Thurston & Loomis & Ors
[2018] FamCA 26
•25 January 2018
FAMILY COURT OF AUSTRALIA
| THURSTON & LOOMIS AND ORS | [2018] FamCA 26 |
| FAMILY LAW – PROPERTY – Where there has been a breakdown of the parties de facto relationship – Where there is a high level of disagreement between parties as to their financial contributions – Where the parties have contributed property into the relationship of relatively equal value – Where the parties have one child of the relationship – Where certain add-backs are considered appropriate to include –Where it is not just and equitable to consider parties’ contributions on an asset by asset basis – Where the parties have lost wealth and their primary remaining asset is their self-managed superannuation fund – Where justice and equity requires the parties’ interests to be adjusted – Where net property pool is to be divided 60 per cent to the Respondent and 40 per cent to the Applicant – Where the matter will be listed to hear final submissions that the Applicant, the Respondents and the Intervener may wish to make in respect of the precise wording of the final orders to be made in the property settlement proceedings so that the Court can be satisfied they give effect to the findings and determinations set out in these reasons for judgment in a just and equitable way. FAMILY LAW – CHILD SUPPORT – ARREARS – DEPARTURE ORDERS – Where the Respondent has provided little assistance in the form of child support– Where the Respondent is likely to be in arrears – Where Applicant has had the principal responsibility of caring for the child since separation and will continue to have principal responsibility into the future–Where leave is granted pursuant to s 112 of the Child Support (Assessment) Act to allow for the Court to make an order pursuant to s 118 of the Child Support (Assessment) Act for any day in the period 1 July 2012 to 7 June 2014 – Where orders are made for the Respondent to make a child support contribution towards the financial support of his child. |
| Family Law Act 1975 (Cth) Child Support (Assessment) Act 1989 (Cth) Income Tax Assessment Act 1936 (Cth) |
| Browne v Green (1999) FLC 92-873 Cerini v Cerini [1998] FamCA 143 Chorn v Hopkins (2004) FLC 93-204; (2004) 32 Fam LR 518 Kowaliw and Kowaliw (1981) FLC 91-092 Marker v Marker [1998] FamCA 42 Omacini and Omacini (2005) FLC 93-218; (2005) 33 Fam LR 134 Stanford v Stanford (2012) 293 ALR 70 |
| APPLICANT: | Ms Thurston |
| FIRST RESPONDENT: | Mr Loomis |
| SECOND RESPONDENT: | L Ltd |
| THIRD RESPONDENT: | C Pty Ltd |
| INTERVENER: | ML Lawyer |
| FILE NUMBER: | BRC | 1010 | of | 2012 |
| DATE DELIVERED: | 25 January 2018 |
| PLACE DELIVERED: | Brisbane |
| PLACE HEARD: | Brisbane |
| JUDGMENT OF: | Forrest J |
| HEARING DATE: | 7, 8, 9 & 10 December 2015 (Last submissions received 22 February 2017) |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Baston (direct brief) |
| THE RESPONDENTS: | Mr Loomis in Person |
| INTERVENERS: | No appearance |
Orders
That leave is granted pursuant to s 112 of the Child Support (Assessment) Act 1989 for an order to be made under s 118 of that Act as between the Applicant mother and the First Respondent father in these proceedings for any day in the period 1 July 2012 to 7 June 2014.
That the annual rate of child support payable by the father in respect of the child, KK born … 2009, be varied to $3,333.20 in respect of each the following child support periods:
(a) From 1 July 2012 to 30 June 2013;
(b) From 1 July 2013 to 30 June 2014;
(c) From 1 July 2014 to 30 June 2015;
(d) From 1 July 2015 to 30 June 2016;
(e) From 1 July 2016 to 30 June 2017;
(f) From 1 July 2017 to 30 June 2018.
That the annual rate of child support payable by the father in respect of the child, KK born … 2009, for the child support period from 1 July 2018 to 30 June 2019 be varied and determined by applying the normal administrative provisions of the Child Support (Assessment) Act 1999, with the father’s child support income being set at $37,000 per annum and the mother’s child support income being set at $28,000.
That the rate of child support payable by the father to the mother thereafter is to be fixed in accordance with the normal administrative provisions of the Child Support (Assessment) Act 1989.
That any payments of child support previously made by the father in the period from 1 July 2012 to 30 June 2018 under the administrative assessment for child support then in force, be credited against the father’s liability for child support under the departure orders for that same period as specified in paragraph (2) hereof.
That the mother and the father shall each cause a copy of these sealed Orders to be served on the Child Support Registrar forthwith and request the Child Support Registrar to put these Orders into effect and to calculate the amount of arrears of child support, if any, now owing by the father in respect of the child, KK born … 2009, in addition to the annual amount of child support payable by the father pursuant to these orders from the date hereof until 30 June 2019. The mother and the father are then to file and serve as soon as possible an affidavit attaching a notice from the Child Support Registrar setting out the amount of arrears, if any, owing by the father as at the date hereof and the annual amount of child support payable by the father pursuant to these Orders from the date hereof until 30 June 2019.
