Riain & Dohman
[2024] FedCFamC1F 549
•22 August 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Riain & Dohman [2024] FedCFamC1F 549
File number(s): SYC 2118 of 2021 Judgment of: CHRISTIE J Date of judgment: 22 August 2024 Catchwords: FAMILY LAW – PROPERTY – Alteration of property interests – Just and equitable – Where both parties wish to retain a property – Where remaining property is subject of dispute – Where existing legal and equitable interests considered – Whether advances from family members have the character of loans – Where husband and wife are both shareholders in companies – Where valuation evidence inadequate - Whether there should be adjustments based on s 75(2) factors – No matters of principle.
FAMILY LAW – INJUNCTIONS – Breach of orders – Where husband requested wife be injuncted from instructing her lawyers – Where wife sought litigation funding – Where husband asserted wife breached orders prohibiting encumbrance of assets by consenting to caveat over matrimonial home – Where husband failed to establish knowledge on behalf of wife’s lawyers – Where there was no aided breach of orders by wife’s lawyers – Application dismissed.
Legislation: Family Law Act 1975 (Cth) ss 75, 79, 81 Cases cited: Bevan & Bevan (2013) FLC 93-545; [2013] FamCAFC 116
Dickons & Dickons (2012) 50 Fam LR 244; [2012] FamCAFC 154
H Stanke & Sons Pty Ltd v O'Meara (2006) 95 SASR 425; [2006] SASC 308
In the Marriage of Pierce (1998) FLC 92-844; (1998) 24 Fam LR 377
Jabour & Jabour (2019) FLC 93-898; [2019] FamCAFC 78
Kowaliw & Kowaliw 1981 FLC 91–092
Mallett v Mallett (1984) 156 CLR 605; [1984] HCA 21
Norbis v Norbis (1986) 161 CLR 513; [1986] HCA 17
Norman v Norman [2010] FamCAFC 66
Stanford v Stanford (2012) 247 CLR 108; [2012] HCA 52
Trevi& Trevi (2018) FLC 93-858; [2018] FamCAFC 173
Wallis & Manning (2017) FLC 93-759; [2017] FamCAFC 14
Whent & Marbrand [2018] FamCAFC 95
Williams & Williams [2007] FamCA 313
Division: Division 1 First Instance Number of paragraphs: 109 Date of hearing: 5-7 August 2024 Place: Sydney For the Applicant: Litigant in person Counsel for the Respondent: Ms Spain Solicitor for the Respondent: Rockdene Lawyers Table of Corrections Paragraph 82 Insertion of item 10 W CBA & ANZ accounts secured over B Street, Town C; $271,631 Amendment to Total Replace $1,727,316 with 1,998,947 Amendment to NET TOTAL ASSETS Replace $4,861,606 with 4,589,975 Paragraph 107 Insertion of item (i) CBA & ANZ accounts secured over B Street, Town C($271,631) Amendment to subtotal Replace $2,139,798 with $1,868,167 Paragraph 108
Line 1 Replace $4,861,606 with $4,589,975
Line 3 Replace $2,552,249 with $2,409,737
Line 4 Replace $169,379 with $312,071
Line 6 Replace $158,122 with $300,814 ORDERS
SYC 2118 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MR RIAIN
Applicant
AND: MS DOHMAN
Respondent
ORDER MADE BY:
CHRISTIE J
DATE OF ORDER:
22 AUGUST 2024
Amended pursuant to rule 10.13 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) on 26 September 2024
THE COURT ORDERS THAT:
1.Within 30 days of the making of these Orders, the applicant husband do all acts and things and sign all documents necessary to transfer to the respondent wife all his rights, title and interest in the property situated at D Street, Suburb E (“the Suburb E property”).
2.Contemporaneously with Order 1 above, the parties do all acts and things and sign all documents necessary to discharge the mortgage secured against the Suburb E property and thereafter the wife refinance all existing liabilities secured against the Suburb E property into her name.
3.If the wife is unable to comply with the requirement for refinance in Order 2 then the parties are to do all acts and things and sign all documents necessary to sell the Suburb E property.
4.The parties do all things to apply the proceeds of sale of the Suburb E property as follows:
(a)Discharge of all encumbrances on title;
(b)Payment of all sums due on settlement;
(c)Payment of legal or conveyancing fees;
(d)Payment of an amount referrable to estimated Capital Gains Tax (“CGT”) (calculated in accordance with Order 5) into a controlled monies account; and
(e)Balance to the wife.
5.In relation to any CGT payable on the sale of the Suburb E property:
(a)Within 60 days of the date of these Orders, the wife will cause her accountant to provide an estimate of the capital gains tax payable on the sale of the Suburb E property;
(b)Within 3 months of the end of the financial year in which the Suburb E property is sold, the parties will do all things and sign all documents necessary to lodge their personal tax returns so that an assessment can issue;
(c)That simultaneously with lodging the tax return, the wife will direct her accountant to prepare a CGT calculation arising from the sale of the Suburb E property and will provide a copy of the calculation to the husband;
(d)Within 14 days of the wife providing the assessment to the husband, the husband and wife will do all acts and things and sign all documents necessary to pay to the ATO from the controlled monies account, the sum necessary to pay in full the CGT liability only as calculated by the wife’s accountant pursuant to Order 5(a) above; and
(e)Any funds remaining in the controlled monies account after the payment of the CGT will be distributed to the wife.
6.Within 30 days of the making of these Orders, the wife do all acts and things and sign all documents necessary to transfer to the husband all her rights, title and interest in the property situated at F Street, Suburb G (“the Suburb G property”).
7.Contemporaneously with Order 6 above the parties do all acts and things and sign all documents necessary to discharge the mortgage secured against the Suburb G property and thereafter the husband refinance all existing liabilities secured against the Suburb G property into his name.
8.If the husband is unable to comply with the requirement for refinance in Order 7 then the parties are to do all acts and things and sign all documents necessary to sell the Suburb G property.
