Perrelli & Atkinson

Case [2022] FedCFamC1F 824

Federal Circuit and Family Court of Australia

(DIVISION 1)

Perrelli & Atkinson [2022] FedCFamC1F 824

File number(s): MLC 10061 of 2020
Judgment of: MCGUIRE J
Date of judgment: 27 October 2022
Catchwords:

FAMILY LAW – PROPERTY – Application by husband for a property settlement – add-backs – two children of the marriage – contributions - taxation liabilities – section 75(2) factors – superior earing capacity - orders that husband receive 62.5 per cent of the net property pool and the wife receive 37.5 per cent

FAMILY LAW - COSTS – Order that wife pay husband’s costs fixed in the sum of $9,000

Legislation: Family Law Act 1975 (Cth) ss 75(2), 79(1),(2), (4)(d) – (g) and s 117
Cases cited:

Best v Best (1993) FLC 92-418

Chorn v Hopkins (2004) FLC 93-204

Clauson & Clauson (1995) FLC 92-595

Fielding & Nichol [2014] FCWA 77

Hickey & Hickey & Attorney-General for the Commonwealth of Australia (2003) FLC 93-143

In the marriage of DJM & JLM (1998) FLC 92 – 816

Jones v Dunkel [1959] HCA 8

Kessey & Kessey (1994) FLC 92-495

Mallett & Mallett (1984) FLC 91-507

R v Watson; Ex parte Armstrong (1976) 136 CLR 248

Stanford & Stanford (2012) 247 CLR 108

Trevi & Trevi [2018] FamCAFC 173

Waters & Jurek (1995) FLC 92 – 635
Division: Division 1 First Instance
Number of paragraphs: 70
Date of hearing: 1 and 2 September 2022
Place: Melbourne     Delivered Hobart
Counsel for the Applicant: Ms Smallwood SC
Solicitor for the Applicant: Coote Family Lawyers
Counsel for the Respondent: Mr Glezakos
Solicitor for the Respondent: Barkus Doolan Winning

ORDERS

MLC 2006 of 2020

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN:

MR PERRELLI

Applicant
AND:

MS ATKINSON

Respondent

order made by:

MCGUIRE J

DATE OF ORDER:

27 October 2022

THE COURT ORDERS THAT:

1.Within 30 days from the date of these Orders the wife, Ms Atkinson, pay to the husband, Mr Perrelli, the sum of $340,430.

2.Within 30 days from the date of these Orders the wife shall transfer to the husband all her right title and interest in C Street, Suburb E in Victoria.

3.Contemporaneously with the transfer in Order 2 herein the wife shall transfer to the husband all that her right, title and interest, if any, in:

(a)his superannuation interests;

(b)his Westpac and R Trading share portfolios;

(c)his cryptocurrency holdings;

(d)the funds in his Westpac Bank accounts ending in # …77 and #...46;

(e)his 2016 Motor Vehicle 1;

(f)all personalty and chattels in the possession or control of the husband as at the date of these Orders; and

(g)all artworks in his possession.

to the intent that he be the sole and absolute legal owner thereof.

4.The husband be solely responsible for and indemnify the wife in respect of the following:

(a)the Westpac Investment Loan Account ending in #...92 and provide the wife with a discharge contemporaneously with the transfer of the property situate at C Street, Suburb E in Victoria;

(b)any and all liabilities attaching to any…

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Perrelli & Atkinson [2022] FedCFamC1F 824
Case
[2022] FedCFamC1F 824
Decision Date

CaseChat Overview and Summary

The parties in this matter were involved in a property settlement dispute following their separation. The wife, who was employed by B Company and had substantial income, sought a fair division of the property pool. The husband, although unemployed at the time of the trial, had a potential income of approximately $150,000 per annum. The case was heard and determined in the Family Court of Australia.

The legal issues that the court was required to decide included whether certain expenditures made by the wife post-separation should be added back to the property pool. These included the purchase of a residence at Suburb S, the prepayment of capital gains tax on the sale of shares, and the value of jewellery and handbags in the wife's possession. The court also had to consider whether the husband's paid legal costs should be added back to the property pool and whether the wife's re-partnering should be considered as a factor in the division of the property.

The court found that the purchase of the residence at Suburb S was a reasonable expenditure from the funds obtained from the sale of the wife's shares, and therefore, it should not be added back to the property pool. The court also found that the prepayment of capital gains tax was reasonable and appropriate, and therefore, it should not be added back. In relation to the value of the jewellery and handbags, the court found that the husband's evidence was not sufficiently reliable to determine the value of these items, and therefore, they should not be included in the property pool. The court also found that the husband's paid legal costs should not be added back to the property pool, as the source of payment for these costs was ambiguous. Finally, the court found that the wife's re-partnering was not relevant to the division of the property.

