Rennie and Rennie
[2019] FamCA 246
•18 April 2019
FAMILY COURT OF AUSTRALIA
| RENNIE & RENNIE | [2019] FamCA 246 |
| FAMILY LAW – PROPERTY – Where the parties established two businesses at the commencement of the relationship, one of which was run through a company and several trusts – Where the parties differ in respect of a number of matters including the parties’ respective contributions and future earning capacities, whether certain amounts should be added back to the property pool, and the impact of the Applicant’s actions in the lead up to the trial on the property of the parties – Where the trial was re-opened for the Applicant to adduce evidence of his mental health problems in the weeks after the trial and the impact of that on the determination of just and equitable property adjustment Orders to be made between the parties – Where after a consideration of the issues in dispute, as well as the history of the matter and the parties and each of their respective contributions at the commencement of and throughout the relationship and future earning capacities of the parties, a just and equitable division between the parties of the property pool, as adjusted, is 55 per cent of the property pool to the wife and 45 per cent to the husband – Where draft Orders are proposed by the Court for the consideration of the parties to reflect the judgment of the Court in this matter. |
| Family Law Act 1975 (Cth) Superannuation Industry (Supervision) Act 1993 (Cth) Family Law (Superannuation) Regulations 2001 (Cth) |
| APPLICANT: | Mr Rennie |
| RESPONDENT: | Ms Rennie |
| FILE NUMBER: | BRC | 1329 | of | 2014 |
| DATE DELIVERED: | 18 April 2019 |
| PLACE DELIVERED: | Brisbane |
| PLACE HEARD: | Brisbane |
| JUDGMENT OF: | Forrest J |
| HEARING DATE: | 31 January and 1, 2 & 3 February, and 13 November 2017 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Bunning |
| SOLICITOR FOR THE APPLICANT: | McInnes Wilson Lawyers |
| COUNSEL FOR THE RESPONDENT: | Mr Linklater-Steele |
| SOLICITOR FOR THE RESPONDENT: | HopgoodGanim Lawyers |
Orders
That the parties and their legal representatives shall consider the draft of proposed Orders and, if they can reach agreement on any changes to the terms of those Orders that should be made before they are made as Final Orders, they shall jointly submit a draft to Justice Forrest’s Associate within three weeks of the date hereof.
That should the parties not be able to reach agreement as to any proposed changes to those draft Orders before they are made final, the matter be listed to hear any further submissions of the parties and to consider any changes proposed by each of the parties at 10.00 am on Friday, 10 May 2019.
Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Rennie & Rennie has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).
| FAMILY COURT OF AUSTRALIA AT BRISBANE |
FILE NUMBER: BRC 1329 of 2014
| Mr Rennie |
Applicant
And
| Ms Rennie |
Respondent
REASONS FOR JUDGMENT
These are my reasons for judgment in a property adjustment dispute between two people who lived together as a couple for 24 years, 20 of which they were married. They raised two daughters to adulthood in that time. They established and ran a successful small business operating out of regional central Queensland in that time. Sadly, they fell out to such an extent after the break-up of their relationship that they then litigated fiercely in this Court, spending almost $500,000 of their combined wealth on legal costs, ultimately losing their successful business due to the lack of trust between them and the lack of a co-operative, mutually beneficial approach to the finalisation of their financial and property affairs.
That three mediations conducted by experienced family law mediators along the way did not result in a resolution of their dispute is further testament to the strength of the positions that each of the husband and the wife have taken against each other in this matter. That the husband, a life-long vehicle operator, ultimately had a breakdown of his mental health that cost him his ability to continue to operate, is also sad testament to the emotional toll that such disputation takes on people caught up in it.
The matter was commenced by the husband in this Court in February 2014. That it did not get to a trial before me until the end of January 2017 is also testament to the long delays that have faced litigants in this Court for many years. Whilst moving its way up the pending cases list, waiting, like hundreds of other equally difficult and conflicted cases, to be set down for trial, as is not uncommon in such circumstances, the differences between the parties brought them before the Court on interim hearings costing them many thousands of dollars in legal costs, on a number of occasions. On some of those occasions, interim Orders were made, some of them by agreement between the parties after negotiations conducted between them with the assistance of very experienced, senior family lawyers. That it became obvious at the trial that each of the parties had willingly acted in contravention of some of those Orders, or, at least, in contravention of the spirit of those Orders, is also testament to the desperation that people caught up in these disputes find themselves in.
Not long after I reserved my judgment at the end of the trial, I had to hear and determine an application brought by the husband to re-open the trial. That application was opposed, but after another hearing, I determined that application in favour of the husband and gave him leave to adduce some more evidence, particularly going to his state of mental health that had, on the evidence he adduced, deteriorated badly after the trial. Acknowledging the wife’s right to test that evidence and each party’s right to make further submissions about its relevance and impact on the determination of just and equitable property adjustment Orders, I listed the matter again for a further day of hearing when it could be first accommodated in the Court’s busy calendar, in mid-November 2017.
This judgment has been reserved since the matter concluded then, further testament to how busy this Court and its Judges are hearing many other cases that have been waiting years to be heard, writing other difficult reserved judgments, and taking necessary recuperative leave. I regret that it has taken this long to write and deliver this judgment. I appreciate the additional burdens the delay will have placed on the already heavily taxed emotional wellbeing of the parties. I trust this judgment will now provide them with the certainty of finalisation they will have been craving.
Property adjustment sought by both parties
Both the husband and wife argued for Orders adjusting property interests as between them, thereby conceding that it is appropriate for the Court to make adjustment Orders in respect of the property of the parties or either of them that it is satisfied are just and equitable, rather than merely leaving their interests in property as it finds them. I accept those are appropriate concessions in this case.
The submissions of counsel for each of the parties were made on the basis of an acceptance that the four-step approach to determining just and equitable property adjustment Orders is the appropriate way to determine this case. That approach involves determining at the first step, as best as can be determined, the interests of the parties or either of them in property and superannuation, the values of those property and superannuation interests, the quantum of liabilities of the parties or either of them and whether those liabilities ought to be deducted from the value of the property and superannuation interests before determining the total net value of the property and superannuation interests of the parties.
The second step involves considering and assessing the contributions that each of the parties made across all aspects of the marriage, including towards the acquisition, maintenance and improvement of their assets, and towards the wellbeing of the family they and their children constituted, and determining how that assessment might be quantifiably applied to the net total of their assets and superannuation in order to notionally divide those things between them.
The third step involves considering all of the matters set out in s 75(2) of the Family Law Act 1975 (“the Act”), in so far as they are relevant, as well as the other matters set out in ss 79(4)(d), (f) and (g), in so far as they are also relevant, and determining if justice and equity demands an adjustment to the notional percentage division previously arrived at after consideration of the parties’ contributions alone. Final property Orders are made at the fourth step where the Court considers the overall justice and equity of the final Orders proposed to be made before making them in terms it is satisfied are just and equitable.
The real issues in this case
Despite the relatively high conflict between the parties in this case, there do not now remain many issues upon which they differ dramatically. They differ only on what may be described as a few “micro” and “macro” matters. They differ on how their respective initial contributions should be assessed. They differ in respect of whether or not there should be some notional amounts “added back” to the value that is ascribed to their net interests in property and superannuation. They differ in respect of how some particular behaviour or “financial conduct” of the husband in the period of separation leading up to the trial, including clear non-disclosure of relevant documents, is to be treated and just how it is to impact on the property adjustment determination. They differ in respect of who should get to keep some particular items of property, and they differ in respect of how their respective earning capacities should be assessed and how that comparative assessment is to impact on the final property adjustment.
Before I turn to the determination of these matters upon which they differ, I will set out what I find to be the relevant factual history.
Some relevant history
The husband and wife met and began living together as a couple in or about 1989. The husband had moved to Australia from Country Q after the end of a prior marriage. He had, at that time, recently obtained a vehicle licence and was employed in the agricultural industry. He had little in the way of assets at that time apart from a small motor car that the wife said she thought was worth about $3,000. He did not ascribe it a value in his evidence.
The wife had her own small business with five employees. She owned a house with a mortgage debt secured against it and a motor car.
She deposed to the following:
(i)That her car was “worth about $10,000” at that time;
(ii)That she sold the business in 1992 for a net amount of approximately $45,000; and
(iii)That she sold the house in 1993 for $113,000 but that the mortgage debt had been about $30,000 at the commencement of their cohabitation.
The husband did not seriously challenge any of those assertions of fact.
Soon after they had commenced living together, the couple moved to Tasmania, where the husband had obtained employment operating vehicles. They moved back to central Queensland in 1993, married and bought a rural property just outside a small rural town, on which they built a house. They used the proceeds of sale of the wife’s home and some savings to pay for the purchase of the land and on the property. They borrowed about $200,000 from a bank to pay for the construction of the house on the property.
The couple’s two daughters were born in 1996 and 1997.
In 1999, the husband’s parents died together in a tragic accident. The husband received a bequest of $50,000 from their estates that he contributed to the financial needs of the family.
The couple established a small hire business which they ran out of their rural property on which they also ran a small livestock business. They ran the two businesses together, with the husband running the operational side of the hire business and the wife doing much of the administrative work out of the office in the house on the property. They parented the girls together, with both going away to boarding school in the years of their secondary education.
Through hard work and good management they built the hire business into a successful small business, at the same time enjoying the fruits of an apparently successful livestock business. Fortunately for them, their wealth grew as a consequence. They acquired additional property adjoining the property on which they lived. They bought and sold another property as well.
