RADCLIFFE & SABLAN

[2019] FCCA 2985

FEDERAL CIRCUIT COURT OF AUSTRALIA

RADCLIFFE & SABLAN [2019] FCCA 2985

Catchwords:
FAMILY LAW – Property settlement – post-separation contributions – valuation of business – CGT and other taxation liabilities – addbacks – section 75(2) factors.

Legislation:

Family Law Act 1975 (Cth), ss.72(1), 75(2), 79(2), 79(4).

Cases cited:

Bevan v Bevan (2013) 279 FLR 1; (2013) 49 Fam LR 387; [2013] FamCAFC 116
Briese, In the Marriage of (1985) 82 FLR 369; (1985) 10 Fam LR 642; (1985) FLC 91-713
Farnell, In the Marriage of (1995) 128 FLR 374; (1996) 20 Fam LR 513; (1996) FLC 92-681
Kowaliw and Kowaliw [1981] FamCA 70; (1981) FLC 91-092

Livesey v Jenkins (1985) 1 All ER 106

Mallet v Mallet (1984) 156 CLR 605

Norbis v Norbis (1986) 161 CLR 513

Stanford v Stanford (2012) 247 CLR 108

Oriolo and Oriolo (1985) 10 Fam LR 665; (1985) FLC 91-653

Applicant: MR RADCLIFFE

Respondent: MS SABLAN

File Number: MLC 7259 of 2015

Judgment of: Judge Mercuri

Hearing date: 7, 8, 9 November 2018, 31 January 2019 and 1 February 2019

Date of Last Submission: 1 February 2019

Delivered at: Melbourne

Delivered on: 24 October 2019

REPRESENTATION

Counsel for the applicant: Mr Williams

Solicitors for the applicant: Kingston Lawyers

Counsel for the respondent: Mr Hall

Solicitors for the respondent: Saxbys Lawyers

ORDERS

1. D Pty Ltd Pty Ltd, (“D Pty Ltd”) be joined as a party to these proceedings.

2. Within 60 days:

   (a)the husband and wife, in their personal capacities and as trustees of any trusts or as directors of any corporate trustees and D Pty Ltd do all such acts and things and sign all such documents as may be required to list the real property situate at and known as G Street, Suburb H in the State of Victoria, being the whole of the land more particularly described in Certificate of Title Volume … Folio … (“the former matrimonial home”) for sale (“the sale”) and the proceeds of sale be applied as follows:

   (i)firstly, to pay all costs, commissions and expenses of the sale;

   (ii)secondly, to discharge any mortgage and any other financial encumbrance affecting the former matrimonial home;

   (iii)thirdly, to pay the sum of $107,841.65 to Mr J;

   (iv)fourthly, to pay all capital gains tax arising from the sale of the former matrimonial home and the property situate at and known as E Street, Suburb H in the State of Victoria;

   (v)fifthly, subject to order (11) below, to pay any sums owed to the liquidator of K Pty Ltd (in liquidation); and

   (vi)the balance then remaining to be divided in the proportions of 70% to the wife and 30% to the husband.

3. Pending the completion of the sale:

   (a)the wife have the sole right to occupy the former matrimonial home and during such right of occupation, the husband pay all instalments pursuant to any mortgage or other encumbrance secured over the former matrimonial home and all rates and taxes and like apportionable outgoings of or with respect to the former matrimonial home as they fall due;

   (b)the husband have the sole right to any income earned by the business, D Pty Ltd;

   (c)the parties hold their respective interests in the former matrimonial home on trust pursuant to these orders; and

   (d)neither party encumber the former matrimonial home without the consent in writing of the other party.

4. Liberty be reserved to either party to apply with respect to the terms and conditions of and execution of the sale.

5. In the event that the parties cannot agree as to the sale price, the reserve price or any other terms and conditions of the sale (“the terms”), the terms shall be determined by the President of the Real Estate Institute of Victoria or his or her nominated agent or business broker.

6. Within 7 days of the date hereof, the funds held by the wife’s solicitors in controlled monies account numbered Westpac BSB … Acc … be distributed in the proportions of 70% to the wife and 30% to the husband.

7. Within seven (7) days from the date of these orders, the wife make the following chattels available for collection by the husband:

   (a)the husband’s motorbike;

   (b)all related motorbike equipment, including two helmets, three jackets specifically including leather jacket, pants and boots;

   (c)the husband’s mother’s small wooden cabinet which belonged to her grandmother;

   (d)the husband’s gifts from karate instructor (imitation katana/sword and ink painting print with porcelain weights); and

   (e)an electric grinder that belonged to the husband’s father.

8. Following settlement and completion of the sale (“the settlement date”), the wife do all acts and things and sign all documents required to transfer to the husband, at the husband’s expense, all of her right, title and interest in the following entities (“the entities”):

   (a)D Pty Ltd Pty Ltd;

   (b)D Pty Ltd Pty Ltd ATF the Radcliffe Family Trust;

   (c)the Radcliffe Family Trust;

   (d)the Radcliffe Property Trust; and

   (e)any other entity whether it be a trust, company or business in which the husband has an interest.

9. On or before the settlement date, the wife:

   (a)resign her position as director, guardian, appointer or any other office holding in the entities;

   (b)assign to the husband all of her entitlement to any loan accounts owing to her by any of the entities; and

   (c)transfer to the husband any shareholding in any of the entities (”the transfers”).

10. Contemporaneously with the transfers, the husband shall be solely liable for and indemnify the wife in relation to all debts and liabilities in his name or affecting any of the entities now or in the future or attaching to any item of property which he is to retain pursuant to these orders.

11. The husband be solely liable for and indemnify the wife with respect to any and all costs with respect to the liquidation of K Pty Ltd (in liquidation).

12. In the event that the husband and/or wife refuses or neglects to execute a deed/instrument in compliance with the provision of these orders, a Registrar of the Family Court of Australia is hereby appointed pursuant to section 106A of the Family Law Act 1975 (Cth) to execute all deeds and/or instruments in the name of the husband and/or wife and do all acts and things to give validity and operation to the deeds and/or instruments.

13. Unless otherwise specified in these orders and save for the purposes of enforcing any moneys due under these or any subsequent orders:

    (a)each party be solely entitled, to the exclusion of the other, to all other property (including real property and choses-in-action) in the possession of such party as at the date of these orders (the remaining furniture, personal possessions and like chattels in the former matrimonial home being deemed to be in the possession of the wife and the furniture, personal possessions and like chattels in the property being occupied by the husband situate at and known as M Street, Suburb N being deemed to be in the possession of the husband);

    (b)moneys standing to the credit of the parties in any bank account are to become the property of the party in whose name the account is registered and any accounts in the joint names of both the husband and wife shall be closed and the parties shall share the moneys in such accounts equally;

    (c)each party forego any claims they may have to any superannuation benefits belonging to or earned by the other;

    (d)insurance policies remain the sole property of the owner/beneficiary named therein;

    (e)each party be solely liable for and indemnify the other against any liability encumbering any item of property to which that party is entitled pursuant to these orders; and

    (f)any joint tenancy of the parties in any real or personal estate is hereby expressly severed.

14. The interim orders made 1 February 2019 remain in full force and effect.

AND THE COURT NOTES THAT:

(A)Pursuant to section 81 of the Family Law Act 1975 (Cth) the parties intend that these orders shall as far as practicable finally determine the financial relationship between them and avoid further proceedings between them.

(B)Section 121 of the Family Law Act 1975 (Cth) provides that it is an offence punishable by imprisonment for up to one year to publish or disseminate to the public any account of family law proceedings which identifies the parties, witnesses or other people concerned with the proceedings, unless specifically authorised by the court.

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

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT MELBOURNE

MLC 7259 of 2015

MR RADCLIFFE

Applicant

And

MS SABLAN

Respondent

REASONS FOR JUDGMENT

Introduction

1. This is an application for orders altering the property interests of the parties under section 79 of the Family Law Act 1975 (Cth) (“the Act”).

Background

1. The parties commenced a relationship in 1991 and moved in together shortly thereafter, although there is a dispute as to the precise date of cohabitation.  The applicant husband is 53 years of age and the respondent wife is 50 years of age. 

2. When the parties met, the wife had a child from a previous relationship, Ms VV born … 1988.  There are also three children of the relationship, Ms A born … 1997 (“Ms A”) who is now an adult, X born … 2002 (“X”) and Y born … 2006 (“Y”).

3. The parties have resolved parenting issues between them.  At the time of the trial, Ms A was living with the father and spending some time with the mother.  The two younger children live with the mother and spend 5 nights per fortnight with the father.

4. The father has since re-partnered with Ms O and they have two children.

5. At the time that the parties met, the husband was a health care worker and shortly thereafter he commenced his health care training. The mother was undertaking her public servant qualifications at the commencement of the relationship.  During the relationship she also studied, completing those studies in … 2000.  The wife has worked as a public servant on a sessional basis during the relationship.  Although she is qualified, she has not yet commenced work in that field.

6. After running a business in Suburb WW with his business partner, Mr P, for some years, the husband sold his share in that business to Mr P in 2005.  In 2006, he started a new business, D Pty Ltd which has developed into a successful and profitable business.  I will discuss this business in more detail throughout the course of these reasons.

7. The parties also ran another business, Ms A's Business. In 2011, the wife commenced a business called Q Pty Ltd.

8. In addition to the income generated from their physical labours and profits generated by the business, the parties entered into a number of other money-making enterprises over the course of their relationship, including the purchase and sale of real property.  Of particular relevance to these proceedings is the husband’s purchase of the following properties over the course of the relationship, together with a lifelong friend, Mr J:

   a)in 2002, the husband purchased a property at AAA Street, Suburb S (“the AAA Street, Suburb S property”) on trust for Mr J and his wife for $445,000;

   b)also in 2002, Mr J purchased R Street, Suburb S, (“the R Street, Suburb S property”) on trust for the husband and the wife for $398,575;

   c)in 2003, the husband and Mr J also purchased (1) and (2) U Street, Suburb V, Brisbane for $360,000 and $410,000 respectively (“the (1) and (2) U Street, Suburb V properties”).  Later that same year, the husband and Mr J sold (1) U Street, Suburb V prior to settlement; and

   d)also in 2003, the husband and Mr J purchased W Street, Suburb Z (“the W Street, Suburb Z property”) for $400,000.

9. In addition to their property dealings with Mr J, the parties’ various business interests have been conducted through the Radcliffe Property Trust (“RPT”) and the Radcliffe Family Trust (“RFT”).

10. In 2006, the parties, through the RPT, purchased the former matrimonial home at G Street, Suburb H (“the former matrimonial home”) for $685,500.

11. In 2007, the husband and Mr J sold the W Street, Suburb Z property and the parties purchased E Street, Suburb H (“the E Street, Suburb H property”) for $730,000, from which they commenced operating Ms A's Business.

12. The parties separated in July 2014 with the husband vacating the former matrimonial home.  Some twelve months later, he issued proceedings in the Family Court of Australia on 3 August 2015. 

13. In 2015, the husband sold the AAA Street, Suburb S property and the net proceeds were transferred to Mr J. 

14. In … 2016, a sale of land contract was signed for the R Street, Suburb S property with settlement due to occur in … 2017.  Ultimately, settlement was delayed as the wife lodged a caveat over the property. This issue was ultimately resolved when the matter came before her Honour Judge Riley on 3 May 2017 as discussed below.

15. The parties sold the G Street, Suburb H property in June 2018 and the sale proceeds were used to reduce the mortgage on the former matrimonial home.  The wife gave evidence that prior to the sale of the G Street, Suburb H property, the outstanding loans secured by the former matrimonial home totalled $986,000, but following the sale, the balance of those loans reduced to $481,797.[1]

    [1] Paragraph 31.2 of the wife’s affidavit affirmed and filed 1 November 2018.

Procedural background

1. The husband initially filed these proceedings in the Family Court of Australia.  Orders were made by consent at the case assessment conference on 27 October 2015 for D Pty Ltd and Ms A's Business to be independently valued.[2]

   [2] Order 2 of the interim orders made by consent on 27 October 2015.

2. The parties attended mediation in March 2016 but the matter was unable to be resolved.  The parties engaged Ms AA from Mr BB to undertake the valuation of the businesses in or about March 2016. 

