Pinta & Pinta (No 2)
[2022] FedCFamC2F 1512
Federal Circuit and Family Court of Australia
(DIVISION 2)
Pinta & Pinta (No 2) [2022] FedCFamC2F 1512
File number(s): ADC 3795 of 2020 Judgment of: JUDGE BROWN Date of judgment: 9 November 2022 Catchwords: FAMILY LAW – Property – marriage of twenty years in duration – marriage produced four children – parties engaged in construction business – loans taken from business in respect of which no liability for tax has been calculated – Part 7A tax liability (Top Up Tax) – business assessed to have negative value – parties have other significant debts – parties agree that former matrimonial home needs to be sold to pay debt – husband to retain business and indemnify wife in respect of other debts including tax liabilities – husband has operated business from other premises owned by parties during marriage – after separation husband has lived in premises – wife seeks to retain business premises and utilise as family accommodation – children estranged from their father – wife asserts property only viable form of accommodation for herself and children – husband seeks to retain property – balance of convenience – assessment of contributions – add backs – just and equitable Legislation: Evidence Act1995 (Cth) s 140
Family Law Act 1975 (Cth) Pt VIII, VIIIB, ss 75, 79, 90XC
Income Tax Assessment Act 1936 (Cth) Div 7A
Cases cited: Bevan & Bevan [2013] FamCAFC 116
NHC & RCH (2004) FLC 93-204 at 79,318-9 118, 129
Clauson & Clauson (1995) 18 Fam LR 693, 710
C & C (2005) 33 Fam LR 414, 424
Collins & Collins (1990) FLC 92-149
Farnham & Farnham [2022] FedCFamC2F 83
Ferguson & Ferguson (1978) FLC 90-500
Ferraro v Ferraro (1992) 16 Fam LR 1
Fox v Percy (2003) 214 CLR 118
Hickey & Hickey (2003) 30 Fam LR 355
In the Marriage of Browne & Green (1999) 25 Fam LR 482
In the Marriage of DJM and JLM (1998) 23 Fam LR 396
In the Marriage of Kowaliw (1981) FLC 91-092
In the Marriage of AJO & GRO (2005) 33 Fam LR 134
In the Marriage of Townsend (1994) 18 Fam LR 505
Kowaliw & Kowaliw (1981) FLC 91-092
Laskari & Laskari [2014] FamCA 1183
L & L [2003] FamCA 40
Pinta & Pinta [2022] FedCFamC2F 34
Phillips & Phillips (2002) 168 FLR 438
Pierce v Pierce (1999) FamCA 74
Rushton & Rushton [2011] FMCAfam 1259
Russell & Russell (1999) 25 Fam LR 629, 644
Stanford v Stanford (2012) 247 CLR 108
Steinbrenner & Steinbrenner [2008] FamCAFC 193
Trevi & Trevi [2018] FamCAFC 173
Waters & Jurek (1995) 20 Fam LR 190, 196
Watson & Ling [2013] FamCA 57
Division: Division 2 Family Law Number of paragraphs: 398 Date of hearing: 6 & 7 June 2022 Place: Adelaide Counsel for the Applicant: Mr Anderson Solicitor for the Applicant: Clelands Lawyers Counsel for the Respondent: Mr Jordan Solicitor for the Respondent: The Law Offices of Elizabeth Temnoff ORDERS
ADC 3795 of 2020 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: MR PINTA
Applicant
AND: MS PINTA
Respondent
order made by:
JUDGE BROWN
DATE OF ORDER:
9 November 2022
THE COURT ORDERS THAT:
A.Upon noting that the orders made on 7 June 2022 as a consequence of which the respondent Ms Pinta (hereinafter referred to as “the wife”) indicated her intention to resign as a director, secretary, trustee, appointor or office holder of O Pty Ltd (as trustee for the M Trust; L Pty Ltd, N Trust, N Pty Ltd and N Super Investments Pty Ltd (hereinafter referred to as “the Business Entities”) prior to 30 June 2022 and thereafter the applicant Mr Pinta (hereinafter referred to as “the husband” agreed to indemnify the wife in respect of all her involvement in the Business Entities.
In full and final settlement of all claims for settlement of Matrimonial property arising between the parties it is ordered as follows:
1.The parties take all necessary steps, if they have not already done so, and pursue any necessary insurance claim, to repair the property located at F Street, Suburb G (hereinafter referred to as “the former matrimonial home”) in order that it be ready for sale by public auction with all such reasonable repair costs, if not provided pursuant to any applicable contract of insurance, to be paid for from the parties’ line of credit with the Commonwealth Bank of Australia.
2.Within 14 days of the completion of the aforesaid repairs or such other date as the parties mutually agree the former matrimonial home be placed on the market for sale by public auction, at a reserve price of no less than $975,000.00, unless the parties agree otherwise, with a real estate agent to be agreed between them or failing agreement as appointed by the Court.
3.Upon the settlement of the sale of the former family home the proceeds of sale be distributed as follows:
(a)In payment of the commission due to the selling agent;
(b)In payment of all legal costs relating to the sale;
(c)In repayment of any monies advanced from the line of credit to secure the necessary repairs required to prepare the property for sale;
(d)To discharge all moneys secured against the title in favour of the Commonwealth Bank of Australia line of credit secured against the property;
(e)To discharge the mortgage secured against the property registered in the parties’ joint names at D Street, Suburb E (hereinafter referred to as “the D Street, Suburb E property”); and
(f)As to the remainder to secure a 70%/30% division of the parties’ other property, with 70% of the worth of such property to be allocated to the wife and 30% thereof to be allocated to the husband in accordance with the orders made hereunder and the reasons for judgment which follow, noting that the Court has determined that the husband will retain the D Street, Suburb E property.
4.Including but without limiting the effect hereof, the husband shall retain for his sole use and benefit absolutely free from any further claim or demand of the wife:
(a)The D Street, Suburb E property;
(b)The Motor Vehicle 1;
(c)The Motor Vehicle 2;
(d)The Business Entities and all plant and equipment owned by such entities, including plant and equipment valued at $71,302.00 purchased by the husband since October 2021 together with all monies due to the Business Entities in respect of work performed by them;
(e)The business styled and known as Company B;
(f)His Super Fund P entitlements standing in his own name;
(g)His personal effects and furniture in his possession at the D Street, Suburb E property.
5.Including but without limiting the effect hereof, the wife shall retain for his sole use and benefit absolutely free from any further claim or demand of the husband:
(a)The assets and stock of the business known at Company Q;
(b)The Motor Vehicle 3;
(c)The Motor Vehicle 4;
(d)Her interest in the property situate at H Street, Suburb E;
(e)Her interest in the Westpac Bank account held with her parents and family;
(f)Her share of the proceeds of sale of the property situate at J Street, Suburb K;
(g)Her Super Fund P entitlements standing in her own name;
(h)Her personal effects and all furniture and household effects in her possession at the former matrimonial home.
6.Upon the settlement of the sale of the former matrimonial home the wife execute all necessary documents to secure the transfer of the H Street, Suburb E property into the sole name of the husband at the husband’s sole expense and thereafter the husband keep the wife forever indemnified in respect of all outgoings and expenses, including rates and land tax in respect of the property.
7.The husband indemnify the wife and keep her forever indemnified in respect of all debts and liabilities arising from her involvement in the operation of the business known as Company B and the related Business Entities including but not limited to:
(a)All debts and liabilities of Company B and the related Business Entities;
(b)All Division 7A and Top-Up tax arising from the operation of Company B and the related Business Entities;
(c)Any capital gains tax arising from the operation of Company B and the related Business Entities;
(d)Any other debts or liabilities of the husband including his Commonwealth Bank visa card.
8.The proceeds of sale of the former matrimonial home, after payment of the sums set out in order 3(a) to (e) hereof be distributed between the parties after taking into account the retention of the items of property delineated in orders 4 and 5 hereof by each of the parties concerned be allocated as to 70% to the wife and 30% to the husband.
9.The application and the response be otherwise dismissed.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under a pseudonym Pinta & Pinta (No 2) has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
JUDGE BROWN:
INTRODUCTION
These reasons for judgment arise from the resolution of competing claims for the settlement of matrimonial property, following a two day trial, which occurred on 6 and 7 June 2022.
The parties to the proceedings are Mr Pinta[1] and Ms Pinta.[2] They married in 1998 and separated, in difficult and emotionally charged circumstances, on 12 May 2018.
[1] Hereinafter referred to as “the husband”.
[2] Hereinafter referred to as “the wife”.
They are the parents of four children – X born in 2003; Y born in 2005; W born in 2009; and Z born in 2014.
The husband commenced proceedings on 14 August 2020 in order to seek formal orders to spend time with the children concerned – with X and Y, as they wished; and defined periods for the two younger children, W and Z.
At this stage, Mr Pinta also sought a property settlement proposing, in broad terms, a division of 55/45% in the wife’s favour and an equalisation of superannuation. However, the main focus of his case was on parenting arrangements.
In her response filed on 4 December 2020, Ms Pinta did not specify in percentage terms what proportion of the parties’ marital assets she sought to receive. It is currently her position that she should receive somewhere in the vicinity of 70%. However, as will elaborated in due course, it is how this figure is to be made up, which is at the heart of the controversy between the parties.
The husband acknowledged that the last two or three years of the parties’ marriage had been extremely unhappy, characterised as it was by frequent arguments, often involving disputes about financial issues.
In this context, Mr Pinta acknowledges that he had been charged and convicted of an aggravated assault on Ms Pinta and was the subject of an Intervention Order, which protected the wife, W and Z. This intervention order is still current on a final basis. It was made on 19 September 2019.
Against this difficult background, the court, at the request of the parties, directed that a Family Report be prepared. It was released in April 2021 and recommended that the children spend no time with their father. It is common ground that all four children are currently estranged from their father and spend no time with him.
Accordingly, the focus of the case has shifted to property issues. However, there can be no doubting the continuing extreme tension and mistrust arising between the parties, which stems from a number of unfortunate incidents which have occurred, including after their physical separation.
In this matrix, one major issue has come to the fore, which is incapable of consensual resolution. Its necessary determination, by the court, will create a winner and a loser with almost certainly a concomitant increase in the bitterness and hostility between the parties concerned. Each party wishes to be conferred with ownership of a single piece of real estate. Its substitution, with cash, will not suffice for either of them.
