Pilot and Pilot

FAMILY COURT OF AUSTRALIA

PILOT & PILOT

[2010] FamCA 1064

FAMILY LAW – PROPERTY SETTLEMENT – long trial – reliability of witnesses – identifycation of relatively large asset pool – various add backs – full and frank disclosure contributions
FAMILY LAW – PRACTICE AND PROCEEDURE – Delay in delivering reasons – an explanation

Family Law Act 1975 (Cth) ss 75(2), 79, 117

MRR v GR [2010] HCA 4
Chorn & Hopkins (2004) FLC 93-204
Essex v Essex [2009] FamCAFC 236
Gollings & Scott (2007) FLC 93-319
Hickey and Hickey and A-G for the Commonwealth of Australia (Intervener) (2003) FLC 93-143
McGregor v McGregor (1996) FLC 92-701
Omacini & Omacini (2005) FLC 93-218.
Townsend& Townsend (1995) FLC 92-569
Kannis & Kannis (2002) FLC 93-135
Stein v Stein (1986) FLC 91-779
Mezzacappa v Mezzacappa (1987) FLC 91-853
Black & Kellner (1992) FLC 92-287
Weir v Weir (1993) FLC 92-338
Gould & Gould (2007) FLC 93-333
Chang v Su (2002) FLC 93-117
Mallet v Mallet (1984) FLC 91-507

APPLICANT:

Ms Pilot

RESPONDENT:

Mr Pilot

FILE NUMBER:

HBF

1990

1999

DATE DELIVERED:

28 October 2010 & 22 November 2010

PLACE DELIVERED:

Hobart

PLACE HEARD:

Launceston & Hobart

JUDGMENT OF:

Benjamin J

HEARING DATES:

4 & 24 July 2008, 18 August 2008, 4 & 29 September 2008, 2, 16, 27, 28 & 30, 31 October 2008, 11 & 12 November 2008, 11 & 16 December 2008, 18, 23, 24, 25, 26 & 27 February 2009, 1 April 2009, 29 & 30 June 2009, 1, 2, 3, 6, 7, 8, 9, 10, 29 & 30 July 2009, 7 September 2009, 28 October 2009, 7 December 2009, 6 & 28 October 2010 and 22 November 2010.

REPRESENTATION

COUNSEL FOR THE APPLICANT:

Mr Foster with Ms Harper (2008) & Ms Eddington (2009 & 2010)
Mr Dixon S.C. at the view
Ms Trezise acted for the wife in August 2008

SOLICITORS FOR THE APPLICANT:

Murdock Clarke

COUNSEL FOR THE RESPONDENT:

Mr Gunson SC with Mr Murray
Mr McGuire (as he then was) at the view

SOLICITORS FOR THE RESPONDENT:

Murray & Associates

Orders

All extant Orders (excluding the Order that the husband pay spousal maintenance to the wife) be and are discharged.
The Order that the husband pay spousal maintenance be discharged as and from sixty (60) days from the date of this Order.
The husband pay to the wife the sum of $132,586.37 within twenty one days of the date of this order, together with interest on that sum accruing from 5 June 2010 to the date of payment. Such interest to be calculated in accordance with the rate of interest prescribed by the Rules under the Family Law Act 1975 (Cth).
The husband pay to the wife a further sum of $164,500 within three (3) months from the date of these orders.
Within three (3) months from the date of this order the parties:-
(a)Each pay to the Pilot Superannuation Fund the sum of $385,825.50 (making a total payment, excluding interest of $771,651);
(b)In addition each party to pay to the Fund interest on the $385,825.50 from 5 June 2010 to the date of payment. Such interest to be calculated in accordance with the rate/s of interest prescribed by the Rules under the Family Law Act 1975 (Cth).
(c)Either party may transfer real property by way of part/whole satisfaction of the liability created by this order provided the value of that real property is either in accordance with the agreed value for the purpose of these proceedings or is reasonably accepted by both trustees and the parties’ respective accountants as having such a value.
(d)If one of the parties is unable or unwilling to pay their liability to the superannuation fund in accordance with this order, within the time specified, then the other party may (if he or she wishes) pay the whole amount of the principal and the interest liability of the other party. Upon such payment the liability of the non paying party shall be to the paying party with interest to accrue on the paid sum (including interest) calculated in accordance with the rate/s of interest prescribed by the Rules under the Family Law Act 1975 (Cth).

27, 99 and 31 Z Street

Within sixty (60) days of the date of this Order the husband and wife respectively do all such acts and sign all such documents as reasonably required to or for:-
(a)The husband to resign as Director and Secretary of DE Pty Limited.
(b)Transfer to the wife the husband’s entire share holdings in DE Pty Limited.
(c)Transfer to the wife any shares held by any other entity or entities in DE Pty Limited.
(d)Transfer to the wife the husband’s interest in the DE Unit Trust.
(e)Appoint the wife and/or her nominee as Appointors of any of the said Trust and for the retirement of the husband and/or any entity in which he is to retain an interest as Appointor.
(f)Transfer to the wife any interest in any Loan Account of the husband or any other entity or entities in DE Pty Limited and the said Trust.
(g)Discharge and/or release the husband from any personal liability relating to any liabilities of DE Pty Limited and the said trust.
(h)Discharge and/or release any entity in which the husband (as a result of these Orders retains any interest) from any liabilities of DE Pty Limited and the said Trust.
(i)Transfer to the wife the C class unit/share held by PG Pty Ltd as Trustee for the P Family Trust in the DE Unit Trust;
(j)Save and except as may be hereinafter provided the wife henceforth (as between the husband and the wife) shall be solely responsible for and indemnify the husband with respect to all liabilities (including but not limited to liabilities to the Australian Taxation Office) of DE Pty Limited and the said trust whether past, present or future and whether actual or contingent. This is provided that the husband has made clear and specific disclosure to the wife of all past or present liabilities of which the husband knew or ought to have reasonably known;
(k)Each party shall bear their own costs of such transfer and if taxes and/or duties are payable then such expenses shall be paid equally.
(l)The wife shall be entitled to all rents and profits in respect of these properties as and from the date of the making of these orders.

The Pilot Superannuation Fund

In calculating the assets of the fund the trustees shall regard the $771,651 plus accrued and accruing interest as an asset of the fund (being the money due to the fund pursuant to order 5 above).
The sub paragraphs of this Order are binding on the Trustees of the fund.
(a)That in accordance with Section 90MT(1)(b) of the Family Law Act 1975 (Cth) whenever a splittable payment becomes payable in respect of the fund:-
(i)The wife shall be entitled to fifty (50) per cent of the splittable payment; and
(ii)The husband shall be entitled to fifty (50) per cent of the splittable payment; and
(iii)There shall be a corresponding reduction in the entitlement of the person to whom the splittable payment would have been paid but for this Order.
(b)That paragraph (a) has effect from the operative time.
(c)The operative time for the purposes of the splittable payment is thirty-two (32) business days from the date of service of this Order upon the Trustee of the fund.
(d)It is noted that the husband and the wife as Trustees of the fund acknowledge that the Trustees of the fund have been afforded procedural fairness and has no objection to these orders.
(e)That the solicitors for both the husband and the wife shall each serve a sealed copy of these Orders upon the Trustees of the fund within fourteen (14) days of the making of these Orders.
(f)The husband’s accountant, Mr S, and the wife’s accountant, Mr R, shall be the joint accountants for the fund for that purpose.
(g)The costs of bringing the fund up to date and ensuring that it is a complying fund is to be shared equally by the parties against any interest they may have in the fund or if that is not available then personally.
(h)If one party, within twelve (12) months of the date of these orders, directs payment of his or her share to another fund then both parties shall sign all documents to enable the remaining party or his or her nominee to take the place of the retiring trustee.
(i)If both parties wish to transfer their entitlement out of the fund within that twelve (12) month period then the cost of winding up the fund will be met equally out of the parties’ shares.
(j)Leave be granted to the parties or either of them to apply in respect of the mechanical aspects of this order in terms of its implementation and, if necessary, the appointment of an independent trustee and/or manager. Such leave to operate for 12 months from the date of the making of these orders.

33 and 35 Z Street

Within sixty (60) days of the date of this Order the husband and the wife respectively do all such acts and sign all such documents as reasonably required to or for:-
(a) The husband to resign as director and secretary of NY Pty Ltd.
(b)Transfer to the wife the husband’s entire shareholdings in the said companies;
(c)Transfer to the wife any shares held by any other entity or entities in the said companies;
(d)Transfer to the wife any interest in any Loan Account of the husband or any other entity or entities in the said companies;
(e)Discharge and/or release the husband from any personal liability relating to any liabilities of the said companies;
(f)Discharge and/or release any entity in which the husband (as a result of these Orders retains) any interest from any liabilities of the said companies;
(g)Save and except as may be hereinafter provided the wife henceforth (as between the husband and the wife) shall be solely responsible for and indemnify the husband with respect to all liabilities (including but not limited to liabilities to the Australian Taxation Office) of the said company whether past, present or future and whether actual or contingent. This is provided that the husband has made clear and specific disclosure to the wife of all past or present liabilities of which the husband knew or ought to have reasonably known;
(h)Each party shall bear their own costs of such transfer and if taxes and/or duties are payable then such expenses shall be paid equally.
(i)The wife shall be entitled to all rents and profits in respect of these properties as and from the date of the making of these orders;

W property

Within sixty (60) days of the date of this Order the husband shall transfer to the wife all that his right, title and interest in the former matrimonial home known as “W property” and situate at W in Tasmania, together with the chattels and furniture contained in that home (with an agreed value of $72,160), to the effect that the wife be the sole registered proprietor thereof and the wife shall henceforth be solely responsible for and shall indemnify the husband with respect to all liabilities, outgoings and expenses concerning the said property.

Lots 10, 14 and 22, K

(a) Within sixty (60) days of the date of this Order the wife do all such acts and things and sign all such documents as reasonably required to transfer to the husband all that her right, title and interest in K Pty Ltd in:-
(i)Lot 10 K;
(ii)Lot 14 K; and
(iii)Lot 22 K.
(b)The assignment of lots 10, 14 and 22 is subject to:-
(a)The properties not being transferred or assigned to the husband until such time as he pays the money due in Orders 3, 4 and 5 herein.
(b)I declare that until the money provided in Orders 3 and 4 herein is paid in full (including any interest) the wife shall have an equitable interest in such properties to the extent of the outstanding money.
(c)The husband henceforth (as between the husband and the wife) shall be solely responsible for and indemnify the wife with respect to all liabilities (including but not limited to liabilities to the Australian Taxation Office) of Lots 10, 14 and 22 whether past, present or future and whether actual or contingent. This is provided that the wife has made clear and specific disclosure to the husband of all past or present liabilities of which the wife knew or ought to have reasonably known.

The B Farm

Within sixty (60) days of the date of this Order the husband and the wife respectively do all such acts and sign all such documents as reasonably required to or for :-
(a) The wife to resign any office she holds in HL Pty Ltd and the Pilot Trust No: 2.
(b)Transfer to the husband the wife’s entire shareholdings, if any, in HL Pty Ltd;
(c)Transfer to the husband any shares held by any other entity or entities in HL Pty Ltd;
(d)Transfer to the husband any interest in any Loan Account of the wife, if any, or any other entity or entities in HL Pty Ltd and the Pilot Trust No: 2;
(e)Discharge and/or release of the wife from any personal liability relating to any liabilities of HL Pty Ltd and the Pilot Trust No: 2;
(f)Discharge and/or release any entity in which the wife (as a result of these Orders) retains any interest from any liabilities of HL Pty Ltd and the Pilot Trust No: 2;
(g)The assignment of B Farm to the husband is subject to;
(i)Any equity in B Farm not being transferred or assigned to the husband until such time as the husband pays the money pursuant to orders 3, 4 and 5 herein.
(ii)I declare that until the husband complies with Orders 3 and 4 herein the wife shall have equitable interest in the B Farm to the extent of the amount due to her.
(iii)The husband henceforth (as between the husband and the wife) shall be solely responsible for and indemnify the wife with respect to all liabilities (including but not limited to liabilities to the Australian Taxation Office) of B Farm whether past, present or future and whether actual or contingent. This is provided that the wife has made clear and specific disclosure to the husband of all past or present liabilities of which the wife knew or ought to have reasonably known
(h)Each party shall bear their own costs of such transfer and if taxes and/or duties are payable then such expenses shall be paid equally.

