PAVLEK & SPICE

[2013] FamCA 885

FAMILY COURT OF AUSTRALIA

PAVLEK & SPICE [2013] FamCA 885

FAMILY LAW – PROPERTY – Contributions and adjustment – 10 year de facto relationship – property in contention being the husband’s shareholding in a company of which he is a Board member – it is found that the husband made a significantly greater financial contribution than the wife – where the husband bore sole responsibility for running the company and managing the shareholdings – where the wife is the primary carer of three children to the relationship – where the wife took no responsibility for the parties’ debts – no adjustments made – division of property 65 per cent to the husband and 35 per cent to the wife – husband made solely responsible for debt to his father – where the husband’s parents had assisted with the husband’s investments – shares to be sold rather than transferred to avoid financial disadvantage to the husband due to the wife’s alliance with Board members since separation.

FAMILY LAW – CHILDREN – Mother restrained from allowing the children to be left alone with their maternal grandfather – where the father alleges sexual misconduct toward one of the children perpetrated by the maternal grandfather – the allegations are not substantiated – order put in place to protect children if needed and to protect the grandfather from  further allegations.

Family Law Act 1975 (Cth) ss 75, 90SF, 90SM

Child Support Assessment Act 1989 (Cth)

Bevan & Bevan [2013] FamCAFC 116

Stanford & Stanford [2012] HCA 52

APPLICANT: Ms Pavlek

RESPONDENT: Mr Spice

FILE NUMBER: (P)NCC 366 of 2011

DATE DELIVERED: 14 November 2013

PLACE DELIVERED: Newcastle

PLACE HEARD: Newcastle

JUDGMENT OF: Cleary J

HEARING DATES: 2, 3, 4, 5 and 11 April 2013

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Graham

SOLICITOR FOR THE APPLICANT: Braye Cragg Solicitors

COUNSEL FOR THE RESPONDENT: Mr Davies

SOLICITOR FOR THE RESPONDENT: McGillivray Solicitors

Orders

1. That the Respondent Mr Spice shall forthwith do all things necessary to cause the company D Pty Ltd to sell for not less than $5.5 million (the minimum price) its shareholding in P Pty Limited.

2. In the event that the shares remain unsold at the minimum price after a period of 12 months from the date of these orders then the Respondent shall cause D Pty Ltd to sell the shares at the best price then attainable.

3. The proceeds of sale of the shareholding shall be paid as follows:

   (a)       to the Respondent, 65 per cent;

   (b)       to the Applicant, 35 per cent.

4. The Respondent shall be responsible for payment of all debts outstanding to his father, Mr Spice Snr, and shall indemnify the Applicant in respect of any claims made against her in respect of those liabilities.

Parenting:

1. The Applicant Mother is restrained from leaving the children S born … 2004, M born … 2006 and T born … 2008 in the sole care of the maternal grandfather.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Pavlek & Spice has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT NEWCASTLE

FILE NUMBER: (P) NCC366 of 2011

Ms Pavlek

Applicant

And

Mr Spice

Respondent

REASONS FOR JUDGMENT

Introduction

1. This is a dispute between partners to a de facto relationship over the adjustment of interests in property and also for orders in relation to a specific issue involving their three children.

2. Ms Pavlek is the applicant. Mr Spice is the respondent. Both parties live in Newcastle.

3. The parties met in 1999, began living together in early 2000 and separated on 21 March 2009.  During that 10 year de facto relationship they had three children now aged nine, seven and five. 

4. The applicant and the children live in the home of the maternal grandparents. The father rents a property locally and the children spend substantial and significant time with him there. There are final parenting orders in place by consent.

5. Commencing this year, all three children are at school.

6. The parties together operated a business called W Company, owned by the respondent. The respondent is the director of a company named D Pty Ltd which has a shareholding in a company known as P Pty Ltd. The adjustment of interests in that shareholding is in contention.

7. The value of the shareholding has been agreed between the parties. Therefore no valuation was undertaken.

The evidence

1. The parties relied upon the following material:

   (a)Amended Initiating Application of Ms Pavlek (applicant) filed 18/09/2012.

   (b)Amended Response of Mr Spice (respondent) filed 12/10/2012.

   (c)Affidavits of Ms Pavlek filed 8/11/2011, 10/7/2012 and 8/3/2013.

   (d)Financial Statements of Ms Pavlek filed 10/07/2012 and 08/03/2013.

   (e)Affidavits of Mr Spice filed 20/12/2011, 16/07/2012 and 20/07/2012.

   (f)Financial Statements of Mr Spice filed 04/7/2012 and 11/03/2013.

   (g)Affidavits of the respondent’s father Mr Spice Snr filed 17/07/2012 and 08/03/2013. 