9.The parties do all things to apply the proceeds of sale of the Suburb G property as follows:
(a)Discharge of all encumbrances on title;
(b)Payment of all sums due on settlement;
(c)Payment of legal or conveyancing fees; and
(d)Balance to the husband.
10.Within 30 days of the date of these Orders the wife in her capacity as Director of H Pty Ltd do all acts and things and sign all documents necessary to refinance the following loans and release the husband as a borrower and/or guarantor:
(a)CBA loan …18;
(b)CBA loan …02;
(c)CBA loan …09; and
(d)ANZ Overdraft …53.
11.If the wife is unable to comply with the requirement for refinance in Order 10 then the wife is to do all acts and things and sign all documents necessary to sell the property situated at B Street, Town C QLD (“the Town C property”).
12.The wife do all things to apply the proceeds of sale of the Town C property as follows:
(a)Discharge of all encumbrances on title and/or monies necessary to release the husband from any personal guarantee;
(b)Payment of all sums due on settlement;
(c)Payment of legal or conveyancing fees; and
(d)Balance to H Pty Ltd.
13.That the husband pay to the wife the sum of $300,814
$158,122within 30 days.14.The husband be declared solely entitled to all shares in his name, bank accounts in his name, superannuation entitlements, car and personal property in his possession or control.
15.The wife be declared solely entitled to all shares in her name, bank accounts in her name, superannuation entitlements, car and personal property in her possession or control.
16.Except as otherwise provided in these Orders each party shall indemnify the other party against any liability in his or her sole name.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Part XIVB of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish an account of proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under a pseudonym Riain & Dohman has been approved pursuant to subsection 114Q(2) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
Amended pursuant to r 10.14(b) of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) on 26 September 2024
CHRISTIE J:
INTRODUCTION
This is an application for property adjustment orders.
The applicant husband and respondent wife agree about who should retain two parcels of real estate but otherwise ask the court to determine what orders would be just and equitable to adjust their interests in property.
BACKGROUND
The husband was born in 1977 and the wife was born in 1977.
The husband and wife commenced cohabitation in 2000, marrying in 2012. They separated on a final basis in 2019, though they resided at F Street, Suburb G (“the Suburb G property”), separately and apart, until 2021 for reasons which are not relevant here. In or around March 2021 the wife moved to a rental property and the husband remained residing at the Suburb G property.
There are three children of the marriage, X aged 14, Y aged 11 and Z aged 9. The children reside with both parents in an arrangement pursuant to final consent orders. Those orders provide that during term time they are in their mother’s care 8 nights a fortnight and in their father’s care 6 nights a fortnight and divide their school holiday time equally between their parents.
The wife filed an Amended Application in a Proceeding on 26 February 2024 seeking orders for the sale of B Street, Town C QLD (“the Town C property”), which was dismissed during the interim hearing on 15 March 2024, with a costs order in favour of the husband subsequently made on 13 May 2024, payable within 90 days.
During the marriage, both parties worked. I accept that since the birth of the parties’ children the mother has been employed on a part-time basis. The father took paternity leave but has otherwise worked full-time. The mother currently works as a finance professional through J Pty Ltd, which is her primary source of income. The father has held roles in two businesses but has, since early 2024, operated his own consultancy business as a sole practitioner through K Pty Ltd.
At the conclusion of the hearing, the parties finalised and tendered a joint Balance Sheet representing the areas of agreement and dispute, and that Balance Sheet (Exhibit 50) is reproduced below:
ASSETS Ownership Description Wife/de facto partner’s value Husband/de facto partner’s value 1 J F Street, Suburb G $1,485,000 $1,485,000 2 J D Street, Suburb E NSW $2,350,000 $2,350,000 3 H L Pty Ltd, M Street, Suburb N $3,350,000 $2,010,000 4 W H Pty Ltd ATF P Trust –1 and 2 B Street Town C $550,000 $550,000 5 W J Pty Ltd $161,157 $279,304 6 W Motor Vehicle 1 $20,000 $20,000 7 H Motor Vehicle 2 $60,000 $60,000 Total $7,976,157 $6,754,304 LIABILITIES Ownership Description Wife/de facto partner’s value Husband/de facto partner’s value 8 J ANZ Mortgages secured over F Street, Suburb G $405,277 $405,277 9 J DD Bank mortgage secured over D Street, Suburb E $874,825 $874,825 10 W CBA and ANZ accounts secured over B Street, Town C $271,631 $271,631 11 H CBA mortgage secured over M Street, Suburb N and investors as at 2023 $868,625 $1,225,102 $1,256,236 12 H Monies borrowed by Husband to pay all mortgages as at 30 June 2024 0 $405,000 13 H K Pty Ltd 0 $196,396 14 H O Financial Services car loan secured over husband’s motor vehicle $50,356 $114,086 15 H Mediation - Parenting 0 $1,320 16 W Car Loan Q Bank $19,400 $19,400 17 W Loan from the wife’s father $165,420 0 18 W Loan from the wife’s cousin $10,255 0 Total $3,022,260 $3,544,171 ADDBACKS Ownership Description Wife/de facto partner’s value Husband/de facto partner’s value 19 W Costs order made by SJR May 2024 $6,500 $6,500 20 W R Company Defect Report $4,757 $4,757 Total $11,257 $11,257 SUPERANNUATION Member Name of fund Type of interest Wife/de facto partner’s value Husband/de facto partner’s value 23 H Super Fund 1 – as at 30 June 2024 Accumulation $261,665 $261,665 24 W Super Fund 2 Accumulation $71,283 $71,283 Total $332,948 $332,948 NET TOTAL ASSETS (including Superannuation) $5,286,845 $3,543,081
The balance sheet did not include the wife’s liability to the company, J Pty Ltd, and that debt should be included as one of the liabilities to be taken into account when determining the net assets of the parties. The figure in the single expert report dated 31 July 2024 for this liability is $118,417.
