Stenson and Osmund (No.4)

[2018] FCCA 1302

FEDERAL CIRCUIT COURT OF AUSTRALIA

STENSON & OSMUND (No.4) [2018] FCCA 1302

Catchwords:
FAMILY LAW – Unusual de facto property dispute – short 4 year relationship – wife contributing $184,000 of funds borrowed against her home to assist husband’s business – wife’s understanding that she would be a co-owner of the business fomented by husband – husband sacking wife when claims for co-ownership pressed – business placed into administration – wife receiving $75,000 from the administration – just and equitable that husband pay wife $110,000 to repay the funds originally advanced.

Legislation:

Family Law Act 1975 (Cth)

Cases cited:

Stanford & Stanford (2012) 247 CLR 108

Applicant: MS STENSON

Respondent: MR OSMUND

File Number: DGC 1706 of 2012

Judgment of: Judge Burchardt

Hearing dates: 9, 10 & 11 April 2018

Date of Last Submission: 11 April 2018

Delivered at: Dandenong

Delivered on: 7 June 2018

REPRESENTATION

Counsel for the Applicant: Mr Rothschild

Solicitors for the Applicant: Elisa Rothschild Lawyer

Counsel for the Respondent: Mr Eardley

Solicitors for the Respondent: Mackellars Lawyers

ORDERS

1. The respondent pay the applicant $110,000 within 90 days.

2. All extant applications be otherwise dismissed.

IT IS NOTED that publication of this judgment under the pseudonym Stenson & Osmund (No.4) is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT DANDENONG

DGC 1706 of 2012

MS STENSON

Applicant

And

MR OSMUND

Respondent

REASONS FOR JUDGMENT

Introduction

1. This is a property dispute of a most unusual kind.  That is because its salient features revolve around commercial dealings between parties who were previously in a de facto relationship.  Given that the company that was at the core of that dispute was placed into administration and effectively ultimately reconstituted by another company wholly owned by the respondent, the dispute takes on particular characteristics.

2. Although much is shrouded in mystery, it is clear that the applicant de facto wife refinanced a unit she owned in Property A in 2011 by an additional $184,000 which was advanced, one way or the other, to assist the respondent’s business interests.  Following the deed of company administration (“DOCA”) into which the respondent’s company was placed, the applicant was paid a bit over $70,000 in the administration.

3. The wife now seeks substantial adjustment in her favour alleging that the respondent’s new business is worth many millions of dollars.  The respondent denies this and says that the business’s affairs are parlous, in any event, and moreover submits that it is inappropriate that there be any adjustment in the applicant’s favour at all.

4. For the reasons that follow, I am going to order the respondent to pay to the applicant the sum of $110,000 to ensure that, in effect, she gets her advance back, although not with any interest thereon.  In the unusual circumstances of this case, this seems to me to be a just and equitable outcome.

Agreed or uncontroversial facts

1. The applicant wife (I use the terms husband and wife for convenience) was born on 1966.  The respondent was born on 1960.  There is dispute as to when the relationship and cohabitation commenced and when the relationship ended.  The parties have both strived to either lengthen the relationship (the wife) or shorten it (the husband).

2. There is no dispute that the wife was employed in the husband’s then business, which I will refer to as Business A, from about 2007 until 2011.  The circumstances in which the employment came to an end are the subject of dispute.

3. It is also clear that the shareholding structure of Business A, at the time the relationship commenced, was that a Mr F held three shares (he was the son-in-law of a Mr C and held those shares on trust for Mr C).  The husband had two shares and his son, Mr W, had one share.

4. Mr C and Mr Osmund fell out and legal proceedings between them ensued, resulting in judgment in favour of Mr C in the New South Wales courts.  It would seem that Business A was operating, at least in part, with three machines leased from Mr C or one of his business entities.

5. Although the precise details are somewhat murky, it seems to be relatively uncontroversial that in 2011, probably in (month omitted), it was agreed that a resolution of the commercial dispute between Mr C and Mr Osmund would be resolved by the payment of a substantial sum in some hundreds of thousands of dollars to Mr C, in return for which the legal dispute would be compromised, Mr F’s shares would transfer to the wife and the husband (although there is a very significant dispute as to the proportions in which this transfer was to occur) and the three machines would become the property of Business A.

