Stoian and Fiening
[2014] FamCA 482
•7 July 2014
FAMILY COURT OF AUSTRALIA
| STOIAN & FIENING | [2014] FamCA 482 |
| FAMILY LAW – PROPERTY – Final – Short relationship – Where there is a significant disparity of capital contributions – How to reflect such a disparity in property settlement orders where substantial capital has been lost – Where there have been substantial withdrawals from a self-managed superannuation fund in breach of the Superannuation Industry (Supervision) Act 1993 (Cth) – Whether the evidence of the husband is unreliable |
| Family Law Act 1975 (Cth) Superannuation Industry (Supervision) Act 1993 (Cth) |
| Biltoft & Biltoft (1995) FLC 92-614 Chorn & Hopkins (2004) FLC 93-204 Ferraro & Ferraro (1993) FLC 92-335 Hickey & Hickey (2003) FLC 93-143 Kowaliw & Kowaliw (1981) FLC 91-092 Lee Steere & Lee Steere (1985) FLC 91-626 Malpass & Mayson (2000) FLC 93-061 Pastrikos & Pastrikos (1980) FLC 90-897 Polonius & York [2010] FamCAFC 288 Re Bailey & Bailey (1990) FLC 92-117 Stanford v Stanford (2012) 247 CLR 108 Waters & Jurek (1995) FLC 92-635 |
| APPLICANT: | Ms Stoian |
| RESPONDENT: | Mr Fiening |
| FILE NUMBER: | BRC | 8141 | of | 2011 |
| DATE DELIVERED: | 7 July 2014 |
| PLACE DELIVERED: | Brisbane |
| PLACE HEARD: | Brisbane |
| JUDGMENT OF: | Kent J |
| HEARING DATE: | 4 and 5 March 2013 and 28 January 2014 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Kirk QC |
| SOLICITOR FOR THE APPLICANT: | Keating Kehn Solicitors |
| SOLICITOR FOR THE RESPONDENT: | Ms Bulyk |
Orders
IT IS ORDERED THAT:
B Street, Suburb R
Within twenty-one (21) days of the date of these Orders the husband shall notify the wife, by her solicitors in writing, as to whether:
(a) he elects to retain the property at B Street, Suburb R and take a transfer of the wife’s interest in exchange for a cash payment to the wife of $268,718.40 on the terms as provided for in Order 2 of these Orders; or
(b) he elects that the property be sold.
If the husband makes the election provided for in Order 1(a) then within forty-five (45) days of the date of these Orders the husband shall:
(a) re-finance the existing mortgage debt to ANZ Bank Limited secured over the property into his own name solely and indemnify the wife and keep her indemnified with respect to the existing mortgage debt and mortgage security; and
(b) pay by bank cheque to the trust account of the solicitors for the wife the sum of $268,718.40 in exchange for a duly executed transfer of the wife’s interest in the property in his favour.
If the husband fails to make any election within the time prescribed; or makes the election provided for in Order 1(b) or, having made the election provided for in Order 1(a), fails to discharge any of his obligations under Order 2; then the following Orders for sale of the property shall immediately take effect.
Subject to Orders 1 to 3 hereof the husband and wife forthwith do all acts and things and sign all documents necessary to effect a sale of the B Street property in the following manner:
(a) the property shall forthwith be listed for sale by private treaty with such real estate agent/agents as nominated by the wife;
(b) unless otherwise agreed in writing by the parties the listing price shall be $1 million;
(c) the husband shall be responsible for the initial payment of reasonable advertising expenses as recommended by the selling agent with this amount to be reimbursed to the husband on settlement of the sale; and
(d) unless otherwise agreed in writing by the parties the parties shall accept any offer to purchase the property for $950,000 or above.
In the event the B Street property has not sold within three (3) months of the date of listing, then the husband and wife shall do all such acts and things, and sign all documents necessary to procure a sale of the B Street property by public auction upon the following terms and conditions:
(a) the auctioneer shall be as determined by the wife;
(b) the reserve price shall be as nominated by the wife; and
(c) the husband shall be responsible for the initial payment of the auction expenses, with this amount to be reimbursed to the husband on settlement of the sale.
Pending the sale of the B Street property the husband shall:
(a) pay and indemnify the wife in relation to all mortgage payments to ANZ Bank Limited as and when they fall due; and
(b) pay and indemnify the wife in relation to all rates, water, and insurance payments with respect to the property as and when they fall due.
Pending the sale of the B Street property, the husband shall, after readying it for sale, make the B Street property available for inspection by prospective purchasers at all reasonable times and on reasonable notice from the selling agent, and will cooperate with the selling agent and make a key to the B Street property available to such agent/agents.
Pending the sale of the B Street property the husband shall do all acts and things reasonably required to maintain the property and shall ensure that vacant possession of the property is given in accordance with the contract of sale of the property.
Upon the sale of the B Street property, the sale proceeds shall be paid in the following order and manner:
(a) payment of any outstanding rates or water charges;
(b) payment of the amount required to discharge the mortgage in favour of ANZ Bank Limited;
(c) agent’s commission and auctioneer’s fees (if any);
(d) legal costs of the sale;
(e) any government duties and charges;
(f) in reimbursement of the husband’s payment of the advertising and auction costs (if any); and
(g) the net proceeds remaining (“the net proceeds”) as provided for in Orders 10 or 11 as the case requires.
If the amount of the net proceeds exceeds the amount of $285,156 then the husband is to receive the sum of $16,546.32 plus 12 per cent of any excess by which the amount the net proceeds exceeds the amount of $285,156, with the wife to receive the balance.
If the amount of the net proceeds is less than the amount of $285,156, then the husband shall receive (or pay to the wife as the case requires) the amount calculated as ($16,546.32 less x where x equals 12 per cent of the difference between $285,156 and the amount of the net proceeds of sale) and the wife shall receive the balance.
Funds in Trust
The wife shall receive or retain for her sole benefit, and the husband shall relinquish to the wife, all money held in the trust account of the wife’s solicitors sourced from the proceeds of sale of the property known as Property A.
The Stoian Superannuation Fund (“the Fund”)
The wife shall apply such amount out of the payment she receives from the husband, or from the sale proceeds of the B Street property, (whichever applies under these Orders) to the Fund so as to extinguish the liability of the parties or either of them for any withdrawals or loans from the Fund to the parties or either of them.
Both parties shall otherwise do all acts and things, including the execution of any documents, as recommended by the accountant for the Fund to eliminate or minimise any penalties being imposed upon the Fund by the Australian Taxation Office.
The husband shall be responsible for and indemnify the wife and keep her indemnified to the extent of 12 per cent of, any penalty imposed by the Australian Taxation Office with respect to the Fund attributable to the withdrawals/loans referred to in the affidavit of the single expert Mr H filed in these proceedings.
The wife shall be responsible for and indemnify the husband and keep him indemnified to the extent of 88 per cent of, any penalty imposed by the Australian Taxation Office with respect to the Fund attributable to the withdrawals/loans referred to in the affidavit of the single expert Mr H filed in these proceedings.
The wife shall otherwise retain free from all claims by the husband her entitlement in and to the Fund.
Pursuant to s 90MT(1)(A) of the Family Law Act 1975 (Cth), wherever a splittable payment becomes payable in respect of the husband’s interest in the Fund the wife shall be entitled to be paid an amount calculated in accordance with Part 6 of the Family Law (Superannuation) Regulations being 100 per cent of the splittable payment and there shall be a corresponding reduction to the entitlement to the husband to whom the splittable payment would have been made but for this Order.
These Orders have effect from the operative time and the operative time is four (4) business days after service of these Orders on the Trustee of the Fund.
The Trustee, the husband and the wife, in accordance with the obligations set out under the Family Law Act 1975 (Cth), the Family Law (Superannuation) Regulations 2001 and the Superannuation Industry (Supervision) Act and Regulations 1994 shall do all such acts and things, and sign all such documents as may be necessary to calculate the entitlement of, and make payment to, the wife in accordance with the provisions herein.
There be liberty to apply to each party and the Trustee of the Fund in relation to the implementation of the Orders concerning the Fund.
The wife serve the Fund with a sealed copy of these Orders as soon as practicable.
Companies
The wife retain free from all claims by the husband her interest in the following entities:
(a) M Pty Ltd;
(b) The Fiening Trust; and
(c) G Pty Ltd.
Within fourteen (14) days of the date of these Orders, the husband shall:
(a) transfer all of his shareholding in M Pty Ltd to the wife;
(b) resign as a director of M Pty Ltd; and
(c) transfer all of his shareholding in G Pty Ltd to the wife.
Save for any liability otherwise specifically dealt with in these Orders, the wife be solely responsible for and meet payment of all liabilities in the wife’s name, in the name of M Pty Ltd, the Fiening Trust and G Pty Ltd and the wife shall indemnify and keep indemnified the husband from any liability howsoever arising thereunder.
Other Property
The wife retain free from all claims by the husband her interest to and in the following:
(a) any funds standing to credit in any account in her sole name;
(b) the BMW motor vehicle, registered number …; and
(c) the personal property, furniture and effects in her possession.
The husband retain free from all claims by the wife his interest in the following:
(a) his entitlement with Australian Super;
(b) his entitlement with BT Lifetime Super;
(c) any motor vehicle in his possession;
(d) the Triumph motor bike;
(e) any funds standing to credit in any account in his sole name; and
(f) the personal property, furniture and effects in his possession.
Liabilities
Save for any liabilities specifically dealt with in these Orders, the wife be solely responsible for and meet payments of all liabilities in the wife’s name, and the wife further indemnify and keep indemnified the husband from any liability however arising thereunder.
Save for any liabilities specifically dealt with in these Orders, the husband be solely responsible for and meet payments of all liabilities in the husband’s name, and the husband further indemnify and keep indemnified the wife from any liability howsoever arising thereunder.
Miscellaneous
Each party sign all necessary documents and do all necessary things in order to give effect to the terms of these Orders and that in the event either party refuses or neglects to so comply, the Registrar of the Family Court of Australia at Brisbane is hereby appointed pursuant to s 106A of the Family Law Act 1975 (Cth) to execute all Deeds and documents in the name of either party and do all acts and things necessary to give effect to these Orders.
It shall be sufficient evidence of a default in signing a necessary document or instrument, as referred to above, when the party requiring it to be executed forwards the same to the other party, or the solicitors who act for the other party in the making of these Orders, and within fourteen (14) days hereof the same is not properly executed and returned to the party requiring its execution by the other party.
The wife’s application for spousal maintenance be dismissed.
The parties have liberty to apply for the making of further Orders to give effect to these Orders.
All outstanding applications be removed from the pending cases list.