Exhibit 51 contained the figure from O Financial Services which would be payable to discharge the debt over the husband’s car. It differs (albeit slightly) from the figure above but represents the accurate encumbrance over the vehicle so I will include it at $113,001.
It is likely that the husband has some publicly listed shares in his name which are not included in the above table because he failed to include them in his financial statement.
APPLICATION IN A PROCEEDING
Injunction
The husband filed an Application in a Proceeding on 30 July 2024 requesting that:
1.This matter be listed urgently for hearing.
2.That pursuant to section 114 of the Family Law Act, the Respondent Wife herby be injuncted and restrained from instructing Rockdene Lawyers, [Mr S] and any solicitor who currently works for that firm, from acting on her behalf any further in relation to these proceedings.
(As per original)
That Application in a Proceeding was listed on the first day of the final hearing. The wife opposed the making of the orders sought.
On that day I heard submissions and made an order dismissing the application. I indicated I would give reasons at the same time as making final orders. The husband’s application was grounded in his belief that the wife’s solicitor had knowingly consented to a caveat over the former matrimonial home in circumstances where the solicitor knew that there were orders which prohibited the parties from further encumbering any assets. The wife approached a litigation lender to secure funding to meet her legal expenses in these proceedings. As part of the application process the lender asked the wife to provide security over her property. The husband says that because there was email communication between the lender and the wife’s solicitor, the court can conclude that he was aware that the lender intended to take action, which would be in breach of the orders. The husband’s evidence did not establish knowledge on the part of the solicitor.
The issue of the caveat had been the subject of submissions before me at a case management hearing on 13 November 2023. Counsel for the wife tendered the transcript (Exhibit 1) of the exchange on this application:
[MS T]: Your Honour, I’m instructed to place one further matter on the record, and that’s the matter that arose last Friday. We’ve become aware that there has been further caveats lodged over two of the properties owned by the parties. My friend quite rightly put us on notice as soon as he became aware. I understand that the wife has engaged with litigation funding, and the litigation funder has lodged caveats on two of the parties’ properties, which is breach of the orders made by Senior Judicial Registrar Glass. I understand from my friend that that has been raised with the litigation funder, and those caveats will be removed forthwith, but I’ve asked for us to be provided with confirmation once that occurred and title searches evidencing those caveat removals. But in circumstances where this is the second time that that has occurred and there were orders made by a senior judicial registrar injuncting the wife from instructing her previous solicitors because of the same issue, I’m instructed to place it before the court this morning and ask for my friend to notify us promptly as soon as that has occurred, the caveats have been removed.
HER HONOUR: Any difficulty with that, [Mr S]?
[MR S]: Yes, your Honour. That one hit us like a Sidewinder on Friday morning when I cleared the mailbox. I have had the assurance and the apologies from the litigation funder, being a third party.
HER HONOUR: Yes.
[MR S]: And as my friend indicated, the minute we heard about it, we took action to have that removed, and I disclosed that fact to her. Once I get confirmation of that caveat being withdrawn, I will let my friend know.
HER HONOUR: Okay.
[MR S]: But I do apologise to the court. That was something that's just - - -
(Transcript 13 November 2023, p.7 lines 3–31)
I accept that there is no evidence to support that the wife’s solicitor knew about the proposed caveat and knowingly aided the breach of an order. Further, it appeared that when it was brought to the solicitor’s attention, he took all necessary steps to remedy the situation. It is no minor matter to restrain a legal practitioner (H Stanke & Sons Pty Ltd v O'Meara (2006) 95 SASR 425 at [81]) although I accept that if I had formed the view that the integrity of the judicial process required it then I would have been able to make the order sought as part of the inherent jurisdiction of the court. The evidence here did not establish such a necessity and accordingly the application was dismissed.
THE LAW
In this case each party seeks that the court make an order which would adjust their interests in property. If it is just and equitable to do so, pursuant to s 79 of the Family Law Act 1975 (Cth) (“the Act”), the court may adjust parties’ existing legal and equitable interests in property.
The question of what property adjustment order to make (if any) is usually undertaken in a four-step process. The Full Court explained in Bevan & Bevan (2013) FLC 93-545:
[60] The four stage (or step) process involves:
•identification and valuation of the property of the parties;
•identification and evaluation of contributions to the property (including property no longer owned by the parties);
•identification and assessment of the various matters in s 79(4)(d)–(g) including, to the extent they are relevant, the matters in s 75(2);
•consideration of matters of justice and equity.
[61]Although the four step process has been regularly applied, the Full Court has stressed it is no more than a means to an end, since the statutory obligation is to alter existing interests only if it is just and equitable to do so. Thus, in Norman v Norman [2010] FamCAFC 66 at [60], the Full Court (Finn, May and Murphy JJ) said:
[60] It is the mandatory legislative imperative (to reach a conclusion that is just and equitable) that drives the ultimate result. For all its usefulness and merit as a “disciplined approach” or a “structured process of reasoning” (per Fogarty, Lindenmayer, McCall JJ, N and N (unreported, FamCA, 10 June 1992), the “three-step” or “four-step” approach merely illuminates the path to the ultimate result.
In a case that focuses on the first step, namely the identification and valuation of the assets, liabilities, superannuation and financial resources of the parties or either of them, the four-step process is a particularly useful tool. That is so in this case.
In the recognised second step of weighing the parties’ respective contributions, a holistic approach is to be taken. That is, all of the “myriad of other contributions” are to be taken into consideration and are to be weighed collectively rather than segmented or compartmentalised, with one being weighed against the remainder: see Jabour & Jabour (2019) FLC 93-898 at [60], [73]–[87]; Wallis & Manning (2017) FLC 93-759 at [20]; and Williams & Williams [2007] FamCA 313 at [26]. In other words, “[t]o elevate one aspect of the parties’ relationship to being determinative of the issue is to attempt to confine the exercise of discretion” (Whent & Marbrand [2018] FamCAFC 95 at [14]).