That the proceedings are adjourned to a time and date to be fixed for the hearing of any further submissions that the Applicant, the Respondents and the Intervener may wish to make in respect of the precise wording of the final orders to be made in the property settlement proceedings so as to give effect to the findings and determinations set out in these reasons for judgment in a way that the Court can be satisfied is just and equitable.
Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Thurston & Loomis and Ors has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).
| FAMILY COURT OF AUSTRALIA AT BRISBANE |
FILE NUMBER: BRC 1010 of 2012
| Ms Thurston |
Applicant
And
| Mr Loomis |
First Respondent
And
| L Ltd |
Second Respondent
And
| C Pty Ltd |
Third Respondent
And
| ML Lawyer |
Interveners
REASONS FOR JUDGMENT
Mr Loomis and Ms Thurston have been involved in litigation about the parenting of their child, the assessment and payment of child support for him, and settlement of their financial relationship, for nearly six years. They have been before both this Court and the Federal Circuit Court (“FCC”) in that time.
Their disputed parenting proceedings have concluded with final orders made by Judge Howard of the FCC after a contested trial and an unsuccessful appeal against those orders by Mr Loomis.
I heard the contested property settlement and child support applications over four days on 7, 8, 9 and 10 December 2015. When the trial started, I did not understand that I was to determine child support matters, but then during the course of the trial, both Mr Loomis and Ms Thurston made it clear to me that they wanted and expected me to deal with child support issues. Each led evidence as to their relevant financial circumstances and each was cross-examined about those matters. I accepted their submissions that I should determine the child support dispute as well and I informed the parties of my determination to do that during the course of the trial and gave some oral reasons for that determination at the time. Written submissions later filed by each of them also addressed matters of child support.
In May 2016, I made some interim orders and gave reasons for my determination that before final judgment could be delivered the parties’ self-managed superannuation fund needed to be put back into compliant status insofar as that was possible to be achieved, with the assistance of a Court appointed expert. That was achieved later in 2016 and funds approaching $570,000 are now held in trust for the parties’ self-managed superannuation fund by the solicitor who used to act for the husband and his two companies, both of which are also parties to the proceedings.
After the interim determination, I gave the parties leave to file any further written submissions they considered appropriate and Mr Loomis filed some in February 2017. My final judgment has now been reserved since those last written submissions of the parties were filed. Whilst reserved, I have had to hear and determine several further applications filed by each of the parties.
I regret that the delivery of these reasons for final judgment has taken this long. It has been a difficult matter before this Court, with many applications being made along the way, both before trial and since trial. Whilst the Applicant, Ms Thurston was represented at the trial by a barrister, Mr Loomis has long acted for himself and also for his two companies and Ms Thurston has appeared without legal representation on each other occasion the matter has been before the Court. I attribute the delay in delivering judgment since the last written submissions were filed last year to the demands placed on this Court’s time and resources by so many other pressing cases that have to be heard and decided. I was also on scheduled leave for several weeks during that time.
Disclosure Issues
Leading up to the trial, at the trial and in the written submissions filed by each of the Applicant and the Respondent, constant and repeated allegations and counter-allegations were made about the other party’s lack of proper disclosure. In the lead up to the trial, I consider I dealt with those as best I could in circumstances where each of the parties was unrepresented each time they appeared before me. I was concerned about the honesty and credibility of each of them, satisfied that both were providing a significant degree of selective disclosure rather than fully and completely meeting their obligations in that respect. I was particularly focused on getting the matter to trial and believed that it was in the best interests of the Applicant and the Respondent (as well as their son), the best interests of all other litigants awaiting trial in this Court and in the interests of justice in this particular case that it be moved on to trial. That is what I did.
As it happened, there were some examples of documents being produced during the trial about which questions were raised in respect of whether they had been disclosed or not. I dealt with those at the time. More will be said about that later in these reasons when it becomes relevant.
The trial proceeded with each party being able to cross-examine and present his and her own case and, as I have said, the Applicant was represented by a very experienced family law barrister. After the trial, both the Applicant and the Respondent, but particularly the Applicant, through her barrister’s written submissions, urged the Court to proceed with determining the matter by dismissing the other party’s case and determining it as if it had been undefended because of the failure of the other party to meet his or her disclosure obligations. I will not do that.
I am quite satisfied that justice is able to be done in this matter on the evidence that was before me, notwithstanding that I had little doubt that each party had selectively disclosed relevant documents in the lead up to the trial.
Objectionable Evidence
Counsel for the Applicant filed a list of objections before the trial. It included objections to much of the evidence-in-chief that the Respondent had filed in the lead up to the trial pursuant to my trial directions.
I do observe that the Respondent had filed an affidavit which was not paginated but which was about four centimetres thick and with 900 paragraphs. It had several very thick volumes of attached documents with it.
On the other hand, the Applicant had filed a 48 page affidavit with 274 paragraphs, but also having a number of volumes of attached documents with it.