6. The wife contributed, as earlier indicated, $184,000, it would seem perhaps in various tranches, towards the total price to pay out Mr C’s interests, although it should be noted that there were additional sums advanced which appear to have been borrowed by the wife from her own mother.

7. On any view of the matter, the wife and the husband themselves had a falling out in 2011 over how much of the business the wife was going to receive, i.e., how many of the six shares she was ultimately going to possess herself.  Although there is substantial disagreement as to how exactly it occurred, it is clear that the wife’s employment came to an end, and she failed or refused to sign the necessary share transfers to enable Mr F’s shares to be transferred to the wife and husband.

8. According to the husband, the fact that he was not the registered owner of the majority of the shares meant that he was unable to obtain further finance and, once again, although there is disagreement as to whether this was appropriate, Business A was placed into administration and ultimately the DOCA took place.

9. Although the wife was a professional in business earning, it would seem, good wages prior to her relationship with the respondent, she is now a full-time carer for her mother with whom she lives in residential care.  Her capacity to continue to work is, however, a matter in issue.

10. The husband has re-partnered and his new partner works for his new business, which I will refer to as Business B, at a salary of some $60,000 a year.  The husband is also paid $60,000 a year by that business.

The parties’ affidavits

1. Both sides have essentially sought to rely upon all the affidavit material they have filed during this interminable litigation from 2012 till now.  Any endeavour to paraphrase the seven or so folders of material would be to produce an enormous volume.  It is not appropriate to do so.  I have read the entire file and have thus traversed everything that the parties have recorded.  I will only refer to the materials filed where it is appropriate to elucidate the oral evidence given at court.

The evidence of the applicant wife

1. It should be noted that what follows is taken from my notes.  This is, of course, not a transcript but, rather, records the aspects of the evidence given that I found to be of note.

2. The applicant was called and adopted her numerous affidavits as true and correct.

3. When taken to paragraph 10 of her affidavit of 30 November 2015, the applicant said that her contributions were over and above those of an employee.  She had deposed that her salary at commencement of employment was about $80,000 a year plus superannuation.  It was raised to $120,000 per year in 2011.  The wife said that she had obtained work for Business A from large companies with whom she had previously dealt.  She had worked all the time.  She had discussed being an owner of the business with Mr C and her husband.  She had built the business as an owner.  She had arranged contracts that would last till 2039 and which are still with the respondent today.  She had not left the company but had been evicted.  As a result of her contributing to paying out Mr C, $800,000 worth of plant became unencumbered and then she was not needed anymore.

4. Under cross-examination the wife was asked about the unexecuted share transfer certificate.  She said Mr R had told her not to sign it.  She said she had not received the certificate and received it only in discovery.  It was put to her by counsel that she had refused to sign the share certificate and the wife answered rhetorically, “Why would I?”  She disagreed.  She wanted to sign the share certificate and wanted to be part of the company.

5. The wife was cross-examined about her health.  She has severe eczema and psoriasis and has been seeing a doctor for five years.  Otherwise she had nothing major.  She had been through IVF with Mr Osmund.  There was no family violence by the husband and no threats of physical violence.  It was a loving relationship to the end.  She went on a one week holiday and was not allowed back.  She had expected to be allowed to go back home.

6. When cross-examined about the removal of chattels from the former matrimonial home, the wife said that she removed her own property.  There was no drug or alcohol abuse and no mental health issues.  She denied that the husband paid all the rent on the Property B flat and said it was paid jointly.  He paid everything from the company but she had paid rent when he lived with her in Suburb K.  She paid for all the groceries and most of the utility bills.  She said she did the shopping.  Both of them contributed to utility bills but she could not recall all of them.  I would interpolate and say there was a tendency on the wife’s part, manifest at this point and others in her evidence, to some exaggeration.

7. The wife did the cooking, washing and ironing and the husband did the barbecue and the like.  IVF made her sad.  She was working so hard in the business and very long hours.

8. It was put to her that she had lent approximately $210,000 to buy Mr C’s share of the business.  The wife denied this.  She said that she had not loaned money to Business A.  She loaned $20,000 to Business A but had given Business A $184,000.  This money was paid to Mr C to buy the machinery.  She said, “It became a loan and I became a creditor”.  Mr Osmund and she had been to her cousin and had asked for a debtor finance facility.  In 2012 she did not know what had happened to her.  Her cousin had made a mistake.  She was in Melbourne and the cousin was in Sydney.  She had provided a proof of debt to the administrators and thought from memory that this was in the sum of $228,000.  She received $75,000 from the liquidator.  She knew there was a deed of company arrangement.