Contributions are not to be assessed with mathematical precision (Norbis v Norbis (1986) 161 CLR 513 at 522) and assumptions of equality of contributions ought not be made, whether as the starting point for any exercise of the court’s discretion or otherwise (Mallett v Mallett (1984) 156 CLR 605 at 610).
A useful illustration of the assessment of respective contributions is that by the Full Court in Jabour, where at [136] it was found that the evidence in that case had established the following:
Whatever was the value of the property at the commencement of the relationship its significance has been largely lost given the myriad of the contributions by each of the parties to their various business ventures, through their employment and care of the family over a long relationship, including the contributions made to the retention of the property which we have discussed above. There is no doubt that they both worked hard and over many years they both contributed to the full extent of their capacity within the roles each took within the marriage. As was said in Wallis at [20] it is important that this miscellany of other s 79(4) factors is not accorded a subsidiary role in the assessment of contributions.
Of the evaluation of direct and indirect financial contributions, the Full Court in Dickons & Dickons (2012) 50 Fam LR 244 explained at [14]:
As is plain from earlier decisions of this court, regard must be had to the use made of contributions of various types so as to compare the contributions made by each of the parties during the course of, and over the length of, their relationship (see, for example, In the Marriage of Pierce (1998) 24 Fam LR 377; (1998) FLC 92-844; [1998] FamCA 74). But that is an entirely different proposition to, as it were, causally linking contributions with their asserted financial “product” or “value”. The former recognises that the nature, form and extent of contributions made by each of the parties might differ; the latter suggests that the absence of a causal link counts as no contribution at all.
The judgment of the Full Court in Dickons also provides guidance in respect of the task of identifying specific contributions or periods of contribution as follows:
[24]There can be little doubt that the classification of contributions by reference to terms such as “initial contributions”, “contributions during the relationship”, and “post-separation contributions”, can be helpful as a convenient means of giving coherent expression to the evidence in a s 79 case and to giving coherence to the nature, form and extent of the parties’ respective contributions. However, the task of assessing contributions is holistic and but part of a yet further holistic determination of what orders, if any, represent justice and equity in the particular circumstances of this particular relationship. So much is clear from the terms of s 79 itself and, in particular, s 79(2). The essential task is to assess the nature, form and extent of the contributions of all types made by each of the parties within the context of an analysis of their particular relationship.
[25]Doing so is also consistent with the demands of authority that the ultimate assessment of contributions should be made without “giving overzealous attention to the ascertainment of the parties’ contributions” (Norbis v Norbis (1986) 161 CLR 513 at 524 ; 65 ALR 12 at 18 ; 10 Fam LR 819 at 825 ; [1986] HCA 17) and the well-established recognition in the authorities (acknowledged specifically by her Honour in this case) that the process required of the court by s 79 is the exercise of a wide discretion, not the performance of a mathematical or accounting exercise.
[26]The necessarily imprecise “wide discretion” inherent in what is required by the section is made no more precise or coherent by attributing percentage figures to arbitrary time frames or categorisations of contributions within the relationship. Indeed, we consider that doing so is contrary to the holistic analysis required by the section and, in the usual course of events, should be avoided.
Following an assessment of contributions in accordance with the relevant principles, what is to be considered is whether or not – having regard to the prescribed factors in s 75(2) of the Act that are relevant in the circumstances – it is necessary to make any further adjustment to parties’ contribution-based entitlements.
As to the fourth step, namely considering justice and equity, what is a “just and equitable” outcome “does not admit of exhaustive definition” and “[i]t is not possible to chart its metes and bounds” (Stanford v Stanford (2012) 247 CLR 108 at [36]).
CONSIDERATION
The issues which fall to be determined in order to determine what property orders are just and equitable are:
(a)Did the wife’s parents loan the parties funds?
(b)How were the funds which came from the wife’s family applied?
(c)Did the husband’s mother and father loan funds to the husband or an entity?
(d)If so, how were those funds applied?
(e)How should the shares in J Pty Ltd be valued?
(f)What is the significance and consequence of the transfer of 40 shares in W Pty Ltd to the parties’ minor children?
(g)In what manner should the parties’ respective contributions during the relationship be weighed?
(h)How should the parties’ respective contributions after separation be weighed?
(i)What is the income and earning capacity of each of the parties?
(j)Have both parties made full and frank financial disclosure? If not, what is the consequence (if any) of that omission?
Disclosure
The correspondence in this case (in evidence before me) demonstrated a frustration on the part of the wife and the solicitors who represented her about the provision by the husband of financial documentation over a long period.
In the period immediately preceding the trial it is plain that many of the documents which had been the subject of previous complaint were provided such that at the hearing the husband’s financial disclosure helped to resolve some of the issues which had hitherto remained unsolved, such as the fate of the proceeds of sale of the property owned by W Pty Ltd.
While the disclosure by the husband was subpar, this did not ground a conclusion that the husband had undisclosed income or assets such as would impact on my assessment of the pool available for adjustment (except perhaps some publicly listed shares).
The financial disclosure of the wife in respect of her income and access to the benefits of self‑employment was also less than ideal but similarly, I did not conclude that this failure ultimately affected the determination of the asset pool and was comfortably satisfied that the financial statements for the entity from which the wife derives income provided a tolerably clear impression of the value she is able to derive from her shareholding.
Items of dispute on the balance sheet
L Pty Ltd
The company owns a property at M Street, Suburb N NSW. The parties agree that the value to be attributed to the Suburb N property is $3,350,000, being the figure in the single expert report dated July 2024. Further, the parties agreed that the Suburb N property is encumbered by way of a mortgage in the sum of $1,222,913.
The husband also says that there are debts of the company to persons who have invested funds with the company (or loaned monies to the company). I examine each of these purported liabilities below.
