Sappho & Sappho (No 2)
[2022] FedCFamC1F 786
Federal Circuit and Family Court of Australia
(DIVISION 1)
Sappho & Sappho (No 2) [2022] FedCFamC1F 786
File number(s): ADC 885 of 2020 Judgment of: BERMAN J Date of judgment: 18 October 2022 Catchwords: FAMILY LAW – PROPERTY SETTLEMENT – Just and equitable – Contributions – Addbacks – Future Needs factors – Where the parties cohabitated for 11 years – Where there are two children of the relationship – Where the applicant is the primary carer and the respondent is the primary income earner – Where the respondent’s company and various entities are his alter ego – Where the respondent has the ability to earn significantly more income than the applicant – Where it is just and equitable for orders to be made – Orders made.
FAMILY LAW – SPOUSAL MAINTENANCE – Where the applicant seeks orders for lump sum spousal maintenance – Where the respondent seeks that the application be dismissed – Where the applicant is unable to financially support herself – Where the Court determines that the respondent is reasonably able to pay – Consideration of the applicant’s intention not to return to work on a full-time basis but her capacity and intention to return to work on a part-time basis – Consideration of orders for settlement of property – Orders made.
FAMILY LAW – CHILD SUPPORT – Child support departure orders – Where the applicant seeks departure orders for periodic and non-periodic payments of the children’s private school and other expenses on a final basis – Where there are existing interim consent orders – Where the respondent seeks that the application be dismissed – Consideration of the ss 116 and 117 Child Support (Assessment) Act 1989 (Cth) – Where the Court does not have jurisdiction pursuant to s 116 – Where the Child Support Registrar has not been served with such an application in accordance with the Rules – Where the failure to serve the Registrar is fatal – Application dismissed.
Legislation: Child Support (Assessment) Act 1989 (Cth) ss 116, 117, 117(2)(b)(ii)
Family Law Act 1975 (Cth) ss 75(2), 79, 79(4)(a)-(c), 79(5)(2)
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) r 1.13
Cases cited: Bevan & Bevan (2013) FLC 93-545
Chorn & Hopkins (2004) FLC 93-204
Cleaves v Cleaves [2021] FamCA 571
C & L [2000] FamCA 1666
Finlayson v Finlayson and Gillam (2002) FLC 93-121
Jabour & Jabour (2019) FLC 93-898
JEL & DDF (2001) FLC 93-075
Kowaliw & Kowaliw (1981) FLC 91-092
Lesley & Lesley [2015] FamCA 894
Mallet v Mallet (1984) 156 CLR 605
Norbis v Norbis (1986) 161 CLR 513
Pearce & Pearce (1999) FLC 92-844
Stanford & Stanford (2012) 247 CLR 108
Townsend & Townsend (1995) FLC 92-569
Vass & Vass (2015) 53 Fam LR 373
Division: Division 1 First Instance Number of paragraphs: 181 Date of hearing: 11-13 July 2022 Place: Adelaide Counsel for the Applicant: Mr Anderson Solicitor for the Applicant: Clelands Lawyers Adelaide Pty Ltd Counsel for the Respondent: Mr Heinrich Solicitor for the Respondent: Camatta Lempens Pty Ltd ORDERS
ADC 885 of 2020 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS SAPPHO
Applicant
AND: MR SAPPHO
Respondent
order made by:
BERMAN J
DATE OF ORDER:
18 October 2022
UPON NOTING:
A.That in relation to the V Super Fund (“the SMSF”):
a.The SMSF is a self-managed superannuation fund listed by the Australian Taxation Office on the Super Fund Lookup Website as a complying superfund.
b.The SMSF was established under a Deed of Trust. The rules governing the operation of the SMSF are contained in the Deed of Trust.
c.The applicant and the respondent are the only members of the SMSF.
d.The trustees of the SMSF are the parties.
e.The applicant has a member account in the SMSF and in accordance with s 90XT(2) of the Family Law Act, as at 30 June 2020, the balance of that account was approximately $401,387.
f.The requirements of procedural fairness in accordance with section 90XZD of the Family Law Act 1975 (Cth), have been observed on the basis that the parties are the directors of the SMSF.
THE COURT ORDERS:
1.That in full and final settlement of any claim that either party may have against the other for settlement of property or alteration of interest in property pursuant to Part VIII of the Family Law Act 1975 (Cth) as amended:
1.1That within sixty (60) days of the date of these orders (“the settlement date”) the respondent shall transfer to the applicant all of his estate and interest both at law and in equity in the property located at F Street, Suburb G in the state of South Australia, being the whole of the land comprised and described in Certificate of Title Volume … Folio … (“the Suburb G property”);
1.2That within sixty (60) days of the date of these orders, the respondent shall discharge in full, any liability and security over the Motor Vehicle 1 (registration number…), currently in the possession of the wife, and shall do all things and sign all documents as may be required to transfer all of his interest, right, and entitlement in the Motor Vehicle 1, to the applicant.
2.That contemporaneously with the transfer of the Suburb G property to the applicant:
2.1The respondent shall discharge in full the mortgage to National Australia Bank (“NAB”) (mortgage number …) secured over the Suburb G property at his sole cost;
2.2The respondent shall pay to Clelands Lawyers Trust Account, for and on behalf of the applicant, the sum of THREE HUNDRED AND SIXTY ONE THOUSAND, FOUR HUNDRED AND FORTY NINE DOLLARS ($361,449) (“the settlement sum”); and
2.3The applicant will transfer her interest in the joint Westpac account …30 to the respondent.
3.That in default by the respondent of the discharge in full of the mortgage to NAB secured over the Suburb G property and/or the payment of the settlement sum, interest shall accrue on any unpaid balance of the settlement sum at the rate of interest prescribed in the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth), to be calculated from the date of default until the date of payment of the full balance outstanding to the applicant.
4.That should the default continue for a period of sixty (60) days from the settlement date, then the property located at B Street, Suburb C in the state of South Australia, being the whole of the land comprised and described in Certificate of Title Volume … Folio … (“the Suburb C property”), shall be sold on such terms and conditions as may be agreed between the parties or in default as fixed by this Honourable Court and upon the settlement of the sale of the Suburb C property:
4.1The proceeds of sale shall be distributed as follows:
4.1.1Firstly, in payment of all costs of sale including agents fees, marketing costs and conveyancing fees;
4.1.2Secondly, to discharge in full the mortgage of the Westpac Bank secured over the Suburb C property;
4.1.3Thirdly, to discharge the mortgage to the NAB secured over the Suburb G property;
4.1.4Fourthly, to pay the unpaid balance of the settlement sum to the applicant together with default interest, provided that from the settlement sum the applicant do pay to the respondent a sum equal to 32.5 per cent of any capital gains tax payable upon the sale of the Suburb C property, by reason of default by the respondent or at his election; and
4.1.5Lastly, to pay the balance remaining to the respondent.
5.That pending payment of the settlement sum and the discharge of the mortgage in favour of NAB, the respondent shall pay all outgoings and expenses in relation to the Suburb G property including any loan repayments arising under the mortgage in favour of NAB secured over the property together with all rates, taxes and insurance premiums and indemnify the applicant and keep her forever indemnified in relation to the same.
6.That in relation to P2 Pty Ltd, P1 Pty Ltd, Q Pty Ltd, V Pty Ltd, LL1 Pty Ltd and MM Pty Ltd (“the Companies”):
6.1That within sixty (60) days of the date of these order the applicant shall do all things and sign all documents as may be necessary to:
6.1.1Resign from any position which she may hold in the Companies; and
6.1.2Transfer all of her shares and entitlements to the Companies to the respondent.
7.That the respondent shall indemnify the applicant and keep her indemnified in relation to all debts and liabilities of and in relation to the Companies including but not limited to:
7.1All taxation liabilities;
7.2Any creditors of the Companies;
7.3Any loans or credit facilities of the Companies including but not limited to credit cards and business loans;
7.4Any monies owing to any employee or contractor engaged by the Companies; and
7.5All proceedings, costs, claims and demands incurred in respect of the Companies.
8.That within thirty (30) days of the date of these orders and at the respondent’s sole expense, the applicant shall do all things necessary and sign all documents as may be required to renounce and surrender any and all beneficiary interests or entitlements to the income and assets or unpaid present entitlements she may have in the following trusts:
8.1The W Trust;
8.2The NN Trust;
8.3The R Trust; and
8.4The T Trust
(“the Trusts”).