9. In 2012 she was good at building the business but had not been through this sort of process before.  She continued to deny that she had lent the money but said she had to accept this.

10. She had handed Mr Osmund the cheque for $184,000 which was payable to Company D, Mr C’s company.  She did not know she was giving the equity in her own unit away and realised this only later.  She refinanced Property A from the Bank 3 with whom she has a mortgage.  Bank 3 has started repossession proceedings and she is taking the bank to the Supreme Court.  She conceded she reported the husband to ASIC for Phoenix activity.  Business B got Business A.  She denied threatening to go to the media through her sister.

11. She was paid a salary by Business A.  She started at $80,000 and was increased to $120,000 in 2011.  She received this because the business was doing so well.  Mr Osmund received an increase also.  She performed well because she thought she was an owner from 2008.  She never signed the share certificate.  She recalled the husband’s solicitor’s letter saying the shares were held in escrow. She denied knowing that the shares were held up by dispute.  She did not recall that Mr Osmund and Mr C had reached an agreement to resolve their own dispute.  The paperwork was done by Mr Osmund and solicitors.  There were statutory demands and a judgment debt of $447,000.  She was aware that she and Mr Osmund were going to buy Mr C’s equipment.  She did not recall District Court proceedings, although she was at one hearing and there were two hearings.  Having first said that she had not seen the settlement document between Mr Osmund and Mr C, the wife resiled and said maybe Mr Osmund had shown it to her.  She had no idea that the shares would be held in escrow.

12. The wife said her flat in Property A was worth $503,000 at the start of the relationship.  It then had a mortgage of $360,000.  She had $40,000 in a savings account and superannuation of approximately $50,000 plus a car, furniture and clothes and jewellery.  The property in Property A is now the subject of a mortgage of $670,000 and probably worth $550,000.  She would not have a clue as to valuing property.  Her weekly income is about $380 per week but she gets a lot of help from her family.  She shares her mother’s pension.  She doesn’t do anything except look after her mother.  She tries to pay rent when she is not paying solicitors.  Her mother pays rent and gets assistance.  There are two bedrooms but she is not actually supposed to be in the premises.

13. The wife said she is not in a relationship and has not been since Mr Osmund.  She receives a pension of about $700 per fortnight.  She chose to be her mother’s carer and lives in an aged care facility which is a sort of nursing home.  It is a housing association.  She repeated that Business A grew because of her.  She had a good and very successful (occupation omitted) career.  She hopes to work when she is no longer a carer.  She is depressed.  She could possibly go back to work but has lost a lot of self-esteem.  She has no savings at present.

14. She received $75,000 from the administrator and that went to her solicitors.  Every time she got a solicitor they wanted moneys in trust.  She paid $50,000 to the first solicitors and has spent over $150,000 with the help of her family and friends.  Her superannuation is presently about $80,000.  Her sister has lent her a car but she has no other shares or investments.

15. She went back to the matrimonial home after their relationship ended and removed property which is in storage in Town A.  She has not seen her belongings for six years.  There are storage fees of $200 per month which are now in arrears.  She denied taking Mr Osmund’s passport and did not take his shirts nor photographs of his children.  These were missing, in any event, from his divorce.  He had complained to her that he had no passport.  She consoled him about his family photographs.  He was lying to suggest he had them.

16. The wife had a group certificate put to her and admitted that she probably saw it.  She could not recall receiving a $14,000 cheque but obviously did.  She had received a tax refund of $11,000.  She would have to speak to her accountant to confirm her income and denied understating her income for taxation purposes.  She said the tax department knows her income.

17. The wife does not support anyone else.  Her mother and sister help her.  Her standard of living has dropped.  She is 52 and there is a lot of competition.  She has no creditors other than the Bank 3 and receives no spousal support from Mr Osmund.  It was not a very short relationship with what they went through.  His business is worth is $5 million.  She was general manager of the business.  It was a $4.5 million revenue.  The ATO report says $5.4 million.  There is a global valuation of equipment which was not then leased.