Given the circumstances that included the parties having prepared their own affidavits of evidence-in-chief, the Respondent being unrepresented at the trial and the Applicant then being represented by experienced counsel, and my satisfaction that both of the parties had included in their affidavits much that was inadmissible, I informed counsel for the Applicant and the Respondent himself at the outset of the trial that I did not wish to take up valuable Court time going through objections. I asked counsel for the Applicant to acknowledge the particular circumstances of the matter and to consider permitting the trial to proceed on the evidentiary material as it stood and to accept that I would be careful about the weight that I would give to evidence that might otherwise be determined to be inadmissible.
I understood counsel for the Applicant, to his credit, to accept that and to be willing to proceed on that basis.
The Level of Dispute
Although it might well have had something to do with the fact that the Applicant and the Respondent were without legal representation for a lot of the time in the lead up to this trial and prepared their own affidavits of evidence-in-chief, the level of disagreement between them as to the relevant factual history of their relationship, particularly as to financial contributions, was extraordinarily high.
I am actually satisfied though that the nature of their individual personalities and the toxicity that developed in their relationship truly explains this level of disagreement and conflict.
Each of the Applicant and the Respondent maintained from the moment the proceedings were in my docket that the other was a liar and a fraud and that he or she should actually end up with every bit of the remaining property to the total exclusion of the other. Each then presented his and her case with that outcome solely in mind.
It has taken days and days of careful consideration of the evidence and scrutiny of the documents that they each adduced into evidence for me to determine, as best I could, in the face of totally contrasting assertions and submissions by each of them, the relevant factual history as it really happened.
The Factual Background of which I am satisfied
Ms Thurston (“the Applicant”) and Mr Loomis (“the Respondent”) are both from the United Kingdom. The Applicant, who is now 51 years of age, moved to live in Australia in 1996. The Respondent, who is now 62 years of age, moved to live in Australia with his former wife and two of their three children in 2003.
The Respondent and his former wife separated in 2005, after 23 years of marriage.
The Applicant had also been married and had separated and divorced her husband by the time she and the Respondent commenced their relationship in March 2006.
When they met and commenced their relationship, the Applicant was living in a property that she retained and owned following the divorce from her former husband. They had finalised a property settlement and the property was solely hers. It was totally unencumbered. She owned and operated a business through a company, T Pty Ltd (TPL). It imported and sold products to the Australian retail industry. The Applicant ran that business, through TPL, since the mid-1990s. Through that business, the Applicant possessed two motor cars, one a 4WD and one a sports car. She also had personal possessions such as the contents of her home and some jewellery, some superannuation, and some investments in listed companies. She also had some insurance policies in the UK which were later surrendered and cashed in during her relationship with the Respondent.
The Evidence about the value of the property that the Applicant owned when this former couple first got together
There is no dispute that the Applicant sold the home she owned in or around August 2006 for $1,100,000 and that she then bought another property on water frontage at Suburb X in BC Town for $730,000 (plainly leaving her $370,000 less the costs of sale of the first property, likely to have been around $28,000). Of course, she would also have paid Stamp Duty on the purchase of the Suburb X property. The Respondent asserted that was $38,000, but there was no documentary evidence as to the amount of that Stamp Duty. So, I am not able to say I accept it was $38,000. Indeed, given the evidence that I refer to shortly as to the Stamp Duty that was paid on a commercial property purchase by the Applicant for $465,000 soon thereafter, I consider that the Stamp Duty paid on the purchase of the Suburb X property was more likely to be around $20,000.
The Applicant asserted, and the Respondent agreed that she had told him at the time, that she spent $130,000 on some renovations to the Suburb X property after she bought it. The Respondent made some comments in his trial affidavit casting doubt on the veracity of the assertion that she had spent that much on the property after buying it.
In November 2006, the Applicant bought another property in her sole name. It was a commercial unit at Suburb CD, also in BC Town. She purchased it for $465,000, paying a deposit of $23,250 and stamp duty of $14,750 (the equivalent of 3.17 per cent of the purchase price). I am satisfied she paid those amounts from the cash she retained from the sale of the other property she had owned. She borrowed $424,000 from a bank to put towards the purchase of this unit. That liability was secured by mortgage over the newly purchased Suburb X property. The difference in the amount borrowed and the amount that remained to be paid for the commercial unit presumably also came from the cash she retained on the sale of the other property.
Indeed, in December 2006, the Applicant completed an application for finance to complete the purchase of a used 2003 model motorboat that she and the Respondent had decided to purchase. There is evidence that this boat was purchased for $165,000. It was bought in the name of the Applicant. The Respondent contributed $50,000 for the initial deposit, but was apparently not able to secure the finance for the balance of the purchase price, thus explaining why it was purchased in the Applicant’s name.
In that application for finance, the Applicant claimed she owned the two properties (Suburb X and Suburb CD), owed $424,000 on a mortgage, owned $50,000 in household contents, $40,000 in jewellery, owned a 4WD worth $13,000 and a sports car worth $60,000 on which she owed $60,000, and owned the business, TPL (said by her to be worth around $200,000 at that time) and stock worth $40,000. She also said she had $150,000 in cash.
