Pope and Pope
[2012] FamCA 204
FAMILY COURT OF AUSTRALIA
| POPE & POPE | [2012] FamCA 204 |
| FAMILY LAW – PROPERTY – Initial contributions – Valuation of husband’s interest in entertainment group at cohabitation – Retrospective valuation principles discussed - Royalty income – Valuation of royalty income – Whether future royalty income is property or financial resource –– Where losses on property development venture - Tax losses – Whether tax losses on property development venture available to offset royalty income – Found tax losses available – Found future royalty income is property – Consideration of property development losses – Principles established in Weir v Weir (1993) FLC 92-338 engaged – Section 75(2) of the Family Law Act 1975 (Cth) considerations – Various factors discussed – Where husband supported wife’s child from an earlier relationship – Ordered that the property pool divided 74 per cent in favour of the husband and 26 per cent in favour of the wife. |
| Evidence Act 1995 (Cth) s 140 Family Law Act 1975 (Cth) s 79 |
| Antman (1980) FLC 92-800 Aroney & Aroney (1979) FLC 90-709 Bell and Bell [2000] FamCA 1301 Browne v Green (1999) FLC 92-873 Cerini [1998] FamCA 143 Farmer and Bramley (2000) FLC 93-060 G & T [2002] FamCA 613 In the Marriage of Clauson (1995) FLC 92-595 In the Marriage of Duff (1977) 15 ALR 476 In the Marriage of Ferraro (1993) FLC 92-335 In the Marriage of Lee Steere and Lee Steere (1985) FLC 91-626 Jones v Skinner (1835) 5 LJ Ch 87 Kelly and Kelly (No.2) (1981) FLC 91-108 Kennon v Spry (2008) 238 CLR 366 Kowaliw (1981) FLC 91-092 Lutzke & Lutzke (1979) FLC 90-714 Marker [1998] FamCA 42 Omacini & Omacini (2005) FLC 93-218 Pierce (1999) FLC 92 -844 Robb & Robb (1995) FLC 92-555 Russell v Russell (1999) FLC 92-877 Tomasetti (2000) FLC 93-023 Townsend (1995) FLC 92-569 Weir v Weir (1993) FLC 92-338 |
| APPLICANT: | Mr Pope |
| RESPONDENT: | Ms Pope |
| FILE NUMBER: | SYC | 5303 | of | 2008 |
| DATE DELIVERED: | 3 April 2012 |
| DATE ORDERS MADE: | 4 April 2012 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Ryan J |
| HEARING DATE: | 18, 19, 22, 23 and 24 August 2011 and 7 March 2012 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Richardson SC with Mr Kearney |
| SOLICITOR FOR THE APPLICANT: | Swaab Attorneys |
| COUNSEL FOR THE RESPONDENT: | Mr Lethbridge SC with Mr Gray |
| SOLICITOR FOR THE RESPONDENT: | KDB Holmes |
Orders made 4 april 2012
That forthwith the husband do all acts and things and sign all necessary documents in order to transfer to the wife all of his right title and interest in the following properties:
1.1rural town K property, being the whole of the land contained in folio identifier …;
1.2Sydney suburb 1 property, being the whole of the land contained in folio identifier …; and,
and the wife shall indemnify the husband and keep him indemnified in respect of all liability of the husband whenever and however arising in relation to each property, including but not limited to any liability for taxation in respect of any income received or deemed to have been received in respect of any such property.
That as between the husband and the wife, the wife be declared to be solely entitled in law and equity to the property at Sydney suburb 2, being the whole of the land contained in folio identifier … and the wife shall indemnify the husband and keep him indemnified in respect of all liability of the husband whenever and however arising in relation to such property.
That as between the husband and the wife, the husband be declared to be solely entitled in law and equity to the property at outer Sydney suburb L, being the whole of the land contained in folio identifier … and the husband shall indemnify the wife and keep her indemnified in respect of all liability of the wife whenever and however arising in relation to such property.
That the wife do all acts and things and sign all necessary documents to effect transfer by the wife to the husband or as he may direct of all right, title and interest in and to each of the following entities, including but not limited to all issued capital and credit loan accounts:
4.1 P Pty Limited; and,
4.2 CH Pty Limited;
AND other than as provided in Order 5 herein, the husband shall indemnify the wife and keep her indemnified in respect of any and all liability whenever and however arising as a result of the wife’s involvement and association with each of the said entities, including but not limited to any liability arising as a result of the wife having been an officeholder or shareholder of either entity and having been or being indebted to either entity on any loan account or otherwise.
That the wife shall indemnify the husband and keep him indemnified in respect of any liability arising as a consequence of or in relation to the involvement of each of the wife and/or Mr G:
5.1 in and with P Pty Limited; and,
5.2 in and with CH Pty Limited; and
5.3any financial or other arrangement between either or both of them and any other natural person or entity (including but not limited to the above entities) pursuant to any written or oral contract or otherwise;
which is not the subject of and included in the reports prepared by Ms B as single expert in these proceedings, which liability shall include but not be limited to all costs incurred and liability arising as a result of any claim, action or demand directed to any act or omission by or on behalf of either of the wife and/or Mr G or in respect of any monies asserted to be owing to either of them and for the avoidance of doubt such indemnity shall expressly extend to and include any liability for taxation (including any interest and penalties) of the husband, P Pty Limited and/or CH Pty Limited arising in relation to the payment of $80,000.00 and/or any other moneys to or for the benefit of Mr G.
That forthwith and notwithstanding any other order herein the wife shall do all acts and things and sign all necessary documents to put into effect such of the recommendations of Ms B (as single expert) in relation to the winding up of P Pty Limited [the company] as set out in her report dated 22 August 2009 and identified as “…B-9” as may be requested by the husband including but not limited to by:
6.1the wife forthwith effecting the removal of Mr G as director and simultaneously appointing herself as director and secretary of the company; and,
6.2the wife forthwith amending her 2010 personal taxation return to include and acknowledge receipt by the wife of each of:
6.2.1a franked dividend of $51,000 in respect of funds already received by the wife from the company; and,
6.2.2a deemed dividend of $115,075 pursuant to Division 7A of the Income Tax Assessment Act;
and otherwise join with the husband in doing any act or thing necessary to address any outstanding issue in relation to the affairs of the company, including in relation to any taxation issue, provided always that the husband will be solely responsible for any taxation for which the wife is consequently assessed as liable to pay.
That within three (3) months of the date of these orders the husband pay to the wife $463,155.00.
That within four (4) months the parties shall put to auction, with an auctioneer nominated by the husband, the 57 items of named memorabilia following which the net sale proceeds shall be divided 26 per cent to the wife and the balance to the husband. In the event that some or all of the bed sheets fail to sell they shall be distributed in specie 74 per cent to the husband and the balance to the wife.
That save in accordance with and for the purpose of Orders 4, 5 and 6 herein, the wife be and hereby is restrained by doing and/or causing or permitting to be done, any of the following:
9.1alienating or further encumbering any of the assets, income or undertakings of P Pty Limited [the company];
9.2 alienating or further encumbering any of the shares in the company;
9.3issuing any new shares or otherwise altering the shareholding (including any rights and entitlements attaching to or any other incident of the same) in the company;
9.4removing, replacing or appointing any director or other officeholder the company;
and the wife shall forthwith notify the husband in writing upon the receipt by the wife of any notice of and/or upon otherwise becoming aware of any intention by any other person or entity to take any action so as to permit or cause any of the matters subject to Orders 7.1 to 7.4 (inclusive) above to occur.
That save as otherwise provided herein, each of the husband and wife is declared to be solely entitled to all property and financial resources in their respective name, possession or control or to which they may be or become entitled.
That if either party refuses or neglects to sign any document necessary to implement these orders, that a registrar sign the necessary document on behalf of the defaulting party pursuant to section 106A of the Family Law Act1975 (Cth).
That the application of the wife for spouse maintenance be dismissed.
[Omitted]
In the event there is an application for costs written notice is to be given to the other party within 14 days and written submissions and material in support of the application is to be filed with the Associate to Ryan J and served on the other party within a further 14 days (28 days total).
Written submissions and material in response shall be filed with the Associate to Ryan J and served within a further 28 days.