18. The company was doing very well and she was an owner in the business in her mind since 2008.  It was not true she was not going to be a shareholder.  She was a victim of crime.  The bank refinancing was arranged through her cousin to pay Mr C.  She signed a debtor finance agreement.  Bank 3 says she signed finance documents.  She did not seek to loan the money.  Her cousin arranged the finance on the phone with Mr Osmund.  Mr Osmund has met this cousin.

19. Business A went into a deed of company arrangement and there was a new company Business B.  It assumed the liabilities of Business A and got its business.  It now trades as Business A.  The profits were described as $198,000 in a loan application in 2011.  She recalled Mr K.  It was her valuation and value of the Business B at $120,000.  The wife said she cannot get enough information to give to a valuer.  Mr K’s valuation lacked information and had incorrect revenues.  Mr K’s affidavit was tendered as exhibit R5.

20. Her mortgage on her property in Property A is $680,000.  Before borrowing, it was about $350,000.  The wife claims a portion of the business.  A lot of the creditors are relatives or his partner.  She suspects this.  This is based on Mr Osmund’s bank records.  Mr Osmund is not on a $60,000 salary but gets a lot more than that.  She would like to see Ms Y’s contract and she is being paid $70,000.  A couple of Mr Osmund’s children are now said to be employees but never worked while she was there.

21. In re-examination, the applicant confirmed that she and Mr Osmund met in 2007 and commenced cohabitation in 2007.  They separated in January 2012.  She had never earned less than $75,000 as salary and had brought in big clients.  She believed that Business B was registered for the purpose of her being a 50 per cent owner.  Mr K’s valuation was given one day before trial and was prepared in two days.  She did not agree with the $4.3 million turnover.  In fact, it was $5.4 million.

22. Under further cross-examination by leave arising from her answers in chief, the wife confirmed that she commissioned the report of Mr K and it was submitted at the first trial.

The evidence of Mr J

1. Mr J is a corporate advisor and company director.  In evidence-in-chief he adopted his affidavit of 6 March 2013 as true and correct.  He worked with Business A between 2008 and 2010.  The Business B was established with a view to acquiring the interests of Mr C and to be owned jointly by the husband and wife.  That is why the trust and company were created.  He was an independent advisor.  He has known Ms Stenson in past business relationships.  She is still associated with him.  He had no business or personal relationship with Ms Stenson until Business A brought him in.  Mr Osmund was involved with others in Business A.

2. Business B was created purely from a tax and asset protection perspective.  Business A was equally owned by the husband and wife before Business B.  He is an accountant and banker who had 10 years experience with Bank 4.  He is a public company director.  He had no idea of any discussions after 2010.  He was present for those two years.  The business was run jointly by Ms Stenson and Mr Osmund.  The only evidence he has is that Mr Osmund said he had committed 50 per cent to Ms Stenson.  Business B was set up to be equally owned and there was six to eight months discussion about this.  He said that he had prepared his affidavit himself.

The evidence of Mr Osmund

1. Mr Osmund adopted his affidavits as true and correct.  He said that he first met the wife in about 2007 and they commenced a relationship in about 2007.  This was the start of employment.  The relationship ceased in October 2011 when the employment ceased.  They lived only at Property B.

2. Under cross-examination Mr Osmund denied living from 2007 in Suburb K with the wife.  They only lived at Property B.  He said they occasionally stayed at her place.  They had weekends together and spent casual nights together until she was employed.  Her salary was $60,000.

3. He does not now have a partner.  He has a girlfriend who has her own home.  She stays at his home about six times per month.  He employs her at a salary of about $70,000 to $75,000.  She gets more than him.  Her skill set is suitable for her job.  She is sales and correspondence.  His company employs about 45 to 50 people.  He has a company car and the fuel is paid by the company.  His telephone is paid by the company and so is his internet connection.  He does not have unlimited access.  The company pays for business related flights.

1. When asked about the creation of Business B in 2008 and for what purpose it was created, the husband’s answers were evasive and unbelievable.  He said, “It was just to look at how to do our own product.  It was combined idea.”  He disagreed that it had been agreed that he and the wife should own it fifty-fifty.  Mr C was ripping them off.  He got him out through a commercial transaction.  He said that 50 per cent of Mr C’s shares were to go to Ms Stenson.  The business was travelling quite well in 2007 and he disagreed that there had been problems arising out of the global financial crisis.  He had a falling out with Mr C.  There was no GFC problem at all.  Before the GFC the company was smaller than it is now, employing about 30 employees.