Their relationship began to experience difficulties and ultimately broke down irretrievably in dramatic fashion in December 2013 after 24 years of being together. Early in 2014, the husband locked the wife out of the property and since soon after that she has lived in rental accommodation in the nearby town.
At the time of the breakdown of the marriage relationship, the real properties they owned were all registered in the husband’s name. The livestock business was also in the husband’s name. They ran the hire business through a company and a couple of trusts. The company, RH Pty Ltd (“RH”), ran the business, hiring vehicles from a family trust, C Trust. C Trust leased the vehicles through lease financing arranged with the Westpac Bank. The husband was the sole director of RH at separation and the wife was the sole shareholder, holding her share on trust for another family trust, H Trust. They also had a self-managed superannuation fund of which they were both members. There was no dispute that the assets of the company and the trusts were the property of the parties or either of them.
At the time of the separation, they were operating four vehicles, with the husband and two employees operating them. The single expert accountant retained to value the parties’ interests in the business entities for the trial determined that the adjusted earnings of the entities before financing costs, taxation, notional commercial remuneration to the parties and a notional commercial rent for the hangar space on the property was as follows:
Financial Year Adjusted Earnings
2012 $412,205
2013 $459,448
2014 $969,340
2015 $689,930
2016 $373,939
On those figures, I consider it fair to describe the business as a relatively successful one.
One of the four vehicles was involved in a crash and was written off in 2016, with the business receiving a payout from an insurance company for it. That left three operational vehicles and parts of another vehicle at the time of the trial. They were independently valued in US dollars converted as at 19 January 2017 to Australian dollars. They were worth $1,513,182 and Westpac was owed $791,642 in respect of them at that time, giving them an assessed net value of $721,540.
After separation, in early 2014, the parties entered into very detailed interim consent Orders that I was asked to make that were intended to carefully regulate their financial and business affairs in the period to trial. Those Orders gave operational control of the business to the husband and administrative control of the business to the wife. They carefully delineated the boundaries of their respective responsibilities and they were to share information about their respective roles.
Those Orders put in place processes for handling mail and email, for banking, and for making payments to each of them. Each was to receive a gross amount of $80,000 per year as salary with the net amount after tax and superannuation deductions to be paid into their respective personal bank accounts. There were provisions for other expenses to be paid by them to also be paid equally, as well as provision for the mortgage repayments owing with respect to the purchase of their real property and for repayments of other loans to be made. There were provisions for the lease payments for the vehicles to be paid. There was a provision for each of them to be paid an additional $5,000 per month on an ongoing basis on account of their legal costs, with the treatment of that being a matter for the trial judge. Relevantly, in respect of the business, they also provided as follows:
Neither the Husband nor the Wife will take any steps to issue invoices for work done by either of them using the assets of [RH] and the [C Trust] or in the course of operating a hire business, or request payment in any name other than [RH].
Those interim Orders also provided for the husband to be responsible for the livestock business and to have sole access to the bank account that was called “the livestock business account”.
One of the employees resigned in September 2014 citing his poor relationship with the wife as the reason. He was the son of a lifelong friend of the husband.
The matter came back before me in early 2016. The husband applied to the Court for sole control of the business and for discharge of the Order that provided for payment of $5,000 per month to each of them for legal fees. Some other Orders were sought by him and also by the wife, including in respect of disclosure by the husband. For reasons I published in writing at the time, I dismissed all of those applications.
A little later in 2016, I listed the matter for a four day trial to take place in early 2017 and I set the matter down for a compliance check on 20 December 2016. On that date, the husband was in New Zealand on a couple of weeks’ holiday. He was represented by counsel – the same barrister who later represented him at the trial. The wife’s solicitor made an application for further disclosure by the husband of documents relating to the use of the vehicles by the business, which was granted. She was also given leave to cause subpoena to issue from the Court directed to some named third parties, and some issues relating to the evidence being obtained from the single expert accountant were clarified.
When the matter came on for trial before me, neither the husband nor the wife wanted to retain the hire business any more, whereas each of them had maintained throughout the proceedings until then that they wanted to be the one to retain the hire business.
At the end of the trial, the husband proposed that the business be closed down, the vehicles sold off, debts be repaid and the net property and superannuation of the parties be divided equally between them. The wife proposed that the husband retain the business and that he could then decide whether to close it down or continue to operate it. These two proposals were put against the backdrop of the single expert accountant having valued the business (as at 30 June 2016) as not worth any more than the value of its net assets, but with it being able to at least sustain a salary to the husband of $120,000, a salary to an administrative employee of around $60,000 per annum and further maintainable earnings over that of around $56,500 per year.
When the evidence finished, an oral application for interim Orders was made by the wife. I heard and determined it at the time. In the period since separation the wife had taken steps to have herself made a director of the company. At this time, the end of the trial, I ordered that the wife resign her position as a director of the company and have no further involvement with the business, leaving the husband as the sole director (having become a director of the company again as a result of my interim Orders of 12 May 2014). I restrained the husband from taking any steps to wind up the company or to cause it to be put into liquidation. I ordered him to pay the wife $50,000 from the livestock business account as partial property adjustment to her. I ordered him to put $50,000 from that account into the business account so that there were funds available for the business to keep operating and, importantly, to make the lease payments on the vehicles, one of which had already fallen into default, as it had to be refinanced and the husband had refused to sign the personal guarantee that Westpac required. I also ordered that the husband transfer title to the property on which the former family home and the vehicle hangar were situated to the wife. I made some other Orders restraining disposal of other assets and providing how the proceeds of sale of any livestock were to be dealt with pending judgment.
Only a matter of weeks after the trial was finished and I had reserved my judgment and made those interim Orders, the husband suffered a breakdown of his mental health, was admitted to hospital for observation and treatment, and had his vehicle licence suspended by the Authority. Evidence was also adduced of the hire business’ single biggest client withdrawing its business from the company because of that.
On 19 May 2017, I determined to re-open the proceedings and to list it for further hearing later in the year. I discharged my earlier Order restraining the husband from taking any steps to wind up the company or to cause it to be put into liquidation and obliging him to continue paying the lease payments on the vehicles. I appointed the wife as sole trustee for the sale of all of the vehicles and provided for the deposit of sale proceeds to the C Trust bank account.
When the matter was before me again in November 2017, the husband and his psychiatrist were both cross-examined on the new evidence each had given.
I do not know whether the vehicles have since been sold. I presume that they will have been and that any net proceeds of sale would have been deposited to the bank account as required. I will deal with the matter in my final judgment as if that has happened and that the net proceeds are earning interest for the parties, awaiting this judgment.
The husband’s pre-trial business activities
The evidence adduced at trial satisfied me that for a long time in the time leading up to the trial, the husband had been asserting that the financial viability of the business was being compromised by the behaviour of the wife and by the payment to each of them of their salaries, expenses and, most significantly, the sum of $5,000 that was being paid to each of them each month to pay their respective legal costs.
The husband had persistently asserted that the company was at risk of insolvency if these matters were not addressed. At one point in time, he actually unilaterally established another company, telling the wife he had done so and that it was a protective measure in the event of the insolvency of the company, RH, through which they ran the business. The wife persistently rejected the husband’s assertions and continued to ask him to tell her who the company’s creditors were who he asserted were not being paid, such that they might act to put the company into liquidation. He did not respond to her requests in that respect.
Though the company had long had its own external accountants preparing its financial statements and providing it with advice, and though there was another firm of accountants jointly appointed to act as the single expert to value the parties’ business interests, in 2016, the year leading up to the trial of the matter, the husband unilaterally engaged another firm of accountants and a different firm of solicitors from the ones that he had instructed in these proceedings, to, ostensibly, provide him with advice relating to the issue of solvency of the company, RH. As the trial approached, the assertions about the solvency of the company increased in regularity and shrillness, yet there was still no evidence adduced of any creditor who was putting pressure on the company to be paid or asserting that it would take steps to wind up the company if it was not paid. Furthermore, during this time, the husband had large amounts (in excess of $100,000) in the livestock business account that he solely controlled and his livestock business owed RH in excess of $100,000 by way of inter-party loan. Notably, the husband never attempted to make out a case that the money from the livestock business account could not be used to repay debt to RH to help it meet any of its liabilities as and when they fell due at the time.
During this same period of time leading up to the trial, the sole remaining employee of the company went to the same firm of accountants that the husband had retained for advice in north Queensland and instructed them to set up a company for him that he called NN Pty Ltd (“NN”). Then, in and around the month of November 2016, a rather extraordinary set of events happened.
One of the “customers” of the parties’ hire business was a Queensland organisation. That organisation had hired RH to provide a vehicle service over a short period of time at around the same time each year over a number of years, at least, to facilitate their conduct of a research survey. It was not in dispute that this organisation required RH to provide the service again in late 2016. The organisation informed the husband in advance of the commencement of the contract that they would require two vehicles for the job in 2016. The Vehicle 4 was the particular vehicle required for the job. Two of those were required and RH now only had one serviceable Vehicle 4.
In 2015, this organisation’s contract was worth a gross amount of just over $30,000 to RH. There was no evidence adduced to suggest that in 2016 that the husband thought or believed the contract was going to be worth less than that.
The evidence established that the husband was operating vehicles for the business at the time. Mr P was also employed by RH operating for the company at the time. Indeed, he was, according to him and the husband, being paid a guaranteed minimum hours-based retainer regardless of the hours he worked for the company so as to guarantee his availability to operate for RH as required.
