Robertson & Duncan
[2023] FedCFamC1F 130
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Robertson & Duncan [2023] FedCFamC1F 130
File number(s): SYC 5434 of 2016 Judgment of: HARPER J Date of judgment: 8 March 2023 Catchwords: FAMILY LAW – PROPERTY – Final property adjustment – Where husband is bankrupt – Where wife has previously received majority of non-superannuation or vested bankruptcy assets pursuant to consent orders between wife and trustee in bankruptcy – Where superannuation only remaining property of any value – Wife seeks superannuation splitting order – Where wife was previously employed by husband’s business and superannuation was underpaid – Order made for allocation of $35,000 from husband’s superannuation following consideration of s 90SM(4)(e) factors – Wife seeks addback of funds relating to line of credit operated by husband’s business – Arguments of waste rejected – Variation of husband’s spousal maintenance liabilities – Proceedings otherwise dismissed. Legislation: Bankruptcy Act 1966 (Cth) s 153
Family Law Act 1975 (Cth) ss 90SF(1)(b), 90SM(4)(e), 117(1)
Cases cited: Kowaliw and Kowaliw (1981) FLC 91-092
AJO & GRO (2005) FLC 93-218; [2005] FamCA 195
Townsend and Townsend (1995) FLC 92-569; [1994] FamCA 144
Trevi & Trevi (2018) FLC 93-858; [2018] FamCAFC 173
Division: Division 1 First Instance Number of paragraphs: 39 Date of hearing: 6 March 2023 Place: Sydney The Applicant: Litigant in person The Respondent: Litigant in person ORDERS
SYC 5434 of 2016 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MR ROBERTSON
Applicant
AND: MS DUNCAN
Respondent
order made by:
HARPER J
DATE OF ORDER:
8 March 2023
THE COURT ORDERS THAT:
1.Upon the Respondent Wife (“the wife”) providing to the Trustee of Superannuation Fund 1 14 days’ notice of these orders, Orders 2 to 4 below will become binding on the Trustee of Superannuation Fund 1.
2.Pursuant to s 90XT(l)(b)(i) of the Family Law Act 1975 (Cth) (“the Act”) a specified amount of $35,000 is allocated to the wife out of the Applicant Husband’s (“the husband’s”) Superannuation Fund 1 entitlements.
3.Pursuant to s 90XT(l)(c)(i) of the Act, whenever a splittable payment becomes payable in respect of the husband’s interest in Superannuation Fund 1 entitlements, the wife shall be entitled to be paid an amount calculated in accordance with Part 6 of the Family Law (Superannuation) Regulations 2001 (Cth) (“the Regulations”) from the husband’s entitlements in Superannuation Fund 1, and there shall be a corresponding reduction in the husband’s entitlement in Superannuation Fund 1.
4.The Trustee of Superannuation Fund 1 shall do such acts and things necessary to:
(a)Calculate, in accordance with the Act and the Regulations, the entitlement created for the wife by Orders 2 and 3 of these orders; and
(b)Pay the entitlement whenever the Trustee makes a splittable payment out of the husband’s interest in Superannuation Fund 1.
5.Within 14 days, the wife deliver up to the husband, or at his direction, two plates engraved with the name “Mr B”.
6.The order for interim spousal maintenance made on 28 July 2017 be discharged to the extent it stands paid.
7.Any arrears of spousal maintenance owing pursuant to the order made on 28 July 2017 be varied to $20,000.
8.Within 28 days, the husband pay to the wife the arrears of spousal maintenance as varied in accordance with the previous order.
9.All outstanding applications be otherwise dismissed with no order as to costs.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Robertson & Duncan has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
HARPER J:
These are property proceedings between the Applicant Husband (“the husband”) and the Respondent Wife (“the wife”). They have been in the Court for many years.
The parties commenced a relationship in 2000 and cohabitation in 2001 or 2002. This difference is not material. They separated on a final basis at the end of January 2015. The parties never married but there is one adult child of the relationship, Ms D, born 2004. There was no dispute the parties formed a de facto relationship within Pt VIIIAB of the Family Law Act 1975 (Cth) (“the Act”).