Trustee for Sale of Assets

Mr E of Deloitte Tohmatsu of Hobart is appointed as Trustee for sale of the properties referred to in this order, subject to the following:-
(a)In the event that Mr E is unable or unwilling to accept that appointment the Trustee shall be some other accountant who is on the list of liquidators approved for appointment as an official liquidator by the Supreme Court of Tasmania and whose appointment is agreed to in writing by both husband and wife. In the event that they are unable to agree as determined by this Court leave be granted for the parties to re-list the matter before me for the appointment of an alternative Trustee. Such leave to operate for 12 months from the date of making these orders.
(b)The Trustee to take and hold the following properties and/or entities:-
(i)Lots 1, 4, 8, 9, 16 , 19 and 21 at K;
(ii)Residential Lot 1 K;
(iii)Residential Lot 8 K;
(iv)3-5, 7 and 9 U Street;
(v)A Pty Ltd;
(vi)Pilot Properties Pty Ltd and Pilot Properties Unit Trust; and
(vii)Pilot Management Pty Ltd and Pilot Management Discretionary Trust
(c)The Trustee is empowered to sign all documents necessary to realise for value the assets of those entities and/or sell such property.
(d)The Trustee may in the exercise of his/her powers, do all such acts as it would but for his/her appointment as Trustee of the husband’s property and entitlements the husband is empowered to exercise in the name of the husband and wife and in addition to such power is expressly empowered, with all those powers of a Trustee granted by operation of the Trustee Act1898 (Tas).
(e)The Trustee shall be entitled to reasonable remuneration and reasonable costs and expenses properly incurred in the performance of his/her duties and the exercise of his/her power pursuant to the Orders, and in setting that remuneration the Trustee shall have regard to the rates charged by liquidators appointed to wind up companies by order of the Supreme Court of Tasmania. Such remuneration, costs and expenses shall be a first charge on any monies realised by the Trustee.
(f)The Trustee shall deliver and account for all amounts drawn by him/her for such remuneration, costs and expenses each of the parties each three months until the termination of his/her appointment or until further order and pay any balances as are due to him/her or by him/her.
(g)The Trustee may employ Solicitors, Real Estate Agents, Auctioneers and Valuers to assist in the sale of the properties.
(h)The Trustee shall keep the parties informed as to the steps he/she is taking pursuant to this order and seek the views of the parties and he/she is to have regard to such views but the method and process of sale is at the Trustees sole discretion.
(i)On the sale of Residential Lot 8 at K, the Trustee shall pay out the ANZ loan (housing loan of $240,421.00) secured over the Title to the said property and pay out the amount due to LL, which was assessed at $62,982.00 as at 30 June 2009 which sum may vary depending on the sale price.
(j)After payment of his/her remuneration, costs, expenses (including legal expenses, agents fees, valuers fees, advertising expenses, auctioneers fees etc), the costs and expenses of the sale, and the discharge of any registered encumbrance on the properties, paying and/or putting aside funds for taxation and other liabilities, the Trustee shall distribute the funds equally between the husband and the wife (subject to orders 3, 4, 5 and 13(o) herein).
(k)The Trustee is specifically empowered to sell any or all of the property held by him/her in trust to one or other of the parties or such entity as the acquiring party may reasonably nominate, subject to:-
(i)Such transfer being the subject of a written agreement by both parties.
(ii)If there is no such agreement but a request for some or all of such property by one or other of the parties, then such property shall be sold by auction with auctioneers determined by the Trustee.
(iii)Any such sale shall be regarded as a sale pursuant to these orders for the purpose of any stamp duty remission.
(l)The Trustee is entitled to the rents received on such property/properties pending sale and if funds are available shall pay taxes, rates, any periodic mortgage installments, insurance premiums and necessary expenses to keep such property safe and in good repair.
(m)The reserve price/prices on such properties shall be determined in these proceedings or as otherwise recommended by a licensed valuer arranged by the trustee.
(n)The Trustee may execute any contract of sale and transfer.
(o)The Trustee may apply the proceeds of sale of one or other of the properties to discharge any mortgage over any of the other properties.
(p)The Trustee shall apply the whole of each parties entitlement to the proceeds of sale of these properties to the disclosed liability to discharge the Perpetual Trustee loans which were, as at 30 June 2009, $6,000,000 and ANZ Loan $2,216,108 (but which were reduced in May/June 2010).
(q)Within sixty (60) days of the date of this Order the husband and the wife respectively do all such acts and sign all such documents as reasonably required to or for:
(i)The retirement of the existing Appointor for Pilot Management Discretionary Trust and by way of substitution appoint the Trustee;
(ii)The resignation of HL Pty Ltd as Trustee for Pilot Management Discretionary Trust and appoint the Trustee; and
(iii)Contemporaneously with the retirement of the existing Appointor the Trustee will be appointed as Trustee for Pilot Management Discretionary Trust and the husband and wife shall do all such necessary acts and sign such all such documents as reasonably required to transfer to the Trustee the twenty five (25) C class and twenty five (25) D class shares held by Pilot Management Discretionary Trust in Pilot Management Pty Ltd.

Existing Perpetual Trustee Company Mortgage and ANZ Mortgages

That within seven (7) days of the date of this Order the husband and wife provide a copy of these Orders to the Perpetual Trustee Company Limited and to the ANZ Bank with a joint letter from the solicitors for the parties explaining the effect of such Orders on the ownership or control of each relevant property.
The husband henceforth (as between the husband and wife) be solely responsible for and shall indemnify the wife in respect of half of the present outstanding liabilities to Perpetual Trustee Company Limited and ANZ Bank and declare that the wife shall have an equitable interest in B Farm to the extent of such liability.
The wife henceforth (as between the husband and wife) shall be solely responsible for and indemnify the husband with respect to half of the present outstanding liabilities to Perpetual Trustee Company Limited and ANZ Bank and declare that the husband shall have an equitable interest in the W property to the extent of such liability.
It is declared that until such liabilities are repaid the husband shall have equitable interest in the W property to the extent of such liability.

Resolution of Disputes

That the Court hereby requests that Mr E monitor the implementation of these Orders with a view to ensuring that they are implemented as quickly as possible, that the parties shall equally share any fees and disbursements in relation to Mr E’s monitoring of implementation, and that Mr E have liberty to apply to the Court for Directions if necessary.
In the event that in the course of the winding up of the financial affairs of the husband and wife to give effect to these Orders accounting (including taxation) differences arise between the parties which do not involve an interpretation of these Orders, then the accountants for each party shall confer and if the parties are still not able to agree then the parties shall brief Mr E who shall determine the dispute subject to either party or Mr E being at liberty to seek any guidance from the Court or to refer any dispute to the Court if deemed by any of the said accountants to be appropriate and in that event the Court be at liberty to make such Orders as to costs as it deems fit.
That subject to the preceding Order herein (that the parties first attempt to resolve appropriate matters through Mr E) there be general liberty to apply as to the application of implementation of these Orders or in the event that any reasonably unanticipated issues arise such leave to be made within twenty-four (24) months of the date of these Orders or such other time Ordered by the Court within that time.
The Trustee and the parties have liberty to apply in relation to this Order.
T
he husband and wife shall do all things and sign all documents to direct Rae & Partners to pay the net balance, if any, of the $85,149 held by them in trust equally to the parties after payment of any outstanding capital gains tax in respect of the sale of the property at 26-28 Z Street. If the $85,149 is not sufficient to meet the said capital gains tax then any such shortfall shall be paid in equal proportions by the husband and the wife.
T
he husband shall retain for his sole use and benefit absolutely all that his right title and interest in the following properties:-
(a) the property jointly owned with Mr MO at D Street;
(b)15 L Street;
(c)13 L Street;
The husband shall forthwith do all such acts and things necessary so as to effect a transfer by PG Pty Ltd (or such other entity as may be the owner) to the wife of:-
(a)the BMW motor vehicle currently in the wife’s possession; and
(b)the Corvette motor vehicle.
to the intent that the wife be the sole and absolute owner of the said motor vehicles.
On or before sixty (60) days of the date of this Order the husband provide to the wife all relevant records under his possession or control concerning any of the above entities and/or properties that are to be transferred to the wife in accordance with these Orders.
IT IS NOTED the Court has directed the Trustee in relation to the sale of the properties to apply each parties’ share against their particular liability in respect of the specified liabilities.
Within sixty (60) days of the date of this Order the husband and wife shall respectively do all such acts and sign all such documents as reasonably required to or for:-
(a)The wife to resign from any position as director and/or secretary of:-
(i)K Pty Ltd;
(ii)HL Pty Ltd;
(iii)PG Pty Ltd;
(iv)X Pty Ltd;
(v)RS Pty Ltd; and
(vi)RO Pty Ltd
(b)The wife to transfer to the husband the wife’s entire share holdings in each of the six (6) said companies.
(c)The wife to transfer to the husband any shares held by any other entity or entities in the said companies in respect of assets to be retained by the husband.
(d)The wife to transfer to the husband the wife’s interest in:-
(i)the K Unit Trust;
(ii)the HL Family Trust;
(iii)the Pilot Family Trust No: 2;
(iv)the P Family Trust;
(v)the HA Unit Trust;
(vi)the Miscellaneous Trust; and
(vii)the Pilot Family Trust
(e)The wife to appoint the husband as Appointor of any of the said trusts and for the retirement of the wife and/or any entity in which she is to retain an interest as Appointor.
(f)The wife to transfer to the husband any interest in any Loan Account of the wife or any other entity or entities in any of the said companies or said trusts.
Within sixty (60) days of the date of this Order the husband and wife shall respectively do all such acts and sign all such documents as reasonably required to:-
(a)discharge and/or release the wife from any personal liability relating to any liabilities of the said companies and/or trusts;
(b)discharge and/or release the wife, or any entity in which the wife (as a result of these Orders retains any interest), from any liabilities of the companies and/or trusts;
(c)Indemnify the wife in respect of any taxes or charges associated with the transfers contained in this order;
(d)The husband henceforth (as between the husband and the wife) shall be solely responsible for and indemnify the wife with respect to all liabilities (including but not limited to liabilities to the Australian Taxation Office) of the said companies and trusts whether past, present or future and whether actual or contingent. This is provided that the wife has made clear and specific disclosure to the husband of all past or present liabilities of which the wife knew or ought to have reasonably known;
(e)The husband shall be responsible for all costs, fees and expenses reasonably necessary to give effect to this Order (excluding the wife’s legal fees).
That on or before the 30^th June 2011 the wife/husband pay to the husband/wife such amount necessary so as to give an overall property distribution in the proportions of 50% to the husband and 50% to the wife. Such percentage to exclude the sums of $132,586.37 and $164,500.00 referred to in Orders 3 and 4 herein which shall be paid by the husband out of his share of the assets.
T
he husband shall assume sole responsibility on behalf of both parties for the management of the litigation between K Pty Ltd and V Pty Ltd subject to the following:-
(a)The husband being solely entitled to make all decisions in relation to that litigation including any settlement or other outcome.
(b)The husband shall within seven (7) days of the making of these Orders irrevocably instruct his legal representatives to keep the wife informed of the progress of the litigation.
(c)At the conclusion of such litigation any net payment to K Pty Ltd after deduction of all legal costs and expenses (as and from the date of these orders) shall be divided between the parties in equal proportions.
(d)the event that there is a net loss then the parties shall share in that loss in equal proportions.
(e)Pending such determination the parties shall contribute equally to further litigation costs and expenses as and from the date of this order (including incurred but unpaid costs and expenses as at the date of this order).
(f)In the event that one party refuses or neglects to pay his/her proportion of such costs and expenses, the other party may pay such costs and expenses and such paying party shall be reimbursed for such payment by the other party (together with interest calculated in accordance with the rules of the Family Court of Australia).
The husband and the wife shall do all such necessary things as reasonably required by Mr S for the wife to lodge an income tax return for the financial year ending 30 June 2003 disclosing the distribution of approximately $50,000 made to the loan account of the wife and $20,000.00 to each of the separate loan accounts of the two children of the marriage (totaling $90,000.00) for that financial year and after the issue of a notice of assessment the husband and wife shall pay the amount assessed including any interest and/or penalties in equal proportions.
The husband and the wife shall each instruct Mr I, an Accountant of KPMG in Launceston, to apply to the Australian Taxation Office for an Amended Income Tax Assessment for the P Family Trust for the financial year ended 30 June 2003 and that each party provide all reasonable co-operation to Mr I and that any refund shall be distributed between the parties in equal proportions.
IT IS DECLARED that Mr H is entitled to be the sole and beneficial owner of the property registered in the name of K Pty Ltd known as and situate at E Street and more particularly comprised in Folio of the Register Volume: … Folio: ….
Save and except for the chattels identified in the preceding Order herein:-
(a)That within sixty (60) days of the date of these Orders at a date and time to be agreed the wife shall permit the husband and/or his agents to collect from W property at his expense the chattels identified in annexure “B” hereto (not being fixtures to W property and not having previously been delivered to the husband) to the effect that the husband shall be the sole and absolute owner thereof. The husband or his agent shall collect such items at a time and date agreed between the respective parties legal practitioners within sixty days.
(b)That save and except for the chattels identified in sub-paragraph (a) hereof or otherwise identified in these Orders:-
(i)Each party be solely entitled to the exclusion of the other to all other property and chattels of whatsoever nature and kind in the possession of such party as at the date of these orders and that for this purpose; any bank accounts are deemed to be in the possession of the person whose name appears on the bank's record thereof, any insurance policies are deemed to be in the possession of the beneficiary thereof, any superannuation entitlements are deemed to be in the possession of the person who is named as the worker whose age or working future provides the conditions of payment out of such entitlement.
(ii)Each party shall be solely liable for and indemnify the other against any liability encumbering any item of property to which that party is entitled pursuant to these Orders.
There be no Order for an adjustment of any costs paid by the Pilot Group for the personal benefit of either the husband or the wife in these proceedings whether by way of add back or otherwise and that each party have liberty in accordance with the Family Law Rules (2004) Cth to:-
(a)Pursue any costs application made during the course of the proceedings which has been reserved; and
(b)Seek the costs of and incidental to the substantive proceedings.
For the purposes of calculating the net property pool and the distributions in accordance with these Orders, it is deemed that the party nominated hereunder has as an actual liability the amount subscribed;
(a)husband and wife joint - tax Y Street - $290,320.00
(b)husband and wife - deferred tax K Pty Ltd - $438,070.00
(c)husband and wife - tax Pilot Management Pty Ltd - $334,615.00
(d)husband and wife - tax NY Pty Ltd - $52,048.00
That the husband and the wife shall be equally liable for any Capital Gains Tax assessed as a result of the sales of:
(a)30 Z Street;
(b)162-164 Q Street;
(c)178 Q Street;
(d)180-182 Q Street;
(e)2-4 Y Street;
together with any Income Tax assessed as a result of the sale of Lot 19 K.
Notwithstanding the preceding Order herein as to the powers of Mr E as Trustee for sale, the net proceeds of sale of Lot 19, K or such lesser amount is then outstanding is to go to the ANZ Bank in reduction of the loans to K Pty Ltd.