To provide the service that the organisation required, a second Vehicle 4 would have to be “cross-hired” (hired by RH from another vehicle owner – a fairly common practice in the industry, I am satisfied). In this particular instance, Mr P sourced a second Vehicle 4 from a known source, cross-hired it, not in the name of RH for whom he worked, but rather in the name of NN, the company he had just established, and then provided it to the organisation alongside the Vehicle 4 that RH provided. The husband operated the RH vehicle and Mr P operated the other cross-hired vehicle. The organisation was invoiced at the end of the job by RH for the vehicle operated by the husband and by NN for the vehicle operated by Mr P. Just over $30,000 in gross fees were invoiced to the organisation by NN for Mr P’s work in the cross-hired vehicle. More fees were invoiced to the organisation by RH for the hours flown by the husband in the RH vehicle. NN paid just under $13,000 to the third party owner of the vehicle that was cross-hired. Mr P asserted in oral evidence that the profit on the job, after that cross-hire cost and other unspecified costs, such as for fuel, were deducted, was around $10,000. Amazingly, he conceded in his oral evidence that all that profit was retained by him, through NN, but that at the same time he still got paid his minimum retainer by RH in that month.
There were a number of aspects to this evidence that were very troubling and, ultimately, quite damaging to the credibility of the husband. First, the husband did not disclose any of this to the wife before it happened, as it happened or even just after it happened. The wife “exposed” it at the trial through her tenacious insistence on further and better disclosure in the weeks leading up to the trial, and, ultimately, through the judicious use of subpoenas, including subpoenas directed at Mr P and the organisation. The husband and Mr P were, I am satisfied, forced into a position where they had to disclose what they had done in respect of this job, in circumstances where the husband was clearly expecting it not to be uncovered.
Secondly, neither the husband nor Mr P could give a satisfactory explanation for why they did this, rather than simply cross-hiring the second vehicle through RH, providing the two vehicles for the job through RH, and rendering an invoice for the total of the work through RH. The husband could not explain how the decision sat with his fiduciary duty as a director of RH to act in the interests of the company and its shareholder and Mr P could not explain how this sat with his duty as an employee to act in the interests of his employer.
Under cross-examination, both the husband and Mr P asserted that the decision to do the job for the organisation in this way was based around concerns that RH might become insolvent at any time. I remained unpersuaded that was a genuine, soundly based reason for doing this particular job in the manner that they did.
In mid-November 2016, Mr P began email communication with another third party vehicle owner in respect of the cross-hire of another vehicle. A copy of the first email sent by him to that third party was produced by that third party in answer to a subpoena. It was, along with all the documents produced by that third party, adduced into evidence at the trial. Mr P had signed off on the email with his name and then “NN/RH, [Town M] Qld”.
Mr P had also been served with a subpoena to produce all relevant documents in his possession. The documents he produced in answer to the subpoena were also all adduced into evidence at the trial. A copy of that same email he sent to the third party was not in the bundle, though subsequent ones were. None of the copies of emails produced by Mr P displayed the sign off referencing “NN/RH”. Mr P was asked, in cross-examination, for his explanation for that. He could not give one. I am quite satisfied that he was selective in what he produced in answer to the subpoena and that he chose not to produce the email that had him signing off with “NN/RH” because he did not want the wife or the Court to see it.
The documents produced under subpoena by this third party, by Mr P and by RH’s largest customer, clearly evidence that the husband and Mr P were trying to put in place another set of circumstances similar to that which they had put in place with the customer which was the organisation.
Mr P was cross-hiring the third party’s vehicle and he and the husband were trying to get the customer to agree to effectively contract with RH in respect of the work to be flown by RH in one of its vehicles but to separately contract with NN, Mr P’s company, in respect of the work to be flown by Mr P in the cross-hired vehicle, for which NN would be liable for the cross-hiring. If this had been able to be put in place, a similar situation as had occurred with the organisation’s work would have been able to have been carried out – that is, gross fees that would otherwise have been charged by RH would have been charged by NN and profit shifted from RH to NN at the same time as Mr P was being paid his minimum hours retainer.
The plan became unstuck, I am satisfied, when the customer, a large, bureaucratically structured organisation, refused to agree to the proposal to contract for the same job with the two different companies. They did so because of their own internal contract tender processing and acceptance systems and the fact that RH had been through those and was approved, but NN had not and was not approved.
What happened next was another set of extraordinary events. There was no dispute that the work for this particular customer had been consistently undertaken over what was called the “storm season” – that is, over Summer, including the Christmas-New Year holiday period and that, depending on the frequency of storms, much work could be required of RH and with that, much money could be made. Notwithstanding this, the husband clearly made plans to travel to New Zealand for a wedding that he was to attend as well as a two week holiday right across this potentially very busy Christmas-New Year holiday period. He was not going to be around to directly run RH on the ground, or to operate any of its vehicles, if required, for this particular customer during that potentially busy time.
The evidence supports a finding that with this plan in mind, another vehicle operator was found and engaged to operate for the company over this period. Then, in early December 2016, just before the husband had gone to New Zealand, Mr P wrote a letter addressed to the husband and the wife in which he asked for a reconfiguration of the terms of his minimum hours retainer so that instead of getting paid an adjustment between actual hours flown and the minimum hours guaranteed at the end of the financial year, he could get the minimum guaranteed hours paid on a monthly pro rata basis each month, including immediate lump sum payment of all those monthly amounts for the months of July–November 2016. The husband expressed his unequivocal support for that position to the wife. When the wife raised questions about the actual existence of that minimum guaranteed hours retainer, Mr P immediately tendered his resignation from RH and requested full accounting for his wages, holidays, allowances, superannuation and minimum guaranteed hours. What he did not do though, was walk away and leave the business or the area. At the same time, the husband did not stay in Australia, but rather still travelled to New Zealand as planned.
The husband and Mr P then just agreed that Mr P and the other employee who had been engaged would provide their services, and the use of the cross-hired vehicle that had been sourced from a third party, to RH through NN. The second employee, who was being provided with free accommodation by the husband on one of the properties of the parties, would operate an RH vehicle as required for the customer, RH would pay NN an agreed rate for that employee and an agreed rate for Mr P and for the use of the cross-hired vehicle.
Mr P cross-hired the vehicle from the third party for an agreed rate per hour and then charged RH a significantly greater agreed rate per hour. It was not in dispute that RH could have cross-hired it from the third party for significantly less per hour than the husband agreed to pay Mr P and NN for that cross-hired vehicle. The husband went on his trip to New Zealand and Mr P and the other employee remained in Town M and undertook the work for RH’s customer, ostensibly for RH. RH invoiced the customer in accordance with the contract between them and Mr P caused NN to issue invoices to RH.
The evidence established that NN invoiced RH a total of approximately $50,000 over this period for work done, all for RH’s customers, including the largest customer. There was no dispute that one of those NN invoices billed RH for work the other operator who had been engaged worked for RH in the period before Mr P had even resigned from his employment with RH. He resigned on 11 December yet NN billed RH a daily charge of $280 for the other operator from as early as 28 November 2016.
There was no evidence to support a finding that RH could not have employed this other operator, that RH could not have cross-hired the vehicle that Mr P operated and that the husband could not have operated that vehicle in place of Mr P, rather than flying over to New Zealand and remaining there for two weeks at this critical time. There was no evidence of the actual profit that RH lost through these arrangements as opposed to the alternative arrangements that could have been put in place to ensure that RH’s profit on the job was retained and maximised.
The husband and Mr P again maintained in their oral evidence that these arrangements were all made so as to ensure the survival of the RH business and the continued servicing of its best customer at a time when RH’s financial survival was at real risk. Again, I do not accept that the husband genuinely and reasonably held that belief. I am quite satisfied that, again, these arrangements were all only uncovered and exposed through the tenacity of the wife as the trial drew near.
I am also quite satisfied that the husband and Mr P made all of these arrangements as part of a plan to shift the work and customer base of RH to NN and then for RH to be shut down. I am satisfied that the husband would have provided his certificate issued by the authority to Mr P and NN for it to take over and continue this work. Indeed, Mr P said in his evidence that it was his intention to continue to seek to use the husband’s certificate, just as he had done for the job that he had done through NN. He and the other employee who contracted to RH through NN in December 2016 and January 2017 also worked under the husband’s certificate, even whilst the husband was away on holidays.
For the wife, it was submitted that the Court could also be satisfied that the husband intended to default on the repayments to the vehicles forcing the bank to exercise its power of sale, thus making it possible for Mr P and NN to purchase those vehicles at “fire sale” prices. The evidence certainly was that the husband refused to sign a personal guarantee that the bank required for the refinancing of one of the lease agreements that expired around the time of the trial, putting RH into default and forcing the sale of the vehicle. Whilst the forced sale of the vehicles might well have been part of the plans of the husband and Mr P, I do not consider that it is necessary now to make any findings in that respect in order to determine just and equitable property adjustment as between the husband and the wife.