Relevant to the assertion that TPL was worth around $200,000 at that time, the Applicant adduced into evidence the 2006 Tax Return for that company. It shows gross income was $346,553 and “Total Expenses” were $323,477, leaving net profit of $23,076. As such, I am satisfied that the Applicant was not in a position to be saving very much at all from that income at that time. There is no other evidence that supports a finding that the company had net assets worth $200,000 or that it had ‘goodwill’ that would have contributed to it being worth $200,000. I do not accept that TPL had anything like that value. The company’s principal assets were the motor vehicles it owned, and they were heavily financed. It was not earning the profit that would have given it $200,000 worth of ‘goodwill’.
Furthermore, given the mathematics involved, if the Applicant had spent $130,000 on the renovations to the Suburb X property as she asserts, I do not accept that she could have had $150,000 in cash left from the $370,000 net sale proceeds of the other property in December 2006. If one allows for the costs of sale of the original property, including commission, to have also been paid from the sale proceeds, there would have been no more than $140,000 left at the most and that does not allow for expenditure on anything else other than the items already mentioned herein. I am satisfied, that either the $130,000 the Applicant said she paid for renovations was exaggerated by about $10,000 or the amount of cash she claimed she had in December 2006 was exaggerated by about that amount. However, I acknowledge that is not a large amount of money in the overall circumstances of this case.
The Evidence about the value of the property that the Respondent owned when this former couple first got together
The Respondent lived in a rental apartment in BC Town when he and the Applicant commenced their relationship. He owned some furniture. He ran a business in Australia importing and selling a miscellany of products through a company, C Pty Ltd (the Third Respondent – “C Pty Ltd”) in which he owned 92 per cent of the shares. His adult daughter owned the other 8 per cent.
The Respondent also had a 50 per cent interest in another Australian company, DE Pty Ltd, (“DEPL”) that he and another man had established in mid-2006. I am satisfied DEPL bought and imported equipment and sold it here in Australia. The Applicant adduced copies of historic financial statements of that company with the first one being for the 2007 financial year. Its balance sheet revealed limited cash resources as at 30 June 2007, but with just under $100,000 recorded in the value of stock held. Its total assets were said to be $123,660 and its total liabilities were said to be $127,373. Accordingly, the Respondent’s share in that company was worth nothing, but he was owed $61,562 that he had lent to the company as start-up capital for it to purchase its initial stock.
DEPL’s profit and loss statement recorded a gross profit of $48,315 for the 2007 financial year, and an operating loss of $3,814 after expenses of $53,421. The company’s financial statements for the years 2008 to 2011 were also in evidence. It never made any operating profit, making small losses each year, and it shut down just after 30 June 2011. It was recorded with ASIC as being deregistered in August 2011. The 2011 balance sheet records it as having no stock left as at 30 June 2011. The last of the machines was apparently sold in that year. The records reflect that the proceeds of sale of those machines were used to partially repay the initial shareholders’ loans. It appears as if the Respondent was repaid about $50,000 of the $61,562 he had initially ‘loaned’ the company.
The Applicant adduced into evidence two invoices said to have been from DEPL to TPL for the sale of machines from DEPL to TPL. The first, dated December 2007, is for $7,700 for one machine. The second, dated, remarkably, 30 December 2011 (after the company was deregistered), is for $38,000 plus GST (total of $41,800) for an undisclosed number of ‘units’ (which I take to mean ‘machines’).
The Applicant says that TPL transferred $41,800 to DEPL in December 2010. Of that transfer, she said this in evidence:
this was a inter-company transaction as [TPL] was making a profit and by paying it to; and then withdrawing it via [DEPL] we were able to utilise the tax loss that [DEPL] had, ie legally pay no tax on it.
Although the Applicant did not say that this transaction reflected the purchase by TPL of machines from DEPL, and she later said that TPL did not buy machines from DEPL, I am satisfied that the Applicant and the Respondent agreed for DEPL to sell machines to TPL at that time to shift funds between the entities for tax saving benefits. I am satisfied that the Respondent, apparently, caused an invoice to issue out of DEPL a year later, when the company had already been de-registered, and he and the Applicant were already separated and in serious dispute, in order to prove the prior transaction. I am satisfied that the money was taken from the DEPL account in December 2010 by the former couple and it was treated in the accounts of DEPL as a part repayment of the Respondent’s initial shareholder’s loan.
In fact, I am satisfied that the Respondent transferred the sum of $41,800 into a joint ANZ bank account of the parties on 4 January 2011. I am reasonably satisfied that it was transferred into the bank account of the parties’ self-managed superannuation fund a few weeks later to make up for funds that had been paid out of that fund in meeting losses on a foreign exchange contract. More will be said about this later.
At the commencement of the relationship in 2006, the Respondent also had a motor car, said to be valued at only $3,500 in 2014. He also owned a jet-ski and trailer.
The Respondent, through C Pty Ltd, had been renting commercial premises also in Suburb CD and running his business from there, using it largely for storage of stock. After she sold her home, the Applicant also began using those same Suburb CD premises to run TPL from and for storage of its stock. This is what led them to decide to buy the commercial unit in Suburb CD. They began running their companies from there and storing the stock there as well. The companies began paying rent to the Applicant for the premises. That rental income was used to pay the repayments on the loan secured by mortgage over the Applicant’s newly purchased property at Suburb X.