The court made orders that the property pool should be divided equally between the parties, with certain adjustments made for the wife's recent purchase of the residence at Suburb S and the prepayment of capital gains tax. The court also ordered that the husband pay the wife's costs of the trial and the wife pay the husband's costs of the interlocutory application.

Orders

Orders of the court

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Background

Background to the litigation

By the time of final addresses, counsel for the wife had compromised her position whereby she now concedes a 10 per cent adjustment to the husband on account of the s 75(2) considerations on an acknowledged differential of income.BACKGROUND The husband is 52 years of age. He is a professional and although currently unemployed he concedes a capacity for employment where he says he has historical and potential income of approximately $150,000 per annum. There is no evidence that the husband has re-partnered. The wife is 48 years of age. She is employed by B Company (‘B Company’) as an executive. Between April 2016 and April 2022 the wife was employed by B Company United Kingdom and resided in England. Her employment with B Company has now transferred to B Company Australia relevant from 31 May 2022. She has returned to live in Australia and shares care of the two children on a week about basis with the husband. During her time in the United Kingdom the children remained resident with the husband in Australia. The wife at times travelled to Australia and at other times the children travelled to the United Kingdom. The thrust of the evidence is that the wife's move to the United Kingdom was a joint decision by the husband and the wife and perhaps with anticipation that at some stage the family unit would also relocate. There was significant evidence, much contradictory, and cross-examination as to the wife's income which clearly is derived from a combination of a substantial salary, bonuses and share issues based on performance criteria and discretionary in B Company but where the wife has historically received such stock which substantially remains unvested for a period apparently as a motivation for the employee to remain with B Company. The wife's own evidence is that she would “potentially” earn approximately $1 million dollars per annum from her employment and from all sources. The salary component in the United Kingdom has been as high as $600,000 per annum but on her current contract may be something less than $500,000 per annum. There is some evidence that the wife has re-partnered. I have no affidavit from that person and given the wife's circumstances I do not consider that person’s financial circumstances to be relevant and nor was such argued before me save and except for some relatively minor financial advancements made by the wife to that person both prior to and after separation. There is some dispute between the parties as to the date of their separation. The husband says the parties separated on 30 September 2018 “on a final basis”. The wife's preferred date of separation is 25 December 2017. Nothing turns on this discrepancy where, in their final submissions, counsel for each of the parties made it clear that I am not required to make a finding of fact in respect of this issue. On or about 1 November 2019 the husband withdrew an amount of $387,576.98 from a joint bank account and deposited it into an account in his sole name. He returned those monies in full to the joint account on 6 November 2019. His evidence in court is that the transactions were carried out as a trial to determine whether he would be able to make unilateral withdrawals in such a quantum by way of Internet banking.

Evidence

Evidence Before The Court

Whilst the parties essentially agree the contents of the property pool and values there remain some specific issues being:(i)The wife has a quantity of jewellery and handbags. The wife attributed a value of $20,000. The husband asserts a value of $150,000. Neither party has provided expert evidence. Neither has provided even an inventory;(ii)In respect of the above-mentioned purchase by the wife of the property at 12 H Street, Suburb S made only in recent weeks, the husband argues that the payment by her of stamp duty struck at $191,250 is an unnecessary benefit to the wife to which he should not be required to contribute. As I understand the husband's argument, the wife may have deliberately put herself in a financially advantageous position by making and completing the purchase of the property prior to this trial where, should the purchase have been made after the trial, then the payment of stamp duty would be her sole responsibility and in essence the net proceeds of sale of the B Company shares (AUS $1.8 millionE) would have been available and apparent in the property pool; (iii)The wife is to receive a Performance Bonus from her employer in September 2022 with an agreed gross value of $92,600. The husband includes this gross figure in his balance sheet. The wife says that the monies will be taxed as income. (iv)The husband argues that the wife's prepayment of CGT on the sale of shares in the sum of AUS $182,519 (£113,000E) was unnecessary given that the tax has not yet been struck and is an estimate only where the wife's residential circumstances have changed and there is no evidence as to what, if any, taxation liability will be imposed in the United Kingdom or Australia. During final submissions, however, counsel agreed it may be that where there are such contingencies, then it is available for the Court to make an order compelling the wife to prudently lodge her United Kingdom tax return thereby causing the CGT to be crystallised and that any consequent adjustment be made proportionately between the parties in accordance with the percentage distribution of the property pool; (v)There is a dispute between the parties as to whether paid legal costs by the husband in a quantum of $232,359 should be “added back” to the pool where the wife argues that the husband has paid those costs from capital whereas she says her own legal costs have been paid from her ongoing income; and(vi)Finally there is an outstanding costs issue between the parties, and from before me assuming carriage of this matter. In May 2022 the husband brought an Interlocutory Application seeking specific discovery from the wife and supported by an Affidavit. It does not seem disputed that the wife filed neither Response nor Affidavit. It seems that the matters raised in the Application settled “at the Court door” but where an Application for Costs by the husband was noted by her Honour Justice Hartnett, reserved for hearing at the Trial, and with the quantum of costs set at $9,000. The husband now pursues that Costs Application. The wife opposes the Application.THE EVIDENCE

Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

The parties, to their credit, had significantly agreed the contents of the property pool and values prior to the commencement of the Trial and further agreement was reached during the course of the Trial. Nevertheless, some matters remain for my determination but where I should comment that the evidence was often lacking and proper preparation for a Trial should involve the giving or adducing of evidence in proper form rather than, as for instance in this case, the equally unqualified evidence of each of the parties as to the value of items such as “handbags and jewellery” in the possession of the wife where the husband attributes a value of $150,000 and the wife a value of $20,000. Certainly, to leave a determination of the Court in such state of evidentiary dilatoriness is inappropriate and unprofessional and particularly so when the Court is apprised of the monies spent by each of these parties in preparing their cases for Court. The following issues remain in respect of the property:(i)The wife has recently purchased a residence at H Street, Suburb S which has an agreed value of $3,250,000. There is a mortgage secured in a quantum of $2,200,000. The wife says that the home and mortgage with equity of $1,050,000 together with residual savings in a bank account should therefore be included in the pool given the general rule of assessing the property pool as at the date of the Trial. The husband argues that the wife unilaterally sold her B Company shares reaping some AUS $1.8 million. He argues that by purchasing the home at Suburb S the wife has incurred a stamp duty bill of $191,250 not evident in the value of the property. Consequently, I see the argument as being whether the purchase by the wife of the property at Suburb S was a “reasonable expenditure” from the funds obtained from the sale of her shares?;(ii)Similarly, the husband argues that the gross proceeds of sale of the B Company shares should be included in the property pool where the wife has also pre-paid CGT of £113,000E (AUS $182,519E). Again, the question is whether the prepayment of this taxation, which is yet to be a formally assessed, was reasonable and appropriate?; (iii)There is a question as to the status of the husband's paid legal costs in the quantum of $232,359. The wife asserts that this amount should be “added back” to the property pool as it was met from capital whereas she has paid her own legal costs from ongoing income. The husband says that his paid costs should not be “added back” where the wife's paid legal costs are not added back and in circumstances where the wife has had a far superior income than the husband but where the husband has also enjoyed an income of $150,000 and the source of payment for his legal costs is therefore ambiguous; and(iv)The value of jewellery and designer handbags in the possession of the wife together with artworks in the possession of the husband. THE RELEVANT LAW – ADD-BACKS/POST – SEPARATION EXPENDITURE Jurisprudence in respect of “add-backs” was recently revisited by the Full Court in Trevi & Trevi[5] and following the important decision of the High Court in Stanford (supra). At [27] and following under the heading “Guidelines for adding back to property available at trial” the Full Court in Trevi said:[27]The Full Court held in Omacini and Omacini[6] that addbacks fall into “three clear categories”: where the parties have expended money on legal fees; where there has been a premature distribution of matrimonial assets; and “waste” or wanton, negligent, or reckless dissipation of assets.[7][28]However, the Full Court also made it clear that an addback does not necessarily occur whenever “a party has expended money realised from the disposition of assets that existed as at the date of separation”, the Full Court describing such a proposition as “unduly simplistic”.[8] An earlier Full Court made the same point, saying that adding back is “the exception rather than the rule”.[9][29]The fundamental precept that addbacks are exceptional, reflected in the decisions just referred to, also mirrors what has been said in earlier decisions of the Full Court that, for example, “the Family Court must take the property of a party to the marriage as it finds it”[10] at trial. An important parallel proposition is that the parties do not “go into a state of suspended economic animation” after separation.[11] Thus, reasonably incurred expenditure does not usually come within accepted categories of addback.[30] Two fundamental premises emerge from Omacini and the authorities preceding it. First, “adding back” is a discretionary exercise. When the discretion is exercised in favour of adding back, it reflects a decision that, exceptionally, in the particular circumstances of a case, justice and equity requires it. The second premise is its corollary: in cases that are not “exceptional” justice and equity can be achieved, not by adding back, but by the exercise of a different discretion – usually by taking up the same as a relevant s 75(2) factor. Indeed, it has been said that the latter is “a course which is, perhaps, technically more correct” than adding back to the list of existing interests in property.[12] [5] [2018] FamCAFC 173, (2018) FLC 93 – 858.[6] (2005) FLC 93-218 (“Omacini”).[7] Footnote omitted. [8] Ibid.[9] Cerini & Cerini sub nom C & C [1998] FamCA 143 (“Cerini”) at [46].[10] Footnote omitted.[11] Ibid.[12] Ibid.