AND IT IS FURTHER ORDERED THAT:
Referral of Papers
The Acting Principal Registrar is hereby authorised and requested to provide to the Commonwealth Attorney-General’s Department; the Australian Federal Police; and the Queensland Police Service a copy of these Reasons and the affidavit of Mr C filed 20 August 2012.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Stoian & Fiening has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| FAMILY COURT OF AUSTRALIA AT BRISBANE |
FILE NUMBER: BRC 8141 of 2011
| Ms Stoian |
Applicant
And
| Mr Fiening |
Respondent
REASONS FOR JUDGMENT
Ms Stoian (“the wife”) born in 1960 and now aged 53 years and Mr Fiening (“the husband”) born in 1961 and now aged 53 years met and commenced a relationship on 9 September 2004; married in September 2005 and their marriage was dissolved in December 2010.
There are no children of the relationship.
The parties differ slightly as to the period of their cohabitation. It was not suggested by either party that anything of great significance turned on that difference. On the husband’s version cohabitation commenced on 11 September 2004 and final separation occurred on 9 September 2009, a period of five years. On the wife’s version cohabitation commenced on 17 December 2004 and final separation occurred on 26 October 2009, a period of four years 10 months. Thus, on either version, this was a relatively short relationship.
Set out below are my findings on credit issues. These include my reasons for preferring the wife’s evidence to that of the husband on disputed issues of fact where these are not otherwise the subject of independent evidence. Consistent with these findings I prefer the wife’s evidence to that of the husband concerning the beginning and end dates of the parties’ cohabitation.
One issue that appeared to be disputed between the parties by reference to their respective affidavits for trial, was the question of domestic violence and its consequences. However, in the result, agreement was reached between the parties with the assistance of their respective legal representatives, not to pursue such issues at trial. That agreement included, for example, the wife no longer relying on paragraphs 102 to 105 of her affidavit filed on 10 August 2012 and the husband did not pursue reliance on paragraphs 71 to 84 of his affidavit filed on 1 March 2013.
Relevant to the relatively short period of cohabitation of the parties is the fact that some three years and four months elapsed between the date of their final separation on 26 October 2009 and the commencement of the trial of these proceedings on 4 March 2013.
Each of the parties seek orders for property settlement, within the meaning of s 79 of the Family Law Act 1975 (Cth) (“the Act”), altering their interests in property. However, there are significant issues between them concerning the items and values of the property interests to be considered (and in particular as to notional adjustments to be included for the purpose of the s 79(4) assessment) and as to how the Court ought address the s 79(4) matters in reflecting appropriate and just and equitable orders.
Whilst the wife’s third Amended Initiating Application filed on 25 February 2013 shortly before the commencement of the trial on 4 March 2013 included an application for spousal maintenance, at the outset of the trial Mr Kirk of Queen’s Counsel for the wife confirmed that no application for spousal maintenance was pursued by the wife at trial. In final written submissions on behalf of the wife it was acknowledged that her claim for spousal maintenance “must fail”. Thus the application for spousal maintenance is to be dismissed.
Each party had a previous marriage relationship and each has now adult children of their respective prior marriage.
As at trial the wife had re-partnered with one Mr D and the husband had re-married, in October 2011, to Ms Fiening with whom the husband has a child born in 2012. Ms Fiening has a child from a previous relationship who was born in 2007.
Three issues permeated these property settlement proceedings.
The first concerns how significant disparity between the parties of capital contributed to the marriage, in the context of contributions otherwise during a relatively short marriage, is to be reflected in final property settlement orders in circumstances where substantial capital has ultimately been lost.
The second concerns the consequences of substantial withdrawals from a
self-managed superannuation fund in breach of the Superannuation Industry (Supervision) Act 1993 (Cth). Those consequences include the potential for the Australian Taxation Office (“ATO”) to impose penalties on the fund thereby reducing its value. Thus the value of the fund to be taken into account for the purpose of these s 79 proceedings is problematic; as is the question of potential penalties.
Third, for reasons discussed below, significant issues of credit attend the husband’s evidence and his reliability as a witness.
Competing Contentions
As will be further discussed, as a result of her property settlement with her previous husband the wife contributed to this marriage capital of about $2,000,000. For reasons which will also be further discussed the comparable capital contribution introduced by the husband was no more than about $350,000.
The husband’s essential contention is, relying on the proposition that he came into this “short” relationship with assets representing, he asserts, 25 per cent of the asset pool; and that he contributed income he earned during the relationship; he ought receive or retain 25 per cent of the overall value of the asset pool for which he contends, a pool including notational adjustments.
The husband contended at trial that whilst the wife ought retain each party’s interest in the self-managed superannuation fund now known as “The Stoian Superannuation Fund” (“the Fund”) the Wife ought also be solely responsible for any ramifications for the Fund by reason of withdrawals from the Fund in the 2009, 2010 and 2011 financial years totalling $216,447.90, including responsibility for the imposition of any penalties by the ATO.
The wife’s essential contention is that the husband’s overall contribution based entitlement to the parties’ existing property interests, as identified and valued in her “pool”, cannot exceed 10 per cent (and ought be less) and there ought be some further adjustment in favour of the wife having regard to s 75(2) factors.
The wife seeks to retain the Fund but also seeks that the husband repay to the Fund the amount of withdrawals attributed to him, by her, totalling $87,436.77 and that he be responsible for some proportion of any penalties imposed by the ATO.
It was ultimately contended on behalf of the wife that on the orders she proposed the husband would be receiving or retaining approximately 11 per cent of the net property pool contended for by the wife, a pool including notional adjustments, which was contended to be more than the husband’s legitimate entitlement.
Just and Equitable Requirement
Set out below are findings as to the parties’ existing legal and equitable interests in property. From that starting point it can be concluded that the just and equitable requirement in s 79(2) is readily satisfied in the circumstances of this case. Those circumstances include that each party seeks orders for property adjustment pursuant to s 79; and it is clear that the parties’ voluntary separation ended their common use of property and ended a range of implicit assumptions underpinning their property holding arrangements whilst their marriage was intact; assumptions of the kind referred to in [42] of Stanford v Stanford[1] (“Stanford”). Because there are some particular aspects in this context concerning the Fund these will be discussed separately.
[1] (2012) 247 CLR 108.
There can be no doubt, following upon Stanford, that consideration of whether it is just and equitable to make a property settlement order begins with identifying the existing legal and equitable interests of the parties in property (Stanford [37]).
Included in the schedule set out later in these Reasons are those existing interests as I find them to be. I have already expressed my finding that having regard to those interests, the circumstances of this case referred to means that the s 79(2) just and equitable requirement is satisfied.
However, also included in the schedule referred to are items comprising adjustments or “notional” assets. Each party sought to have (differing) items and/or (differing) amounts of this type included in the assessment process.
It was raised in submissions by Mr Kirk that following Stanford there had been some debate or conjecture about the legitimacy of incorporating “add backs” or adjustments or notional assets in such a schedule. For his part, Mr Kirk contended that Stanford ought not properly be interpreted as bringing about that result.
I accept that submission. When it is kept in mind that incorporating “add backs” as notional property or making notional adjustments in such a schedule is a methodology for undertaking the process of assessing contributions to existing property pursuant to s 79(4); whilst Stanford is directed to the s 79(2) requirement; there is no conflict between what the plurality held in Stanford and authorities of this Court concerning the “adding back” of notional assets.
In Polonius v York[2] the Full Court of this Court endorsed several approaches concerning such adjustments or notional “add backs”. These included the approach of including a notional asset in the divisible pool; the approach of taking the item into account more generally when assessing contributions; or the approach of including consideration of the item as part of the s 75(2) considerations.
[2][2010] FamCAFC 288.
Outlined in the following are my determinations on the issues in dispute between the parties concerning the items and/or values of both existing and “notional” property interests to be considered in the s 79(4) assessment process. However, I make it clear that the starting point considered in determining that the just and equitable requirement has been fulfilled are the parties’ existing property interests.
Disparity of Capital Contributed and Capital Lost
It is not in issue that on 17 December 2004, about three months after the parties met, they commenced living together at the Wife’s then home at I Street, Suburb E (“the I Street property”) which allowed the husband to rent his then residential property at F Street (“the F Street property”).
At paragraph 24 of his affidavit filed 1 March 2013 the husband deposes to receiving rent from the F Street property in the sum of $450.00 per week over the period from December 2004 until that property was sold in May 2008. The husband there also deposes to using that rental income “to cover the mortgage for that property and expenses.”
The period between December 2004 and May 2008 is about 3.5 years. At the rate of $450.00 per week it means the husband was applying gross rental receipts of $23,400 per annum to the mortgage of the F Street property and expenses. That is a gross total of about $80,000 over that period, subject to taxation.
There was an issue at trial, based upon expert evidence, as to the value of the husband’s F Street property at the commencement of the parties’ cohabitation. The husband asserted that certain renovations or improvements had been carried out to the property and relied upon an historical valuation assuming that to be so for the value of this property he asserted. For her part, the wife disputed that the claimed renovations or improvements had been carried out prior to the relationship. The husband’s case on this issue rests entirely on his testimony uncorroborated by any other evidence.
Again, for the reasons set out below, I do not accept the husband as a witness of truth or that he is a credible witness. For the same reasons I prefer the wife’s evidence. I therefore find that the renovations were not carried out
pre-relationship and the valuation of F Street on that basis is not sustainable.
That aspect aside, apart from the substantial rental proceeds from the F Street property that were facilitated by the parties’ accommodation in a residence owned, and brought to the relationship, by the wife, a fundamental feature is that the F Street property was not sold until May 2008, some 3.5 years after cohabitation had commenced and only some 17 months before the parties’ final separation. Again, at paragraph 24 of his affidavit the husband confirms receiving “$347,596.53 after payment of agent’s commission and mortgage” in respect of that sale.
That fact led to the concession by Ms Bulyk in her final submissions on behalf of the husband that, despite depositions in his affidavit material placing his capital contribution at higher figures, the husband’s contribution of capital was, putting that contribution at its highest, about $350,000.
It bears repeating that the $350,000 approximate net proceeds were achieved in circumstances where for the previous 3.5 years approximately, the husband had been able to hold and rent the F Street property and apply those substantial rental proceeds to the mortgage only because he was able to reside in accommodation provided by the wife. In circumstances where the parties’ cohabitation was only for four years 10 months the period of 3.5 years is thus significant.
The concession made by the husband via Ms Bulyk at the final submissions stage of the trial to the effect that his contribution of capital could be seen as being no greater than $350,000 on his “best case” was properly made. At paragraphs 18 and 19 of his affidavit filed 1 March 2013 the husband had sought to claim a contribution of capital of about $450,000 or at least that being the value or his net asset position as at the commencement of the relationship. However, that included the value he contended for the F Street property (which I reject) and more particularly included an asserted value for his then business known as J Pty Ltd trading as Business K, at a figure of $280,000, before taking liabilities into account.