The applicant, Ms Pavlek

1. The applicant is 37 years old.  She is a freelance designer.  In 2000 she obtained a relevant degree from A University.

2. In 2012 she commenced Graduate entry law at the same University.  She will probably complete this degree at the end of 2014 and thereafter commence employment as a lawyer.

3. The applicant was an inconsistent rather evasive witness.  She answered vaguely and spoke softly.  She very often answered that “she did not know”, “could not remember” or “didn’t agree.”  For instance, she was initially unable to state her current hours at University but gave details when pressed.  However on occasions, she gave decisive detailed and accurate responses about events in the past.  For example, she was able to remember what the respondent said to her in 1999 about a job offer she did not ultimately take up.

4. My impression was that the applicant was intent on persuading the Court that she had been overborne in the relationship and excluded from information.  I do not consider that she was overborne.  She is clearly an intelligent capable woman.  I have the impression that she was, and continues to be, resentful about her role in the Spice family. In particular that she was not directly involved in family discussions between the generations about proposed financial transactions.

5. The applicant was prepared to concede that she was consulted by the respondent from time to time about financial matters, but was firm in her assertion that the respondent’s decision in all business matters was final.  That may have been the case.  However, I conclude that the applicant understood very well their business at the time when the parties ran it together and that they did so as business partners.

P Pty Ltd

1. The parties’ private company D Pty Ltd holds shares in P Proprietary Limited.

2. The respondent, as director of D Pty Ltd, has a seat on the board of P Pty Ltd.

3. The applicant seeks an order from this Court for transfer of shares in P Pty Ltd to her. 

4. The applicant conceded that she knew that the likely consequence of division of the shares held by D Pty Ltd was that the respondent would lose his place on the Board, because his shareholding would fall below 20 per cent.  A letter tendered into evidence[1] confirms that it would be unlikely that he would retain that seat in those circumstances.

   [1]  Exhibit 4

5. In theory at least there is therefore a potential disadvantage to both parties in the division of the shareholding. The applicant did not address it in her affidavit, but her oral evidence revealed that she understood the implications.

6. The applicant also understands the current state of play between the respondent as a director of a minority shareholder, and the rest of the Board. She knows that he wanted to take action as an oppressed minority shareholder.

7. She has quite deliberately formed alliances with Board members and positioned herself to optimise personal advantage.

8. On the fourth day of this hearing an application was made by the husband for an adjournment pursuant to Section 79(5) of the Family Law Act1975. The application was refused and extempore reasons given. During the course of the submissions in relation to that application Counsel for the Applicant put the extraordinary position on her behalf that “she could trust the Board (of P Pty Ltd) to do what is in her best interests”. There could be no more persuasive evidence of the alignment between the applicant and the Board of P Pty Ltd which has no legal obligation to the Applicant at all.

9. By the conclusion of the hearing the alliance between the applicant and one particular Board member was obvious.

10. I formed the impression that the applicant is confident that through the support of this Board member she would not be at a financial disadvantage if she became a minority shareholder, although the respondent almost certainly would be.

11. Accordingly in my view there is a probable disproportionate financial disadvantage to the respondent if he transfers shares in P Pty Ltd rather than selling them and accounting to the applicant.

Loans from Respondent’s parents

1. The Bendigo Bank Loan

1. The respondent borrowed $250,000 to invest in P Pty Ltd. The respondent’s parents allowed a property they owned in Suburb B to be used as security for the debt.

2. The loan of $200,000 from Bendigo Bank was borrowed in the sole name of the respondent. 

3. The applicant was not present for conversations about loans and terms.  Those discussions were between the respondent and his father.  However there is no doubt that the respondent relayed the information after the event to the applicant.

1. The personal loan of $50,000

1. The respondent borrowed the further sum of $50,000 from his parents to invest in P Pty Ltd.

2. The applicant was questioned about monies lent to the respondent by his father, Mr Spice Snr.  The applicant conceded that $50,000 was borrowed which went into the P Pty Ltd business, “It all went in.”  

3. The applicant also agreed that at the time of this second loan the respondent still owed Bendigo Bank $200,000 raised to invest in the business.  

4. The proposition was put to the applicant in respect of the first loan, that it was the only way it could have been secured, she answered, “No, I don’t know, we could have found another way I guess”.

5. In respect of the second loan, the proposition was put to the Applicant that there was no other way to get $50,000 than to borrow from the respondent’s father, (given that they had already borrowed $240,000).

6. The applicant denied all knowledge of a document providing for the provision of the $50,000 in exchange for a 30 per cent share of the respondent’s shareholding at that time.  There was then a series of questions and answers as follows:

   Q:       What other way could you have raised the $50,000?

   A:       I don’t know.

