Pavlic & Pavlic (No 3)
[2022] FedCFamC2F 1550
Federal Circuit and Family Court of Australia
(DIVISION 2)
Pavlic & Pavlic (No 3) [2022] FedCFamC2F 1550
File number(s): MLC 6470 of 2020 Judgment of: DEPUTY CHIEF JUDGE MCCLELLAND Date of judgment: 10 November 2022 Catchwords: FAMILY LAW – PROPERTY – Where the applicant sought variation of final orders pursuant to r 10.13 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) – Applicant contends that the orders do not account for certain liabilities and therefore do not reflect the 43 per cent adjustment made to the applicant in the substantive proceedings – Where applicant contends that his indemnifying the respondent in respect of taxation liabilities has not been considered in the orders – Liabilities were appropriately considered in deducting liabilities from the assets to assess the net matrimonial property pool – Where counsel for the applicant agreed with the methodology of calculating the property pool in the substantive proceedings – Application dismissed. Legislation: Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) r 10.13 Cases cited: Halstron & Halstron [2022] FedCFamC1A 65
Hickey and Hickey and Attorney-General (Cth) (2003) FLC 93-143; [2003] FamCA 395
Manifold & Alderton (2021) FLC 94-015; [2021] FamCAFC 61
Stanford v Stanford (2012) 247 CLR 108; [2012] HCA 52
Division: Division 2 Family Law Number of paragraphs: 26 Date of hearing: 10 November 2022 Place: Melbourne (via videolink) Counsel for the Applicant: Mr McIvor Solicitor for the Applicant: Coote Family Lawyers The Respondent: Litigant in person ORDERS
MLC 6470 of 2020 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: MR PAVLIC
Applicant
AND: MS PAVLIC
Respondent
order made by:
DEPUTY CHIEF JUDGE MCCLELLAND
DATE OF ORDER:
10 NOVember 2022
THE COURT ORDERS THAT:
1.The applicant husband’s application to vary final orders pursuant to r 10.13 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) is dismissed.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Pavlic & Pavlic (No 3) has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
EX TEMPORE
REASONS FOR JUDGMENTDEPUTY CHIEF JUDGE MCCLELLAND:
By way of letter initially sent to my chambers on 7 November 2022, the solicitors for the applicant husband made submissions as to purported errors which they contend were made in my decision dated 28 October 2022 and consequent orders made on that day. I have been advised in today’s proceedings that a subsequent letter was sent yesterday, albeit with a date of 3 November 2022 affixed. It is substantially in the same form as the 7 November 2022 letter, save for a variation to the penultimate paragraph which I have read on to the transcript today.
By way of letter dated 9 November 2022, the respondent wife has replied to the contentions set out in the correspondence from Coote Family Lawyers to which I have referred. I have advised the parties today that I have treated the amended letter, dated 3 November 2022 and provided to the Court on 9 November 2022, as amounting to an application pursuant to r 10.13 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) (“Family Law Rules”). Relevantly, that rule provides that the Court may, at any time, vary or set aside an order if one or other of the conditions set out in r 10.13(1) is satisfied, including most relevantly for the purpose of these proceedings, subparagraph (e), where it does not reflect the intention of the Court.
In considering this matter, counsel for the applicant has indicated that the applicant does not take issue with the balance sheet nor the calculations regarding the balance sheet as set out at [89] of the reasons for judgment.
Essentially and relevantly, the balance sheet included the following liabilities:
·B Pty Ltd tax liability – 185,255;
·Partnership tax liability – $11,502;
·Westpac Platinum credit card tax liability – $20,037
·Personal tax liability of the applicant – $103,288
·Personal taxation liability of the respondent – $60,000.
It appears that the applicant’s primary concerns are with Orders 18 and 23 of the orders that I made on 28 October 2022. I would note, however, that those orders reflect the proposed orders set out in Exhibit 1 tendered in the proceedings, which were the initial proposed orders of the applicant.
For the purpose of considering this issue, the most significant contentions, as set out in the letter from Coote Family Lawyers, are:
That the assets in [B Pty Ltd] be sold and the net sale proceeds be applied to repaying any sales commission costs and any business liabilities (save for the [B Pty Ltd] tax debt), with the balance thereafter to be divided 57/43 in the Wife's favour;
The other relevant paragraph is on the middle of the second page, immediately under the subheading ‘Payment to the Husband’:
The Wife's payment to our client of $287,632 does not provide our client with his 43% entitlement, as the total calculation of our client’s retained property at paragraph 162 of the Reasons ($1,157,728) omits the liabilities our client is to retain pursuant to paragraphs 18, 20 and 23 of the Final Orders,
I should, for the record, indicate that Order 20 made on 28 October 2022 similarly reflects paragraph 20 of the orders as proposed by the applicant in Exhibit 1.