As paragraph 17 of that same affidavit confirms, the figure of $280,000 was the historical cost of the husband’s purchase of the business in 2002. When that business was sold on 30 May 2006 only $223,369.80 was yielded in gross sale proceeds and the husband confirms (paragraph 21 of his affidavit) that those proceeds were used in their entirety to repay business debt. Indeed those proceeds were insufficient to meet all business debts and the husband had to increase the borrowings on his home loan mortgage over the F Street property to a total of $196,000 to obtain surplus funds to pay remaining business creditors.
Exhibit 13 comprising financial statements for the business; and
cross-examination of the husband on them and also on Exhibit 11(being a schedule compiled from the husband’s taxation returns as to his earnings) established that, in an overall sense, the business mainly accumulated losses and did not produce any substantial income for the husband over the period from when cohabitation commenced until the business was sold.
Even if the value for the F Street property the husband contends for, of $515,000 is taken for the purpose of analysing the husband’s contentions, the subtraction of the increased home loan at $196,000 leaves about $320,000. It is to be noted that other items, at least two motor vehicles, seem to relate to and be included in the company or business figures.
Thus in terms of capital contributed by the husband, it cannot be assessed at any higher than about $350,000 and it must be noted that such contribution effectively was made about 3.5 years into the relationship; and having regard to the husband’s accommodation as earlier referred to, the wife made an indirect but substantial contribution to the net proceeds of the F Street property when it was sold given the application of rent to mortgage costs. That is, the $350,000 was not solely the husband’s contribution.
In respect of the wife’s capital introduced, as already noted, the parties were living in the wife’s I Street, Suburb E property as at December 2004 onwards until its sale in March 2007. Moreover, the sale of that property fully funded the purchase of the property known as Property A for $886,403.19 (including costs of acquisition) where the parties then lived until October 2008.
Only some two months after the parties had commenced cohabitation, that is, on or about 24 February 2005, the wife received as her property settlement from her previous marriage the following items at the following values which are not in dispute:
a)
I Street, Suburb E
$850,000.00
b)
Mercedes Benz C200 Kompressor motor vehicle
$50,000.00
c)
Furniture and effects
$10,000.00
d)
NAB Bank Account
$1,208.00
e)
G Pty Ltd
$364,166.00
f)
M Pty Ltd
$227,540.00
g)
Superannuation
$449,368.00
TOTAL
$1,952,282.00
It is to be noted that whilst the wife’s I Street, Suburb E property can be accepted to have had a value of $850,000 as at the commencement of the parties’ cohabitation, when it was sold in 2007 it was sold for $950,000. Notably, the sale of this property and the use of its sale proceeds occurred before the husband’s sale of his F Street property as earlier referred to. I accept the wife’s evidence that no real estate agent’s sales commission was payable on the $950,000 sale of the Suburb E property because no agent was involved in that sale.
I note in passing that at paragraph 5.4 of the written submissions on behalf of the husband, after referring to the wife having brought in assets of approximately $1,952,000 and using the figure of $449,000 for the husband it was contended “the husband came into the relationship with assets representing approximately 25 per cent of the asset pool…”.
Even on those figures the husband’s asserted contribution does not amount to 25 per cent. $449,000 is 18.7 per cent of that combined total. If the figure of $350,000 is used, the husband’s proportion reduces to about 15 per cent of that total and I have already referred to reasons why using a figure of $350,000 as being contributed solely by the husband ignores the wife’s contribution to that amount. This exercise also credits the husband with the sale proceeds of the F Street property received in May 2008 but does not likewise credit the wife with the sale proceeds of the I Street, Suburb E property of $950,000 when it was sold, in lieu of the historical value of $850,000.
To compare like with like, if the husband were to be notionally credited with introducing capital of $350,000 the wife ought be credited with introducing $2,052,282 given the sale proceeds for her Suburb E property. Thus, in relative terms, the husband’s capital introduced cannot be argued to be greater than about 14.5 per cent (and is more accurately less given the wife’s contribution to that) of the total of capital, and that introduced by the wife is about 85.5 per cent (and is more accurately greater given the wife’s contribution to the $350,000) of that total, before liabilities are taken into account.
I accept the wife’s evidence that her only liabilities at the commencement of the relationship were a credit card debt of $4,000 and a liability in relation to commission payable in the sum of $1,500.
With respect to the husband, the wife’s affidavit filed 10 August 2012 tabulates (at paragraph 30) what the wife says about the husband’s asset and liability position. Relevantly it includes estimates of accrued child support liability owed by the husband in an estimated amount of $25,000 as well as a debt said to be owed to the ATO.
Presumably any debts for the business, for taxation or otherwise were absorbed in the business sale already discussed and the sale of F Street already discussed. More problematic is reaching any firm conclusions as to any outstanding child support liability owed by the husband when cohabitation commenced. Curiously, in his affidavit evidence, whilst the husband traverses some of the contents of the wife’s material, he does not descend to any detail at all about the alleged child support debt. It was obviously within the husband’s means to answer the wife’s case in this respect.
The evidence does not permit precise findings but it would seem to be more probable than not that child support was payable by the husband and there may well have been a debt for child support outstanding when the parties commenced cohabitation. It is clear that child support payments by the husband had to be made during the currency of the relationship, as will be further discussed.
I therefore do not deduct the wife’s modest liabilities from the assessment of capital disparity as I infer from the husband’s failure to address the issue of child support that he probably owed more than the wife’s total liabilities.
Capital Losses
Predominantly as a consequence of the effects of the global financial crisis upon the property market in the Gold Coast area, over the course of their short relationship and until trial, substantial losses were sustained by the parties in respect of real properties bought prior to the decline in the market and sold or retained subsequently.
The end result is that from a notional combined starting point of a capital position in the order of $2.3 million, more than $1 million of that had been lost by the time of trial.
Whilst neither party ultimately sought to attribute sole responsibility to the other for any loss referable to particular items of real property or other assets bought and sold during the relationship, and there is therefore no forensic need for the Court to undertake some kind of audit as to these losses, some brief reference to some more significant transactions illuminates the nature and type of losses involved.
The real property known as Property A was purchased on 14 March 2007 for $886,403 (including stamp duty, adjustments and legal fees) and was sold some three years post-separation in October 2012 for $555,000. Without including all acquisition or holding costs over the five and a half years the property was held, or disposal costs, a capital loss of about $330,000 can be identified in respect of that transaction alone.
The jointly owned property known as the B Street property which is still retained by the parties was valued at trial at $930,000. It was purchased on 3 October 2008 for a price of $1,333,000, a difference of $403,000, ignoring any other costs.
The property at L Street, Suburb N was purchased on 26 July 2007 for acquisition costs of approximately $725,000 and was sold on 3 October 2008. After legal fees and adjustments, $667,000 was received from the sale, a difference of $58,000.
Only months before final separation, in July 2009, the parties expended about $150,000 on the acquisition and subsequent additions to a Type O boat which was sold post-separation in June 2012 for $92,000, a difference of $58,000 leaving aside maintenance and other costs incurred during the period of ownership.
In broad terms, by reference to the wife’s affidavit for trial, something in the order of about $100,000 in losses would be accounted for by reference to motor vehicles and motor cycles bought and sold during the period and the parties spent between $80,000 and $100,000 on an extended overseas trip taken early in their relationship.
Factoring in other expenses associated with multiple real estate transactions undertaken such as the costs of acquisition and disposal of the various real properties bought and sold during the relationship; the expense of interest on various mortgages obtained and other property holding costs; these together with the above items referred to account for the overall substantial loss of capital.
Thus it is that a central issue in this case is not only how disparity of capital introduced by each party in a relatively short marriage is to be treated, but also how substantial losses of capital are to be reflected in appropriate s 79 orders now made adjusting the parties’ interests in property which remains.
Credit Issues
The nature and degree of disputed issues of fact as between the parties and conduct of the husband which will now be discussed renders it necessary to address credit issues. The wife contends that such is the degree of departure of the husband from reasonable standards of probity that the Court ought conclude that her evidence is to be preferred to that of the husband on disputed issues of fact.
I find that the husband’s credibility as a witness and his personal honesty and integrity are demonstrated to be fundamentally flawed by reference to his conduct surrounding his 3 June 2012 sale of a then jointly owned asset, a Type O boat registered number … named “AB” (“the boat”).
The purchaser of the boat, one Mr C provided an affidavit filed on 20 August 2012 in the wife’s case. Mr C was not required for cross-examination by the husband and thus his evidence went unchallenged. I accept the evidence of Mr C.
The wife’s evidence on this topic (paragraphs 112 and following of her affidavit filed 10 August 2012 and associated annexures) which evidence I accept, establishes that:
a)No later than March 2012 the wife was agitating for the sale of assets, including the boat, because she had no access to funds;
b)The wife’s clear position was that sales of assets, including the sale of the boat, were to be conducted in consultation. On 3 April 2012 the wife, by her solicitor, sought from the husband via his then solicitors, an undertaking not to sell the boat without the wife’s consent and pointed out that the wife ought be kept informed of any enquiries in relation to the sale of the boat;
c)On 24 April 2012 the wife, by her solicitors, confirmed to both the husband via his then solicitors and to one Mr P, the broker with whom the husband had unilaterally listed the boat for sale, that Mr P did not have the wife’s authority as joint owner of the boat to sell or deal with it;
d)
On 31 May 2012 at a directions hearing before Registrar Coutts, the wife foreshadowed, as she had done at a previous court event, an application being made by her for orders regulating the sale of,
inter alia, the boat;
e)On 5 June 2012, obviously unaware that the husband had already effected a sale of the boat on 3 June 2012, the wife caused her solicitors to forward to the husband’s then solicitors, proposed consent orders to, inter alia, regulate the sale of the boat.
Mr C’s evidence establishes that he purchased the boat, via Mr P’s brokerage firm, on 3 June 2012 for a price of $92,000. As already noted above, the acquisition of the boat in July 2009 together with additions of improvements to the boat had cost about $150,000.
To compound his position in this context (if that be possible) at paragraph 86 of his affidavit filed 1 March 2013 the husband swears to directly telling the wife a blatant lie on 8 June 2012. At that paragraph the husband refers to the wife’s attendance at the B Street home and when she asked “where’s the boat?” the husband deposes that he replied to the effect that the boat was being repaired and effectively attributing then responsibility to the wife for that. In fact, as Mr C’s evidence establishes, the boat had already been sold on 3 June. The repairs had been effected months earlier, in January, on the invoices provided by the husband.