At the commencement of the relationship, the husband was a professional operating his own incorporated business (“the business”). During the relationship, the wife worked in this business. Also during the relationship, the parties purchased C Street, Suburb E (“C Street”) in 2002 for over $500,000, which became the relationship home. The business provided the deposit of $120,000 for the purchase of this property, with the balance provided by bank loan.
In 2007, the parties purchased an investment property in the name of the wife at Suburb F (“Suburb F”). According to the wife, the parties jointly borrowed $585,000 and $20,000 for the 5 percent deposit.
The proceedings were commenced in August 2016 by the husband in the Federal Circuit Court of Australia (as it then was).
After separation, Suburb F was sold in July 2017 for over $600,000. The net proceeds of about $25,302 were divided approximately equally between the parties. The sale attracted a capital gains tax liability.
In April 2018, G Bank, which provided a line of credit to the business, required repayment of the outstanding debit balance of $500,000 over four months. The husband formed the view that this could not be achieved. In mid-2018, the business was placed into liquidation.
During the proceedings, the husband was made bankrupt by sequestration order made in early 2020. His discharge from bankruptcy will likely take place in early 2023.
The proceedings eventually became listed for final hearing which took place on 6 March 2023 after transfer to the Family Court of Australia (as it then was) on 2 May 2019. By reason of s 35 of the Bankruptcy Act 1966 (Cth), this Court has jurisdiction in bankruptcy in relation to any matter connected with, or arising out of, the bankruptcy of the husband.
In light of the history of this matter, as will be explained, it has become unnecessary to consider contributions in much detail. Through orders made by consent on 25 May 2022, the wife received a payment from the husband’s trustee in bankruptcy (“the trustee”) of $493,116.54. This amount was the residue of the proceeds of sale of C Street. Excluding superannuation, this payment represented about 86.25 per cent of the property pool available for division between the husband and wife. Those orders also provided for $21,928.40 to be paid to the wife to meet the capital gains tax liability which accrued upon sale of Suburb F. The orders of 25 May 2022 finalised the involvement of the husband’s trustee in the proceedings.
Consequently, when the matter was called for final hearing, the parties’ non-superannuation assets were modest. They consisted of approximately $470,000 held in a bank account in the name of the parties’ adult daughter, being the balance of the $493,116.54 received by the wife from the trustee. As already noted, this has been received by the wife as partial property settlement. There was also Motor Vehicle 1 valued at $33,000, some household effects, and very modest cash savings.
I note here that the wife contended that among the household effects owned by the husband there were included two artworks worth $11,500. However, there was no valuation of the artworks and neither party seemed able to explain their whereabouts. Accordingly, I will treat the value of the husband’s household effects as approximately $1,000.
There were also included liabilities of the wife. It was not in dispute that she owed tax of $20,008. The wife agreed this amount was the outstanding balance of the capital gains tax for Suburb F, the payment of which was provided for in the orders made on 25 May 2022. The wife also claimed a credit card debt of $21,758 which she agreed had been incurred for the purposes, at least partially, of living expenses since separation.
The husband has an outstanding debt for spousal maintenance arrears of $40,400 and child support arrears of $22,700. These debts will not be released upon the husband’s discharge from bankruptcy, by reason of the definition of “maintenance order” in s 5, and the terms of s 153(2)(a)(c) of the Bankruptcy Act, unless the Court makes an order for release from such liability pursuant to s 153(2A).
The husband has approximately $130,483 in superannuation. One component of that is a public service entitlement worth approximately $40,000, but which the husband claims could not be subject to a splitting order. The wife has superannuation of approximately $116,975.
Accordingly, as at the date of trial, the only property of any significance remaining and divisible is the parties’ superannuation.
Although an order had been made pursuant to s 102NA of the Act, neither party was represented at final hearing. The wife claimed she had retained solicitor and counsel, but neither appeared on 6 March 2023. I was told the solicitor for the wife was unable to appear because she was caring for her children, and counsel retained by the wife was apparently unwell. In this entirely unsatisfactory situation, the trial proceeded. No cross examination was conducted by either party of the other.