The activities of the husband and Mr P were uncovered by the wife and exposed to the Court at the trial. I am quite satisfied that those activities cost the business, the company and the husband and wife money in lost profits over the last several months of the company’s business activities. It is impossible for me to determine exactly how much that lost profit was. But at the end of the day, the husband had a mental health breakdown that cost him his vehicle operating licence and cost the company the business of its largest customer. Neither the husband nor the wife wanted to retain the business after the trial. According to the single expert accountant who provided opinion as to the value of the business, it was not worth more than the sum of its assets in any event, though it would have paid a yearly salary to the husband of $120,000 plus a profit over and above that of around $56,000 per year. Some of those facts will be relevantly considered in determining property adjustment orders that are just and equitable at the end of this judgment but the property to be adjusted will include the net proceeds of the sale of the vehicles that, presumably, remains in the bank account of the C Trust rather than the values attributed to the vehicles at the time of the trial by the expert valuation witness.
When the trial actually first concluded on 3 February 2017, one of the options available to the Court was making an Order that the husband retain the business, including the vehicles at the valuation that had been expertly attributed to them. However, the post-trial developments in respect of the husband’s mental health, the suspension of his vehicle operating licence, the loss of the business’ major customer, and the effective shut down of the business, effectively, in my judgment, ruled out the option of leaving the business with the husband.
In his submissions to the Court at the end of the trial, counsel for the husband, on behalf of the husband, simply submitted that the Court should notionally add $10,000 to the value of the net pool of property and superannuation interests to be adjusted between the parties on account of net profit lost to the business having regard to the circumstances in which the husband and Mr P undertook the job for the organisation. That concession seemed to be based on the oral evidence of Mr P that the net profit made on the gross charges of around $30,000 that he invoiced the organisation for that job would have been around $10,000. Counsel for the husband made no similar concession in respect of the net profit loss to the business having regard to the circumstances in which the husband and Mr P undertook the work of the business through December 2016 and January 2017. As I have already observed, I am quite satisfied that the business also lost net profit in those months because of the circumstances of the arrangements that the husband and Mr P put in place. I do not accept that the husband’s hand was forced in that respect and that he had no other options but to submit meekly to Mr P’s terms. I am satisfied that he did that willingly because it suited him.
Counsel for the wife submitted, with reference to a number of decisions of the Full Court of this Court, that the most appropriate, and, ultimately, just and equitable way to deal with the circumstances of these lost profits was not to just notionally add an amount to the value of the net property and superannuation interests of the parties before turning to consideration of the contributions based entitlements and the matters that might demand further adjustment, but rather to make a percentage adjustment having regard to his failure to disclose and his financial “misconduct”. I accept there is merit in that submission and will return to these matters later in these reasons.
The property and superannuation interests of the parties
The real property known as “Property R” was to be transferred to the wife, mortgage free, pursuant to the interim Orders I made on 3 February 2017 at the end of the trial. There was no dispute that property was valued at $1,150,000. The mortgage that was still registered on it did not actually secure any remaining debt. The amount of $1,150,000 will be included in the value of the net assets and superannuation interests of the parties and included on the wife’s side of the balance sheet.
The real properties collectively known as the “Property F lots” were all to be sold. I shall presume that they have been sold by now and that the debt to the bank that was secured by mortgage over that property was paid out and discharged on the sale of the lots and that the net balance has been retained in a bank account or paid to the husband as the properties were registered in his name. Those properties had been valued at a total of around $1,490,000 by an independent expert. The mortgage debt was $214,178 at around the time of the trial and there was evidence that the realisation costs and taxation consequences of the sales for the husband (as the properties were in his sole name) were going to total around $256,891. On those figures, the ultimate net amount realised would be likely to be around $1,018,931 which I will, for the purposes of these reasons, round up to $1,019,000.
If those properties have all been sold, presumably the costs of sale have been paid and it may be the case that the husband’s tax liability in respect of the sales has already been determined and, perhaps, even paid. For the process of determining just and equitable Orders, I will work on the notional sum of $1,019,000 being included in the value of the net assets and superannuation interests of the parties. I will, though, ensure that the Orders that are ultimately made are made having regard to the actual sale prices achieved, actual costs of sale and actual tax impact on the husband so that the actual net amount that he has received is the figure that is used in determining the actual property adjustment. Any increase in the principal mortgage debt that was owing to the bank at the time of the trial will, having regard to paragraph 9 of my interim Orders of 3 February 2017, be born solely by the husband.
The former couple agreed that certain items of plant and equipment that were owned personally by them and situated on the properties had a value of $160,642 at the time of the trial. Those items included a motorcycle valued at $37,500 and another motorcycle valued at $14,000. The wife wanted to retain those two motorcycles. The husband did, too. For the moment, I will include $160,642 in the value of the property and superannuation interests and I will put that amount on the husband’s side of the balance sheet.
The C Trust was valued by the single expert accountant. Its assets included plant and equipment that were business assets, including a truck, a trailer, and a tractor, as well as some firearms. Its assets also included a boat and trailer, and motor vehicle 5 in the possession of the wife, and driven by her, valued at $21,500. They also included a third motorcycle valued at $40,000. The wife wants to retain vehicle 5 and the third motorcycle. I will put vehicle 5 on the wife’s side of the balance sheet but leave the motorcycle and all the other items of plant and equipment on the husband’s side of the balance sheet. That is $21,500 to the wife and $167,230 to the husband in the first instance.
I note there was $39,250 listed in the C Trust bank accounts and cash assets at 30 June 2016. That may or may not have been a different figure at the time of the trial. However, I will notionally consider it to be that sum and include it notionally in the value of the property and superannuation interests of the parties. My final Orders though, will adjust what cash there is in the bank at the time of the adjustment.
The C Trust held some listed shares at 30 June 2016 valued at $197. I will notionally include the sum of $200 but will order those shares to be sold and the proceeds deposited to the bank account of the trust before the final adjustment.
The single expert accountant included the four vehicles (all assets of the C Trust) at their assessed fair market value then deducted the liabilities owing with respect to them and arrived at a net figure of $721,540. I will notionally include that amount in the value of the net property and superannuation interests of the parties but my Orders will reflect and adjust the net sale proceeds ultimately realised on those vehicles that should all have sold by now with the proceeds to have been deposited to the bank account of the C Trust.
The financial statements of the C Trust recorded as assets of the trust loans owed to it by the husband of $61,586 and by the wife of $30,526. I will not include those as assets in the value of the property and superannuation interests of the parties as they would be cancelled out by liabilities of the same amounts owed by the husband and the wife.
The single expert did observe that the C Trust’s financial records reflected debt owed by the trust to the parties’ adult daughters in the amount of $47,086 owed to each of them. I will include those two liabilities in the determination of the net value of the parties’ property and superannuation interests and I will Order that those amounts be repaid to each of those young women from the money standing to the bank account of the trust unless otherwise forgiven by them in writing.
There are debts owing by the C Trust to RH. I will not include those in the value of the parties’ interests as they would then be cancelled out by a corresponding asset in RH. I will not include them as assets of RH for the same reason.
Rennie Hire Pty Ltd
The valuation by the single expert accountant included a statement of opinion that the parties’ shareholding in the company was worth $1,176,310 but that included debt owed to the company by the husband and wife of $785,968, leaving net assets of $390,342.
Those net assets included $162,813 in the bank as at 30 June 2016, $123,052 in trade debtors at that same date, plant and equipment valued at $25,245 including a van worth $25,000. It also included a debt owed the company by the C Trust of $26,190 and the company’s entitlement to be paid its beneficiary loan account balance of $220,069 from that same trust. I will not include these inter-entity liabilities as they cancel each other out, in the same way as the debt owed the company by the parties. The net assets also include provision for income tax and future income tax on trade creditors of $134,878.
Given that at the time of the trial, the bank account was overdrawn to almost $50,000 and the trade debtor situation would have been different, I will not include the figures from 30 June 2016. The one figure I will include in the value of the parties’ interests in property and superannuation will be the plant and equipment at $25,245 and I will put that on the husband’s side of the balance sheet as I expect that he will have retained those items. I will not include the provision for income tax as I expect that would have already been paid. As the business will now have been shut down and the company probably wound up, the opinion of the single accountant expert that the net tax payable on a liquidation would be $324,860 is directly relevant. I will notionally include that as a liability in the value of the parties’ interests in property and superannuation when considering the matter further, though my Orders will ultimately provide for the tax liabilities of the parties to be dealt with in a more direct and appropriate manner.
Other property interests
There was agreement that the husband had Telecommunication shares at the time of trial valued at $3,834. I will include those in the value of the parties’ interests and put them on the husband’s side of the balance sheet.
In respect of the livestock business, there were three separate parts for which values were to be attributed. The parties agreed that there was a stock of frozen semen and embryos valued at $27,400. I will include that figure in the value of the net property interests and put it on the husband’s side of the ledger.
There was a valuation report for the livestock that the husband retained control of at 6 December 2016 valuing them at $268,965. For the husband, it was asserted that he had disclosed the sale of a stud animal for $4,000 since that valuation was undertaken and that the sale proceeds were deposited to the livestock business account. That contention was not challenged or disputed by the wife at the trial. I will include the sum of $264,965 notionally in the value of the parties’ interests in property and put it on the husband’s side of the ledger. However, given that I made interim Orders on 3 February 2017 that provided for the husband to pay half of the sale proceeds of any livestock he sold from that time on I shall take that into account when making final Orders.
There was a bank account solely operated by the husband that was called the livestock business account. At 30 November 2016, it had $147,127 in it. At 30 January 2017, it had $141,883 according to the husband. Presumably, he had deposited the sum of $4,000 from the sale of the asset S into it but had expended about $10,000 in running the livestock business in the interim period. None of these factual matters were challenged or disputed by the wife through her counsel in cross-examination. I will work on the figure of $141,883 being correct at the time of the trial.