Not until 13 June 2012 did the husband impart to the wife that the boat had been sold. However the husband sought to deceive the wife and her solicitors about that sale. Annexure “GG” to the wife’s affidavit of 10 August 2012 being correspondence from the husband’s then solicitors to the wife’s solicitors establishes that:
a)The husband instructed his solicitors, falsely, that the sale price for the boat was $55,000;
b)The husband instructed his solicitors, falsely, that the net amount he received from the sale was $53,185;
c)The husband instructed his solicitors, falsely, that he had sold the boat “privately” i.e. not via any broker.
On 14 June 2012, the husband falsely created an email “receipt” in respect of the boat sale asserting a total price paid of $53,185.00 and that the sale was “private” and that the sale was effected on 6 June 2012. The husband caused that false document to be provided to the wife’s solicitors by his then solicitors.
On 25 June 2012 the husband, by then acting for himself, wrote to the wife’s solicitors again falsely asserting the boat had been sold for $55,000 and that “the price achieved for the boat was the best possible price considering the poor economic market to sell the boat …”.
On 10 August 2012, the husband asserted that of the money received by him from the sale proceeds “these only cover the cost of repairs and maintenance to be able to insure and sell the boat, plus mortgage arrears on the [Property A] unit.”
It might have been thought that when it became obvious to the husband that the wife and her solicitors were not satisfied about the husband’s disclosure concerning the sale of the boat and were pursuing enquiries with the purchaser, Mr C, the husband might finally reflect upon his conduct and volunteer the truth. Alas, that was not to be.
At a compliance hearing before Registrar Coutts on 13 August 2012, to the husband’s knowledge the Court was informed of the prospect of Mr C being issued with a subpoena to give evidence at the trial at the instigation of the wife.
On Mr C’s evidence, on that very day, he received a telephone call from the husband to tell him “I just want to give you the heads up. You are going to be subpoenaed”.
Crucially it was in that telephone call that the husband requested of Mr C that the latter give false evidence to the wife and, presumably if necessary, ultimately to this Court. I accept Mr C’s evidence that the husband “asked me to recite a story for him and said words to the effect ‘can you tell them that you paid $53,185 for the boat and that the balance was for a car loan’”.
Even when Mr C clearly indicated in that telephone conversation of 13 August 2012 to the husband that he would not provide such false information, the husband still did nothing to redress his conduct. Mr C attended on the wife’s solicitors on 14 August 2012 to compile his affidavit filed in these proceedings as referred to. It was only via her solicitors’ pursuit of this issue and Mr C’s cooperation that the wife actually learned the truth.
In my judgment the husband’s conduct, in terms of its gravity, goes well beyond a failure of his absolute duty to make full and true disclosure in these proceedings. In his attempt to secure a financial advantage for himself it appears that, prima facie, the husband has gone so far as attempting to pervert the course of justice by attempting to have a witness, Mr C, provide false evidence to corroborate the husband’s attempt to defraud the wife and to mislead this Court.
This Court is not prepared to act upon or accept any uncorroborated evidence of the husband either generally or in respect of what he asserts in relation to the sale of the boat or his use or dispersal of the $92,000 sale proceeds for the boat.
The husband’s deceptive conduct, knowing that the wife wished to have involvement in the sale and method of sale of assets, leaves open questions as to whether the sale of the boat actually achieved fair market value or the best obtainable price for the asset.
It follows that the Court is not prepared to act on the uncorroborated evidence of the husband as to how the $92,000 of sale proceeds for the boat were disbursed. Nor is it to be concluded that this was fair market value.
At paragraph 51 of his affidavit filed 1 March 2013, the husband asserts that he effected repairs to the boat “in January 2012 at a cost of approximately $12,000”. He attaches as Annexure “E” receipts. The actual receipts attached (leaving aside an attached “schedule”) total only $5,975 and of that total amount, approximately $1,047 is a receipt for insurance premium, not repairs.
In any event, the husband had the exclusive use of the boat in the period under discussion and if he effected repairs in January 2012, that was probably to his own benefit.
In paragraph 52 of his affidavit, the husband asserts that “after payment of Mr [P’s] commission and expenses, the sum of $81,500 was received” implying that Mr P’s “commission and expenses” were $10,500 on a $92,000 sale. No documents were put into evidence by the husband to corroborate or verify such expenses. That is in circumstances where the wife’s evidence establishes that Mr P was advised that he did not have the wife’s authority as joint owner to sell the boat. The wife’s evidence also establishes that Mr P would not respond to enquiries made of him about the sale and that the husband was clearly on notice that full and complete disclosure was required in relation to disbursement of the sale proceeds.
In these circumstances, if the husband in fact incurred any liability for commission or expenses, he did so without reference to, and without the authority of, the wife and he provides no corroborative evidence of any actual amount incurred. Conversely, it is difficult to see how Mr P could legally purport to charge commission or brokerage in respect of a sale of an asset when he was on notice from the wife, via her solicitors, that she did not authorise him to sell the boat.
The evidence which is corroborated is that from $92,000 the wife received $33,960 of the proceeds. The wife has acknowledged that the husband paid $6,501 of the proceeds towards the Property A mortgage, leaving a balance of $51,539. I accept the wife’s evidence and her approach that it is that amount which should be accounted for by the husband.
Moreover, given the amount involved and the lack of cooperation from Mr P in providing information to the wife the Court is, in all the circumstances, left with significant disquiet as to the true position as to the arrangements between the husband and Mr P as to the latter’s alleged receipt of $10,500 in alleged commission and expenses. I return to this aspect later in these Reasons.
I record that Ms Bulyk for the husband was given the opportunity during submissions to address the Court on the question of the Court referring the husband’s conduct to relevant authorities (Malpass & Mayson[3]). In my judgment the gravity of the husband’s conduct demands such referral and the orders made will include orders for that to occur.
[3](2000) FLC 93-061.
Whilst not of the same gravity as the husband’s fraudulent conduct concerning the sale of the boat there were other troubling aspects of the husband’s evidence in terms of his credit.
For example, in his affidavit filed 13 August 2012 the husband swore as the truth the following:
I also have the duty to support my mother and father at my home, both parents are aged pensioners, my mother has had recent bowel cancer surgery while my father has onset Alzheimer’s disease.
(Emphasis added)
At paragraph 48.2 of her affidavit filed on 27 February 2013, the wife deposes to contacting the husband’s parents at their home in South Australia after receiving that affidavit both in August 2012 and again in February 2013.
Cross-examined about that, the husband acknowledged that he did not have his parents living with him at his home when he swore the earlier affidavit and suggested that what he intended to convey was that at some indeterminate time in the future he would have the need to support his parents. I do not accept this was a matter of mistake or omission. In my judgment, the husband clearly intended to falsely convey what his August 2012 affidavit did convey.
An issue agitated by the wife in these proceedings was the child support paid by the husband in respect of his children from his earlier marriage and the extent to which the wife funded such payments from her own resources.
At paragraph 100 of her affidavit filed 10 August 2012, the wife details information provided by the husband to the Child Support Agency on 27 March 2008. Exhibit 4 in the proceedings is a letter constituting an objection to a decision made by a senior case officer of the Child Support Agency, dated 27 March 2008, expressed to be by the husband and under his name.
When cross-examined about Exhibit 4, the husband disavowed the document. He asserted that he had only seen that document for the first time on the morning of the first day of trial. However, it was demonstrated that the document had been disclosed to the husband and a copy provided in March 2012 (Exhibit 9) and it is listed in the wife’s list of documents provided in July 2012. The husband had been aware of the contents of paragraph 100 of the wife’s affidavit since August last year, but produced no evidence via, for example, subpoenaed documents from the Child Support Agency to challenge the provenance of Exhibit 4. I reject the husband’s evidence on this topic. It is explained by the husband’s desire to disavow the content of Exhibit 4. I accept the accuracy of what is contained in Exhibit 4 as concerns the level of child support being paid by the husband during the period of cohabitation; and as to the assertions of his lack of contribution to the acquisition of the properties referred to in that correspondence.
The orders of 20 June 2012 made by consent included provision for sale of the property known as Property A. The initial listing price of the property was to be as agreed between the parties and failing agreement, as advised by the listing agent.
The evidence establishes that prior to the parties ultimately entering into the contract for sale, the husband was agitating that the market was falling and the property was worth less than the $555,000 contract price ultimately achieved. When that contract arrived, the husband maintained the property was worth significantly more. Under pressure, the contract was ultimately signed at the $555,000 price.
During a later meeting with the wife’s legal representatives, the husband was challenged about his apparent change in position regarding the value of Property A. As the affidavit of Alexis Vaughan filed 26 February 2013 confirms, when asked about the variations in his position as advised to the agent, the husband asserted “… conversations don’t mean anything. What wasn’t written wasn’t said.” In my judgment that reveals a troubling attitude by the husband about being truthful.
Finally with respect to the husband’s credit, the wife agitated issues concerning the husband’s sale of a Mercedes Benz motor vehicle the value of which had been agreed during 2012 at an earlier stage of these proceedings.
The agreed value was, I accept, $54,000. The wife contended at trial that this amount ought be included.
The husband’s case is that he sold the vehicle in late 2012 for sale proceeds of $38,000. Given the wife’s experience with respect to the boat as earlier discussed, it is unsurprising that she would insist upon documentation to corroborate the husband’s evidence on the figures concerning the sale of the Mercedes Benz. Despite that request the husband provided no documents, even as at the conclusion of the trial, beyond a bank statement showing a deposit for $38,000 which the husband asserted was the sale proceeds.
When Mr Kirk cross-examined the husband about his failure to provide documents to corroborate the husband’s assertion as to the sale price obtained the husband asserted to the effect that if he had been asked for documents he would have provided them. That answer implied that no such request had ever been made. Only when Mr Kirk produced a letter containing such a request did the husband acknowledge his failure to meet it. As noted, it was a failure never cured by the husband as at the trial’s conclusion.
Given the foregoing, the husband’s evidence where uncorroborated has to be treated with significant caution.
In her final submissions the solicitor for the husband acknowledged that there were no issues concerning the wife’s creditability as a witness, and I find her to be a credible witness.
The Stoian Superannuation Fund (“the Fund”)
Mr H, chartered accountant and partner of Q Accountants, was appointed the single expert to audit and value the self-managed superannuation fund known as the Stoian Superannuation Fund (“the Fund”). His affidavit and report was filed on 27 February 2013.
At paragraphs 9 and 10 of his report Mr H records the statement of financial position for the Fund as at 30 June 2012, establishing the net assets of the Fund, at market value as at 30 June 2012 to be $724,471. He noted, however, that included in those net assets are “receivables” in the form of loans to the parties as members totalling $216,447.90.