3. The proceedings were then transferred to this court in May 2016. 

4. On 17 August 2016, a directions hearing was conducted before her Honour Judge Riley.  At that time, orders were made by consent for both the RPT and the RFT to be valued by Ms AA. 

5. It was also ordered by consent that:

   The costs of the valuations (including any associated costs of same) are to be paid for at first instance by the husband subject to order 4 of the consent orders made 27 October 2015.[3]

   [3] Order 3(a) of the interim orders made by consent on 17 August 2016.

6. Ms AA delivered a draft report on 22 July 2016, a further draft on 9 December 2016 and her final report on 20 December 2016.[4]

   [4] Page 21 of annexure S-2 of the affidavit of Ms AA affirmed 16 and filed 17 October 2017.

7. The matter then came before her Honour Judge Riley on 3 May 2017 where it was ordered by consent that the proceeds of the sale of the R Street, Suburb S property be paid into the trust account of Saxbys Lawyers, to be held in an interest bearing account in the names of both parties pending written agreement or further order as to how the funds were to be distributed.[5]

   [5] Order 1 of the interim orders made on 3 May 2017.

8. Judge Riley also ordered that the wife remove the caveat she had lodged on the R Street, Suburb S property, and further:

   3.the husband pay or cause to be paid:

   i.periodical payments for the loans and financial arrangements secured over:

   i.G Street, Suburb H;

   ii.M Street, Suburb N;

   iii.E Street, Suburb F;

   iv.the husband’s Motor Vehicle CC;

   v.the wife’s Motor Vehicle BBB;

   b.a monthly payment of $16,000 (inclusive of any salary) to the husband; and

   c.a monthly payment of $5,759 to the wife.

   4.Save for the payments referred to in order 3 and ordinary business expenses, the husband, by himself, his servants or agents be restrained from:

   a.withdrawing or utilising any funds standing in the name of any of the following entities:

   i.D Pty Ltd Pty Ltd;

   ii.D Pty Ltd Pty Ltd as trustee for the Radcliffe Family Trust;

   iii.the Radcliffe Family Trust;

   iv.the Radcliffe Property Trust;

   v.K Pty Ltd Pty Ltd;

   vi.DD Pty Ltd;

   vii.Ms A's Business; and

   viii.ABN … (“the entities”);

   b.selling, alienating, encumbering or dealing with any assets standing to his name or in the joint name of the parties whether as joint proprietors or tenants in common, or in which any of the parties may have an interest;

   c.selling, alienating, encumbering or dealing with any assets standing in the name of any of the entities whether held by the entities in their own right or in their capacity as trustee of any trust;

   d.divesting himself of any interest or control or reducing the value of his interest or control in any company and/or trust including, although not limited to, the entities;

   e.doing anything that has the effect of varying the terms of any trust deed relating to any trust in which the husband and/or the wife have an interest (whether present or contingent);

   f.doing anything that has the effect of removing himself or any of his servants or agents as a director of any company or appointor or guardian of any trust; and

   g.doing anything (directly or indirectly) that would cause or permit any of the entities to deal with any of their assets or to borrow any moneys.[6]

   [6] Orders 3 and 4 of the interim orders on 3 May 2017.

9. Judge Riley also ordered that the monthly payment to the wife of $5,759 was to be characterised at trial.[7]

   [7] Order 9 of the interim orders made on 3 May 2017.

10. On 9 February 2018, the husband’s application to sell the business was dismissed and the husband was granted leave to adduce further evidence with respect to the value of D Pty Ltd.

11. Orders were made on 25 May 2018 and 17 August 2018 for further discovery, further filing of expert evidence and for Mr J to be permitted to intervene in the proceedings. The parties were also ordered to attend mediation before the trial.

12. The matter did not resolve at mediation and the matter proceeded to trial on 7 November 2018.  It was initially listed for three days.  It did not conclude in the three days allocated and was adjourned part heard to 31 January 2019, with final submissions concluding on 1 February 2019.

Documents relied upon by the parties

1. The husband relied upon the following documents at trial:

   a)amended initiating application filed 12 July 2016;

   b)affidavit of Mr Radcliffe sworn 30 April 2017 and filed 1 May 2017;

   c)affidavit of Ms O sworn and filed 9 October 2017;

   d)affidavit of Mr B sworn 25 and filed 27 October 2017;

   e)affidavit of Mr J sworn and filed 27 October 2017;

   f)affidavit of Mr Radcliffe sworn and filed 27 October 2017;

   g)affidavit of Mr Radcliffe sworn and filed 13 November 2017;

   h)affidavit of Mr B sworn and filed 13 November 2017;

   i)updated financial statement filed 13 November 2017;

   j)affidavit of Dr L sworn and filed 8 February 2018;

   k)affidavit of Dr GG sworn and filed 28 February 2018;

   l)affidavit of Dr HH sworn and filed 28 February 2018;

   m)affidavit of Mr Radcliffe sworn and filed 16 May 2018;

   n)affidavit of Mr J affirmed and filed 8 August 2018;

   o)affidavit of Mr B sworn and filed 16 August 2018;

   p)affidavit of Mr Radcliffe sworn 15 and filed 16 August 2018;

   q)affidavit of Ms O sworn 26 and filed 28 September 2018;

   r)affidavit of Ms JJ sworn 28 September 2018 and filed 4 October 2018;

   s)affidavit of Mr KK sworn and filed 5 October 2018; and

   t)affidavit of Mr Radcliffe sworn 29 and filed 30 October 2018.

2. The wife relied upon the following documents at trial:

   a)affidavit of Ms AA sworn 16 and filed 17 October 2017;

   b)affidavit of Mr LL sworn 9 and filed 10 November 2017;

   c)affidavit of Ms Sablan affirmed 10 and filed 13 November 2017;

   d)financial statement filed 13 November 2017;

   e)affidavit of Mr MM sworn and filed 13 November 2017;

   f)affidavit of Mr NN sworn and filed 14 November 2017;

   g)affidavit of Mr LL sworn 28 and filed 29 May 2018;

   h)affidavit of Mr NN sworn and filed 15 August 2018;

   i)affidavit of Ms AA affirmed and filed 29 October 2018;

   j)affidavit of Mr NN sworn 30 October 2018 and filed 1 November 2018;

   k)affidavit of Mr C sworn 31 October 2018 and filed 1 November 2018;

   l)affidavit of Ms Sablan affirmed and filed 1 November 2018;

   m)further amended response filed 1 November 2018; and

   n)financial statement filed 1 November 2018.

Proposed orders

1. The husband’s proposal at trial was for an adjustment of the parties’ property interests in the proportions of 45% to him and 55% to the wife. 

2. The wife’s proposal at trial was that she receive an overall division of the asset pool in the order of 65% and the husband receive 35%. 

3. Whilst there is a difference between the parties as to the percentage adjustment in the final analysis, the real difference between the parties arises from what they each say should be included in the pool and the value to be attributed to those assets. 

4. For her part, the wife seeks orders which would see her retain the former matrimonial home without a mortgage or any outstanding legal fees, which she says she has no prospect of paying from her own resources.  The wife also seeks to retain her vehicle free of any encumbrance and for the husband to pay her a further sum which would result in an overall adjustment of 65% in her favour.  Moreover, the wife seeks that, pending the completion of these orders, the husband continue to pay her periodic spousal maintenance of $5,759 per month. 

5. In the alternative, if the court were to accept the pool as submitted by the husband, the wife seeks ongoing periodic spousal maintenance “in such sum as the Court determines having regard to the provisions of section 72 of the Family Law Act 1975 (Cth)”[8] as:

   a)the wife would need to rehouse;

   b)the wife would incur a capital gains tax liability (“CGT liability”) upon selling the former matrimonial home; and

   c)the wife would incur significant mortgage repayments upon securing appropriate rehousing.

   [8] Order 16 of the wife’s further amended response filed 1 November 2018.

Issues in dispute

1. The issues for determination in this case are:

   a)what assets and liabilities ought to be included in the pool;

   b)the value, if any, of D Pty Ltd; and

   c)if the wife’s asset pool is not accepted, what orders should be made, if any, for the wife to receive ongoing spousal maintenance.

Evidence of the parties

1. Both parties gave evidence and were subjected to extensive cross examination. 

2. In addition, the husband’s new partner, Ms O gave evidence, as did members of staff from D Pty Ltd. 

3. Mr KK and Ms AA also gave expert evidence about the valuation of D Pty Ltd.

4. Before summarising the evidence, I make the following general observations:

   a)the parties’ financial arrangements both during their relationship and post-separation were complex;

   b)both during and after the relationship, the husband undertook the principal role in managing the parties’ finances;

   c)the parties conducted their family finances by accessing income generated by the RFT; and

   d)the approach of managing the income and profit generated by D Pty Ltd through the RFT has resulted in a certain lack of transparency about where funds come from to meet the expenses of the parties. While this was not an issue during the parties’ relationship as the wife said she ‘trusted her husband’[9], it has become a significant issue post-separation.

   [9] Transcript page 252 at line 16.

5. It is apparent from the wife’s evidence and the way in which this litigation has been conducted that post-separation, no trust exists between the parties.  Further, the wife’s removal of funds from a D Pty Ltd account without the husband’s knowledge or approval did little to ameliorate this position.

6. The wife’s case at trial was largely premised on the proposition that the husband has accessed funds generated by D Pty Ltd, a business in which she is an equal share owner, without her knowledge or consent and has failed to properly account for those funds.

7. The husband was subjected to extensive cross examination.  He maintained his position that he had spent money from D Pty Ltd on expenses of the business, his family including now Ms O and their two children and had otherwise complied with the interim orders to the best of his ability, whilst trying to maintain a business which was generating the income necessary to support both himself, the wife and the children.  I found him to be a witness of truth.  He has provided an explanation of the movement of money generated by D Pty Ltd post-separation and I accept his evidence in this regard.

Ms O

Earnings from D Pty Ltd

1. Ms O is married to the husband.  She has been employed by D Pty Ltd since approximately 2011. 

2. The husband gave the following evidence with respect to Ms O:

   a)she works full time from home;

   b)she assists with the management of the business; and

   c)in addition, she undertakes a significant amount of work in promoting the business through social media platforms and the like.

3. It was put to the husband that as Ms O’s main role was now to care for her two young children, it could not be said that she was working full time in the business.  Implicit in this submission was the suggestion that in paying Ms O a full time salary and other amounts discussed below, the husband was diverting funds which ought to have been available for distribution between the parties. The husband rejected this suggestion and maintained his position that she contributed significantly to the profitability of the business.

4. Ms O also rejected this proposition and stated that she works around her children’s routine and also has the support of her mother, which enables her to work.  Her evidence in this regard was as follows:

   … I’m definitely a dedicated mother… but because I was with D Pty Ltd for such a long time, and I created a lot of my role… I was instrumental in… creating the YouTube and the website and the social media, and we’ve really taken the D Pty Ltd in a very different direction to what a normal business would have… we have clients come from all around the world… it’s something I can do on my phone, …I’m able to do that round the kids …[10]

   [10] Transcript page 186 at lines 37 to 47.

5. In addition to her salary, Ms O received payments from Google AdSense to the value of some $32,000.  The evidence of both Ms O and the husband, which I accept, is that Ms O was responsible for a significant amount of work in putting together and moderating various YouTube educational videos.  Initially, the purpose was not to generate any income or attract advertisers, however it soon became apparent that irrespective of whether they wanted advertisers, advertisements would be placed on the videos.[11]

   [11] Transcript page 187.

6. Ms O said:

   a)if they placed paid advertisements on their videos, they could control the advertising and by doing this, they generated some additional income; and

   b)the husband agreed for this money to be paid to Ms O in addition to her salary as compensation for her work and also in recognition of the fact that she spent a lot of time on weekends and evenings working on these videos.[12] 

   [12] Transcript page 187.

7. Notwithstanding the wife’s position as a director of D Pty Ltd and as a trustee of the RPT, it is common ground that even during the relationship, the husband took the lead in running the business, including hiring staff.  It is not suggested that at any stage, he was required to seek the wife’s permission before employing someone or determining an appropriate salary for them.