On 3 February 2017, I ordered the husband to withdraw $50,000 from that account and pay it to the wife by way of partial property adjustment. Accordingly, I will include $50,000 in the value of the parties’ property interests and put it on the wife’s side of the balance sheet. That would have reduced the amount in the livestock business account to $91,883.
I also ordered the husband to pay to the business bank account the sum of $50,000 from that livestock business account. That would have reduced the livestock business account to $41,883. The $50,000 was part repayment of a debt that the livestock side of the business owed to the company RH and was to ensure that RH could keep paying the lease repayments on the vehicles at the time.
I will add the sum of $41,883 to the value of the parties’ net property interests and add it to the husband’s side of the balance sheet as he had the sole use of that money from the end of the trial onwards.
I will not add the sum of $50,000 that was to be repaid to the business account as I expect it was used to pay debts of the business, including lease payments on the vehicles for some of the time before they were sold. Indeed, the husband asserted that the bank account of the business was almost $50,000 overdrawn at the time of the trial. The payment would have simply taken it back to a nil balance.
The parties agreed that the husband had $14,504 in another bank account that I will include in the parties’ property interests and put on the husband’s side of the balance sheet.
There were apparently a few other bank accounts “of the parties to the marriage or either of them”. One was identified as an account of the husband. There was no agreement between the parties as to how much was actually in the account at the time of the trial, but the wife did not contend for any sum to be included in the parties’ property interests in respect of this account. Accordingly, I will not.
Another one was identified by the husband as a joint account, held for the children. The wife did not contend that it be included in the parties’ property interests, and neither did the husband, so I will not do so.
I will also deduct liabilities of $45,317 and $14,914 that were owing with respect to the financing of the trucks that were in the husband’s possession at the time of the trial. I will make him responsible for those loans as he has and will retain the trucks and I will put those liabilities in those amounts on his side of the balance sheet.
There were some credit card liabilities of the parties at the time of trial. About $1,000 for the husband and about $9,000 in total for the wife. Counsel for the wife did not ask for these to be included. Indeed, his submission was that they not be included. I accept that and will not include them.
The parties agreed that their interests in their private, self-managed superannuation fund as at 30 June 2016 were valued at $452,456 for the husband’s interest and $373,745 for the wife’s interest. I will include those amounts in the value of the net property and superannuation interests of the husband and the wife and shall include the respective amounts on their sides of the balance sheet.
At the end of this part of the exercise, I consider the notional value of the parties’ net property and superannuation interests for adjustment consideration is $4,054,131.
Add-backs
Both parties proposed, consistent with authority, I am satisfied, that money spent by each of them on legal fees in the proceedings should be notionally added to the value of their property interests that are to be adjusted and, effectively, treated as partial property adjustment already effected. That said, they could not agree on the amounts that should be notionally included at this point in the process.
There was agreement that the amount of $206,618 be considered as the amount paid by the wife in legal fees in the first instance. The wife, through her counsel, conceded that another $7,500 be added for her half of the sum of $15,000 paid into her solicitors’ trust account in January 2016 for expert’s fees and that a further sum of $7,277 be added, being amounts paid out of the company’s account for costs in January and early February 2017. The husband was also arguing for amounts (less than the amounts conceded by the wife) to be added for those items of expenditure, so I will include the amounts conceded by the wife.
The husband concedes a sum of $197,333 be added back for his legal fees. The wife argues that the following should also be added to that amount:
(i)The applicant’s trial fee of $805 paid by the husband out of the business bank account in January 2017;
(ii)$7,500 being the other half of the amount paid into the wife’s solicitors’ account in January 2016 to pay expert’s fees; and
(iii)$28,860 being the amount paid by the husband to the third party firm of accountants that he engaged to give him advice about the solvency of the company through 2016.
The husband apparently opposes those, submitting in respect of the last amount that it should be treated as a joint company expense.
I consider all three of these amounts contended for by the wife should be included as amounts spent by the husband on his costs and in connection with advancing his own interests in these proceedings such that they should also be notionally added to the value of the net property interests of the parties. I am not satisfied that the costs associated with the husband’s unilateral decision to engage third party accountants and to instruct them to provide advice and services to him and the company as part of his presenting to the wife an argument that the company was insolvent should be shared between the parties. It is more appropriately treated as pre-trial expenditure of the husband that reduced the property available to be adjusted between the parties and, accordingly, notionally added to the value of property being considered for adjustment now and treated as partial property settlement already received by the husband. I will notionally add $234,498 for all of these expenditure items and put it on the husband’s side of the balance sheet.
The husband also argues that there are other amounts that should be treated in the same way for the wife, in that the funds came from the parties’ joint funds. Those are:
(i)$1,031 that he said she used to pay J Crossan & Company;
(ii)$19,300 that he said she paid for rent and a bond for accommodation post-separation over and above the amount that they had agreed upon;
(iii)$12,958 that she had paid for other personal expenses;
(iv)$2,752 that she had paid for her private medical insurance; and
(v)$49,340 that she had accessed from their joint funds that she had otherwise spent.
The husband said that the payment to J Crossan & Company, a firm of solicitors, was not a business expense incurred by the company. The wife did not argue to the contrary. I will add it back.
The husband said that in 2014, after separation, he agreed to the wife drawing rent in the sum of $310 per week from their joint account for the place she was living in in the nearby country town, whilst he continued to reside on the property, effectively rent free. He said that she then moved without his knowledge or consent to another property, one that was owned by her parents in that town. The rent she was paying increased to $450 per week and she continued to draw that full amount from their joint account. He said that she also drew $1,800 from the account and paid the bond for that rental accommodation. He argues that the standard of accommodation was better than the wife needed and that the difference in rent for the post-separation period and the amount of the bond should be added back as post-separation expenditure by the wife and treated as partial property adjustment already received by her.
I will add the $1,800 bond as it is probable that she will get that back from her parents, if she has not already. As for the difference in the rent, I will not add that back. The wife needed a place to stay whilst the husband continued to occupy the former family home. The wife said that one of their daughters was very distressed at the standard of the accommodation that the wife was living in when she first was locked out of the property. Accepting that, the accommodation cannot have been great. That the full cost of her rental was being paid for by the parties’ joint funds during all that period of time is a matter to be considered at the contributions assessment stage, in my view. Generally, when a party is forced to live elsewhere and pay their own rent, they are considered to be making an indirect contribution to the welfare of the party who remains rent free in their former family home and that is considered in the contributions assessment. In this instance, the wife’s contribution in that respect, was effectively cancelled out or counter-balanced by the husband’s contribution through the rent that was paid for her accommodation. I make no finding that she was paying her parents more than market rent for the place.
The husband also gave evidence that the wife drew additional money from the business bank account in the post-separation, pre-trial period to meet other personal expenses that were not included in the 2014 Orders as expenses meant to be met out of the joint funds. He submitted that these expenses should have been paid out of the money the wife was otherwise permitted to be drawing as a salary. He said that she spent such additional drawings on her car expenses including maintenance and fuel, pest control, taxi fares, and airfares. He said that he calculated these amounts to be $12,958 and he argues they should be notionally added back.
The 2014 interim consent Orders were quite specific in respect of which expenses were to be covered out of joint expenses. In paragraph 6(A) the items referred to were “school fees, private health insurance and the girls’ expenses”. However, the husband was clearly getting the benefit of paying for his own motor vehicle expenses, including fuel and maintenance out of one or other of the business accounts. Any expenses he incurred around the home, such as electricity would probably also have been covered as a business expense and paid out of the joint funds. In the circumstances, I will not add this amount back. I will consider it at the contributions assessment stage of the process.
The husband argues that the amount of $2,752 drawn from joint funds and paid by the wife for her personal health insurance should also be added back. He said the children’s health insurance was paid for from the joint account but that he paid his own personal cover from his own personal account. Nevertheless, as I just observed, paragraph 6(A) of the 2014 interim Orders provided for the private health insurance to be paid out of the parties’ joint funds. I will not notionally add this amount back.
As for the final sum of $49,340 that the husband argues should be notionally added back, I can find no evidence about it in the husband’s two affidavits of evidence in chief that were read and relied upon by him at the trial. Indeed, it is not included by him under the heading “Addbacks” in the table he included in paragraph 224 of his trial affidavit filed 16 December 2016. Consequently, I will not include it.
At the end of this process, I arrive at a figure of $4,512,855 being the notional value of the parties’ net assets, superannuation interests and added back pre-trial expenditure that reduced the property interests that would otherwise have been available for adjustment between them. I will consider this figure when considering the nature of the property adjustment orders I will make at the conclusion of the matter.
Contributions assessment
Despite the submissions for the husband that the initial contributions of the parties balance each other out, I do not consider that they do. When the parties commenced their relationship in the late 1980s, as I have already set out, the wife owned a car, had equity in her own home, and owned a hairdressing business that she later sold. She gave evidence that satisfies me that this property realised for her, a few years later, a total of about $135,000 and that she contributed this to the couple’s needs, particularly towards the purchase of their real property. On the other hand, the husband had little in the way of assets at the time they got together but did inherit $50,000 in or around 1999. These contributions cannot be said to cancel each other out, in my judgment.
As for the 24 years of cohabitation, I did not understand either party to be contending that contributions across all spheres of their married life, otherwise, were other than equal. Indeed, I consider those to be appropriate concessions on the part of both parties.