Mr H’s affidavit and report relevantly contains the following:
The net assets of the Fund, at market value, as at 30 June 2012 is $724,471.00.
Included in the net assets of the [Stoian] Superannuation Fund are receivables (loans to members) totalling $216,447.90. On a member allocated basis, this amount is split as follows:
Ms [Stoian] $129,011.13
Mr [Fiening] $87,436.77
Mr H included an unsigned copy of his audit report for each of the 2010, 2011 and 2012 years noting the reports to be prepared in accordance with the requirements of the ATO.
Mr H further records in his report:
These audit reports, together with copies of the trustee representation letters, have been provided to the Husband and Wife for review and signing. At the date of this report, only the Wife has returned signed trustee representation letters, signed trustee declarations and signed members’ statements to me. I am precluded from signing my audit reports until both trustees have signed and returned the trustee representation letters and signed trustee declarations to me.
Furthermore, the audit cannot be complete until I have signed my audit reports. This is also preventing lodgement of the Fund income tax and regulatory returns for the three years in question, as these returns cannot be lodged until completion of the audit.
Upon completion of my audit, I am obliged to advise the ATO if there has been a breach of the Superannuation Industry (Supervision) Act 1993 and associated Regulations. As reported in paragraph 10 above, the [Stoian] Superannuation Fund has provided financial assistance to members, which is a breach of the legislation. Upon completion of the audit, it is a requirement that I notify the ATO in writing of this breach.
The evidence establishes that in each of the 2009, 2010 and 2011 financial years, amounts were withdrawn from the Fund totalling $216,447.90. The wife has caused the accounts for the Fund and income taxation returns for the Fund for those years to reflect $87,437 of the total as being monies loaned to the husband as a member with the balance of $129,011 being treated as loans to the wife as a member.
It is not in issue that such withdrawals, as noted and treated in the records of the Fund as loans to the parties as members of the Fund, were in breach of the Superannuation Industry (Supervision) Act 1993 (Cth) and associated regulations.
Section 65 of the Superannuation Industry (Supervision) Act 1993 (Cth) prohibits such loans to members. As at trial there was evidence as to the prospect of the ATO imposing penalties as a result of the breach of this legislation.
As noted, Mr H recorded that he was precluded from signing his audit reports until both parties, as trustees, had signed and returned the trustee representation letters and had signed trustee declarations; and Mr H recorded his obligation to advise the ATO of the breach referred to.
On 5 March 2013, the second day of the trial, orders were made by consent that, inter alia, both parties do all acts and things reasonably necessary to cause the audit reports and taxation returns for the Fund for the 2010, 2011 and 2012 financial years to be completed and lodged. The husband was at liberty to place whatever qualification he wished to place on the record concerning the loan account attributed to him.
There was evidence at trial both from Mr H (including what is recorded in Exhibit 14) and from one Mr S, the parties’ accountant, as to a range of possibilities in terms of the ATO’s possible imposition of penalties.
That evidence, and indeed the wife’s final submissions, included reference to the possibility at least of the ATO imposing a maximum penalty of 46 per cent of the value of the assets of the Fund. Obviously, at a value of $724,471 (including the loans or withdrawals), 46 per cent of that amount would result in a penalty of $333,256.66.
The maximum penalty aside, any penalties imposed would have obvious potential for the value of the Fund.
It was not in issue, as between the parties, that the wife should solely retain the Fund, including any member benefit of the husband, as part of the property she is to receive or retain in final property orders made.
However, there was a fundamental dispute and there were fundamental differences between the parties surrounding the withdrawals from the Fund referred to and how the consequences or potential consequences of those withdrawals should be dealt with. There were also uncertainties on the evidence as to what those consequences might entail.
On the wife’s case, it was contended that the husband should be responsible for repaying to the Fund the $87,437 proportion of the withdrawals which she had caused to be attributed as loans to the husband as a member in the accounts of the Fund and in the 2009, 2010 and 2011 taxation returns for the Fund which she had caused her chartered accountant, Mr S, to prepare.
On behalf of the wife, Mr S’s written submissions at trial concluded with the following:
8. THE SUPER PENALTY
Whilst the Wife is hopeful that the ATO will not penalise the Super Fund too heavily, there are 2 matters that require Your Honour’s attention, namely:
(a)A direction/order for the Husband to do all things necessary to ensure that the Superannuation Returns are lodged immediately – we would ask for that now.
(b)An order as to how the penalties ought be paid by the parties. It would be unfair for the Wife to be solely responsible and as the Super Fund will be entirely the Wife’s (the Husband seeks this too) and the penalty will be levied against the Super Fund the Husband can escape any penalty even if he continues to co-operate in lodging the returns. This can be easily handled by ordering the Husband to meet a percentage of any penalty by paying such to the Super Fund or the Wife. We have not drafted such an order at this stage but will do so at the appropriate time. Apart from late lodgement penalties ($550 per year), the maximum penalty for non-compliance is the top marginal tax rate (46%) on the fund assets.
As to the submission in (a), as already noted the parties consented to orders being made to facilitate the lodgement of the prepared returns on the basis that the husband could place whatever limitations or qualifications upon his signature to the returns and any associated documents concerning his dispute as to the allocation of any withdrawn funds to his name.
In support of the contention of the wife that the husband ought be responsible to repay “forthwith” $87,436.77 to the Fund, and to be held responsible by order for a percentage of any penalty imposed by the ATO, the wife’s case can be summarised and paraphrased as follows:
a)Emphasis was placed upon an email of the husband to the wife, earlier in time than an email of 23 August 2010 which will be referred to, being an email dated 21 January 2010 in these relevant terms:
I am fine with you drawing on the super funds to cover the mortgage as well. I would pay it but have the Visa card to cover first. After that is paid then I will pay the mortgage.
b)In circumstances where, at separation, the husband controlled, and later occupied, the property known as Property A, upon which a mortgage had to be met; whilst the wife occupied the property known as the B Street property upon which a mortgage also had to be met, and likewise when the parties “swapped” those residences in about September 2011; the husband was aware at all material times that the only means available to the wife to meet mortgage payments and outgoings, was to draw from the Fund and he knew she was making such drawings.
c)The combined effect of (a) and (b) above is that the husband can be taken to have consented to or acquiesced in withdrawals from the Fund being made.
d)Payments to mortgages and outgoings on property were to the benefit of both parties, including the husband.
e)Other than a net $15,313.70 withdrawn directly by the husband from the Fund in the 2010 and 2011 financial years (Annexures “L” and “M” to the wife’s affidavit filed 27 February 2013) the balance of the total of $87,436.77 ascribed to the husband as drawings from the Fund comprises 50 per cent of outgoings paid, predominantly with respect to mortgages and real property outgoings on the property occupied by the wife, but also other expenses characterised as “joint” expenses by the wife in the 2010, 2011 and 2012 financial years (Annexures “N” and “O” and paragraphs 49 to 62 of the wife’s affidavit).
On the husband’s case, on the assertion that he had not consented to, or authorised, the withdrawals made, he rejected the proposition that he was responsible to repay $87,437 or any amount to the Fund, and that the wife should be solely responsible both for any necessary repayment to the Fund and any consequences of the breaches the withdrawals caused. The husband had refused to sign the 2009, 2010 and 2011 taxation returns referred to, on this basis.
I interpolate here that whilst the “Balance Sheet” in Annexure “B” to the husband’s Summary of Argument filed on the first day of trial on 4 March 2013 might indicate, by including $216,448 “repayment to superannuation” as a liability in his calculation of the divisible pool (albeit attributing that repayment to the wife) that the husband was accepting a share of that liability given its inclusion as a liability to be deducted as a Balance Sheet item.
However, both the husband’s Second Amended Response filed on the second day of trial on 5 March 2013 and the final submissions of his solicitor Ms Bulyk made it clear that the husband did not accept any responsibility or apportionment of the liability. That is, any liability to repay money to the Fund or liability for any consequences of the breach.
In terms of consequences, or potential consequences of the breach, Mr S, Chartered Accountant, did not provide any oral evidence. His affidavit filed on 10 August 2012 in the wife’s case did not address this particular issue.
However, Exhibit 2 in the proceedings was a letter from Mr S dated 1 March 2013 addressing issues concerning the Fund. It refers to a draft letter prepared by Mr S (itself in the form of a submission addressing penalties) but relevantly contains:
If after receipt of the auditor’s contravention report the Taxation Office were to make the [Stoian] Superannuation Fund non-compliant, the highest penalty which could be imposed would be to tax all of the assets of the Fund at the top marginal rate, 46% and to remove its access to future tax benefits within Superannuation and Income Tax administrations. Also, penalties of $550.00 per year for late lodgement can be applied.
After referring to interest or penalties, the letter continues:
In making these decisions the Tax Office will consider other factors around the events such as compliance history of the Fund and reasons for the withdrawals. In my experience the Australian Taxation Office is likely to be sympathetic to the circumstances set out in my draft letter.
Whilst there may be penalties, I do not believe, in my experience, that the penalties will be as significant as they might otherwise have been. However, in saying this, I am unable to predict the outcome of these withdrawals.
Exhibit 2 fell for consideration with the affidavit of Mr H filed on 27 February 2013, the Single Expert appointed to conduct an audit and valuation of the Fund as at 30 June 2012.
In her submissions on behalf of the husband Ms Bulyk, with reference to Mr S’s letter (Exhibit 2) and the draft letter therein referred to, raised that on one interpretation of Mr S’s evidence it could be concluded that the wife may be able to convince the ATO not to impose any penalties. That is, that the withdrawn monies would not have to be returned to the Fund with no penalty being imposed.
At that point it seemed that on this most favourable scenario advanced by Ms Bulyk by reference to Mr S’s evidence, the wife might retain the existing fund, $508,023.11 in net terms without any obligation of repayment to the Fund and no other penalties imposed. Of course, at the other end of the spectrum of possibilities Mr S’s reference in Exhibit 2 to “the highest penalty” which “could be imposed” would be a tax assessment of 46 per cent on “all of the assets of the fund”, that is, 46 per cent of $724,471, being $333,256.66. That would reduce the net fund (without any repayment) to only $174,766.45 and the Fund would no longer be treated as compliant for superannuation/taxation purposes.
Mr Kirk for the wife took issue during his submissions with Ms Bulyk’s interpretation of Mr S’s evidence and contended that there was no realistic prospect of the wife falling within what is known as the “hardship” provisions of the superannuation legislation both because she would not be able to demonstrate “hardship” and because she had not applied under the relevant provisions in advance of the withdrawals being made from the Fund. Mr Kirk thus contended that the withdrawn amounts would have to be repaid to the Fund.