   Q:You knew there was no other way to get the money other than from Mr Spice Snr.

   A:       No I wouldn’t say that.

   Q:       There was no other source.

   A:       There could have been.

   Q:You don’t say anything about any other possible source in your affidavit.

   A:       No.

   Q:Mr Spice (the respondent) had to have the $50,000 to put into the company.

   A:I wouldn’t agree.  It wasn’t the only option.  He didn’t have to have the $50,000 and other amounts (a reference to investments by friends and family of the applicant herself). 

   Q:       He could have sold shares.

   A:       Yes.

   Q:       He was desperate to get the money at that time.

   A:       I wouldn’t know if I’d say he was desperate.

   Q:There was no necessity to borrow if the money didn’t have to be put into the business.

   A:       No.

7. In my view, this passage does not reflect a lack of knowledge by the applicant at the time when the money was borrowed, but rather hostility about who it was borrowed from and how it was arranged.  I am satisfied that the applicant knew about the borrowings.

8. Whenever the respondent said she didn’t know something about the parties’ financial arrangements, my impression was she was communicating to the Court, “I only know what I was told”, by implication after the event by the respondent.

9. For that reason it was difficult to be confident in the truthfulness of the applicant when she disclaimed knowledge.

W Company and P Pty Ltd

1. There is no doubt that the parties worked together initially in the respondent’s business W Company and subsequently in the P Pty Ltd business, which had the potential to deliver significant profits. 

2. However the respondent was always under capitalised.  He borrowed to invest. He sold certain valuable communications products to raise capital and shares.  Those he sold to had the capital to develop the idea.  The respondent increasingly lost control. The applicant hoped to be part of the success of P Pty Ltd, but was ambivalent about taking on personal risk and obligation.

3. There is nothing to suggest that the applicant pushed to be included in the financial commitment, for instance to be a party to the mortgage, or to raise funds in any other way.  The overall impression was of ambivalence by the applicant about the extent of her involvement. 

4. The applicant conceded that the respondent had his own business when they met and she began working for him through his then business, W Company. 

5. The parties’ skills were clearly complementary and I accept that they worked well together in the early years of the relationship.  I also accept that after the birth of at least the parties’ second child in 2006, the applicant was progressively less involved in the business.

6. The value of the communications products the business was buying became increasingly evident.  Shareholders with money to invest came into the business.  The parties struggled with the very success of the business. 

7. The respondent became embattled during a push by the Board to acquire his shares at the end of 2008.  The applicant asserts that she had had no influence over the respondent in what he should do.

8. There had been an offer from the Board of P Pty Ltd to D Pty Ltd in November 2008 to buy out the interest of the respondent for somewhere between $2.4 to $3 million.  The offer was rejected.

9. The respondent contemplated litigation against the Board for oppression of himself as a minority shareholder.

10. Just after separation in early 2009 the applicant certainly exercised influence. She opposed a loan being raised for that purpose.  Thereafter the respondent provided information to Board members about these proceedings and the relevant restrictions upon him.

Occupation of the B property

1. The parents of the respondent provided to the parties the use of a home at B which they owned.  The parties and their children lived there from January 2006 until separation, about three years.

2. The applicant denied that there had ever been any discussion about the need for herself and the respondent to pay rent for the property.  She denied that the figure of $300 per week, or rent to any extent, was ever discussed.  I accept that there was probably no direct discussion between the Spices and the applicant.

3. However my impression was that the applicant was again expressing resentment rather than doing her best to tell the truth.  The evidence does not support a finding that the respondent’s parents offered the use of their property to the parties rent free indefinitely.

4. It is clear that the applicant was not a participant in discussions about money involving the respondent and his parents.  My impression is that at least on this issue the discussions were as follows.  The respondent’s parents discussed matters between themselves and came to a position.  The respondent and his father then discussed matters directly.   Next the respondent communicated with the applicant what had been decided.  On some occasions there was then resentful discussion between them about the conditions of assistance imposed by the Spices.

The loan from Bendigo Bank

1. In respect to the Bendigo Bank loan, the applicant agreed that the loan was still being paid in 2006 when the parties moved into the respondent’s parent’s home in B.  The applicant said she could not remember whether that loan was interest only, or principal and interest, but that she was aware that they were falling behind in their payments.

2. In regard to this issue the applicant distanced herself from responsibility for the Bendigo Bank loan.  However the liability was undeniably incurred to procure the asset over which the parties are now litigating.

The respondent, Mr Spice

1. The respondent was a straightforward witness.  He readily conceded the contribution made by the applicant to the business, “an immensely valuable resource.”  He agreed that the applicant had talent in design and in production of aesthetic sense and talent in design.