2. When cross-examined about turnover in 2011 to 2012, the husband said he would need to look back at his records.  He agreed that there was a debtor owed $600,000 in 2011.  The share transfer did not occur.  His landlord wanted higher rent, so he moved at significant cost.  He had problems with the landlord and the bond.  He could not go to the bank to get finance.  The cost of moving was $150,000 and the bond was $68,000.  He made an agreement with Mr C to get him out of the business.  He is still a 100 per cent owner of Business B.

3. He said Business B is valueless.  It was an arrangement to get Mr C out.  In return for the shares, he bought machinery he was renting from him.  This was a (machinery omitted).  There was no verbal agreement with the wife as to her getting shares.  Mr C got a judgment debt against him.  Mr F was Mr C’s son-in-law.  The $184,000 was to buy 1.5 shares and Business A paid for the other 1.5 shares.  He never received the shares because the agreement was never executed.  The wife wanted all the shares.  He did not get the shares.  He had to borrow to buy the machinery.  He was forced into administration because the shares were not signed.  He used cashflow to pay for the machinery.  He repeated that he lost $68,000 on the bond and that the move cost money.  Without majority shareholding he could not get approved finance.  The total paid to Mr C was $447,000 which was payment for the machines in return for the shares.

4. The husband was further cross-examined in detail about his affidavit sworn 14 August 2012 and the financial affairs of the company revealed therein.  The husband said he had tried to get finance.  He had many guarantees.  He was struggling to pay.  He took money out of the cashflow from the company and wanted the bank to replace cashflow.  He took $263,000.  The share transfer was the problem.  He could not borrow against the machines.

5. He said the DOCA was open to anyone.  He did not wind the company up to reduce entitlements.  He got interim debtor finance.  Bank 1 was this debtor finance.  Business B was registered several years beforehand and could have been registered in 2012.  He did not recall why.  He did not know that the creditors would vote for the winding up rather than a DOCA.  He was unable to remember revenue.  He said all relevant paperwork had been made available to the valuer but the figures for 2012 were not available.

6. The husband was cross-examined about the revenue of Business B in the 2017 year and said rough cashflow was about $6 million with outgoings normally the same.

7. The husband said that the DOCA spells out what happened to the various loans.  Mr W is his ex-father-in-law.  He borrowed money from him and he is over 80 years old.  He is owed some $60,000 to $80,000.  Another friend is not owed a lot of money.  Business B is not running that well.  They need to improve efficiency.  Costs are going through the roof.  The company is paying its way.

8. The husband confirmed that the relationship ended on 20 October 2011 when the wife abandoned her employment.  She just abandoned her employment.  He denies what Mr C says.

9. He vaguely recalled a letter from Ms Stenson’s solicitor in December 2011.  He said that in October she took off without saying anything.  He got no notification she was coming back.  A letter was received two months later.  She was not an owner of Business A.  Mr C and he bought Business A in 2004.  He denied that the number of staff in 2007 was as low as 11.  He could not remember a turnover of $2 million.  He said that Company E was not the largest customer and not worth $1 million.  He said he kept matters to himself.

10. Business B was registered in 2008 but there were no new products between 2008 and 2011.  He denied the fifty-fifty shareholding agreement.  He denied manipulating loan records.  $20,000 had been paid off her loan.  When it was put to him that his own loan had been transferred to Business B, he said this was on the advice of an accountant.  When cross-examined about exhibit A20, being a balance sheet, the answers were not, in my view at least, easy to follow.

11. In re-examination, Mr Osmund said $415,000 was his credit card.  He could not say what the credit limit was but it was high.  When asked about the $593,000 loan disclosed to him, he said this was an accumulation of loans over a period of time.  He said he has not been paid any of that money and is now owed $611,000.  He has always been the sole shareholder of Business B and the sole director.  There has been no profit over the last three years and no dividends over the last three years.  He was unable to explain why the 2012 tax returns for Business A was not available.  Business B bought Business A in the 2013 tax year.  It had been dormant before then.  There was no missing $1 million.  He tendered as exhibit R6 up-to-date records for Business B.

12. By common consent, Ms Stenson was recalled for further cross-examination.

13. The wife was taxed with a record from Bank 2 Savings showing $23,127 on 31 July 2017.  The wife confirmed that this was correct but that the balance is now about $200.  When cross-examined about Business C Pty Ltd, she confirmed that she does not trade.  That is used only for superannuation.  All her superannuation is in that account.  She bought $60,000 worth of shares out of her $80,000.  Her superannuation on 31 October 2016 was $113,974.  This was before she bought the shares.  She is not allowed to access her superannuation.