BY CONSENT

Both parties are to equally share any liability for tax, interest and penalties flowing from the reporting of the $90,000 income distribution to the wife and the parties’ two daughters in relation to the 2002-2003 financial year.
Both parties are to equally share any entitlement or benefit arising from the rectification of the duplicated reporting to the Australian Taxation Office of $780,000 in income for the 2003 financial year.
All outstanding applications be dismissed.
This matter be removed from the list of cases requiring determination.
All subpoenaed documents are to be returned to the persons or institutions from which they emanated and all exhibits are to be returned to the person or persons who tendered the same.
The husband within seven days sign all authorities and directions to enable the wife’s solicitor Ms Rebecca Reid and/or her accountant Mr R to contact and communicate with the Perpetual Trustees in respect of the current liabilities of the parties or any corporation or trust of the parties to that lending institution including release of securities and cross guarantees.

IT IS NOTED

All expenditure from Pilot Group funds since separation which directly benefited the children of the parties is to be treated as expenditure by the husband and the wife equally and consequent adjustments are to be made to the loan accounts of the parties. Any liability by the children to the parties or the Pilot Group as a result of payments to them or for their benefit is extinguished.
To avoid any confusion Lot 22 Z Street is also known as Lot 22A Z Street which together with 24 Z Street are dealt with by the Consent Orders made the 4^th March 2010 and which were a premature distribution of $350,000.00 and $135,000.00 to the husband and to be credited to his account in the overall settlement.

IT IS CERTIFIED

Pursuant to Rule 19.50 of the Family Law Rules 2004 (Cth) it was reasonable to engage counsel and senior counsel to attend.

IT IS NOTED that publication of this judgement under the pseudonym Pilot & Pilot is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT HOBART

FILE NUMBER: HBF: 1990 OF 1999

MS PILOT

Applicant

And

MR PILOT

Respondent

REASONS FOR JUDGMENT

INTRODUCTION

Ms Pilot (“the wife”) and Mr Pilot (“the husband”) have shared significant material success and accumulated a sizeable portfolio of real estate and other assets over their relationship which stretched from cohabitation in 1978 or 1979,[1] their marriage in 1983 and final separation in April 2002.
[1] In view of the extent of the relationship and the parties’ respective financial status at the commencement of the relationship that precise date is of little significance.
The parties were divorced in 2004. In September 2009 the wife was aged 52 and the husband 58. There are two children of their marriage, aged about 27 and 26. Both children are relatively self sufficient.
The parties have been unable to agree on the division of their extensive pool of property.
These proceedings were commenced in June 2004. There were numerous interim and interlocutory applications and the trial commenced in July 2008 with a view of the various parcels of land owned by or on behalf of the parties. The trial was initially estimated to occupy five days but for a variety of reasons eventually occupied six weeks or more of court hearing time. As a consequence the hearing was spread over a period of about eighteen months. The trial was marked by high levels of distrust, antagonism and conflict between the parties which remained features of their relationship and the hearing.

THE ISSUES

The wife generally claimed that the husband obstructed her in investigating the finances of the businesses and did not make discovery as required by the Court. The husband conceded at some levels that his disclosure was not as it should have been but said that it arose out of his concerns that the wife was acting contrary to the interests of the parties in terms of their assets and with the risk that such alleged disclosures could prejudice the K litigation.
The wife complained that “the consequence of the Husband’s persistent pattern of non disclosure was the cause of the prolongation of the litigation, the need to engage Mr [E] and ultimately the incapacity of the wife and the Court to ascertain what happened to the assets of sales, borrowings and income of the Group during the seven post-separation years.”[2] For the reasons set out in this judgment it is clear that the wife has had adequate access to the records and accounts of the respective entities of the parties and that the engagement of Mr E was necessitated as a result of the high levels of conflict and deep lack of trust exhibited by both parties and it is not sustainable for the wife to set the blame wholly at the feet of the husband.
[2] Page 25 of the wife’s written submissions filed 29 July 2009.
The wife also complained that the husband (with the assistance of Mr H and possibly his accountant, Mr S) concealed assets and/or income. Further that the husband, his barrister, his solicitors (both family law and commercial) and/or accountants participated in delaying or frustrating the proceedings and participated in concealing the reasonable provision of financial and other information.
The wife complained that she was not allowed to properly prosecute her case in that she was not permitted to cross-examine the husband on his criminal history. Secondly, there was a limit on cross-examination of Mr H in relation to the number of staff and thirdly there was a limitation put on the cross-examination of the valuer with regard to B Farm.
The wife asserts that the husband has had control of the parties’ assets since 2002 and has applied the benefits of the income and capital to his own use and to her exclusion.
The other issues between the parties fall into three primary areas.
The first is a group of issues relating to the pool of assets including some valuations and some add-backs (albeit that the add backs can be dealt with under the considerations in respect of contributions and/or other factors). The pool of assets of the parties is about $15,000,000. Some of the capital assets and liabilities have agreed values. These issues included:-
a.A submission that as a consequence of the complex financial arrangements of the parties I should look at assets as at 30 June 2009 and I have had regard to the evidence and agreements from the accountants on 28 October 2009. I will assume that the value of the assets remains constant (as there was no application to re-open in that regard[3]) and I will address the issue of income, if any from that date. This includes the issue as to whether the business and assets of the parties and their alter egos are producing an income surplus or an income loss and either way whether there should be an allowance for any such surpluses or losses between 1 July 2009 and final orders. The wife claims a continuing add-back of $25,000 per month.
[3] Exhibit H1.1 (28 October 2009).
b.The value of properties 27, 29, 31, 33 and 35 Z Street.
c.How to deal with the proceeds of sale of the 2-4 Y Street Property.
d.The wife asserted that the husband was the beneficial owner of his parent’s property at 13 L Street. The husband denied this. Two questions arise from this, the first is whether the property was in fact in the beneficial ownership of the husband and if so, the second issue which needs to be addressed is, whether there ought to be an add-back of some rental in respect of that property.
e.The value of the plant and machinery of PG Pty Ltd.
f.The interest of LL in lot 8 at K.
g.The parties’ interest, if any, in Residential lot 7 K. One of the husband’s employees, Mr H has built a house on Lot 7 in the residential part of the development at K. There is agreement that Mr H has an equitable interest in that property. The extent of that equity is in issue. Mr H has not been joined as a party to the proceedings. I can make an order that lot 7 be transferred to him and if I determine that the parties or one of their alter egos has an equitable interest in that property then I am able to add back that amount to the husbands account.
h.A question of deferred Capital Gains Tax and Income Tax liabilities and credits. As part of the taxation issues there are some other tax issues, which I have dealt with.
i.An alleged over-capitalisation of a farm property owned by the husband (“B Farm”) and how to treat it. In Exhibit H1.1 (28 October 2009) the wife sought an add-back/wastage of $1,317,780. This issue falls into subgroups which I have dealt with in these reasons. In submissions, counsel for the wife said that B Farm’s value should remain at $740,000. Counsel for the wife submitted that because of the husband’s over-capitalisation of B Farm that this was either an ‘add back’ or ‘other factors’ or a ‘just and equitable issue’. One of the sub issues with regard to B Farm was whether the use of fill from K property on B Farm was for the benefit of both developments or solely for the benefit of B Farm, with the husband having an eye on its potential development into the future. The wife asserted that the removal of fill from the K property and the placement of it at B Farm, by one of the buyers, was an unnecessary expense (with a value of upwards of one million dollars). She says this was done with the sole intention of redeveloping B Farm and without any significant benefit for K and ultimately the parties. The husband’s case was that the fill needed to be removed to make K property a sub-dividable property and that significant work needed to be done to K property.
j.After separation the husband learnt how to fly aircraft and in doing this lived for a period of time in Queensland. He has purchased two aircraft the latter of which is used in a business. There is agreement that as a consequence of entering into that business there is an overall loss to the assets of the parties. There is an issue as to how this is to be treated, in particular if there should be an add-back, and if so how much.
k.It was an agreed fact that the husband invested $15,000 in 2008 in a company called Pilot Securities Pty Ltd. It was also agreed that the $15,000 should be treated as an asset of the husband albeit that it was lost subsequent to investment.
l.There was also a claim by the wife for an add-back of just under $2,000,000 being drawings allegedly taken by the husband in excess of drawings taken by the wife. Mr E, a qualified accountant, was appointed a single expert and was instructed to perform investigative work for the period 1 July 2002 to 30 June 2007 in relation to the various entities of the parties and prepare the report in that regard. His appointment was in part to address this issue. Included in this was a question of whether the husband was entitled to an allowance for running the enterprises and if so, how much. This issue was argued in the context of payments to the wife and their two children[4] of about $1,200,000[5] over that period of time. There was agreement between the parties that, whilst I needed to have regard to the loan accounts in determining any add-back, there was not to be any call on them in respect of the children.
m.A further claim for an add-back was made by the wife in respect of rental allegedly received by or on behalf of the husband in respect of property 24 Z Street.
n.The wife also claimed an add-back in respect of a sum of about $300,000 in expenditure identified by Mr E.
[4] Report of Mr E dated 7 August 2008 12.7.7 (page 54) Exhibit H8.
[5] See Exhibit H1.2.