The most significant piece of property that was owned by the Respondent at the time this former couple commenced their relationship was a piece of commercial real estate in the UK. He owned it, and still does, through a UK company, L Ltd (the Second Respondent – “L Ltd”). Relevantly, I am satisfied that it was not encumbered by debt at the time the Applicant and Respondent commenced their relationship. There is no evidence as to what it was actually worth at that time save for the Respondent’s bald, unsupported assertion that it was worth £500,000 (that he asserts was equal at that time to $1,255,000).
Curiously, that UK investment property is shown on the balance sheets of L Ltd in the 2006 and 2007 financial statements at £86,000 and £111,000 respectively but then from 2008 until 2011 at £500,000 before dropping back in the 2012 financial statements to £365,000. The initial jump in recorded value was not explained in evidence of the Respondent, or explored in cross-examination of him.
Throughout the lead up to the trial and even during the trial, the Respondent, who also appeared for the Respondents, L Ltd and C Pty Ltd, said things that indicated he did not concede that L Ltd was actually his company. He has made the point again in his written submissions. He asserts it is owned, ultimately by his three children of his first marriage.
I am, as I told the Respondent many times during the proceedings, both in the lead up to the trial and at the trial, more than satisfied that L Ltd, regardless of its registered shareholdings (which involve some convoluted trust structure and registration in a tax haven), is ultimately beneficially owned by him alone and actually controlled by him, regardless of who may be its formally listed directors (changes in directorship were effected at around the time of the breakup of his relationship with the Applicant) or registered shareholders. I am quite satisfied that if this convoluted structure results in other parties being described as the directors of L Ltd and the owners of the shares in the company at law, that this is just a “sham” in the true sense of that word to create the appearance that the company is not the Respondent’s company.
I have absolutely no doubt that L Ltd is the Respondent’s “creature” and that its assets are, ultimately, the Respondent’s assets. I have never seen any credible, persuasive evidence to the contrary, although the Respondent did produce some of the company registration documents from time to time. No one but the Respondent ever appeared in the proceedings before me for L Ltd. No remotely credible case to contradict the proposition that L Ltd is the Respondent’s company and that its assets are beneficially his, was ever run by him or L Ltd. The Respondent’s behaviour and utterances relating to L Ltd throughout the proceedings in this Court, and the preponderance of the evidence, has, in my judgment, always been consistent with his beneficially owning and actually controlling L Ltd.
At the commencement of the relationship, the Respondent also had interests in a number of other companies in the UK, through which he ran a couple of small businesses without much apparent success. He also said he had some money in bank accounts in the UK and in Australia. Critically though, he did not adduce any bank statements to support that assertion.
The Co-habitation Agreement
A document called a “Cohabitation Agreement” purportedly signed by the former couple in February 2007 was adduced into evidence by the Applicant. Though by the time the trial commenced, the Applicant conceded the document was not binding upon them and did not oust the Court’s jurisdiction to make property adjustment orders between this former “de facto” couple, it nevertheless was a significant piece of evidence.
The Respondent had always alleged in the proceedings that the “Cohabitation Agreement” was fraudulently created by the Applicant. He denied ever signing it. The Respondent’s evidence was that in 2012, after separation, he had found it at the Suburb X house and taken it to his solicitors. There was evidence that his solicitors had written to the Applicant’s solicitors soon thereafter, asserting that the document was not binding on the former couple, but not more.
The Respondent conceded in oral evidence that his solicitors had not asserted in that 2012 correspondence to the Applicant’s solicitors that the Respondent maintained he had no recollection of signing the document. He conceded that they had not asserted that the document was fraudulently created. He conceded that they had not asserted that the lists of assets attached as schedules to the document were wrong and misrepresented the true position.
Indeed, the list of assets said to be the Applicant’s at that time was completely consistent with what it is that I am satisfied she owned at the time. I am also satisfied that the list of assets said to be the Respondent’s is reasonably consistent with what the Respondent now asserts he owned, save that it does not include money in a bank account that he has since said he and his former wife still had in the UK at that time, which he asserted had a substantial amount of cash in it.
In short, I reject the Respondent’s assertions that the document was fraudulently created and never signed by him and I accept that it was signed by him in February 2007, at around the time the former couple moved into the Suburb X property that was registered in the Applicant’s sole name and purchased with her money.
In his affidavit of evidence-in-chief filed and relied upon by the Respondent at the trial, the Respondent included a table in which he listed what he asserted were his assets “at the time of Co-Habitation”. He included a cash sum of $17,810 said to be held by L Ltd in a bank account. In this respect, the sum of £12,077 appears in the schedule of historic balance sheet figures for L Ltd included in the valuation evidence of the single expert accountant, Mr H, described as “cash at bank” for 2006. It might be that is where the Respondent got his Australian dollar figure from. It is not clear. I have not seen any better evidence of that, such as a bank statement that corroborates that.
The Respondent also included amounts totalling $255,428 that he asserts were assets of C Pty Ltd as at 30 June 2007. He did adduce evidence of C Pty Ltd’s balance sheet as at that date to support these figures and Mr H included in his evidence a schedule that summarises C Pty Ltd’s balance sheet positions for a number of years, including years going back as far as 30 June 2006 and 30 June 2007. I presume that Mr H had been provided with these historic financial documents that the Respondent possessed.