Relevant legal principles
The relevant law is, as I have indicated, that the Court has power to vary orders to correct a situation where the orders do not reflect the intention of the Court. Rule 10.13 is essentially an exception to the Court otherwise being functus officio once final orders are made, that being the conclusion of the proceedings. I therefore accept that, if error in the sense of the orders not reflecting the intention of the decision is found, the Court has the power to correct the relevant orders.
Additionally, of relevance in these proceedings are those authorities setting out principles that assist the Court in undertaking the task that a Court is required to undertake in order to determine what is a just and equitable adjustment of the parties’ property. This issue was discussed in quite some detail relatively recently by the Full Court in Halstron & Halstron [2022] FedCFamC1A 65 (“Halstron & Halstron”).
Firstly, at [29] of that decision, by reference to the well-known case of Hickey and Hickey and Attorney-General (Cth) (2003) FLC 93-143, the Court confirmed the generally accepted methodology of calculating the property of the parties, and it is as follows:
Having determined that such an adjustment was appropriate, the primary judge then adopted what has been regarded as the “preferred” approach to the determination of an application under s 79 of the Act, referred to by the Full Court in Hickey and Hickey and Attorney-General for the Commonwealth of Australia (Intervener) (2003) FLC 93-143 (“Hickey”) (at [39]) by:
•Firstly, making findings as to the identity and value of the property, liabilities and financial resources of the parties as at the date of the hearing.
•Secondly, the Court identifying and assessing the contributions of the parties within the meaning of ss 79(4)(a), (b) and (c), and determining the contribution-based entitlements of the parties expressed as a percentage of the net value of the parties’ property.
•Thirdly, identifying and assessing the relevant matters referred to in ss 79(4)(d), (e), (f) and (g) including, as a result of s 79(4)(e), the matters referred to in s 75(2) so far as they are relevant, and determining the adjustment (if any) that should be made to the contribution-based entitlements of the parties established at step two above.
•Fourthly, considering the effect of those findings and determinations, resolving what order is just and equitable in all the circumstances of the case.
(Emphasis added)
Also of relevance is [36] of Halstron & Halstron, which, by reference to Stanford v Stanford (2012) 247 CLR 108 and Manifold & Alderton (2021) FLC 94-015 observed that:
…the first task of a trial judge considering an application pursuant to Pt VIII of the Act is “to identify and value, as far as the evidence would allow, the parties’ existing legal and equitable property interests”. This necessarily involves identifying the value of the property, liabilities and financial resources of the parties as at the date of the hearing: Hickey at [39].
That is relevant because, in this matter, it was not possible to identify the ultimate outstanding tax liability that would remain after the sale of B Pty Ltd, in the context of the sale price of B Pty Ltd being unknown. That reference to the outstanding tax liability means the outstanding tax liability over and above the net sale price received from the sale of B Pty Ltd. This becomes relevant when I refer to the manner in which the applicant presented his case in this matter.
Also of relevance is [81] of Halstron & Halstron, which confirms that including a liability on the balance sheet that is to be deducted from the parties’ assets in calculating their net property has the effect of the parties being assigned a portion of that liability, to the extent of the proportion of the adjustment of the parties’ property that the Court determined to be just and equitable on the facts of the particular case.
This supports the contention of the respondent that the effect of including a liability on the balance sheet results in the party who is not the party in whose name the liability exists effectively shares in that liability in accordance with the proportion of adjustment determined to be appropriate in the proceedings. Specifically with respect to [81] of Halstron & Halstron, the Full Court noted that the incorrect inclusion of a putative liability to repay a brother, which the Full Court found in that case was only a moral and not a legal obligation, had the consequence of including the relevant amount on the balance sheet, which had the effect of the appellant being assigned, on the facts of that case, 35 per cent of that liability. This was in circumstances where the Court determined that the appropriate adjustment in that case to the wife was 35 per cent. In summary, that is the effect of a liability being included on the balance sheet.
In this case, the Court accepted that aspect of the balance sheet as set out in Exhibit 2, which was tendered by the applicant and included on the balance sheet the taxation liability owing by B Pty Ltd. This has the effect that, in the event of the net sale price of B Pty Ltd that is obtained through the sale of B Pty Ltd exceeding the taxation liability, the respondent will effectively share in that taxation liability to the extent of 57 per cent because that liability has been included on the balance sheet. If, however, the sale price does not exceed the value of the taxation liability, then the orders provide for the applicant to be responsible for that liability.
This is the outcome that was clearly proposed by the applicant in the proceedings, as reflected in a number of instances in the transcript,[1] as follows:
MR McIVOR: In terms of the orders 1 to 5 – but the key orders are really paragraph 1 and paragraph 5 of the proposed orders, your Honour – relating to the proposed sale of [B Pty Ltd], what had been sought in his amended application, at paragraph 5, was that once the assets of the business are sold, it’s applied to outstanding business liabilities, including but not limited to the [B Pty Ltd] tax debt.