The issues for determination were ultimately identified as follows:
(1)Whether there should be an add back to the balance sheet of $303,066 relating to the G Bank line of credit which had been secured against C Street;
(2)Whether the husband’s liability for spousal maintenance should be discharged;
(3)Whether the parties’ superannuation should be split in favour of the wife;
(4)Whether the husband had wasted or diminished matrimonial assets by the irresponsible conduct of his business; and
(5)Whether orders should be made for the trustee to pay to the wife the value of vehicle licence plates.
I turn first to the question of the proposed add back. In Trevi & Trevi (2018) FLC 93-858, the Full Court referred to AJO & GRO (2005) FLC 93-218 at [30], Kowaliw and Kowaliw (1981) FLC 91-092, and Townsend and Townsend (1995) FLC 92-569 to confirm that add backs fall into “three clear categories”: where the parties have expended money on legal fees, where there has been a premature distribution of matrimonial assets, and “waste” or wanton, negligent, or reckless dissipation of assets.
The wife accepted the line of credit had been used for both personal and business purposes, although there was no dispute that the $303,066 claimed as an add back were referrable business expenses for the purposes of the business.
The wife claimed the husband had committed waste, or reduced the matrimonial pool by increasing the debit balance of the line of credit through his poor business activities. The evidence relied upon by the wife in this regard was not convincing. She pointed to failures by the husband to bill work in progress (“WIP”) in a timely fashion and to take appropriate steps to recover outstanding fees. She complained that he entered “contra deals” with clients whereby he would write off their WIP or invoices in return for cash, goods, or services. She claimed that during the time she worked in the business, she argued with the husband about some of his business practices which caused her disquiet.
In her trial affidavit, the wife said at paragraph 103 that:
I remained concerned that the situation the Applicant claimed to be in had been caused by his wasting of assets, poor management and reckless indifference, evidenced by the unbilled WIP and outstanding debtors of nearly $3m. There was no evidence that the Applicant had made any attempts to mitigate his financial losses by moving to smaller premises or reducing staff, or that he made any attempts to secure funding from another bank…
Ultimately, in summary, she contended that the husband created additional borrowings which led to his own bankruptcy for the purpose of spiting her. I find this to be unlikely. She claimed the husband deliberately failed to obtain work, despite his qualifications. I do not accept this argument either. The husband gave a plausible account of his attempts to find work, his work history, and income after separation.
I do not accept the wife has demonstrated “waste” by the husband. I am not satisfied that the amount claimed by the wife should be added back to the balance sheet.
Turning next to the question of a superannuation split, the wife argued that during the relationship and her employment in the husband’s business, the husband chose not to pay her superannuation entitlements, and nor did he pay his own. She claimed that other employees had received their full superannuation entitlements, and that if hers had been paid in accordance with superannuation laws, her superannuation balance would be much greater.
When it was pointed out to her that she had already received 86.25 percent of non‑superannuation assets, she in substance repeated her arguments in support of allegations of wanton and wasteful dissipation of assets after separation by the husband.
I do not accept these arguments. Even if the husband did irresponsibly dissipate or reduce the matrimonial pool, this is reflected, I infer, in the substantial division of non-superannuation assets in her favour.
In determining the question of a splitting order, however, s 90SM(4)(e) factors have relevance. The husband is currently 63 years old. He has recently obtained employment from mid-2022 on a salary package of $180,000 per annum, of which $163,000 is the cash component. The wife is 66 years old. She has employment earning approximately $109,000 per annum.
The husband argued that the only money available to him in retirement will be his modest superannuation balance. However, I note here that there was no dispute that the husband is a discretionary object of a testamentary trust established in accordance with the terms of his late father’s will. This trust is under the control of his daughter from an earlier relationship. The size of his father’s estate was not entirely clear, but according to the husband himself, there was cash and shares valued in the region of $1.5 to $2 million. It is therefore clear, and not in dispute, that his interest as a discretionary object under the testamentary trust is a financial resource, and he may receive a distribution from his father’s estate in the future.