In the years between the separation of the parties and the trial in early 2017, I am satisfied that the parties both participated in the ongoing management of the hire business and the support of their daughters. Each received very significant financial support from the income generated by the business in that time. The husband, as I have already said, continued to occupy the former family home on the family property, looking after it and receiving some other financial benefits associated with that, but the wife, at the same time, had her rent and some other motor vehicle expenses and even some personal expenses such as her private health insurance cover paid for. All of these contributions, I am satisfied also balance each other out.
As I have already observed, counsel for the wife submitted that the husband’s actions in the running of the business in the months leading up to the trial should result in a percentage adjustment in the wife’s favour.
I am not convinced that it should be an adjustment at the contributions assessment level. If I could be completely satisfied that the money that was “redirected” away from the parties’ business to Mr P’s company was actually paid back to the husband by Mr P, if it was not considered appropriate to notionally add that amount to the value of the property and superannuation interests being adjusted, then it may very well have been appropriate to consider that the husband’s receipt of that money to the exclusion of the wife could be assessed as a contribution on the part of the wife that was not balanced out by a contribution by him.
However, not being satisfied to the extent necessary to find that the husband eventually received that money, I do not consider it best to treat it as a matter to be included in the contributions assessment. It is rather, in my judgment, more appropriate to consider it at the next step of the determination process, when considering the matters pursuant to s 79(4)(e), including all of the matters set out in s 75(2) in so far as they are relevant, before considering whether a further percentage adjustment is required to ensure the final orders are just and equitable. It is to be noted that s 75(2)(o) provides as follows:
Any fact or circumstance which, in the opinion of the court, the justice of the case requires to be taken into account.
Accordingly, bearing in mind that the value I have attributed to the notional net interests of the parties in property and superannuation is just over $4.5 million, I am of the view that the assessment of contributions to the time of the trial results in a notional percentage division of 52/48 in favour of the wife, principally to reflect the differences in their initial and external financial contributions. The 4 per cent differential notionally equals $180,000. Given the different value of money from the late 1980s/early 1990s to 1999 and current times, I consider that to be an appropriate differential to reflect the difference in those contributions. Though the parties were together for some 24 years, I do not consider that the initial differences, particularly given the fact that the proceeds of sale of the wife’s real property were directly contributed to the costs of purchasing the property “Property R”, were somehow cancelled out over the years.
The other s 79(4) matters, including the matters set out in s 75(2)
The husband was nearly 58 years old when the re-opened trial concluded in late 2017. He will now be 59 years of age. The wife was 55 years of age then and will now be 56 years of age.
At the time of the trial in January 2017, the husband was advocating that the hire business should be shut down and the business wound up. He maintained that was because of the alleged insolvency of the business. I am satisfied that was rather an odd, perhaps contrived position, given that the single expert accountant had assessed the business as generating future maintainable earnings of around $56,000 per annum, after allowing for a commercial rate of salary to the husband as owner/operator effectively of $120,000 per annum, and a commercial rate of salary of $60,000 for a person doing the work that the wife had been doing, and also allowing for a commercial rent of around $67,000 for the premises out of which the business operated.
It is extraordinarily difficult to understand why the husband would not want to have continued to operate the business, in circumstances where the wife would no longer have been involved, where it would have provided him with income of at least $176,000 per annum, and perhaps more, if he was able to secure administrative assistance to do the work the wife previously performed, for a sum less than $60,000 per annum, even if he had to rent premises away from “Property R” out of which to operate the business.
In any event, rather unfortunately for the husband, it appears his emotional health did not cope with the interim decision made at the very end of the trial that he was to continue to operate the business and that he was not, at that time, to take any steps himself to wind up the company. Perhaps the stress of being caught out, as he was, shifting RH’s business and income to NN, did not help his mental health either.
The evidence subsequently allowed to be adduced on his successful application to re-open the trial, satisfies me that the husband suffered an almost immediate onset of major depression that resulted in his hospitalisation for some days and impacted significantly upon his ability to operate and to run the company. The Authority suspended his licence and the business’ major customer terminated its business. I then lifted the restraint on the husband winding up the company and put orders in place for the vehicles to be sold off. By November 2017, the husband was still not working, though he was plainly well enough to go on an adventurous and apparently arduous expedition in the mountains of the south island of New Zealand, which he did, not long before the November re-opened hearing.
Though the husband spoke of likely retirement, I am satisfied that he has some residual earning capacity. I am not satisfied that he will never operate vehicles again, and expect he might when these proceedings are completely finalised and he has recovered, if not already. However, I expect that he would likely only operate as an employee or contractor and that he would not likely work full-time in the industry again. He has a great interest in the livestock industry. I expect he will continue to breed and sell livestock and that he will earn an income in that way into the future. He already has a small established herd.
I am satisfied, notwithstanding what has happened to the husband, that his future earning capacity is greater than that of the wife. I do not consider that her years of experience doing administrative work in the family hire business will facilitate her being able to obtain work that pays as well as work the husband might be able to obtain. She, too, may be able to earn some income breeding and selling livestock, and given that she has retained “Property R”, she is well positioned to do that, though she will have to acquire livestock to do so. Accordingly, I would not expect the husband’s greater earning capacity to be substantially greater than the wife’s earning capacity over time.
I am mindful of the fact that there is a pool of property (not taking into account the amounts notionally added back) of about $4 million that could be divided between the parties. As the wife retains “Property R”, the husband will receive most of his entitlement in cash and superannuation that he will soon be able to draw upon, either as a lump sum or in some form of pension.
There is no evidence that either party has an obligation to support any other person now, including their young adult daughters.
Finally, I consider it appropriate to take into account at this stage of the process, the fact that the husband consciously made decisions and acted in a manner in connection with the operation of the family business in the months leading up to the trial that positively deprived the business of income and profit that it would otherwise have made, probably with a view to supporting his assertion that the business was in financial difficulty and should be wound up. The wife was definitely deprived of a share of the profit that was lost. The husband acted as he did, unilaterally and secretly, in terms of the wife, and was simply caught out in doing so by the persistence of the wife and the efforts of her lawyers on her part.
That it cost the wife money was conceded by the husband, when, at the end of the trial, his counsel submitted that $10,000 should be “added back” to the notional value of the property and superannuation interests for the profit lost on the contract with the organisation. However, as I have said, I am satisfied that more than $10,000 in profit was lost to the business due to the husband’s actions over the months leading up to the trial at the end of January 2017, though I simply cannot put a figure on that.
Adjustment after considering the matters set out in s 75(2) is not a precise accounting or mathematical exercise. It is an exercise in judicial discretion. I am satisfied, in this exercise, that justice and equity requires a further adjustment in favour of the wife. A further 3 per cent adjustment is in my judgment an appropriate one. On the value of $4.5 million, such an adjustment is equal to $135,000. That, however, creates a further 6 per cent disparity in the entitlements of the parties, seeing the wife with 55 per cent and the husband with 45 per cent of the total. That equates to a difference of $450,000 in dollar terms on that notional pool of property, superannuation and notional inclusions. I consider such a percentage division just and equitable in all the circumstances.
The Orders to be made
The final Orders I would make will provide for the wife to retain the property “Property R” and vehicle 5 as well as any other personal possessions she retains that are not included in the lists of items that are to be retained by the husband. Those Orders would provide for the amounts of $206,618, $7,500, $7,277, $1,031, $1,800 and $50,000 to be regarded as part property adjustment already received.
Those same final Orders I would make will provide for the husband to keep all of the plant and equipment that was valued at $160,642, including the two collectible motorcycles included in that list. I am satisfied that the husband has a greater sentimental attachment to those motorcycles and that, as the wife is retaining the only real property that remains, that the husband should retain these motorcycles. The orders will provide for the husband to retain the plant and equipment of the C Trust (save for vehicle 5 already mentioned) including the third motorcycle for the same reason already given with respect to the other two.
The Orders will provide for the husband to keep his Telecommunication shares and the livestock enterprise, including the stock of frozen embryos and semen, and any livestock and progeny born since 3 February 2017 that have not been sold already by agreement between the parties. I am satisfied that the husband would have been doing the work in maintaining the herd since the trial and that it is best not to force the parties to have to go through a non-consensual process of dividing up the herd. All costs of running that herd since 3 February 2017, will be the husband’s, though he might already have shared some sale proceeds of livestock sold by agreement since then with the wife. That he will retain any progeny will, in my view, make up for his bearing the costs of the business in that period.
The orders will provide for the husband to retain a truck and a lift that were assets of the company, RH.
The orders will also regard the husband has already having received $234,498, $41,883 and $14,504 as part property adjustment, being the money he spent on legal and third party accounting fees, the money he retained in the livestock business account at the end of the first part of the trial and money he retained in another bank account at that time.
They will also provide for the husband to be solely responsible for the repayment of the two debts associated with the finance of two trucks, in the amounts of $45,317 and $14,914 and those will be taken into account in determining his final entitlement.
The final orders will simply see the wife roll her superannuation interest determined as at 30 June 2019, out of the parties’ self-managed superannuation fund with the husband retaining his interest in that fund. The value of those interests determined as at 30 June 2019 will be included in the calculation of the total of the property and superannuation interests of the parties, included in the one pool for adjustment and each party’s interest will be included in the property they are retaining.
I propose making orders that permit the husband to retain the trust structures of the AIS and the C Trust if he wants to. If he does not want to, given that the wife has expressed the desire not to retain them, the Orders will provide for them to be wound up and to vest. I consider that appropriate.