The second area of issues related to contributions which included:-
a.The wife submitted that the parties contributed equally throughout the time they lived together and that all of the property should be divided on that basis.
b.In terms of contribution the parties agree that, save and except for the submission that the husband made a “special” contribution, the contributions both before and after separation were equal. The husband’s case is that he was an “entrepreneur, property developer, builder, financial controller, property manager and project manager”.[6] He asserts that the wife was of significant help in a book-keeping sense and in her role as a carer of the children but not at the same level as him. As a consequence he claimed that the contributions should be assessed on the basis of 55 per cent by him and 45 per cent by the wife.
c.There was an issue as to the work undertaken by the husband subsequent to separation. The wife asserts that there has been, essentially, no development since separation in April 2002 with the exception of the finalisation of the K property sub-division, money being spent on B Farm and the waste of resources in terms of the husband’s involvement in the aircraft business (in which it is not an issue that the wife was not in any way involved or consulted in advance). The wife says that the work undertaken by the husband, or on the husband’s behalf, at K property was limited. I have had regard to my findings on the issues of the husband’s work since separation, the aircraft business, the dispute regarding drawings, the B Farm dispute and the other ‘so called’ add back issues in terms of contribution (and for that matter the other factors and fair and reasonable considerations).
d.Further the wife submitted that the husband had access to the funds of the business which he used essentially for his own personal purposes. In many regards this submission and the wife’s evidence upon which it is based has been negated by the evidence of Mr E. In this respect I have had regard to the husband’s failure to account to the wife for the funds due to her in June 2010 and his failure to promptly disclose the O Holdings settlement.
e.As part of the evidence there is a question of the litigation that arose following a proposed sale of the K development. The husband says this litigation arose because the wife refused to refinance a significant loan in regard to K property. He says he was then obliged to endeavour to sell the remaining development at K to manage that secured loan. In undertaking that commercial arrangement conflict arose which in turn led to Supreme Court litigation arising between the parties’ corporate structure and the putative buyers of K property (“the WL litigation”). The parties’ K corporate structure had contractual obligations with the owner of an adjoining development and with whom the commercial relationship soured with the sale and Supreme Court civil litigation which arose in that area (“the V litigation”).
f.One of the considerations was how the Supreme Court civil litigation impacted upon the parties’ contributions. The husband complained that the wife inter-meddled in the litigation and at some levels assisted the other parties in prosecuting their claims against the parties’ assets.
g.The husband found a purchaser for some of the investment properties and claimed that the wife prevented those sales from going ahead costing the parties significant monies.
h.The husband says that, since April 2002, he has run this complex business, albeit at times when he was away, and that whilst his drawings were greater than those of the wife the expenses he was paid were appropriate for someone undertaking his tasks.
[6] Paragraph 51(b) of husband’s affidavit filed 18 October 2007.
The third element is the question of the other factors and what is just and equitable. At the commencement of the trial both parties opened on the basis that there should be no adjustment for other factors bearing in mind their pool of assets. However, in final submissions the position of the wife altered and she sought adjustments in one or the other or both of these primary considerations as:-
i.An alternative to the direct add-backs referred to in respect of the pool of assets;
ii.Implicitly, that any claim for an add-back against the husband ought to be set off against loss arising by reason of the wife’s alleged refusal or frustration of an offer by DR to purchase some of the parties’ real estate. The wife claims this should be rejected.
iii.An adjustment in the wife’s favour as a result of her allegedly being excluded from the family assets and income including an alleged consequential reduction in her standard of living. This can be rejected on 2 bases, firstly that I have preferred the evidence of Mr. S that the income (except for the aircraft) was used for the business and secondly the evidence of the wife where she says that prior to separation the parties led a modest life to create the assets.
iv.The wife claimed that the husband had a higher standard of living than her as he had access to the assets and income that she did not.
v.Counsel for the wife submitted:-[7]
The marriage and separation affected [presumably detrimentally] the wife’s earning capacity by excluding her from her usual work as co-manager and partner in the family business.
These words in this part of the submission create an obnubilate meaning. If the wife claims her earning capacity is reduced because she was working in the business, that hardly makes sense as the wife’s case was that she provided the high level administrative skills to support the hard work and ideas of the husband and that it was the combination of the parties’ respective skills that developed the asset base. While I have not accepted the wife’s skills at the level claimed by her, I have found that her contribution was equal. If the submission was that the wife has lost her skills or reduced her skills between separation and hearing I am not satisfied on the evidence that she has done so. Once she was out of the business there was no reason she could not have tried to obtain employment in that or other fields elsewhere. The parties’ children became relatively self sufficient in the years that followed separation. If the wife’s skills needed to be upgraded or renewed there was ample time for her to do so rather than remaining static in the W home and brooding and fussing over this litigation. I am able to make these comments about the wife, after consideration of the evidence and having seen her in court over a number of years, during the hearing process.
vi.The wife submitted that the husband had not made full and frank financial disclosure and there were undisclosed assets and failure to account; and
vii.The wife also submitted that there should be an allowance or adjustment in her favour in respect of the unequal distributions in favour of the husband. This in terms of the parties and their children’s respective loan accounts from the business and a consequent submission that the husband should not be allowed a sum in salary or wages for managing the business since separation.
[7] Page 38 – (f) of wife’s written submissions filed 29 July 2009.
Another issue is how to deal with the possibility of liability or asset (including legal costs) in respect of litigation between K Pty Ltd and V Pty Ltd. In August 2004 an agreement was entered into between K Pty Ltd, the Executors of the Estate of the late MN and V Pty Limited. The agreement involved the staged payment of $800,000 to K Pty Ltd, the termination of a Land Transfer agreement, the withdrawal or lifting of caveats by K Pty Ltd, the granting of various rights of way and service easements, it seems the construction of a roadway, some rock works and removal and reconstruction of security gates. After the putative sale to WL problems arose pursuant to this agreement. K Pty Ltd and V Pty Limited are now involved in civil litigation (the V litigation). K Pty Ltd seeks $400,000 and V Pty Limited seeks damages of $450,000.[8]
[8] Exhibit H18.
Significant, but un-particularised legal costs have been incurred and some have already been paid by K Pty Ltd. If successful, K Pty Ltd could end up with a judgment of up to $400,000 (presumably plus interest) together with the likely benefit of a party/party costs order. If successful, such amounts would likely be income of the development and the net proceeds would be available for distribution as income or a return of capital to the husband and wife. If the litigation is unsuccessful, there could be a requirement for capital to pay out any verdict and any order to pay V Pty Ltd’s costs. In the meantime the litigation will need funding towards a hearing in the Supreme Court of Tasmania. Any payment to V Pty Ltd pursuant to such a result would create liabilities for K Pty Ltd with the attendant tax consequences, which may diminish the overall losses.
In terms of this issue I sought further submissions.
The husband’s submissions were:-[9]
the husband assume sole responsibility on behalf of both parties for the management of the litigation between [K] Pty Ltd and [V] Pty Ltd and be solely entitled to make all decisions in relation to that litigation including any settlement or other outcome. At the conclusion of such litigation any net payment to [K] Pty Ltd after deduction of all legal costs and expenses shall be divided between the parties in the proportions of 55% to the husband and 45% to the wife. In the event that there is a net loss then the parties shall share in that loss in the proportions of 55% to the husband and 45% to the wife and that pending determination the parties contribute in the proportions of 55% to the husband and 45% to the wife to any reasonable litigation costs and expenses.
[9] Paragraph 18 of the husband’s draft orders 21 October 2009.
The wife’s submissions were set out by her counsel in July 2009 under a part headed “Agreed Adjustments to be Covered by Consent Orders”. The wife submitted that there should be:-
Equal sharing of benefits and burdens arising from completion and outcome of [V] litigation (see page 82 of transcript 27^th October 2008).
In a written submission made on behalf of the wife on 21 October 2008 her counsel said:-[10]
A further submission will be provided in relation to whether or not properties should be marketed, the appointment of a solicitor for any properties to be marketed, dealing with any contingent liabilities arising out of the litigation …
[10] Wife’s further submissions in response to aspects of the Court’s request of 17 September 2009 dated 21 October 2009.
Counsel for the wife then went on in that further submission to seek orders transferring the K Pty Ltd assets to the husband and that he (the husband) indemnify her in respect of liabilities arsing from such ownership.
The amounts involved are considerable and as such I will adopt the course submitted in general terms on behalf of the husband.