The wife has some health problems, and the parties’ adult daughter lives with her. She gave evidence that she had entered into a contract to purchase an off the plan apartment which will require her to borrow a further $220,000 in order to settle the purchase. This will be a future liability which she will be required to service. She claimed that in order to service and pay off this liability, she will be required to work to the age of approximately 73.
I have considered these matters carefully, and in light of the modest amounts available in superannuation, I am inclined to make a splitting order allocating $35,000 to the wife from the husband’s Superannuation Fund 1 entitlements. The wife sought an allocation of $90,000 from the husband’s entitlements. The fact that the wife has already received the lion’s share of the non-superannuation assets supports a conclusion that an allocation of $35,000 is sufficient.
The husband ultimately did not press any orders for variation of the arrears of child support.
Regarding arrears of spousal maintenance, the husband pointed out that the original order for the payment of spousal maintenance was made on 28 July 2017, requiring a payment of $400 per week. The husband argued that since that order was made, two critical changes in circumstance had arisen. The first on 11 May 2018 were the actions taken by G Bank to foreclose any capacity for the husband to continue to draw down the line of credit operated for the purposes of his business, referred to earlier. His argument was that therefore, after 11 May 2018, he no longer had any capacity to meet obligations to pay spousal maintenance. The second factor was that as of early 2020, the husband became bankrupt. He pointed out that on 6 November 2019, he filed an Application in a Proceeding to discharge the liability for spousal maintenance arrears. This application was not dealt with by the Court and remained extant at final hearing. He argued that the Court should not simply take a broad brush approach to assessing his capacity to pay spousal maintenance, but the two circumstances to which he pointed make clear that it could not be concluded on any reasonable view that he lacked continued capacity after 11 May 2018. However, he conceded that even on his argument between 28 July 2017, the date of the original order, and 11 May 2018, he retained capacity. I do not entirely accept the evidence demonstrates that the husband’s capacity disappeared on 11 May 2018. But I accept that, bearing in mind the date of his bankruptcy, the husband likely did not have capacity to make the spousal maintenance payments originally agreed to from 6 November 2019, being the date of filing his application to discharge it.
I accept, therefore, that the liability for spousal maintenance arrears should be reduced. The evidence did not permit me to form a view about any precise figures, so a broad brush approach is unavoidable. Accordingly, I vary the amount of outstanding arrears of spouse maintenance to $20,000, and will order that any future liability for spousal maintenance be discharged.
I am also satisfied that there is no proper basis to order spousal maintenance for the wife on a final basis. Even though the husband has fresh employment, and his capacity to meet spousal maintenance payments may be assumed, I am not satisfied the wife has demonstrated she is unable to support herself adequately for any of the reasons set forth in s 90SF(1)(b) of the Act. Indeed, I am satisfied that she is able to do so.
Three further matters require comment. The first is that the husband sought delivery up to him of two platters engraved with the name of his great grandfather, which the wife did not contest. Orders will be made for her to deliver up those platters.
The second issue is that, despite the final orders made on 25 May 2022 between the wife and the husband’s trustee, the wife sought an order against the trustee concerning licence plate “[…]” which she claims should have been delivered to her and transferred into her name by the trustee according to the orders by consent on 25 May 2022. She did not dispute that the licence plates had been delivered to her physically. Her claim was that they were worthless to her because the appropriate administrative steps to transfer them into her name had not been undertaken by the trustee. The evidence about this was unclear and not persuasive. In the absence of the trustee in the proceedings, I am not inclined to make any orders in relation to the licence plates.
The third matter is that the wife claims a payment of $10,500 for costs incurred by her in attempting to resolve claimed non-compliance by the husband with an order by Judge Kemp on 27 September 2018 requiring him to withdraw sufficient funds from his superannuation to meet mortgage arrears. The wife gave no detail of the costs to show they were reasonable or why they should be ordered now in her favour, bearing in mind the requirement of s 117(1) of the Act. I decline to make any order about these costs.
Otherwise, I will make no order as to the costs of either party.
I certify that the preceding thirty-nine (39) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Harper. Associate:
Dated: 8 March 2023
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