L Pty Ltd was incorporated in early 2015 and acquired the Suburb N property in mid-2015. Pursuant to a share sale agreement with Mr U in late 2017 the husband caused 10 of his shares in L Pty Ltd to be transferred to Ms V and the same month Ms V transferred the shares back to the husband. In September 2019 Mr U commenced proceedings against the husband, wife and K Pty Ltd and sought leave to commence proceedings against L Pty Ltd and W Pty Ltd. The wife was released from the proceedings. A Deed of Settlement and Release (“the Deed”) ended all claims between the remaining parties in early 2021. One of the terms in the Deed (Exhibit 20) reads as follows:
(b) Not later than 3 business days from execution and exchange of this Deed, [Mr U] and [Ms V] will each:
…
(iii) provide to [Mr Riain] share transfer forms for the transfer to [Mr Riain] (or his nominee) of all shares in [L Pty Ltd] which are held by them;
(Deed of Settlement and Release dated early 2021)
It is clear that the husband elected to have those shares transferred into the names of the parties’ minor children. This occurred about 2 years after the parties separated. The actual transfer occurred in November 2021.
It was necessary for the husband to pay the sum of $800,000 to Mr U pursuant to the Deed. When BB Street, Suburb AA (a property owned by W Pty Ltd) was sold, $500,000 of the $800,000 was paid to Mr U directly from the proceeds of sale. Bank statements suggest the entirety of the $800,000 was ultimately paid.
There was no valuation of the shares in L Pty Ltd. The most recent financial statements for the entity were in evidence and revealed the mortgage balance for the CBA loan in the sum of $1,245,213 as at 30 June 2023 and the following debts listed as “related party payables”:
Loan W Unit Trust $10,175
Loan Ms CC $495,081
Loan K Trust $284,206
Loan Mr Riain $45,012
Total $834,474
Initially, the wife was pursuing the inclusion of W Pty Ltd as an entity with value in the proceedings – but ultimately the evidence satisfied her that the proceeds of sale of a property sold by W Pty Ltd had been applied to the extinguishment of a debt and the entity did not appear on the final version of the balance sheet.
In his affidavit the husband said that W Pty Ltd, the trustee of the W Unit Trust, was dormant and had no assets and accordingly both parties agreed not to include the entity on the balance sheet. If those monies are not to be repaid to the W Unit Trust then this approach is sound but it follows that I ought not consider those funds as a liability of L Pty Ltd.
It is not clear whether the amount said to be owing to the husband’s mother is in addition to or part of the funds said to be advanced under the loan agreement and whether it includes or excludes any monies said to have been borrowed to fund mortgages post-separation.
Ordinarily it would be appropriate where shares in a company are being ascribed a value having regard to its net asset backing (as appears to have been the parties’ agreement here), to take into account all of its liabilities. The position is more problematic here. The sum of $284,206 is said to be owed to the K Trust. K Pty Ltd is the corporate trustee. The asset does not appear on the financial statements for the entity. If those monies are not to be paid to the K Trust then they ought not be included as a liability of L Pty Ltd. The monies said to be owing to the husband by L Pty Ltd, if included as liability of the company, would be included as an asset of the husband. In effect, they would cancel one another out.
Having examined each of the liabilities which the husband says total $834,473 the only one which requires further consideration, having regard to the above discussion, are the funds said to be owing to his mother. I accept that the financial statements of the company have recorded the funds advanced by the husband’s mother historically and accept that the husband’s capacity to acquire the interests of his previous business partners has probably been largely dependent upon the injection of cash from outside the company in circumstances where neither he nor the wife had funds available in their own names. I accept that the husband says that there is interest payable on these monies, but given that I cannot be satisfied that all of the funds were in fact advanced in accordance with the terms of the loan, then doing the best I can with the available evidence, I will accept the figure from the most recent set of financial statements in evidence before me namely $495,081 (excluding interest).
I accept that the approach of valuing the shares by taking the value of the real property and deducting the secured debt (mortgage) and the one debt which appears on its face to be repayable is a less than ideal approach but the manner in which the parties conducted their case left this as the only credible approach to the conundrum. Accordingly, the 100 shares in the entity have a value derived as follows:
Value of M Street Suburb N $3,350,000
Mortgage over M Street Suburb N ($1,225,102)
Ms CC ($495,081)
Total: $1,629,817
The husband owns shares in L Pty Ltd. He owns 60 of the hundred issued shares in the company or 60%. The remaining 40 shares are owned by the parties’ minor children.
In her application, the wife sought an order that the children be declared to hold their shares on trust for the father. The children are not parties to the proceedings. I am not satisfied that the evidence establishes that the children hold their shares on trust for the father, and even if I had been satisfied it would have been necessary for their interests to be represented. I am however, satisfied that the father voluntarily caused the shares to be registered in the names of the parties’ minor children in circumstances where it was open to him in the factual circumstances which arose to have the shares transferred into his own name and accordingly I am satisfied that it would be appropriate to treat the value of the children’s shareholding as though it were an asset in the name of their father.
The wife sought the following declaration in her Amended Minute of Order (Exhibit 47):
… pursuant to section 78 of the Family Law Act 1975, it is declared that [X], [Y] and [Z] hold their shares in [L Pty Ltd] on trust for the husband
(Wife’s Amended Minute of Order tendered 7 August 2024)
The wife’s counsel did not make any submissions in support of the making of this declaration either in writing or orally. While it was not made explicit it may have been in the wife’s contemplation that the children held their share on resulting trust (the father having provided the consideration necessary to obtain the 40%). However, if that were the contention, no submissions addressed the presumption of advancement.
The husband did not explain his conduct in gifting these shares to the parties’ minor children other than to submit that he had done so to assist the children financially in the future. The husband is, of course, entitled to deal with his assets. However, 40 shares in the entity have a value of about $650,000 and, but for the gift post-separation, would have been part of the property available for adjustment between the husband and wife.
No party has asked that I make an order for transfer of the shares held by the children. The issue is how I should treat the fact that the husband procured transfer of an asset which the Deed provided could be transferred to him, to the children instead, hence removing it from the assets which he legally owns for the purpose of these property proceedings. In order to do justice and equity between the husband and wife it is not open to me to effectively ignore the fact that the pool is smaller.