The issue is one which mathematicians would characterise as a zero sum game – namely one in which only one of the parties can be successful in the desired outcome and the other must lose totally. In mathematical terms player one's gain is equivalent to player two's loss, therefore the net improvement in benefit of the game is zero.
As will become apparent, as these reasons develop, although the parties have each worked hard throughout their relatively long marriage, they have not always made prudent financial decisions and, as a consequence, their pool of matrimonial assets cannot be considered a large one. In addition, they face significant challenges meeting outstanding tax liabilities accrued during their marriage relating to a business of which they were joint proprietors.
In these circumstances, the end of their marriage must be accounted as a financial disaster for each of them and will inaugurate a period of austerity for both. It will also necessitate the sale of their former home to defray debt, including to the ATO. This leaves a modest property, which has previously been rented out for many years, but which is now occupied by the husband in controversial circumstances. The also husband currently utilises it from which to run his business and has done so for many years. He wants to retain it.
From his perspective, it would represent a gross inconvenience, if he had to re-locate the plant and equipment relating to the business, to alternative premises, particularly given he proposes (and the wife agrees) that he will acquire the wife’s interest in their business and it will continue to be the major source for the family through the provision of child support.
The wife is familiar with the property – it was the parties’ family home in the early years of their marriage. From her perspective, it is a known quantity. It is close to schools selected for the children, in a suburb with which she is familiar. She has deposed that she is apprehensive at the prospect of having to enter the property market, either as a tenant or possible purchaser.
Rather, she would prefer to be able to return to the small home, which she knows, without it being subject to debt, so that she and the children have the security of a roof over their heads for the foreseeable future. Essentially, what she proposes is that her significant capital entitlements, currently mostly held in the form of the former family home, should be crystallised and allow her retention of the smaller residential come business premises on a debt free basis.
Mr Pinta has reason to doubt the sincerity of Ms Pinta’s motivations in regards to her vehement claim to the unit. He suspects some ulterior objective on her part, namely she is wanting to spite him and want the property because he does or she sees some value in the property other than as accommodation for her family.
This is not the first time this issue has been subject to my adjudication. I was called upon to resolve who should occupy the property in the context of an interim hearing, which took place on 10 December 2021. At this stage, there was considerable controversy regarding the value of the business operated by the parties during their marriage. It had been valued by a chartered accountant, Mr C, but issue arose about the payment of top up tax, in anticipation of a trial fixed in the following June.
I declined to make the order sought by the wife at this stage on the following basis:
At this juncture, in my view, two salient factors militate against the making of the orders sought by the wife. Firstly, the uncertainty and controversy surrounding the relevant evidence, particularly what is the parties’ worth in net terms. Secondly, the fact that a final hearing is relatively imminent being fixed to take place in June of this year, less than six months away.[3]
[3] See Pinta & Pinta [2022] FedCFamC2F 34 at [115].
In between, the date of this interim hearing and the final hearing which took place on 6 and 7 June 2022, the parties have been able to largely resolve the extent of their property pool and the liabilities relating to it, including in respect of taxation liabilities. Mr C did not have to give evidence.
However, the controversy about the unit[4] remains and has been vigorously contested. It falls to the court to resolve on the basis of the evidence which each of the parties have provided. As will become apparent each can muster powerful arguments in support of their respective positions.
[4] Hereinafter referred to as “the D Street, Suburb E property”
The vehemence of this disputation is reflected in the amounts each party is prepared to defray in the payment of legal costs. The husband has been informed by his solicitor that the trial of the matter will cost him somewhere in the vicinity of $92,000.00. The wife has been informed by her solicitor that her costs are at least $64,000.00.
It is highly regrettable that this court must exercise its discretion to award the property to one or other of them given the significant expense such resolution will incur for both the husband and the wife.
background
Throughout the proceedings, there has been no controversy that the parties divided their family responsibilities, during their marriage, along conventional lines with the wife being the children’s primary carer and providing the larger proportion of homemaking and parenting duties; whilst the husband was the main financial provider and breadwinner for the family.
Both parties have strong financial connections to the domestic construction industry. Ms Pinta agreed with a proposition that I put to her, perhaps in unduly figurative terms, that she had concrete running in her blood. Her father, brothers and other relatives are builders or former builders. As such, she is likely to be able to secure expert building advice and assistance, if she should ever want to embark upon a building project of some kind.
Mr Pinta is in the same position. He started working in his father’s business, Company B in 1992, when he was 18 years of age. Later, he became a partner in the business and bought his father out, when he retired in early-2010.
Throughout the parties’ marriage, Company B and corporate entities relating to it have been the major source of the family’s financial support. The operation of this business has been a significant source of controversy in the proceedings to date, which such controversy can be summarised as follows:
·The transparency of the corporate structure, through which the business is conducted and whether the motivation for the creation of new entities, since separation, by the husband, is to divert funds to him personally and defeat the wife’s claim;
·The overall ongoing viability of the business and what is its value, at present, in real terms, when any division 7A top up tax due by the business is accounted for;
·In general terms, whether during their marriage, the parties lived beyond the means generated by the business by failing to pay tax, on advances taken by each of them from it, which are liable to be treated as income by the ATO.
Division 7A of the Income Tax Assessment Act 1936 (Cth) is directed towards the taxation of profits taken from private companies, in an non-taxable form, most commonly in the form of loans ostensibly made by the company concerned to individuals connected to it.
Where a private company makes a loan to a shareholder, during an income year, division 7A can allow the Tax Commissioner to deem the company to have paid a dividend, which is assessable for tax in the hands of its recipients. Top up tax, arises if there is a difference between the rate of tax attributable to company earnings (30 cents in the dollar) and the highest rate levied on personal income (47.5 cents in the dollar).
There is no controversy that during their marriage both parties withdrew money from the company (L Pty Ltd), which operated their business for their own personal use, which was not declared or treated as their income but rather allocated to them as loans. In the context of the current proceedings, issues have arisen regarding the implications of this potential liability for top-up tax is to be apportioned between the parties and how it will affect the allocation of assets between them.
Mr Pinta wishes to retain the business, in which Ms Pinta is currently an equal share holder. This has been the only form of employment he has known for the whole of his life to date and, for axiomatic reasons, he has no other viable forms of livelihood.
In practical terms, the parties cannot both be employed by the business, given the end of the relationship between them; the acrimonious nature of their relationship; and the wife’s lack of practical skills in construction. Accordingly, the husband must acquire the wife’s interest in the business and must locate a source of capital to do so.
Mr Pinta has obtained evidence from his accountant, Mr R, who deposes as follows:
The husband will have to find the additional top up tax from his cashflow. If the husband’s business does not continue to be profitable, the tax will need be paid from alternative sources, the existence of which will be limited given the assets the husband owns or may end up owning following the conclusion of these court proceedings.[5]
[5] See Affidavit of Mr R filed on 3 June 2022 at [8].
Apart from the parties’ business entities, their other major items of property are readily identifiable consisting of two pieces of real property – their former family home at F Street, Suburb G,[6] which Ms Pinta and the children occupied at the date of trial; and a property at D Street, Suburb E.
[6] Hereinafter referred to as “the F Street, Suburb G property”.
The husband has been living in the property since August of 2020. Prior to that date it was tenanted but the tenant vacated in early January of 2020. As previously indicated, the husband utilises the property to store plant and equipment, for his business, at the property.
The parties have each reached the sad conclusion that it is inevitable that the F Street, Suburb G property will have to be sold to discharge debt, including taxation debt, to enable the business to keep operating. The wife has recently agreed to resigning as a director or other office bearer of any of the corporate entities through which the business has been operated and surrendering any shares, which she holds.
The D Street, Suburb E property – who of the parties should retain it, in the light of the potential taxation issues surrounding their concrete footings business, is at the centre of the controversy between the parties, which the court must quell, as best and as fairly as it can. This is the central issue in these reasons for judgment.
Given the parties’ current straightened financial circumstances, stemming both from their separation and the failure to make provision for taxation, the F Street, Suburb G property must be sold. Necessarily, this will mean that Ms Pinta and the children will have to find a fresh source of accommodation. It will be challenging for her to have to look for a suitable rental property, as she doubts she will have sufficient cash to buy her own home.
The D Street, Suburb E property was purchased by the parties, in the early years of their marriage, in November 2000, for $122,500.00. The parties lived in it for a time, prior to them purchasing the F Street, Suburb G property, on which they constructed their home. The F Street, Suburb G property is agreed to be valued at $975,000.00.[7] Both properties are subject to mortgage, which in turn secures a line of credit, which enables their business to operate. The sale of F Street, Suburb G will rationalise debt. Its sale will also definitively crystallise its value for the purpose of these proceedings.
[7] See Report of Mr T dated 7 April 2021.
The D Street, Suburb E property has a dwelling on it which is described as a single level three bedroom, one bathroom home constructed in 1962. It also has a large double garage and a number of sheds on it. Mr Pinta uses the garage and sheds to store his equipment and some trucks. He lives in the dwelling.
Significantly, the property is on a block of land, which has been described by the valuer, Mr S, who formally valued the property as being larger than typically found in D Street, Suburb E and surrounding areas. Of these improvements, on the land, Mr S said as follows: the current improvements are considered to be of limited added value [to] the site. In these circumstances, Mr S opined that the existing use of the subject property to be inconsistent with the highest and best use of the land. We consider the highest and best use is for medium-density residential development.[8]
[8] See Report of Mr S annexed to his affidavit of 12 May 2022 at pages 15 & 19. The date of the valuation is 1 April 2021.
Essentially, the property is ripe for redevelopment. Mr S valued the D Street, Suburb E property, as it currently is, at $650,000.00. The date of this valuation is early April 2021. The parties agree that this value is to be adopted for the sake of these proceedings. As a consequence, Mr S was not questioned about the development potential of the property. As I will detail, in due course, in my view, this aspect of the evidence is somewhat problematic.
During the course of the hearing, I asked Ms Pinta some questions about this aspect of the property from her perspective. She agreed with my proposition that the block had great development potential but indicated that at the present time she could not afford herself to knock the dwelling down and redevelop it, although she suspected her former husband might be able to do so. In this context, she acknowledged that she would be annoyed if the husband did so because it was a project she and he should have done together given it had the potential to make money.[9]
[9] See Transcript at page 134 -5.