8. As the husband had the right to hire and fire, it was within his role to employ Ms O and pay her a salary that he considered commensurate with her skill and performance. I accept the evidence of the husband and Ms O that she has continued to work for D Pty Ltd and is entitled to be paid for such work. There is no basis on which this court could find that there was anything improper in her engagement or in the level of her remuneration.

Ms O’s property interests

1. It is also not in dispute that Ms O has the following property interests:

   a)a property at OO Street, Suburb PP (“the OO Street, Suburb PP property”) which she purchased in 2011;

   b)a property at QQ Street, Suburb H, (“the QQ Street, Suburb H property”) which she purchased from her mother in 2016; and

   c)a property jointly with the husband at M Street, Suburb N (“the M Street, Suburb N property”) which was purchased on … 2015.

2. In relation to the OO Street, Suburb PP property, Ms O gave evidence, which I accept, is that she purchased this property with the benefit of a loan of $8,000 from D Pty Ltd.  Her evidence, which was not disputed, was that she repaid that amount to D Pty Ltd within 24 months of the initial loan.[13] This occurred prior to the parties’ separation.

   [13] Paragraph 5 of the affidavit of Ms O sworn 26 and filed 28 September 2018.

3. Ms O deposed that her mother gifted her the $130,000 deposit to purchase the QQ Street, Suburb H property.[14] 

   [14] Paragraph 6 of the affidavit of Ms O sworn 26 and filed 28 September 2018.

4. The deposit for the M Street, Suburb N property was initially paid for by Mr J, the husband’s friend and business partner.  The parties borrowed $1,350,000 from ANZ to complete the purchase of the M Street, Suburb N property for $1,270,000, including repaying Mr J. The balance was used by Ms O to pay the stamp duty on the QQ Street, Suburb H property.[15]

   [15] Paragraph 8 of the affidavit of Ms O sworn 26 and filed 28 September 2018.

5. Ms O further deposed that the parties were able to obtain finance for the M Street, Suburb N property as a result of the equity which Ms O had in the OO Street, Suburb PP property and QQ Street, Suburb H property, plus a personal guarantee from the husband’s mother for $350,000 secured over her home.[16] 

   [16] Paragraph 9 of the affidavit of Ms O sworn 26 and filed 28 September 2018.

6. Ms O’s evidence, which I accept, was that:

   a)she and the husband do not have any equity in the M Street, Suburb N property at this stage;[17] and

   b)she earns rent from the OO Street, Suburb PP property and QQ Street, Suburb H property and meets all the mortgage expenses and outgoings in respect of these properties.[18] 

   [17] Paragraph 9 of the affidavit of Ms O sworn 26 and filed 28 September 2018.

   [18] Paragraph 10 of the affidavit of Ms O sworn 26 and filed 28 September 2018.

7. Whilst the husband’s income earning capacity has undoubtedly assisted in his ability to obtain finance for the M Street, Suburb N property with Ms O, I am satisfied that there is no equity in the M Street, Suburb N property. 

8. In any event, it seems that ultimately, the wife did not seek to add the M Street, Suburb N property or indeed any other property owned by Ms O in the asset pool, but rather sought to argue that the existence of these properties is evidence that the husband has ‘misappropriated’ funds from the business to which the wife has a claim which is discussed further below.

9. For the reasons set out below, I am not persuaded by this argument. 

RPT and RFT

1. There are two family trusts which the parties established during their relationship, namely the RPT and the RFT.

2. The RFT owns D Pty Ltd.

3. The RPT currently owns the former matrimonial home and previously owned an investment property (being the G Street, Suburb H property) from which the parties operated Ms A's Business.

4. The husband and wife are trustees of the RPT.  The beneficiaries of the RPT are the husband, the wife, their children and related entities.

5. Mr B is the husband’s accountant and was, prior to separation, also the wife’s accountant. Mr B gave the following evidence about the nature of the transactions between these entities and the parties:

   The RFT has ‘loaned’ monies to the RPT, the RPT has then on-loaned these funds to the beneficiaries being the husband, the wife and Ms A.

   The explanation for this is that in order for the parties to utilise income from D Pty Ltd, they must transfer monies from the RFT (the legal owner of D Pty Ltd) to the RPT that they are beneficiaries of, to access the money.  The Husband has used this money to apply to living and business expenses, including mortgage and car repayments.[19]

   [19] Paragraph 4(d) and (e) of Mr B’s affidavit sworn and filed 13 November 2017.

K Pty Ltd

1. It is common ground that the husband established K Pty Ltd (“K Pty Ltd”) in … 2015 of which the husband was the sole director and secretary.[20]  The husband is also the sole shareholder in K Pty Ltd.

   [20] Exhibit G.

2. On 19 September 2018, a liquidator was appointed to K Pty Ltd.  The wife asserted that the husband established K Pty Ltd without her consent and also placed it into liquidation without her consent. 

3. The husband’s evidence, which I accept, was that he established this company post-separation on the advice of his accountant, Mr B to delay the requirement to pay income tax in that financial year after the business of D Pty Ltd had grown strongly post-separation.  His evidence was that it was a ‘tax efficiency vehicle’.[21]  The husband further deposed:

   It would thus provide a period of grace during which we would not have to meet out tax obligations for a period of up to 12 months.  Jack is what is colloquially known as ‘a bucket company’.

   The entire purpose was to manage our family tax obligations which had increased substantially in the preceding three years since 2012 and it was also useful that we did not have to pay interest on the money which was advanced to Jack until the following tax year.[22]

   [21] Paragraph 99 of the husband’s affidavit sworn and filed 27 October 2017.

   [22] Paragraphs 6 and 7 of the husband’s affidavit sworn 29 and filed 30 October 2018.

4. The husband annexed correspondence from Mr B to his solicitors setting out the tax liability of the Radcliffe entities as at 23 May 2018. [23]   The correspondence reveals an overall tax liability of $422,133.71, of which K Pty Ltd had a tax liability of $282,983.10.  At the conclusion of that email, Mr B wrote:

   With Mr Radcliffe’s payment obligations in regard to the matrimonial matter, cashflow is continuously tight preventing Mr Radcliffe to pay the tax debt by the due date.  As a result, we constantly need to negotiate payment arrangements with the Tax Office to pay the debt by instalments over time…

   I am gravely concerned about this situation and Mr Radcliffe’s financial viability to meet the groups tax obligations, which are increasing.[24]

   [23] Annexure R-2 of the husband’s affidavit sworn 29 and filed 30 October 2018.

   [24] Annexure R-2 of the husband’s affidavit sworn 29 and filed 30 October 2018.

5. On 26 June 2018, Mr B wrote to the husband’s solicitors confirming that as at 30 July 2018 when a PAYG instalment would become due and payable, K Pty Ltd would have an outstanding tax liability of $311,405.45.  He concluded with the following:

   Needless to say, I am concerned.

   As the company can nit (sic) pay its debts, the issue of insolvency arises, which may have an impact on Mr Radcliffe personally.[25]

   [25] Annexure R-3 to the husband’s affidavit sworn 15 and filed 16 August 2018.

6. In light of these concerns, K Pty Ltd was placed into voluntary liquidation on 19 September 2018.  The liquidator since demanded that RPT repay to K Pty Ltd the sum of $1,101,337.79, being the amount that the RPT owes to K Pty Ltd.

7. It is common ground that the wife did not sign any resolution for distributions of income from either the RFT or the RPT to K Pty Ltd. 

8. The wife relied upon the expert evidence of Mr C which was not challenged.[26]  Mr C’s report explained how the property of K Pty Ltd would be required to be distributed in the liquidation process.  Mr C gave the following evidence:

   [26] Affidavit of Mr C sworn 31 October and filed 1 November 2018.

   a)K Pty Ltd has been the subject of a member’s voluntary liquidation;

   b)the main assets of the company consists of debtors in the sum of $1,161,337;

   c)the company has total liabilities of $351,612;

   d)if the liquidator of the company recovers the debts owed to the company in full, it would be in a position to make a distribution to the creditors of the company and such payment would be required to be made in the following order:

   i.first, to pay the expenses incurred by the liquidator;

   ii.second, to pay all unsecured creditors; and

   iii.finally, to pay any interest on any admitted debt or claim; and

   e)if there is any surplus beyond those expenses, that is required to be distributed as between the members of the company. In this case, the husband is the only shareholder and therefore the surplus would be distributed to him. 

9. Whilst both parties agree that the debt of K Pty Ltd should be included in the asset pool as a liability, the wife asserted that the costs of the liquidation ought not be included on the basis that these are costs which the husband incurred without reference to her or without her consent.  Moreover, it was submitted by the wife that in placing K Pty Ltd in liquidation, the husband acted in breach of her Honour Judge Riley’s orders.

The legislation

1. Section 79 of the Act gives the court power to alter the interests of the parties to a marriage in the property of the parties to that marriage. Subsection 79(2) of the Act provides that:

   The court shall not make an order under this section unless it is satisfied that, in all the circumstances, it is just and equitable to make the order.

2. Section 79(4) of the Act sets out the matters the court must take into account when considering what orders, if any, should be made for the alteration of the interests of the parties in property. I do not propose to set those matters out in full.

3. It is well settled since Stanford v Stanford (2012) 247 CLR 108 (“Stanford”) that the proper approach to an application under section 79 of the Act is as follows:

   Section 79(2) provides that “[t]he court shall not make an order under this section unless it is satisfied that, in all the circumstances, it is just and equitable to make the order”. Section 79(4) prescribes matters that must be taken into account in considering what order (if any) should be made under this section. The requirements of the two sub-sections are not to be conflated. In every case in which a property settlement order under section 79 is sought, it is necessary to satisfy the court that, in all the circumstances, it is just and equitable to make the order.[27]

   [27] Stanford v Stanford (2012) 247 CLR 108 at [35].

4. The court went on to say:

   The fundamental propositions that have been identified require that a court have a principled reason for interfering with the existing legal and equitable interests of the parties to a marriage and whatever may have been their stated or unstated assumptions about property interests during the continuance of marriage.

   In many cases where an application is made for a property settlement order, the just and equitable requirement is readily satisfied by observing that, as the result of a choice made by one or both of the parties, the husband and wife are no longer living in a marital relationship. It will be just and equitable to make a property settlement order in such a case because there is not and will not thereafter be the common use of property by the husband and wife. No less importantly, the express and implicit assumptions that underpinned the existing property arrangements have been brought to an end by the voluntary severance of the mutuality of the marital relationship. That is, any express or implicit assumption that the parties may have made to the effect that existing arrangements of marital property interests were sufficient or appropriate during the continuance of their marital relationship is brought to an end with the ending of the marital relationship. And the assumption that any adjustment to those interests could be effected consensually as needed or desired is also brought to an end. Hence it will be just and equitable that the court make a property settlement order. What order, if any, should then be made is determined by applying s 79(4) (footnotes omitted).[28]

   [28] Stanford v Stanford (2012) 247 CLR 108 at [41]-[42].

5. In this case, the parties have been in a long marriage which produced three children and during which the husband helped raise another child from the wife’s previous relationship. The parties’ relationship ended and they are each seeking orders of this court pursuant to section 79 of the Act.

1. I am satisfied that in all of the circumstances, it is just and equitable to make orders adjusting property matters between them on a final basis. 

2. Having come to this view, I turn to the approach that the court takes in considering what orders are appropriate under section 79 of the Act. In this context, regard can be had to the following comments of the

   
   

   High Court in Norbis v Norbis (1986) 161 CLR 513 in which Justices Mason and Dean said:

   Here the order is discretionary because it depends upon the application of a very general standard – what is ‘just and equitable’ – which calls for an overall assessment in the light of the factors mentioned in s.79(4), each of which in turn calls for an assessment of circumstances…[29]

   [29] Norbis v Norbis (1986) 161 CLR 513 at [4]; see also Mallet v Mallet (1984) 156 CLR 605 at [609].

3. In determining what, if any, orders are appropriate under section 79 of the Act the court must:

   a)identify the assets and the value of the assets in the property pool;

   b)determine the contributions made by each of the parties to those assets, both directly and indirectly and in financial and non-financial terms;

   c)determine whether any adjustment is required for section 75(2) factors; and

   d)in light of those findings, determine what orders for the division of property is just and equitable.