2. There was a disagreement between the parties as to when the applicant ceased billable work.  The respondent asserted that the bulk of the applicant’s work was done before the birth of their first child in 2004.  The applicant disagreed and asserted she was actively working after the birth of their second child in 2006.  I am unable to make a positive finding but consider it likely that the applicant was less actively involved after the birth of M.

3. The respondent was extensively challenged in cross examination.

4. One example was over the respondent’s expressed wish not to disclose his address.  His explanation was his fear that one of the directors of the Board of p Pty Ltd, who had made threats against his physical safety in 2005 and 2009, could learn where he lived.  

5. He described attacks on his vehicle, threatening emails and discussions between the parties prior to separation about applying for an Apprehended Violence Order (AVO).  I accept his evidence including the applicant’s knowledge, at the time they were made, of the threats.

6. It did not reflect well on the applicant that her counsel put to the respondent that his explanation was “rubbish” and had been “made up.”  The director who is alleged to have made the threats is the same director with whom the applicant has now formed an alliance.

7. Likewise, in relation to the claim for unpaid rent on behalf of the respondent’s parents, the respondent asserted that a figure of $300 was discussed with his parents to be paid when they “got back on their feet.”  The proposition was put, “There was never an agreement that as you and your father say”.  

Respondent’s father, Mr Spice Snr

1. Mr Spice Snr was a forthright witness, open about the tension in the relationship between himself and his son over financial matters.

2. In 2004 he had been sympathetic to his son’s entrepreneurial interest in the development of the newly emerging market in relevant communications products.  He agreed to the use of a block of vacant land as security for borrowing from Bendigo Bank.  He lent two sums of cash $40,000 and $50,000.  This was in the knowledge that all funds borrowed would be used to invest in the acquisition of right of use to such products.

3. His son offered him a share in the shareholding for the final loan of $50,000 made in September 2004.  I accept this offer was made by the respondent to overcome his father’s reluctance to lend again.  The applicant did undertake such work to assist her partner’s father.

4. I consider that Mr Spice Snr did not understand much about the asset his son was investing in and did not have a belief in any particular profit being generated. I do accept that he expected to have the loans repaid.  His motivation was to assist his son.

5. Mr Spice Snr and his wife personally guaranteed the main loan from Bendigo Bank.

6. It became clear to the Spices that their son was focused on chasing the communications product business idea.   He was channelling all available funds that way and not into repaying Bendigo Bank.  The Spices arranged to sell the land and repay their son’s debt that was by then $250,000.

7. The sale settled early in 2006.  Prior to settlement the Spices were again asked for assistance.  Their son, his partner and the children had to move, at $600 per week they were unable to pay their rent in Suburb L.

1. I accept that there was a conversation between the respondent and his father where Mr Spice Snr offered the B house for $300 per week for 12 months, rent deferred until “you get back on your feet.”  Thereafter the arrears would be expected to be paid.

2. The parties moved in and lived in the property for three years, until their ultimate separation.  No rent was paid to the Spices for the entirety of the time the parties lived in the property.

3. I accept that there was no such agreement, as was put on behalf of the applicant, that the work undertaken by her for Mr Spice’s business would be in lieu of rent.

4. The situation was that the parties were without income and in debt.  The Spices paid out their loan to Bendigo Bank and provided them with accommodation.  It was a significant contribution.

5. However the expectation of repayment is real and documented.  Interest on debt will likely be a matter of negotiation between the respondent and his father when and if the parties’ asset proves to be valuable.

The law

1. In property settlement proceedings, after the breakdown of a de facto relationship, the Court may make orders pursuant to the provisions of

   
   

   Pt VIIIAB of the Family Law Act 1975.  The Court may make such order as it considers appropriate in altering the interests of the parties to the de facto relationship in the property.  Such orders, including an order for a settlement of property in substitution for any interest in the property, and an order requiring either or both of the parties to the de facto relationship to make for the benefit of both or either of the parties to a de facto relationship, or a child of a de facto relationship, such settlement or transfer of property as the Court determines.[2] 

   [2]  Family Law Act 1975 (Cth), s 90SM

2. The Court must not make an order under this section unless it is satisfied in all of the circumstances, it is just and equitable to make an adjusting order and that if an order is made, that the outcome is likewise just and equitable. 