The parties agree that their current accumulated superannuation is of modest value being just under $217,000.00 in total and, as such, currently inadequate to support a comfortable retirement for either of them. In these circumstances, there is no controversy that the relevant superannuation holdings should be effectively equalised.
Given this state of affairs, I would be naïve to consider the implications of the development potential of the D Street, Suburb E property for each of the parties. Necessarily, if the property could be advantageously developed, at some appropriate time in the future, it would represent a significant windfall for the spouse who retains it, particularly in terms of a possible augmentation of retirement savings. It seems to me to be clear that each of the parties is well aware of this fact.
I also acknowledge that there are also significant logistical issues arising for each of the parties as the current juncture. For the husband of having a location from which to run his business; for the wife of having an immediate roof over her head for her and her family, which she knows. In due course, I will have to attempt to balance the respective levels of convenience (or inconvenience) these issue represent for each of the parties as fairly and equitably as I can.
In this context, the wife eloquently summarised the dilemma facing the court from this issue. She conceded, somewhat reluctantly, that the D Street, Suburb E property was not her dream home, in terms of its glamour or luxury. She deposed as follows:
This isn't perfect for you, is it?‑‑‑Sorry?
It’s not perfect for you?‑‑‑It’s not perfect but as long as we’re happy, it’s the perfect home. I don’t – I – I – my views have changed in life lately. My view is a happy home; you happy is a happy – doesn't matter if it needs to be in a glamorous – a luxury home ‑ ‑ ‑
Okay?‑‑‑ ‑ ‑ ‑ or a – yes.
Okay. And to a certain extent [Mr Pinta] wants it?‑‑‑Yes. He does – we both do.
Yes?‑‑‑Yes. And I'm afraid you have to choose.[10]
[10] See Transcript at page 135.
These reasons for judgment are directed to the making of the necessary choice, which the polarised positions of the parties has rendered necessary. At this point, it is appropriate to point out that the discretion I have in respect of the D Street, Suburb E property, like all judicial discretions, is one which must be exercised in a principled manner, within the matrix of justice and equity provided by Part VIII of the Family Law Act 1975 (Cth).[11]
The Evidence
[11] Hereinafter referred to as “the Act”.
General Issues
Both parties presented as pleasant and generally honest individuals. Neither struck me as being particularly sophisticated in business affairs or having any significant level of financial acumen. More significantly, I do not doubt the respective level of intensity regarding the appropriateness of their competing contentions that he or she has the greater claim to D Street, Suburb E.
However, as I have reflected on each of their evidence, I am left with the uncomfortable perception that neither has been completely candid in their evidence, particularly in respect of the factors which have tempered the strength of their competing claims for D Street, Suburb E. In my view, each is likely to have ulterior motives for wanting to retain the property, which they have not disclosed in any detail.
These relate to the development potential of the property and the perception that, in due course, perhaps even in the relatively distant future, it can be converted, with the assistance of construction skills available to each of them, either personally or through family, to build more than one dwelling on the property, thus creating a significant windfall, which he or she will enjoy to the exclusion of the other.
In addition, regrettably, I perceive that each wants the property as a rebuff to the other’s desire for it, which arise as a response to the acrimony of the current proceedings. In this context, neither party has approached the case as a problem solving exercise or considered alternative and perhaps unpalatable ways to resolve the case – the most obvious of which are either sharing the property or selling it, so both can benefit from its current capital value, particularly in the sense of being able to consider other options which may present better long-term solutions to their respective accommodation problems.
There has been a significant level of complexity regarding the parties’ past financial affairs, which has necessitated the involvement of accountants. This complexity has included a self-managed superannuation fund – U Super Pty Ltd and a related property trust, which purchased a commercial warehouse property in August of 2018, which was sold in July 2020 creating capital gains tax issues. In addition the construction business has been operated through various trusts controlled by corporate trustees of which the parties have been shareholders.
In addition, the business has had to utilise a line of credit to continue to operate, which has been secured against the parties’ real estate interests, most recently the F Street, Suburb G and D Street, Suburb E properties. As the business has generated profits, the parties have taken these profits to fund their recurrent living expenses. As previously indicated, the parties do not seem to have made prudent arrangements to meet their liabilities in this regard.
This state of affairs is reflected in the baleful conclusion to Mr C’s negative valuation of the business, which is in the following terms:
It is apparent that the parties have borrowed money to fund assets or lifestyle outside of the trading entity over and above profits that have been generated and withdrawn over a number of years.
This has been done in circumstances where significant historical trading profits remain to be exposed to personal rates of tax.[12]
[12] See Report of Mr C dated 6 May 2021 at [151] – [152].
Neither party impressed me as being completely across the intricacies of their financial situation, which have been informed largely by what they have been told by their accountant to do. However, the husband is likely to have a better understanding of them than the wife, who struck me as being something of a fiscal ingénue in this regard.
The husband has significant business acumen and knows what level of income the business generates in general terms, given he writes all the relevant quotes for it and generates all its invoices. Accordingly, apart from the fact that it is all he has ever known, so far as earning his living is concerned, it is a significant matter that Mr Pinta is intent on retaining the business. Clearly, notwithstanding its present parlous financial situation, he can see a future, for himself, in it.
It is the thrust of the husband’s evidence that, during the parties’ marriage, his former wife was profligate in accessing business funds, which in large part has led to the current financial crisis confronting the parties, which the parties’ acrimonious separation forced him to confront, otherwise both of them and their family faced fiscal ruin.
It is not useful, at this juncture for the court to try and attribute fault for the growing financially crisis which was gathering around the family in the last years of the parties’ marriage. In my view, each of them must accept some responsibility in this regard. However, in my assessment, the fact remains that the husband continued to work hard in the business through this period and it continued to generate a reasonable level of income.
It is the effect of the husband’s evidence that it was his growing realisation of the state of this financial crisis, in the period after separation, which led him to radically change the structure through which Company B was operated. In March of 2021, he settled the Pinta Family Trust and transferred significant funds from the pre-existing entities, over which the wife had control, to Company B, over which he had control alone.
For obvious reasons, this development had the effect of greatly intensifying the wife’s suspicions of and hostility towards the husband and almost certainly has led to the protraction of these proceedings and the escalation of the resulting legal costs. In this context, issues to do with the D Street, Suburb E property has become of totemic significance to each of them. Ms Pinta being concerned that Mr Pinta is pulling a fast one over her. Whilst he considers she is just being bloody minded for the sake of it.
However, in my assessment, although Mr Pinta may not be completely across his financial affairs and the structure through which they operate, there is no evidence from which I can conclude that he has done anything to defeat the wife’s claim or conceal assets or evidence from her. In my view, the evidence indicates that he has been transparent in respect of his finances and, in extremely difficult circumstances, has continued to provide financial support, as appropriate, to Ms Pinta and the children.
It is necessary for me to indicate the evidentiary standards which apply to these proceedings and provide my overall impressions of each of the parties. In these reasons for judgment, findings of fact are made on the balance of probabilities, from my observation of the demeanour of each of the witnesses concerned.[13] I have tried to reach my conclusions on credibility and reliability on the basis of contemporary materials, objectively established facts and importantly, on the apparent logic of events.[14]
[13] See Evidence Act1995 (Cth) s 140.
[14] See Fox v Percy (2003) 214 CLR 118, 129 [31] (Gleeson CJ, Gummow and Kirby JJ).
The parties were each represented by highly experienced, expert and sensible counsel. In the case of the husband, by Mr Anderson, who attended the proceedings electronically, due to being in quarantine as a result of contracting Covid19; in the case of the wife, by Mr Jordan.
As a consequence of agreement between counsel reached after Mr Anderson and Mr Jordan had consulted with Mr C, many of the initial controversies arising between the parties was able to be resolved consensually, particularly the value of the family construction business and the implications of top up tax for it. It is agreed that the business, given the tax liability, has an effective negative value of ($239,333.00).[15]
[15] See Report of Mr C dated 6 May 2021 at [148].
As I understand it, this figure does not include the amount currently secured against the F Street, Suburb G property by way of a line of credit. When this is taken into account the business is encumbered with a very significant level of debt in the area of half a million dollars. In his closing address, Mr Jordan conceded that the amount owed to the CBA was $573,340.00.[16]
[16] See Transcript at page 140.
In my view, this is a somewhat artificial figure but obviously, based as it is on Mr C’s accounting expertise, I am not in a position to look behind it to any great degree. In the context of the present proceedings what is important for the court to consider is the future capacity of the re-constructed footings business to generate income for Mr Pinta and what is his likely tax exposure. Whatever findings are open to the court, in this regard, must then be balanced against Ms Pinta’s future financial prospects.
Essentially, what I must do is attempt to assess, not necessarily in purely arithmetical or accounting terms, what is the on-going value to the husband personally of him leaving the marriage with the sole control of the business, with the income generating potential which it has.
At the same time, I cannot ignore the fact that it is Mr Pinta alone who will have to service the debt with which it is burdened and cope with the financial millstone around its neck arising from the top up tax liability, which will have to be serviced and satisfied at some indeterminate time in the future. This depends on the loans which are owned to the business being compliant with the requirements of the ATO.[17]
[17] See Transcript at page 21.
In these circumstances, there was no need for Mr C or Mr R to be called to give evidence. The only witnesses were the parties themselves. However, that is not to say that the business is not a significant factor in the case. Axiomatically, it has generated significant income both during and after the parties’ marriage and has the potential to continue to do so as a consequence of Mr Pinta’s skill, experience, contacts in the industry and the fact that he has a significant level of backing in plant and equipment. As such, barring unforeseen exigencies, he is likely to have a secure source of income for the foreseeable future.
In the context of the approach adopted by their counsel to focus on the main issues in the case, the parties elected not to examine in any detail issues raised in their respective affidavit material regarding add backs being made to their pool of property, which were asserted to relate to waste of monies as a consequence of unauthorised and extraneous expenditure undertaken by the husband, relating to escort services or by the wife in respect of her alleged financial profligacy. Neither party has attempted any exercise in forensic accounting in this regard.