Written submissions and material in reply shall be filed with the Associate to Ryan J and served within a further 7 days.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Pope & Pope has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| FAMILY COURT OF AUSTRALIA AT SYDNEY |
FILE NUMBER: SYC 5303 of 2008
| Mr Pope |
Applicant
And
| Ms Pope |
Respondent
REASONS FOR JUDGMENT
Introduction
These are proceedings for property settlement pursuant to s 79 of the Family Law Act 1975 (Cth) (“the Act”).
Mr Pope (“the husband”) commenced proceedings in 2008. His application included parenting matters which were resolved by agreement prior to this hearing. Consequently, only the property settlement applications required adjudication.
In broad terms the husband’s contention is that the net asset pool is in the vicinity of $12.6 million in relation to which he claims 85 per cent. Ms Pope (“the wife”) contends that the net asset pool is in the vicinity of $12 million which she says should be divided equally. The apparent closeness in the value of the net assets belies significant differences about how the asset pool should be constituted.
Central to the outcome is the contribution made by the husband as a founding member of an entertainment group (“the group”) which, when the parties commenced cohabitation, was well advanced along a trajectory towards the success discussed in the evidence. Associated issues arise in relation to the Court’s ability to retrospectively value his interest in the group at the commencement of cohabitation and treatment of his future royalty income.
Health difficulties resulted in the husband’s retirement from the group in 2006. About two years later he entered into an agreement (“the settlement”) with the group’s group of companies whereby the group, constituted by the remaining founding members, acquired his interest for a payment of a significant sum. He retained royalty rights in relation to musical compositions assigned to T Company as well as those received from the Australian Performing Right Association (“APRA”). Thereafter the husband used a portion of the settlement to fund a luxury property development venture. This has been unsuccessful and resulted in losses in the vicinity of $3.4 million.
Senior counsel for the wife questioned the husband at length about the property development venture. As a consequence the wife appropriately abandoned her claim that the property development losses, as well as anticipated losses in relation to the sale of a home at outer suburb L, were negligent, reckless or wasteful in the manner discussed in Kowaliw (1981) FLC 91-092. However, it is her contention that to the extent required these losses should nonetheless be taken into account so that she receives an equal division of property.
It will be apparent that there is a significant divergence in the outcome which each party claims is just and equitable. It is agreed, however, that the wife will retain the home in which she and their daughter, N, live, as well as two other properties. In the event the effect of the Court’s findings is that in order to retain these properties the wife is required to pay him an adjusting amount, the husband foregoes the adjustment.
Background Facts
Throughout these reasons statements of fact are findings of fact determined upon the balance of probabilities (s 140 Evidence Act 1995 (Cth)).
The wife was born in 1966.
The husband was born in 1972.
C, who is the wife’s son from a previous relationship, was born in 1990.
In 1991 the entertainment group was established, one of whom was the husband.
The [group name] Pty Ltd was registered in April 1993.
In August 1994, the parties met when the husband dined at a restaurant where the wife worked.
At Easter 1995, the parties commenced cohabitation. The wife and her son left the rural town and moved into the husband’s fully furnished home at Sydney suburb 3. Sydney suburb 3 property was purchased by him a few months earlier for $223,000.00 (its value when the parties commenced cohabitation), of which $179,000.00 was borrowed from a bank. The husband owned two cars, had savings of $20,000.00, modest superannuation and a 25 per cent share of the group which the single expert (Ms B) (“the company expert”) said was worth $1.8 million. The wife had a Toyota motor vehicle, savings of about $10,000.00 and otherwise nothing of value. Her income comprised welfare payments which she supplemented with part-time work in the hospitality industry. Once the parties started to live together, for a short period she received a small Family Allowance. There was an issue about whether the wife informed Centrelink about her changed circumstances, allied to which was a challenge to her reliability as a witness. In this regard the wife’s evidence that she notified Centrelink in a timely way is accepted and the manner in which she dealt with this issue in her evidence does not undermine her veracity.
The husband’s income was earned from his work with the group which in the year the parties commenced cohabitation was $237,110.00.
The parties married in February 1996.
In March 1996, they purchased in joint names land at Sydney suburb 1 for $174,000.00. For this $157,000.00 was jointly borrowed from the Commonwealth Bank with the remaining acquisition costs drawn from joint savings. A home was constructed and in November 1996 the parties and the wife’s son took up occupation. This is where the parties lived until September 2004 when the husband moved out. The wife and children (C and N) continue to reside at the Sydney suburb 1 property which, it is agreed, she will retain.
P Pty Ltd was incorporated in April 1996. The parties were each allocated one of the two issued shares and each were appointed directors. The company’s principal activities comprised the husband’s employment with the group, ownership of shares in companies associated with the group and copyright royalties derived from T Company. In short, it was the corporate vehicle in relation to the husband’s involvement with the group and which received the vast majority of his group related income. Excluding income (and royalties) paid to P Pty Ltd there is a separate performance royalty stream paid by the Australian Performing Rights Association (“APRA”) which must be paid to an individual, in this case the husband.
The husband sold the suburb 3 property for $230,000.00 in February 1997. The $44,000.00 net sale proceeds were applied towards the suburb 1 mortgage.
The parties’ only child, N, was born in July 1997. N lives with the wife and spends time with the husband on Monday afternoons and at other agreed times.
On the parties’ joint application on 11 June 1998 orders were made in this Court that C lives with them and to the exclusion of C’s father, they were given sole parental responsibility for his long term and day to day care, welfare and development.
The parties incorporated CH Pty Ltd in July 2000. The wife was made the sole shareholder and the husband its sole director. The company was incorporated for the purposes of delivering multi media sports education tools in relation to which the husband created and wrote over 200 tutorials. He engaged the services of professional sportsmen with the resultant DVDs and programs delivered through the internet.
The wife ceased her directorship of P Pty Ltd in late July 2000. A replacement director was not appointed. In June 2001, P Pty Ltd undertook a share buyback as a consequence of which the wife became its sole shareholder. The husband remained its sole director. P Pty Ltd continued to receive the husband’s group related income.
In May 2001 the wife and a friend, Ms O, incorporated W Pty Ltd in which they were equal shareholders. The company ran at a loss and ceased to trade in about 2008. The wife will retain her interest in the company which it is agreed has no value. The wife failed to disclose that she recently renewed the “[W Pty Ltd]” business name which is registered until 2013. This is but one example of her giving selective disclosure and misleading evidence. Re-registration of the business name tends to suggest that once these proceedings are finalised the wife plans to establish a business.
In their joint names, in August 2003, the parties purchased the rural town, K, property (“K property”) for $58,500.00. The purchase price comprised approximately $34,600.00 from the wife’s recently received inheritance from her late mother’s estate and the balance from the parties’ joint savings. Income deposited into the parties’ joint account was primarily sourced from the husband’s work with the group. About two years later the parties borrowed $384,000.00 from the National Australia Bank which funded construction of a home on the K land. Construction was completed in 2005 (after the parties separated) following which the wife’s aunt and uncle moved in. They pay the wife $130.00 per week which she applies to rates, insurance and maintenance costs. Not long after the husband received his settlement monies, he discharged the mortgage. It is agreed the wife will retain the K property.
In late 2003, P Pty Ltd purchased H Company for $130,000.00. H Company provided support services in the entertainment industry. The husband made appropriate due diligence enquiries and was satisfied that the business would be profitable. From P Pty Ltd, H Company borrowed a further $200,000.00 which was spent on equipment and motor vehicles. When the workload, staff required and consequential OH & S obligations became onerous and it would appear, disproportionally expensive, the husband re-analysed the business and decided it was no longer profitable. Not long after, it was closed, I infer at a loss.
In January 2004, the parties purchased in the wife’s name (I infer as an asset protection measure) commercial premises at Sydney suburb 2 for $590,000.00. These funds were borrowed from the National Australia Bank. Although the wife says she borrowed $510,000.00 from the bank, attached to the husband’s affidavit is a copy of the mortgage which shows his evidence that she borrowed a total sum of $601,000.00 to complete the purchase is correct. This is an example of the comparative reliability of the parties’ evidence. It contributes to my comfortable satisfaction about the reliability of the husband’s evidence. On the other hand, as with this issue, it was established the wife’s evidence was often unreliable, albeit not necessarily intentionally so. Unless stated differently, in relation to uncorroborated evidence, where the parties’ evidence conflicts the husband’s is preferred.