3. If an order is to be made, the Court must take into account the following factors:

Contributions and future needs

(a)     The financial contribution made directly or indirectly by or on behalf of a party to the de facto relationship, or a child of the de facto relationship:

(i)to the acquisition, conservation or improvement of any of the property of the parties to the de facto relationship or either of them;

(ii)otherwise in relation to any of that last-mentioned property;

whether or not that last-mentioned property has, since the making of the contribution, ceased to be the property of the parties to the de facto relationship or either of them; and

(b)    the contribution (other than a financial contribution) made directly or indirectly by or on behalf of a party to the de facto relationship, or a child of the de facto relationship:

(i)to the acquisition, conservation or improvement of any of the property of the parties to the de facto relationship or either of them;  or

(ii)otherwise in relation to any of that last-mentioned property;

whether or not that last-mentioned property has, since the making of the contribution, ceased to be the property of the parties to the de facto relationship or either of them; and

(c)     the contribution made by a party to the de facto relationship to the welfare of the family constituted by the parties to the de facto relationship and any children of the de facto relationship, including any contribution made in the capacity of homemaker or parent;  and

(d)    the effect of any proposed order upon the earning capacity of either party to the de facto relationship;  and

(e)     the matters referred to in subsection 90SF(3) so far as they are relevant;  and

(f)     any other order made under this Act affecting a party to the de facto relationship or a child of the de facto relationship;  and

(g)    any child support under the Child Support (Assessment) Act 1989 that a party to the de facto relationship has provided, is to provide, or might be liable to provide in the future, for a child of the de facto relationship.

1. Recent decisions of both the High Court in Stanford & Stanford [2012] HCA 52 and the Full Court of this Court in Bevan v Bevan [2013] FamCAFC 116 have emphasised the significance of making adjustments to legal and equitable interests of parties only if it is just and equitable to do so.

2. The principles in Stanford were enunciated in the context of a long standing marriage in unusual circumstances.  However there is no apparent basis for taking a different approach in applying the relevant law outlined above to de facto relationships.

3. Evaluation of respective legal and equitable interests should lead to an analysis of what each party owns at date of hearing.  That is identification of the asset pool.

4. The next step is to consider whether it would be just and equitable to make any adjustment.  

5. If it is just and equitable, the next step is a consideration of the relevant statutory elements relating to contributions both financial and to the welfare of the family, and the requirement in 90SM(4)(e) to consider the application of the relevant factors in s 90SF(3) of the Act by way of adjustment.

6. The final consideration is whether the overall distribution according to proposed orders is just and equitable.

1. Identify the assets and liabilities of the parties

1. The net asset pool was asserted to be as follows in the Joint Balance Sheet :

O’ship			Description		Wife value	Husband value
Assets
1	J		Shares in [P] Pty Ltd/[N] Pty Ltd		$5,500,000.00	$3,188,310.00
2	H		1991 Honda … motor vehicle		$1,500.00	$1,500.00
3	H		Home contents		$2,000.00	$2,000.00
4	H		[C] Pty Ltd		NIL	NIL
5
6	W		[H Company]		NIL	NIL
7	W		Household contents		$3,000.00	$3,000.00
Total					$5,506,500.00	$3,194,810.00
Addback
8		W	Invoice to [P Pty Ltd]		NIL	$69,245.00
9		W	Wife’s legal costs associated with Family Law proceedings		$21,157.00
10		H	Monies received from [P] Pty Ltd/[N] Pty Limited		$85,919.00	$85,919.00
11		W	Monies received from [P] Pty Ltd/[N] Pty Limited		$24,654.00	$24,654.00
12		H	Husband’s legal costs associated with Family Law proceedings		$NK	$14,800.00
13
Total			$131,730.00	$194,618.00
Liabilities
14		J	[Mr & Mrs Spice Snr] re rent		NIL	$46,800.00
15		J	[Mr & Mrs Spice Snr] re loan		$255,000.00	$255,000.00
16		J	[Mr & Mrs Spice Snr] re interest on loan		NIL	$124,152.08
17		H	Personal and Business: -  Esanda Finance re … -  Esanda Finance re … [D] Pty Ltd – [Product] Marketing …		NIL                  NA	$3,568.00           $3,624.00          $97,415.00
Total					$255,000.00	$530,559.08
18		H	MLC	Accumulation interest	$12,211.00	$12,211.11
19		H	MLC	Accumulation interest	$12,417.21	$12,417.21
20		H	AMP	Accumulation interest	$2,979.73	$2,979.73
21		W	REST	Accumulation interest	$13,006.09	$13,006.09
Total					$40,614.03	$40,614.03

Notes

Item No:

1.Difference attributed to husband’s assertion that 30% shareholding is owned by his father.

8.Husband asserts this is a debt owing to the parties.  Wife asserts this to be a dummy invoice prepared under duress from the husband as part of negotiations with hostile business partners.

14.Wife disputes there was ever a rental agreement in place.

16Husband alleges interest on loan to his parents.  Wife denies this debt.

17In relation to Esanda Finance debts, these debts relate to companies which do not form the personal assets and liabilities of the parties.  Wife denies liability for these debts.

In relation to D Pty Limited product Marketing, the wife cannot admit how much of this debt has been accumulated post separation.