Clearly, by comparing the references to C Pty Ltd in the table in paragraph 59 of the Respondent’s trial affidavit and C Pty Ltd’s 2007 balance sheet, one sees that the Respondent has taken his figures from the “assets” part of the balance sheet. However, what the Respondent has failed to do in the same table in his affidavit is to acknowledge that C Pty Ltd’s balance sheet for 30 June 2007 included $254,577 in liabilities to trade creditors, $1,026 liabilities to payroll creditors, $2,955 in GST liability and $8,600 of liabilities in shareholder loans. The balance sheet actually shows the net assets of C Pty Ltd at 30 June 2007 as negative $11,730. The Profit and Loss Statement also reflects C Pty Ltd’s operating profit before tax as negative $24,189 for 2006 and $18,249 for 2007.
Accordingly, taking that evidence into account, I am satisfied that C Pty Ltd was not worth anything at the time of the commencement of the relationship as the Respondent clearly would have the Court believe by his selectively chosen evidence. Indeed, the Respondent goes on, later in the same table, to assert that C Pty Ltd had ‘goodwill’ worth $200,000. There is no evidence supporting that bold claim and I reject it as baseless. Nevertheless, the balance sheets did show that as at 30 June 2007, C Pty Ltd had “cash and cash equivalents” of $124,057 and “trade debtors” of $53,000.
The Respondent baldly asserted from the bar table during the course of the trial that notwithstanding the fact that the balance sheets recorded ‘trade creditors’ of C Pty Ltd at $254,577 at 30 June 2007, that C Pty Ltd did not have trade creditors. He asserted that the Applicant must be responsible for what he alleged was an incorrect entry on the balance sheet. I simply do not accept that assertion without more. He certainly did not ask the Applicant any questions about that in cross-examination, nor suggest to her that she had deliberately misrepresented the true position in her bookkeeping for C Pty Ltd at that time.
The Respondent includes in the same table an assertion that he held $117,058 in a EF Bank account in the UK in the names of Ms M Loomis and Mr M Loomis (who he asserted was his brother) as at 1 February 2007. I have not seen any better evidence of that, such as a bank statement to corroborate his claim.
The Respondent includes his motor car at an asserted value of $45,700. That is not supported by any better evidence either. Indeed, I am not actually convinced that the 2006 and 2007 balance sheets of C Pty Ltd do not already take up the motor car in the assets recorded. ‘Motor vehicles’ are listed as having a cost price of $39,000 and have been depreciated over a few years by 30 June 2007. There was no evidence that C Pty Ltd had any of its own vehicles distinct from the motor vehicle that the Respondent drove at the time. Accordingly, I am not satisfied that the motor vehicle should be listed as a separate asset of the Respondent’s or that it was worth anything like $45,700 in 2007. The fact that the motor vehicle was not separately listed in the schedule of the Respondent’s assets in the “Cohabitation Agreement” also helps me to reach this position.
The Respondent also listed in the schedule the amount of $52,351.98 that he asserted was the deposit paid on the boat that was purchased in December 2006. I accept that he provided the deposit for the purchase of that boat from cash resources he held at the time. The Applicant concedes that. As I have already observed, I am satisfied that for reasons associated with the financing of the boat, and probably also with the fact that the Respondent had not finalised his property settlement with his former wife at that time, that the boat was registered in the Applicant’s sole name.
The Respondent also asserted in his table that FG Pty Ltd (the small business in the UK) held the equivalent of $34,587 in its bank account at the time. I have not seen any better evidence, such as a bank statement, to corroborate that. I do not accept the bald, unsupported assertion that the Respondent had this money as an additional asset.
The Respondent also asserted that he had an investment equivalent to $13,584 in something called “GH Pty Ltd”, but I have not seen any better evidence than this assertion. I do not accept that he had this as an additional asset either.
He asserted in the same table, a $5,000 investment in a HI Group account; an $6,275 equivalent investment in a UK HI Group account; $30,646 in a KL BANK joint account; $9,592 invested in Company IJ; a Company JK pension worth $52,000; an investment in a company called LM (this is the company that was called DEPL) worth $60,000; and furniture and contents worth $40,000.
I accept he had the pension which he says he later (though he did not say when) converted to an annuity of £1,800 but that in 2013 he cashed a portion of that in and used it to live off. So, whilst I accept that he had this pension asset at the commencement of the relationship, I am satisfied that it was not contributed to the benefit of the relationship at all and was retained and has been used by the Respondent solely after the relationship ended.
I am not persuaded that he had the HI Group investment assets at the start of the relationship. I accept that he had furniture and contents, though I doubt and do not accept that those items were worth quite as much as $40,000 at the time.