This was a sensible course to adopt, in my view. I doubt that, if the issue had been explored, I would have been able to approach it on anything other than an extremely general basis and certainly not on a dollar for dollar one. The range of the contentious add backs range between $5,000.00 and $50,000.00. I will detail the legal considerations in respect of add backs later in these reasons.
There are some other issues relating to add backs, to which greater reference will be made in due course, arising from monies withdrawn from the business when it was re-configured by Mr Pinta following separation (the relevant amount is $99,252.00) and capital items to a value of $71,302.00, which he has purchase since. In addition, the wife withdrew $10,000.00, from the old business entity, which she used for family support, shortly prior to her being denied access to it. There are also associated issues related to the financial provenance of legal fees paid by the husband from the business account.
In these circumstances, apart from some minor issues, the parties were able to agree on the construction of the majority of their relevant asset pool, which in round net terms is approximately $1.1m. As previously indicated their combined superannuation is an amount of $216,692.00, which is held with a commercial superannuation fund.
The parties disagree about the manner in which some investments owned by the wife, which predate the parties’ marriage and which she holds with members of her family, are to be approached. It is the wife’s contention that these are somewhat abstruse financial resources and should be treated as such. The husband contends that they are concrete assets and should be included at their actual value, in the parties’ pool of assets and allocated to the wife as part of the distribution to be made in her favour.
The parties agree that their earlier foray into having a self-managed superannuation fund, based on a property trust which owned a warehouse property, did not turn out well for them and the warehouse had to be sold, albeit at a profit, (but not in accounting terms), leaving them with a capital gains liability. The fund is now dormant and has no assets.
Although the devil is in the detail, particularly so far as the disposition of the D Street, Suburb E property is concerned, the husband proposes a 65/35% division of the pool in the wife’s favour; whilst the wife proposes a 70/30% division, again in her favour. There is some complexity arising from such a formulation, because, in particular, it cannot be known what the sale of the F Street, Suburb G property will realise in net terms and some work has to be done to it to ensure it secures the best possible price.
Apparently, the F Street, Suburb G property has sustained some form of flood or water damage. It is subject to insurance but the claim is not fully settled. Ms Pinta has indicated that she believes the cost of repair work to be done to rectify the damage is somewhere in the vicinity of $30,000.00. Mr Pinta does not necessarily agree but I have been provided with no formal documents in respect of the issue.
The basis of the husband’s position is that the parties’ financial and non-financial contributions, made during their twenty year marriage should be regarded as essentially equal. He concedes that the wife faces a more problematic financial future because of her lack of formal employment background and skills and her responsibilities to parent the younger children. This is the basis of the allowance of a further 15%. The wife contends that this is an inadequate formulation in response to these issues.
The parties’ personal circumstances
The husband was born in 1974. There is no suggestion that he enjoys anything other than robust good health. The wife was born in 1975. There is no controversy that the parties began to cohabit on the date of their marriage, which was in 1998. As previously indicated, the husband started to work for his father and uncle in 1992, when he was seventeen. He holds an advanced building diploma from a TAFE College.
Accordingly, he has been a tradesman for all of his adult life. He holds a business licence, which allows him to construct buildings, both commercial and residential, up to $1.2m in value and up to two stories in height. In his oral evidence, Mr Pinta deposed that if he enters into a contract to complete a large scale project, he is likely to be asked to provide a bank guarantee to secure the build and provide security to ensure its completion.
In order to be able to obtain such a guarantee, he needs to provide some form of collateral to his bank. Most usually, this has been real estate. With the sale of F Street, Suburb G, this potentially leaves him only with the D Street, Suburb E property as a source of such security, as he does not believe the business alone would be able to secure such a guarantee. In his submission, this is a factor which militates in favour of him retaining the property.
The business does not employ any staff. Rather, if needed, Mr Pinta engages up to 11 regular sub-contractors to complete jobs. He has to provide work cover for them. It is his evidence that he does not have one major client to whom he provides his services. Rather, he operates on a job to job basis. As such, the business has limited goodwill and its only assets are its plant and equipment.
Mr C, in his report, describes the business as mainly preparing work sites for domestic customers. In this context, Mr C indicates that, in recent years, Company B has two main customers in the form of two building firms, one of these has apparently gone into receivership fairly recently.
This plant and equipment has been formally valued in August of 2021 at a sum of $219,850.00.[18] This amount was taken into account by Mr C in reaching his negative valuation for Company B (less GST). Essentially, in reaching this value, he has taken into account the business’ tangible assets, in the form of its plant and equipment, less the monies owed by it, principally the CBA line of credit,[19] together with other monies owed to the bank, into which has been factored top up tax.
[18] See Exhibit 7 to husband’s affidavit filed 11 May 2022.
[19] This is known as the CBA Better Business Line of Credit.
When the F Street, Suburb G property is sold, as it secures this line of credit, it will be discharged. Accordingly, if it sells for around its current valuation of $975,000.00, the sum to be released to the parties, in concrete terms, is likely to be around $700,000.00, which does not take into account monies secured against the D Street, Suburb E property. Obviously, this figure must be approached as being rubbery, given it does not include selling costs or the prospect it may achieve more or indeed less on sale.
In this context, it is the submission of Mr Jordan that, with the discharge of the line of credit, included in the valuation of Mr C, Mr Pinta will obviously no longer have to serve the debt involved and will axiomatically have greater funds available to him. He will, however, retain responsibility for the parties other line of credit, also secured over their real property, which is referred to as the CBA Viridian Line of Credit, which is currently agreed to be frozen in an amount $282,307.00.
Mr C has calculated that the various group entities, which have operated the concrete footings business have, in effect, loaned the parties the sum of around $680,000.00, which has been recorded as book dividends. This sum attracts a potential franking credit of 26% ($239,000.00), which when taxed at the appropriate margin rate of 47% creates a tax liability of around $432,000.00, which in turn attracts a franking credit leaving the potential top up tax, as calculated by Mr C, as at 30 June 2020 to be $193,308.00.[20] The parties have subsequently revisited this figure and agree the figure to be adopted is $162,500.00.
[20] See Report of Mr C dated 6 May 2021 at [138].
Significantly, Mr C has determined that the business generates a maintainable surplus on the basis of what it has earnt in the past. For the financial year to March 2021, Mr C calculated its surplus to be around $148,000.00. Mr Pinta has never drawn a formal wage from the business. Mr C estimates that a reasonable annual salary for him, given the income generated by the business and what Mr Pinta does in it to be somewhere in the range of $100,000.00 to $130,000.00 per annum.
Mr Pinta characterises his work as being physically demanding. He reported to Mr C that he was works long hours and generally 5 to 6 days per week. I accept that this is the case. In this context, he asserts that he is doubtful that he will be able to continue working in the same capacity for much longer. This assertion is not supported by any medical evidence and I take it with a pinch of salt. More likely than not, as much by dint of his thirty years plus experience in construction, he has at least another decade of useful work before him.
Although, I accept that Mr Pinta does not necessarily have one large builder on whom he can rely because of a long term contractual relationship. It is clearly the case that he has many contacts in the industry, some of which he inherited from his father and uncle. Barring some general recession or down turn in the building industry he is likely to have a reliable source of income for some years to come.
The husband personally provides all the quotes for the work which he performs and renders all the necessary invoices. He supervises the subcontractors. It is clear that he has a significant level of skill in all these areas. The evidence as to what is Mr Pinta’s actual level of income is, in my view, somewhat opaque. However, I do not think that this has been contrived at. Rather, it is as a consequence of how the business has been configured and the fact that he has not hitherto drawn a salary.
In his statement of financial affairs,[21] Mr Pinta deposes that his weekly income is estimated to be $2,800.00, which equates to approximately $145,600.00 per annum. However, of this sum, he further deposes that he receives franked dividends estimated to be $1,500.00 per week from L Pty Ltd, which are not physically received.
[21] See Husband’s statement of financial affairs filed 11 May 2022.
Prior to the marriage, the wife, who has completed Year 12 at secondary school, worked as a tradesperson and in hospitality. She has struggled with endometriosis and high blood pressure over recent years but has not provided any medical evidence to the court. It is not in dispute that she is not presently in paid employment and receives social security and child support, from the husband, as her current sources of financial support.
Due to complexities arising from her notionally receiving income from the parties’ family business, there has been controversy about both the level of family tax benefit she has received and the equity of the child support assessment. In the financial year 2020/2021 (after the parties’ separation) her taxable income was assumed by Centrelink to be $101,569.00 on the basis of her tax return.[22]
[22] See Exhibit W1.
This was made up of dividends received from the business and capital gains. During this period, she received family tax benefit of $19,920.07. On Centrelink’s calculations, this has resulted in her receiving an overpayment of $10,524.97.[23] During this period, it is the husband’s position that he provided significant financial support for the wife and the children dependent upon her in the form of paying the mortgage on the F Street, Suburb G property and the associated line of credit ($4,200.00 per month); private school fees ($1,000.00 per month); private health insurance ($623.31 per month) and some child support in cash.
[23] See Exhibit W3.
Clearly, with the resolution of these proceedings, which will involve the sale of F Street, Suburb G and the removal of the wife as a recipient of dividends from the construction/footings business, the wife’s financial position will fundamentally alter. This will also coincide with her having to find alternative accommodation for herself and the children.
It is her submission that these are powerful factors which militate in favour of her being able to move into the D Street, Suburb E property, which will be mortgage free and not involve any incidental purchase costs, such as stamp duty. Above all, from her perspective, the property is a known quantity.
Once Ms Pinta’s income is normalised, she will be re-qualify for a school card, which will significantly reduce the school fees of W and Z from $12,000.00 per annum to closer to $8,000.00. Y is in her final year of school at V School; whilst both the boys attend AB School being currently (in 2022) in Year 8 and 4 respectively.
Up until the end of 2021, W and Z attended AC School, which is the adjoining suburb to F Street, Suburb G. AC School only goes up to Year 6. Accordingly, a new school progressing to secondary school had to be found for W for the start of 2022. It was in this context (and following Mr Pinta’s reoccupation of the D Street, Suburb E property in August of 2020) that Ms Pinta made the decision to enrol the boys at AB School.
It is her case that she attempted to discuss the issue with the husband but he ignored her calls leaving her with no choice but to select the school, which she thought was the best. After touring a number of schools, she settled on AC School as the best one for W.