Given the uncertainties presented and notwithstanding that the trial had reached the stage of final submissions being made, I sought from the parties and their respective legal advisors further clarification via further evidence from Mr S.
In the event, Mr S was not contactable but the respective legal representatives were able to obtain further evidence on the issue from the single expert Mr H, the expert appointed to audit and value the Fund.
The information provided by Mr H was reduced to a statement signed by the parties’ respective legal representatives and that statement was admitted into evidence by the consent of both parties as Exhibit 14. Its contents are as follows:
Position in relation to the Super Fund from [Mr H] of [Q Accountants].
1.It is highly likely that the ATO will require the monies removed from the Super Fund to be repaid to the Fund.
2.It is very rare today for the hardship provisions to be available other than when bankruptcy is close and in any event the application has to be made before the withdrawals are made.
3.If there are any properties available to fund the repayment the ATO will require those properties to be sold but they will give a reasonable time for that to occur.
4.It is also probable that the ATO will agree to a repayment program over a reasonable time frame.
It could thus be concluded from Exhibit 14 that the ATO would require that $216,447.90 be returned to the Fund (albeit on an agreed “repayment program over a reasonable time frame”) and that the hardship provisions would not be available to the wife.
Whilst Exhibit 14 did not amplify upon what “repayment program” would be agreeable to the ATO or what a “reasonable time frame” might be, the opinion as to the possibilities expressed, taken with the other evidence referred to, supported the inference that provided the repayment was made the non-compliance would be remedied and substantial penalties avoided.
That is, an inference available to be drawn from Exhibit 14, particularly paragraph 4, taken with the other evidence discussed, is that provided the $216,447.90 removed from the Fund is restored the “highest penalty” referred to by Mr S of the imposition of the tax of 46 per cent on all of the assets of the Fund would be avoided.
In support of her central contention that the husband did not consent to withdrawals from the Fund being made, Ms Bulyk emphasised the content of the husband’s email to the wife of 23 August 2010 (part of Annexure “O” to the husband’s affidavit filed 1 March 2013) which was in these terms:
It is my understanding from our discussions that you are using your Superfund money and not borrowing from friends as you first told me, to make house repayments on our [B Street] property. This practice must cease as it is illegal without proper permissions. Now that I am aware of this I recommend that you put the house on the market and accept fair market value. Once sold the super funds will need to be repaid and you can buy a property in the same market or whatever you choose to do.
Whilst Ms Bulyk did not refer the Court to any authorities it may be taken from the thrust of her submissions that the husband casts the wife’s conduct in withdrawing from the Fund as unreasonable. Thus the husband’s approach might be said to be consistent with Biltoft & Biltoft[4] (“Biltoft”) that the Court may properly determine that any liability for penalties as a consequence may be disregarded as being unreasonably incurred. Alternatively, the husband’s position might be seen as one of characterising the wife’s conduct as falling within paragraph (b) of the following oft-quoted decision of Baker J in Kowaliw & Kowaliw[5] at 76,644:
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.
[4] (1995) FLC 92-614.
[5] (1981) FLC 91-092.
In his Second Amended Response to the Initiating Application filed on 5 March 2013 by leave, in relation to the orders sought by the husband in relation to the Fund, the husband relevantly, for present purposes, sought the following order:
That the Wife shall indemnify the Husband, and keep him indemnified, in relation to any non-compliance by the fund and any payments or penalties payable as a result of the non-compliance.
On the husband’s case and the overall outcome he contended for, the wife will apparently not have the capacity to restore $216,448 to the Fund. The evidence in Exhibit 14 foreshadows the ATO taking steps to act against members of the Fund and their property to secure repayment to the Fund. Both parties are members.
In the light of Exhibit 14, Ms Bulyk’s further submissions were to the effect that whilst it was accepted that the wife would not be able to avail herself of the “hardship” provisions the husband’s position on this issue remained unchanged. That is, in summary, that the withdrawals made from the Fund were solely the responsibility of the wife; they were made over the objection of the husband and without his consent; that any consequences of that conduct by way of penalties imposed by the ATO were likewise the sole responsibility of the wife; and as the wife would retain the Fund including any member’s benefit of the husband, the wife would have that property to deal with whatever consequences flowed and in such manner as she determined.
Thus one obvious question raised, was whether the case fell to be considered in light of the wife holding a notional $724,471 in superannuation (if the Fund is restored); or $508,023 (its present net value); or $174,766.34 if the present Fund is reduced by the maximum penalty?
The issues arising out of the preceding discussion of the Fund, or more particularly the uncertainties arising out of it on the evidence, as discussed, having regard to authorities of the Full Court of this Court concerning the need to identify and value property interests as a first step and the decision of the High Court in Stanford, require careful consideration.
In Stanford the plurality identified three fundamental propositions with respect to s 79 of the Act the first of which was expressed as follows (at paragraph 37):
… it is necessary to begin consideration of whether it is just and equitable to make a property settlement order by identifying, according to ordinary common law and equitable principles, the existing legal and equitable interests of the parties in the property.[6]
(Original emphasis)
[6] Stanford v Stanford (2012) 247 CLR 108, 120 (French CJ, Hayne, Kiefel and Bell JJ).
To similar effect, in this context, are the guidelines derived from Full Court authority that determination of an application under s 79 involves as a first stage or step, identifying and determining the value of the property of the parties or either of them.[7]
[7] Pastrikos & Pastrikos (1980) FLC 90-897; Lee Steere & Lee Steere (1985) FLC 91-626; Ferraro & Ferraro (1993) FLC 92-335; Waters & Jurek (1995) FLC 92-635 and Hickey & Hickey (2003) FLC 93-143.
Thus, for example, in Re Bailey & Bailey[8] the Full Court held that because the question before the Court in the s 79 application was what property of the parties the s 79 order sought to effect, and the nature and extent of that property could not be determined until proper liabilities had been ascertained, then it was appropriate to stay the proceedings until such time as the liabilities were determined.
[8] (1990) FLC 92-117.
Given my delay to that point in delivering judgment following the trial and with these issues in mind, I required the matter to be re-listed to examine whether any further relevant evidence had come to light since the trial as to the position of the ATO concerning any penalties of the Fund that were in contemplation by the ATO, given Mr H’s earlier evidence of his obligation to advise the ATO of the breach of the superannuation legislation.
Thus the matter was reopened in a hearing on 28 January 2014. For the purpose of that hearing the wife was given leave to read and rely upon the affidavit of Mr S, the accountant for the wife and for the Fund, filed on 23 January 2014.
Mr S’s affidavit revealed that on 24 June 2013 the ATO had advised the Trustee of the Fund that the Fund had been selected for audit in respect of contraventions reported by Mr H for the period 1 July 2009 to 30 June 2012. Moreover, Mr S’s evidence was that whilst the ATO intended to complete the audit by 4 November 2013, that was qualified by the advice “this will depend upon the specific details of your case”. Mr S’s affidavit confirmed that he had heard no further from the ATO since that advice.
Otherwise, Mr S’s affidavit addressed the means by which penalties might be avoided or minimised and the penalties that might apply otherwise, consistent with the evidence of Mr H at trial as earlier referred to.
Based upon this evidence the Court sought the attitude of both parties to the proceedings being stayed pending any further determination by the ATO of the subject issues. Neither party sought a stay and indeed both opposed that course. Ms Keating, solicitor for the wife, highlighted that, in effect, it was unknown when the ATO might finalise the audit and a great of deal of time might elapse with the matter not being advanced. The husband, who appeared for himself on that occasion, likewise sought that the Court proceed to determine the matter notwithstanding the uncertainties surrounding this issue.
Recognising that in Stanford the plurality were addressing the “power given by s 79”[9] and that s 90MS makes it clear that a payment splitting order is made “in proceedings under s 79” in my view the first fundamental proposition as stated is applicable to superannuation interests.
[9] Stanford v Stanford (2012) 247 CLR 108, 120 (French CJ, Hayne, Kiefel and Bell JJ).
The question is whether the issues discussed in relation to the Fund renders the fundamental proposition highlighted in Stanford, that consideration of whether it is just and equitable to make a property settlement order begins with identifying the existing legal and equitable interests of the parties in the property, incapable of fulfilment with respect to the Fund?
I have resolved, not without some hesitation, that this is not the case for reasons which follow. Moreover, I have resolved, likewise not without hesitation, not to stay the proceedings pending the outcome of the audit of the ATO for these reasons.
First, the nature of the parties’ existing interests in property, and how those interests are held, including in relation to the Fund, is not in doubt. The uncertainties attending potential penalties that may in the future be imposed by the ATO are contingent and rest upon future events, including the outcome of the audit. There is no currently existing or determined penalty. Moreover, penalties imposed may affect the value of the interests held but not their nature.
Second, even if value is an important or even critical element in the process of identifying existing legal and equitable interests in property the fact that more than one value, or potential range within which the actual value might fall, dependent upon variable factors, would not seem of itself to necessarily render consideration of that starting point impossible.
Third, in Stanford the plurality stated (at paragraph 40):
…To conclude that making an order is ‘just and equitable’ only because of and by reference to various matters in s 79(4), without a separate consideration of s 79(2), would be to conflate the statutory requirements and ignore the principles laid down by the Act.[10]
(Original emphasis)
Whilst the plurality there explained that it would be wrong to conclude that making an order is “just and equitable” only because of or by reference to the s 79(4) matters, the plurality did not say that reference to s 79(4) matters was irrelevant to such a conclusion. At paragraph 36 the plurality stated:
As has already been emphasised, nothing in these reasons should be understood as attempting to chart the metes and bounds of what is ‘just and equitable’. Nor is anything that is said in these reasons intended to deny the importance of considering any countervailing factors which may bear upon what, in all the circumstances of the particular case, is just and equitable. In particular, as the Full Court pointed out in its first judgment in this matter, the magistrate erred in not taking account of the consequences that would follow for the husband if a property settlement order were to be made in the terms which were sought on behalf of the wife. The husband would be required to sell the matrimonial home, in which he was still living, despite the needs of his wife then being met by the provision of full time care, a further provision of money against future contingencies and the possibility, if needed, of making a maintenance order. [11]
(Original emphasis)
Thus it would seem that reference to s 79(4) matters may be a legitimate and important part of, but not the sole reason for, the conclusion that making an order is just and equitable.
[10] Stanford v Stanford (2012) 247 CLR 108, 121 (French CJ, Hayne, Kiefel and Bell JJ).
[11] Stanford v Stanford (2012) 247 CLR 108, 123 (French CJ, Hayne, Kiefel and Bell JJ).