4. In Bevan v Bevan (2013) 279 FLR 1; (2013) 49 Fam LR 387; [2013] FamCAFC 116 (“Bevan”), Bryant CJ and Thackray J stated:

   Although, the four step process has been regularly applied, the Full Court has stressed it is no more than a means to an end, since the statutory obligation is to alter existing interests only if it is just and equitable to do so.  Thus in Norman v Norman [2010] FamCAFC 66 at [60], the Full Court (Finn, May and Murphy JJ) said:

   It is the mandatory legislative imperative (to reach a conclusion that is just and equitable) that drives the ultimate result.  For all its usefulness and merit as a ‘disciplined approach’ or a ‘structured process of reasoning… the
   

   [30] Bevan & Bevan (2013) 279 FLR 1; (2013) 49 Fam LR 387; [2013] FamCAFC 116 at [61].

   ‘three-step’ or ‘four-step’ approach merely illuminates the path to the ultimate result.[30]

5. Bryant CJ and Thackray J went on to say:

   It follows that judges would be well advised to avoid what we consider to be arid discussion of the ‘stage in the process’ at which ‘adjustments’ are permissible.  Such discussion tends to elevate the four step process to the status of a statutory edict, when in fact it is no more than a shorthand distillation of the words of a statute which has but one ultimate requirement, namely not to make an order unless it is just and equitable to do so.[31]

   [31] Bevan & Bevan (2013) 279 FLR 1; (2013) 49 Fam LR 387; [2013] FamCAFC 116 at [72].

6. These comments are particularly apt in the circumstances of this case.  Ultimately, the court’s task is to determine what, if any, orders are just and equitable.  I have applied these principles in determining this matter.

Agreed assets and liabilities

1. As is evident from the summary of evidence and procedural history in this matter, not much is agreed between the parties in this case. 

2. To the extent that there is agreement, the parties concede that the following assets and liabilities should be included in the asset pool for division between them:

Assets	Ownership	Value
G Street, Suburb H property	Trustee of the RPT	$1,500,000
Net proceeds of sale of the R Street, Suburb S property as at October 2018	Saxbys Lawyers	$453,250
Motor Vehicle BBB driven by the wife	RFT	$43,190
Total agreed assets		$1,996,440

Liabilities	Ownership	Value
Liabilities secured over G Street, Suburb H property	RPT	$481,797
Tax payable on sale of the G Street, Suburb H property	RPT	$47,506
Total agreed liabilities		$529,303

Disputed assets and liabilities

1. In determining the asset pool, the parties do not agree on the following:

   a)the valuation for D Pty Ltd;

   b)whether the pool should include an amount of just over $1,000,000 in respect of the figure asserted by the wife to be owed by D Pty Ltd for which the husband has failed to account;

   c)the value of the CGT adjustment for the G Street, Suburb H property in favour of Mr J; the wife believes the payment should be $64,645 whereas the husband believes it should be $107,841.65;

   d)whether the taxation debts arising from the income generated by D Pty Ltd post-separation ought to be included as liabilities of the husband and wife or solely of the husband, and what value ought to be attributed to that debt;

   e)whether the costs of the liquidation of K Pty Ltd ought to be borne by both parties or by the husband alone; and

   f)whether the cars owned and/or driven by the husband and Ms O ought to be included in the asset pool;[32]

   [32] Although no evidence has been given as to the value of those vehicles.

   g)whether there should be any addbacks or adjustments to the pool, in particular for:

   i.the interim property settlement paid to each of the parties of $40,000;

   ii.the husband’s payment of Mr BB’s valuation fees of $30,479;

   iii.the husband’s payment of Mr KK’s fees and Mr B’s fees;

   iv.the husband’s paid legal costs of $233,072; and

   v.the wife’s paid legal costs of $117,000;

   h)how the wife’s unilateral withdrawal of funds totalling $117,722 ought to be treated; and

   i)whether provision needs to be made for the CGT liability which will crystalize if and when the former matrimonial home is sold.

Asset pool – consideration

Valuation of D Pty Ltd

1. It is common ground that:

   a)in 2006, D Pty Ltd was established through the RFT; and

   b)D Pty Ltd was the main source of income for the family during the parties’ relationship.

2. D Pty Ltd has been valued three times in the course of these proceedings.  It was initially valued in May 2015 by Mr B, the husband’s accountant who stated that it had a value of just under $263,000.

3. As noted above, pursuant to court orders, Ms AA was appointed as a court appointed expert to value both the businesses conducted by the parties and the RFT and the RPT. 

4. It is common ground that Ms AA provided a draft valuation in July 2016 where she valued D Pty Ltd at $526,500.  Ms AA then revised her valuation and provided a final valuation in December 2016 where she valued D Pty Ltd at just under $1,200,000.

5. The husband challenged Ms AA’s final valuation and orders were made permitting the husband to obtain a further valuation by Mr KK for the final hearing.  Mr KK concluded that D Pty Ltd did not have any transferrable goodwill and stated that it should be valued on a net tangible assets basis.  He ultimately concluded that D Pty Ltd had nil value.

6. Ms AA filed two affidavits in these proceedings, one on 17 October 2017 and one on 29 October 2018.  In her 2017 affidavit, Ms AA annexes her valuation report dated 20 December 2016. 

7. In the December 2016 report, Ms AA acknowledged providing an earlier draft of her report to the parties on 22 July 2016.  Ms AA acknowledged that there was a significant difference between her current and July 2016 valuation and went on to explain the basis of that difference.[33]

   [33] Annexure LS-2 of the affidavit of Ms AA affirmed 16 and filed 17 October 2017 at pages 21 to 22.

8. Ms AA also set out in detail the correspondence she had received by the legal representatives of both the husband and the wife in which they each questioned her analysis, assumptions and conclusions.[34] 

   [34] Annexure LS-2 of the affidavit of Ms AA affirmed 16 and filed 17 October 2017 at pages 23 to 25.

9. Ultimately, in December 2016, Ms AA valued the RFT which operates D Pty Ltd at between $1,151,000 and $1,239,000 and the RPT at approximately $1,110,000. 

10. Ms AA provided an updated valuation report of both RFT and RPT in her October 2018 affidavit.  She valued the RFT, which she indicated operates D Pty Ltd at between $1,010,000 and $1,250,000.

11. The husband’s case is that any goodwill in D Pty Ltd is dependent upon his particular experience and business and therefore is not transferable goodwill.  The husband practices the ‘Health Care’ technique of treatment.  The husband gave the following evidence, which I accept, that the Health Care technique:

    … is highly unique in Australia, with many health care workers using more traditional techniques.  Only a handful of health care workers use the Health Care technique correctly and I was one of the first in Australia to begin publicising and marketing my use of this technique.  I believe this made me stand out from the sea of health care workers and saw me as a leading health care worker within Australia, and internationally.[35]

    [35] Paragraph 8 of the husband’s affidavit sworn and filed 13 November 2017.

12. The husband also gave evidence about his training in the Health Care technique, which included:

    a)attending various seminar based programs over a 21 year period;

    b)obtaining a qualification with the Health Care Australia; and

    c)obtaining a Health Care qualification, the top level within the society.[36]

    [36] Paragraph 11 of the husband’s affidavit sworn and filed 13 November 2017.

13. The husband also deposed to the following:

    a)he has taught the Health Care technique both within Australia and internationally and continues to do so;[37]

    b)as a result of his international reputation, he has a:

    widespread referral base of clients from all over Australia and the world… These recommendations have now gained momentum whereby clients are referring their own family and friends, forming an expanding web of clients.[38]

    c)his skills in this area have led to increased social media exposure as a result of a successful YouTube channel set up by his staff.  He attributes his high number of international referrals to the fact that in 2016, his videos had over 50 million total views and 250,000 subscribers;[39] and

    d)a high number of clients desire his specific services.[40]

    [37] Paragraph 13 of the husband’s affidavit sworn and filed 13 November 2017.

    [38] Paragraph 15 of the husband’s affidavit sworn and filed 13 November 2017.

    [39] Paragraph 16 of the husband’s affidavit sworn and filed 13 November 2017.

    [40] Paragraph 19 of the husband’s affidavit sworn and filed 13 November 2017.

14. The wife did not lead any evidence to challenge the assertions made by the husband about his experience, professional standing or reputation in the business of the Health Care technique. 

15. The health care workers who work with the husband do so as contractors and are remunerated on the basis of 50% of the fees they charge.  Their evidence, which was not challenged, was that both they and D Pty Ltd are at liberty to bring their contractual relationship to an end at any time and for any reason.

16. Each of the health care workers who work with the husband gave evidence that they were attracted to the business because of the husband’s professional reputation, and for the mentoring and leadership he provides in the Health Care technique.  For example:

    a)Dr HH said, “without Mr Radcliffe I would likely not continue to act as a consultant to D Pty Ltd such is Mr Radcliffe’s importance to the businesses’ overall success”[41];

    b)Dr L deposed, “without Mr Radcliffe D Pty Ltd would not survive because so few clients would attend and I believe it would soon be placed into liquidation”[42]; and

    c)Dr GG added, “Mr Radcliffe has an excellent reputation and is a tremendous support to me and the other health care workers.”[43]

    [41] Paragraph 7 of the affidavit of Dr HH sworn and filed 28 February 2018.

    [42] Paragraph 12 of the affidavit of Dr L sworn and filed 8 February 2018.

    [43] Paragraph 6 of the affidavit of Dr GG sworn and filed 28 February 2018.

17. The wife relied upon Ms AA’s valuation of D Pty Ltd and says that as determined by Ms AA, D Pty Ltd has significant goodwill and this goodwill ought to be included in the asset pool for distribution.

18. The husband relied upon Mr KK’s report in which Mr KK concluded that any goodwill associated with D Pty Ltd is non-transferable personal goodwill and therefore ought not be treated as property but rather as a financial resource available to the husband for the purposes of considering section 75(2) factors.

19. Both Ms AA and Mr KK dealt with the issue of the nature of Mr Radcliffe’s goodwill in their respective reports.

20. Mr KK relevantly stated:

    In the valuation process, particular attention is paid to the goodwill component (if any) in relation to a business enterprise valuation. Distinction is made between “enterprise goodwill” and non-transferable “personal goodwill”.  For family law purposes enterprise goodwill is regarded as property whereas personal goodwill is treated as a resource.  It may be possible (for) a business to contain elements of both enterprise and personal goodwill and the final valuation should make appropriate allowances where this is the case.[44]

    [44] Annexure -2 of the affidavit of Mr KK sworn and filed 5 October 2018 at paragraph 6.4.1.

21. Mr KK further stated:

    Numerous experts have published opinions regarding the distinction between non-transferable personal goodwill and enterprise goodwill.  Dr Shannon Pratt in “Overview of Enterprise and Personal Goodwill” states:

    “… goodwill should be considered enterprise or practice goodwill only if it would continue to exist in the enterprise if the practitioner were not present.  Therefore, a good “litmus test” of whether goodwill is business or personal is the extent to which truly ‘excess’ earnings (over and above adequate return to capital and adequate compensation for work performed) would continue to exist in the absence of the key individual.”[45]

    [45] Annexure -2 of the affidavit of Mr KK sworn and filed 5 October 2018 at paragraph 8.1.6.

22. Ms AA agreed that there are essentially two types of goodwill ‘enterprise (or entity) goodwill and personal goodwill’[46] and went on to say:

    According to James Hitchener “personal goodwill is the goodwill that attaches to the person and the personal efforts of the individual.  It is generally considered to be difficult to transfer, if at all.  Entity goodwill is the goodwill that attaches to the business enterprise.”[47]

    [46] Annexure -2 of the affidavit of Ms AA affirmed and filed 29 October 2018 at paragraph 4.4.5.

    [47] Annexure -2 of the affidavit of Ms AA affirmed and filed 29 October 2018 at paragraph 4.4.6.

23. Ms AA also made reference to an article by Ms SS.[48] 

    [48] Annexure -2 of the affidavit of Ms AA affirmed and filed 29 October 2018 at paragraph 4.4.9.

24. Both Ms AA and Mr KK then set out their reasons for their respective conclusions as to the nature of the goodwill which attaches to D Pty Ltd.