14. She and her accountant have access to the account and she acts upon the accountant’s advice.  Her superannuation is worth approximately $113,000 and she has no other superannuation.  She now has no Bank 5 account.

Some brief observations about the credit of the witnesses

1. As earlier indicated, the wife had a tendency to exaggerate and she was clearly given, both during her evidence and in the body of the court, to vivid emotion.  Some of her answers were non-responsive in that she tended to answer questions with her own questions.  Nonetheless, and despite some inconsistencies to which I shall come in more detail, and noting that she changed her evidence once or twice, she was in the main, in my opinion, telling the truth as she saw it.  What needs to be borne in mind, however, is that she is in a fury against Mr Osmund and remains vividly so.  Her perception of her mistreatment by him and, as she would see it, the swindling by Mr Osmund of both the company away from her and her future more generally, make her evidence such that it must be approached with some measure of caution.

2. Mr J was an excellent witness.  He answered questions directly and straightforwardly.  He gave clear and direct answers.  He was, in my opinion, plainly telling the truth although this does not mean that all his answers necessarily reflect the totality of what occurred.

3. By way of contrast, the husband was not a good witness.  He impressed me as having an excellent memory for figures and dates when it suited his interests, but whenever pressed about any matter that he felt might be damaging to his case he affected a vagueness and loss of memory.  At times, as already indicated, his evidence was evasive and unbelievable and his evidence must be approached with an even greater degree of caution than that of the wife.

Findings as to the relevant facts

1. The parties met in 2007.  Having heard and seen them give their evidence, I accept the wife’s assertion that the relationship rapidly became intimate and that the husband stayed more often with her in his premises that he is now prepared to concede.  Nonetheless, as I find, the relationship did not move decisively to co-habitation until she was employed and moved into Property B in 2007.

2. There is no doubt that the wife was good at the work that she did.  While her previous salaries do not point necessarily to a stellar career (never less than $75,000) there is no reason to doubt that she committed herself both to the relationship with the respondent husband and to his business.  She was prepared to undergo all the difficulties of IVF in an endeavour to have a child with him.  I have no doubt that she worked long and hard in her position and that this contributed, at least to an extent, to general aggrandisement of the business’s affairs.  The fact that her salary was increased very substantially in 2011 points to such a commitment on her part.

3. I also accept that Business B was set up, as Mr J says, in 2008 as an asset protection and tax minimisation project.  It seems plain it was not, however, active until, in due course, Mr C was bought out of the business and thereafter Business B was the medium for the husband to retain control of the business.

4. I accept that there must have been at least some discussion of the wife becoming a 50 per cent owner of the business in 2008 to 2010 because that is what Mr J says.  Nonetheless, while I accept the truthfulness of his evidence, I do not think that the discussions between the husband and wife went as far as she now believes they did.

5. The husband was engaged in increasingly strained relations with Mr C, who it would seem had him somewhat by the short hairs.  He controlled through his son-in-law, Mr F, half of the company.  Even accepting that Mr Osmund junior was wholly a creature of his father, the fact is that he did not have outright control of the company.  He was also leasing very substantial, expensive and important equipment from Mr C (I ignore the various shelf companies through which these transactions occurred).  Mr C obtained judgment in the New South Wales District Court against Mr Osmund and it became imperative for Mr Osmund to get out of that entanglement.

6. Following the discussions that must have taken place between the husband and the wife, the wife not only took out $184,000 further credit against her mortgage, but signed a guarantee in favour of the business Business A.  This was undoubtedly in part done out of love and affection but also because she thought she was buying into the company.  I think that she genuinely thought she was buying half the company and I think that is because of what Mr Osmund had told her in the years 2008 to 2010 when Business B was being established.  That does not mean that he intended her to have half the business, however. 

7. It is clear that the total amount of moneys paid to Mr C was far greater than the $184,000 contributed by her.  Even if one factors in the additional $20,000 odd dollars, she provided no more than about half of the total paid to Mr C.  It is understandable that Mr Osmund thought that it was appropriate for him to get half of the shares to be bought from Mr C.