Splitting Order 1
9.That in accordance with section 90XT(1)(b) of the Family Law Act1975 (Cth):
9.1The respondent is entitled to be paid the specified percentage, being one hundred per cent (100%), out of the applicant’s SMSF interest; and
9.2The applicant’s entitlement to the amount in her member account (and the entitlement of any other person to payments out of the applicant’s interest) in the SMSF is correspondingly reduced.
10.That the parties in their capacity as trustees of the SMSF, shall do all such acts and things and have signed all such documents as may be necessary to:
10.1Calculate, in accordance with the requirements of the Family Law Act 1975 and the Family Law (Superannuation) Regulations 2001 the entitlement awarded to the respondent in the preceding clause of this order; and
10.2Pay the entitlement whenever the trustees make a splittable payment out of the applicant’s interest in the SMSF.
11.That the splitting order 1 operates from operative time specified in 15.
Splitting Order 2
12.That in accordance with section 90XT(1)(b) of the Family Law Act 1975 (Cth):
12.1The applicant is entitled to be paid a specified percentage being fifty per cent (50%), less the sum of $1,693 (being one half of the Superannuation Fund 2 entitlement of the applicant), out of the respondent’s SMSF interest; and
12.2The respondent’s entitlement to the amount in his member account (and the entitlement of any other person to payments out of the respondent’s interest) in the SMSF is correspondingly reduced.
13.That the parties in their capacity as directors of the trustee corporation SMSF, shall do all such things and sign all such documents as may be necessary to:
13.1Calculate, in accordance with the requirements of the Family Law Act 1975 (Cth) and the Family Law (Superannuation) Regulations 2001, the entitlement awarded to the applicant in the immediately preceding clause of this order; and
13.2Pay the entitlement whenever the trustees make a splittable payment out of the respondent’s interest in the SMSF.
14.That splitting order 2 operates from operative time as specified in 15.
15.That the operative time for splitting order 1 and splitting order 2 operate as follows:
15.1Firstly, splitting order 1 operates from the beginning of the day of the transfer of the transferrable benefit; and
15.2Secondly, splitting order 2 operates immediately following the operation of operative time in 15.1.
16.That pending the transfer of the transferable benefits from the respondent to the applicant and from the applicant to the respondent:
16.1Each party is restrained from dealing with, charging, encumbering or disposing of any investment property of the SMSF other than in accordance with the terms of this order;
16.2In the event of any liabilities being incurred by the SMSF they are to be met from the SMSF’s bank account; and
16.3Each party shall immediately revoke any binding death benefit nomination already made and each party be, and is hereby, restrained from:
16.3.1Making any binding death benefit nomination in favour of a child described in regulation 13 of the Family Law (Superannuation) Regulations 2001;
17.That forthwith upon the implementation of splitting order 1 and splitting order 2, the applicant shall retire as a trustee of the SMSF and renounce and release all of their interest therein as a member.
18.That within thirty (30) days of the date of these orders, the parties shall do all things necessary and sign all such documents as may be required to close any joint savings bank accounts, with the funds held in the accounts to be distributed in full to the respondent.
19.That within sixty (60) days of the date of these orders:
19.1The respondent shall discharge in full any liability and security over the Motor Vehicle 1 currently in the possession of the applicant; and
19.2The respondent shall do all things necessary and sign all documents as may be required to transfer the interest of the Motor Vehicle 1 to the applicant at his sole cost.
20.That subject to the terms of these orders, the property in the following shall vest in the applicant absolutely free of all further claim or demand or right or entitlement of the respondent:
20.1The furniture, furnishings and personal effects in the applicant’s possession including the applicant’s jewellery;
20.2The applicant’s separate savings;
20.3The applicant’s superannuation entitlements with Superannuation Fund 2; and
20.4Any other real or personal property or financial resources in the applicant’s name and/or possession not otherwise specified herein.
21.That subject to the terms of these orders, the property in the following shall vest in (or if necessary be transferred or assigned to) the respondent absolutely free of all further claim or demand or right or entitlement of the applicant:
21.1The property located at B Street, Suburb C;
21.2The furniture, furnishings and personal effects in the respondent’s possession including his firearms;
21.3The respondent’s separate savings;
21.4The respondent’s shares and investments; and
21.5Any other real or personal property or financial resource in the respondent’s name and/or possession not otherwise specified herein.
22.That a Registrar of the Federal Circuit and Family Court of Australia (Division 1) be appointed pursuant to s 106A of the Family Law Act 1975 (Cth) to execute any document and/or instrument necessary to give effect to these orders in the event of any of the parties refusing or neglecting to execute such document within seven (7) days of the date on which they are required to do so pursuant to these orders, and being requested to do so by any of the other parties or by the other parties’ legal representative.
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 Sappho & Sappho has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
BERMAN J
INTRODUCTION
By Amended Initiating Application filed 23 June 2022, Ms Sappho (“the applicant”) seeks orders by way of settlement of property and spousal maintenance as follows:-
1.1. That the net assets of the [respondent] and [applicant] and/or controlled by the [respondent] and/or the [applicant] including financial resources and superannuation be divided as to 80% to the [applicant] and 20% to the [respondent].
1.2.That the [respondent] do pay or cause to be paid lump sum spousal maintenance to the [applicant] in the sum of $54,184 (calculated on the basis of spousal maintenance in the sum of $521 per week for a period of 24 months).
In addition, the applicant also sought an order pursuant to s 117(2)(b)(ii) of the Child Support (Assessment) Act 1989 (Cth) (“the CSA Act”) for a departure from the Administrative Assessment in respect of X born 2010 and Y born 2012 (collectively “the children”).
At the commencement of the proceedings, it was conceded that notice had not been given to the Child Support Registrar of the proposed Application for Departure sought in the applicant’s Amended Initiating Application.
In Lesley & Lesley [2015] FamCA 894 (“Lesley”), McClelland DCJ considered that nonservice was a denial of natural justice and is fundamental to the Court having jurisdiction to deal with child support matters pursuant to s 116 of the CSA Act.
It is regrettable that the parties were not able to resolve their differences in respect of child support in circumstances where, the significant issue underpinning the Application for Departure are the education and extra-curricular expenses necessary for the children’s attendance at their current private school.
By way of Response to Initiating Application filed 7 July 2022, Mr Sappho (“the respondent”) seeks orders by way of property settlement in the following terms:-
1.1That the net asset pool (excluding superannuation) be divided as to 55% to the [applicant] and as to 45% to the [respondent].
The parties are agreed that the respondent will transfer to the applicant, all of his estate and interest in the property situate at F Street, Suburb G (“the Suburb G property”) and that he will discharge the National Australia Bank (“NAB”) loan secured by mortgage over the Suburb G property.
The respondent seeks that the applicant roll over her member entitlement in the self-managed superannuation fund, the V Super Fund (“the SMSF”), to a fund as may be nominated by her and thereafter, she will have no further interest or involvement in the SMSF.
Relevant to these proceedings, is the agreement reached by the parties for the future parenting arrangements for the children, as set out in a Consent Minute of Order dated 30 June 2022.
The orders provide for the parties to have equal shared parental responsibility and for the children to live with the mother and spend time with the father. As to X, she spends time with the father each alternate week from the conclusion of school on Friday (or from the conclusion of after school extra-curricular activities or 3pm if a non-school day) to 9pm and at such other times as X may wish to spend time with the father. As to Y, she spends time with the father each alternate weekend from the conclusion of school on Friday to the commencement of school on Monday, one week during each of the children’s school holidays and on other special occasions.
The Consent Minute of Order confirms that the respondent will provide the children’s primary care.
It is a significant oversight that the parties did not resolve the future educational arrangements for the children. It is an area of contention as to whether the children receive a private school education and in particular at OO School or whether they should be enrolled in the state school system as is now sought by the respondent.
Documents relied upon
The applicant relies upon the following documents:-
(1)Amended Application for final orders filed 23 June 2022.
(2)Financial Statement filed 23 June 2022.
(3)Applicant’s Trial Affidavit filed 23 June 2022.
(4)Applicant’s Further Affidavit filed 6 June 2022.