1. The parties’ major asset is the shareholding in a discretionary trust.  The trustee of the trust is D Proprietary Limited, a company of which the respondent is the sole director and shareholder.  The appointer of the trust is also the respondent.  The shares are in a company; P Proprietary Limited.  P Pty Ltd is a business which acquires communications products and then licenses those products to businesses.  There are now four Directors of P Pty Ltd, of which the respondent is one and nine shareholders, both individual and corporate.  The respondent is a shareholder through his trust company D Pty Limited, with a current share holding of 22 per cent.

2. The parties have agreed on a value for the shares of $5.5 million. 

3. The parties have no other significant assets and there are debts.

1. Contributions at the commencement of cohabitation

1. When the parties began living together in early 2000, they did so in a rented unit in a suburb of Sydney.  The applicant’s parents lent them $2,000 for the bond.  This was not repaid.  They each had a car.  The applicant’s car was a gift from her parents.

2. The respondent had an advertising business, W Company.  Neither had any other assets of significance.

3. The parties started out as equals.

During the relationship

1. The applicant who had just finished her degree at University began to work for the respondent.  The respondent had a business degree and had worked for a business for a couple of years.

2. The respondent started his own business, W Company, in 1997.  The shareholders were himself and his father equally.  The parties worked together from the beginning.  They had complementary skills.  However by May 2002 they were struggling financially.  The applicant sold her car and gave the proceeds to her parents.  She began part-time work for third parties.  W Company was not generating sufficient income for them both to live on.

3. In February 2003 the respondent proposed marriage.  The applicant accepted then changed her mind.  However the relationship continued.

4. Three months later in June 2003, the respondent had an idea which is at the heart of this litigation.  He and a partner Mr O started up a company whose business was to acquire communication products with commercial appeal.  The idea captured the imagination of both parties and they threw themselves into developing the business.

5. On 10 September 2003 P Proprietary Limited was registered.  It was clearly a business with huge potential.  That is reflected in the current agreed share value.  However in the start up phase it was financially demanding.  It absorbed all the money the parties could generate.  The parties had no capital reserves.  They each worked to capacity within the business and in outside employment.

6. The respondent sold one of their products to raise capital of $70,000.

7. In September 2004 two very different, significant events occurred.  The parties’ first child S was born and the relevant Australian Government Scheme began.

8. The idea of the communications product became more obviously appealing commercially.  A third party became a director and shareholder, Mr E.  He also became chief financial officer of the company.  With that the respondent’s shareholding was diluted from 50 per cent to 33⅓ per cent.  The respondent borrowed to keep up; $40,000 from his parents which was repaid, then $200,000 from Bendigo Bank secured on property owned by his parents then a further $50,000 loan from his parents linked to an entitlement to shares.

9. In her affidavit[3] the applicant says this:

   For us to be financially involved in the business it was necessary for us to raise a loan from the Bendigo Bank in the sum of $250,000.00 and we had otherwise contributed approximately $150,000.00 of our own funds prior to that time into [P] Pty [N] Limited ATF [N] Unit Trust.

   We made repayments on this loan and [the respondent’s] parents did not contribute to these repayments.

   [3]  Affidavit of the Applicant filed 10/07/2012, pars 33, 34

10. The applicant’s statement that the respondent’s parents did not contribute to the repayments on this loan is illuminating.  There was no legal reason why the respondent’s parents would have been expected to make repayments.  They put real estate on the line to enable their son to borrow money.  The applicant herself did not become a borrower.  It is consistent with the case presented on her behalf that the applicant sought to share equally in the asset of the parties, but to distance herself from the costs of acquiring that asset.

11. It is also true to say that the respondent’s parents dealt exclusively with their son and not his partner when lending money, or even discussing financial arrangements.

12. During the relationship the respondent made a greater financial contribution. He worked in the business throughout and took on debt to create investment capital. The parents of the respondent made significant contributions on his behalf by lending money; providing their property as security for debt and providing a home for the parties and their children. The parties could not have retained their interest in the P Pty Ltd shares without this assistance and support to them and the children.

13. The applicant worked in the business less from 2004 and not at all by 2006. She took on a greater share of the care of the children.

14. She did not take on any legal responsibility for debt.

15. I consider that the significantly greater contributions were made by the respondent and on his behalf in the ratio of 65/35 in his favour.

1. Adjustments pursuant to s 90SF(3)

Age and state of health

1. The parties are in early middle age at 40 and 37.  They are both healthy.

Income, property, financial resources and capacity for work 

1. The respondent continues to operate his company and to maintain his seat on the Board of P Pty Ltd.  His income is derived from payments from P Pty Ltd, of which he has had the greater share.

