liability which she accepted meant it was a company asset.
c. Loan HP $39,225.59 (Balance Sheet). The wife agreed under cross examination that the company had advanced this sum to her for her own use.
The total of these figures is $105,664.71 which is the correct figure rather than $103,744 named in the document. Collectively these are described as “loans to wife”.
Is it agreed?
My understanding is that the wife does not agree that this figure should be added back.
How should it be treated?
Because the wife has yet to characterise these advances, the husband says that they should be treated simply as an asset in the hands of the wife. They were derived from funds generated by the business which, despite its structure, was essentially set up as a jointly owned business of the husband and wife. Since separation the wife, through her company and trust, has made use of the equipment owned by the husband’s company and trust without payment.
This equipment was essential to the operation of the [K] business. The advances of funds to the wife post date the valuation of the business. The business was, and still is, jointly owned at the time those advances were made to her. The husband, as effective co-proprietor, was entitled to a say about how those funds were to be applied. He was not given that opportunity and was denied by the wife any benefit from his investment. Those funds stand independently of any valuation of the [K] business based upon net maintainable earnings calculations. They are in effect not unlike undistributed profit deposited into a company bank account that would have to be treated independently of such valuation.
To give an example, assume that with that $105,000 odd the company in January 2009 purchased a car space in Canberra City. That asset would, as a matter of logic, have to stand independently of the company valuation based on its net maintainable earnings. The wife’s use of that money, which was not revealed until the Financials ending on 7 May 2009 were provided just prior to the commencement of the hearing, ought be added back as a premature distribution of marital assets.
In Clives and Clives (2008) FLC ¶ 93-385, it was argued before the Full Court that bank interest of about $57,000 earned from the investment of the proceeds of sale of the matrimonial home and used by the wife after separation ought to have been be added back as a premature distribution of property. Although the Full Court did not ultimately add that sum back their reasons were that it had all been fully accounted for and used for legitimate and reasonable living expenses. In paragraph 56 their Honours said:
56. The wife dealt with the effect of the receipt of the income in paragraphs 59-64 of her affidavit sworn 13 July 2006. In addition, the wife relied on evidence in chief in an updating affidavit sworn 5 April 2007 (paragraphs 120-136). The wife annexed copies of her income tax returns for the year ended 30 June 2006, together with documents received by her from the Family Assistance Office. This material supported the findings made by the trial Judge.
The points of distinction in this case are that:
·The wife has had available to her 3 sources of income, her salary or about $85,000, her rents (unknown) and about $105,000 advances from the company being a total of not less than about $190,000.
·The wife did not disclosure these advances in her Financial Statement nor her affidavits; just as she failed to disclose fully the rent she received from the 3 rentable dwellings in her control. She has not sought to fully explain her expenditure. In fact her affidavit does not deal with the advances at all.
If Your Honour is against us then the Court is still requested to disregard the payment of $58,000 towards the home mortgage as a contribution by the wife.
Loans to Husband from [K Business] - Husband's value $1,097
Recorded as Loan JP $1,097.44 (on Balance Sheet 7.5.09)
Is it agreed?
My understanding is that the wife does not agree that this figure should be added back.
How should it be treated?
For consistency the husband says that this figure ought to be added back as an asset and treated as belonging of the husband if the sum of about $105,000 is added back as an asset of the wife. It is noted that although it is recorded as money advanced to him, like the notional distribution to him of $86,346 he has not actually received it.
Husband tax debt from sale of shares - Husband's value (-)$15,164
This is the husband’s calculation of his CGT liability arising from the sale of his shares post separation was referred to paragraph 97 of his affidavit. The affidavit does not include a calculation of CGT. The husband referred to CGT figures in his Financial Statement sworn 8 May 2009 which was rejected by Your Honour having regard to its lateness.
Is it agreed?
I understand that the wife does not agree that this figure should be deducted from the pool of assets.
How should it be treated?
The sale of shares having occurred the husband asks the Court to take into account his CGT liability in the manner referred to in NOETEL, TW and QUEALEY, PA (2005) FLC ¶ 93-230 notwithstanding the limited evidence.
Husband tax debt from sale of [P] property - (-)$57,251
This is a CGT liability which arises from the sale of this property referred to in paragraph 97 of the husband’s affidavit. The calculation for the figure appears in the last table towards the end of the coloured spreadsheet handed up to your Honour on the first day of the hearing titled “Financial Summary of 5 May 2009”.
Is it agreed?
I am uncertain whether the wife agrees that this figure should be deducted from the pool of assets.
How should it be treated?
The sale of the property having occurred the husband asks the Court to deduct his CGT liability in the manner referred to in NOETEL, TW and QUEALEY, PA (ibid).