(5)Final Orders sought by the wife tendered on 13 July 2022.
(6)Outline of Case Document.
The respondent relies upon the following documents:-
(1)Amended Response filed 7 July 2022.
(2)Financial Statement filed 7 June 2022.
(3)Respondent’s Trial Affidavit filed 7 July 2022.
(4)Outline of Case filed 8 July 2022.
Both parties relied upon the Affidavit of Mr PP filed 1 July 2022, the Affidavit of Mr KK filed 4 July 2022 and the Affidavit of Mr QQ filed 4 July 2022.
A Case Outline document was provided by each counsel and their closing final submissions were supplemented by updated balance sheets setting out assets and liabilities of the parties.
background
The applicant was born in 1982 and is 40 years of age. She is not in paid employment.
The respondent was born in 1973 and is aged 49 years of age. He is a self-employed healthcare professional and runs his own business via the following entities:-
·Mr Sappho t/as P Business;
·P1 Pty Ltd;
·P2 Pty Ltd; and
·A 43% interest in LL Pty Ltd t/as the LL2 Pty Ltd, held by the W Trust (“the business”).
The business operates from premises situate at M Street, Suburb N (“the Suburb N property”) which is owned by the parties’ SMSF.
The parties met in 2005. The respondent was an employed healthcare professional and the applicant was a healthcare worker. Cohabitation commenced in or about 2007/2008 and the parties married in 2009. The parties separated on 9 August 2019.
There are two children of the marriage namely, X born 2010 (“X”) and Y born 2012 (“Y”) (collectively “the children”). As discussed, arising from the consent order, the children are in the primary care of the applicant.
The children currently attend OO School. X is in year 7 and Y is in year 4. The children have attended their school since reception.
Following separation, the respondent commenced a de facto relationship with his business manager. The applicant continues to reside in the property situate at F Street, Suburb G (“the Suburb G property”) whereas the respondent resides with his current partner in rental premises at Suburb AB.
The parties are agreed that as part of the settlement of property, the respondent will transfer his interest in the Suburb G property to the applicant.
At the commencement of cohabitation, the respondent was a partner in a business. Whilst not conceded by the applicant, the respondent’s taxable income at the commencement of cohabitation was $255,588 and the applicant’s income was approximately $40,000.
A significant issue in the proceedings, is the extent of the interest of the parties in property and superannuation at the commencement of the relationship.
At paragraph 20 of the respondent’s Trial Affidavit, the respondent contends that he held a valuable interest in the following assets:-
(1)A property at Street, Suburb C (“the Suburb C property”).
(2)A 50% interest in L Street, Adelaide (“the L Street property”).
(3)An interest in the T Trust which held a third interest in investment properties at J Street, Suburb K (“the J Street property”).
(4)A partnership interest in P Business.
(5)An interest in W Trust set up to hold an interest in an investment property at H Street, Suburb C (“the H Street property”).
(6)An interest in NN Trust.
(7)An interest in RR Pty Ltd (a service entity that does not hold assets).
(8)A motor vehicle.
(9)Substantial savings with Westpac Bank.
(10)A superannuation interest with Superannuation Fund 1 estimated by the respondent in the sum of $104,500.
The respondent claims that his mother lent him the total sum of $280,000 comprised of $80,000 in 2003 or 2004 to purchase his interest in the L Street property and then a further $200,000 to purchase his interest in the J Street property.
The respondent’s initial position as set out in his Trial Affidavit, but more particularly in his schedule at paragraph 83, lists a loan from his mother in the sum of $280,000.
The issue has significant uncertainty in that at annexure SS2, the respondent lists his initial contributions including the properties to which he says he used money provided by his mother, but does not list a liability to her.
The agreed balance sheet setting the assets and liabilities of the parties does not seek to claim an outstanding loan in favour of the respondent’s mother.
Any money that may have been provided by the respondent’s mother to him prior to the commencement of the parties’ relationship is subsumed in the discussion as to the contributions of each of the parties. At best, the respondent’s stated position is that he feels some obligation to return money to his mother to assist her in a transition to the next phase of her life. The respondent did not call his mother to give evidence.
The respondent generates income through P Business, P1 Pty Ltd and P2 Pty Ltd as Trustee for W Trust, which are then distributed to R Group Pty Ltd as trustee for T Trust.
In early 2009, the parties purchased a property at SS Street, Suburb TT (“the Suburb TT property”) for about $470,000. The parties contributed approximately $140,000 by way of a deposit with the balance of the purchase cost obtained by way of a mortgage loan.
The parties lived in the Suburb TT property until the fully financed purchase of the Suburb G property in 2011 for $675,000.
The Suburb TT property was sold in mid-2013 for the sum of $595,000.
The applicant ceased paid employment at about the time of the birth of the parties’ first child, whereas the respondent has worked throughout the relationship, save and except for a period of medical incapacity.
In about 2017, the T Trust and the GG Family Trust purchased the remaining 50 per cent interest in the L Street property.
In June 2014, the parties’ SMSF acquired property at M Street, Suburb N (“the Suburb N property”) being the premises from which the business operates.
In 2009, the respondent received income protection and trauma insurance compensation for a serious illness. He received $400,000 in early 2009 and $95,000 in 2011. The respondent concedes that the entirety of the compensation proceeds were used as working capital for the business and to pay down liabilities. Following separation, the parties have remained in conflict as to the extent of the respondent’s financial contribution to the applicant, the upkeep of the Suburb G property and periodic and non-periodic child support.
By consent order made 24 April 2020, the parties agreed as follows:-
13.Pursuant to section 117 (2)(b)(ii) of the Child Support (assessment) Act 1989 (“the CSA Act”) that there be a departure from the Administrative Assessment of child support payable by the father to the mother for the children from 24 April 2020 such that in addition to payment of child support as assessed by the Department of Human Services (Child Support) from time to time the father will pay:
13.1all education expenses for the children’s attendance at [OO School] including fixed tuition fees;
13.2the extracurricular expenses as agreed between the parties for the children;
13.3 the children’s mobile telephones;
13.4the costs of any medical, dental, orthodontic, and allied health treatment for the children after any rebate received from Medicare or private health insurer holding a policy of the benefit of the children.
Exhibit “2” in the proceedings comprises the child support assessment for the assessment period 1 January 2022 to 31 January 2023, in the annual amount of $33,938 and the monthly amount of $2,828. The respondent’s adjusted income for the purposes of child support was $293,231 and for the applicant $9,115.
In addition, the parties also reached agreement as to interim spousal maintenance in the following terms:-
14.The [respondent] do continue to pay the following expenses for and on behalf of the [applicant]:
14.1the NAB mortgage repayments, home and contents insurance and council rates as and when they fall due, relating to the former matrimonial home at [F Street, Suburb G, SA] (“the [Suburb G] property”);
14.2 the emergency services levy associated with the [Suburb G] property;
14.3the lease repayments and insurances with respect to the [applicant’s] [Motor Vehicle 1] registration number […]; and
14.4the [applicant’s] private health insurance at the current level of cover with [UU Health Insurance] (inclusive of ambulance cover) noting that the [applicant’s] private health cover will include the children.
legal costs of parties
The notices as to the parties’ cost comprise exhibit “1”.
As at 10 July 2022, the total costs and disbursements of the applicant are as follows:-
1. Costs paid to date to her current solicitors (including counsel fees, disbursements and office costs) $137,454.59;
2. Costs billed but not yet paid $13,822.40;
3. Costs unbilled to date $7,882.30 plus GST;
4. Anticipated costs of trial (5 days):
a.Solicitor fees (preparation and attendance at trial) $15,000 - $20,000 plus GST; and
b. Counsel fees (preparation and attendance at trial) $25,200 plus GST.
5. Anticipated expenses payable to an expert witness or estimate of the expenses:
a. [Mr KK] - $2,200 plus GST.
By orders made 23 March 2021 and 11 April 2022, $120,000 was paid to the applicant by way of litigation funding.
I am not told as to the source of funds for the remaining $17,454.59, but it is likely it is money borrowed from the applicant’s parents.
By orders made 11 April 2022, $40,000 was paid to the respondent by way of litigation funding.