2. After the sale of the shares he will have a capacity to work in the industry either as an employee or self-employed.  He has entrepreneurial skills.  He earns $650 average per week as a company director and company manager.[4]

   [4]  Financial Statement of Respondent filed 11/03/2013

3. The applicant has business skills.  She has the capacity to work as a freelance designer, although not full time hours.  She earns average $50 per week through self-employment in this area of work.[5]  She will complete a Law degree in a little over a year and should be qualified to practice in approximately two years’ time.

   [5]  Financial Statement of Applicant filed 08/03/2013 

4. Neither party has real estate or liquid assets.

Care and control of children of the relationship under 18 years

1. The applicant has the majority care of the parties’ three children, the youngest of whom is five years.  The applicant lives with her parents.

2. The respondent spends substantial and significant time with the children.

3. Both parties wish to have independent accommodation for themselves that is also suitable for the children.

Commitments to support/ responsibilities to support any other person

1. Neither party has the responsibility to support another person.

Eligibility for a pension allowance or Government benefit  

1. The applicant receives a supporting parent benefit and a Family Tax benefit.

Superannuation

1. The applicant has about $13,000 in superannuation and is not presently able to contribute further to her fund.

2. The respondent has about $27,000 in superannuation benefits and is not presently contributing to a fund.

Reasonable standard of living

1. The parties lived in rented accommodation in three different areas during the first six years of their relationship.  They then moved into a property in B owned by the Respondent’s parents.  They remained there for three years until separation.  Thereafter the applicant moved to live with her parents and the respondent found rented accommodation.

2. The income of the parties was directed into the businesses. They did not purchase a family home.

Duration of relationship and effect on earning capacity

1. The relationship endured for nine to 10 years.  Both parties used and developed their marketing and business skills.  The applicant was less and less able to engage in work in the business as each child was born.

Need to protect parties role as parent

1. Both parties are committed to their roles as parents.  The applicant studies and works with the assistance of her parents in a way most conducive to caring for and supervising the children.

Child support liability

1. The respondent pays child support.  There is a dispute before the Tribunal about the current assessment.

2. The applicant says the respondent pays $75.00 per week and should be paying $97.00 per week.

3. The respondent says he is paying $250 per week that the Assessment is $172 and that there are arrears of $9,000.  Very little attention was given to this aspect of the dispute.

Any fact or circumstance affecting the justice of the case

1. Post separation the parties no longer functioned as business partners to any extent.  The applicant was not engaged in the business at all.  However through her solicitor, she opposed an action for oppression of a minority shareholder. Through her own actions she communicated information to Board members which undermined the position of the respondent.

2. The respondent has had the sole responsibility for running the company and managing the shareholding through his seat on the board of P Pty Ltd.

3. The applicant has had the greater share of the care and supervision of the children with the assistance of her family especially by their provision of accommodation in the Pavlek family home.

4. Balancing the obligation of the respondent to repay debts to his parents against the greater share of parenting undertaken now and in the future by the applicant I conclude that no further adjustment is required to the assessment of contributions.

(iv)   Is the outcome just and equitable

1. The outcome of the sale of the shares is unpredictable.  The parties agreed on a value for the shares for the purposes of these proceedings but there was no formal valuation.  The shares could lose their value almost entirely or greatly increase.  It is appropriate that they share the potential loss or benefit.

2. In any event the respondent will be left with a greater share of whatever sum is realised but the responsibility for repaying his parents for their loans which facilitated the acquisition of the shares, and the debt relating to occupation by the parties and their children  of the property owned by the Spices.

3. If the parties are accurate in their estimated value of the shares both parties will have sufficient funds to buy property in which to house themselves and the children and a fund for contingencies.

4. Each has a strong capacity to work and earn income commensurate with tertiary education and business experience.

5. I am satisfied that the outcome is a just and equitable in the circumstances of the case.

Parenting Orders

1. In this part of the judgment I will refer to the Applicant as the mother and the Respondent as the father.

2. There is a contentious issue between the parties, unresolved by final parenting orders made by consent on 6 September 2011.  There was a short hearing on that discrete issue on 27 October 2011. 

3. The father seeks an order[6] that the mother be restrained from leaving any of the children in the sole care of her father.  The mother has been on notice of that particular order being sought since October 2012.  The maternal grandfather was not called as a witness.

   [6]  Order 10

History of the issue of whether children should be left with maternal grandfather

1. On 16 October 2009 the parties’ middle child M, then aged three years, had made the following complaint to her father during a contact visit, about the conduct of her maternal grandfather, known to her as DD.

   [DD] touched my private parts.  I said ‘stop’ and he didn’t listen and we were alone together today and him (sic) poked me.