As for the claim that he had a separate $60,000 investment in the company, LM, it would seem apparent from what I have observed with respect to the company, DEPL, earlier in these reasons, that the Respondent had contributed around $60,000 to the start-up costs of this company, funds that were apparently used to purchase machines to be sold. I have already described how much of that money was seemingly repaid to the Respondent at around the time DEPL was deregistered. I am satisfied, as I have already said, that money was contributed then by the Respondent to the expenditure needs of the couple. Much of it was paid into their self-managed superannuation fund.
He also asserted that he had (through C Pty Ltd and L Ltd) invested $124,000 into purchasing a property at Suburb GG. That property was purchased by the former couple and again registered in the name of the Applicant alone in or around August 2007. It was a large block of waterfront land purchased for $895,000. Although, the Applicant did not depose to it in her affidavit evidence, she ultimately conceded in her oral evidence that the Respondent had contributed that sum of $124,000 to its purchase when it was bought. She said that she had contributed $84,000 that she managed to draw together from cash still held and the sale proceeds of her listed share investments. The Respondent asserted in his affidavit evidence that the balance of the purchase price and associated expenses, a total of $733,000, was borrowed from the Westpac Bank. I accept that.
I accept the Applicant’s evidence that the original intention was to sell the Suburb X property and to use the proceeds of sale to pay for the construction of a house on the Suburb GG property. However, that did not happen. More will be said of that later in these reasons.
I am satisfied that the Respondent had $52,000 available to contribute to the purchase of the 33 foot boat in December 2006 and I am satisfied that he also put $124,000 towards the purchase of the Suburb GG land in August 2007. The Respondent adduced no evidence as to where those funds came from. However, I am satisfied that he probably got the sum of $124,000 from money C Pty Ltd held in the bank in Australia at the time. It is to be remembered that the C Pty Ltd balance sheet for 30 June 2007 recorded $124,000 held in “cash and cash equivalents”. Using all of that in August 2007, would have depleted those cash holdings, but they were replenished to some degree soon thereafter. I will refer to that a little further on in these reasons.
I do not accept that the Respondent had all of the other cash investments that he said he did at the commencement of their relationship. If he did, then I am satisfied they were the source of the funds that he contributed to the purchase of the boat and the purchase of the Suburb GG property. I am satisfied of that as the evidence quite clearly establishes that he borrowed significantly against the equity that L Ltd held in the property in the UK around 8 November 2007. In fact, he borrowed the very substantial sum of £300,000. If his own evidence about exchange rates in the table he included at paragraph 59 of his trial affidavit is correct (and it was not ever challenged), that was equivalent to $753,000 at the time.
A bank statement from a UK bank was adduced in evidence showing the deposit of the £300,000 to an account in L Ltd’s name on 8 November 2007. The same statement shows the following drawings against that amount around the time of this significant borrowing:
Fee arrangement fee £3,000.00 8 Nov
Company QR fees £2,704.43 8 Nov
I-F transfer £21,750.00 8 Nov
NO Lawyers £35,000.00 8 Nov
Overseas Payment C Pty Ltd £30,043.00 8 Nov
Debit £1,057.50 12 Nov
T Ltd (UK) £3,341.75 29 Nov
HW Accountants £10,000.00 13 Dec
Overseas Payment Company MN £14,609.53 7 Dec
Overseas Payment Mr Loomis £175,035.00 21 Jan 08
(Note: on the exchange rate set out by the Respondent in paragraph 59 of his affidavit this equals $439,337)
Unknown £4,112.50 4 Feb 08
After these transactions and some other smaller ones, including the monthly payments of interest only on the principal debt, there was only £266 left in the account as at 6 February 2008. Considering this, the absence of corroborating documentary evidence and the Respondent’s poor credibility generally, I am quite satisfied that had the Respondent all the other funds that he said he had in various accounts set out in the table in paragraph 59 of his trial affidavit, he would not have had to borrow all of this amount against the equity in the UK property owned by L Ltd and he would not have had to use as much of it as he did in paying creditors at the time of the borrowing. I am satisfied that by paying $52,000 towards the purchase of the boat in December 2006 and $124,000 towards the purchase of the Suburb GG property in August 2007, that the Respondent depleted all of his available cash assets and was thereby forced to borrow against the UK property owned by L Ltd as he did in early November 2007 to obtain further funds.
Looking at the particular withdrawals against the borrowings, I am satisfied that the payment to Company MN of £14,609 was to purchase machines for resale in Australia through one or more of the companies the Applicant and the Respondent were operating. By this point in time (November 2007), the former couple were buying machines and selling them in Australia through DEPL and TPL. C Pty Ltd received an amount of around £30,000 which I am satisfied replenished cash funds it held after the Respondent contributed funds from C Pty Ltd to the purchase of the Suburb GG property.
NO Lawyers, the evidence shows, is a firm of solicitors in Town N in the UK. I do not know what the money paid to them was for, but as it was around the equivalent of $80,000, I consider it likely to have been the money from which the Respondent a few months later paid his former wife funds to finalise their property division. I shall refer to that below.
After paying funds to his UK accountants (HW Accountants) and fees in connection with the borrowing, I consider that the Respondent was left with around £200,000 plus the amount of £30,000 sent to C Pty Ltd, drawn against the equity in the L Ltd owned property, that he then had at his disposal to be contributed to the use of him, the Applicant and their companies. I am also satisfied that he contributed the amounts of £3,341 and £14,609 to the purchase of machines and stock that were imported to Australia to be sold by the Applicant and the Respondent in their businesses.