THE PROCEEDINGS

The proceedings were commenced by the wife in June 2004. The delay in the proceedings failing to come promptly before the Court arose from a number of reasons including; the need for a single expert accounting report, the high levels of conflict between the parties and change of legal practitioners and on one occasion the illness of senior counsel.
At the time she filed her primary application, the wife sought an interim order for spousal maintenance. After a contested interim hearing in July 2004, Hannon J ordered the husband pay to the wife spousal maintenance of $1,000 per week. This maintenance has been generally paid, although there were interlocutory proceedings between the parties in respect of payment prior to the final hearing.
In February 2006 I made interim orders restraining the husband from disposing of the proceeds of sale of some of the K properties and consequential mechanical orders.
The proceedings took from June 2004 to September 2008 for the primary evidence to commence. The hearing spanned from a view by me, the real estate valuer and the legal representatives of the parties in July 2008 to final evidence and submissions on 28 October 2009. This was followed by a further interim application in December 2009, the result of which forms part of the material for the substantive determination. It has taken some time to write these reasons. At the time I was ready to deliver reasons in about June 2010 the wife applied to reopen her case and adduce further evidence. That application was heard on 6 October 2010. That was a date allocated to meet the needs and convenience of counsel for both parties. The evidence was admitted without cross examination but I had regard to the assessment of these witnesses in previous cross examination of each of them.
Having regard to the comments of the High Court in MRR v GR [2010] HCA 4 as to question of delay I will set out some explanation for the delay in determining these proceedings.
From June 2004 to September 2008 there were numerous interlocutory and interim hearings. In July 2005 the Court was informed that the matter had settled ‘in principle’. That settlement was not realised. In September 2005 agreement was reached between the parties about single expert real estate valuers. By application filed 23 December 2005 the wife sought the appointment of a single expert forensic accountant. In February 2006 interim orders were made, the subject of those orders is discussed later in these reasons. In April 2006 the wife filed an application asserting the husband had contravened a court order. That application was dismissed in May 2005.
On 31 July 2006 the wife sought to have the husband dealt with for alleged contempt of court orders. The proceedings came before Bryant CJ in August 2006 for directions. In October 2006 an order was made for Mr E to prepare a forensic accounting report. Due to the high level of conflict between the parties, slow disclosure and poor communication Mr E’s final report was not ready until about August/September 2008. The parties need to look to themselves for this delay, certainly not to Mr E.
The delay in providing the report did not reduce the parties’ ardour for litigation. On 30 January 2007 there was a joint directions hearing conducted by Registrar Weidmann and myself. A conciliation conference was listed for a day in May 2007. Unfortunately the conference did not lead to a resolution of the conflict and there were further applications and conflict about the DR sale, of which I have discussed elsewhere in these reasons.
In October 2007 the proceedings were specially fixed for a 5 day hearing in April 2008, to focus the parties on the preparation of this matter for trial. The expert evidence was not ready and as such the hearing was later listed for hearing for 5 days commencing 23 June 2008. In the meantime there had been an application for costs made by the wife and later a further full day conciliation conference on 1 April 2008. The report of Mr E was still unavailable for the June 2008 hearing. As a consequence the hearing date was shifted to 4, 10, 11 and 25 July 2008.
A view of the extensive real estate holdings of the parties and their alter egos was arranged and took place on 4 July 2008. The hearing was rescheduled for August and September 2008. The view of the real estate was useful as it greatly assisted me in better understanding the real estate evidence. I inspected the various properties including the commercial properties at Z and Q Street, the former matrimonial home W property, B Farm and K property.
Between July 2008 and September 2008, the wife twice changed her solicitors, thereby causing delay. The husband’s senior counsel became sick and the hearing was further delayed. I began to worry that the hearing would never commence. Sadly, once the hearing commenced my worry transmogrified to a fear that the hearing would never end.
Evidence was taken by way of the view and there followed days of attempted hearings and hearings in August and September 2008. Five days were allocated in October 2008. The trial continued taking hearing days in October 2008, December 2008, February, March, June, July, September, October and December 2009. Plus the reopening on 6 October 2010.
During that time the matter was allocated two weeks of hearing time in June/July 2009 commencing Monday 29 June 2009. When the matter came before me on that day there were a series of applications in a case. The first was an application by the wife to take control of the Z and Q Street properties. This application was filed on 31 March 2009 and substantially replicated an application which had been dismissed by me on 25 February 2009. The wife’s subsequent application in that regard was also dismissed. The husband then sought permission to sell properties at Z Street and Y Street. The wife opposed that application. The basis of the husband’s application was that he had found buyers for the subject properties which were well above the value determined by a single expert. I determined that those properties ought to be sold as funds were urgently needed by the parties.
During the course of that argument I raised with the parties counsel the question of whether the wife wished to purchase those Q Street and/or Y Street properties. This was in circumstances where her counsel had submitted that funding was likely to be available for borrowings, the net income on those properties was said to be in excess of $300,000 per year and where the husband agreed, in those circumstances, to transfer his interest in the former matrimonial home to the wife.
Later that day I was informed that the parties were engaged in substantial negotiations in respect of the proceedings. The following day I was informed that the parties had reached an agreement and were in the process of documenting that agreement. Late in the afternoon of 30 June 2009 I was informed that the matter needed to be stood over to the following day so that the terms could be handed up. On 1 July 2009 I was informed that settlement did not proceed. Each party indicated they would be seeking costs (including indemnity costs) against the other. The cost arguments await the outcome of the substantive proceedings.
Later in that week counsel for the wife informed me that there would be an application for leave to appeal in relation to the order for the sale of the Q Street properties. I was informed that the wife would be seeking a stay of the order for the sale of the Q Street property. As at that date I had not perfected the orders with regard to the sale of the properties and the consequential order that the wife not interfere in those sales. I said that when a notice of appeal was lodged or a form of notice of appeal was put before me (provided it was done within the next few days) I would hear the stay application on Tuesday 7 July 2009. I enquired as to whether counsel for the wife was going to file further evidence. On Thursday 2 July 2009 I was provided with a form of the order although it did not reflect exactly what orders I thought I had made particularly in terms of the sale prices. I perfected those orders on Monday 6 July 2009. No stay application was made in respect of that interlocutory order.
Initial submissions were made on the 29 and 30 July 2009. At that time the only matter which remained outstanding was a meeting between the husband’s accountant Mr S, and the wife’s accountant Mr R to finalise a balance sheet as at 30 June 2009.
Unfortunately the accountants did not meet in August 2009 and when the matter came back before me on 7 September 2009 I was informed that there may need to be further evidence and further submissions.
In addition there was then a new service provider for the provision of transcripts for the Court. A teething problem arose and the new transcription service did not record the evidence and the submissions made on 30 July 2009. On 7 September 2009 I informed the parties of that circumstance and gave leave for them to file written submissions in relation to the oral submissions they had made which had not been recorded. I indicated to the parties that my notes of the submissions were incomplete. I did not intend to rely on my memory of those submissions.

The proceedings were then adjourned to 28 October 2009. This was to enable the accountants to define the agreed assets and disputed assets as at 30 June 2009. In the meantime I directed my legal associate to seek the provision of further information from the parties and those who represented them, including an up to date chronology, list of trial days, list of issues and the precise orders each party sought.
In September 2009 I sought:-
·clearer submissions in respect of the wife’s add back claims,
·submissions in respect of Mr H’s alleged liability and property,
·confirmation of an agreed fact,
·a list of witnesses,
·clarification in terms of the submissions in respect of the other factors,
·submissions about what was to happen with regard to the outstanding litigation in respect of K property (which I have dealt with earlier in my reasons); and
·costs.
The proceeding recommenced on 28 October 2009 and evidence was give by the parties’ respective accountants, Mr S and Mr R. Final submissions were made and some interim/interlocutory applications were made which were dealt with by me.
This hearing occupied almost eight weeks of hearing time over a period of about fifteen months,[11] in circumstances where the original estimate of hearing time was five days. The parties made numerous interlocutory and interim applications throughout the trial which used up significant time in respect of the substantive application.
[11] This extended much further when the application was made to adduce further evidence in mid 2010, and upon allowing that evidence to be put before me I needed to and did reflect on that evidence in terms of all of the findings made in these reasons and the overall outcome.
On one occasion the wife’s counsel, presumably on the wife’s instructions, wanted to spend days cross examining Mr H in terms of the number of staff the enterprises employed over a period of years. Counsel for the wife sought to go through the wage records from June 2005 until the end of 2008 (some three and a half years). This was to establish the small working force operating the office and also a small number of staff outside the office. The submission was that it would also show that much more work had been undertaken at B Farm than at K property.
I was concerned that this would have been a very long cross-examination and served no forensic purpose. The evidence of Mr MC was that much of the other labour was provided through sub-contractors. I delivered short reasons and would not allow questions in relation to the day to day activities of that small number of staff over that three and a half year period.
This area of cross-examination addressed no significant issue for determination except perhaps the remuneration, if any, which ought to be allowed to the husband. In any event the business records established the extent of the employees and if there were issues in respect of them such issues should have been raised with Mr E when he prepared his report or in cross-examination.
I observed the wife, when she gave evidence and noted her approach in respect of the titles to the various properties, including the lodgement of the priority notices with the Land Titles Office in late 2008, her approach with regard to the proposed DR sale and her approach to the trial generally. As I have said later in these reasons, her evidence troubled me as did her general approach to the litigation. The wife’s complaint about the valuation of the former matrimonial home at W was an example of where she objected to the valuation and wanted an allowance for work to be carried out. A single expert had been appointed and as far I can discern from the evidence no questions were asked of him under the rules. The wife wanted her own valuer. The end result was both delay and an increased valuation on that property, which was contrary to the wife’s financial interests as she has at all times wanted to retain the home.
In these reasons any statement of fact is to be regarded as a finding of fact unless the contrary intention is clear from the context.

Submission on behalf of wife imputing that the husband’s advisors acted improperly