As at 8 July 2022, the total costs and disbursements of the respondent are as follows:-
Our client’s actual costs up to 8 July 2022, with Camatta Lempens, are $51,100.39 including GST. This is comprised of the following:
a) Solicitor’s fees of $37,099.34 including GST
b) Disbursements of $10,000 including GST
c) Billed Counsel fees of $4,001.25 including GST
Of the total amount referred to above, as at 8 July 2022, none of our fees have been paid. Our client has unbilled costs of $18,068.45 including GST. This is comprised of solicitor’s fees. The estimated future costs of our client inclusive of a five-day trial are around $50,000 comprised of the following:
a)Solicitors’ fees for Trial and preparation at Trial at $20,000 including GST; and
b) Counsel fees for Trial and preparation at Trial at $30,000 including GST.
The respondent changed solicitors on or about 31 March 2022. Having regard to paragraph 80 of the respondent’s Trial Affidavit, he states that he paid $150,000 to his former solicitors. There is no statement as to the source of funds used to pay the respondent’s legal fees but it is likely that $140,000 came from NAB account …58 and from GHP business account …17.
is it just and equitable to alter the property interests of the parties
In Bevan & Bevan (2013) FLC 93-545 the Full Court considered at [73] that the decision in Stanford & Stanford (2012) 247 CLR 108 (“Stanford”) could be reduced to three “fundamental propositions” summarised as follows:-
1. Determination of a just and equitable outcome of an application for property settlement begins with the identification of the existing property interests (as determined by common law and equity);
2.The discretion conferred by the statute must be exercised in accordance with legal principles and must not on an assumption that the parties’ interests in the property are or should be different from those determined by common law and equity; and
3.A determination that a party has a tight to a division of property fixed by reference only to the matters in s 79(4), and without separate consideration of s 79(2), would erroneously conflate what are distinct statutory requirements.
(Emphasis as per the original)
The parties each seek orders for settlement of property on the basis that they consider that their separate interests in property cannot be properly reflected by the application of common law and equitable principles.
The parties commenced cohabitation in or about 2007/2008 and separated in 2019. The period of cohabitation was for eleven years. There are two children of the relationship.
I consider that it is just and equitable for an order to be made pursuant to s 79 of the Family Law Act 1975 (Cth) (“the Act”).
child support
A significant issue in the proceedings is the applicant’s application for a departure from the Administrative Assessment of child support pursuant to s 117(2)(b)(ii) of the CSA Act seeking that the respondent as the liable parent pay:-
(1)Child Support as may be assessed by the Department of Human Services (Child Support);
(2)All education expenses for the children’s attendance at OO School including fixed tuition fees;
(3)The extracurricular expenses as agreed between the parties for the children;
(4)Y’s mobile telephone; and
(5)The cost of any medical, dental, orthodontic and allied health treatment for the children after any rebate received from Medicare or a Private Health insurer holding a policy of the benefit of the children.
The precursor to the departure application are the interim orders made for child support on 24 April 2020. Whilst it is unnecessary for the determination of this aspect of the proceedings, it is apparent that the orders for child support are in the same terms as the interim order, noting that the date of 24 April 2020 is not intended to represent a claim for retrospective payment, but rather is an indication of poor drafting.
The respondent seeks that the application for departure and by implication the interim order, be struck out. The contention is that the applicant and/or her solicitors, did not advise the Registrar of the application. Notice is a fundamental precursor to the Court having jurisdiction to deal with child support.
In Cleaves v Cleaves [2021] FamCA 571, Harper J noted that:-
[12]Numerous decisions under the Assessment Act have held court proceedings regarding child support assessments should be the exception rather than the rule because the Assessment Act establishes a detailed administrative framework to deal with child support applications; the circumstances in which departure applications are to be heard by the Court are limited, given the desirability of such issues being determined in a manner characterised as being less adversarial, whilst, at the same time, remaining fair: …
An application for a child support departure order is made pursuant to the provisions of s 117 of the CSA Act. Rule 1.13 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) (Family Law Rules) provides that the Child Support Registrar must be served with such an application and is entitled to intervene. In this matter, no notice has been given to the Child Support Registrar either in respect of the interim orders of 24 April 2020 which were the subject of consent, nor in respect of the current application.
In Lesley (supra), McClelland DCJ said:-
[59]Failure to serve the Registrar in accordance with the Rules is fatal to the Court dealing with the application at this time. Requiring service to be effected is not simply insisting on ritualistic compliance with the Rules for the sake of mere compliance. Non-service on a person or entity that has a statutory right of intervention is a fundamental denial of natural justice that, in the absence of urgency, prevents the Court from dealing with that aspect of the application. In Child Support registrar & Nixon, the Full Court said:
... given the emphasis placed by the High Court in both Taylor and Allesch v Maunz on the right of a party to be heard when an order is to be made affecting that party, we accept that where a party has not been given notice of the proceedings in which the order was made, and thus not been heard on the making of the order, that that is a matter which should be given very significant weight in the exercise of the discretion to set aside the order. As his Honour did not refer to the fact that the order had been made without notice to the Registrar, it has to be assumed that he gave this fact no weight, and thus his discretion must be regarded as having miscarried on account of his failure to have regard to this important matter.
We add that we do not accept, as we understood to be submitted by the respondents, that a distinction should be drawn between a party to the proceedings as opposed to a third party.
(References omitted)
The difficulty for the parties, but in particular the children, is that fundamental to the departure application is the non-periodic payment component relating to the children’s attendance at their private school. The respondent now contends that although the children continue to receive a private school education, they could gain entry into the state school system. The applicant seeks that the children continue to be educated in the way that she contends was the subject of agreement between the parties.
It is surprising that as part of the resolution of parenting orders, the parties did not resolve the future educational arrangements for the children. I do not know whether it was mere oversight or whether it was an issue of ongoing dispute, but the predicament for the children is that there is no ongoing certainty of their education.
I am not able to preserve the interim orders in circumstances where there was no jurisdiction for the orders to be made. Had either the interim orders or the departure application been validly commenced, even with the resolution of property orders, the Courts jurisdiction to hear and determine the application for departure from the administrative assessment of child support would remain.
I accept that it is likely to have been an oversight on the part of the applicant’s solicitors and counsel but the consequences for the children and the applicant are potentially dire. If it is her position that the children should remain at their current school and that proper grounds exist for a departure from the Administrative Assessment, such that in addition to the periodic assessment the respondent should be required to pay the children’s school fees and related charges, then the lack of notice to the Registrar relegates the applicant to the Administrative Assessment process rather than a resolution as part of these proceedings. I will strike out the child support orders as sought by the applicant and discharge the interim child support order of 24 April 2020.
table of assets
I find the agreed and disputed assets of the parties to be as follows:-
ASSET OWNER APPLICANT’S VALUE RESPONDENT’S VALUE Property at F Street, Suburb G, SA Joint $950,000 $950,000 19 B Street, Suburb C,SA Respondent $1,025,000 $1,025,000 Westpac Account …30 Joint $8,516 $8,516 Westpac Account …57 Applicant $126 $126 Westpac Account …99 Applicant $100 $100 Westpac Account …09 Applicant $2,011 $2,011 Westpac Choice Account …09 Respondent $1935 $657 … AC shares (as at 22 June 2022) Respondent $2,521 $2,521 VV Company shares (as at 22 June 2022) Respondent $37 $37 WW Company (as at 22 June 2022) Respondent $1,499 $1,499 XX Investments Respondent $47,351 $47,351 Wife’s jewellery Applicant NIL $12,100 Motor Vehicle 1 P2 Pty Ltd $80,000 $80,000 Addback of monies retained by the husband from NAB Home Loan Account Respondent $1,982 NIL Sappho Group of Companies (including trusts) Respondent $811,641 $866,400
Mortgage liabilities
DESCRIPTION OWNER APPLICANT’S VALUE RESPONDENT’S VALUE NAB Mortgage over Suburb G property Joint ($299,056) ($299,056) Westpac Mortgage over Suburb C property Respondent ($283,682) ($283,682) Other liabilities of respondent
DESCRIPTION OWNER APPLICANT’S VALUE RESPONDENT’S VALUE YY credit card credit card …05 Respondent NIL ($29,193) Westpac Mastercard Respondent NIL ($12,244) JJ Finance loan Respondent ($181,000) ($181,000) JJ Finance loan for Motor Vehicle 1 Respondent ($64,895) ($64,895) Settlement payment to Mr FF Respondent NIL ($450,000) Loan from Mr GG Respondent NIL $25,000 Superannuation
DESCRIPTION OWNER APPLICANT’S VALUE RESPONDENT’S VALUE Suburb N property V Super Fund (SMSF) $2,470,000 $2,470,000 Westpac DIY Account V Super Fund (SMSF) $120,473 $120,473 ZZ Bank Loan V Super Fund (SMSF) ($1,336,138) ($1,336,138) Superannuation Fund 2 Applicant $3,385 $3,385 Total of Superannuation entitlement $1,257,720 $1,257,720 Westpac choice account …09
The respondent holds a Westpac Choice bank account which at the date of filing of the respondent’s Trial Affidavit, held the sum of $1,935. The applicant seeks to bring that money into account whereas the respondent’s evidence is that there has been some modest expenditure reducing the account balance to $657.