8. At this point, and it appears to have been about October 2011, things rapidly came to a head.  One of the unusual and surprising features of this case is the lack of any significant and direct evidence by either the husband or the wife as to exactly how things broke down, although it is clear that they did.  I think that the wife wanted all three shares from Mr C and I think that the husband thought she was becoming greedy.  There were threads of this evidence in the oral evidence given before the court.

9. Stupidly, as one may say with the benefit of hindsight, the wife did indeed fail to sign the share transfer document.  Whether it was ever even forwarded to her is open to question.  What is clear is that she made it clear she wanted all three shares.  It would seem to me more probable than otherwise that once this became clear to Mr Osmund he decided to excise her from his life and from the company Business A.  She went to Melbourne for a short break and he took advantage of her absence to terminate her employment.

10. To the wife, this was as ruthless as it was sudden.  Her perception was and remains that she was cynically manipulated into advancing funds and the guarantee and, once this was done, she was excised.  I think she is correct.  I think that that is what Mr Osmund did.  Nonetheless, I think it is also the case that this was because the wife had made it clear that she would not accept only a 25 per cent shareholding.  I do not think that the husband ever really intended to give her half the business, but, in any event, things went off the rails.

11. One area of the husband’s evidence I do accept is that the failure to have the majority shareholding inhibited in the most decisive way his capacity to obtain further credit.  It is entirely consistent and conformable with experience and common sense that this would be so.  A bank would not lend further funds to someone who did not actually control the company.  I accept that he then drew upon operating finds to service his debts and got into difficulties leading to the administration and ultimately the DOCA.

12. I also accept, however, that this course of action was less unattractive to the husband because he knew it would excise the debt otherwise owing to the wife.  She got $75,000 back on advances totalling in excess of $210,000.

13. Although in theory the DOCA was, of course, open to anyone, and although, of course, there is nothing improper in the company entering into administration and ultimately the DOCA itself, it is clear from the outcome and clear from the circumstances generally, that this was indeed a Phoenix operation in the sense that the assets, and for that matter the liabilities, of Business A passed to Business B which is wholly owned by the husband. He continues to operate it and, indeed, I accept Ms Stenson’s evidence that a number of the clients he presently has are ones that he had with Business A.  She remains obviously well-informed about the company’s affairs. 

14. This brings us to the circumstances of Business B itself.  It employs between 40 and 50 people.  It has weathered the costs of relocation and the loss of the bond.  It pays Mr Osmund and his partner a combined salary of about $130,000 plus ancillary benefits.  It appears to pay some of his children wages also.

15. While the husband was at pains to try and downplay the commercial success of the company, the fact is that it continues to operate and operates at a substantially greater level, in terms of turnover, than it did when it was Business A.

16. Something should be said of the wife’s continuing assertions that the husband has manipulated matters so as to ensure that the true position of both Business A and the Business B are not properly disclosed.  I should make it plain that the deficiency in the materials provided to Mr K of the 2012 tax years of Business A does not strike me as being sinister.  It reflects the fact that the company was placed into administration.

17. Likewise, while it is true that the documentation from the Australian Taxation Office suggests that turnover was $1 million higher in the 2011 to 2012 tax year than that revealed by the company’s own documents, I do not accept that this means that the company had a million dollars more in terms of profit than was otherwise disclosed.  All product requires or entails operating costs and there is simply no logical or plausible explanation before the court as to how it would have been that the husband could, as it were, have extracted a million dollars out of the company or, alternatively, away from his account.

Stanford & Stanford (2012) 247 CLR 108

1. The submissions of the husband go close to suggesting that this is a case in which it is inappropriate that there be a property adjustment.  However, when characterised more accurately, it was put that it was inappropriate that there be a property adjustment not because it was unjust to do so but rather because the particular circumstances of the relationship led to this conclusion.

2. In this case, as in so many others, the basis upon which the parties conducted their finances during their relationship has radically altered upon its cessation. Indeed, the wife’s circumstances changed overnight from secure and well-paid employment to circumstances of considerable difficulty. If consideration of the matters in section 79 of the Family Law Act 1975 (Cth) otherwise make it appropriate, it is plain that it is just and equitable there be a property adjustment.

The pool

1. The wife appears to have chattels of an undisclosed and unknown amount in storage in Town A.  At the most these were, however, chattels taken from the Property B property and would constitute household effects.  It is not possible to allot any value to them.  The wife does not own a car but drives one loaned to her by her sister. 