Significantly, AB School is located in the suburb of Suburb E. Ms Pinta’s evidence is that the school is a five minute drive away from the D Street, Suburb E property. Needless to say, this is a major plank in her case. On the other hand, it is implicit in Mr Pinta’s case that its selection was motivated, to some degree or other, by her desire to buttress her claim for the D Street, Suburb E property.
Most recently, Centrelink have indicated that Ms Pinta is entitled to a family assistance payment of $530.60 per fortnight on the basis that she provides 100% of the care of Z, W and Y, who each attend school. There is no controversy that the wife provided the larger proportion of homemaking and parenting responsibilities during the parties’ marriage and continues to do so.
During the parties’ marriage, the wife operated a business known as Company Q. The business began in 2015 and was operated from the warehouse purchased by the parties through N Property Trust. It would not be a useful exercise to have the business formally valued. Its value consists of its unused stock of products and related equipment. It is agreed that these have an agreed value of $5,000.00 and the wife will retain them.
She also seeks to retain a Motor Vehicle 4 van, which was purchased for use in the business. Its agreed worth is $28,000.00. The wife acknowledges that she has the capacity to reinvigorate the business but would need to do some advertising to get it up and running. She would also have to purchase some machinery. She also acknowledges that over the past few months she has done a few events – perhaps one or two per month – which have netted her about $300.00 for each function.
At present, Ms Pinta is investigating the prospect of obtaining a part time job, which she could fit around school hours, involving the manufacture of food products. If successful, she would be paid on an hourly basis. The effect of this evidence is that Ms Pinta accepts that it is a financial necessity that she obtains employment but her scope, in this regard is limited, given her lack of skills and the fact that W and Z have many years of school before them.
Ms Pinta has not formally re-partnered. She has begun another serious relationship but the two do not cohabit. In her words, they are taking it slow. The gentleman concerned is a tradesman by trade but who now occupies a managerial position at a large company.
In her evidence to the court, Ms Pinta deposed that she had approached the manager of her local branch of the CBA to inquire as to her prospects of obtaining mortgage finance. She was told that in the absence of an assured salary or an income stream from a business, she would not fit the bank’s lending guidelines.
Mr Pinta has re-partnered. His current partner is Ms AD, who lives with him in the D Street, Suburb E property. She is employed as a tradesperson on a part time basis, working two or three days per week. Her employment is restricted by her suffering multiple sclerosis. Mr Pinta estimates her income to be around $300.00 per week. She has two children aged 14 and 18 years.
It is the effect of Mr Pinta’s evidence that his relationship with Ms AD, given her financial situation, is not likely to assist him in any application he may make to a potential financier to obtain a mortgage advance to enable him to purchase an alternative form of accommodation in the event he is compelled to vacate the D Street, Suburb E property.
Separation
There is no controversy that the date on which the parties finally separated was 12 May 2018. On this date, the wife request that the husband move out of the former family home at F Street, Suburb G. At this stage, the husband moved in with his parents. The D Street, Suburb E property was tenanted.
The separation was extremely fraught in emotional terms. One of the sensitive issues arising between them at this stage was the husband’s acknowledged use of escort services. I have no desire to unpack this difficult issue and, in my view, although it remains highly controversial, as previously indicated, the parties themselves sensibly elected not to cross examine the other about it.
Accordingly, the issue remains one that arises only on the papers and cannot be resolved on the basis of any assessment of credit. The husband asserts that the sums of money involved were minor – no more than $5,000.00; whilst the wife asserts that the sum was in the vicinity of $50,000.00.
What is clear is that what is the sum in question it has gone and its exact amount cannot be calculated by me in the absence of any exercise of forensic accounting or fiscal reconstruction. The issue is recounted to provide some indication of the challenging circumstances surrounding the parties’ separation.
In these difficult circumstances, the parties were obliged to engage with one another on account of their joint proprietorship of their business, which supplied each of their and their children’s financial requirements, particularly through the agency of their two joint line of credit provided by the CBA. It is the wife’s evidence that she stopped operating Company Q around this time, as she did not have sufficient time to devote to it, whilst also parenting the parties’ children.
As previously indicated, it is the husband’s evidence that after separation, he has continued to make extensive financial provision for the family, both before and after the joint line of credit was frozen. These payments are as follows:
·D Street, Suburb E loan of $580.00 per month;
·Line of Credit repayment of $1,500.00 per month;
·Health Insurance for the family of $632.31 per month;
·Home Insurance of $243.32 per month;
·Council rates for F Street, Suburb G of $206.00 per month;
·Council rates for D Street, Suburb E of $175.24 per month;
·Regular tax payments of $1,066.00 per month;
·Child Support of $611.00 per month.
On my calculations, this comes to $5,013.87 per month.
It is the effect of the husband’s evidence that, from his perspective, he was trying to do the right thing financially by the family but the wife did not reciprocate and continued to withdraw from the joint line of credit in an unrestrained manner, which was not sustainable given the fact that two households needed to be supported. It was this state of affairs, which led him to open an alternative line of credit in March of 2021, which also coincided with a further deterioration in the parties’ relationship with one another.
Parenting Arrangements
X and Y were aware of the issues arising between their parents regarding escorts. This caused them to become aligned with their mother and over time the two younger children have followed their course. This difficult situation has caused several flashpoints in the parties’ relationship with one another and led to the wife being granted an intervention order.
The husband acknowledges that this intervention order was appropriately granted given he was charged with assaulting the wife in July 2018 following an attempt at rapprochement, at the F Street, Suburb G home, which went wildly wrong. He pleaded guilty to the assault and was referred to court directed anger management.
Against this difficult background, a Family Report was prepared by a psychologist, Ms AE, in April 2021, which recommended that the children spend no time with their father. It is common ground that all four children are currently estranged from their father and spend no time with him.
This has been a difficult situation for Mr Pinta to deal with. His evidence is that he has sought out professional advice and counselling to see if the situation can be ameliorated but has recently accepted that the court’s processes are not likely to be helpful to him or the family. In these circumstances, he elected not to pursue any formal orders from the court in respect of parenting issues.
In this context, a consent order was made on 7 June 2022 conferring sole parental responsibility, for the children, on the wife and confirming their living arrangements with her. The only contact envisaged with their father was through correspondence of it they indicated a wish to see him.
One of the flashpoints in the parties’ relationship occurred in the context of the husband’s residential occupation of the D Street, Suburb E property, which occurred on 9 August of 2020 and involved Y in particular. It is the husband’s case that the residential tenancy of D Street, Suburb E came to an end in late December 2019 or early January 2020, whilst he was still living with parents but had become involved with Ms AD. In these circumstances, he was looking for somewhere affordable to live.
He also asserts that the wife had indicated to him, a few months earlier, that she and the children would move from F Street, Suburb G into the D Street, Suburb E property, whilst the F Street, Suburb G property was readied for sale. However, from the wife’s perspective this was dependent on the husband emptying the sheds on the property and moving his business equipment away from it, which he had not done.
The husband provides the falling account of what happened next:
On 9 August 2020 I informed the wife that I was moving into the [D Street, Suburb E] property as it has been vacant for approximately 8 months, the tenants having vacated the property in late December 2019/early January 2020. The wife had been telling me she was going to move with the children from the [F Street, Suburb G] property for over 12 months but had not done so. I had been living with my parents since September 2018 and I needed my own place. I also decided to move because I want to have a place for the children to stay if the Court makes such an Order. I sent a text message to the wife at 4.48pm on 9 August 2020 informing her that I had moved in and had changed the locks as I did not have any keys to the place and she responded at 5.02pm. Within 30 minutes she and the two older children, [X] and [Y], turned up at the [D Street, Suburb E] property.[24]
[24] See Affidavit of the husband filed 11 May 2022 at [32].
It is the effect of the wife’s evidence that the husband’s text message distressed her and unwisely, in my view, she decided immediately to confront the husband. X and Y were with her, having been collected from their soccer. An ugly argument ensued about possession of keys, which involved X. The police were called. The husband was charged with assaulting X but the charge was withdrawn and relations between father and children and husband and wife reached a disastrous new nadir.
I recount this baleful incident not because it is strictly necessary for me to make findings about it but to provide more context for the primary issue in dispute between the parties regarding who should retain the D Street, Suburb E unit. From the husband’s perspective, the property had been offered to the wife earlier, when it first fell vacant and she had not taken it up, leaving him little alternative, given his parlous accommodation situation, other than to take it up. Essentially, the husband asserts that given the wife was apparently disinterested in moving into the property, in a period of around six months before his occupation, it would be unfair to evict him some two years later.
In addition, he asserts his claim to the property on the basis of his superior connection to it. Not only has it been his and Ms AD’s home since August of 2020, it is his case that the wife has had not lived in it since the family relocated to the F Street, Suburb G home in 2008, some fourteen years ago. More significantly, it is the site of the premises from which he has operated his business for many years.
I am reluctant to draw strong inferences about the motivations of either party from these conflicted and vitriolic circumstances. In particular, in my view, it would be unwise for me to accept the wife was disinterested in occupying the property, on a long term basis, as a consequence of her not immediately moving into it when it fell vacant. However, it is also clear that she did not view the property as being perfectly suited to her and the children and indicated as much to the husband.
In any event, given her situation at the time, it would have necessarily taken her some time to make such a move. At the time, her affairs were in a state of flux, which was not a situation likely to be amenable to her being in a position to take drastic action, as she is likely to have perceived it. In addition, the conduct of the husband can hardly be described as being conciliatory. Rather, on balance, it seems more likely than not, that he was desirous of forcing the wife’s hand in respect of the issue and securing his own advantage.
It is the wife’s evidence that she perceived some problems with moving into the D Street, Suburb E property, when it fell empty, because of mould in the bathroom and its general state of disrepair. She was also concerned that asbestos might have to be removed.
In cross-examination from Mr Anderson, she asserted that she had changed her mind about a number of her previous objections to the property, including the safety of the windows for the children and possible removal of asbestos from the veranda, because she had more recently formed the view that her father or brother could undertake the repairs required.
She also conceded that initially she had not been interested in the D Street, Suburb E property because it was three bedrooms rather than four, which would necessitate the two boys sharing a room. The effect of her current evidence was that she no-longer saw this as a difficulty because she considered that, with the assistance of relatives, she would be able to construct an extension on the property.