25. Ultimately, Ms AA concluded that whilst some of the goodwill is referable directly to the husband, the bulk of it comprises enterprise goodwill. Ms AA further stated that the extent of personal goodwill has been taken into account in the valuation multiple that she has applied in her valuation.[49]

    [49] Annexure -2 of the affidavit of Ms AA affirmed and filed 29 October 2018 at paragraph 4.4.15.

26. Conversely, Mr KK concluded that in the particular context of this business, the goodwill (including enterprise goodwill is nil) and therefore the appropriate way to value the business is on a net tangible assets basis.[50]  On this basis, he assessed the net realisable value at negative $28,806, and noted:

    The liabilities include an amount owing to a related party of $71,758 and I have assumed that the related party can only realise $42,952 of the amount owing in order to reduce the deficit to nil.’[51]

    [50] Annexure W-2 of the affidavit of Mr KK sworn and filed 5 October 2018 at paragraph 8.3.3.

    [51] Annexure W-2 of the affidavit of Mr KK sworn and filed 5 October 2018 at paragraph 9.1.

27. Although Ms AA was the jointly appointed expert, I have a number of concerns about her report.  In conducting her review, Ms AA did not attend the premises of D Pty Ltd or test the assertions made by D Pty Ltd staff about the way in which clients come to the business.  Although she acknowledged reading the affidavits from D Pty Ltd staff filed in these proceedings which attested to the following:

    a)the husband is the face of D Pty Ltd;

    b)90% of clients make bookings with the business because of the husband; and

    c)without him, the business would not be as successful as it is.[52] 

    [52] Annexure -2 of the affidavit of Ms AA affirmed and filed 29 October 2018 at paragraph 4.4.7.

28. However, Ms AA dismissed these statements on the basis that as these affidavits are made by employees, they “may not be entirely objective and independent”.[53]  That may be so, however it is concerning that Ms AA did not undertake any independent inquiries to determine whether this was in fact the case. 

    [53] Annexure -2 of the affidavit of Ms AA affirmed and filed 29 October 2018 at paragraph 4.4.8.

29. In the course of cross examination, Dr L confirmed that clients often asked to see the husband in the first instance.  She explained that they would try and refer the clients to other practitioners but that was not always possible even if the husband was booked for months in advance.[54] 

    [54] Transcript page 180 at line 39 to page 181 at line 2.

30. In her report, Ms AA also relied heavily on the proportion of fees generated by the other health care workers as evidence that the business does not unduly rely upon the husband.  In circumstances where she did not speak to the staff at the business or indeed review the booking system and booking process for each practitioner, it would seem that her conclusion is somewhat questionable. 

31. By comparison, Mr KK said that he attended the premises, spoke to some of the staff and reviewed some of the bookings and that he had regard to all of this information in coming to his conclusions as to whether any goodwill was non-transferable personal goodwill.[55]

    [55] Annexure -2 of the affidavit of Mr KK sworn and filed 5 October 2018 at paragraph 8.1.1.

32. Mr KK’s analysis was criticised by the wife’s counsel on the basis that he only reviewed some four days of bookings.  Indeed in the course of cross-examination, Ms AA indicated that if she were to do an assessment of how clients came to the business, who they wanted to see and whether they went elsewhere if the husband was unable to accommodate them in a timely manner, this would require in-depth analysis of months of bookings, interviews with clients and the like, not just a cursory examination of four days of bookings.[56]

    [56] Transcript page 355 at lines 34 to 39.

33. Whilst a more detailed analysis would no doubt have been of considerable assistance, in this case, Ms AA did not undertake any assessment and review of the booking system in informing her conclusions.  Nor did she make inquiries of staff to determine how clients came to the business and indeed how they came to be referred to the other health care workers working within the business. 

34. In addition, Mr KK was told that the husband was booked for months in advance. When he reviewed the bookings for the other practitioners, it was clear that they had availability within days or weeks.  This is more consistent with the evidence given not only by the husband but also the other health care workers that clients are attracted to the business because of the husband but that if he cannot see them at the beginning, he encourages them to see one of the other practitioners initially and subsequently becomes involved to review their progress. 

35. I am satisfied on the basis of the evidence before me that the ability to attract clients to the business is of fundamental importance. 

36. None of the practitioners who gave evidence in these proceedings stated that they came to the business with their own client base, and whilst some conceded in cross-examination that they tried to do a good job with each patient, and their sense of professionalism was such that it was their desire for the patient to want to see them if they came back, none of them went so far as to give evidence that they had developed their own client base separate from the clients who came to the business because of the husband. 

1. Moreover, Ms AA did not make any reference to the fact that the health care workers who currently work in the business are not employees, but are in fact independent contractors who could leave the business at any time. 

2. Importantly, Mr KK noted that:

   An examination of the Appointments Register at the business premises clearly indicates a concentration of clients (particularly new clients sourced locally, interstate and overseas) sourced by Mr Radcliffe, compared to other associates.  A review of the Register over four consecutive days disclosed:

   -19 new clients booked in to see Mr Radcliffe, compared to a total of 6 for the other 3 associates working that week.  Further, the majority of the 6 were re-allocated from Mr Radcliffe to the associates because Mr Radcliffe was fully booked.

   -In the same period, approximately 15 international clients were booked to see Mr Radcliffe, including people from Country CCC, Country TT, Country DDD, Country EEE and Country FFF.  The associates had none.

   ...The Appointments Register showed unfilled appointment times available for other associates within a week.[57] 

   [57] Annexure -2 of the affidavit of Mr KK sworn and filed 5 October 2018 at paragraph 8.1.3.

   …I also spoke directly to one of the associates (Dr GG) who confirmed his opinion.[58]

   [58] As set out in the affidavit of Dr GG sworn and filed 28 February 2018.

3. On the basis of these observations, Mr KK concluded:

   The evidence suggests that a significant majority of new clients do not contact D Pty Ltd seeking an appointment with any health care worker, rather they specifically request a first appointment with Mr Radcliffe.  Subsequently, Mr Radcliffe often attempts to transfer clients to other associates, who rely on him for patient referrals.[59]

   [59] Annexure -2 of the affidavit of Mr KK sworn and filed 5 October 2018 at paragraph 8.1.3.

4. Ms AA did not undertake any such analysis.  Whilst there is no doubt that a statistical analysis which shows the percentage of fees generated by the husband as compared to those generated by his associates might support the conclusions Ms AA has reached, they do not specifically address the fundamental question of who is responsible for the attraction and retention of the clients who generate those fees. 

5. It is not clear upon what basis Ms AA concluded that a reasonably competent health care worker who purchased D Pty Ltd would be able, not only to generate fees to replace those not generated by the husband, but also to attract sufficient clients to the business to maintain the current leverage in the business. 

6. A criticism was made of Mr KK’s report on the basis that in part, he relied on the fact that he spoke to the receptionist when he attended at D Pty Ltd who provided him with certain information about requests to have an initial appointment with the husband.  It was suggested that as that person had not been called to give evidence or have that evidence tested, it was unsafe to rely upon his conclusions which flowed from that evidence and indeed, his sensitivity analysis.

7. Whilst this submission may hold true insofar as the receptionist herself was not called, I note that the evidence of Dr HH was that he believed that more than 90% of the clients at D Pty Ltd ‘make bookings because of Mr Radcliffe.[60]  Similar comments were also made by Dr L and Dr GG, with whom Mr KK also spoke during his site visit at D Pty Ltd.

   [60] Paragraph 5 of the affidavit of Dr HH sworn and filed 28 February 2018.

8. For each of these reasons, I prefer the evidence of Mr KK to that of Ms AA. I therefore accept his valuation of D Pty Ltd at nil. I find that whilst D Pty Ltd is a resource available to the husband for the purposes of section 75(2), it does not have transferrable goodwill and therefore cannot be included in the asset pool for distribution between the parties.

Unaccounted monies from D Pty Ltd

1. In closing her case, counsel for the wife submitted:

   An important feature of this case is the amount of income generated by the parties’ entities, including their business D Pty Ltd, for the period since the parties separated to date… and what has become of that income.[61]

   [61] Exhibit O, paragraph 1 on page 2.

2. In essence, the wife’s case is that:

   a)the husband has refused to accept that profit generated by D Pty Ltd post-separation is money to which she is entitled as an equal shareholder in that company;

   b)the husband has used these funds for his own benefit without her approval or consultation; and

   c)after adjusting the amounts in annexure R-4 which were paid to the wife or on her behalf directly by D Pty Ltd rather than from the profit distributed to, or to the benefit of the husband, there is a significant amount of money which has not been accounted for.

3. The wife therefore seeks to include the sum of over $1,000,000 as monies owned by the parties’ jointly for which she alleged the husband has failed to account.

4. Counsel for the wife provided the court with a number of ‘aide memoirs’ which attempted to summarise the evidence as to the money available to the husband in the post-separation period from D Pty Ltd and from the disposition of various properties sold by the parties post-separation.   The analysis of how counsel for the wife reached the figure of $1,036,442 in total income taken out of the business for which the husband has failed to account is set out at paragraphs 1 to 14 of the wife’s written submissions.[62]  I do not propose to repeat that analysis here.

   [62] Exhibit O.

5. On its face, there are some difficulties with the submissions made:

   a)for example, the wife asserted that the husband had access to ‘other income’ of $553,921 post-separation (that is, in addition to income generated through D Pty Ltd); however, it is not readily apparent on the face of the ‘aide memoirs’ as to how this figure is calculated; and

   b)the analysis does not seem to take into account any payments made to reduce the mortgage on the former matrimonial home following the sale of the G Street, Suburb H property, which is conceded on the wife’s own evidence.

6. In any event, the difficulty in asking the court to accept this analysis is that the analysis itself is not evidence.  The person or persons who have undertaken the analysis have not been called to give evidence or, importantly, to have their analysis tested.  The content of the ‘aide memoires’, and the analyses therein, have not been tested through cross-examination.  Whilst the financial returns and income tax returns for the various individuals and entities demonstrates what monies were received over that period, they do not reveal how that money was applied.  The parties have had ample opportunity to review and consider each other’s discovery. 

7. This is a case in which the parties have utilised the services of experts in many respects.  If the wife wished to put before the court an analysis of the money trail which demonstrated a gap of something in the order of $1,000,000, it was incumbent upon her to do so in an appropriate manner.  This is particularly so given the size of the asset pool. On either parties’ case, such an amount represents a significant proportion of the pool.

8. Summaries of the evidence are just that; a summary.  They cannot constitute evidence.  The analysis by the wife is based on an absence of evidence from which the court is invited to draw an inference.  It is not based on evidence for example, given by a forensic accountant who, having analysed the financial records of the various entities, the parties and their bank statements, points to particular amounts which have been taken from the business and misappropriated or misspent. 

9. For his part, the husband’s case is that, other than drawing a reasonable income for his own benefit, he has applied all monies generated by D Pty Ltd for the benefit of the wife, his children, the business or his family with Ms O.

10. In addition to the analysis contained in the various aide memoires attached to the wife’s written submissions, the wife also pointed to the husband’s transfer of funds from the Westpac D Pty Ltd account to the Westpac Choice personal account and was critical of this approach on the basis that:

    a)the husband did not seek her agreement before making these transfers, even though she was a director of D Pty Ltd and a trustee of the RFT; and

    b)whilst there was over $1.5 million transferred out of the Westpac account, there was only $600,000 transferred back in; it was argued that this further evidenced the husband’s misappropriation of $900,000 for his own benefit.

11. In cross examination, the husband conceded that the income generated by D Pty Ltd belongs to the RFT and is for the parties’ benefit until such time as the wife is no longer a shareholder of the business.

12. When asked about the transfer of funds from a D Pty Ltd account to a personal account in his name, the husband explained that:

    a)when he became aware that the wife had withdrawn funds from a business account which he had set up to make provision for tax liabilities which would become due and payable, he was concerned that the wife would continue to access further funds from D Pty Ltd accounts;

    b)he tried to set up another business account to which only he was a signatory to protect against this happening again but it was not possible without the wife’s consent; so

    c)he established an account in his own name, but which, for all intents and purposes, he used as a business account to protect income from the business necessary to meet business expenses from being accessed by the wife without his knowledge.