As I consider things, the Property F lots are likely to have been sold already. The net proceeds after the costs of sale should have been realised. The mortgage debt should have been paid out. The husband’s liability for capital gains tax (CGT) may or may not have been determined and paid. The proceeds are likely to have been held in an account awaiting final orders.
The vehicles are likely also to have all been sold pursuant to the interim orders I made in 2017. The financing debts are likely to have been paid out. The balance should be sitting in the bank account awaiting these orders.
I will order that the shares that were owned by the C Trust be sold and the proceeds deposited into the bank account. That is likely to be only a few hundred dollars.
As debts are owed by the C Trust to the parties’ adult daughters, I consider it appropriate, just and equitable for those to be paid to those two young women from the money held by the C Trust unless those women or either of them, forgive the debt owed by the Trust.
On the evidence, there will be significant tax liabilities owing by the parties on the winding up and vesting of all the entities including RH, C Trust and H Trust, as well, as I have already observed, in respect of CGT owing on the sale of the Property F lots (if not already paid). The final Orders will provide for all the necessary steps to be taken by the parties to instruct accountants (including the single expert accountants, W Group, if there is disagreement between the parties after their long-standing accountants, V Group, give them advice) to finalise the financial statements and tax returns for the entities and the parties individually, to finalise any winding up and vesting of the entities and to advise them, jointly, on the most appropriate approach to be taken that will minimise the total tax liability as between them. Those tax liabilities are to be paid for out of the funds that were realised on the sale of the Property F lots and the sale of the vehicles before the balance of those amounts is to be used in calculating the total net property and superannuation to be divided between the parties. Then payment is to be made to the parties to reflect and arrive at a 55/45 adjustment in favour of the wife.
To be clear, tax liabilities incurred by the parties since 3 February 2017 in respect of income earned by either of them that is unrelated to the businesses conducted by them up to the trial are to be born separately be each of them and without joint funds being drawn upon to pay them. Any tax payable by the husband and wife on income earned from the sale of livestock post 3 February 2017 is to be paid separately by each of the parties without drawing upon joint funds to do so.
The final Orders will reflect that inter-entity loans are to be dealt with and finalised in that process in the most tax effective way possible but with neither party having any further liability to the other or to any of the entities other than as I have determined in these reasons already, or other than such liability that is sought to be retained by the party with appropriate indemnities in place to protect the party not retaining the entity.
I have drawn up a draft of Orders that I consider should meet these objectives. However, I intend not to make them just yet but rather to give the parties and their legal advisers time to consider these reasons and my determination as to the property adjustment that I consider just and equitable and intend to make, and to discuss between themselves the precise wording of Orders that would best reflect my intent, having regard to the matters, such as the sale of real property, the sale of vehicles and the sale of livestock that might have occurred since the trial concluded. This will give them the opportunity to take some advice around the winding-up and vesting of the entities, the tax consequences and how that can best be achieved to minimise tax liabilities in a lawful way and to have some control over the orders that best achieve that, without, of course, seeking to change my findings in respect of any of the issues that were in dispute. Of course, this will not deny to the parties the right to appeal against any of my findings, should they consider that appropriate, even if they do reach agreement on the terms of any proposed changes to these draft Orders.
It is hoped that the parties and their advisers will reach a consensus on this and submit terms to the Court that achieve this in a way that reflects my findings and determination in this matter. I will give the parties three weeks to do this having regard to the imminent Easter holiday break. If they reach agreement on the terms of such Orders, they can submit those to me for me to actually pronounce as Orders in chambers within that timeframe. If they cannot reach agreement and have to, once again, argue the matter, I will consider any competing propositions and hear oral submissions at 10.00 am on Friday, 10 May 2019.
These are the draft Orders I am currently considering making, subject to hearing from the parties:
Draft Orders
“Interpretation
(1)That in these Orders, unless the context necessarily requires:
(a)“Property F” means the real properties adjacent to the former matrimonial home, situated at Y Road, Town M and known as “Property F”, also registered in the sole name of the husband, including all improvements on that land and all water licenses used on that land, being all the real properties more particularly described as:
(i)Lot 1 on SP …80, Title Reference …;
(ii)Lot 2 on SP …80, Title Reference …;
(iii)Lot 3 on SP …80, Title Reference …; and
(iv)Lot 4 on SP …80, Title Reference …;
(b)“the W Group report” means the single expert report by Mr B of W Group dated 25 January 2107 and which includes reliance on the single expert report of Z Services Report dated 15 December 2016 (the Z Services report);
(c)“the Livestock business account” means the Westpac bank account number …11 held in the sole name of the husband;
(d)“the plant and equipment” means both of:
(i)“the husband’s plant and equipment” means the plant and equipment controlled by the husband which is situated on the former matrimonial home and on Property F, that is particularised in Annexure 6 of the W Group report as being attributed to the husband and wife in equal shares; and
(ii)“the entities’ plant and equipment” meaning the plant and equipment that is owned by the entities and is particularised in Annexure 2 and Annexure 3 of the W Group report.
The Property Adjustment
(2)That the wife shall retain as her property solely the following items of property:
(a)The real property “Property R”, BC Road, Town M and known as “Property R”, being all the property more particularly described as Lot 2 on RP …, Title Reference …, including all improvements on that land and the water allocation identified as WA … on AP …, title reference …;
(b)Vehicle 5 that was in her possession with the parties doing all things necessary to cause the transfer of that motor car to the wife from the H Trust;
(c)Any furniture, chattels and personal effects of the wife in her possession not included in the husband’s plant and equipment and the entities plant and equipment (as defined herein) to be retained by the husband pursuant to these orders (save for Vehicle 5 just referred to which is to be the wife’s);
(d)The wife’s own personal bank accounts and credit card accounts;
(e)The wife’s superannuation once rolled out of the parties’ self-managed superannuation fund; and
(f)All other interests in property and financial resources of whatsoever nature that the wife has at the date of these Orders, including funds released to the wife’s solicitors by consent between the parties, to be applied towards the wife’s legal costs; and
(g)Any cash amount paid to her pursuant to the ‘final adjustment’ provisions of these Orders.
(3)That for the purposes of giving effect to these Orders, the wife shall be deemed to have already received by way of partial property adjustment the following:
(a) The sum of $206,618 spent on her legal costs and outlays;
(b)The further sums of $7,500 and $7,277 spent on legal costs and outlays;
(c)The sum of $1,031 she spent on obtaining advice from another firm of solicitors;
(d)The sum of $1,800 being money used by the wife to pay a rental bond;
(e)The sum of $50,000 being money paid to the wife from the livestock business account pursuant to interim Order of 3 February 2017.
(4)That the husband shall retain as his property solely and the wife do all necessary things to transfer to the husband the following items of property:
(a)All of the husband’s plant and equipment (as defined herein) including two collectible motorcycles, all ascribed a value of $160,642 for the purposes of these Orders;
(b)All of the entities’ plant and equipment (as defined herein, save for Vehicle 5 that is to be retained by the wife), including a third collectible motorcycle, all ascribed a value of $167,230 for the purposes of these Orders;
(c)A parcel of shares that were held in his name at the time of the trial given a value of $3,834 for the purposes of these Orders;
(d)A stock of frozen livestock embryos and straws of frozen livestock semen, ascribed a value of $27,400 for the purposes of these Orders;
(e)All of the plant and equipment of RH Pty Ltd that were movable assets of that company (a lifting sling and a truck) that were included in the valuation of that company, ascribed a value of $25,245 for the purposes of these Orders;
(f)The livestock enterprise including all of the livestock that were included in the valuation of the livestock herd that was obtained by the single expert in these proceedings that were, in my judgment, ascribed a value of $264,965, including any of their progeny born since the trial, at a valuation to be determined by deducting from $264,965 the total sum of any proceeds of sale of any of the livestock sold with the consent of the wife since 3 February, 2017 from which the wife already received a half share pursuant to paragraph (7) of the Orders of 3 February, 2017;
(g)Any other furniture, chattels and personal effects of the husband retained by him in his possession;
(h)The husband’s own personal bank accounts and credit card accounts;
(i)The husband’s superannuation interest in the parties’ self-managed superannuation fund after the wife’s interest is rolled out of that fund; and
(j)All other interests in property and financial resources of whatsoever nature that the husband has at the date of these Orders, including funds released to the husband’s solicitors by consent between the parties, to be applied towards the husband’s legal costs; and
(k)Any cash amount paid to him pursuant to the “final adjustment” provisions of these Orders.
(5)That for the purposes of giving effect to these Orders, the husband shall be deemed to have already received by way of partial property adjustment the following:
(a)The sum of $234,498 spent on his legal costs and outlays as determined in the reasons for judgment herewith;
(b)The sum of $41,883 that remained in his livestock business account after payment to the wife of the sum of $50,000 and payment to the RH bank account of the sum of $50,000 pursuant to the interim Orders of 3 February, 2017;
(c)The sum of $14,504 held by him in another bank account at the time of the trial as determined in the reasons for judgment herewith.
(6)That the husband shall remain solely responsible for the repayment of debts that related to the financing of the acquisition of two trucks that are ascribed the balance of $45,317 and $14,914 for the purposes of these Orders and he shall be solely responsible for any amount exceeding those amounts in respect of those two liabilities and shall indemnify the wife and keep her indemnified against any and all liability pertaining to those debts.