As with the husband’s evidence, I was left with the distinct impression that Ms Pinta had tailored her more recent evidence to achieve her current desired outcome. In particular, whilst her family was likely to assist her with a renovation to the D Street, Suburb E property, she doubted assistance would be forthcoming to help her renovate some other property which she might elect to purchase, if the case did not go as she currently wished.
The Parties’ Marital History and Acquisition of Property
The parties began their marriage when they were each relatively young in their mid-twenties. It is the husband’s evidence that he owned a property at AF Street in Suburb G, when the parties married, which he had purchased with his brother in 1992 and subsequently sub-divided, with each brother building a house on their vacant portion. The property was subject to a mortgage. This property was the parties’ first marital home.
The extent of the husband’s equity in AF Street is lost given the passage of time but it seems clear that the subdivision and construction of a home was directed towards increasing value and it seems to have been a successful exercise in this regard. It is the wife’s case that she brought her savings of around $20,000.00 into the marriage, which were injected into the AF Street mortgage to reduce debt. Each had a car of modest value at the commencement of the relationship.
The parties opened a joint bank account, on their marriage and thereafter pooled their financial resources. As such, there seems no doubt that they approached their marriage as a financial partnership, in which each played an integral role. The wife continued to work, until she became pregnant with X and thereafter, Mr Pinta became the family’ primary breadwinner. He became initially a part owner in his father and uncle’s business in 2000, having started there in 1992, after leaving school.
In 2010, Mr Pinta Senior retired and the husband purchased his father’s interest in the goodwill and plant of the business for approximately $53,000.00 and a further sum of $100,000.00 was borrowed to formally purchase the company through which it was operated. It was at this time, the parties first began to operate the line of credit secured against their real properties.
These properties were firstly D Street, Suburb E, which was first acquired in late 2000 for the sum of $122,500.00 which was borrowed using the interest in the AF Street property as security. This was the parties’ family home for a number of years until they moved to the F Street, Suburb G property in 2008. After 2008, the D Street, Suburb E property was regularly tenanted.
The land on which the F Street, Suburb G property was constructed was purchased in 2004 with the husband, brother and sister-in-law. It was a large block, which was subdivided with each couple keeping half on which to construct a property. The husband sold the AF Street property for $387,500.00, which was utilised to finance the build of the F Street, Suburb G home. Given his skills and occupational background, the wife accepts that he did much of the work himself, which took a few years to complete.
It is the submission of counsel for the husband, Mr Anderson, that the assets, in the form of the AF Street property and his opportunity to acquire his father’s business interests, which were then utilised the parties’ financial support, must be regarded as the springboard from which the parties’ subsequent wealth has been generated.
Prior to the marriage, the wife had a legal interest in two pieces of real estate, which she owns as to a fifth share, as tenants in common with her parents and sister and brother. The properties are located at J Street, Suburb K, which was purchased in 1997 for the sum of $75,000.00 and H Street, Suburb E, which was purchased in 1998 for the sum of $83,000.00.
Each property was purchased largely with mortgage finance, as an investment, and rented out pursuant to residential tenancies from time to time. The wife did not make any contributions of capital in respect of the purchases and did not receive rent, which was used to defray the mortgage payments. However, her personal income tax return reflects the receipt of rental income.
The J Street, Suburb K property was sold in November 2020 for the sum of $450,000.00 netting an amount of $145,231.05, which was received and subsequently by her father Mr AG.[25] In notional terms, the wife received the sum of $29,056.00, on which capital gains tax was levied.
[25] See Exhibit 16 of Wife’s Exhibit Book.
However, in real terms, it was allocated to reducing the mortgage on the H Street, Suburb E property. It is the husband’s position that this sum should be included in the parties’ table of marital assets. On the other hand, it is the wife’s position that it should be regarded as a potential financial resource possibly available to her.
The H Street, Suburb E property remains in the ownership of the wife and her family. It has been formally valued at $465,000.00. It is subject to a mortgage of $93,036.39. It is the wife’s position that the property has financial utility to her, as her father effectively controls the property and the income it produces. At best, she calculates, taken into account the flow of capital from J Street, Suburb K into the H Street, Suburb E property mortgage, she has a financial resource valued at $86,433.00 in net terms, which may be realised at some uncertain time in the future.
In her oral evidence to the court, Ms Pinta conceded that she has recently discovered that her father has opened a bank account, at Westpac, in her name, into which rental monies from H Street, Suburb E are paid. As she was unaware of its existence, it was not included in her statement of financial affairs. The account has a balance of $3,411.00.
Although, Ms Pinta has not received any monies directly attributable to either the J Street, Suburb K or H Street, Suburb E properties, her father has provided significant financial assistance to help her meet her legal fees. She estimates that he has paid between $34,000.00 and $35,000.00 towards her fees. In addition, prior to restructure of L Pty Ltd and its related line of credit, she withdrew a sum of $14,215.00 from the Viridian line of credit, which was held in the parties’ joint names, to defray her legal expenses.
The husband also utilised the Viridian account for the same purpose but withdrew significantly more monies. He has provided a copy of the relevant statement for this account in the post separation period, from April 2020 to March of 2021, when it was frozen.[26] He has also provided a copy of the statement of the subsequent line of credit, which was opened in his name alone in March of 2021.[27] Monies moving between these accounts and the use made of monies withdrawn from them are a source of significant controversy in the context of potential add backs.
[26] See Exhibit H1.
[27] See Exhibit H2.
For the purpose of the proceedings, the parties agree that the joint account is currently overdrawn in an amount of $282,307.00. Prior to this date, there is no dispute that Mr Pinta also withdrew sums from the joint account and placed them in his sole account. The parties disagree about how these sums are to be characterised for the purposes of these proceedings. There is no doubt that the monies no longer are accessible to the parties themselves. In this sense they are to be regarded as notional in quality.
However, it is the wife’s position that they should be added back into the pool of the parties assets so that they can be accounted for in order to achieve an outcome which is just and equitable to her. The husband disagrees contending that the sums in question have been spent on legitimate purposes, related both to the operation of the business and the support of the wife and family. In these circumstances, he submits it would not be fair to him for the sums to be added back.
In this context, it is necessary to return to the issue of the warehouse which the parties purchased through the N Property Trust. As previously indicated it was sold in June of 2020 recouping the significant sum of $535,331.15. However, given the parties’ then level of indebtedness, the payment of this sum brought the parties only marginally into credit in an amount of $61,364.25 but this was immediately eroded by a tax payment of $100,000.00.
The warehouse purchase was funded by monies lent by the CBA, which were secured by mortgaging the D Street, Suburb E property in an amount of around $460,000.00. It is the husband’s evidence, which the wife is not in a position to challenge, that the sale of the warehouse was compelled by the parties’ worsening financial position, particularly in respect of taxation liabilities. Since June of 2020, apart from some modest credits, the deposit represented by the payment of the proceeds of sale of the warehouse has dissipated and the account returned to debit.
The various accounts concerned indicate regular payments to Mr Pinta’s solicitors to pay legal fees and disbursements, including to secure the relevant reports from Mr C and Ms AE. These figures have not been tabulated in full but in the statement of legal fees paid, provided by Mr Pinta’s solicitor, it is indicated that the sum of $54,000.00 has been paid. In these circumstances, it is the contention of Mr Jordan, counsel for the wife, that this sum should be added back dollar for dollar.
More significantly, Mr Pinta concedes that in March of 2021, he withdrew the sum of $78,267.71 from the joint account; and the sum of $20,975.26 from the business account of L Pty Ltd – a total of $99,252.97 – which was placed into an account in his sole control. Given these circumstances, Mr Jordan also contends that this sum too should be added back into the parties’ pool of assets and credited to the husband as an asset utilised by him.
The husband disagrees. It is the effect of his evidence that this was done as a protective measure and the sum was utilised, in effect, over time to pay legitimate expenses related principally to the support of the business, particularly in paying regular taxation instalments and servicing its debts.
In addition, a large sum was paid to his visa card, which was regularly utilised to pay family expenses, particularly school fees and private health insurance. In these circumstances, given that the sum in question cannot be identified as still existing in some discrete form, but has been expended legitimately, it is the husband’s position that it would be fundamentally unfair to him for the sum to be approached in this way.
At this point, it is appropriate to point out what these proceedings are not. They are not some form of accounting or arithmetical exercise, in which every dollar, which has passed through the hands of the parties concerned can be reckoned and some final reconciliation made. Necessarily it is a more nuanced process directed toward achieving a proper and fair outcome.
There is no principle of law that the parties, in matrimonial property proceedings, are required to enter into some form of suspended financial animation, upon their separation. Obviously life, with all its associated financial demands must continue. Separated spouses, like everyone else, must still earn and living and pay their bills. Parties are entitled to continue to provide for their own support and to make provision for their family. [28] Clearly, submissions of this kind also apply to the sum of $10,000.00, which the wife drew from the joint account to fund her living expenses prior to the account being frozen.
[28] NHC & RCH (2004) FLC 93-204 at 79,318-9.
As a consequence of considerations of this kind, it is the exception rather than the rule that add backs, of the sort proposed by the wife, are made by the court on a dollar for dollar basis. That is not to say that such issues can be ignored. It remains a matter for the court to consider whether the impugned expenditure is reasonable or extravagant particularly whether it can be accounted for in a more generalised way pursuant to the consideration contained in section 75(2)(o) of the Act.
The husband also concedes that in February and April of 2020 he undertook two large jobs outside the orthodox business structure provided by Company B. The total amount invoiced was $27,997.50. It was disclosed to Ms Pinta in June of 2021. Again Ms Pinta seeks its accounting on a dollar for dollar basis, which Mr Pinta resists on the basis that the monies in question have been utilised to pay either family or business related expenses.
The parties each agree that when the husband changed the corporate structure of the business and the manner in which it was financed in March of 2021 it had the effect of leaving a sum of $22,320.00 in an account in the name of Company B. The parties refer to this amount as the quarantined funds. They agree it needs to be taken into account in these proceedings.
More Issues to do with the D Street, Suburb E property
In his oral evidence, Mr Pinta confirmed that the D Street, Suburb E property is bisected by a fence, which creates half of the property which he described as his work yard. The property has been fenced in this way since the parties acquired it in 2000. The yard is accessible through a lockable double gate from D Street, Suburb E. The dwelling, where Mr Pinta is currently living with Ms AD, has a separate mode of entry.