(Emphasis added)
[1] Transcript 27 April 2022, p.23 lines 42–46.
At page 24 of the transcript dated 27 April 2022:
MR McIVOR: … Now, the business is held in – each party has a share in the company that operates the business – would have left a messy situation, if I can put it that way, in terms of the outstanding tax debt. So what – the effect of what he has proposed in the amended minute [Exhibit 2 in the proceedings] is that he take on the tax debt and the net proceeds of sale of the assets of the business.
HIS HONOUR: Is the tax debt in his name?
MR McIVOR: No, it’s not. It’s in the company name, your Honour, but he would indemnify the wife in respect to that.
(Emphasis added)
I also refer to page 139 of the transcript of the 28 April 2022 proceedings:
MR McIVOR: Yes. But not asking your Honour to make a finding about what those vehicles [owned by [B Pty Ltd]] are worth.
HIS HONOUR: And, as I recall, your orders are the husband would indemnify the wife in the event that there was any loss from the sale of [B Pty Ltd]; is that right?
MR McIVOR: Yes. Yes. And the tax liability.
HIS HONOUR: Yes.
MR McIVOR: He will indemnify her with respect to that as well.
(Emphasis added)
Additionally, I also refer to page 149 of the transcript of proceedings dated 28 April 2022:
MR McIVOR: …the husband will be taking on, under these proposed orders, the liabilities, for example, the tax debt of 185,000, his personal tax debt of 103,000.
HIS HONOUR: But that – those debts would come off the pool to determine – those liabilities would come off the pool to determine what the pool is –
MR McIVOR: Yes.
HIS HONOUR: – and then you would say – so, say, the net pool – I haven’t got a calculator here and I’m sorry about this. So we take out superannuation, so the total pool is 2,904 –
MR McIVOR: Yes, 2,904,000.
It can be taken and reasonably inferred that when I stated “come off the pool”, I was referring to the tax debts being a deduction of the assets specified in the pool. Further, I do not rely on the reference to $2,904,000 because, clearly, that was subsequently varied, having regard to my analysis of the issues in the proceedings.
Finally, on page 150 of the transcript of proceedings, there is a reference to the liabilities of the respondent:
HIS HONOUR: Well, no, the tax – the debts – if I included those liabilities on the balance sheet –
MR McIVOR: Yes.
HIS HONOUR: They will come off the property of the parties. They will – that will come off to get to that figure of 2,904,000.
MR McIVOR: Yes.
HIS HONOUR: And then I will apply the percentage adjustment to that figure –
MR McIVOR: Yes.
HIS HONOUR: – if I – assuming I take that –
MR McIVOR: Yes.
HIS HONOUR: – and then I will work out what property each party has in their own column –
MR McIVOR: Yes.
HIS HONOUR: – and if there’s any financial adjustment to get to whatever the 52/48, 55/45, whatever it is, less what that party has in their pool.
MR McIVOR: Yes. Whether that’s a net figure or be it – yes, net figure for each…, but –
HIS HONOUR: Yes, I’m looking at a – in terms of cash adjustment for the wife, if she does keep, if she wants to, the matrimonial home.
(emphasis added)
In his submissions made during the course of my delivery of the decision today, counsel for the applicant contended that, in adjusting the property according to the percentage split of 57 per cent to the respondent and 43 per cent to the applicant, it was incumbent upon me as trial judge to take into consideration the assets and, relevantly, the liabilities of the parties. With respect, we are at cross-purposes. I did that in my decision of 28 October 2022 for the purpose of calculating the net asset pool of the parties and that is confirmed, with respect, by my reference to the liabilities coming off the property of the parties above.
That is, I firmly stated on the record during the course of the substantive hearing and obtained the agreement of counsel for the applicant that calculating the net asset pool of the parties was the appropriate methodology to apply. I am satisfied that I did apply that appropriate methodology to the calculation of, firstly, the assessment of the net property pool. That is, by identifying assets and then deducting from those assets the liabilities of the parties, including the B Pty Ltd tax debt and the partnership taxation debt, which was in the order of $11,000, which will remain the responsibility of the applicant. The partnership liability in particular will certainly remain the responsibility of the applicant. The question as to whether the B Pty Ltd tax liability will remain the responsibility of the applicant will depend upon the sale price that is obtained from the sale of B Pty Ltd and, in particular, whether that sale price exceeds the amount of the outstanding taxation liability.
Accordingly, I am satisfied that I have not made any error in the orders that I have made in the proceedings, and they correctly reflect the intention of the Court, having regard to the manner in which the applicant presented his case and the orders proposed by the applicant to which I have earlier referred.
Accordingly, for these reasons, I dismiss the applicant’s application pursuant to r 10.13 of the Family Law Rules.
I certify that the preceding twenty-six (26) numbered paragraphs are a true copy of the Ex Tempore Reasons for Judgment of the Honourable Deputy Chief Judge McClelland. Associate:
Dated: 14 November 2022
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