In identifying the “existing legal and equitable interests” of the parties, as Stanford entreats, I accept that the 40 shares are not in the husband’s name. However it is open to approach the case on the basis of a notional addback to the assets in the husband’s name the value of those shares. As the Full Court observed in Trevi& Trevi (2018) FLC 93-858 at [47]:
Doing so does not offend what was emphasised by the High Court. Adding back does not seek to create property interests that do not exist. Rather, doing so emphasises that satisfying the respective requirements of ss 79(2) and (4) of the Act to do justice and equity can require an “accounting” or “balance sheet” exercise for the purposes of s 79(2) and (4), so as to include the value of the dissipated property or expended sums within the total value of the parties’ existing interests in property, and to credit the value of same against the assessed entitlement of the dissipating or spending party.
The effect of this finding is that for the purpose of the balance sheet I will treat the husband as though he has 100% of the shares.
J Pty Ltd
The wife is the sole shareholder of the shares in J Pty Ltd. There was considerable detail in the material and in the cross-examination about the circumstances in which she came to be the sole shareholder. I am not satisfied that those circumstances touch on questions of valuation or contribution and accordingly they will not be further dealt with in these reasons.
The wife uses this entity to work as a finance professional. The entity pays her director’s fees. The shares in J Pty Ltd were valued by a single expert and that report was before the court. The single expert report dated 31 July 2024 concluded that the value in the shares of the entity was $161,157. The wife asks that I make a finding in accordance with the opinion of the single expert.
The single expert was not required for cross-examination. In final submissions, the husband contended that the value of the shares in J Pty Ltd was the sum of the value in the single expert report and the value of assets owned by the entity. The husband did not require the single expert valuer. It is difficult to challenge the conclusions of the single expert without cross‑examination. In effect what the husband sought to do was to adopt two alternate methods of valuing the entity and effectively add them together. I reject that approach and adopt the unchallenged evidence of the single expert.
K Pty Ltd
The husband is the sole shareholder of K Pty Ltd and the husband uses the company as a vehicle through which to earn consultancy income. There was no valuation of the shares in K Pty Ltd. The wife says that the court would find the entity has a nil value. The husband asked that the court take into account two specific liabilities of the company (for which he has given a personal guarantee and which are secured by real property). The loans relate to a business overdraft and a loan which was obtained to fit out an office for a business which is no longer operated by the company.
The financial statements of K Pty Ltd are in evidence. As at 30 June 2020 there was $128,932 outstanding in respect of the office fit out loan. That reduced to $113,200 as at 30 June 2021. The financial statements also record the ANZ overdraft with an outstanding balance of $5,863 as at June 2020 and $96,336 as at 30 June 2021.
The total amount the husband now seeks to bring to account is $196,396. In evidence before me was a statement for the “fitout loan” showing an outstanding balance of $89,421. The account number for that account is …42. It is not immediately apparent which bank account represents the remainder of the balance said to be outstanding but I am confident that the husband has consistently represented that the approximate total balance of about $200,000 has been outstanding during these proceedings.
I accept that the loans exist. I accept that the husband has been making payments in respect of these loans.
In the ordinary course I would not bring to account the liabilities of an entity (which might otherwise be reflected in the value of its shares to the owner) but in circumstances where those liabilities are secured against the parties’ property and are guaranteed by the husband I accept that it is proper that I have regard to the amount outstanding when reaching a conclusion about the net assets available for adjustment between them.
Monies borrowed by the husband
I commence by recording that it seems tolerably clear that the husband has had the benefit of funds which came from outside the marriage both during the relationship and after separation. It is much less clear exactly where the funds came from and whether they were provided to the husband personally or to an entity with which he was associated.
The husband asks that the court take into account as a liability funds which he asserts have been borrowed after separation to fund the various mortgage payments which he has not been in a position to meet himself. Those funds are said to total $405,000. That is the estimate in the husband’s financial statement. It is difficult to reconcile with the evidence.
The wife says that the husband has failed to demonstrate that he has in fact borrowed those funds in circumstances where proof ought logically have been available to him. I accept that there are significant deficits in the evidence but that does not persuade me that the funds which have been applied to the parties’ expenses (most particularly debt) were the funds of the husband.
The husband’s affidavit does not make a distinction between money borrowed from his mother, his father and family friends. None are on affidavit. The attached schedules to the husband’s affidavit also record his own mortgage repayments as loans. The husband’s father is retired and has been retired for some time. He owns a home in Suburb FF. The husband did not provide any details about his father’s financial position in his affidavit material. In cross-examination the husband said his father had recently travelled to Country GG and inferentially transferred or brought unspecified funds to Australia from disposal of a business operated by the husband’s father in Country GG in the 1980s.
The husband tendered a copy of a document headed “Loan Agreement” dated 21 July 2021 between L Pty Ltd and Mr EE, his father. That agreement referred to the loan of a sum up to $350,000. The terms of the loan to L Pty Ltd included a term of 10 years or on sale of M Street, Suburb N. It also included interest of 10% and stated that the loan was strictly for maintenance of the Suburb N property.
Curiously the husband’s affidavit refers to a different repayment term.
The husband’s affidavit does not address the question of precisely what funds his mother has advanced to him personally or to L Pty Ltd.
The husband provided a copy of a document headed “Loan Agreement” dated 30 May 2015 between L Pty Ltd and his mother Ms CC. That agreement referred to the loan of a sum up to $550,000. The terms of the loan to L Pty Ltd included a term of 10 years or on sale of M Street, Suburb N. It also included interest of 10% and stated that the loan was strictly for maintenance of the Suburb N property. Curiously, the husband’s affidavit speaks of a different loan sum up to $480,000, a different repayment term (2026) and a different rate of interest (8%).
There was no affidavit from the husband’s mother.
The husband did not seek to rely upon any bank statements (for bank accounts in the names of either of his parents) which demonstrated that his parents had loaned him funds.