P Pty Ltd occupied the Sydney suburb 2 property which is where that company stored stock and where the husband’s personal assistant worked. From his settlement, on 23 June 2008 the husband paid $510,000.00 to discharge the National Australia Bank mortgage. The property was thus unencumbered and under the wife’s control. There is an issue about her ability to tenant this property. Following the first directions hearing conducted in these proceedings, the husband agreed to vacate the premises, which he did. At paragraph 219 of her affidavit the wife said, that although the property was listed with agents, she had been unable to rent it. Thus she allowed her friends Mr G and Ms U into occupation on the basis that they paid statutory charges and utilities. In answer to specific questions administered before the hearing the wife denied entering in a lease. This answer was wrong and there is no doubt that in late 2008 she leased the property, for three years with a three years option, to Mr G for either $600.00 or $800.00 per week. According to her, not only did Mr G fail to pay rent (about which she took no action), expenses were only paid between January 2009 and December 2010. However, in two letters dated 13 May 2009 the wife’s former solicitors said she received $800.00 per month as payment of all outgoings. If this is correct, she failed to disclose this income.
Connected to this issue is the wife’s misleading evidence about her involvement with a company GUP Pty Ltd (“GUP”) registered in July 2008 with her, Mr G and Ms U its equal shareholders and three directors. GUP had its registered offices at Sydney suburb 2 property. In her affidavit she said the company name was an acronym for “…” and correctly pointed out that within three weeks she resigned and transferred her shareholding to Mr G and Ms U. She failed to disclose that when it was established, the company name was made up of the three shareholders last initials to which she advanced $17,000.00. At about the same time the wife invested in a company M Pty Limited of which Ms U was its sole shareholder. It would appear that GUP invested the wife’s $17,000.00 in M Pty Ltd and that she invested a further $10,000.00. M Pty Ltd had its registered offices at the suburb 2 property. The wife acknowledged that her former solicitor’s letters dated 13 May 2009 were written in response to an enquiry from the husband’s solicitors about particulars of the companies trading from the Sydney suburb 2 property, her involvement and the financial arrangements. Although the wife only conceded that her response was possibly misleading, she ultimately agreed that she decided to bend the disclosure rules. In other words, she knowingly provided misleading information to the husband in correspondence. In a similar vein her affidavit evidence on these matters is misleading in a material way.
On 17 September 2009, the wife borrowed $75,000.00, which advance was secured against the Sydney suburb 2 property. The wife used these funds for living expenses. She discharged that mortgage in March 2010. The Sydney suburb 2 property is unencumbered and it is agreed will be retained by the wife, albeit it is her intention that it will be sold.
The husband commenced collecting celebrity memorabilia in early 2004 which is now worth in the vicinity of $4.3 million. Subject to the disposition of specified items it is agreed the collection will be retained by the husband. During the hearing, there was an allied issue about whether approximately $600,000.00 in memorabilia sale proceeds should be included as the husband’s notional asset. After judgment was reserved, at the husband’s request the proceedings were relisted on 22 November 2011. The day before the parties tendered an amended balance sheet which showed that the memorabilia addback issue had been resolved, with that and motor vehicles sold by the husband to be notionally included as his asset at $590,416.00.
The parties purchased in joint names property at outer Sydney suburb L (“L property”) on 12 July 2004 for $2,750,000.00. From the National Australia Bank they jointly borrowed $3,376,000.00 from which the entire acquisition costs were drawn. The balance was used to develop the K property and the L property.
In September 2004, the husband moved to the L property. The wife remained resident at the Sydney suburb 1 property. One of the significant issues is whether this is when the parties separated or, as the wife asserted, separation occurred on 15 March 2008. There is no doubt that the husband spoke with the wife about his hopes for his relationship with his now wife on 15 March 2008. According to the wife, this is when she realised that the marriage was over and separation occurred.
In her affidavit the wife devoted 16 paragraphs to the date of separation issue. Lest it be thought that on reflection she abandoned the notion that separation occurred in 2004, in oral evidence the exchange below occurred:
Is it your contention that between September 2004 and March 2008 your marital relationship with [the husband] continued unhindered?‑‑‑Yes.
And that – is it your position that during that period him residing at [the L property], substantially when he was in Sydney, was something that was just a curious incident of how the relationship was then formed?‑‑‑Yes.
And at no point during that time did you regard the two of you as being separated?‑‑‑No.
At no point did you regard your relationship to have broken down?‑‑‑No.
You’re absolutely unequivocal about that?‑‑‑Except for the time – it was a short time in 2006.
Short time in 2006 is the only time, is that right, as you reflect upon it?‑‑‑Yes.
And you identify that because you know that [the husband] has subpoenaed records that demonstrate that you engaged Watts Macray to act for you in matrimonial proceedings in 2006, don’t you?‑‑‑Yes.
And so you were anxious to identify that date as an exception because you would be left swinging in the wind somewhat to explain why you were doing that in the face of what you, otherwise, would claim was a continuing marital relationship in that period; is that right?‑‑‑I was asked to see them.
By who?‑‑‑[The husband].
Because he said you should go and get some advice, didn’t he?‑‑‑He asked me – he wrote up the letter and asked me to take it to see a lawyer to make sure that he got enough money from the [group] if we went ahead.
So apart from this period in 2006 where his suggestion to you about going to a lawyer might have created some confusion of the position, which your position otherwise that between September 2004 and March 2008 the two of you were not separated?‑‑‑No.
And he hadn’t left you?‑‑‑No.
He hadn’t moved out on you?‑‑‑He had moved out of the marital home, yes.
You see, have you read the affidavit that Ms [S] swore?‑‑‑Yes.
She says that in mid-2004 that you told her that [the husband] wanted to separate from you and that about a month after that you told her that [the husband] had moved out to [L]. Do you recall reading that in her affidavit?‑‑‑Yes.
And that’s consistent, can I suggest to you, with exactly what happened. Correct?‑‑‑Correct.
Well, you must have considered yourself to be separated from [the husband] when those events unfolded in 2004 and you related them to Ms [S], weren’t you?‑‑‑Yes.
Well, that would sit somewhat inconsistently with your evidence earlier today, wouldn’t it?‑‑‑Yes. (Transcript, 22 August 2011, pp 15-16)
She failed to disclose that until September 2004 household expenses were paid out of a joint account from funds the husband transferred from an account in his sole name. Or that in September 2004 she established an account in her sole name with the National Australia Bank to which the husband did not have access. Or that by December 2004 he commenced payments called maintenance and by 2005 he commenced monthly electronic payments into this account called “child support”. On this topic the following exchange highlights the misleading nature of the wife’s evidence on this topic:
Okay. Now, bearing in mind your marital relationship as you describe it, did it not strike you oddly at the time that from 2005 [the husband] was paying to you these amounts of money every month that he was describing as “child support”?‑‑‑No.
You didn’t see child support as something that one parent pays to another after they separate as a contribution to the financial support of a child?‑‑‑Yes, I do see it as that.
Right. Well, in that context his four years from 2005 through to 2008 putting these account payments into your account labelled in that fashion, can I suggest, was revealing of his mind being very different about the status of your relationship, at least, as opposed to yours?‑‑‑On the bank statements, yes.
Because you wouldn’t call it child support; is that right?‑‑‑No.
And you wouldn’t call payments to you “maintenance” I take it then either?‑‑‑No.
No. You’re quite sure about that? Do you want to think about that for a minute because I’m suggesting to you that you assigned such descriptions to payments that were received by you on occasion between 2004 and 2008; do you accept that?‑‑‑Yes.
And that was because you knew full well that they were amounts of money being received by you pursuant to the terms of an agreement you had reached with [the husband] consequent on the breakdown of your marriage?‑‑‑No. (Transcript, 22 August 2011, pp 17-18)
She later conceded that as early as 2005 she too recorded in her bank records payments as being maintenance. In addition, the wife failed to disclose that the parties entered into an arrangement whereby, following specific authorisation from the husband, she was able to withdraw specific amounts from his account. For example $74,980.80 on 31 January 2007 which she categorised in her bank records as “spousal maintenance.” Or that after September 2004 he no longer paid the child N’s school fees and from that time she paid these from his monthly payments. No less importantly she failed to disclose that in 2006 the husband proposed a financial settlement in relation to which she obtained legal advice. In this regard, agreement was reached albeit its precise details are not in evidence.