13. His evidence, which I accept, is that he transferred money out of the Westpac D Pty Ltd account into a Westpac Choice account in his sole name and then either paid business accounts as and when they fell due from the Choice account, or transferred money back into the Westpac business account.  He said the latter was necessary, for example, if there were direct debit arrangements in place.

14. His evidence, which I accept, is that this account was used for business purposes.  In answer to a question about the amount of money which was at his disposal over the relevant period, the husband said:

    … the only money that I take for myself personally is the $4000 a week, and the rest is expenses and wages, but the… money that comes from the takings of the business includes all the associates’ takings.  50 per cent goes back to them.[63]

    [63] Transcript page 89 at lines 41 to 44.

15. The wife has also made reference to various transactions from D Pty Ltd accounts to the joint account held by the husband and Ms O,[64] I make the following observations:

    a)many of the transactions occurred prior to the May 2017 orders which restrained the husband from withdrawing or utilising funds from D Pty Ltd and related entities, other than for ordinary business purposes;

    b)in any event, the husband conceded that his finances and those of Ms O have been intermingled;

    c)the transactions do not establish, in themselves, inappropriate use of funds from D Pty Ltd or related entities; and

    d)after the making of the May 2017 orders, the husband gave evidence that he withdrew $4,000 per week to cover both his salary and business expenses of $1,000.[65]

    [64] Paragraph 57 of the wife’s affidavit affirmed and filed 1 November 2018.

    [65] I am satisfied that the documents at pages 372 to 376 of annexure -2 of the wife’s affidavit affirmed and filed 1 November 2018 are consistent with the husband’s evidence in this regard.

16. The wife also identified some $22,000 being transferred to Ms O from D Pty Ltd between 17 July 2014 and 26 September 2017, in addition to wages and the payments to her from Google Adsense.  In relation to this, I make the following observations:

    a)this figure is quite small in the context of the size of both the asset pool and the legal costs expended by the parties in this matter; and

    b)in any event, the husband has given evidence, which I accept, that from time to time, Ms O would make payments from her own personal account which related to the business and was quite properly reimbursed for these amounts.[66] This appears to be consistent with the descriptions attached to payments totalling almost $14,000 which have the word ‘reimburse’ or ‘repay’ in the description. 

    [66] Transcript page 77 at lines 5 to 20.

17. The other payments identified by the wife which make up the balance of the $22,000 referred to, have the following descriptions:

    a)seminar accom       $2,368.53;

    b)health care research        $1,813; and

    c)report payment       $10,000.

18. I am not satisfied, on the balance of probabilities, that the wife has established that these amounts evidence any misappropriation by the husband.

19. The wife also identified various transactions which she asserted were questionable between D Pty Ltd accounts and Ms O’s personal account. For example, the wife referred to a total of $21,000 which was debited from Ms O's NAB account (ending …) with the description ‘Mr Radcliffe's Funds’ in the period from 26 November 2015 to 8 September 2017.[67]  These payments occur twice monthly and in $1,000 increments.

    [67] Pages 346 to 367 of annexure S-2 of the wife’s affidavit affirmed and filed 1 November 2018.

20. Moreover, the wife identified a further $78,000 which are deposited into Ms O's NAB account (ending …) over the period 26 November 2015 to 8 September 2017 also identified as ‘Mr Radcliffe's Funds’. Ultimately, the husband gave the following evidence in relation to these monies:

    I think this is a transfer from Ms O to herself.  She’s got a property account that she manages her houses from but she’s also got a savings account and I know that she transfers $1000 to herself from herself every month – every week but I don’t know why it’s called Mr Radcliffe’s funds.  But if you asked me I would be 90 per cent sure that’s what that is.  That’s a transfer from her to herself.  One account to another.[68]

    [68] Transcript page 85 at lines 25 to 30.

21. This explanation appears to be credible.  When reviewing Ms O’s statements for her NAB account ending … (noting that the excerpts attached to the wife’s affidavit are not complete), there appear to be corresponding withdrawals of $1,000 on the same day as deposits of $1,000 into her account ending …, with both transactions being identified as ‘Mr Radcliffe's Funds’.  This would seem to be consistent with the husband’s evidence about these amounts.

22. Moreover, as submitted by the husband, even if the deposits were deposits by him into Ms O’s account, there is no evidence before the court that such money was taken from D Pty Ltd assets to which the wife has any claim, rather than from the husband’s own income derived from D Pty Ltd to which she has no claim.

23. Ms O also gave evidence, which I accept, that she and the husband would often have to pay business accounts from their personal bank accounts and then move money around.[69]  

    [69] Transcript pages 190 to 191.

24. It was ultimately submitted for the husband that the wife has failed to prove any misappropriation. In response, counsel for the wife referred the court to In the Marriage of Briese (1985) 82 FLR 369; (1985) 10 Fam LR 642; (1985) FLC 91-713 (“Briese”) in which Smithers J referred to the House of Lords decision in Livesey v Jenkins (1985) 1 All ER 106 (“Livesey”) and Oriolo and Oriolo (1985) 10 Fam LR 665; (1985) FLC 91-653 (“Oriolo”).  These cases make clear that parties to family law property disputes have an overriding obligation to make full and frank disclosure and that this obligation differs from the obligation of disclosure which might arise in general commercial disputes.  For example, in Briese, Smithers J said:

    … in financial proceedings between spouses each party must make a full and frank disclosure of all material facts... it was made clear that full and frank disclosure was required as a matter of principle in the light of the fact that it was the duty of the court, taking into account a number of designated criteria, to make a decision which basically involved the exercise of a discretion.[70]

    [70] In the Marriage of Briese (1985) 82 FLR 369; (1985) 10 Fam LR 642; (1985) FLC 91-713 at [662].

25. Accepting those and other comments made by Smithers J in Briese, and the comments of the Full Court of the Family Court in Oriolo, I am not satisfied that this is a case in which the husband has failed to make full and frank disclosure.  It is clear that the wife had access to financial statements, tax returns, bank statements of not only the husband and each of the parties’ entities, but also of Ms O. 

26. Whilst there is a duty of disclosure in family law proceedings, this does not, in my view, rise to the level of a duty on a party to prove the other’s party’s case theory.  That is in essence what the wife asserts here.  Her case theory is that the husband has had access to funds in excess of $1,000,000 which he has not accounted for.  The wife, however, has not led evidence which would support this case theory.

27. For the reasons set out above, I am not satisfied on the totality of the evidence that the wife’s claims in this regard have been made out.  The husband has continued to operate and personally work in the family business since separation.  He has continued to generate income which has been available to continue supporting the wife and the parties’ children post-separation. Indeed, the evidence shows that the business has become more, not less profitable, over that time. 

28. Whilst there may be legitimate criticism of the husband’s financial management and record keeping, the wife has not established, on the balance of probabilities, that the husband has diverted any money from the business.

29. As stated above, the second limb to the wife’s submission in relation to the ‘missing money’ is that the court should find that the assets accumulated by the husband (and by inference Ms O) post-separation “on the balance of probabilities stem from income of the family trust that the Husband had no right to unilaterally dispose of.”[71]

    [71] Exhibit O, paragraph 31 at page 7.

30. In particular, it was submitted that Ms O would not have been able to purchase the various properties that she has purchased over the years without the husband’s financial assistance.

31. At the conclusion of the hearing, it was submitted on behalf of the wife that the appropriate way to deal with the issue of post separation properties was to add the sum of $1,036,442 (which the wife says was money owed by the parties’ jointly owned business) for which the husband has failed to account.  It was submitted that this approach would adequately bring to account the husband’s interests in the properties owned by Ms O, either solely in her name or jointly with the husband as well as cash and bonds in the RFT and the RPT.

32. For the reasons set out above, I am not satisfied that the husband has failed to account for income generated by or assets of the jointly owned businesses.  I am therefore not satisfied that the figure of $1,036,442 is to be included in the asset pool.

33. Moreover, on the basis of the totality of the evidence, I find that:

    a)there is no equity in the M Street, Suburb N property;

    b)whilst Ms O borrowed $8,000 to complete the purchase of the OO Street, Suburb PP property, she repaid that amount to the husband within 24 months and therefore there is no proper basis on which a finding could be made that the husband has any equitable interest in that property; and

    c)Ms O was gifted $130,000 by her mother to pay the deposit for the QQ Street, Suburb H property and there is no evidence that the husband has contributed to the purchase of this property or otherwise has an equitable interest in it.

34. I also accept the evidence of Ms O that she receives rent from each of the OO Street, Suburb PP and QQ Street, Suburb H properties and meets the mortgage and other costs and expenses of those properties.

1. The fact that the parties had to take out a loan to meet this liability suggested that they were unable to meet it from their cash flow.  Similarly, Mr B gave unchallenged evidence that this additional liability had not been reduced until recently, again suggesting that there was insufficient cash flow to meet this liability.

2. Mr B gave evidence that as at the date of swearing his affidavit (namely 14 August 2018), the tax liability of the Radcliffe Group in respect of the period from 2015 to 2018 was $410,457.12.  The table annexed to his affidavit also reveals that over that period, the Radcliffe Group paid a total of $222,541.10 in tax.[107] 

   [107] Annexure -2 of the affidavit of Mr B sworn and filed 14 August 2018.

3. In addition, the wife’s own conduct in unilaterally accessing funds which the husband had set aside to meet their tax liabilities in 2016 did not assist the company in meeting its tax liabilities in a timely manner.

4. It is important to remember that at the time the wife withdrew these funds, she was:

   a)living in the former matrimonial home, all costs of which were being met by the husband;

   b)being paid an annual salary of $100,000 plus superannuation from the business; and

   c)the husband was meeting all costs for the children, including their education expenses.

5. Moreover, the wife has, for over almost five years post-separation, continued to receive both a direct and indirect benefit of the distribution of funds from D Pty Ltd.  For the first two years post-separation, the wife continued to receive a distribution from the RFT of close to $100,000 plus superannuation, which only ceased after she withdrew further monies from a joint account which the husband had deliberately put aside for an upcoming tax liability. 

6. In addition, the wife has continued to have the benefit of living in the former matrimonial home without having to contribute to the mortgage, rates or other expenses which have been solely met by the husband.  Nor has the wife made any contribution to the costs and expenses associated with the children’s education and the like, as these too have been met by the husband.  The husband also contributed to the costs of an overseas holiday for the wife and the children post-separation.

7. For each of these reasons, I reject the wife’s submission that the husband alone should bear the liability of the outstanding tax debt of the parties’ entities.

Liquidation costs of K Pty Ltd

1. As stated, the husband established K Pty Ltd as a bucket company to buy some time in relation to tax liabilities that had become, or were soon to become, due and payable.

2. Unfortunately, the parties’ property settlement did not resolve quickly.  Furthermore, in 2016, the husband became aware that the wife unilaterally withdrew $117,000, money which I accept he had put into a separate account as provision for a tax liability.  This only exacerbated the husband’s difficulties in meeting his tax obligations, either directly or through the vehicle of K Pty Ltd. 

3. By May 2018, K Pty Ltd had accumulated significant tax liabilities and the husband formed the view that it was not likely to be able to meet those debts and therefore resolved to wind the company up.[108]  In doing so, he has incurred the costs of liquidation. 

   [108] Paragraphs 9 and 10 of the husband’s affidavit sworn 29 and filed 30 October 2018.

4. I acknowledge that the wife has had no part to play in the establishment of K Pty Ltd.  Whilst on one view, she has had the benefit of the initial delay in the tax liability, the decision to deal with the tax issue in this way, which ultimately led to the decision to wind up K Pty Ltd was one which the husband made on his own. Therefore, the costs of the liquidation are not costs which, in my view, ought to be included in the asset pool. 

5. For the avoidance of doubt, the tax liabilities themselves are to be borne equally by the parties.

Cars driven by the husband and Ms O

1. Ms O conceded during cross-examination that she is currently driving the Motor Vehicle CC which was previously driven by the husband.  Unfortunately, neither party has provided any evidence as to the value of that car and therefore it is not possible to attribute a dollar value to it. 

2. The evidence confirms that the husband is provided with a car by D Pty Ltd which he has access to both for business and personal use.  Again however, neither party has produced any evidence as to the value which ought to be attributed to that car.

3. It is not possible on the basis of the evidence before the court to attribute a value to these vehicles. I therefore do not include these assets in the asset pool for distribution.