The state of the evidence was unsatisfactory. This is even more so in circumstances where I accept that the wife has sought documents from the husband to verify the amounts purportedly loaned – at least so far as documents from the purported lenders is concerned – none have been forthcoming.
I have however, as discussed above, accepted that the advances by the husband’s mother to L Pty Ltd as recorded in the company’s financial statements should be acknowledged. I have not, as indicated above, included any figure for interest, the unexplained contradictory evidence precludes same.
I accept that the husband has had access to funds to meet mortgages after separation. I accept that the husband’s own earnings do not seem to have been nearly sufficient to service the level of his indebtedness. He accepted that it was so. He submitted that his recourse to borrowings to support the loans in the post-separation period had been an asset preservation strategy and had allowed the capital growth the properties had enjoyed in this period. I accept that at least in so far as there is evidence of the increase in the value of the both the Suburb N and Suburb E properties the submission is well-grounded.
The husband disposed of a car after separation. He was unable to identify where the proceeds of that sale had been applied. The husband also entered into a financially disadvantageous loan with O Financial Services which has him owning a car worth $60,000 but subject to a payout of $113,001. Factors such as these mean I must assess the husband’s post-separation contributions both within the context of his post-separation financial conduct more generally and within the overall contributions of each party after separation to ensure that disproportionate weight is not attributed to his support of the mortgages.
I cannot, given the state of the evidence, make a finding that the husband is liable to a person or persons unknown. Given the state of the evidence the approach most likely to do justice and equity as between the parties is to acknowledge that the funds which have been applied by the husband to mortgages in the post-separation period are a contribution on the husband’s behalf to be expressed as a percentage as opposed to acknowledgment of a loan.
Loan from the wife’s parents
The evidence establishes that the wife’s father transferred funds to the wife in 2014 which she asserts were provided by way of a loan. On 1 April 2014 he transferred $26,3700AUD which was received by the wife’s ANZ bank account on 3 April 2014. She then transferred $26,000 to an account …29 (an ANZ overdraft).
On 12 November 2014 the wife’s father transferred $139,050AUD which was received by the wife’s bank account on 13 November 2014. On 3 December 2014 the wife transferred $120,000 to account …25 (an account associated with H Pty Ltd) and on 11 December 2014 she transferred $9,000 to account …29 (an ANZ overdraft).
The husband initially challenged the receipt of the funds but ultimately accepted that they had been advanced but did not accept that they had been applied as the wife contended nor did he accept that they had the character of a loan.
I am not particularly concerned with the dispute as between the parties about the application of the funds since I accept that all funds which each party received in this case were applied to family expenses and the question of whether they were directly applied to acquisition, conservation or improvement of an asset is not material to my assessment of contributions in this case.
I agree with the husband that the advance does not have the nature of a loan which would be enforceable at law. There is no direct evidence from the wife’s parents. There is no evidence about terms. There have been no repayments and the initial advance was made more than 10 years ago.
However, I consider that the advance is a contribution on the wife’s behalf and when regard is had to its timing and quantum, it is a contribution to which I must have regard when determining the parties’ respective financial contributions.
Addbacks
Included in the balance sheet were two amounts labelled “add backs”, being an amount owed by the wife to the husband pursuant to a costs order and an amount said to represent half the cost of the single expert (defects) report. I do not propose to include them in the final balance sheet of assets, liabilities, superannuation, add backs and financial resources because being amounts owed by the wife to the husband, their inclusion in the balance sheet would in effect see the husband contribute to their payment. They are debts which the wife will attend to from her separate property post-order.
Accordingly, I find that the assets, liabilities and superannuation of the parties available for adjustment between them are:
Ownership Description Value 1 J F Street, Suburb G $1,485,000 2 J D Street, Suburb E NSW $2,350,000 3 H Shares in L Pty Ltd $1,629,817 4 W Shares in H Pty Ltd ATF P Trust $550,000 5 W Shares in J Pty Ltd $161,157 6 W Motor Vehicle 1 $20,000 7 H Motor Vehicle 2 $60,000 Total $6,255,974 Ownership Description Value 8 J ANZ Mortgage secured over F Street, Suburb G $405,277 9 J DD Bank mortgage secured over D Street, Suburb E $874,825 10 W CBA & ANZ accounts secured over B Street, Town C $271,631 13 H ANZ overdraft and fit out loan (K Pty Ltd) $196,396 14 H O Financial Services car loan secured over husband’s motor vehicle $113,001 16 W Car Loan Q Bank $19,400 W Wife’s liability to J Pty Ltd $118,417 Total 1,998,947 Member Name of fund Type of interest Wife/de facto partner’s value 23 H Super Fund 1 – as at 30 June 2024 Accumulation $261,665 24 W Super Fund 2 Accumulation $71,283 Total $332,948 NET TOTAL ASSETS (including Superannuation) 4,589,975 Assessment of contributions
Looking at the situation globally and giving each of the parties credit for working, homemaking and parenting over a relationship which spanned some twenty-one years of cohabitation and an additional three years following the parties assuming separate residences, it is important not to place too much significance on financial contributions over non-financial contributions because this would have the effect of placing too little weight on work which is not financially remunerated.
The parties’ assets at the time of cohabitation were modest, although I accept that the husband may have had some savings from work undertaken before the parties’ relationship.
The husband’s affidavit was at times expressed in absolute terms. Of the wife he said “she used her wages solely on herself and her own personal expenses”. I find, following cross‑examination, that in addition to using her wages to meet her own expenses, the wife applied her earnings to the children’s expenses and expenses incurred on the parties’ credit card.
The husband’s affidavit evidence asserted that he had been the primary carer for the children when they were small. I accept he was an involved parent but it stretches credulity to find that while the wife was not employed and he was employed full-time, albeit he may have had the opportunity to work from home, he would have simultaneously undertaken the care of infants and babies.
The husband also had a tendency to express himself in the witness box in absolute terms and reluctantly acknowledge that earlier impulsive answers were not borne out by documents.