In short, cross-examination established that the wife gave a highly selective account of what occurred after September 2004 and withheld evidence which strongly supported the husband’s claim that this is when they separated. That said, there was no dispute that the parties remained in close contact. They socialised extensively as a family, occasionally holidayed together once without children and otherwise as a family, briefly resumed a sexual relationship, continued to deal with property issues jointly, the wife came to the husband’s assistance when he was ill and to a degree maintained a façade that the marriage continued. The point being that for family and professional reasons associated with the husband, the parties did not widely communicate their separation. There is no doubt that after the husband moved to the L property, they went through a tumultuous period during which they united as parents, with the wife hopeful until 2008 that they would reconcile and the husband intent to behave well towards his daughter’s mother, to remain actively involved in both children’s lives and to give them all time to adjust to the reality of separation.
Ms S gave evidence in the wife’s case about how often she and her husband spent time with the parties after 2004 and her understanding about the state of their marriage. Apart from her discussions with the wife, the gravamen of her evidence is that the parties and the Ss socialised at least weekly, either at L or Sydney suburb 1 and that the husband kept clothes and belongings at the Sydney suburb 1 property. As to the latter, but not the former, there is no issue. Although Ms S was and remains the wife’s confidant, her affidavit suggests that she was unaware of the matters conceded by the wife during cross-examination. In other words, she too had a selective account of what was really going on. Thus, although Ms S was unmoved during cross-examination, her evidence carries less weight than that afforded to the husband’s.
Unfortunately, it is necessary to observe that the wife’s evidence about the date of separation was troublingly misleading and appears to have been designed to obfuscate rather than illuminate the facts. The husband’s evidence is not similarly compromised.
The wife’s affidavit evidence about the husband’s involvement in the children’s lives before and after separation is similarly prone to mislead. In relation to C, the gravamen of her affidavit evidence is found in paragraph 141 where she said “[C] did not see his biological father or extended family at the applicant’s insistence.” As to the nature and extent of C’s father involvement in his life, a more accurate and different picture emerged in cross-examination:
He was in his first year at school when you and [the husband] commenced living together?‑‑‑Yes.
His father and yourself had not lived together during the time of [C’s] life?‑‑‑No.
Indeed, you told [the husband] subsequently, did you not, that [C’s] father had, at one point, been denying that he was the father and asking you to undergo DNA testing?‑‑‑Correct.
And [C’s] father had, but for a couple of occasions visiting with a birthday present, made no contribution towards [C’s] support?‑‑‑No.
When you say “no” there, you’re agreeing my proposition?‑‑‑Yes.
And [C’s] – and that extended to he didn’t pay maintenance to that point of time and he didn’t at any stage thereafter?‑‑‑No.
And apart from a couple of visits, [C’s] father, sadly, had shown no interest in having a relationship with [C] throughout his life?‑‑‑Yes.
And would it be fair to say that [the husband] took a very different approach to [C]?‑‑‑What do you mean by a different approach?
Well, from the earliest days of your relationship, he showed an interest in [C]?‑‑‑Yes.
And established with [C] a warm relationship?‑‑‑Yes.
And they became very close?‑‑‑Yes.
And he provided, can I suggest, to [C] a father role in his life in every respect?‑‑‑Yes.
And you – and it was a role that, even between 2004 and 2008, you would have liked to have seen re-established in every way, wouldn’t you?‑‑‑Yes.
That was part of your desire at that point to have the family back together?‑‑‑Yes.
And during that period, he remained very good to [C]. Would you accept?‑‑‑Yes.
And he always showed an interest in [C], in his welfare?‑‑‑Yes.
And he – [the husband], can it be accepted, from the early days of your relationship, provided you with a great level of assistance in relation to [C]?‑‑‑Yes.
Life must have been much easier to now be living with a man who wanted to be involved with [C] than, effectively, being a single parent. Would that be fair to put?‑‑‑Yes.
And he had no reluctant at all from the earliest days in providing for all of [C’s] financial needs. Is that correct?‑‑‑Yes. (Transcript, 22 August 2011, pp 37-38)
So too, in relation to N, the wife’s affidavit evidence in relation to the husband’s pre and post separation involvement in her care told only part of the story. Curiously she approached this issue on the basis of what he did not do, examples of which she gave. It was cross-examination that she conceded that he, in effect, played a loving and active role in N’s life. Ultimately and notwithstanding her affidavit evidence, the wife agreed that when the husband was at home he was actively involved with both children and around the house.
In any event, it was agreed that the existing improvements at the L property would be demolished and replaced by a newly built luxury home. This was undertaken in two stages. Following months of preparation and, after quotations from three builders, in March 2005, the husband entered into a building contract with X Constructions Pty Ltd. The contract price was $1,636,500.00 which took the property to lockup stage but did not include a complete fit out. Planning approval was required in relation to which the wife joined the husband in the planning application. So that it is clear, the wife was reasonably well informed about the magnitude of the improvements the husband intended for the L property. It appears that because she remained hopeful they would reconcile and that she would join him at the L property, she did not object to the scale of expenditure and development undertaken. For his part, because the husband planned to live at the L property for many years he was unconcerned that in the short term the magnitude of the development overcapitalised the property.
Following development approval, the parties obtained a $1.4 million construction loan from the National Australia Bank, all of which was applied to the L property. In August 2008, the husband contracted D Builders Pty Ltd to complete the L property fit out for a further $1,694,812.00. Pursuant to orders made on 7 October 2010, the wife transferred to the husband her interest in the L property following which he borrowed $350,000.00 from HSBC Bank which was paid to her. Of this amount $200,000.00 constituted partial property settlement (legal expenses) with the remaining $150,000.00 to be categorised at the final hearing. This latter sum was paid via P Pty Ltd. Although it is agreed the husband will retain the L property, the property is listed for sale. At August 2011 it was valued by Mr V (the joint real estate valuer) at $5 million. During the hearing the husband rejected an offer for its purchase at $5.5 million and made a $6.5 million counter-offer. For reasons not disclosed the sale failed and the property remains on the market. In the revised balance sheet received on 21 November 2011, the parties agreed the L property was worth $5 million. The L property was revalued in March 2012 and it is agreed that it is now worth $4.5 million. It is apparent that considerably more has been spent on the acquisition and development of the L property than it is worth.
Along with three friends the wife incorporated WM Pty Ltd in May 2006. This is a craft business. The wife did not invest any funds in the business. The business leased a shop at L where, for six months in 2006, the wife served customers, answered telephones and taught groups how to do the craft. She did not receive wages or dividends and in June 2007 resigned as director and transferred her shareholding.
Whilst on tour with the group in the overseas in August 2006, the husband was unwell. He had, for some time, experienced symptoms which required treatment and compromised his ability to perform. Because of this, on a couple of tours an understudy performed in his stead. In any event, his symptoms in August 2006 precipitated the husband’s early departure from the tour and he returned to Sydney. Until his recent return to the group, this was the last time he performed with them. Having taken further medical advice in October 2006 the husband resigned. The following week he was diagnosed with a medical condition.
In advance of settlement, on 29 June 2007 the group paid the husband $2 million. In total he received a prepayment in the amount of $2,502,445.00 plus franked dividends of $800,000.00. From these funds, he spent approximately $388,000.00 on the acquisition of specified celebrity memorabilia about which the wife was aware. Indeed in 2006 she loaned him $80,000.00, which he repaid, and was used in relation to the celebrity venture. By early 2008 he was in discussion to establish a permanent home for the collection. The husband was offered space in a public building in K for which an entry fee would be paid. It was early in 2009 that his celebrity collection opened at K.