The difficulty is that there is limited evidence other than a broad understanding that the respondent withdrew funds for the exigencies of life.
The funds used by the respondent would not fall into one of the exceptional areas of expenditure that would invite the difference between the two amounts to be considered as an addback.
Parties are entitled to utilise their property providing their conduct could not be categorised as wanton, negligent or deliberately reckless.
I bring to account the reduced sum of $657.
Money retained by respondent from NAB home loan account …58
The applicant asserts at paragraph 129 of her Trial Affidavit, that on 22 February 2021, the respondent unilaterally redrew the sum of $48,982.35 and $150,000 from the NAB Home Loan Account …58 (“NAB Account …58”) held in the parties’ joint names. The NAB Account …58 and redraw facility was associated with the former matrimonial home.
The applicant was not made aware of the respondent’s intentions to redraw a total sum of $198,982.35.
The respondent’s solicitors confirmed that the respondent had redrawn monies and claimed that they were to top up his business account, pay for accreditation requirements involving the purchase of new equipment and to continue to meet mortgage and other repayments.
An order was made on 23 March 2021, requiring the respondent to transfer the sum redrawn back into the NAB Account …58 within seven days and that thereafter each of the parties be the subject of injunction and restraint preventing further withdrawals.
For reasons that are not explained, the respondent transferred the sum of $197,000 back into the NAB Account …58 causing a shortfall of $1,982.35.
There is no explanation by the respondent as to why he did not comply with the earlier request and an order.
In Kowaliw & Kowaliw (1981) FLC 91-092 at 76,644, Baker J considered the treatment of a dissipated money as follows:-
As a statement of general principle. I am firmly of the view that financial losses incurred by parties or either of them in the course of a marriage whether such losses result from a joint or several liability, should be shared by them (although not necessarily equally) except in the following circumstances:
a)where one of the parties has embarked upon a course of conduct designed to reduce or minimise the effective value or worth of matrimonial assets, or
b)where one of the parties has acted recklessly, negligently or wantonly with matrimonial assets, the overall effect of which has reduced or minimised their value.
In Townsend & Townsend (1995) FLC 92-569 Nicholson CJ had to consider the conduct of the husband in distributing to himself an asset in which the wife held an interest. His Honour did not consider that the husband’s conduct could be dealt with pursuant to s 75(2) of the Act. He determined that the proper treatment was to return the asset to the pool on a notional basis.
There has been some discussion as to whether the decision of Stanford (supra) is authority for the proposition that because an addback is not a legal or equitable interest, it can only be dealt with under s 79(5)(2) or s 90 SF(3) of the Act.
However, in Vass & Vass (2015) 53 Fam LR 373, the Full Court said:-
[138]There is no error committed per se in adjusting the parties’ actual property interests by a calculation involving notionally adding back into the pool sums which have been dissipated by the parties. We reject any suggestion that the decision of Bevan & Bevan (2013) 49 FLC 93-545 - or, more particularly, the decision of the High Court in Stanford & Stanford (2012) 247 CLR 108 - is authority for any necessary contrary solution. Some statements made by the High Court may lead to the conclusion that references to “notional property” as have been referred to in decisions of this court and at first instance may need to be reconsidered.
(Emphasis as per the original)
I propose to addback the sum of $1,982, as property retained by the respondent.
Loan from Mr GG
Mr KK was jointly instructed by the parties to value the respondent’s interest in the “[Sappho] Group of Companies”. Mr KK’s first report was dated 17 May 2021 however, on 20 April 2022, he was jointly instructed to prepare an addendum report.
On 21 June 2022 an addendum report was prepared. At page 2 of the addendum report, Mr KK notes that the additional materials which were provided and which he relied upon for the addendum report, are as follows:-
1.6.1FY21 financial statements and income tax returns for the entities which comprise the respondent’s [business] plus management accounts for FY21 and YTD Mar-22 and budget for the final quarter of FY22;
1.6.2FY21 financial statements and income tax returns for the other relevant entities except for the [V Super Fund] (not available) and [LL Pty Ltd] (management accounts only as financial statement are not prepared)
1.6.3updated independent real property valuations except for [M Street, Suburb N SA] owned and operated by the [V Super Fund] (not procured); and
1.6.4instructions from [Mr Sappho]’ external accountants ([Z Pty Ltd]), which I reference where relevant in this report.
At page 8 of the addendum report, Mr KK updates his valuation of AA business by reference to the assets and liabilities of the subject entity. Under the heading of “Liabilities” a loan of $25,000 is recorded in favour of Mr GG. Paragraph 4.24 makes specific reference to the loan as follows:-
The liabilities at Mar-22 included loans of $181,000 from [JJ Finance] in respect of the [Mr HH] legal settlement and $25,000 from “[Mr GG]”, both of which did not exist at June 2020.
Accordingly, the loan to Mr GG has been brought to account in the valuation by Mr KK. To bring it to account as sought by the respondent would be to double count the loan.
I propose to exclude the loan from the balance sheet.
Unpaid present entitlements
At page 15 of the addendum report, Mr KK notes that there are unpaid present entitlements totalling $54,759, comprising as follows:-
[The applicant] from [T Trust] $32,694
[The respondent] from [R Trust] $22,065
I propose to bring the unpaid present entitlements to account but in respect of the applicant’s unpaid present entitlements, it should be transferred to the respondent.
Respondent’s credit card liabilities
The respondent seeks to bring back as liabilities, his [YY credit card] credit card …05 debit of $29,193 and his Westpac Mastercard debit of $12,244. The evidence as to how the current liabilities were incurred is scant but is touched upon in paragraph 136 of the respondent’s Trial Affidavit as follows:-
Over the course of three days in [late 2019] [the applicant] withdrew $15,000 from a Westpac Bank Account (no. …62) specifically held for the benefit of the children and the payment of school fees. The payment of school fees is first met by the [YY credit card] which is part paid from the Westpac Bank Account (no. …17). Currently, the credit card which is the business card is hovering at $27,000 - $30,000 in debt.
There is insufficient evidence that enables me to trace the 2019 expenditure in respect of the children’s schooling to the current debit balances.
It is likely that the current liability is at least in part attributable to the respondent’s personal and business expenditure.
In the absence of being able to determine that the credit card liabilities have any nexus with the parties, I do not consider that the respondent’s credit card liabilities should be brought to account as a liability against the asset pool.
Accordingly, I do not bring to account the YY credit card credit card …05 debit of $29,193 and the Westpac Mastercard debit of $12,244.
Settlement payment to Mr FF
Historically, the respondent’s business employed other healthcare professionals pursuant to employment contracts.
In 2020, the two contracted healthcare professionals left the business and then initiated legal proceedings in the South Australian Employment Tribunal, claiming that they were employees and were entitled to be paid unclaimed leave.
The respondent states that the total of the two claims were in excess of one million dollars.
One of the healthcare professionals settled with the respondent for the sum of $200,000 in mid-2021, which was paid by way of a loan from JJ Finance. The balance of that loan, in the sum of $181,000, appears in the list of assets and liabilities and is accepted by the applicant as a valid liability.
Legal fees
As discussed, the applicant has paid $137,454.59 to her solicitors as at 10 July 2022. The respondent has paid about $150,000 to his former solicitors. I am satisfied that the applicant’s costs have been paid from property of the parties as evidenced by the various orders underpinning litigation funding.
I am not able to be as certain as to the source of monies paid by the respondent to his former solicitors.