In his opening counsel for the wife, Mr Foster, said:-[12]
In a sense, the difficulties for the court, for all of us, are created by the events of the following six years because had the settlement occurred in 2002 it should have been relatively easy to divide up the assets at that time and to share those assets in a way which delivered to the parties a proper sharing of the solid income flow that existed, but with the following six years had these characteristics. One is that the husband consciously and deliberately frustrated the settlement. Your Honour has seen some of that evidence already. There were constant difficulties in disclosure and, your Honour will hear, some criticisms of [the husband], not only of [the husband] but of his lawyers and accountants, who in a sense were part of the style in which [the husband] conducted his affairs and the business affairs in the last six years.
[12] Transcript of proceedings dated 11 November 2008 at lines 23 to 33.
Many of the issues raised by the wife’s counsel during the course of the hearing ought to have been put to Mr E preferably as he was undertaking his investigation or during his cross-examination. A number of the wife’s submissions were in a sense the putting of partial information to the Court whereas Mr E in his analysis of the businesses could have better dealt with those. The Court was not the place to do an audit or a forensic accounting exercise. That was for the single expert and that expert could then present that evidence to the Court and be cross-examined on it. The wife wanted the Court to at some levels engage in that accounting exercise, which course I declined.
I am satisfied that the wife ran this case for as long as she was able and raised as many issues as she was able. One of the consequences of this was, at least in part, the inordinate length of the hearing.
I am satisfied that in 2002 and 2003 the husband was reluctant to resolve these proceedings. However, with the putative sale of part of the K property and the events that led up to it, and subsequent events, I am not satisfied, on the material before me, that from that time the husband frustrated the resolution of these proceedings.
There were problems with disclosure which I have dealt with later in these reasons. However, the attack on the legal representatives and accountants by the wife’s counsel was without substance and time was taken in trying to find evidence to base that submission. There was no substantive evidence to support the submission.
The lawyers for the husband included his Barristers, Mr Gunson SC and Mr Murray. Mr Hart, a solicitor from Rae and Partners, acted for some of the commercial entities of the husband and has accepted appointment of trustee for the sale of some property during the course of these proceeding. Mr S was the accountant for the husband and the corporate and trust structures. Senior counsel for the husband submitted that the allegation made by the wife’s counsel was scandalous. He submitted that such a scandalous allegation was not put to Mr Hart or Mr S by the wife’s counsel. These serious allegations were not properly supported by evidence and importantly the allegations were not put to the witnesses. Senior counsel for the husband in his written submissions said:-[13]
It is submitted that absent the challenge foreshadowed by Mr Foster that Your Honour must reject what flowed from Mr Foster in his opening. Given the reputations of the persons against whom these serious allegations were made, we invite Your Honour to address the issue in the reasons for judgment and not shrink from criticising the wife’s counsel for what he said in the opening. The comments were totally without foundation and not the slightest attempt was made to justify them. They were scandalous. They have not been withdrawn and despite our submissions were not made. They should be soundly condemned by the court. It is often said of defamatory statements in defamation cases – “who knows where the poison will surface and when”. Both Mr [S] and Mr Hart are entitled to have the court uphold their reputation and the findings should be made that they have committed no wrong. Even if Mr Foster withdraws these allegations in his closing submissions it is too late. They should have been withdrawn long ago and we still seek the condemnation of such allegations made without substance for the positive finding to be made.
[13] Pages 23 and 24 of the husband’s final written submissions filed 29 July 2009.
In his written submissions supplied in July 2009 counsel for the wife asserted that the evidence of Mr S was compromised however he did not put or submit that Mr S was a party to the alleged failure to disclose
In his reply, to the issue regarding his opening, counsel for the wife relied upon a number of arguments. The first was that the husband had every advantage in the conduct of the proceedings and the wife was at a considerable disadvantage.
Throughout the proceedings, until shortly before the trial, the wife was represented by Mr Fabian Dixon S.C. of Murdoch Clarke. For a short period of time the wife was represented by Ms Andrea Trezise and for the hearing the wife was represented by Mr Michael Foster of Murdoch Clarke. At all relevant times the wife was represented by competent and well regarded legal practitioners. The wife had the assistance and support of her friend and accountant, Mr IS, her daughters and in later times the support of her accountant, Mr R.
Counsel for the wife submitted that his client was not provided with information. I am satisfied that the husband did not strictly comply with the orders of the Court but that has to be seen in the context of his legitimate concerns that the wife was providing information to other parties in the contentious Supreme Court civil litigation. I have dealt with this elsewhere in these reasons.
Counsel for the wife also complained that the husband did not disclose the payment by an entity, Pilot Securities Pty Ltd, of $15,000 and also of a non disclosure of a small joint account the husband had with Ms J. This, in the context of a multi million dollar asset base, was a relatively minor sum which was overlooked and was not indicative of any systemic non disclosure by the husband. These two issues are minimal in the context of the wealth of the parties and are not demonstrable of some failure to disclose. When the $15,000 was raised the husband promptly acknowledged it and included it as one of his assets. As to the account with Ms J the husband believed it was some sort of credit card.
Counsel for the wife asserted that at all times during the litigation the husband’s legal and accounting advisors were appraised of both the civil and family law litigation and implicitly the wife’s legal advisors were not so appraised.
Counsel for the wife also complained that Mr Gunson S.C. acted for K Pty Ltd in the civil litigation and then subsequently acted for the husband in the family law litigation. In doing so all of the files of Mr Gunson and his firm, in relation to the civil litigation, were made available to the wife and her legal advisors. There was an application for disqualification of Mr Gunson, which was dismissed and, in so far as I am aware, there has been no appeal in relation to that order.
In part reply to this submission senior counsel for the husband asserted, and I accept:-[14]
During the course of submissions made by Mr Foster on a number of occasions he referred to me as “Counsel for the [Pilot] Group of companies”. As I submitted in my reply, this was yet another example of the hyperbolic statements that were littered throughout Mr Foster’s closing address. I repeat what I said to His Honour in my reply, namely that the evidence disclosed that I had only ever acted for [K] Pty Ltd in the Supreme Court of Tasmania litigation concerning the aborted sale to [WL] Pty Ltd. That was the only evidence. There was no evidence that I was “Counsel for the [Pilot] group of companies”.
[14] Outline of reply by the husband and the wife’s counsel’s submissions made 29 & 30 July 2009 page 3 at paragraph 5.
Counsel for the wife submitted:-[15]
… An example of this advantage was that the husband’s counsel was aware, when the Wife and the Court were not informed, that a reputable Tasmanian valuer had prepared a report which detached a significantly different value to the [K] property than the single expert valuer. That counsel did not voluntarily disclose that information although the Wife was the owner of the company which had retained him and despite his obligations under Rule 1.08(2) to ensure that the husband complied with his duty of disclosure under Rule 13.01 of the Family Law Rules.
[15] Page 20 of the wife’s written submissions filed 29 July 2009.
In terms of the complaint, the valuation was provided to the wife, however it was its lack of being ‘highlighted’ which seemed to be the fundamental issue.
As indicated elsewhere in these reasons there was litigation between K Pty Ltd and WL Pty Ltd. The legal advisors of WL Pty Limited arranged for a valuation of part of the land at K which was the subject of the litigation (apparently lots 1 and 4 on registered plan … and lot 6-10, 14, 16, 18-23 on registered plan …) totalling some 19.301 hectares. Mr PA, a certified practicing valuer inspected the property on 22 August 2008 and prepared the valuation.
The valuation was prepared in the course of litigation and presumably provided to WL Pty Ltd and its solicitor. The valuation was based on an “as is” basis and an “as if complete” basis.
On that basis the valuer made a number of assumptions and concluded that if the property was as if complete [emphasis added] depending on the extent of the development it would have a value of between 7.24 million dollars and 8.995 million dollars.
On 17 October 2008 the files in respect of the WL litigation and other litigation were inspected by or on behalf of the wife and she became aware of the valuation of Mr PA.
In respect of the K litigation with WL Pty Ltd, Mr Hart deposed that Rae and Partners were the solicitors acting for K Pty Ltd in the litigation with WL and the V Litigation and that he [Mr Hart] had carriage of the file. He said:-[16]
I am aware that [the wife] was a shareholder in [K Pty Ltd].
I had not ever taken instructions or directly communicated with [the wife] regarding this matter.
…
Rae & Partners have briefed Mr David Gunson S.C. of Counsel to advise with respect to the litigation in the Supreme Court of Tasmania.
Rae and Partners provide Briefs to Counsel in the usual form.
[16] Paragraphs 6,7,9 and 10 of the affidavit Ross Hart filed 1 October 2008.
In an earlier affidavit[17] Mr Hart deposed that K Pty Ltd was likely to:-
… take proceedings to enforce the removal of caveats lodged by [WL] Pty Ltd.
[17] Affidavit Ross Hart filed 10 June 2008.
In his letter to Gunson Williams dated 25 August 2008 Mr Hart confirmed that in respect of the litigation (presumably the removal of caveat litigation) the affidavit material had been settled by Mr Gunson S.C. and then went on to discuss other issues in respect of that application. At that time, vis 25 August 2008, there was no indication that Mr Hart had received or seen the valuation prepared by Mr PA, for the other party to the civil litigation, some three days earlier.
In his affidavit filed 1 October 2008 Mr Hart observed that the wife had inspected the K files on 14 and 15 May 2008 and there was an issue between the parties as to whether the files of Rae & Partners ought to be examined in Launceston (where Rae & Partners have their office) or in Hobart. It is clear that Mr Hart, sensibly and prudently, wanted to keep the civil litigation files close to him as there was significant activity going on in relation to that litigation, not the least of which was the impeding mediation. The wife’s solicitors were permitted to inspect the brief held by the firm of Gunson Williams at Hobart.
The valuation prepared by Mr PA presumably came to the notice of Rae & Partners sometime between 25 August 2008 and 17 October 2008.
A letter from Butler McIntyre & Butler to the mediator for that part of the civil litigation dated 22 October 2008 provides some more detail as to what was happening in the civil litigation. On 26 September 2008 a settlement proposal was put forward on behalf of WL Pty Ltd to K Pty Ltd. That led to the letter being forwarded to the mediator on 22 October 2008 appointing him mediator, a mediation followed on 24 October 2008 which led to the settlement of those proceedings.
As set out earlier in these reasons this hearing was to continue in early September 2008. The delay was due to a variety of reasons including the wife changing her solicitors and counsel being sick.
Between 25 August 2008 and 17 October 2008 there appears to have been hearings in the Supreme Court of Tasmania.
On 2 October 2008 the Family Court proceedings were before me and an order was made enabling the parties to borrow money to fund the family law litigation and provide working capital for the business.
The civil litigation files of Rae & Partners and the brief of Mr Gunson S.C. in terms of that civil litigation were at all reasonable times available to the wife and her advisors.
Between late August 2008 and October 2008 there were significant proceedings going on in both the Family Court and the Supreme Court and there is no evidence that there was a conscious failure on the part of Murray & Associates, Rae & Partners or Mr Gunson S.C. to highlight that valuation.
The criticism by counsel for the wife of the husband’s legal representatives in this regard was unnecessary, confrontational and added to the intensity of the litigation. The reluctance of Mr Hart to part with the civil litigation files at a time when there were matters pending in the Supreme Court and serious negotiations and arrangements for mediation which led to settlement was wholly understandable, and should have been apparent to the wife’s legal representatives.
Counsel for the wife makes a significant issue of this so called ‘non disclosure’ whereas it was part of the material provided to him and was certainly not a valuation obtained by the husband or K Pty Ltd. There is no evidence of the husband or any of his advisors endeavouring to suppress this valuation report. Quite the contrary, the valuation was provided to the wife with the files.
In the absence of substantive evidence the submission ought not to have been made. It was inflammatory and without adequate foundation and is regrettable. The submission wasted time in terms of the hearing and unnecessarily added to the task of writing these reasons. It can only be that such a submission, and confirmation of it at the conclusion of evidence, was made on the express and clear instructions of the wife, and as such it reflects badly on her and was part (although not all) of the material upon which I formed an adverse view of her evidence and conduct.

Delay in delivering reasons

The High Court in MRR v GR [2010] HCA 4 was critical of a Court in the time it took to deliver reasons, in the absence of an explanation. In the light of that comment it is apposite to explain to the parties the reason for delay in delivering these reasons. As I said earlier, these proceedings occupied many days of hearing between July 2008 and 28 October 2009. The hearing was initially listed for 5 days and upwards of 7 times that estimate was used.
Since 28 October 2009 there have been 2 more days, one in December 2009 which involved the sale of one of the properties and again in May/June 2010 to enable clarification of some submissions. However, by 28 October 2009 the hearing of the evidence had all but concluded.

I am not satisfied he will be responsible in relation to any aspect of the sale of the property except for perhaps finding buyers.
In respect of the overpayment I will make orders for payment of same to the wife, as referred to earlier, and I will also charge some properties which are being transferred to the husband in which the husband will obtain an equity (either directly or through one of his alter egos) but making those subject to the wife’s equitable interest in those properties to the extent of the overpayment liability. I will also include in that equitable charge any other funds which the husband is required by virtue of these reasons, to pay to the wife or provide an indemnity or release for the wife.
In these reasons I have determined that the proceeds of 24 Z Street were a premature distribution of property to the husband. Consent orders were made in March 2010. Accordingly this should be a credit of $350,000 on the husband’s account.
Pursuant to the orders that I propose the husband will retain his interest in 13 & 15 L Street which have a joint valuation of $310,000.
D Street is to remain the property of the husband as is the plant equipment etcetera owned by PG Pty Ltd.
Rae & Partners hold money in trust for capital gains tax. I have treated that money as being divided equally and I will make an order directing Rae & Partners to distribute any net surplus of those funds equally between the parties.
In final submissions there was about $8,216,108 outstanding to the Perpetual Trustee, being $6,000,000 to Perpetual Trustee Sydney and $2,216,108 to Perpetual Trustees Hobart. On the evidence of Mr Hart it is clear that about 3.5 million dollars was paid to Perpetual Trustees on the sale of the Q Street properties. It is not clear how much is outstanding.
I have structured the order to provide that each party shall pay one half of those liabilities. Each party shall indemnify the other in respect of such liability. I will also provide that the properties retained by each of the parties are secured to the benefit of the other party in respect of any other outstanding liability with Perpetual Trustees. That will mean if the wife defaults in respect of her obligations the husband is entitled to treat W property as security for any payments he makes pursuant to any liability of the wife and in terms of the wife, if the husband does not pay his proportion then the wife shall have security in respect of the properties he retains.
I have left the husband responsible to pay the Miscellaneous Trust liabilities, the trade creditors, the asset purchase liability, and the income tax GST of -$369,543.
As discussed in these reasons Mr LL has an interest in Lot 8 K. I will be directing the trustee to pay out LL’s share at that time.
In terms of the deferred capital gains tax on K property of -$438,070, tax from Y Street -$290,320, retained profits Pilot Management -$344,615 and tax retained profits at NY Pty Ltd -$52,048 I will be declaring that each party is equally responsible for those liabilities and shall fund them out of their own resources.
In setting out the following calculations I am conscious that there may be some change when they are examined by the parties’ respective accountants and legal advisors and if there is agreement to whole or parties in specie distribution. This can be dealt with when the orders are finalised.
The wife is to retain the following assets:-

Description of asset Value

W home          $1,825,000

27, 29 & 31 Z Street          $2,050,000

33 & 35 Z Street             $940,000

Chattels at W home               $72,160

One half of superannuation fund to be determined once the money paid out in June 2010 is repaid.