On 14 April 2008, the husband and P Pty Ltd, entered into a settlement agreement with the group. The disposition of these funds is set out at pars 224-227 of the husband’s affidavit. Relevantly, this included:
· $5,148,575.00 tax;
· further tax - $422,020.00;
· acquisition of celebrity memorabilia - $4,168,953.00;
· storage of celebrity artefacts - $29,392.00;
· improvement of the property at K - $5,769.00;
· motor vehicles - $120,899.00;
· $3,203,481.00 loan to PP Pty Ltd (as at 28 June 2011);
· conservation and improvements to the L property - $4,011,133.00;
· $200,000.00 partial property settlement to the wife;
· $151,500.00 to the wife to be categorised in this hearing;
· $93,000.00 child support for the child N;
· school fees for the child N - $6,910.00; and
· charitable donations - $24,500.00.
From the settlement the husband made the following payments in reduction of mortgages:
· $500,000.00 on 4 July 2007 to the L property;
· $1,100,000.00 on 14 April 2008 to the L property;
· $5,786.73 on the L property paid 16 April 2008;
· $2,524,000.00 on the L property on 14 April 2008;
· $380,000.00 on K property paid 14 April 2008;
· $1,617.42 on K property paid 16 April 2008; and
· $510,000.00 on Sydney suburb 2 property paid 23 June 2008.
PP Pty Ltd was incorporated in May 2008 with the husband its sole director and shareholder. As its name suggests, the company was incorporated to primarily carry out property development. It is also the vehicle through which, following the wife removing him as a director of P Pty Ltd in 2009, he receives group related and other income, which will be discussed later. There is an issue about the utilisation of tax losses as a consequence of failed property ventures offset royalty and contract income. In this regard property sale proceeds (and losses) are brought to account on this company’s revenue account. In any event, when PP Pty Ltd was established, it was the husband’s intention that, through the development and sale of luxury properties he would, in the long-term, optimise his settlement. He considered and rejected significant investment in the stock market, in relation to which recent falls concerned him. Essentially, he considered the potential to profit from property development was greater and the associated risks lower than in the share market. He planned to acquire a number of properties which he would develop one at a time and in turn use the profit from one property to develop the next. To this end, he negotiated a $4 million line of credit from Bank of Queensland for PP Pty Ltd in mid 2008 which he alone personally guaranteed.
In July 2008, PP Pty Ltd purchased D Road, L (“[D] Road”) for $1,575,000.00. Before this the husband attended a number of auctions of comparable properties and determined that D Road was worth more than he ultimately paid for it. He then marketed the property for sale as a block of vacant land with permission for a 90 square home with tennis court and pool. When it did not sell the husband took advice from property developers and decided the best way to absorb the cost price of the land was to build. He retained MB Company and spent approximately $2.7 million completing the dwelling and improving the property. The property was initially marketed at $5.5 million and, after six months lapsed without an offer, he lowered the sale price. Following this, in April 2010, he accepted an offer to purchase for $4.4 million. However, when the purchasers did not exchange he put the property to auction. Eventually the property sold in December 2010 for $3.41 million. When GST and interest on the loan are taken into account, about $1.362 million was lost.
The husband initiated these proceedings on 10 September 2008.
PP Pty Ltd purchased HP Street, Sydney suburb 4 (“[HP Street]”) for $2.1 million in October 2008. Thereafter, the husband engaged a licensed builder who supervised improvements to the existing dwelling and property. Including costs associated with the acquisition, holding costs, GST and the costs of improvements, the husband spent an additional $761,590.00. It was then listed for sale, and, after months without an offer, the husband changed real estate agents and the property was listed for sale at $2.75 million. When this was unproductive, the property was listed for auction which, because of lack of buyer interest, did not proceed. The property was sold on 6 November 2009 for $2.425 million which equates to a loss of approximately $437,000.00. The husband explained that his decision to sell this property was motivated by an imminent conciliation conference in relation to which he considered it prudent that he free up capital, I infer to assist with the parties unfruitful settlement discussions.
The day after PP Pty Ltd purchased HP Street, it purchased F Road, L (“[F] Road”) for $1.47 million. In addition to $104,000.00 costs associated with its acquisition, approximately $700,000.00 has been spent on landscaping, maintenance fees, project management fees and earthwork carried out to level the site. It had been the husband’s intention to build a 70 square home on F Road. However, when the $4.4 million D Road sale collapsed he decided that further costs were beyond his reach. By that time (approximately September 2010) he was sensibly concerned that the market for luxury homes was falling and further expenditure on F Road would be imprudent. F Road was thus listed for sale at $1,395,000.00. As at August 2011, the highest offer was $950,000.00. At that stage, the costs associated with acquisition, development and interest on the loan were approximately $1.02 million. According to the real estate valuer that the property was then worth $1.2 million. At that time F Road was the last piece of real estate owned by PP Pty Ltd and, for the purpose of that company’s valuation, the real estate valuer’s opinion about its value at $1.2 million was agreed. Because it was agreed PP Pty Ltd would be transferred to the husband, the effect of this was that he continued to manage disposition of F Road and service its associated loan and expenses.
F Road sold on 27 January 2012 for $1 million. Excluding holding and selling costs, this results in an approximate $1.49 million loss. From the sale proceeds, relevantly the husband discharged the HSBC mortgage ($352,102.72) and paid $538,481.67 to the Bank of Queensland which reduced the amount outstanding from $1,107,185.00 (August 2011) to $523,391.00. With PP Pty Ltd having disposed of its final piece of real estate the parties agree (as they did in August 2011) that it has no value. As a consequence of the sale, however, the husband’s credit loan account has been reduced from $264,392.00 to $66,256.00. Although the amount of the loan account is agreed, there is an issue about whether, as the company expert says should happen, this amount should be included as the husband’s asset. Essentially, it is his assertion that the company’s capacity to repay the loan account is too uncertain to warrant inclusion. There is an allied issue in relation to the use of tax losses offset against royalty income to pay the loan account and whether if the royalty stream is an asset (as the wife and company valuer contend) that it involves double counting. This is a matter to which I will return.
Interim orders were made on 10 November 2008 which required that the husband pay the wife $100,000.00 by way of partial property settlement. Eleven months later a similar order which required him to pay a further $100,000.00 was made. With these orders the husband complied. As has already been mentioned husband relinquished occupation of the Sydney suburb 2 property “for the purposes of the wife renting out the property”. It will be recalled that within weeks she allowed Mr G and Ms U to move in and, although she signed a lease with Mr G she says she did not enforce his obligation to pay rent. Her explanation that he was unable to afford to pay her sits uncomfortably with her decision to retain him as her financial advisor and pay him $80,000.00. Even if the wife did list the property for rental the way in which she approached this tenancy suggests she had little interest in securing a tenant who paid commercial rent.
In November 2008, PP Pty Ltd purchased MD Grove, Sydney suburb 5 (“[MD Grove]”) for $570,000.00. Including costs associated with its acquisition, $4,000.00 painting, GST and realisation costs, when MD Grove sold in April 2010 it returned a profit of approximately $20,000.00. When interest on the loan is taken into account, it is likely that overall this transaction resulted in a small loss.
On the same day PP Pty Ltd purchased MD Grove it completed the purchase of a Central Coast property for $400,000.00. Prior to its purchase the husband informally agreed with the owner of an adjacent property to jointly develop the combined site upon which 10 townhouses would be built. Shortly after the Central Coast property settled the husband discovered the adjacent property was sold. He investigated the viability of developing five townhouses on the land he owned and decided that the construction costs would not be recouped. Thus, rather than incur continuing holding costs, the Central Coast property was sold in December 2010 for $260,000.00. This represents a loss of about $154,000.00.
It will thus be seen, that in the space of five months, through PP Pty Ltd in capital costs alone, the husband spent $6.115 million acquiring the five parcels of real estate discussed above. In broad terms, $3.4 million has been lost.
In about January 2009, the husband established KK Company to produce and sell merchandise and display celebrity memorabilia. In May 2010, KKN Pty Ltd was incorporated with the husband its sole director and shareholder. That company, which has not yet commenced to trade, is intended to be the corporate vehicle through which income derived from KK Company will be streamed via licence fees paid by the company. The celebrity memorabilia owned by KK Company, not the company with a similar name, has an agreed value of $1.97 million. It is agreed that KKN Pty Ltd and KK Company will be retained by the husband.