Chorn & Hopkins (2004) FLC 93-204 (“Chorn & Hopkins”) considered the treatment of the legal fees of the parties where they may have been sourced from “matrimonial property” or borrowed funds.
Following a consideration of the authorities, the following appears:-
50. In Gartner [2000] FamCA 793, Kay, Holden & Mullane JJ said:
…
47.Whilst the principle the (sic) emerges from Farnell (1996) FLC 92- 681 is that where prepayment of legal costs has the effect of depleting the pool of assets available for division, it is usual to notionally include those prepaid costs in the pool, such a finding is normally dependant upon evidence as to the source of the prepayment. In the absence of any such evidence it would be entirely speculative of this Court to guess where the monies came from. If this was an issue that was important it should have been raised at the trial by Counsel so that the Judge could have dealt with it and made the necessary findings. It is too late to raise it on appeal. (Suttor v Gundowda Pty Ltd (1950) 81 CLR 418).
At [52] their Honours referred to the decision of the Full Court in C and L [2000] FamCA 1666 where the following was said:-
52. It will be seen from the table of the parties’ assets and liabilities contained in his Honour’s judgment…that his Honour included as assets the legal fees already paid by each party. There seems to be no argument but that it was open to him to do this.
At [54] of Chorn & Hopkins (supra), their Honour’s also referred to the decision of Finlayson v Finlayson and Gillam (2002) FLC 93-121 where the Full Court said:-
345.If this were a payment of his legal costs of the proceedings from the husband’s own capital resources, it would be in accord with decisions of this Court, including Farnell and Farnell (1996) FLC 92-681 and Townsend and Townsend (1995) FLC 92-569 for the trial Judge to have included this as a ‘notional asset’ in the hands of the husband for the purposes of the s 79 proceedings. If, on the other hand, this were a payment by the husband of his costs of the proceedings from funds borrowed by him from and still owing to a third party, the appropriate course would have been to disregard both the payment and the debt to the third party in calculating the total net property of the parties for the purpose of the s 79 proceedings. Alternatively, if the payment were brought to account as a ‘notional asset’, then the liability of the husband to repay the debt would also have to be taken into account in arriving at the net property of the spouses.
There is no suggestion that the respondent paid his legal fees from sources not connected to the parties or via his business.
Orders for litigation funding assisted the respondent in part to pay his legal fees. I assume that the balance of monies paid came either out of the respondent’s business or by way of a wage he received from the business.
Either way, the legal fees of the parties are virtually the same and as such I do not propose to addback the legal fees of either of the parties. If it is the respondent’s contention that in him providing money to the applicant to enable her to pay her legal fees, that a liability has been created in the business, then it is brought to account as part of the business valuation. If the respondent was able to meet his legal fees from his income derived from the business, then payments made by the respondent can be considered as being derived from the property of the parties.
Assets and liabilities of the parties
The adjusted property pool is as follows:-
ASSET OWNERSHIP VALUE F Street Suburb G SA Joint $950,000 B Street, Suburb C Respondent $1,025,000 Westpac Account …30 Joint $8,516 Westpac Account …57 Applicant $126 Westpac Account …99 Applicant $100 Westpac Account …09 Applicant $2,011 Westpac Choice Account …09 Respondent $657 AC shares Respondent $2,521 VV Company shares Respondent $37 WW Company Respondent $1,499 XX Investments Respondent $47,351 Wife’s Jewellery Applicant $12,100 Motor Vehicle 1 P2 Pty Ltd $80,000 Addback of monies retained by the husband from NAB Home Loan Account Respondent $1,982 Unpaid present entitlements Respondent $54,759 AA business including Sappho companies Respondent $88,172 W Trust Respondent $347,418 T Trust Respondent $376,051 TOTAL $2,998,300 liabilities
ASSET OWNERSHIP VALUE NAB Mortgage over F Street Suburb G Respondent ($299,056) Westpac Mortgage over B Street, Suburb C Respondent ($283,682) JJ Finance loan AA business / Respondent ($181,000) Loan from Mr GG Respondent ($270,000) JJ Finance loan for Motor Vehicle 1 AA business ($64,895) TOTAL ($1,098,633) TOTAL NET EQUITY $1,899,667 SUPERANNUATION
ASSET OWNERSHIP VALUE Suburb N property V Super Fund (SMSF) $2,470,000 Westpac DIY account V Super Fund (SMSF) $120,473 Superannuation Fund 2 Applicant $3,385 Less liability
ZZ Bank loanV Super Fund (SMSF) ($1,336,138) TOTAL $1,257,720 CONTRIBUTIONS OF THE PARTIES
The Court is required to make orders that are just and equitable when adjusting the interests of the parties in the division of property.
I am required to consider the direct and indirect financial contributions made by the parties to the acquisition, conservation or improvement of the property (s 79(4)(a) of the Act), the contributions other than a financial contribution made directly or indirectly by the parties to the acquisition, conservation or improvement of the property (s 79(4)(b) of the Act) and the contribution made by the parties to the welfare of the family in their capacity as parent and homemaker (s 79(4)(c) of the Act).
The parties commenced cohabitation in or about 2007/2008, were married in 2009 and separated in 2019 after a period of about 11 years of cohabitation.
There are two children of the relationship currently aged 10 and 12 years, who remain in the primary care of the applicant.
The respondent is a well-regarded and successful healthcare professional. The applicant had been a healthcare worker however, by the agreement of the parties, she undertook the role of homemaker significantly as and from late 2012 (but for a period of a few weeks in 2019).
There is some contention between the parties as to the care arrangements for the children during a period of cohabitation however, I find that on the evidence and doing the best that the respondent could, his primary focus was to pursue his career with the clear understanding that the applicant would undertake the role of homemaker.
I am able to find that the parties have used their best endeavours to provide for the family and to promote the care, welfare and development of the children.
In considering the evaluation of the contributions of the parties, I am careful not to assume a starting point that presupposes the quality of contributions.
In Mallet v Mallet (1984) 156 CLR 605, Wilson J said as follows:-
15.… . However, equality will be the measure, other things being equal, only if the quality of the respective contributions of husband and wife, each judged by reference to their own sphere, are equal. The quality of the contribution made by a wife as homemaker or parent may vary enormously, from the inadequate to the adequate to the exceptionally good. She may be an admirable housewife in every way or she may fulfil little more than the minimum requirements. Similarly, the contribution of the breadwinner may vary enormously and deserves to be evaluated in comparison with that of the other party. It follows that it cannot be said of every case where the parties reside together that equal value must be attributed to the contribution of each. That will be appropriate only to the extent that the respective contributions of the parties are each made to an equivalent degree. …
In Norbis v Norbis (1986) 161 CLR 513, Mason & Deane JJ said as follows:-
16.Although it is natural to assess financial contributions under s.79(4)(a) by reference to individual assets, it is also natural to assess the contribution of a spouse as homemaker and parent either by reference to the whole of the parties’ property or to some part of that property. For ease of comparison and calculation it will be convenient in assessing the overall contributions of the parties at some stage to place the two types of contribution on the same basis, i.e. on a global or, alternatively, on an “asset-by-asset” basis. …
I am obliged to consider the contributions of the parties not at the date of separation but rather at the date of trial. Circumstances may arise where pre-separation contributions will be treated differently to those made either prior to separation or after separation. It is not an arithmetical exercise.
The parties were focused on securing a financial future for the family. The respondent was in the continuing occupation running a private business.
In the decision of Jabour & Jabour (2019) FLC 93-898 (“Jabour”), the Full Court did not favour an approach which attempted to quarantine property contributions but rather considered that the contributions of each of the parties, especially in circumstances where there was a long period of cohabitation, should be a single exercise and not the subject of separate and individual assessment of each contribution.
In JEL & DDF (2001) FLC 93-075 at 88,334, the Full Court summarised the approach which should be taken when considering and evaluating the contribution made by the parties:-
152.It seems to us that the following general principles can be said to arise from the cases referred to in these reasons, namely:
(a) There is no presumption of equality of contribution or “partnership”.
(b)There is a requirement to undertake an evaluation of the respective contributions of the husband and the wife.
(c)Although in many cases the direct financial contribution of one party will equal the indirect contribution of the other as homemaker and parent, that is not necessarily so in every case.
(d)In qualitatively evaluating the roles performed by marriage partners, there may arise special factors attaching to the performance of the particular role of one of them.