Adjustments

Interim property payments

1. The wife asserted that the part property distributions of $40,000 to her and the husband ordered by consent on 17 August 2018[109] should be added back to the pool.

   [109] Order 3 of the interim property orders made by consent on 17 August 2018.

2. The husband gave evidence that he spent that money on the family and on payment of Ms AA’s report and therefore, the amount he received should not be added back. 

3. I am not persuaded by these arguments.  Both parties received a partial property distribution of $40,000.  The orders provided for the husband to apply $32,000 of his portion of the distribution to pay for the report.[110] The appropriate course is for these amounts to be added back to the pool. 

   [110] Order 3 of the interim property orders made by consent on 17 August 2018.

4. The following orders were made by consent on 27 October 2015 with respect to the valuations of D Pty Ltd, the RFT and the RPT:

   a)among other things, D Pty Ltd be valued by an agreed valuer and in the absence of agreement, a valuer appointed by the President of the Law Institute of Victoria;[111] and

   b)a boat owned by the parties (The Boat) only be sold by agreement of both parties,

   and the net proceeds are only to be used for the purpose of paying for valuation fees for valuations conducted as provided by these Orders and any surplus be split equally between the Husband and the Wife.[112]

   [111] Order 1 of the consent orders made on 27 October 2015.

   [112] Order 4 of the consent orders made on 27 October 2015.

5. On 17 August 2016, further orders were made by consent (“the August 2016 orders”) for the joint valuations of the RPT and the RFT by Ms AA of Mr BB with “the costs of the valuations… to be paid for at first instance by the husband subject to order 4 of the consent orders made on 27 October 2015”.[113]

   [113] Order 3(a) of the interim property orders made by consent on 17 August 2016.

6. In the context of the August 2016 orders, I am satisfied that it is appropriate for the wife to reimburse the husband for half of the cost of the valuations undertaken by Ms AA of the RPT and RFT.

Mr KK and Mr B’s costs

1. As to Mr KK’s costs, as stated above the husband sought and obtained leave to lead evidence from his own valuer.  Ultimately, the evidence of Mr KK has been accepted by the court.  It was submitted on behalf of the husband that in those circumstances, the court should order that the wife pay half the costs of Mr KK. 

2. The wife opposes any such order and says that such an order would be contrary to the terms and spirit of section 117 which requires each party to bear their own costs unless the court otherwise orders.

3. I am not persuaded that in the circumstances of this case an order in the terms sought by the husband is warranted.  This case has involved numerous experts.  The wife has commissioned expert reports of her own on the question of taxation and other matters.  Ultimately, the costs of these experts, including but not limited to Mr KK, ought to be borne by the party who called that evidence absent an order pursuant to section 117.  The court was not referred to any precedent or case law which would support the approach proposed by the husband.

4. In addition, the husband seeks inclusion of the costs incurred by him of Mr B, who he says undertook a significant amount of work to produce financial information required by the parties in these proceedings.  Much of this, it was submitted, was due to the wife’s requests for evidence of how funds had been used. It is submitted that for these reasons, Mr B’s costs should be shared.

5. For reasons similar to those outlined above in relation to the costs of Mr KK, I do not accept the husband’s submission that there ought to be an adjustment to the asset pool in respect of Mr B’s fees or an order that those fees be paid equally. 

Legal fees paid by each party

1. It is the wife’s case that the husband utilised approximately $250,000 of the funds generated by D Pty Ltd to pay his legal fees and, in doing so, has utilised his control of jointly owned business to distribute the income of the trust as he sees fit.

2. The husband’s evidence in relation to his expenditure on legal fees was that he has paid about $233,072 in legal fees and these fees have been paid through withdrawals from the business. 

3. Pursuant to the May 2017 orders of her Honour Judge Riley, the wife filed an affidavit in which she accounted for the $117,000 she withdrew from the D Pty Ltd account referred to above.[114]  In that affidavit, the wife deposed to have spent $72,000 of this on legal fees.  The balance was spent on furniture, computer equipment, tuition fees, a hobby excursion to the USA, a taxation liability and a holiday.[115]

   [114] Wife’s affidavit affirmed and filed 29 May 2017.

   [115] Paragraph 3 of the wife’s affidavit affirmed and filed 29 May 2017.

4. Exhibit L sets out the fees which the wife has been billed as at 9 November 2018 and as at that date, the wife had been billed for and had paid $117,722 in legal fees.  It is not clear from the wife’s evidence where the remaining $45,722 came from, and in particular whether they were received:

   a)from post-separation income earned by her;

   b)from the post-separation distribution she received from D Pty Ltd until August 2016; or

   c)from the payment of $5,797 per month from the husband pursuant to the orders of her Honour Judge Riley, to be characterised at trial.

5. In the course of cross-examination, the wife gave the following evidence:

   Mr Williams:     But in any event, madam, that money that you have paid has all come from you. Is that correct?

   Ms Sablan:From moneys I control. Correct.

   Mr Williams:     … And the moneys you control come from bank accounts in your name?  Is that correct? 

   Ms Sablan:Correct.

   Mr Williams:     … the money has come… either from the business, when you took the money from the account, or alternatively it has come from money that you have saved from money that has been paid to you from the business account by the husband.  Is that fair?

   Ms Sablan:Correct.[116]

   [116] Transcript page 248 at lines 40 to page 249 at line 2.

6. In Farnell, In the Marriage of (1995) 128 FLR 374; (1996) 20 Fam LR 513; (1996) FLC 92-681, the Full Court dealt, among other things, with how the court ought to deal with a situation where a party uses matrimonial funds to pay legal costs. Kay J stated:

   If the Court is to:

   (b)ignore costs already paid by a party in relation to the proceedings, thus diminishing the pool of assets that might otherwise have been available for distribution, and

   (c)make allowance for outstanding costs.

   then in my view it necessarily follows that the pool of assets available for distribution will be smaller, and the amount that each party receives from that pool of assets will be diminished.  The effect of this is that indirectly one or other of the parties may well be paying a portion of the other party’s costs. 

   …

   The notional inclusion of costs already paid on account, or the exclusion of costs owing as a liability, is in my view a proper exercise of judicial discretion and well within the normal method by which property cases should be determined.[117]

   [117] Farnell, In the Marriage of (1995) 128 FLR 374; (1996) 20 Fam LR 513; (1996) FLC 92-681 at [535].

7. The husband said that in circumstances where the parties separated in June 2014 and the evidence clearly shows that the husband has continued to work in the D Pty Ltd business and generate a significant personal income as a result (as opposed to profit for distribution between the parties), the court should find that he has been able to meet the legal costs he has incurred from post-separation income and there is therefore no proper basis for those expenses to be added back to the pool.

8. There is some merit to this argument. In circumstances where the parties separated in 2014 in the ordinary course, where a party was generating income through employment, this submission would be very persuasive. 

9. It is conceded by the husband that the legal fees were paid from the D Pty Ltd business account.  However, it is also clear that all expenses of the parties were initially paid out of the D Pty Ltd account.  That is not determinative of whether the expense was ultimately treated as a company expense or personal expense of one of the parties. 

10. What is also evident from the evidence is that the husband received a distribution from the RFT (via the RPT) of some $570,000 in income from 2015 to 2018.  The legal fees paid by the husband represents almost 44% of that income. There is no insufficient evidence on which the court can rely on to conclude that all of these fees were paid for out of post-separation income.

11. In these circumstances, on balance, I find his fees should be added back to the pool.

12. In relation to the wife’s legal fees, they too should be added back into the pool.  On her own evidence, she used the bulk of the $117,000 that she withdrew from the D Pty Ltd account to pay for the majority of those fees.

CGT payable on the former matrimonial home

1. As stated, the former matrimonial home is owned by the RPT. 

2. Mr NN gave evidence, which was not challenged, that whilst the transfer of an asset from a trust to an individual would normally be considered to be a capital gain event and therefore a sale for income tax purposes, that CGT liability can be deferred until the asset is subsequently sold and the spouse receiving the CGT asset on transfer will be liable to tax on the taxable gain.[118] 

   [118] Annexure -2 of the affidavit of Mr NN sworn 30 October and filed 1 November 2018.

3. If the former matrimonial home is transferred to the wife, Mr NN gave evidence that the amount of tax ultimately payable by the wife will depend on her income in the year on which it is sold.  Mr NN’s evidence is that the tax payable will be between $160,333.13 and $165,668.24 depending on the cost base figure.[119]  This is calculated on the following assumptions:

   a)the wife will have other income of $41,000;

   b)the sale price is $1,500,000; and

   c)selling costs of $20,000.[120]

   [119] Annexure -2 of the affidavit of Mr NN sworn and filed 14 November 2017.

   [120] Annexure -2 of the affidavit of Mr NN sworn and filed 14 November 2017.

4. The wife sought that the CGT liability be included in the asset pool. 

5. The husband did not make any submissions about this issue; however, he did not include any such amount in his proposed balance sheet.  It is appropriate that the parties share in the tax liability arising from the manner in which the former matrimonial home was purchased.  That structure which was agreed (implicitly if not explicitly) during the relationship, has created a situation where a contingent liability will arise when the property is ultimately sold.

Conclusions regarding asset pool

1. For each of these reasons, I find the asset pool consists of the following assets and liabilities.

Assets	Ownership	Value
G Street, Suburb H property (former matrimonial home)	Trustee of the RPT	$1,500,000
Net proceeds of sale of the R Street, Suburb S property as at October 2018	Saxbys Lawyers	$453,250
Motor Vehicle BBB driven by the wife	RFT	$43,190
D Pty Ltd	RFT	NIL
Wife’s bank account	Wife	$1,798
Interim property settlement	Wife	$40,000
Interim property settlement	Husband	$40,000
50% equity in M Street, Suburb N property	Husband	NIL
Paid legal fees	Husband	$233,072
Paid legal fees	Wife	$117,000
Total assets		$2,428,310

Liabilities	Ownership	Value
Liabilities secured over G Street, Suburb H property	RPT	$481,797
Tax payable on sale of the G Street, Suburb H property	RPT	$47,506
Motor Vehicle BBB lease balloon	RFT	$37,000
CGT adjustment between husband and Mr J	Husband	$110,000
Taxation debt owed to the liquidator of K Pty Ltd[121]	RPT	$351,612[122]
CGT on former matrimonial home	Joint	$165,668
Total liabilities		$1,193,583
Net assets		$1,234,727

[121] Per calculations in annexure -2 to affidavit of Mr B sworn 14 August 2018.

[122] This excludes the liquidation costs and expenses which I have found the wife ought not be liable for.

1. Neither party is seeking superannuation splitting orders.

Section 79(4) factors

Section 79(4)(a) to (c) contributions

Initial contributions

1. It is common ground that the parties had minimal assets when they met and commenced cohabitation.  They both studied and obtained professional qualifications during the relationship.

2. I find that their contributions at the commencement of the relationship were equal.

Contributions during the relationship

1. It is also common ground that although the wife has accumulated professional qualifications throughout the relationship, including completing a degree, she took on the primary homemaker role within the relationship while the husband built his business, initially with a partner in Suburb WW and then later, on his own in G Street, Suburb H.

2. The parties also entered into various investments throughout the course of their relationship, some in their own name or through companies and trusts owned and operated by them, and sometimes together with Mr J and his wife.

3. The parties conducted their affairs through rather complex trust and corporate structures.  While I find that the husband predominantly ran the business during the relationship, the parties contributed equally to the best of their respective abilities.

4. For the reasons discussed above, I am satisfied that from time to time the parties experienced cash flow difficulties which made it hard for them to meet their tax liabilities as and when they became due and payable.  The fact that the parties had to obtain a second mortgage secured against the former matrimonial home prior to separation is a testament to this.

5. I have given consideration to the husband’s submission that he contributed significantly towards the care of Ms VV, the wife’s child from a previous relationship and that this ought to be weighed in his favour. 

6. The husband submitted that the court should consider the husband’s support throughout his relationship for Ms VV who was not his child as an additional contribution made by him. 

7. Having regard to the totality of the evidence, however, I find that the parties’ contributions during the relationship, both financial and non-financial, directly and indirectly, were equal. 