I share those reservations. If the court’s determination is that both properties be sold and if they achieve a sum greater than the current valuations, this is likely to lead to a situation in which Ms Pinta will be able to purchase a property more accommodating of her needs. She would, however, have to outlay stamp duty on such a purchase.
In terms of considerations of justice and equity, such an outcome would have the appeal of transparency and openness. Both parties would know what amount of capital was available, in precise terms, to purchase an alternative form of accommodation. In addition, neither would be able to harbour any sense of grievance that the other had gained the upper hand, over the other, in respect of the disposition of the D Street, Suburb E property.
Paragraph (na) – As previously indicated, the wife’s responsibility to parent W and Z, who are still at school, will place a heavy financial burden on her shoulders. She, of course, will not bear this burden alone, as Mr Pinta will be assessed to pay child support for them. The evidence indicates that Mr Pinta will be reliable in his payment of child support and will not conduct his affairs in such a way as to avoid his liability.
However, the structure through which the husband operates his business is not without its challenges. It cannot be said, in my view, that his recurrent level of income has the same degree of ease for the calculation of child support as the income of a person employed on a PAYG basis, with an employer paying the recurrent tax as it is incurred on income. In Clauson & Clauson [66] the Full Court said as follows:
The weight to be attached to a child support assessment will vary with the circumstances of each case, including the amount of the assessment, the financial circumstances of the parties, the needs of the children, whether the assessment is being paid regularly, and whether it is likely that it will continue to be paid at a regular and adequate rate in the future.
[66] Clauson & Clauson (1995) FLC92-595 at 81,911.
The amount of child support currently being paid by the husband is $238.00 per week representing the fact that they currently spend no time whatsoever with him. This amounts around $12,000.00 per annum, which in my view, is unlikely to reflect the entire cost of maintaining the children. I note, however, that Mr Pinta has paid the childrens’ school fees.
Paragraph (o) – In Ferguson & Ferguson [67] the Full Court of the Family Court held that section 75(2)(o) was to be read ejusdem generis with the other matters listed in the section 75(2) which enabled the court to bring into account conduct which has an economic significance in the parties’ dealing with each other or the property in dispute.
[67] Ferguson & Ferguson (1978) FLC 90-500 at 77,607.
The major issue which arises for consideration under this general consideration relates to the manner in which Mr Pinta operates the business. In general terms, the business has an overdraft. Mr Pinta pays all his recurrent expenses from this account, which is reduced when he receives payment from his various trade debtors.
Accordingly, this arrangements leads to a melding of business and personal expenses. For reasons already provided, I have determined that it would be unfair to strictly add back on a dollar for dollar basis monies expended on his legal fees and some aspects of his recurrent living expenses. However, in general terms, some account must be taken.
As previously indicated, the parties agreed not to call Mr C to give evidence and provide elaboration on his expert opinion regarding the various entities related to Company B. In this context, it was agreed that the business had a negative value, in the sense that its plant and equipment and other attributes relating to it are far exceeded by the amount (in excess of half a million dollars) by what it owes to its financier.
However, notwithstanding the negative equity situation, the business has obvious value to Mr Pinta. It enables him to earn his income, which he calculates to be around $150,000.00 per annum, on which sum, to some degree, is calculated his liability to pay child support. Accordingly, it is in Mr Pinta’s personal interests and also in the interests of his family that the business, notwithstanding its level of insolvency, continue, otherwise both he and to a lesser extent his family will be destitute.
Accordingly, in my view, there is a level of artificiality in including the business, as the parties have agreed to do, as a negative asset, which will be allocated to the husband. The corollary of this allocation being that Mr Pinta has agreed to indemnify the wife in respect of the business debts, including tax debts, of which I am satisfied she played a significant role in their acquisition.
In my view, considerations of fairness dictate that, as far as possible, Mr Pinta should be given the best opportunity to be able to continue on in business, in order to secure his financial solvency and pay off the considerable debts in which both parties played a part in incurring.
Members of Ms Pinta’s family have assisted her with the payment of her legal fees. Again, whether she will repay all of the sum in question given the fact that she has a legal interest in properties she owns with her family the benefits of which do not automatically accrue to her is not clear.
In general terms, the fact that Mr Pinta has been able to pay his legal fees and fund other of his living expenses out of the business, albeit with the corollary of increasing his level of indebtedness is a factor which favours the wife and which I will take into account in assessing any percentage allowance to be made in her favour.
Paragraphs (p) & (q) – These are not relevant considerations in the present matter.
Summary of section 75(2) factors
In my assessment, in their totality, the cumulative effect of the various factors to be considered arising under section 75(2) favour the wife to a significant degree. In summary, her age, lack of skills, parenting responsibilities and challenging employment situation render her financial future far more problematic than that of the husband, who retains the business, which has generated the family’s wealth during the parties’ marriage.
In theoretical terms, I would allocate her a further 20% of the parties’ non-superannuation assets on the assessment of section 75(2) factors, which at the end of the third phase leads to a distribution of 70%/30% favouring Ms Pinta.
Given the modest levels of superannuation held by each of the parties and their approximate equalisation in value, I do not propose to derogate from the position adopted by the parties that each should retain their respective superannuation.
Conclusions
I am satisfied that in all the circumstances of this case, it is just and equitable to make orders pursuant to section 79(2) of the Act. The marriage between the parties has clearly ended and the financial relationship between them must be brought to an end. The next issue is what form those orders should take and where individual items of property should lie.
This is the most difficult aspect of the property aspect of the proceedings. It is the point at which abstract notions of justice and equity must become concrete. This is particularly so in respect of the disposition of the D Street, Suburb E property, in respect of which each party has expended a significant level of resources both in financial and indeed emotional terms.
The sorts of issues to be considered in determining how to allocate actual assets and cash, in proceedings such as these, was considered by Moore J in L & L.[68] Her Honour considered that the relevant factors were as follows:
·the purchase price of appropriate accommodation and re-housing costs for both parties;
·the need for a financial buffer for ordinary exigencies of independent living;
·the current level of the parties’ superannuation;
·the probability that the wife would be able to acquire appropriate superannuation benefits from her own future income;
·the husband’s substantial earning capacity and ability to borrow significant sums at favourable rates (from his employer).
[68] L & L [2003] FamCA 40.
70% of the parties’ net non-superannuation assets, as I have calculated them, is represented by the sum of $783,182.40 and 30% to $335,649.60. Calculating how each party will receive such in a sum, in practical terms, is not without its challenges, given the negative value of the business and its other associated debts. The exercise I must follow is not a purely arithmetical one. Rather it is an exercise in equity.
I must look to what will be the financial resources available to each party to equip them for the next portion of their respective lives. I acknowledge that the future looks uncertain for each of them. At the end of the exercise, the court must be satisfied that the outcome is an equitable one, taking into account all the factors arising under section 75(2).
The husband will leave the proceedings with an asset, in the form of the business, which has no actual worth, given its level of indebtedness exceeds the value of its tangible assets by ta marked degree. However in practical terms, the business has significant intrinsic worth to Mr Pinta, as it is the means by which he has hitherto earned his livelihood and it is the only mechanism by which he can pay of the business’ debts. All agree he should retain it and make provision for the payment of the Division 7A tax, when the ATO claims it. It leaves him with an asset that has only negative value but the reality is that other than insolvency he must continue on with it.
With the sale of F Street, Suburb G, the line of credit secured against it will be released. It will also be necessary for the joint mortgage on D Street, Suburb E to be discharged. On current figures, which do not take into account selling costs, this will potentially release to the parties the net sum of $588,953.00. 70% of this sum is $412,267.10 and 30% $176,685.90. If the property sells for more than its valuation, these figures can be adjusted, so no anomaly arises.
Each party envisages utilising the sum to be notionally received by him/her from the sale of F Street, Suburb G be utilised to purchase the other’s interest in D Street, Suburb E. Ms Pinta intends to be debt free; whilst Mr Pinta will be encumbered by the liability for Division 7A tax and the responsibility for maintaining the heavily indebted business.
The problem with this approach is that it will not reflect either any increase or decrease in the market since the valuation of D Street, Suburb E was obtained. This has the potential to be unfair to the unsuccessful party for D Street, Suburb E, if the market is rising and vice versa, to the successful party, if it is falling. Essentially, two different mechanisms will have been applied to fixing a value of the parties’ real estate – one infallible, the other not. It will be a case of comparing apples with oranges.
In my view, fixing the value of one property, whilst selling the other, which will secure the unarguable value of the latter, as at the date of sale, particularly if the market has risen since the valuation was undertaken, is potentially unfair, particularly to the party who is not successful in persuading the court as to the probity of his/her application to retain D Street, Suburb E.
The unsuccessful party will feel that he or she has been disadvantaged by reason of the fact that his portion of the D Street, Suburb E property has been kept artificially low, in what is a rising market. The same considerations will apply, in reverse, if the market is falling. In my view, this is a factor, which militates strongly in favour of both properties being sold and the inconvenience occasioned being equitably shared by both the husband and wife.
The major deficit of this approach being that the parties will incur selling costs in respect of the property, which will add a sour taste to the bitterness of their mutual disappointment. Such bitterness will only be sweetened if the property sells for more than $650,000.00. In addition, it is not an outcome proposed by either party or one which has been canvassed with either. In these circumstances, I fear the law of unintended consequences, particularly whether a sale now would have tax implications for the already heavily burdened parties.
In addition, I apprehend that although a compulsory sale of both properties has the superficial appeal of appearing to be even-handed in the sense that neither party will achieve his/her desired outcome and each will be deprived of the must sought for property, it will be an outcome perceived by the parties themselves to be capricious and patronising.
In effect, like an officious school teacher, the court will determine that because the parties cannot agree, neither will get what they want and both will be punished for their apparent intransigence. In these circumstances, regrettable though it is, I fear as Ms Pinta has it, the court is compelled to make a choice.
In order to ascertain the overall equity of the husband retaining D Street, Suburb E, on the one hand and the wife retaining it on the other, on the basis of 70/30% division on the asset pool as calculated by me, in my view, it is necessary to ascertain what each such outcome will produce in dollar terms. Thereafter, it will be necessary to turn to the parties’ competing claims in respect of convenience and disadvantage.