(e)The Court will recognise any such special factors as taking the contribution outside the “normal range” in the sense that the phrase was understood by the Full Court in Maclay (supra).
(f)The determination of an issue of whether or not a “special” or “extra” contribution is made by a party to a marriage is not necessarily dependent upon the size of the asset pool or the “financial product”. When considering such an issue, care must be taken to recognise and distinguish a “windfall” gain.
(g)Whilst decisions in previous cases where special factors were found to exist may provide some guidance to judges at first instance, they are not prescriptive, except to the extent that they purport to lay down general principles.
(h)It is ultimately the exercise of the trial Judge’s own discretion on the particular facts of the case that will regulate the outcome.
(i)In the exercise of that discretion, the trial Judge must be satisfied that the actual orders are just and equitable, and not just the underlying percentage division.
The parties are not agreed as to their initial contributions. As discussed, the respondent sets out his initial contributions at annexure “MS2” to his Trial Affidavit. He estimates that his net non-superannuation assets held at the commencement of cohabitation was $1,062,225 whereas the applicant only held money in a bank account to the sum of $30,000. In addition, the respondent asserts that he had superannuation of $104,500.
The applicant does not accept the respondent’s contention as to his initial contributions and argues that the respondent has not produced any evidence as to value.
The respondent estimates the value of the B Street property at $460,000 but does not attribute any outstanding loan. A consideration of exhibit “5” comprising LTO documents confirms that the respondent purchased the B Street property for $470,000, but that there was a loan secured by mortgage for $399,500, leaving an equity of about $70,000.
A similar consideration applies in respect of the L Street property. Consideration of exhibit “6” comprising LTO documents confirms that the L Street property was purchased for $253,900 however, the mortgage was $203,000, leaving an equity of $50,000. The applicant had a one half interest in the L Street property, leaving an equity of $25,000.
The respondent also conceded that there was no equity in the Suburb C property and whilst the P Business was purchased for $2,632,866, there was a liability of $2,473,041. No evidence was provided to establish any net value.
The Motor Vehicle 2 may well have been purchased for $60,000 but the purchase was also enabled by way of finance.
Accordingly, whilst it cannot be said that the parties were each possessed of similar interest in property as at the commencement of cohabitation, the difference between them was not as dramatic as initially promoted by the respondent.
I accept that the respondent was likely to have brought property of greater value into the relationship than the applicant, but the difference is not so significant as to overwhelm the later contributions of each of the parties.
I do not ignore the contribution by the respondent of compensation for income protection and trauma insurance received in the total sum of about $495,000 from March 2009 to 2011. The difficulty is that the evidence presented by the respondent gives scant regard to the manner in which the proceeds were disbursed beyond the broad statement that the money was used as working capital and to pay debts.
The decision of Pearce & Pearce (1999) FLC 92-844 (“Pearce”) is a relevant authority as to the approach to be adopted when considering a party entering into the relationship with a substantial initial contribution. The Full Court said at page 85,881:-
28.In our opinion it is not so much a matter of erosion of contribution but a question of what weight is to be attached, in all the circumstances, to the initial contribution. It is necessary to weigh the initial contributions by a party with all other relevant contributions of both the husband and the wife. In considering the weight to be attached to the initial contribution, in this case of the husband, regard must be had to the use made by the parties of that contribution. In the present case that use was a substantial contribution to the purchase price of the matrimonial home…
Pearce (supra) is not authority for the proposition that an initial capital contribution by a party should be isolated. Nor should an initial contribution be considered in isolation to the broad spectrum of contributions made by the parties. It is not necessary that there be a nexus between the contributions by a party to a particular item of property and its present value.
The parties decided the respondent’s ability to generate significant income required the support of the respondent as a homemaker. It is an agreed position that the applicant undertook the role of homemaker and to provide the necessary care of the children. The respondent worked long hours. In Jabour (supra), the Full Court rejected the approach of the trial judge in determining that a significant contribution was made by the husband by reason of two blocks of land introduced into the relationship by the husband, which was then able to be rezoned resulting in a significant increase in value. In upholding the appeal the Full Court said at [83]:-
Importantly, it also had the effect of minimising the myriad of other contributions that were made in the course of a long marriage during which both parties worked very hard and raised a family. In this case, those contributions were made over a very long period and the parties regarded them as being equal.
Following separation, I consider that the respondent adequately supported the financial needs of the applicant and the children.
I have regard to the net value of the asset pool in the sum of $2,169,720 and consider that any percentage adjustment should not be considered as an abstract application of principle but rather, must be considered as to its dollar effect.
There is a basis for recognising that there is a difference in the contributions of the parties and I cannot ignore the initial contribution of the respondent and the later contribution of compensation and income protection payments.
I assess weight to be given to the respective contributions of the parties as to 53 per cent to the respondent and 47 per cent to the applicant. The difference is 6 per cent.
Section 75(2) factors
The Court is obliged to consider the factors as set out in s 75(2) of the Act. It is to be remembered that the exercise is not one of social engineering. The purpose is not to equalise the circumstances of the parties going forward but rather, to determine an appropriate adjustment taking into account the s 75(2) factors in order to reach an outcome that is just and equitable.
The respondent currently has available to him substantial income. By reference to his financial statement he lists his income as $172,900. For the purposes of child support assessment his adjusted taxable income is recorded as $293,231 based upon the 2021 financial year tax records. The respondent operates his business via the Sappho Group of entities. Exhibit “8” is a tax summary document for the Sappho Group for the year ending 30 June 2021, as prepared by the respondent’s accountant, Z Pty Ltd. It sets out the income for all of the relevant entities summarised as follows:-
INCOME AMOUNT Taxable income for the Sappho Group $930,000 Tax at ordinary rates $238,529 Medicare levy $3,758 Tax offsets ($1,955) Balance of tax payable $240,328 PAYG instalments paid ($193,412) Franking Credits ($21, 653)
I have found that the Sappho Group is the alter ego of the respondent.
There was no challenge to the proposition put to the respondent that he had the advantage of being able to access and utilise the income across the relevant group of entities.
The respondent’s income is a significant factor. The applicant’s income is non-existent at present, although she fairly concedes that now that the health issues that impact Y are able to be adequately managed, she intends to seek and take up employment on a part-time basis by the end of 2022. The applicant was impressive in her reasonable expectation that she should receive spousal maintenance for a limited period but not thereafter.
In bringing to account the income available to the respondent, I do so recognising that in valuing the entities that comprise the Sappho Group, the business structure may well be necessary to enable the respondent to generate the income currently available to him.
The respondent’s interest in his business was valued on an asset backing basis and not by reason of future maintainable earnings. In summary, the respondent’s business does not have good will. Even so, the respondent’s ability to practice as a healthcare professional requires the use of premises and sophisticated equipment.
It is reasonable to have regard to the ability of the respondent to seek work as an employed or contracted healthcare professional without the need for the retention of his business.
The respondent’s evidence provides some insight, albeit limited, of the income that a contracted healthcare professional is likely to receive. The evidence presented on the topic was scant and given that the income able to be generated by a healthcare professional is very much dependent upon the method, manner and efficiency by which any individual healthcare professional undertakes their work, nonetheless the opportunity available to the respondent either by remaining in his current business arrangement or by working as a contracted healthcare professional elsewhere, is significant and represents a substantial disparity between his income potential and that of the applicant.
The respondent was 49 years of age and the applicant 40 years of age.
At best, the applicant is to return to healthcare work as a healthcare worker on a part-time basis. The income is likely to be modest. There is nothing to suggest that she would be able to improve her income capacity beyond a modest sum.
I bring to account the separate liabilities of the parties and the respondent’s intention, at least for the present, of providing money to his mother to offset her purported generosity.
A significant issue in the proceedings, is the status of the interim orders made for departure from the Administrative Assessment and the fate of the applicant’s current departure application. As discussed, the interim orders are to be discharged and the current departure application dismissed for want of jurisdiction in circumstances where notice was not given to the Registrar as required under the CSA Act.
The parties have not agreed the future education arrangements for the children. The applicant wants the children to remain at their current private school and for the respondent, in addition to the periodic assessment of child support, to pay non-periodic child support in respect of the children’s private school tuition fees, related charges and extra-curricular activities. The amount has not been quantified although some indication of the children’s expenses can be considered by reference to the applicant’s financial statement filed 23 June 2022.