Finally, for the reasons that will be outlined as to the outcome and orders I have resolved upon, I am satisfied that the wife will have sufficient property to likely remedy or rectify the problem so as to avoid or minimise penalties and, as already noted, both parties opposed the proceedings being stayed.
I find that the present value of the Fund is $508,023 being the value remaining after the withdrawal/loan amounts to the parties. That value is obviously at risk of reduction for penalties as earlier discussed that may be imposed by the ATO in future.
I accept the wife’s evidence in preference to that of the husband that in the 2010 and 2011 financial years, the husband directly withdrew from the Fund a net total of $15,313.70.[12]
[12] Paragraphs 51 to 55 of Wife’s Affidavit filed 27 February 2013 and Annexures.
I reject the contentions on behalf of the husband, which mainly rely upon his email to the wife of 23 August 2010 earlier referred to, to the effect that the husband did not consent to, or acquiesce in, withdrawals being made from the Fund; and that the wife should thus bear sole responsibility for such withdrawals; for these reasons:
a)Accepting the wife’s evidence in preference to that of the husband as to the husband’s own withdrawals from the Fund, it can be seen from Annexure “M” to the wife’s affidavit filed 27 February 2013 that the husband himself made several withdrawals, totalling $3,592.76, after his email of 23 August 2010;
b)It is clear from the husband’s email dated 21 January 2010 that the husband was then content for the wife to draw on the Fund to pay mortgage payments (and to relieve him of that need); and the husband well knew that this was, then and thereafter, the only means available to the wife to so do;
c)As a co-director with the wife of the trustee company (M Pty Ltd) of the Fund it was at all times within the husband’s power to take steps to prevent withdrawals being made from the Fund if he truly was insistent on further funds not being withdrawn. That is, his email of 23 August 2010 was not supported by any subsequent action on his part when he well knew the wife would be continuing to use the funds to support mortgage payments on an asset or assets in which he had an interest; and the use of the withdrawals were thus for his benefit; and he could have prevented them had he wished to do so.
Assessment of Contribution
As has already been discussed, there is a very substantial capital disparity in favour of the wife in terms of capital introduced. In a relationship as short as this one was, which produced no children, such capital disparity has fundamental significance.
Moreover, aside from the dollar value differences of the capital disparity between the wife’s contribution and the husband’s contribution respectively, it is important to recognise, as a contribution by the wife, the fact that the parties lived in the wife’s Suburb E property from December 2004 until its sale in March 2007; and then in Property A, fully funded from the sale of the Suburb E property.
It is well settled that provision of accommodation is in and of itself a contribution. Moreover, as also already discussed, provision of that accommodation to the husband allowed him to rent his F Street property and from that rental income, mortgage payments on the property were met.
The capital introduced by the wife at the outset included her investment in G Pty Ltd of $364,000 and in M Pty Ltd of $227,000. She also had her self-managed superannuation fund then worth $449,368. It is obvious from the wife’s evidence, which I accept, that she derived significant investment income from the capital introduced. That is, it is not only the dollar value of the wife’s capital but also the income derived from that capital thereafter that the wife contributed.
As at the commencement of cohabitation the husband was pursuing his business known as Business K. I accept the submission on behalf of the wife that when the evidence concerning the performance of the business is considered, including the evidence that when sold the business could not meet all business debt, it is more likely than not that the husband’s financial circumstances were such that he was only able to meet mortgage repayments on his F Street property by being accommodated in the wife’s Suburb E property allowing the husband to use rental he received from the F Street property to meet the mortgage payments.
It was demonstrated in the course of cross-examination that in the early period of the relationship the husband continued to borrow sums against his F Street property mortgage to meet liabilities. These included the borrowing of $21,000 on 3 May 2005; $8,500 on 30 August 2005 and $8,000 on 10 May 2006. The evidence is also that the husband resorted to withdrawing $900 on his mortgage as at January 2006. That reflects an inability of the husband to meet his expenses from income derived from the business.
Notably, the husband’s taxable income for the year ended 30 June 2005 was $6,365 and for the year ended 30 June 2006 was $7,297.
The financial accounts for the business show that as at 1 July 2004 there were accumulated losses of $103,437 with a profit of $52,786 being made in the year ended 30 June 2005 and a loss of $14,786 being made in the year ended 30 June 2006.
In May 2006 the husband sold the business and as already discussed the net sale proceeds were insufficient to pay all business debts. Then it was that between July and December 2006 the parties travelled overseas for an extended six month holiday. Save for approximately $18,000 which the husband drew down on his mortgage as his contribution to expenses, the wife funded the holiday. Estimates of her funding vary from $80,000 to $100,000 but it is unnecessary to identify the precise amount. All that need be observed is that overwhelmingly the wife contributed the funding for the six month holiday taken.
It was not until January 2007 that the husband returned to external paid employment. Obviously enough that is a little over two years after the parties commenced cohabitation in an overall period of cohabitation of four years ten months.
I accept that aside from providing rent free accommodation the wife assisted the husband with his debts and in particular with child support, the level of which is reflected in Exhibit 4. Obviously the wife was predominately responsible for the costs not only of the overseas holidays but the husband’s costs of living. It is clear enough that the husband did not have the capacity, in the period under discussion, to meet such costs without the wife’s assistance.
I accept the wife’s evidence that she worked in the husband’s business after commencement of cohabitation until the business was sold in May 2006 without receiving any remuneration for her work. The wife also worked externally between January 2006 and July 2006 and again between March 2008 until August 2008. I reject the husband’s attempts to portray the wife’s participation in his business as disruptive and that it was simply the means by which she received training from the husband. I find that the wife did make a contribution to the husband’s business albeit that the business was not successful in a financial sense.
In March 2007, the wife sold her Suburb E home for $950,000 without incurring any commission. She used the proceeds to fully fund the purchase of Property A for a total amount of $886,403 and the parties commenced residing in Property A.
In April 2007, the parties commenced their endeavours concerning the purchase of investment properties with the purchase of Property 1, V Street, Suburb W and Property 2, V Street, Suburb W. As is confirmed by Exhibit 4 and by the husband in his oral evidence in cross-examination, it was the wife who provided all of the parties’ equity in those investment properties.
In the course of these proceedings, via affidavits, the husband has given varying estimates of the amount of income he says he earned and contributed during the relationship. Exhibit 11 is a schedule constructed from the husband’s taxation returns as to his income taking into account also the negative gearing expenses for rental properties. Exhibit 11, taken with the cross-examination of the husband in relation to Exhibit 11, confirms that the net income after tax contributed by the husband to the relationship is substantially less than his claims of as much as $450,000. Exhibit 11 demonstrates that to 30 June 2009 the husband earned a total of net after tax income of $165,905 before any accounting for negative gearing. The parties finally separated in October 2009. As already noted, the nature of the capital investments the wife held at the outset of the relationship meant that she earned significant income from her investments.
The wife also contributed the income from employment she earned during the periods of external employment already referred to.
It can be accepted that both parties contributed their respective incomes derived during the course of the relationship to the relationship. However, for the reasons discussed, I do not accept the husband’ s contention that his contributed income during the relationship was at the level of “$450,000” as he asserted in his affidavit filed 13 August 2012. The more modest figures in paragraph 26 of the husband’s affidavit filed 1 March 2013 are gross figures and the net (after tax amounts) are set out in Exhibit 11. The wife sets out her taxable income during the relationship at paragraph 37 of her affidavit filed 10 August 2012, which was not challenged.
Whilst it can be accepted that from the net proceeds of the F Street property received by the husband in May 2008 of approximately $347,000, the husband contributed $30,000 to the Fund, it would be double-counting that sum as a contribution given account already being taken of the net proceeds in the discussion already outlined of the parties’ respective capital contributions. Moreover, reference has already been made to the wife’s contributions allowing the husband to hold and rent that property until it was sold and the fact that rental income was applied to the mortgage on the property.
I interpolate here that there is an obvious internal inconsistency in the husband’s affidavit filed 1 May 2006. At paragraph 13 the husband asserts that he contributed $30,000 to the Fund when he sold his business in May 2006. However as paragraphs 21 and 22 of that affidavit makes clear, the business sale proceeds were insufficient to pay business debts, let alone allow a contribution to superannuation. There was only one $30,000 contribution by the husband to the Fund and it came from the sale of F Street.
Similarly, whilst it is the fact that about $250,000 of the F Street sale proceeds were applied to mortgage debts on the two investment properties the parties then held (Property 1 and Property 2, V Street, Suburb W) the capital contributed has already been taken into account.
In terms of each party’s capacity to contribute financially during the relationship I accept the wife’s evidence that in August 2008 she suffered a breakdown and was diagnosed with a major depressive illness. I accept that her illness prevented her from engaging in employment for the balance of the cohabitation period, and apart from working as a casual worker from approximately June 2011 to September 2011 when she earned approximately $6,000, she did not work in the post-separation period as at trial.
As at the date of the parties’ separation the wife was unable, by reason of her health difficulties, to engage in employment. The husband’s income from employment had by then risen to gross annual income of about $90,000.
I interpolate here that post-separation the husband’s annual income increased to in excess of $110,000 in the 2010 financial year and increases thereafter took it to in excess of $140,000 as at trial. There is thus some irony in the husband’s complaints to the effect that during the relationship the wife wanted him to sell his Business K and, as he would have it, the wife applied pressure upon him to achieve that outcome. When regard is had to the working hours/seven days a week schedule the husband says he devoted to the business for, at best, very modest financial returns, and comparison is made between the historical financial return from the business as compared with the income as a professional the husband has derived since, these criticisms by the husband ring somewhat hollow.
The parties were living in their jointly owned property at B Street, Suburb R when they separated on 26 October 2009. They also jointly owned the then rental/investment property known as Property A, a two bedroom sub-penthouse apartment at X Street, Suburb Y. Both properties were then subject to mortgage debt.
I accept the wife’s evidence that from 2 December 2009 the husband
re-directed rental income of $650 per week from Property A to his own account whilst meeting interest only payments on that mortgage. In October 2010 the husband commenced residing in Property A but was still able to rent the other bedroom for $250 per week.
By August 2011 the mortgage repayments on the B Street property that had been met by the wife from capital including withdrawals from the Fund, were unmanageable for her and the parties agreed to “swap” residences. Thus the wife lived in Property A from then until its sale in September 2012. She has accommodated herself elsewhere ever since.
For his part, the husband has continued to have the significant benefit of occupying the B Street property, whilst meeting the monthly mortgage payment, and has accommodated his current wife and their children in that property.
Notwithstanding the wife’s incapacity for work and the income the husband has earned post-separation, other than contributing mortgage repayments and outgoings (on property where he was accommodated and in which he had a financial interest as outlined) the husband has not paid spousal maintenance to the wife.