I confirm the asset pool is as follows:
Total Asset Pool $1,697,423.00 Debts ($578,591.00) Net Available Assets $1,118,832.00
If the husband retains D Street, Suburb E, in my calculation, it will have the following result:
Husband – 30% - $335,649.60 Wife – 70% - $783,182.40 100% D Street, Suburb E (mortgage free) $650,000.00 30% of F Street, Suburb G
less Line of credit &
less D Street, Suburb E mortgage$176,685.90 70% of F Street, Suburb G
less Line of credit &
less D Street, Suburb E mortgage$412,267.10 plus assets retained by him[69] $108,622.00 plus assets retained by her[70] $110,468.00 plus interest in H Street, Suburb E $93,000.00 Total Assets $935,307.90 Total Assets $615,735.10 less Division 7A Tax ($162,500.00) less H Street, Suburb E mortgage ($19,519.00) less Company B ($239,667.00) less Centrelink debt ($10,525.00) Total debts ($402,167.00) Total debts ($30,044.00) Subtotal (net) $533,140.90 Subtotal (net) $585,691.10 less sum to be paid to wife to achieve 70/30% split ($197,491.30) plus sum received from the husband to achieve 70/30% split $197,491.30 Husband Retains $335,649.60 Wife Retains $783,182.40 [69] Includes: Motor Vehicle 1 $5,000.00; Motor Vehicle 2 $10,000.00; plant and equipment $71,302.00 and quarantined funds $22,320.00.
[70] Includes: Motor Vehicle 3 $45,000.00; Motor Vehicle 4 $28,000.00; proceeds of sale of J Street, Suburb K $29,056.00; Westpac Account $3,412.00 and Company Q $5,000.00.
If the wife retains D Street, Suburb E, on my calculations, it will have the following result:
Husband – 30% - $335,649.60 Wife – 70% - $783,182.40 100% D Street, Suburb E (mortgage free) $650,000.00 30% of F Street, Suburb G
less Line of credit
less D Street, Suburb E mortgage$176,685.90 70% of F Street, Suburb G
less Line of credit
less D Street, Suburb E mortgage$412,267.10 plus assets retained by him $108,622.00 plus assets retained by her $110,468.00 plus interest in H Street, Suburb E $93,000.00 Total Assets $285,307.90 Total Assets $1,265,735.10 less Division 7A Tax ($162,500.00) less Centrelink debt ($10,525.00) less Company B ($239,667.00) Less H Street, Suburb E mortgage ($19,519.00) Total debts ($402,167.00) Total debts ($30,044.00) Subtotal (net) ($116,859.10) Subtotal (net) $1,235,691.10 plus sum to be paid to husband from wife to achieve 70/30% split $452,508.70 less sum to be paid to husband from wife to achieve 70/30% split ($452,508.70) Husband Retains $335,649.60 Wife Retains $783,182.40
If the husband retains D Street, Suburb E, he will not have to move or relocate his business. He will be mortgage free, but will have a considerable level of debt related to Company B and Division 7A tax. In the form of the business he will an asset which he can utilise to bring some of Company B’s debts under control and to enable it to continue to trade, which will facilitate him being able to pay child support.
As previously indicated counsel for the wife concedes that the negative value of the business arises because of monies owed to the CBA, which are presently in the vicinity of half a million dollars. In these circumstances, in my view, the husband has a pressing need to ensure the on-going viability of the business, which is axiomatically subject to a very significant degree of financial stress.
In my view, the best prospect open to enable the payment of the parties’ considerable debts, including taxation debts, in respect of which I am satisfied both parties must share the same degree of responsibility, is if the husband is able to continue to trade without undue interruption.
Given the business’ current level of indebtedness, a sum of around $300,000.00, which would be the amount to be received by Mr Pinta, if the wife retains D Street, Suburb E, seems inadequate to both permanently rehouse the husband and provide a new base from which the business can operate. I am concerned that a further incident of stress to the business, necessarily arising because it must relocate, may have the effect of dealing it a final blow in respect of its on-going viability. In my view, this is a decisive factor which favours the husband retaining D Street, Suburb E.
In the calculations outlined above, Company B, which the husband retains, goes in at a negative valuation. This is as a consequence of the parties’ agreement, reached via their legal representatives, regarding Mr C’s valuation of it and their consequent acceptance of the negative figure calculated by him, after the discussions of their counsel, with Mr C, to which I was not privy. I was told, however, that it was agreed that the business owed a sum in excess of $500,000.00 to its financier.
In my view, the inclusion of this negative figure has the potential to be somewhat misleading. As previously indicated, the business has a significant worth to Mr Pinta, as it provides the means by which he earns his income. Although he has a significant level of debt, he is able to put the capital of the business to productive effect, which enables him to earn an annual income of $150,000.00. It would be inequitable to him if a body blow was delivered to the business, as a consequence of the outcome of these proceedings, which could be otherwise avoided.
The husband has agreed to indemnify the wife in respect of both the business’ other accrued liabilities and the not insignificant Part 7A tax, which is attributable to their mutual drawings from the business to fund joint expenses incurred during their marriage. Thus the husband retains the debts, of which the wife is absolved, albeit that he continues to control the mechanism which generated the income to which the tax is related. Whether the ATO will accept the indemnity is not known to me. No doubt it will depend on how the husband is able to meet its demands. This is another factor which favours the husband being able to operate the business as efficiently as possible, without any avoidable impediments.
In my view, in these circumstances, overall considerations of justice and equity dictate that the husband should be given the best opportunity to maintain the on-going viability of the business in order that he can continue to support himself; discharge debts incurred during the marriage and provide a maximum level of support to the family through child support. Essentially, I have reached the view that the determinative factor in determining who of the parties should retain D Street, Suburb E is what will give Mr Pinta the best shot of remaining solvent, including paying off the ATO.
I accept that the D Street, Suburb E property is integral to the operation of the business at the present time and if it is withdrawn as a de facto depot it will be highly disruptive to it. This may push the business into further insolvency, which in all the circumstances, I consider to be potentially very unfair. In addition, as indicated above, I am concerned that the sum to be realised to the husband, if Ms Pinta acquires D Street, Suburb E alone, will not be sufficient to fund alternative accommodation for the husband and the business. I am satisfied that D Street, Suburb E provides an idiosyncratic solution for Mr Pinta in terms of being able to provide him with low cost personal accommodation and facilities for his business.
Regardless of whether or not the wife gets D Street, Suburb E, she will have to suffer the inconvenience of having to move. If she retains the property she will have to utilise the entire sum notionally realised from the sale of F Street, Suburb G to allocate to the husband and unless it sells for more than its current valuation and even then she may be short the amount required. How she will obtain the necessary sum is unclear to me, unless she liquidates her interest in H Street, Suburb E or turns to her family. She will have no buffer of cash to cover her for exigencies.
If the husband retains D Street, Suburb E and F Street, Suburb G sells at its current estimate, the wife will receive approximately $400,000.00; together with a further sum payable to her by the husband of just under $200,000.00. No evidence has been provided by her as to what assistance may be available to her from her family or whether she will be able to realise her interest in H Street, Suburb E. If F Street, Suburb G sells for more, she will have a greater sum. This may not be optimal from her perspective, but the sum in question does not seem to me to automatically preclude her from purchasing some form of accommodation in proximity to the boys’ school.
In my view, the evidence available to me indicates that Ms Pinta, certainly in the immediate aftermath of the parties’ separation has expressed a degree of ambivalence about the D Street, Suburb E property. In these circumstances, I find that it is most certainly not her dream home. In these circumstances, although I accept it may well be difficult and challenging for her to move, there do not seem to me to be any insuperable barriers to her finding alternative accommodation for her and the children, particularly given that she must move regardless.
In reaching this conclusion, I have endeavoured to bear in mind the various considerations delineated by Judge Turnbull in Farnham. Essentially, I have concluded that the loss of D Street, Suburb E, from which Mr Pinta has operated his business for many years, would have a devastating consequence for him and it. On balance, I am satisfied that this outcome will sufficiently equip the wife to re-house herself and the children through the provision of a relatively large sum of money.
Accordingly, in an extremely finely balanced case, this favours the husband retaining the contested property. Whilst appreciating the wife’s disappointment, I do not consider that this outcome can be considered an arbitrary or capricious one. On the other hand, selling the property and dividing its proceeds, although ostensibly even-handed, would have such connotations.
Finally, there is the issue of the potential windfall which may accrue to Mr Pinta alone, if and when the circumstances arise which would enable him to demolish the old house and subdivide the property. I consider that this prospect is likely to be extremely attractive to both parties and was the major factor militating in favour of the immediate crystallisation of its value, with each party given the opportunity to bid for it, at open auction.
I have decided not to pursue this course because, in my view, the evidence indicates that the possibility of the property being developed must be many years off. Neither party has provided any clear intention to do so and nor have they the financial resources to commit to such a development. As such, it remains a dream, as it was when the parties were married. In these circumstances, I do not consider it inequitable that the husband retains the property, particularly given that he retains responsibility for all of the parties’ considerable debts, acquired mutually during their marriage.
I acknowledge that I have been troubled by the fairness of their being one mechanism to value the F Street, Suburb G property and another to value D Street, Suburb E. The former relies on the market; the latter, is fixed. However, in this context, I note the parties agreed on the value of D Street, Suburb E. In these circumstances, I have concluded that it would be inappropriate to go behind this bargain, which is likely to have suited each of them when their primary aim was the retention of the property. In addition, in my assessment the other factors relating to equity listed above mandate the court adopt the value agreed between the parties.
For these reasons, I will make order in terms of the proposal contained in paragraph 378 of these reasons for judgment. Essentially, the parties’ assets as identified therein, after the sale of the former matrimonial home, be divided on a 70/30 basis, after discharge of the mortgage on D Street, Suburb E and the discharge of the line of credit secured against the former matrimonial home, on the basis that the husband retain the property which he currently occupies, at D Street, Suburb E and the parties retain the other items of property currently in their respective names and control. I will order that each party also retain the superannuation standing in their respective names.
For all these reasons, the orders of the court will be as set out at the commencement of these reasons for judgment.
I certify that the preceding three hundred and ninety--eight (398) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Brown. Associate:
Dated: 9 November 2022
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