It will be recalled that royalty income from T Pty Ltd was paid to P Pty Ltd. Although the wife was its sole shareholder, she and the husband were employees and he its sole director. He executed a loan agreement with the company on 1 July 2009. The wife does not have a loan agreement with the company. According to the wife she was concerned about the husband’s expenditure of P Pty Ltd money and, thus without notice to him, on 12 October 2009 she removed him as director and in his place appointed her friend and financial advisor, Mr G. The following day the husband withdrew $500,000.00 from P Pty Ltd’s Bank of Queensland account which he transferred to his account. Of the company funds which remained the wife spent $283,269.46 for her own purposes.
On 19 October 2009, via P Pty Ltd, the wife paid Mr G $80,000.00. This is part of an agreed retainer of $130,000.00 plus 9 per cent superannuation for 12 months work. She has subsequently agreed no further funds will be paid to him. At par 202 of her affidavit, the wife lists work undertaken by Mr G on her behalf. In relation to this expenditure, the companies expert noted that Mr G has not rendered a tax invoice and expressed the opinion his fee is excessive even if the proposed services had been delivered. In view of there being no financial statements prepared by Mr G for entities in which the wife has an interest as at July 2011, it is apparent he has not even delivered the services for which he was retained. Nor did he use these funds to pay rent for the Sydney suburb 2 property.
The parties agree that P Pty Ltd is to be transferred to the husband. Part of their agreement involves the wife indemnifying the husband in relation to Mr G’s involvement with this company. This includes an indemnity in relation to the taxation consequences, if any, as a result of money paid to him being treated as a company expense. The parties jointly instructed the company expert to value various interests as well as to calculate the taxation implications that arise if P Pty Ltd is wound up. Although the company will continue to trade, it is agreed that the steps recommended by her at paragraph 2.4 of her report (…B 9) will be undertaken. Put simply, a series of franked and unfranked dividends will be declared and the wife ordered to transfer the company’s assets to the husband at market value. This will trigger a tax liability payable by the husband of $297,430.00 and $115,348.00 by the wife. P Pty Ltd will become liable to pay $43,208.00 tax on the gain attributable to the transfer of assets and the interest income derived on the husband’s loan account. As part of the parties’ property settlement these taxation liabilities will be met by the husband.
In October 2009, without notice, the wife removed the husband as a director of CH Pty Limited and replaced him with Mr G. The parties agree with the company expert that CH Pty Limited has no value. It is agreed that the wife will transfer her interest in this company to the husband.
On 23 January 2010, the husband married Ms Z. Ms Z has two children aged 6 and 8 by her former partner who passed away in 2007. She and the husband have two children, one newly born and the other who is two.
On 29 March 2011, the parties entered into final parenting orders. Essentially these orders provide that they have equal shared parental responsibility for their daughter who will continue to live with the wife. The child will spend time with the husband during school term one evening each week and on other occasions by agreement.
Sometime in early September 2011 the Managing Director of TH Pty Ltd contacted the husband and asked whether he would consider returning to the group for a period as an employee. Between late 2011 and early 2012 meetings were held by the husband with the group’s Managing Director and some of its principals. Once agreement in principle was reached, on 9 January 2012 the group offered to contract PP Pty Ltd to provide the husband’s services as an entertainer to [group name] Pty Ltd commencing 18 January 2012 until 31 August 2012. On 17 January 2012, on behalf of PP Pty Ltd, the husband executed the agreement.
The effect of the agreement is that the group will pay a fixed amount to PP Pty Ltd plus GST for the term of the contract, fortnightly in arrears. The group will meet touring expenses and pay a daily allowance for each night of overnight travel. The group will approach its sponsors to extend to the husband the same benefits during the contract period as sponsors provide to the group. Provision is made for the group, at its election, to pay the husband a performance bonus at the end of the term. The criteria for a performance payment are not identified and are unknown to the husband. It would be mere speculation to conclude that a performance bonus may be paid.
This contract does not alter the agreement made between the husband and the group on his retirement. So that it is clear, he is an employee and has not regained an interest in the group. His pre-existing song assignment agreement with T Pty Ltd is unaffected. The husband will receive royalties arising from songs to which he contributes during the contract. In relation to control and marketing, the husband has not gained control over the group’s songs, performances or any say in relation to the sale of the group’s products.
There is no prospect that the husband will continue as an entertainer with the group after 31 August 2012. Nonetheless, it is the husband’s hope and expectation that he will retain a degree of involvement with the group at a creative level, particularly as a songwriter. This appears reasonably likely.
General principles for the adjustment of matrimonial property
The approach to the determination of an application under s 79 is well established by authority. In the Marriage of Lee Steere and Lee Steere (1985) FLC 91-626; In the Marriage of Ferraro (1993) FLC 92-335; In the Marriage of Clauson (1995) FLC 92-595. The process ordinarily involves a four part procedure. Firstly, identifying the property, liabilities and financial resources of the parties at the time of the hearing. Secondly, evaluating the contributions made by the parties as defined in s 79(4)(a) to (c) and the effect of any proposed order upon the earning capacity of either party. I must then evaluate the matters contained in s 75(2) insofar as they are relevant, any other order made under the Act affecting a party or child and any child support under the Child Support (Assessment) Act 1989 that a party to the marriage is to provide, or might be liable to provide in the future, for a child to the marriage.
In determining what order the Court should make under s 79, the Court must be satisfied in all the circumstances that it is just and equitable to do so (s 79(2)). It is the justice and equity of the actual orders that the Court must consider. Russell v Russell (1999) FLC 92-877.
Assets, liabilities and financial resources as at the date of hearing
The parties reached agreement as to the value of most assets and liabilities. Aspects of their agreement are documented in the table below, as are my findings in relation to contentious matters. In relation to some items, there is a contradiction between contentions contained in the various Balance Sheets and submissions. For example, on 24 August 2011 the wife’s counsel conceded that credit card liabilities would be “taken out before your Honour divides the property.” Yet the amounts were included in a later Balance Sheet in relation to which it is now argued that they should be included. On 24 August 2011 counsel for the wife argued for inclusion of about $538,000.00 and not the $938,577.00 the husband paid the wife post separation, yet the higher amount is included in the final Balance Sheet. In any event, on 21 November 2011 the parties submitted an updated balance sheet. It showed that after judgment was reserved agreement was reached in relation to the values of the L property, the husband’s paid legal costs, celebrity memorabilia and motor vehicles sold by him. Further evidence in relation to assets and liabilities and another Balance Sheet was provided in March 2012.
Description Agreed Value ASSETS L property (H) Agreed $4,500,000 Sydney suburb 1 property (J) Agreed $950,000 K property (J) Agreed $525,000 Sydney suburb 2 property (W) Agreed $475,000 Funds in bank (W) Not agreed $54,442 Funds in bank (H) Not agreed $15,908 Shares (W) Not agreed $18,034 1256 IAG Shares (H) Not agreed $4,157 Toyota motor vehicle (W) Agreed $16,000 Toyota motor vehicle (H) Agreed $50,000 Yamaha motorcycle (H) Agreed $4,150 Kia motor vehicle (H) Agreed $30,000 W Pty Limited (W) Agreed Nil PP Pty Limited (H) Agreed Nil KK Company (H) Agreed $1,970,000 KKN Pty Limited (H) Agreed Nil JP Pty Limited (H) Agreed Nil P Pty Limited (W) Agreed $1,666,000 CH Pty Limited (W) Agreed Nil CH Pty Limited – loan account (H) Agreed $1,041 P Investments Pty Limited (W) Agreed Nil Furniture, contents and jewellery (W) Agreed $21,825 Furniture, contents and jewellery (H) Agreed $61,875 Specified and other celebrity memorabilia (H) Agreed $2,257,625 Wife’s solicitors trust account (W) Agreed $9,834 Future Royalty Stream $834,000 Total $13,464,891 ADDBACKS Partial property settlement pursuant to orders (10 Nov 2008 and 8 Nov 2009) (W) Agreed $200,000 Money paid via P Pty Ltd pursuant to orders dated 7 October 2010 (W) Agreed to $200,000 $350,000 Sold specified celebrity memorabilia (H) Agreed $590,416 Informal property settlement advance (W) Not agreed $200,000 Legal Costs (H) Agreed $458,644 Total $1,799,060
LIABILITIES Bank of Qld line of credit (H) Agreed $523,391 P Pty Limited (H) Agreed $1,111,353 P Pty Limited (as at 1 August 2011) (W) Agreed $486,917 Potential Tax on funds withdrawn from P Pty Limited(deemed dividends) (W) Agreed $115,348 Potential Tax on from funds withdrawn from P Pty Limited(deemed dividends) (H) Agreed $297,430 P Pty Limited – further taxation payable on adjustment (H) Not agreed $43,208 E Auctions (H) Not agreed $34,903 Credit cards (H) Agreed as to $51,394 $51,394 Total $2,663,944 SUPERANNUATION MLC (H) Agreed $89,947 MLC (W) Agreed $21,754 Total $111,701 TOTAL NET ASSETS $12,711,708
The child N is 14½ years of age and will reside with the wife until she is 18 years. The wife has been primarily responsible for the child’s care and, after the parties separated, overwhelmingly so. The child N is sufficiently independent that the wife no longer collects her from school in the afternoon. The child is heavily involved in dancing, singing and acting which activities she pursues after school and on weekends. In addition to transporting her to lessons, performances and the like, the wife makes and purchases her costumes. The child’s homework is supervised by her and the child’s other needs attended to by the wife. With some modification for the child’s increasing maturity and independence, this is the style of care the wife will provide for the child for the next 3½ years. Although the husband will pay child support, as the Full Court in Clauson (1995) FLC 92-595 said at 81,991:
It should not be forgotten that the payment of child support in no way compensates the custodial parent for the loss of career opportunities, lack of employment mobility and the restriction of an independent lifestyle which the obligation to care for children usually entails.