Half interest in money held in trust for Rae & Partners for capital gains tax               $42,575

Wife other liabilities             $135,042

Husband is to retain the following assets:-

Description of asset Value

Lot 10 K             $700,161

Lot 14 K             $469,143

Lot 22 K             $188,372

B Farm[130]             $740,000

Proceeds of sale 24 Z Street             $350,000

15 L Street               $50,000

13 L Street $260,000

Chattels at B Farm          $11,840.00

D Street       $125,000.00

One half of superannuation fund

Half interest in money held in trust for Rae & Partners for capital gains tax               $42,574

Cash at bank NAB                 $2,272

ANZ business account cheque               $30,125

ANZ GST account $17,144

ANZ investment account               $18,636

Trade debtors               $83,107

Add back for investment in aircraft             $256,303

Pilot securities               $15,000

Rent 13 L Street               $38,900

Rent received Z Street               $72,000

Husband’s car park Queensland               $33,000

Plant & equipment, steel, trucks and fence panels, Nissan Navara (PG Pty Ltd)          $1,445,125

Misc Trust              -$20,000

Misc Trust                -$1,800

Superannuation creditor                -$8,407

Trade creditors[131]           -$322,153

Asset purchase              -$32,399

Income tax/GST (updated 30 June 2009)           -$369,543
[130] There is an issue as to how B Farm is to be dealt with having regard to the wife’s view that it has been grossly overcapitalised and has a value to the husband far greater than its present sale price value. There is no issue as to the valuation.
[131] This has been dealt with in the discussion relating to the proceeds of sale of Y Street.

The following assets are to be sold,[132] unless there is an agreement for in specie assignment. There is general agreement in relation to the value of many of the assets. Unless specified to the contrary the assets and liabilities are an agreed amount. The agreed amounts and the areas of difference were set out in Exhibit H1.1. The assets are:-
[132] Unless already sold and distributed.

Description of asset Owned by Value

180 Q Street, Pilot Properties as trustee for Pilot Properties Unit Trust
         $1,000,000

178 Q Street Husband          $1,060,000

162 – 164 Q Street, Lot 1 Q Street Husband          $1,150,000

2-4 Y Street[133]   0

Lot 1 K K Pty Ltd          $2,981,905

33-35, 37 and 39 U Street Pilot Management Pty Ltd          $4,700,000

30 Z Street RO Pty Ltd as Trustee for the Pilot Family Trust $120,000

22 Z Street Husband
            $135,000

Residential Lot 1 K K Pty Ltd                                $170,000

Residential Lot 8 K K Pty Ltd             $545,000

Residential Lot 4 K K Pty Ltd             $650,000

Balance of commercial lots at K (lots 4,8,9,16,19 and 21)
K Pty Ltd
         $3,042,324

Perpetual Trustee Sydney[134] Mortgage        -$6,000,000

Perpetual Trustee Hobart Mortgage        -$2,216,108

Interest LL[135] Lot 8 K              -$62,982

Deferred income tax, CGT K Pty LTd[136]           -$438,070

Tax on Y Street[137]           -$290,320

Tax retained profit – Pilot Management           -$334,615

Tax retained profits – NY Pty Ltd              -$52,048
[133] This property has been sold and there is an issue on the allocation on the proceeds of sale, which has been discussed in these reasons.
[134] The loans from Perpetual Trustee will need to be varied as with the sale of properties at Q Street these debts have been reduced.
[135] There is an issue as to whether this liability is $73,000 as asserted by the husband or $59,637 as asserted by the wife.
[136] There is an issue as to whether this should be $360,000 or $438,070.
[137] There is an issue as to whether the tax on Y Street should be $150,000 or $290,320.

The husband seeks an order that the plant and equipment which he has collected, including some items since separation in 2002 ought to be sold and the proceeds divided equally. Having regard to all of the facts and circumstances in these proceedings I am satisfied that these ought to be left in the possession of the husband as he has had control and management of them over a period of time approaching ten years. What he does with it from that time onward is a matter for him.
In his orders the husband seeks a payment to himself of a wage of $297,000 for the seven years (now eight years) since separation. I am satisfied on the material that the husband has had the benefit of the property and whilst I will not be making an adjustment sought by the wife I will not be making the payment as sought as sought by the husband.
The husband seeks orders that each of the parties contribute equally to the outstanding fees due to Mr E and the property Valuers. I see no reason why that order ought not to be made. The husband also sought orders in relation to expert reports of Mr UC. Mr UC was a witness of the husband. I do not intend to make that order.
Monies have been expended by the entities of the parties for proceedings and payments made during the course of the proceedings. That submission is sensible and is, in all the circumstances, just and equitable. The parties are able to apply to the Court for such substantive cost orders as they consider would be reasonable having regard to the provisions of s 117 of the Act.
The husband seeks to restrain the wife from approaching purchasers in respect of the properties to be sold. Much of the property has now been sold or will be distributed pursuant to the orders. Such properties are to be sold by the trustee and debts paid. In those circumstances, notwithstanding the history of the parties, I am not convinced there is any need to put in place an injunction such as that at the present time. However, I have given the parties leave to apply in respect of the sale of these properties and if circumstances arise it may well be that such an order could be imposed against one or other of the parties.
Orders will be needed to be drafted to ensure that the wife is entitled to a net share of any fruits of the V litigation by way of payment direct to her from the husband. The net payment will be calculated by deducting from her share one half of the sum of the practitioner/client costs[138] set off against the party/party costs recoverable from the other side, if any. If the litigation is unsuccessful then the wife must contribute 50 per cent of any adverse verdict plus 50 per cent of the party/party costs and 50 per cent of the practitioner/client costs incurred from the date of these reasons to the conclusion of that litigation. I am aware that there is money presently outstanding to Rae and Partners in respect of litigation, including these proceedings, however much has been paid including the transfer of lot 22 K to Rae and Partners (with an attributed value of $200,000) together with a payment of $26,000. As such the wife has indirectly contributed to the costs of the civil litigation to date.
[138] Being costs and disbursements on both practitioner/client basic and party/party basic incurred from the date of these reasons until completion of the V litigation.

Application to re-open the wife’s case

On 20 July 2010 the wife filed an application in a case to re-open together with other orders. That application was supported by affidavits which I will deal with later.
At the hearing of that application on 6 October 2010 it was conceded by counsel for the husband that this was an appropriate matter where there should be a re-opening. I accepted that view and permitted the re-opening of the case. Neither party sought to cross-examine at the re-opening of the case.
The wife relied upon four affidavits namely:-
(a)      affidavit of the wife filed 20 July 2010;
(b)      affidavit of the wife filed 3 September 2010;
(c)      affidavit of the wife filed 5 October 2010;
(d)      affidavit of Mr R (the wife’s accountant) filed 5 October 2010.
The husband filed a response to the application in a case on 20 September 2010 and filed (by facsimile) an amended response to the application in a case on 6 October 2010.
In the response the husband sought permission to sell Lot 19 K and consequential orders. The only issue arising out of that order was whether Mr Ross Hart should act as the solicitor on the sale. I have dealt with that aspect of the application earlier in these reasons and I made a consent order.
The husband initially opposed the admission of further evidence, however that position did change during submissions and the evidence was admitted, albeit on the basis that I assess it in terms of the proceedings as a whole, which I did.
The husband relied upon the following:-
(a)      affidavit of the husband filed 20 September 2010;
(b)      affidavit of accountant, Mr S, filed 20 September 2010;
(c)      affidavit of Ross Anthony Hart filed 4 October 2010.
Having regard to the nature of the complaints raised by or on behalf of the wife I had made a chambers order on 5 August 2010 requiring Mr Hart to make available original file notes and records in respect of a sale of a Q Street property.
I also made orders that the husband provide to the wife’s accountants MYOB data and directed that certain financial information be provided. I gave the parties notice that they ought to address me, in submissions, as to whether there ought not to be interest on any monies that were inadvertently or incorrectly paid to the husband and in relation to the trustees for sale of the properties.
The only other material provided to the Court was an affidavit of Mr Ross Hart filed 17 June 2010.
The issue requiring the re-opening of evidence arose out of the sale of properties at Q Street pursuant to an order made by me on 3 July 2009. Mr Hart acted as Trustee for the sale.
Two problems arose out of that sale. The first was that the balance of the proceeds of sale totalling $265,192.74, which was to be paid as to one half to the wife and one half to the husband, was that the whole amount was unfortunately, due to an error made by Mr Hart, paid to the husband.
On receiving those funds the husband deposited the monies and says that he used those funds to carry out additional work at K as was deemed by him to be necessary.
He says:-[139]
At all material times it has been my understanding that pending delivery of judgment I have needed to continue to manage the [Pilot] Group and our assets and liabilities. The continuation of work at [K] was seen to me to be in the normal course of business operations[140]
[139] Paragraph 6 of the Husband’s affidavit filed 20 September 2010.
[140] Husband’s affidavit filed 20 September 2010 paragraph 6.
The husband went on to explain how he spent that money. I do not accept his explanation. He was fully aware that this money did not belong to him and he disbursed it without regard to the orders that I had made. The evidence of Mr R in his affidavit filed 5 October 2010 was that he reviewed the bank balances and that the Pilot Group had sufficient funds to repay the $132,586.37 to which the wife was entitled. I accept that evidence.
The husband ought to have paid that money to the wife, he chose not to do so. I am not satisfied that he has been frank with the Court in respect of this asset and the reason he did not repay it to the wife. He acted in a high handed and arbitrary way putting his personal interests ahead of orders of this Court and his wife’s lawful entitlements. Earlier in these reasons I discussed the law relating to failure to disclose. Having regard to those principles what I intend to do is to order that he pay $132,586.37 to the wife. I do not intend that this payment indirectly come from wife’s share of the property, it must come from the husband’s share and not be calculated in the equal division.
I had asked each of the parties to raise the question of interest. The husband’s view was that he ought not to have to pay the money at all. Having regard to the findings made by me I determine that he ought to pay interest on that sum to the wife as and from 5 June 2010.
The second issue I was asked to address was in relation to some funds which were provided to the Pilot Group by O Holdings. In her affidavit filed 5 October 2010 the wife deposed that she had learned that the claim by the Pilot Group against O Holdings had been settled and that the husband had received $290,000 and there was a further $43,000 to be paid. It was only during submission that the husband disclosed to the wife that he had received the final $43,000.
During submissions it was agreed evidence that the husband had (via the corporate structure which he controlled) received the $290,000 plus goods and service tax (“GST”) and the further sum of $43,000 which included GST. This further sum represented approximately $39,000 excluding GST making a total receipt on that claim of $329,000 plus GST. From the evidence I infer that the GST will be paid to the Government.
The husband made no disclosure of that sum to either the wife or to the Court. The husband had an ongoing duty of disclosure and I am satisfied he knew of that ongoing duty of disclosure. Again the husband acted in a high handed and arbitrary way.
In his final submissions made in October 2009 senior counsel for the husband sought orders that that money be quarantined and there be an adjustment to each of the parties from those funds. The husband now asserts that the money was used substantially for renovations to the property. The evidence of the wife is that there is no indication that the funds were used for that purpose. On balance I prefer the evidence of the wife and her accountant on this aspect of the evidence.
I reiterate what I said earlier about duty to disclose. I again have had regard to the principles set out earlier in these reasons. I do not know whether these funds have been applied or have not been applied as asserted by the husband. What is clear is that the husband collected these funds and applied them without reference to the wife or without reference to the Court. That was despite the orders that he originally sought. I do not know whether there is tax payable on that sum nor do I know how the money was spent and whether it was spent on the properties as asserted by the husband (given the concerns I have expressed elsewhere in terms of some of his evidence) or otherwise. There were many reasons for not accepting important parts of his evidence in this respect having regard to what I considered was unsatisfactory explanations.
This is a large sum of money and it is appropriate for the husband to come to the Court and say he has received that money and say how he wants to apply it. He needs to provide evidence rather than simply spending the money and adopting the approach that he has adopted. I see no reason why the husband should not simply be ordered to pay half of that sum to the wife. It is the husband who should bear the consequences of this non-disclosure. Accordingly I intend to make an order to that end.
As with the other sum, I do not intend that this payment indirectly come from the wife’s share of the property, it must come from the husband’s share and not be calculated in the equal division. The order will be that I will order him to pay $164,500 within a period of time after the orders. I will not be ordering interest on this sum in respect of the past. However there will be interest accruing on it if it is not paid within that time.
The parties are, in their individual capacities, trustees for the Pilot Superannuation Fund of the Pilot Superannuation Fund. One of the Q Street properties (No: 180) was owned by Pilot Properties Pty Ltd as Trustee for Pilot Properties Unit Trust and twenty four of the units were held by the Unit Trust for the parties’ superannuation fund.
When the properties were sold there was no accounting to the superannuation fund for the sum of $771,651 to which it was entitled.