2. The wife’s Property A property is clearly now very heavily encumbered.  It is not possible to say how much, if any, equity there is in it. The only other discernible asset that the wife has is her superannuation worth about $80,000. I note it was $76,000 in her December 2015 Financial Statement.

3. The husband has and continues to have the complete ownership of the Business B.  There is no valuation of it before the court.  It appears to have a turnover of about $6 million and 45 employees.  Whatever its debts, it owns very valuable equipment bought for some hundreds of thousands of dollars from Mr C.  It is not possible to put a value on the business but I have no doubt that it is a valuable income stream to the husband and his partner, paying not less than $130,000.  If cars and other matters are factored in, the net benefit to him is over $150,000.  The husband has superannuation of $98,000 in December 2012, the time of his only Financial Statement.

Contributions

1. This was not a lengthy relationship.  It lasted from about mid-2007 to about 2011. During it, the parties both contributed as best they were able not only to the domestic arrangements but to the development of the business.  I fully accept the wife’s evidence that she worked very long and very hard in the business because she thought she would become a joint owner of it in whatever proportion that may have been.  I would, in the circumstances, assess their contributions as equal.

2. However, that assertion must be taken in proper context.  The husband already jointly owned Business A together with Mr C.  It was not as if he had nothing.  Whatever his difficulties with Mr C were, and whatever difficulties the business may have faced generally, the fact is that he already possessed it.  It is not possible to put any kind of percentage adjustment in these circumstances but this overarching pre-ownership of the business is plainly a very relevant consideration.

The section 75(2) factors

1. The husband has a business that must be profitable or it would not be trading.  It has very substantial turnover and according to Mr Osmund he is in the process of endeavouring to make it more efficient and, therefore, more profitable.  Any business that can afford to pay 40 to 50 employees and keeps its doors open is obviously earning substantial amounts of money, although it is not possible to say how much.

2. Both parties are in sufficiently good health that it is does not operate on their future in any major way.  The husband will continue to earn more money and, as I find, is likely to continue to expand his relatively profitable business in times to come.

3. The wife, by way of contrast, has taken a perfectly proper and understandable decision to devote herself to the care of her mother.  It is uncertain how long that will continue.  What can be said, however, is that as and when Ms Stenson seeks to re-enter the workforce, she will be significantly disadvantaged.  Hers was a successful but not stellar career.  She is now into her 50s and by the time she were to apply for further work she will have been out of the workforce, at the very least, for some three or four years, noting that her work post the Business A was not outstandingly successful.

1. Ordinarily, one would make a significant adjustment in the wife’s favour in this regard.

Just and equitable

1. As I indicated at the commencement, this is a very unusual case.  It turns on a very particular and unusual set of facts.  The husband inveigled the wife into investing $184,000 of her own money into his business to help him out of a tight spot.  As soon as he got the money, he sacked her.  She is right to feel that she was abused.

2. In the particular circumstances of this case, I think that the husband should pay the wife the $110,000 back (it is rounded off) that she did not get out of the DOCA.  The husband’s case was run very much on the footing that the DOCA was the end of all responsibilities on the part of Business A towards the wife.  Clearly, as a matter of law, that must be correct.  But it is not the end of the financial affairs between the husband and the wife.  No one has suggested the court does not possess the power to make a property order if it is appropriate to do so.  In the particularly shabby circumstances of this case, I think that the appropriate and sensible outcome that is just and equitable is to require the husband to pay to the wife $110,000.  How he finds that money is a matter for him.  He has a business with a substantial turnover and it is reasonable to conclude, as I do, that he will be able to borrow $110,000 to make this payment.

3. I do not think that there should be a superannuation splitting order as the wife seeks.  The parties were, in truth, only together for some four or so years.  Their superannuation accruals would owe very little to the relationship.  There has been a substantial period of post-relationship accrual and there would have been substantial pre-relationship accrual as indeed both parties’ estimates of their superannuation at the commencement of the relationship reveal.

4. I repeat again, this is a strange case calling for remedies which might otherwise be thought methodologically strange.  Nonetheless, I think that the husband should repay the wife the additional funds he borrowed from her and there will be an order of the court accordingly.

I certify that the preceding ninety-one (91) paragraphs are a true copy of the reasons for judgment of Judge Burchardt

Date: 7 June 2018