2. The father asked the child if she had told her mother.  M is reported to have said she had told her mother who said, “[DD] is a bad boy.”  The father immediately advised the mother what their daughter had said.  When he returned the children to the mother’s home, the father asked the mother not to leave any of the children alone with the grandparents until the Joint Investigative Response Team (“JIRT”) had investigated.

3. On 19 October 2009 M was interviewed by JIRT.  She is reported to have said without prompting:

   [DD] didn’t do it.

   She also said no one had touched her in her genital area.  The Caseworker noted the following:

   [Ms Pavlek] [the mother] stated that she hadn’t told her father about the current allegations.  TM and I discussed that it would be a good idea to tell him, and to protect all parties, it would be recommended that she not leave her children alone with their maternal grandfather, always ensure there is another adult present.  The mother agreed.

4. Under the heading Likelihood of Harm or Risk continuing there are these comments:[7]

   Harm or risk of harm is not substantiated.  However [M’s] mother has agreed to ensure that her children are not left alone in the care of the maternal grandfather.  This will:

   a) assist in protecting [M] from harm if something has occurred with the maternal grandfather, or

   b) protect the paternal (sic) grandfather from further allegations if   this allegation is malicious.

   [7]  Exhibit 12 (previously Exhibit 1 in hearing on 27/10/2011)

5. The evidence of the mother in these proceedings is that up until 27 October 2011 she did not leave the children alone with her father.  That was the date when there was a short hearing before me in relation to this issue.

6. The mother said that she had not understood until that hearing, “It was not made aware to me”, that she was bound by any undertaking.  I consider that this was the mother drawing a distinction between the words “Undertaking” and “Agreement.”  There is a difference.  However I have no doubt that the mother knew with certainty that she had made a commitment to the Caseworker not to leave the children alone with her father.  She says she honoured that commitment.

7. The outcome of the short hearing was  that, given there was an undertaking  in place with the Department, there was no need for further orders to be made by this Court.  The mother said that she did understand about the Undertaking after the short hearing.  That evidence makes what follows concerning.

8. Subsequent to that hearing the mother says she did allow the children to be alone with her father at times.  She was unable to say how often that had happened, “Can’t say, not often, don’t know, infrequently.”  She said that the reasons she sometimes left the children alone with her father was that she did not believe the allegation had any substance, although she did think that she needed to comply with her undertaking for the protection of her father, however “sometimes I have no choice but to let it happen”. 

9. When questioned why she has sometimes had to leave the children alone with her father, the mother said that it could be anything, such as taking a child to the doctor, but that in truth she thought that the allegation had been originally malicious, that there was no risk to the children and that there had been no further allegation by M.  Worryingly, when asked whether the mother would leave the children alone with her father again, the response was, “Couldn’t say, if I was forced to, yes.”  When pressed as to whether she meant it was out of her own control the mother said, “No I might choose to”.

10. The answers of the mother on this topic were evasive and contradictory.  Indeed, in the early questioning, the mother said in response to the first question about whether she had in fact left the children alone with her father, “My father is always with my mother” paused then said “usually”.

11. It is of concern that the mother has simply chosen not to comply with the undertaking when it is inconvenient to comply with it.  She has not been forthright with the father about that.  He rang the maternal home and found that T was at home alone with her grandfather.  In her oral evidence the mother was dismissive of the father’s fears.  She said that her mother “had just ducked over to give a message to a neighbour” on that occasion.

12. There is no evidence that the mother has approached the Department to be released from the undertaking or to seek their guidance on approach.  I infer that the mother thought it was a matter for the father to make an application if he continued to be concerned about it.  The father did so in his Amended Response filed in October 2012.  It is an unsatisfactory state of affairs. 

13. Without the evidence of the maternal grandfather I am unable to make any finding about possible risk to the children.  I am not in a position to know the state of knowledge of the maternal grandparents about either the undertaking or   the original allegation by M.  The extent of that evidence is a reference in a letter from October 2009 written by the mother’s solicitors to the father as follows:[8]

    Our client and her father emphatically deny the allegations that have been raised by your client.

    [8]  Exhibit 2 from hearing on 27/10/2011

14. I cannot be sure whether the mother feels overborne by the situation of living in her parents’ home with such a restriction, but does entertain some private concern, or whether she is entirely satisfied that there was never any substance in the allegation and simply gave the promise she did  to the Department to avoid  further attention. 

1. Clearly, no finding of unacceptable risk has been made.  There is a real possibility that the maternal grandfather is entirely innocent of any misconduct.   However an order restraining the mother from allowing the children to remain alone in the company of their maternal grandfather is appropriate in these unusual circumstances and has been made accordingly.

I certify that the preceding one hundred and forty-eight (148) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cleary  delivered on 14 November 2013.

Associate: 

Date:  14 November 2013