An omission arises from either the respondent or his solicitor’s failure to complete Part N of his financial statement.
By reference to the respondent’s Trial Affidavit, he has paid school fees in the sum of $2,673.86 per month or $32,122.32 annualised over twelve months. It is likely that there are further educational expenses close to $50,000 per annum.
It is unfortunate that the parties were not able to reach agreement as to the future educational arrangements for the children. Whilst I intend to discharge the interim order and have dismissed the application for departure, I accept that the applicant intends to administratively pursue a departure application based upon the respondent paying both periodic and non-periodic child support. I do not think it is reasonable that the children’s education be left in a state of uncertainty until such time as the applicant has been able to pursue her departure application. I consider it a relevant factor that whilst the respondent pays child support as assessed, it is reasonable for the applicant to want the children to complete the 2022 academic year. I propose to bring to account about $16,000 to $20,000 necessary to enable the children to remain at their current private school for the balance of this academic year. I note that as at trial, there were arrears of $13,000 that the respondent agreed to pay and discharge.
I am obliged to reach an outcome that is just and equitable and I do so by considering the consequences of the order that I propose to make.
I bring to account the relevant factors pursuant to s 75(2) of the Act and for the reasons given I propose to adjust the apportionment by 25 per cent in favour of the applicant.
This results in an overall outcome of 72 per cent in favour of the applicant and 28 per cent in favour of the respondent. The differential represented by this apportionment is $949,833.
I consider the outcome to be just and equitable.
superannuation
Taking into account the age of the parties, there will be a significant period of time before each of them are able to satisfy a condition of release. It is proper that there be a two pool approach in respect of the superannuation interests of the parties, which is comprised almost entirely the value of their separate entitlements in the self-managed superannuation fund, comprising the business premises from which the respondent operates his business.
I bring to account the superannuation interest of the respondent at the commencement of cohabitation but even so, consider that there should be a superannuation split in favour of the applicant such that it would equalise their interests. At present, the applicant’s member entitlement is $401,387. But the respondent’s entitlement is $852,948. The total of the parties’ superannuation entitlements, including the sum of $3,385 representing the applicant’s Superannuation Fund 2 amount, is $1,257,720. At 50 per cent, the applicant would be entitled to $628,860, which would require an order that provided a superannuation split of $224,008 to the applicant.
The respondent was asked as to how he would be able to pay that sum to the applicant and with some high level of confidence, he gave evidence that he has the financial support of members of his family.
I am cognisant of the potential for there to be a need for property to be sold should there be a default and as such, the orders reflect that there is likely to be CGT and other tax amounts levied.
spousal maintenance
In Hall & Hall (2016) 332 ALR 1, the High Court set out the appropriate approach in considering an application for spousal maintenance as follows:-
3. … the gateway to the operation of Pt VIII in relation to spousal maintenance is in s 72(1). That sub-section provides that "[a] party to a marriage is liable to maintain the other party, to the extent that the first-mentioned party is reasonably able to do so, if, and only if, that other party is unable to support herself or himself adequately…having regard to any relevant matter referred to in [s] 75(2)".
4.The liability of a party to a marriage to maintain the other party that is imposed by s 72(1) is crystallised by the making of an order under s 74(1). That sub‑section provides that, "[i]n proceedings with respect to the maintenance of a party of a marriage, the court may make such order as it considers proper for the provision of maintenance in accordance with this Part".
5.A court exercising the power conferred by s 74(1) is obliged by s 75(1) to take into account the matters referred to in s 75(2) and only those matters. Those matters are presented as a comprehensive checklist. They include what s 75(2)(b) refers to as "the income, property and financial resources of each of the parties and the physical and mental capacity of each of them for appropriate gainful employment". They also include, by virtue of s 75(2)(o), "any fact or circumstance which, in the opinion of the court, the justice of the case requires to be taken into account".
(Citations omitted)
The applicant is a party who at present, has satisfied the first threshold question namely, that she is unable to support herself adequately. The applicant has not been employed since 2012. Prior to that she retained modestly paid employment on a part-time basis.
It was conceded by the respondent, that it was the joint decision of the parties that the applicant would undertake the role of homemaker, which enabled the respondent to pursue and expand his business.
It is also agreed, that the various health issues affecting Y arising from her medical condition, was a prime focus of the parties and was considered by the applicant to be a medical condition that required ongoing supervision.
Whilst there may be contention between the parties as to whether the applicant could have returned to part-time employment following separation, there is no doubt that the respondent accepts that Y was a child at medical risk.
The applicant’s evidence was impressive in her explanation of the needs of the children, but in particular Y and a concession by her that as time has passed, Y is able to self-administer medication and that the school is vigilant in her medical requirements.
Whilst the applicant does not intend to return to full-time employment at this stage, she accepts that by the beginning of 2023, she has a high level of confidence that she will return to part‑time paid employment.
I accept the evidence of the applicant. The next step is to consider the financial circumstances of the applicant. The order sought is that the respondent pay the applicant a lump sum spousal maintenance order in the sum of $54,184, calculated on the basis of $521 per week for a period of twenty four months.
When considering an application for spousal maintenance, the financial circumstances of the parties must be brought to account. In that regard, the orders for settlement of property become a relevant consideration. It may be that following an order for settlement of property, the circumstances in respect of spousal maintenance may well have changed. The predominant outcome of the proceedings is to enable the applicant and the children to remain in the Suburb G property and the respondent to retain the business assets necessary to continue his business.
In circumstances where the applicant has no income, other than the money she receives by way of a government pension benefit or allowance together with maintenance paid by the respondent, it is reasonable to consider the applicant’s financial needs.
Part N in the applicant’s financial statement provides a total average weekly expenditure of $621. Even at the most cursory consideration, the applicant’s items of expenditure are reasonable. The applicant however seeks $521 not $621 as set out being the total of Part N expenses. It seems to me then, that the sum of $521 per week is a reasonable reflection of the applicant’s necessary commitments.
When considering the ability of the respondent to meet the sum sought by the applicant, the evidence provided by the respondent is scant. By reference to the respondent’s financial statement, the total average weekly income is $3,325 or $172,900 calculated on an annualised basis. The respondent’s income comprises $3,019 from his business and $300 from rent at Suburb D. Moreover, little assistance is provided as to the respondent’s weekly discretionary expenditure.
I take note that the total expenditure as recorded in the respondent’s financial statement, is $5,888. Pursuant to an earlier order, the respondent pays the mortgage of $414 per week in respect of the Suburb G property and a range of other expenses for, and on behalf of, the applicant including the lease payment for the Motor Vehicle 1.
The respondent’s financial position is compounded by the lack of any explanation as to the manner in which the total of $930,000 arising from the Sappho Group, including $157,016 by reason of a wage paid to the respondent, is treated and distributed. It is a reasonable finding on the evidence that the respondent’s income is not $172,900 but rather a sum significantly greater than that in keeping with the tax summary for the year ended 30 June 2021, being exhibit “8” in the proceedings.
I consider that it is well within the financial resources of the respondent to pay spousal maintenance to the applicant in the sum of $521 per week. Taking into account the evidence of the applicant as to her capacity for employment, it is reasonable that the respondent pay spousal maintenance in the sum as ordered for a period of twenty six weeks ($13,546), noting that the ability of the applicant to work over the school holiday period is likely to be compromised not just by the time of year, but that the children will not be at school.
conclusion
The net property of the parties is in the sum of $1,899,667. Given my determination that a just and equitable outcome to the applicant is 72 per cent of the net assets, the applicant is entitled to a retain property to the sum of $1,367,760.
The applicant retains the following property:-
PROPERTY AMOUNT Suburb G property $950,000 Westpac accounts $2,237 Jewellery $12,100 Motor Vehicle 1 $80,000 TOTAL $1,044,337
The applicant is to receive $1,367,760 less $1,044,337, leaving a balance of $323,423 with the following:-
(a)spousal maintenance $13,546
(b)costs of application to adduce evidence $6,480;
(c)school fees and expenses $18,000; and
being a total settlement sum of $361,449.
I make orders as appear at the commencement of these reasons.
I certify that the preceding one hundred and eighty-one (181) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Berman. Associate:
Dated: 18 October 2022
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