In a cohabitation relationship as short as this one, which did not produce children, homemaking contributions do not assume the significance they might otherwise have or such significance as compared to financial contributions. Nevertheless, I accept the wife’s evidence, and reject contrary contentions of the husband, that the wife bore the major share of homemaking tasks during the relationship.
Indeed accepting as I do the evidence of the wife in preference to that of the husband, I find that in relation to non-financial contribution and financial contribution not already discussed the position may be summarised as follows:
a)Shortly after commencing cohabitation, the wife worked for no remuneration on essentially a full-time basis in the husband’s business;
b)Between January 2006 and May 2006 the wife continued working in the husband’s business after hours whilst also working on a full-time basis externally;
c)During the marriage the wife assisted with maintenance of the F Street property; management of the tenants of that property; property repairs and the payment of outgoings;
d)During the marriage the wife arranged, and paid from her resources, private health insurance for herself and the husband and also for the husband’s children, Z and BB. The wife also provided bedroom furniture, a television and computers to the husband’s sons during the relationship;
e)The wife funded the husband’s parents for a trip to New Zealand in October 2005 and a trip from Melbourne to the Gold Coast in 2008. She also funded the purchase of a Kia motor vehicle for the husband’s parents at a cost of $14,900 in December 2006; and outdoor furniture that same year;
f)During the relationship the wife was responsible for managing the parties’ rental properties with such tasks including liaising with rental agents, supervising and pricing repairs, cleaning and yard maintenance between tenancies and at the time of purchase and sale of each property;
g)The wife was responsible for maintaining all book-keeping records for preparation of tax returns and she attended on the accountant for their preparation;
h)Prior to the sale of the F Street property in 2008, the wife carried out the gardening work and cleaning of the property to ready it for sale as the husband was not available because of his work to so do;
i)Throughout the relationship the wife was responsible for the management of finances, ensuring that all bills were paid when due, and meeting with the parties’ accountant concerning investments;
j)Whilst the husband maintained the pool at the parties’ home and at times assisted with the cooking, shopping, and general maintenance duties around successive homes, the wife was the primary homemaker and bore primary responsibility for cleaning, washing and ironing, and cooking tasks;
k)The wife’s homemaking role was for the benefit of the husband’s sons in the periods when they visited or were part of the household.
It may also be accepted that the husband made non-financial contributions in the form of external maintenance and household tasks; and assisting the wife’s son with driving instructions.
I take into account that the motor vehicles presently owned by the husband, as included in the above schedule, have been partly or perhaps largely funded by the husband’s post-separation income. Likewise I am mindful that the husband’s BT superannuation and, for example, some of his furniture has been acquired by him from post-separation earnings. I also take into account that the husband has contributed post-separation income to mortgages and outgoings on jointly owned properties. Clearly though, the parties’ financial affairs have been intertwined in the respects already referred to. Given the wife’s introduced capital, in terms of its amount and the use to which it was put for both parties’ benefit, it would be unfair to quarantine the husband’s post-separation earnings to the extent they are reflected in such item.
It is obvious that compared to what may be conveniently described as the “starting position” of combined capital introduced of about $2.3 million, the above schedule reflects a very significant loss of capital.
I accept the submission of Mr Kirk that in these circumstances to simply take, as a percentage, the proportion of capital introduced by the husband and apply that percentage to the divisible pool now remaining, there would be a distortion in terms of sheeting home to the wife the major share of capital losses sustained, which ought be more equitably shared.
However, I do not accept Mr Kirk’s approach that on the one hand the husband ought be ordered to restore the loan/withdrawal amount attributed to him with respect to the Fund yet at the same time his contribution assessment in percentage terms is to be treated as unaffected.
In other words, if the husband were ordered to pay any sum by way of return of capital to the Fund it seems to me that that would necessarily affect the assessment of his contribution. He would then have to be treated as having contributed that sum which met expenses over the relevant period.
That would produce an obvious distortion in favour of the wife in circumstances where she is to retain the benefit of the Fund. That is, that she would retain the benefit of any sum now repaid by the husband as she will be retaining the Fund solely.
I accept the wife’s evidence that the sums attributable to the husband in terms of withdrawals from the Fund (which includes the amounts earlier discussed that the husband himself withdrew) were used to support assets. I therefore accept that they were for the husband’s benefit also. However there is also a risk of double-counting with respect to capital contributed if the wife is credited solely with these sums, given that their source is capital.
I do not propose to make an order for the husband to repay the loan/withdrawal amount attributed to him but I am satisfied he ought be responsible for a share of the contingency for penalties, if imposed by the ATO.
For the reasons already outlined I consider that capital contributed by the husband to overall capital in terms of the “starting position” was no more than about 14.5 per cent and I have already outlined the reasons, given the wife’s contribution to the sum of $350,000, why that is being generous to the husband.
In my judgment, balancing the relevant considerations discussed and having regard also to the very significant loss of capital, the contribution based entitlement of each party to the divisible pool as outlined in the above schedule is legitimately assessed at 88 per cent/12 per cent in favour of the wife.
Section 75(2) Matters
Eighty-eight per cent of the above total of $1,119,755 will see the wife retain the benefit of, or receive, the value of $985,384.40 whilst in the case of the husband 12 per cent equates to the value of $134,370.60.
Whilst that is a very significant disparity between the parties there was, of course, a much greater disparity between the capital contributed by each party respectively.
There is also the feature that there are included items or values which are notional adjustments or assets which are no longer available. That is particularly the case for the wife who has, as but one example, expended what she received from Property A on legal fees having no employment since.
Moreover, inclusion of the Fund at the current net value is predicated upon the wife having the capacity to restore the Fund and thereby eliminate or minimise the imposition of penalties.
In final submissions Ms Bulyk for the husband acknowledged, fairly it seems to me on the evidence, that it must be treated as “unknown” whether the wife would return to employment. There is also the G Pty Ltd Division 7A issue even if the wife returns to work within the time frame contemplated by Mr S’s letter in Exhibit 3 for the dividend/franking process to be completed.
In comparison to the wife the husband has a vastly superior income earning capacity, his income having increased to $140,000 per annum as at trial. He is now 53 years of age and can exercise that capacity for a significant period into the future.
As at trial the wife was receiving financial support from her partner Mr D and there was no suggestion that would not probably continue and this was the basis for her not pursuing any spousal maintenance claim. The wife does not have the care or control of any child.
As noted the husband has re-married and has the responsibility to maintain his current wife and the child of that marriage, a responsibility that will obviously endure for a significant period.
The wife came to this relationship with an established earning capacity and, without attributing any fault or responsibility to the husband for this, it is clear that the dysfunction in the marriage, whatever its cause, was a contributing cause to the wife’s health difficulties precluding her exercise of that capacity both during the marriage and post-separation.
It could not be said that the wife contributed in a relevant sense to the husband’s earning capacity in that the husband had his qualifications and capacity pre-relationship and the period of marriage and cohabitation was short. However it was her capital which provided significant support to the husband until he resumed remunerative employment in early 2007.
Both parties suffered the effects of the significant loss of capital which occurred as discussed.
Discussed below are the orders to be made to achieve a just and equitable outcome. Taking the effects of those orders into account in balancing the relevant s 75(2) matters, in my judgment no further adjustment for such matters is called for.
Just and Equitable Orders
On the husband’s evidence at trial it is unlikely that he has the borrowing capacity to retain the B Street property including the re-finance of the existing mortgage debt into his sole name, and pay to the wife her cash entitlement.
However, that option ought be allowed for if the husband can in fact achieve it.
If the husband cannot raise finance then obviously the property has to be sold.
Whilst Mr Kirk for the wife contended that the husband ought vacate the property immediately if orders for sale are made; whilst at the same time being responsible for mortgage and outgoing costs pending sale; it is in my judgment reasonable for the husband to be allowed to continue to occupy that property pending sale. It will be in the husband’s interests to maximise the sale price achieved given that he ought share in any excess of net sale proceeds over and above the net equity of $285,156 to the extent of his 12 per cent entitlement.
On my findings concerning the Fund, the husband ought also be obliged to indemnify the wife, to the extent of 12 per cent thereof, of any penalties imposed by the ATO on the Fund given that the above figures assume that in accordance with Mr S’s most recent affidavit steps can be taken to eliminate or minimise such penalties. Likewise, as it is in both parties’ interests that this occur, both parties will be obliged by order to cooperate in the steps necessary for this prospect to be maximised.
Twelve per cent of the above total of $1,119,755 is $134,370.60. The items attributable to the husband are as follows:
Triumph motor cycle $ 7,500
Alfa Romeo motor vehicle $ 32,000
2007 Mercedes A 170 motor vehicle $ 11,400
Partial property from boat sale proceeds $ 51,539
Furniture and effects $ 8,605
Bank account balances $ 905
Subtotal: $111,949
Less tax liability $ 31,000
Net total: $ 80,949
Plus BT superannuation $ 36,984
TOTAL: $117,933
Thus on the above schedule the difference between the husband’s 12 per cent entitlement of $134,370.60 and the above figure is $16,437.60.
On the above figures the equity amount in the B Street property is $285,156. Thus if the husband elects to retain the property and thus retain that equity the cash sum he must pay to the wife is $285,156 less $16,437.60 which is $268,718.40.
If that property is to be sold and the net sale proceeds exceed the figure of $285,156 then in addition to the sum of $16,437.60 the husband ought receive 12 per cent of the excess between $285,156 and the net sale proceeds figure, with the wife to retain the balance. Obviously, if the net sale proceeds are less than $285,156 then the figure of $16,437.60 is to be reduced accordingly, and the orders as formulated are intended to provide for that.
Given the nature of the husband’s fraudulent conduct surrounding the sale of the boat and the consequent burden for legal costs the wife incurred in pursuing that issue, including the costs associated with obtaining Mr C’s evidence, there would appear to be no reason for the wife not to have her costs of and incidental to that issue met by the husband on an indemnity basis. However, as other costs issues may (if not agreed) require determination in the light of these Reasons and orders, and all costs issues are more appropriately dealt with together, I will await the filing of applications pursuant to Rule 19.08 of the Family Law Rules (2004) before determining any costs issue or costs order.
I am satisfied that the orders proposed are appropriate and are just and equitable in all the circumstances. For these reasons I make the orders set out at the commencement of these Reasons.
I certify that the preceding two hundred and seventy-nine (279) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Kent delivered on 7 July 2014.
Associate:
Date: 7 July 2014
Key Legal Topics
Areas of Law
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Family Law
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Property Law
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Tax Law
Legal Concepts
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Remedies
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Costs
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Jurisdiction
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Statutory Construction
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Injunction
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Damages
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