The evidence of the wife (particularly in cross-examination) also suffered from difficulties, most particularly a tendency on her part to respond to any questions which she found challenging in defensive manner – repeatedly intoning “don’t recall”. Where this related to her current financial circumstances those answers were unconvincing.
Ultimately, I formed the view that each of the parties was seeking to manage the evidence they gave to achieve a desired outcome as opposed to being deliberately untruthful. I find that the husband made greater financial contributions from income during the marriage but the wife’s contributions to home making and parenting were greater than those of the husband.
I accept that it is appropriate to acknowledge the contribution made on behalf of the wife by her father. While she characterised it as a loan, I found that she had not satisfied the evidentiary burden of establishing that it had that legal character.
As against that there was no challenge that the parties had also sent money to her family to meet various expenses – albeit that those amounts were not equivalent to the money the wife received. The money from the wife’s family is a contribution on behalf of the wife to which I must have regard when assessing contributions overall.
I also accept that while the evidence fell well short of establishing the existence of legal loans between the husband and his parents, the husband had significant financial assistance in meeting the parties’ joint expenses particularly after separation. The husband submitted that his contributions after separation in servicing the mortgages were significant but as discussed above they cannot be viewed in isolation.
Against that, the wife was no longer residing in the home and was required to make payments of rent for her accommodation.
In a manner which is not unusual, the vicissitudes of the life were such that while these parties both made sound financial decisions, they also made some decisions which resulted in economic loss – such as the wife’s share trading losses and the demise of the husband’s business for which he continues to carry significant debt. I cannot find that either example would constitute “waste” as that term is understood: Kowaliw & Kowaliw 1981 FLC 91–092 at 76,644.
I must, when assessing contributions, also have regard to the fact that it would appear as though the husband met payments for legal fees from K Pty Ltd (I accept I have no evidence about how those payments were characterised by the company).
Each party gave evidence about alleged violence but no party submitted that I should take this conduct into account in my consideration of what property adjustment orders were just and equitable. I have not.
While I am obliged to consider all the contributions identified by the material in the context of the relationship as a whole, the most significant matters underpinning my contribution findings come from the imbalance in the contributions which each party received from family.
Doing the best I can with the evidence available I find that the contributions favour the husband 52.5% to the wife’s 47.5%.
Section 75(2) factors
The husband and wife are approximately the same age. Neither suffers from ill health. The parties’ children live between the homes of their parents in accordance with consent orders which divide the time so that it slightly favours the mother’s household during term time. I accept that this is unlikely to be significant in so far as each parent will need to accommodate the children for significant periods both in term time and during holidays.
From the bar table I was told by the husband that one of the parties’ children had recently moved to his home. This was not the subject of affidavit evidence (and hence not the subject of cross-examination). In any event, even if I had had evidence of this circumstance given the age of the child and the history of care arrangements it would have been difficult to conclude that this circumstance was permanent and would sound in any different assessment of either parties’ future financial position.
Making a finding about the parties’ respective incomes and earning capacities is somewhat difficult since each of the parties earns income as a consultant with that income paid to a corporate entity. I accept that the income which the wife set out in her financial statement relied upon in these proceedings understates the combined director’s fees and benefits of employment.
The entity J Pty Ltd has been profitable and has had the capacity to loan monies to the wife.
The husband estimated his consultancy income at about $3,000 per week. Accordingly, the income and earning capacity of each of the parties while difficult to state with precision is relatively equivalent.
It follows that I am not as concerned about the issues which the wife has raised about tardy payment of child support since I cannot be confident that the income upon which the assessment issued was accurate. I accept that the husband has paid child support. It is not clear what the appropriate rate of child support will be moving forward but given the time arrangements and my findings about income this is of no particular moment.
ORDERS
There was agreement as between the parties that:
(a)The wife would retain the property located at D Street, Suburb E and subject to a mortgage which she would refinance into her own name;
(b)The husband would retain a property located at Suburb G and subject to a mortgage which he would refinance into his own name.
The husband will have the following assets:
(a)F Street, Suburb G $1,485,000
(b)Mortgage over F Street Suburb G ($405,277)
(c)Shares in L Pty Ltd $977,890
(d)Shares in L Pty Ltd (gifted) $651,927
(e)Overdraft and fit out loan ($196,396)
(f)Motor Vehicle 2 $60,000
(g)O Financial Services ($113,001
(h)Superannuation $261,665
Subtotal: $2,721,808
The wife will have the following assets, liabilities and superannuation:
(a)D Street, Suburb E $2,350,000
(b)Mortgage over D Street Suburb E ($874,825)
(c)Shares in H Pty Ltd $550,000
(d)Motor Vehicle 1 $20,000
(e)Q Financial Services ($19,400)
(f)Superannuation $71,283
(g)Shares in J Pty Ltd $161,157
(h)Loan to J Pty Ltd ($118,417)
(i)CBA & ANZ accounts secured over B Street, Town C ($271,631)
Subtotal: $1,868,167
The pool for adjustment is $4,589,975. Having regard to my findings above, in order for the parties to obtain the result which I have determined, it will be necessary for the net assets (including superannuation) of the husband to be $2,409,737. Accordingly, he will be required to pay to the wife a sum necessary to achieve the overall result. That sum is $312,071, but to take into account the outstanding costs order and the amount payable for the wife’s share of the single expert report the figure should be reduced by $11,257 to $300,814.
There are a significant number of loans, overdrafts, mortgages and guarantees identified by the parties. I will require the parties to discharge and refinance the loans to release one another from obligation and in default the orders will provide for sale. I accept that there may be attendant costs (including taxation costs) if sale is required and the sale price may differ from the valuation evidence but in the absence of evidence about the likely costs and absent submissions the approach is necessary to finalise the matter and adhere to the intent of s 81 of the Act.
I certify that the preceding one hundred and nine 109 numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Christie delivered on 22 August 2024 and re-issued on 11 October 2024. Associate:
Dated: 11 October 2024
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