Post-separation contributions

1. More importantly, the husband submitted that the following contributions made by him ought to adjust post-separation contributions in his favour:

   a)providing the wife with an income from D Pty Ltd until August 2016 of $100,000 plus superannuation;

   b)meeting all the mortgage and associated costs of the former matrimonial home; and

   c)paying for the children’s education and extra-curricular activities. 

2. The wife disputed this on the basis that any income distributed to her or for her benefit is income of the business which the parties established during the relationship and it is fallacious for the husband to maintain that this distribution is from him to her.  She was of the view that it constitutes income from a joint asset to which she has an entitlement until such time as she ceases to be a shareholder/owner of the relevant entities which generate and distribute that income. 

1. Moreover, the wife stated that she has remained the primary carer of the two younger children of the relationship and has continued to support them, which constitutes a post-separation contribution on her behalf.

2. For his part, the husband stated that the two younger children spend time with him pursuant to a 5/9 arrangement and therefore he also provides significant care for them.  Moreover, the eldest child of the parties, Ms A, lives with the husband and the husband provides evidence of ongoing financial support to her by him post-separation.

3. It appears that both parties have adopted a ‘have their cake and eat it too’ approach when it comes to considering the post-separation contributions that the other party has made to the joint assets on the one hand, and the liability that the other party ought to bear for such joint assets on the other. 

4. For his part, the husband submitted that he has made greater contributions post-separation and this ought to be weighed in the balance.  At the same time, he seeks that the wife share the liability for taxes incurred by D Pty Ltd in respect of income earned and distributed as a result of decisions made largely by him post-separation.

5. For her part, the wife argued that her post-separation contributions are equal to those made by the husband and is critical of the husband’s handling of joint assets post-separation without ‘consultation’ with her, but fails to accept that she ought to be held liable for taxation debts incurred as a result of the income from which she has derived a personal benefit.

6. Neither position is tenable.  I am satisfied that both parties have made equal post-separation contributions, having regard to the fact that:

   a)the husband distributed significant funds generated by D Pty Ltd to the wife in circumstances where the wife remains an equal owner and shareholder in that business;

   b)the wife, for the reasons set out above, has remained liable for the tax debts incurred as a result of distributions from D Pty Ltd. 

7. It is also appropriate to have consideration for the ongoing role that the wife and the husband have both continued to perform in caring for the children post-separation.

8. Overall, I find that the parties’ contribution throughout their relationship and post-separation is equal.

Section 79(4)(d)

1. The orders I propose making will see the wife no longer having access to an income stream that was previously available to her during the marriage from profits generated by D Pty Ltd.  This is not an insignificant consideration.

2. Having said that, the wife is highly educated and has various professional qualifications.  At trial, she gave evidence that she has sought employment as a professional but that it has been difficult for her to obtain such employment on a part time basis which would allow her to continue to care for her two youngest children.[123] At trial, those children were 17 and 13 years of age respectively.  It is anticipated that over the coming years, the impact on her time in caring for them will reduce and her ability to maximise her income will increase.

   [123] Transcript page 241 at lines 32 to 34.

3. In addition, the wife gave the following evidence:

   a)she runs a business called Q Pty Ltd, but her income at the time of trial from this business is minimal; and

   b)she was employed on a sessional basis at Employer UU and it was her hope that she would be able to obtain full time employment with that organisation in the future.[124] 

   [124] Transcript pages 243 to 244.

4. The husband has demonstrated that notwithstanding the uncertainty of these proceedings which have become protracted, he has been able to continue in his business as a health care worker and indeed, it would seem that the business is continuing to do well. 

5. The proposed orders seek to bring finality to these proceedings and allow the parties to sever their financial ties. 

Section 75(2) factors

1. I turn now to the relevant section 75(2) factors.

2. Both parties are of a similar age.  The husband’s evidence, which I accept, is that he recently suffered a stroke.  Notwithstanding this health issue, he has managed to continue to run D Pty Ltd.

3. The wife is in good health.

4. The husband will continue to have access to the profit generated by D Pty Ltd.  On the basis of the totality of the evidence before this court, this is a significant financial resource, which will allow the husband to re-establish himself with relative ease. 

5. The wife has her current income and on the basis of the orders I propose making, will have at her disposal funds to re-establish herself in a home.  The wife has the physical and mental capacity to obtain appropriate gainful employment either as a public servant or as a public servant and has significant income earning capacity.  

6. As stated, the husband has the capacity to continue earning a significant income from D Pty Ltd into the future.  In addition, the husband currently lives in the M Street, Suburb N property which provides him with stable accommodation for himself, Ms O and their children, although I recognise the home currently does not have any equity.

7. The wife has the ongoing care of the two youngest children of the marriage, X and Y.  As stated, they are currently 17 and 13 years of age. The husband spends significant and substantial time with X and Y by agreement.

8. The husband also has the responsibility of supporting his two children of his relationship with Ms O.

9. The proposed orders will allow the parties to have a standard of living that is reasonable in all of the circumstances.

10. This was a long marriage.  I find, on the basis of the totality of the evidence, that the parties arranged their affairs on the basis that the husband would work full time in his business to develop his professional reputation and the wife would principally devote her efforts to the care and welfare of the family and raising the children.  This undoubtedly has impacted upon the wife’s ability to further her own career and her income earning potential.  However, given the ages of their children and her professional qualifications, it is reasonable to expect that she has the capacity to earn a greater salary in the near future.

11. The wife gave evidence that she wishes to continue in her role as the primary carer for the two youngest children of the relationship.  Given their ages, whilst the manner in which she carries out her parenting may change, the proposed orders would not impact on her ability to continue in her role as a parent. 

12. The wife’s evidence is that she has not re-partnered.

13. The husband has re-partnered.  Ms O has given evidence that she owns two properties in which she has some equity.  She is also a part-owner of the M Street, Suburb N property.  As an employee of D Pty Ltd, Ms O derives an income of $100,000 plus additional income from her business and advertising sales.  The husband gave evidence that his financial affairs and those of Ms O are entirely intermingled. 

14. In determining what orders are just and equitable in this case, it is also relevant to consider the fact that these parties separated in June 2014.  In circumstances where the various trusts and corporate entities in which the wife held an interest were tied to the business conducted by the husband, final orders would need to clearly sever the wife’s ties with those trusts and corporate entities.

15. The wife has continued to derive an income from those trusts and corporate entities post-separation.  Leaving aside the question of whether these payments were made from pre- or post-distribution funds, the wife has received a combination of income, superannuation and payments pursuant to the May 2017 orders.  In addition to these direct payments, the wife has had the benefit of living in the former matrimonial home for over five years with the husband paying all mortgage and other outgoings, to the tune of a further $300,000. This does not include the amounts that the husband has paid to meet the educational and extra-curricular expenses of the children.  These sums received by the wife are significant given the size of the asset pool currently available for division between the parties.

16. Another relevant factor for consideration is that as a result of the manner in which the parties structured their affairs and specifically, the fact that the former matrimonial home is owned by the RPT, when the former matrimonial home is sold, the parties will incur a CGT liability. 

17. I have also had regard to the husband’s evidence that both he and Ms O have access to a motor vehicle for transportation, although the evidence was unclear as to the value of those vehicles, whether they are owned or leased and indeed when and how they have been financed. 

Whether it is just and equitable to alter the parties’ property interests

1. For the reasons stated above, I am satisfied that it is just and equitable to make an order adjusting the parties’ property interests.

What order is just and equitable?

1. Having come to this view, I now consider what, if any orders are just and equitable.

2. Having regard to the totality of the evidence and each of the factors discussed above, I find that the asset pool as set out in paragraph 252 above, should be divided in the overall proportions of 62% to the wife and 38% to the husband. 

3. Having regard to the fact that the parties each received the benefit of an interim distribution of $40,000 together with their legal fees which have been added back into the pool, in order to give effect to the overall 62/38% division, I propose making the following orders:

   a)that the former matrimonial home be sold and after payment of joint liabilities, the balance be divided in the proportions of 70% to the wife and 30% to the husband; and

   b)the proceeds of sale of the R Street, Suburb S property currently held on trust by the wife’s solicitors also be divided in the proportions of 70% to the wife and 30% to the husband.

4. The wife will otherwise retain her Motor Vehicle BBB unencumbered pursuant to interim orders made by consent on 1 February 2019, as well as her bank accounts and savings together with her superannuation contributions and entitlements.

5. This would see the wife retain sufficient funds to allow her to re-establish herself in alternative accommodation.

6. The husband will retain his share in the M Street, Suburb N property and importantly, he will continue to be able to run D Pty Ltd and generate income and profit from that business.  The husband will also retain some funds from the proceeds of sale of the former matrimonial home and the R Street, Suburb S property proceeds after paying the liabilities transferred to him.

7. In making orders in these terms, I have had regard to the wife’s evidence that she would not be able to meet the current mortgage repayments from her own income at this stage.  In those circumstances, the former matrimonial home needs to be sold.

Spousal maintenance

1. The wife’s case in the alternative, is that if the court does not determine the asset pool in the terms put forward by her, she seeks an order for ongoing spousal maintenance “in such sum as the Court determines having regard to the provisions of section 72 of the Family Law Act 1975 (Cth).”[125]

   [125] Wife’s minute of proposed order dated 1 February 2019.

2. The wife has not quantified the amount she seeks by way of spousal maintenance.  It is implicit in the husband’s case that any such order for spousal maintenance is opposed. 

3. Leaving aside the failure to quantify any spousal maintenance, the wife has not made any submissions addressing why ongoing spousal maintenance would be appropriate in this case. The wife addresses section 75(2) factors, although this appears to be in support of the overall property adjustment sought by her pursuant to section 79. Relevantly, the wife submitted that “section 75(2) indicates that there should be a substantial adjustment to the Wife.”[126]

   [126] Exhibit O, paragraph 2 at page 23.

4. As part of these submissions, it was further argued on behalf of the wife that her future income earning capacity is limited by:

   a)previous decisions made by the parties that the wife should stay home and look after the children;

   b)her continuing primary care for the parties’ two children;

   c)the fact that full-time employment is not a realistic proposition for her; and

   d)her age will make it more difficult for her to find employment.[127]

   [127] Exhibit O, paragraph 2 at page 23.

5. To the extent these factors are relevant in adjusting the parties’ property interests, I have addressed these matters above.

6. The only express reference to ‘spousal maintenance’ in the wife’s written submissions is as follows:

   It is submitted that the wife’s needs as stated on Form 13 are reasonable.  She remains highly reliant upon the Husband for the support of herself and the children.  She clearly has a present need for significant spousal maintenance from the Husband.  The business presently pays periodic payment of $1,330 pwk after tax; the mortgage, bills for the home to the value of $640 pwk, a motor vehicle lease, registration and insurance to the value of approximately $390pwk, plus provision of children’s school fees, books and uniforms $1,000 pwk.[128]

   [128] Exhibit O, paragraph 3 at page 23.

7. The orders which I propose making to adjust the parties’ property interests will see the wife receive the majority of the remaining assets of the relationship. She will be in a position to find reasonable alternative accommodation for herself and the two remaining children living with her. 

8. Relevantly, as stated above, the wife is well qualified and has the physical and mental capacity for appropriate gainful employment. 

9. Whilst the wife has the primary care of the two children, the husband also provides care and support for the children pursuant to a 5/9 arrangement. 

10. The husband also has responsibilities to support Ms O and their two children in addition to providing ongoing support to the children of his relationship with the wife.

11. In all of these circumstances, I conclude that the wife has not established that an order for spousal maintenance is justified.  In coming to this view, I have also had regard to the fact that the parties separated over five years ago in July 2014 and that for the bulk of this period, the wife has had the benefit of ongoing financial support from the husband and the businesses established during the relationship.  Whilst it is correct that the wife is an owner/shareholder of those entities, it is also the case that the bulk of D Pty Ltd’s revenue has been generated by the efforts and reputation of the husband, whether directly or indirectly.  The wife has therefore benefited from the husband’s continued work in that business for over five years post-separation.   

12. I therefore do not make any order for ongoing spousal maintenance.

Conclusion

1. For each of these reasons, I make the orders set out in the beginning of my reasons for judgment.

I certify that the preceding three hundred and fifteen (315) paragraphs are a true copy of the reasons for judgment of Judge Mercuri

Date:     24 October 2019