[v] Omitting salutations, the additional submissions of Mr Farrar as requested by me are as follows (dated 18 May 2009):
...our position is that we do not agree to the inclusion of any of the figures referred to. We say that the first two items should not be “added back” as notional assets. We say that the second two items are not liabilities which are in evidence. By way of expanding on those comments we say the following:
1.The first two items relate to figures shown on the interim Balance Sheet dated 7 May 2009 which became an exhibit during the wife’s cross-examination. We are not able to identify the makeup of the figure of $103,744 as it does not appear in the interim Balance Sheet.
As was commented by his Honour and as was submitted by me, the interim Balance Sheet is not a final Balance Sheet. It simply places certain expenditure items in the Balance Sheet pending final attribution at the end of the financial year after advice from the Accountant. It is likely that the loan payments referred to therein will ultimately be included as interest payments in the Profit and Loss Statement, which currently contains no items for those expenses. Journal entries will be made at the end of the year to deal with the issue.
The items in the interim Balance Sheet do not represent monies of which the wife has had the benefit. The figures were prepared by the bookkeeper using MYOB. The items shown as loans await re‑characterisation by the Accountant.
The figure of $103,744 is not explained. There is no agreement that it be treated as an asset. My submissions on this matter were set out in paragraph 1 of my Written Submission document.
Likewise we did not include the loan to the husband from [K Business] as an asset or liability.
The wife has paid the business outgoings for the whole of the 2009 financial year to date, which is the period reflected in the draft Balance Sheet. His Honour has evidence that the business outgoings include over $5,000 per month payable to the Commonwealth Bank with respect to the loans raised by the [Patrice] Family Trust to purchase the plant and equipment on its own behalf and the goodwill of the business on behalf of [K Business]. That creates a loan to the [Patrice] Family Trust in the [K Business] accounts.
In addition the wife has paid the house mortgages. The evidence was that 23% of those mortgage payments relate to properties in the husband’s sole name.
The wife has run the business and has not drawn a wage.
The husband has spent $776,813 from the matrimonial asset pool since separation (see Husband Annexure “C” page 23). Of that expenditure he would have it that only the following items represent assets:
·His equity in the [N] property (Annexure “C” – 16) $339,750.00
·Loan repayable by his father (Annexure “C” – 24) $64,795.00, and
·Items purchased which form part of the valuation of the chattels in his possession
It is clear that he has spent several thousand dollars on items which have no present value.
Included in those items of expenditure by the husband are:
·Macquarie Bank loan shares (Annexure “C” – 21) $26,864.00
·Interest on ComSec margin loan $8,157.00
·Car Expenses (Annexure “C” – 23) $42,128.00
·Sporting Equipment (Annexure “C” – 23) $4,228.00
·Tools (Annexure “C” – 23) $11,998.00
·Losses on investment properties (Annexure “C” – 23) $25,599.00
·Medical & Dental (Annexure “C” – 22) $43,057.00
·Home Maintenance (Annexure “C” – 22) $1,437.00
·Children Expenses (Annexure “C” – 21) $10,277.00
·Household Items (Annexure “C” – 20) $47,415.00
·Food (Annexure “C” – 18) - $12,616.00
·Furniture (Annexure “C” – 18) $8,163.00
·CD’s and DVD’s (Annexure “C” – 16) $4,992.00
·Home Mortgage payments on [N] property (Annexure “C” – 16) (Last 8 items under “[N property]” Annexure “C” – 16) $30,455.18
·Clothes (Annexure “C” – 16) $1,411.00
The point of all that is if the wife is going to be deemed to have money in her possession which she no
longer has, then the husband should be treated likewise.
2.The husband seeks to bring to account what his Counsel’s Submissions say is a tax debt from the sale of shares and a tax debt from the sale of the [P] property. There is no evidence proffered by the husband to establish those liabilities. The figures do not appear in any document which is in evidence in these proceedings. They are excluded from our calculations. The calculation of the amount of applicable tax, if any, would be a complex matter, necessitating analysis of the husband’s other income in the year. In the husband’s case this other income in the current year is quite low and it is reasonable to infer that the amount of tax would be quite low. The onus was on the husband to adduce admissible evidence as to the quantum of any tax. The wife could then have considered and challenged that evidence. No admissible evidence was proffered.
[vi] Taxable income for the Wife between 01 July 2000 and 30 June 2007 (all Exhibit “W13”): 01.07.00 to 30.06.01 = $34,664.00; 01.07.01 to 30.06.02 = $45,321.00; 01.07.02 to 30.06.03 = $52,884.00; 01.07.03 to 30.06.04 = $66,592.00; 01.07.04 to 30.06.05 = $71,051.00; 01.07.05 to 30.06.06 = $53,145.00; 01.07.06 to 30.06.07 = $66,859.00; no Taxable Income recorded for 01.07.07 to 30.06.08 as the wife’s tax return is yet to be submitted.
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