These matters warrant an adjustment in the wife’s favour, albeit given the child’s age not great significance. .
Other than the child N, the wife does not have responsibility to support another person. The husband is obligated to support his wife until she returns to work, and their two small children. In relation to his stepchildren, a step-parent has a duty of maintaining a stepchild under the age of 18 years only if ordered pursuant to s 66M to do so. Given his wife’s limited earning capacity this is a matter of some significance and weighs in the husband’s favour. No such order has been made and thus, in relation to the husband’s stepchildren, s 75(2)(d) does not apply.
Section 75(2)(e), however, requires that the Court takes into account the responsibility of either party to support any other person. In other words, responsibilities to someone other than the parties to the marriage, or children of the marriage who have not attained the age of 18 years. Responsibility in this context means being answerable or accountable for support, or morally or legally obliged or duty bound to support any other person. Lutzke & Lutzke (1979) FLC 90-714, Aroney & Aroney (1979) FLC 90-709. The wife’s son C lives with the wife. He is currently studying fulltime at university and hopes to graduate at the end of 2012 with a Bachelor’s degree. He has a university cadetship and works one day a week as a teacher’s aide. After tax he earns $357.00 per week. According to the wife she spends at least $280.00 a week on C. This she is not obligated to do. In circumstances where C is an important part of this family it is appropriate to take into account in a small way that the wife will carry additional expenses for him, albeit for no more than another year or so. In a similar vein I take into account pursuant to this subsection that the husband is morally bound and will contribute to his step-children’s (Ms Z’s children) support.
Both parties enjoy a comfortable standard of living and will continue to do so. The application of subsection (g) does not warrant an adjustment in favour of either party.
Subsections (h) – (k) do not arise.
Subsection (l) recognises that a parent may legitimately consider his or her children’s needs when structuring life post separation. There is an obvious connection between s 75(2)(l) and ss 75(2)(b) and (c). The Court must be careful not to double count the impact upon the wife’s circumstances of her having N’s primary care. In the circumstances, I make no adjustment pursuant to the subsection.
Section 75(2)(n) achieves a cross-referencing between s 75(2) and s 79(4). The outcome of the assessment of contributions and other factors has resulted in the husband receiving 74 per cent of the assets compared to the wife’s 26 per cent. These findings have already been considered pursuant to subsection (b) and do not warrant further adjustment pursuant to the subsection.
Section 75(2)(na) concerns a party’s liability to pay child support. I have already considered the husband’s payment of child support to date. Under this subsection the Court considers the impact of child support payments not already taken into account. By his solicitor’s letter dated 30 June 2011 the husband informed the wife that he “intends paying $400.00 per month to your client by way of child support for the time being, given that he has a shortfall of income over expenses of $1,142.00 per week”. Since August 2005, it will be recalled that the husband paid $2,583.33 each month periodic child support. In April 2011, he paid $800.00 which, given that nothing was paid by him in May 2011, reveals his intention that the $800.00 be applied at the rate of $400.00 for April and May 2011. Although a child support assessment is prima facie based on income, ss 114 and 117 CSAA, inter alia, make plain that it is intended parents share equitably in the support of their children and that children have their proper needs met from reasonable and adequate shares in the income, earning capacity, property and financial resources of both of their parents. The husband’s unilateral decision by reference to his income alone to reduce his child support by $2,183.33 per month augurs poorly in relation to his voluntary provision of proper child support in the future. Notwithstanding his past history of appropriately generous child support, I am not satisfied that the words “for the time being” should be interpreted as indicative of this being his intention merely for the short term. Although the wife could anticipate success in relation to a departure application, in circumstances where the parties have each spent large amounts on legal expenses, it is quite feasible that the process of securing more than $400.00 per month child support from the husband would be expensive and not quickly resolved. Thus, while it is feasible that in the medium to long term the husband might become liable for more than $400.00 per month child support, it is more likely for the foreseeable future he will pay no more than that amount. An adjustment in his favour is not warranted.
There are a number of s 75(2)(o) factors to consider. Firstly, in relation to the wife’s son C, the wife had a legal duty to maintain C as did C’s father. Whilst the husband had parental responsibility for C, the child’s parents had the primary duty to maintain their son. The husband was only obliged to maintain the child if ordered to do so. As no maintenance order was made against him he was not duty bound to financially support C. As was explained in Robb the correct approach to this issue is:
In considering whether the justice of a case requires some act done by a party to be taken into account under s 75(2)(o), the Court should, we think, have regard primarily to the existence or otherwise of any legal obligations, as between the parties, in relation to the doing of that Act, and also, perhaps, to ordinary notions of justice and equity between the parties.
Ordinary notions of justice and equity between the parties mean that notwithstanding the husband’s guardianship responsibilities for C that his financial and non-financial contributions to the wife’s child from an earlier relationship are taken into account in a significant weight in the husband’s favour. I did not understand the wife claimed an adjustment should be made in her favour as a consequence of her contributions to C, whether pursuant to s 79(4) or s 75(2). In the context of this marriage, an allowance in her favour would be neither just nor equitable.
As mentioned earlier the sale of the F Road property resulted in further tax losses for PP Pty Ltd which the wife argues should be taken into account pursuant to s 75(2)(o), in effect as his resource. The magnitude of the remaining tax losses makes further tax losses of no value to the husband. It would be nothing more than mere speculation to conclude that the F Road property tax losses might ever be utilised by the husband and accordingly they will not be taken into account.
It is submitted by the counsel for the wife that she should receive an additional allowance for the property losses in order to achieve an equal division of property. Other than a submission that the court would find that these losses arose from ill advised investments, a principled basis for such an adjustment was not advanced. By way of background it is useful to record what the real estate valuer said about market conditions of Sydney’s Hills District which, it will be recalled, is where the husband, via PP Pty Ltd, acquired real estate which ultimately resulted in losses in the vicinity of $3.4 million. In relation to market conditions, the valuer’s evidence, which is accepted, is set out below:
…The Sydney residential and semi-rural prestige market has shown generally declining values over the past 5 years, after the peak of the book time market was reached in late 2003. The markets of Sydney’s Hills District showed some decline in 2004/2005 with poor market conditions, however through 2007 appeared steady. For Hills District acreage, late 2007 into 2008 saw the beginnings of a recovery in values, as confidence rose and values appeared to have reached a level to entice ready purchasers into the marketplace. However the continued rising interest rate climate and realisation of the Global Financial Crisis in late 2008 quickly and severely saw an end to this optimistic market, and prospective purchasers delayed or postponed indefinitely planned searching for property, as the market generally adopted a wait and see attitude effectively to gauge to the extent of the downturn. Volume of sales turned down sharply through the latter part of 2008, particularly in the prestige price ranges of say $2 - $5m, and if properties in this range had to be sold, quite substantial discounting was required, particularly if the market perceived any significant detrimental factors or a forced sale situation. Further, as prices achieved provided little incentive for properties to be marketed, few prospective vendors were encouraged to market properties in the first place.