Superannuation
(7)That in relation to the T Superannuation Fund, that the husband and wife as trustees of the T Superannuation Fund shall do all acts and things necessary, conduct all necessary meetings and sign all documents necessary to:
(a)Effect the wife’s resignation as a member of the T Superannuation Fund;
(b)Allow the wife to roll out her member balance whatever that amount might be at the date of roll out, to be calculated as at 30 June 2019;
(c)To enable the husband to retain the balance of the T Superannuation Fund whatever the value of his member balance at the date of the roll out of the wife’s interest is, subject to the roll out of the wife’s entitlements, with the husband to be responsible for the management and control of the T Superannuation Fund thereafter;
(d)Amend the trust deed to enable the T Superannuation Fund to become a single member fund within the meaning of s 17A(2) of the Superannuation Industry (Supervision) Act 1993 (Cth);
(e)Cancel the wife’s signatory arrangements in respect of all bank accounts held by the T Superannuation Fund; and
(f)Contemporaneously upon the wife’s rollover, transfer the shareholdings of the T Superannuation Fund and all bank accounts of the T Superannuation Fund to the remaining trustee, being the husband.
(8)That the wife do all such acts and things and sign all such documents as may be necessary, including but not limited to exercising her request pursuant to r 7A.06 of the Superannuation Industry (Supervision) Regulations 1994 (Cth) for the transfer of her transferable benefits (defined in r 1.03 of the Superannuation Industry (Supervision) Regulations 1994 (Cth)) to such complying fund as notified by the wife to the trustees.
(9)That the husband and wife as trustees of the T Superannuation Fund:
(a)Are bound by these Orders and must comply with the obligations imposed upon the trustees of eligible superannuation plans under the Family Law Act 1975 (Cth) and Family Law (Superannuation) Regulations 2001 (Cth);
(b)Have been accorded procedural fairness in relation to the making of these Orders.
(10)That the husband and the wife shall take all steps necessary to cause the shares in public companies owned by the C Trust to be sold as soon as possible, if that has not happened already, with the proceeds to be deposited to the bank account of the C Trust to be dealt with pursuant to these Orders.
(11)That should the husband wish to retain the C Trust and/or the H Trust, he shall inform the wife in writing within twenty-eight (28) days of the date hereof of that wish and:
(i)The wife shall resign from, relinquish, renounce or transfer and assign to the husband any position or power (whether at law or at equity) which she holds, occupies or is entitled to hold or occupy pursuant to the terms of the H Trust and/or the C Trust (whichever trust he wishes to retain);
(ii)The wife shall transfer and assign to the husband (at the expense of the husband) all her right, title and interest in any debit and/or credit loan account of the H Trust and/or the C Trust (whichever trust he wishes to retain) and the husband shall indemnify the wife against any liability pursuant to such loan accounts; and
(iii)The wife shall return to the husband any and all data files, computer discs, data lists, certificates, manuals, books of account and records, or any other documents of any other kinds, if any, relating to or belonging to either of the trusts he wishes to retain that are in her possession, power or control;
(iv)At the election of the husband and upon being so directed in writing by the husband, the wife shall both unconditionally and permanently exclude herself from all classes of beneficiary (particularly as primary beneficiary) of the H Trust and/or C Trust (whichever trust he wishes to retain);
(v)The wife shall relinquish any and all right, title, claim and interest, to the corpus and income of any of the trusts he wishes to retain; and
(vi)The wife shall request the trustee of whichever trust the husband wishes to retain to not consider her for a distribution of either the income or capital of that trust, and do all such things and sign any document requested by the husband so that she does not become entitled to such a distribution and, acknowledging that this request cannot bind the trustee of such trust, if she does, to re-contribute this distribution to the trust.
(12)That should the husband not wish to retain the C Trust and/or the H Trust, he shall inform the wife in writing within twenty-eight (28) days of the date hereof of that fact and:
(i)The parties shall take all steps necessary, including signing all documents that are necessary to cause the trust or trusts that the husband does not wish to retain to be wound up and to vest, with all the costs necessarily associated with same to be paid from the funds held by the parties from the sale of the vehicles.
Taxation Issues
(13)That before completion of all of the obligations imposed upon the husband and the wife by these Orders, the parties shall do all things necessary to finalise financial statements and any outstanding tax returns for the trusts and for themselves as at 30 June 2019 and for the purposes of doing so:
(i)Each of the parties shall do all acts and things and supply all documents necessary to enable the business’ accountants, V Group, to prepare those documents and shall promptly comply with all requests from the V Group for information and documents;
(ii)The parties shall do all acts and things reasonably necessary to ensure that all such tax returns and financial statements have been completed on or before 31 August 2019;
(iii)The costs of the V Group (and if necessary for the W Group) in respect of the entities, and in respect of the parties personally only for the documents that are to be prepared for them in accordance with these Orders, shall be paid from the funds held by the parties from the sale of the vehicles and the sale of the Property F lots;
(iv)The parties shall jointly seek advice from the V Group, and where in dispute, from the W Group, as to the most tax effective method of winding up and vesting the entities and distributing the net proceeds to the parties, such that the total tax liability of the entities and the parties personally is the lowest properly achievable overall amount;
(v)The tax liabilities of the entities and the parties personally shall be paid from the funds held by the parties from the sale of the vehicles and, if necessary, from the sale of the Property F lots, and each party shall be provided with an estimate of each such liability and the parties shall cause funds equal to the tax liabilities of the entities and the parties personally, reduced by any amount that arises from income derived from sources apart from the entities, to be paid from the funds held by the parties from the sale of the vehicles and, if necessary, from the sale of the Property F lots, before the balance of those funds are distributed to the parties pursuant to the “Final Adjustment” provisions of these Orders.
Final Adjustment
(14)That for the purposes of the final adjustment, the wife is considered to have already received and retained the following, which shall be referred to as “$W”:
(i)The real property “Property R” $1,150,000;
(ii)Vehicle 5 $21,500;
(iii)$50,000 from the livestock business account;
(iv)$224,226 for legal fees and other amounts already received by her;
(v)$X – where X equals the value of the superannuation interest rolled out of the parties’ self-managed superannuation fund pursuant to these orders.
(15)For the purposes of the final adjustment, the husband is considered to have already received and retained the following:
(i)$160,642 being the plant and equipment retained by him;
(ii)$167,230 being the plant and equipment of the C Trust to be retained by him;
(iii)$3,834 being shares retained by him;
(iv)$27,400 being frozen livestock embryos and semen retained by him;
(v)$234,498 for legal fees and other amounts already received by him;
(vi)$41,883 retained by him from the livestock business account;
(vii)$14,504 from another bank account;
(viii)$25,245 being the plant and equipment of RH retained by him;
(ix)$A – where A equals $264,965 for the value of the livestock retained by him less the total sum of sale proceeds of livestock sold with the wife’s consent since 3 February 2017 from which he has already paid the wife a half share pursuant to the orders of 3 February 2017;
(x)$Y – where Y equals the value of the superannuation interest retained by the husband in the parties’ self-managed superannuation fund after the wife has rolled her interest out pursuant to these orders.
(16)That for the purposes of the final adjustment, the husband’s retention of the liabilities of $45,317 and $14,914 for the truck financing shall be included and deducted from the value of all of the property and superannuation interests retained by the husband pursuant to (15) hereof, to arrive at a figure that shall be referred to as “$H”.
(17)That the remaining pool (that shall be referred to as “$RP”) to be included for the purposes of the final adjustment will be (the sum of the proceeds of sale of the Property F lots after the Westpac mortgage fixed at $214,178, and the costs of sale have been deducted plus the amount of cash funds remaining to the account of the C Trust after sale of the vehicles and discharge of the liabilities to Westpac in respect of the financing of those vehicles and the discharge of the liabilities to the adult daughters of the husband and wife (if not forgiven)) less (any amounts required to discharge any tax liabilities of the husband and the wife or any of the three entities arising out of the sale of the Property F lots, the business activities of RH Pty Ltd, the C Trust and the H Trust that shall be paid out of the first sum of money referred to in this paragraph).
(18)That the final adjustment is to be effected as follows:
The total value of property and superannuation interests to be adjusted is the value of the following:
Total $ = $W+$H+$RP
Each of the husband and the wife shall be paid so much of $RP as will, in the case of the wife, when added to $W, give her 55% of the Total $, and, in the case of the husband, when added to $H, give him 45% of the Total $.
Indemnities
(19)That except as otherwise specifically dealt with in these orders, the husband indemnify the wife and keep her indemnified against all liabilities in his personal name, and all liabilities attaching to property received or retained by the husband pursuant to these orders.
(20)That except as otherwise specifically dealt with in these orders, the wife indemnify the husband and keep him indemnified against all liabilities in her personal name, and all liabilities attaching to property received or retained by the wife pursuant to these orders.
(21)That each party do all acts and things necessary including signing all necessary document so as to give full force and effect to the provision of these orders and in the event that either party refuses or neglects to comply with any provision of these Orders within fourteen (14) days of a written request to do so by the other party, then a Registrar of the Family Court of Australia at Brisbane, be hereby appointed, pursuant to s 106A of the Family Law Act1975 (Cth) to execute all documents in the name of that party and to do all acts and things necessary to give validity and operation to these Orders.
(22)That each of the parties has liberty to relist the matter for the seeking of any further Orders relating to the mechanics of the execution of these Orders.”
I certify that the preceding one hundred and forty-five (145) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Forrest delivered on 18 April 2019.
Associate:
Date: 18 April 2019
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