From the evidence of Mr S I am satisfied that that money needs to be re-paid to the superannuation fund. I accept that the payment may have put the fund in breach of the Superannuation Industry (Superannuation) Act 1993.[141]
[141] Affidavit of Mr R filed 5 October 2010.
There was some issue at the re-hearing as to whether Mr S knew of the payment and each of the accountants dealt with it in their affidavits. I am satisfied, on the evidence, that Mr S did have communication with Perpetual Trustees. I make no criticism of Mr S in that regard.
The wife blames the husband entirely in relation to that payment. The husband, through submissions of his counsel says it was the responsibility of both parties. It is clear that the superannuation fund ought to have been paid the money, it is not clear whether that would have been permitted by the mortgagee who had security over the subject property.
Both parties were trustees of the superannuation fund and ought to have been alert to that circumstance. Both parties were represented and both parties had accountants. It may be that the fault lies with Mr Hart. In any event what I propose to do is order that the parties, from the sale of any of the K properties, direct that that capital sum be paid back to the superannuation fund together with interest from 5 June 2010.
It is the view of Mr S[142] that if the parties repay the funds or transfer existing financial property to the superannuation fund, any breach would be dealt with by the Commissioner of Taxation favourably.
[142] Affidavit of Mr S filed 20 September 2010.
Accordingly I will make an order to that end.
The wife’s counsel argued that the whole of the superannuation fund should be transferred to the husband and there ought not to be any splitting order. Having regard to the joint responsibility of both parties for this fund I do not propose to adopt that course.
During the course of the submissions counsel for the wife argued that the argument of the husband that the failure to sell the investment properties to diminish the assets of the Pilot Group should now fail.[143] The wife asserts that there was an overall increase in the value of the properties by some $342,318.
[143] Paragraph 27 of the wife’s affidavit filed 5 October 2010.
I raised with counsel for the wife the basis upon which that assertion was made. The DR sale of the property was for all of the property for a purchase price of $13.2 million dollars. Mr S in his affidavit filed 10 June 2008 apportioned those funds and that is the basis upon which the wife came to this calculation in her most recent affidavit. I do not accept that as the appropriate method of valuation. Mr S is not a valuer nor does he assert that he has such qualification.
I have not made any adjustment in favour of the husband for the wife’s failure to permit the DR sale, but I had significant concern in relation to her conduct in relation to that sale in terms of the reliability of her evidence. This submission changes nothing in that regard.
The wife now seeks allocation of properties between the parties and her counsel provided to the Court a distribution of assets and liabilities as at 7 October 2010. Having regard to the determinations made in respect of this matter and the significantly contested issues with respect to which properties should be retained and which properties should not be retained I do not intend to adopt that course. I intend that the properties ought to be sold by a receiver manager as is anticipated by the draft orders attached to these reasons.
I intend to deliver these reasons about a week prior to making the final orders. Leave will be given to the parties to make submissions to me on 4 November 2010 as to which properties they have agreed can be transferred to one party or another and if the parties are unable to agree then the properties will be sold by the liquidator/receiver and if there is any loss occasioned by this process it is a matter for the parties.
The other issue raised by counsel for the wife is the appointment of a joint solicitor for the sale. Having regard to the comments I have made elsewhere in these reasons I intend to appoint a trustee for that purpose.
The final issue raised by the husband was an adjustment of the tax debt which the counsel for the husband says is reduced from $367,185 to $132,068.
I am unable to adopt this course as it would involve a re-assessment of all of the factors involved in the determination of issues raised by me in these proceedings. The wife’s solicitors also asked that I allocate rent from the relevant properties to whoever receives the property without having regard to expenditure. I do not intend to adopt that course as it again would be a partial approach and would involve accepting the approach of Mr R rather than that of Mr S in terms of the overall expenses. I have not done so and whilst some of the evidence provided since June 2010 is troubling it is not such as to alter my views with regard to the evidence of Mr S.
The material filed by the parties in terms of this additional evidence has been taken into account although I have treated the affidavits of the husband and wife with caution bearing in mind the comments I have made about their evidence elsewhere in these reasons.
I am satisfied Mr Hart did not act dishonestly. However, I am concerned that he distributed trust funds without first taking the ordinary and prudent steps of referring those payments and the method of payments to both the parties and to their accountants.
Mr Hart is an experienced solicitor and was aware of the high levels of conflict between the parties. It is almost unthinkable that he would make payments to one party or another without being absolutely certain that the payments are approved by both.
I made directions in early August 2010 in relation to Mr Hart’s file. Having regard to the submissions made I am satisfied that Mr Hart, as a trustee, had an obligation to the parties, including the wife and the superannuation fund. His distribution of the funds in the way that he deposes to in his affidavit was cavalier.
I had contemplated appointing Mr Hart as trustee for the purpose of the sale of the remainder of the assets of the parties. In the circumstances I will not do so.
I will first invite the single expert, Mr E, to take that role, if he is willing. He has great knowledge of the parties and the corporate and trust structures. Should he not be willing or able to take that role, the Supreme Court of Tasmania has a list of liquidators/receivers and one of those ought to take on that task. I determine that the properties which are to be sold ought to be placed in the hands of the liquidator who will collect the funds and disburse them in accordance with the orders I propose to make.
The wife’s counsel submitted on 6 October 2010 that I should divide the property in specie between the parties and proffered as an aide memoire a list in that regard. Having seen the conflict between the parties and their respective contributions to the conflict, I will not adopt that course. To do so would invite more litigation and conflict. The wife’s counsel proffered amended orders which he said would give effect to the in specie distribution. As I did not adopt that course I did not need to go through those long and complex orders.
Likewise, counsel for the wife submitted that each party should receive the income from such property from 1 July 2009 as there had been no (or limited) updated financial information since 1 July 2009. To have adopted that course would have given rise to an injustice, having regard to the expenses and overheads of the corporate structures. A division of the income without reference to the outgoings was not attractive.
Considering all of the facts and the circumstances of the parties, the relative contributions, the other factors and the nature and scope of the property, I am satisfied that the overall result is just and equitable.
Reasons were first published on 28 October 2010. At that time the Court invited submissions on the structure and form of the orders but not the underlying principles intended by these reasons. A draft order was provided by the Court at that time. The parties sought some time to discuss the form of orders and to obtain legal and accounting advice to that end.
The proceedings were adjourned to Monday 22 November 2010 for the making of final orders. On both the 28 October and 22 November 2010 counsel for the parties sought general direction in terms of the approach to be adopted in respect of some specific orders (such as leave to apply and taxes), which general direction I gave in terms of these reasons. I include in these reasons those oral directions and the exchanges between counsel and the Bench on both 28 October and 22 November 2010. The format of the orders (albeit not consent orders) were approved and submitted by the parties.
Paragraphs 646 to 648 were added to these reasons on 22 November 2010.

I certify that the preceding six hundred and forty eight (648) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Benjamin delivered on the 22 November 2010.

Legal Associate:

Date: 22 November 2010

[2010] FamCA 1064

28 October 2010 & 22 November 2010

Key Legal Topics

Areas of Law

Family Law

Equity & Trusts

Legal Concepts

Remedies

Costs

Fiduciary Duty

Constructive Trust

Injunction

Description of asset	Value
W home	$1,825,000
27, 29 & 31 Z Street	$2,050,000
33 & 35 Z Street	$940,000
Chattels at W home	$72,160
One half of superannuation fund to be determined once the money paid out in June 2010 is repaid.
Half interest in money held in trust for Rae & Partners for capital gains tax	$42,575
Wife other liabilities	$135,042

Description of asset	Value
Lot 10 K	$700,161
Lot 14 K	$469,143
Lot 22 K	$188,372
B Farm[130]	$740,000
Proceeds of sale 24 Z Street	$350,000
15 L Street	$50,000
13 L Street	$260,000
Chattels at B Farm	$11,840.00
D Street	$125,000.00
One half of superannuation fund
Half interest in money held in trust for Rae & Partners for capital gains tax	$42,574
Cash at bank NAB	$2,272
ANZ business account cheque	$30,125
ANZ GST account	$17,144
ANZ investment account	$18,636
Trade debtors	$83,107
Add back for investment in aircraft	$256,303
Pilot securities	$15,000
Rent 13 L Street	$38,900
Rent received Z Street	$72,000
Husband’s car park Queensland	$33,000
Plant & equipment, steel, trucks and fence panels, Nissan Navara (PG Pty Ltd)	$1,445,125
Misc Trust	-$20,000
Misc Trust	-$1,800
Superannuation creditor	-$8,407
Trade creditors[131]	-$322,153
Asset purchase	-$32,399
Income tax/GST (updated 30 June 2009)	-$369,543

Description of asset	Owned by	Value
180 Q Street,	Pilot Properties as trustee for Pilot Properties Unit Trust	$1,000,000
178 Q Street	Husband	$1,060,000
162 – 164 Q Street, Lot 1 Q Street	Husband	$1,150,000
2-4 Y Street[133]	0
Lot 1 K	K Pty Ltd	$2,981,905
33-35, 37 and 39 U Street	Pilot Management Pty Ltd	$4,700,000
30 Z Street	RO Pty Ltd as Trustee for the Pilot Family Trust	$120,000
22 Z Street	Husband	$135,000
Residential Lot 1 K	K Pty Ltd	$170,000
Residential Lot 8 K	K Pty Ltd	$545,000
Residential Lot 4 K	K Pty Ltd	$650,000
Balance of commercial lots at K (lots 4,8,9,16,19 and 21)	K Pty Ltd	$3,042,324
Perpetual Trustee Sydney[134]	Mortgage	-$6,000,000
Perpetual Trustee Hobart	Mortgage	-$2,216,108
Interest LL[135]	Lot 8 K	-$62,982
Deferred income tax, CGT	K Pty LTd[136]	-$438,070
Tax on Y Street[137]	-$290,320
Tax retained profit – Pilot Management	-$334,615
Tax retained profits – NY Pty Ltd	-$52,048