Towards the very end of 2008, with interest rates falling and the government initiatives encouraging first home buyers, lower end properties of suburbs across most of Sydney began showing signs of improvement. At the mid point of 2009, the lower to middle value range of Hills District suburbs began to recover lost ground, encouraged by those ‘trading up’ benefited by first home buyer purchases at lower levels. The Hills District acreage market however has continued to struggle through to present time, with limited interest and generally slow turnover of property. At various times over the past 12 months, the lower end entry level acreage market would appear to have seen some slight strengthening in market demand with purchasers seeing opportunity to move from residential to acreage holdings with only relatively modest differences in values, though these trends have often been short lived. The subject is within a value range at the very upper end of the [L] market, and properties around this range are still showing very limited signs of interest, with few prospective purchasers in the marketplace with $3-$7m to spend, and those that are, have a wide range of prestige acreage locations and substantial improvements choice. The majority of sales having occurred in the upper range in recent time have typically been realised after quite extensive market periods of anywhere between 6 months to 3 years and dependant upon the vendor’s willingness to ‘meet the market’.
The higher end prestige range in the Sydney market would seem to be dependent on financial markets maintaining some normality/predictability and our economy remaining reasonably sound in terms of fundamentals, which has been impacted quite heavily as a result of various local and international events such as recent changes in Government on both national and State levels, natural disasters including the Queensland floods and Christchurch earthquakes, the strength of the Australian dollar, and attention being drawn to concerns over a weak European economy including Greece and a number of other smaller nations declared or on the border of becoming bankrupt and in need of substantial international financial assistance.
This evidence lends support to the husband’s decision to buy when he did was not reckless, foolish or wanton. While I accept that these transactions (excluding the L property) were his venture in relation to which the wife was not involved, he sought to optimise and not reduce his financial position. It would be neither just nor equitable to make an adjustment in the wife’s favour primarily because “the continued rising interest rate climate and realisation of the Global Financial Crisis in late 2008 quickly and severely saw an end to this optimistic market”.
There are no additional factors which require consideration.
Having regard to all of the s 75(2) factors, it is appropriate that there is no adjustment. This reflects the cumulative outcome of the findings I have made pursuant to s 75(2) (Tomasetti (2000) FLC 93-023).
The husband will, therefore, be entitled to a property settlement of 74 per cent or $9,406,664.00 compared to the wife’s 26 per cent or $3,305,044.00.
Section 79(2)
Because the Court must consider the actual orders, not just the percentage distribution, under s 79(2) justice and equity in cases like this requires that the Court stands back and looks carefully at the outcome of the s 79(4) and s 75(2) process. It is at this stage that the Court considers the actual structure of the orders. I will not repeat the findings made thus far. It is sufficient to refer to those which relate to the quantum and nature of the husband’s greater initial contribution which was the cornerstone for what followed, that thereafter he made the overwhelming and in dollar terms very large financial contributions to the property now available for distribution, the duration of the period which has elapsed since the parties commenced cohabitation and their contributions, notably the wife’s in her role as a homemaker and parent, made therein. Contributions continued post separation in the manner discussed. I am conscious that notwithstanding the wife’s responsibilities for the child N in particular and her limited prospects for remunerative paid employment she has not secured an adjustment pursuant to s 75(2) in her favour. Had I not been persuaded to include the husband’s future royalty income as an asset and thus this was taken into account at the s 75(2) stage, an adjustment in her favour would have been appropriate. However, there were also weighty considerations which s 75(2) required be considered in the husband’s favour; specifically his contributions to the wife’s son C and his obligations to his wife, their children and to a lesser extent his step-children. I am comfortably satisfied that an outcome which distributes the available assets 74 per cent to the husband and 26 per cent to the wife is just and equitable.
The combined effect of the parties’ agreement about assets the wife will receive and my findings is that her property settlement entitlement will give her the following assets:
· Sydney suburb 1 property - $950,000.00;
· K property - $525,000.00;
· Sydney suburb 2 property - $475,000.00;
· Funds at bank - $54,442.00;
· Shares - $18,034.00;
· Toyota vehicle - $16,000.00;
· W Pty Ltd – nil;
· P Investments Pty Ltd – nil;
· Furniture, contents and jewellery - $21,825.00;
· Solicitor’s trust account - $9,834.00;
· Partial property settlement pursuant to orders (10 November 2008 and 8 November 2009) - $200,000.00;
· Money paid to P Pty Ltd pursuant to orders dated 7 October 2010 - $350,000.00;
· Informal property settlement add back - $200,000.00;
· MLC Superannuation - $21,754.00.
Total $2,841,889.00
The effect of the parties’ agreement that the husband will receive P Pty Ltd is that, relevantly, she will receive an indemnity in relation to her loan account and taxation payable as a consequence of the steps required to give effect to the transfer. Thus, the effect of the property settlement orders is that the wife will receive $3,305,044.00 overall which means a balancing amount of $463,155.00 is to be paid to her.
Calculated on the same basis the husband will receive:
· L property - $4.5 million;
· Funds at bank - $15,908.00;
· Shares - $4,157.00;
· Toyota vehicle - $50,000.00;
· Yamaha motor cycle - $4,150.00;
· Kia vehicle - $30,000.00;
· PP Pty Ltd – nil;
· KK Company - $1.97 million;
· KKN Pty Ltd – nil;
· JP Pty Ltd – nil;
· P Pty Ltd - $1.666 million;
· CH Pty Ltd – nil;
· CH Pty Ltd loan account - $1,041.00;
· Furniture, contents and jewellery - $61,875.00;
· Celebrity memorabilia - $2,257,625.00;
· Future royalty stream - $834,000.00;
· Sold celebrity memorabilia - $590,416.00;
· Legal costs - $458,644.00;
· MLC superannuation - $89,947.00.
Total $12,533,763.00
The husband will have the following liabilities:
· Bank of Queensland line of credit - $523,391.00;
· P Pty Ltd - $1,111,353.00;
· Indemnity to wife re P Pty Ltd - $486,917.00;
· Tax on wife’s (P Pty Ltd) deemed dividends - $115,348.00;
· Tax on husband’s (P Pty Ltd) deemed dividends - $297,430.00;
· P Pty Ltd – tax on gain - $43,208.00;
· E auctions - $34,903.00;
· Credit cards - $51,394.00.
Total $2,663,944.00
The effect of this is that to give effect to my findings, the husband is required to pay the wife $463,155.00. These funds are not immediately available and it is appropriate that he has three months within which to rearrange his complicated financial circumstances in order to make the payment. Although the wife would wish to receive the payment sooner, it is necessary to strike a just balance between her entitlement to promptly receive the adjustment with affording the husband a proper opportunity to reorganise his financial circumstances and raise the amount.
Before entering the proposed property settlement orders my reasons will be published to the parties so that their lawyers may proofread the orders to ensure that my calculations and findings are accurately reflected therein.
In her final suite of proposed orders the wife abandoned an application for spousal maintenance. Nonetheless it is appropriate to record that having regards to the findings already made and the outcome of the property settlement proceedings, it is difficult to see how she could have established that she is unable to adequately support herself. For the avoidance of doubt, an order will be made which dismisses any outstanding application for spousal maintenance.
Other Matters
An issue which requires further consideration is whether, even in an anonymised form, publication of these reasons for judgment will inevitably identify the parties. Having given the matter considerable thought it is my preliminary view that notwithstanding the interests of open justice, this is a case where the Court’s reasons should be suppressed. An opportunity will be afforded to the parties to make further submissions on the point.
I certify that the preceding one hundred and ninety three (193) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Ryan delivered on 3 April 2012.
Associate:
Date: 3 April 2012
Key Legal Topics
Areas of Law
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Family Law
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Property Law
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Tax Law
Legal Concepts
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Remedies
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