The establishment of the R Superfund
A few months before those borrowings, in June 2007, the former couple had established their own self-managed superannuation fund in Australia. A short time after that, the Suburb CD commercial unit that had been purchased by the Applicant in late 2006 was transferred to the superfund as an in specie lump sum contribution by each of the Applicant and the Respondent to their respective superannuation member accounts in the fund. I accept that there was an agreement between the Applicant and the Respondent that the contribution to the Respondent’s member account of over $200,000 in lump sum superannuation would be his “remuneration” for work he was doing for TPL for which he was not being paid a salary. In addition, the Applicant transferred the sum of just over $35,000 from her Sunsuper superannuation member account into the R Superfund and some of that was used to pay the Stamp Duty on the transfer of the unit to the fund.
The repayments on the loan taken out by the Applicant to buy the Suburb CD unit continued to be paid by the parties. Rent paid by C Pty Ltd and TPL for use of the unit was, clearly, income of the self-managed superannuation fund, the value of which began to increase.
Much more will be said of the Superfund later in these reasons.
Settlement with the Respondent’s former wife
In March 2008, the Respondent and his former wife settled the division of their property with consent orders being made in a court in Town N in the UK. That consent order provided for the Respondent to pay his former wife a sum of $75,000 and stated it was equivalent to approximately £31,227 ($2.40 to £1). It did not set out the balance of property owned by either of them.
I am satisfied that the Respondent paid that amount of money to his former wife, and, as I have already observed, it is more likely than not it came from the money he borrowed in the UK in November 2007. As I observed earlier, there was an amount of £30,000 from the funds borrowed paid to a Town N firm of solicitors.
At the exchange rate provided for in the consent order, the approximate amount of £248,000 that the Respondent had available to contribute to the needs of this former couple, or had spent on stock they were selling, was equivalent to $595,200. It is not entirely clear where all that money was held by the Respondent or exactly why he needed it all to be drawn down in November 2007, but it is consistent with the former couple’s plans to build on the Suburb GG land that had recently been purchased, with that money being held for use in connection with that.
The Couple commenced cohabitation
I am satisfied that after living some time together in the Respondent’s rented flat in late 2006 and early 2007, the Applicant and the Respondent then moved into the renovated Suburb X property. The Respondent’s teenage son of his former marriage, ST, moved in to that property to live with them in 2007 also. From that time on, they continued to run their businesses through TPL, C Pty Ltd and DEPL. Another company they jointly started, PQ Pty Ltd, does not appear to have produced any income or assets for them. I expect, from its name, that it was intended to be involved with importing goods from Hong Kong or from China that were to be sold in Australia. I know little more about it.
Fire Destroys the Suburb X Property
On 9 November 2007, just a day after the borrowings in the UK were secured by the Respondent, there was an electrical fire that effectively destroyed the house at Suburb X and all of its contents. The house and the contents (some of which were the Respondent’s that he had brought in to the relationship and some of which were the Applicant’s) were insured.
The Applicant, the Respondent and the Respondent’s son, ST, moved into temporary accommodation and they claimed on their insurance policy. The Respondent adduced into evidence some schedules of their claims for the home and the contents. I accept that they were documents prepared at the time of the claims. I am uncertain as to who prepared them. They could have been prepared by the Applicant and/or the Respondent. They could have even been prepared by the insurance company or an insurance assessor. They are far too specific to have been fabricated by either the Applicant or the Respondent. In fact, I did not understand there to be a dispute about the authenticity of what they reflect.
They reflect that the insurance company paid to the Applicant the sum of $187,407 for the repairs specified and quoted by a building company. The costs of temporary accommodation and other out of pocket expenses of $4,716 were also paid. Rental for the agreed period of the approved repairs (9 November 2007 to 30 May 2008) of $34,800 was paid. They received progressive payments on their claim that included $63,989 total for their lost and damaged contents. In all, though paid over time, they received in their hands $290,912, of which $34,800 plus $4,716 was for out of pocket expenses they had incurred and just under $70,000 was for contents, some of which had been the Respondents at the commencement of their relationship.
No attempt was made by either the Applicant or the Respondent to go through the itemised schedule of contents claimed as damaged or lost to determine prior ownership with any precision. Although the Respondent made some assertions that almost all of the damaged contents were his, I do not accept that and I consider it reasonable to accept that each of them probably contributed equally to that pool of contents that was lost for which they received just under $70,000.
I am satisfied that they received around $250,000 from the insurance company that was then spent by them, about $35,000 of which was indirectly contributed by the Respondent through the payment received for his destroyed furniture and $215,000 of which was indirectly contributed by the Applicant through the payment she received for her destroyed house and furniture. As they determined not to just repair the house but to effectively rebuild it from the ground up, the Applicant contributed the property as well. There was no evidence adduced as to what it was worth at the time. I doubt that it was worth the sum total of its purchase price of $730,000 plus the cost of original renovation of around $130,000 less $190,000 the cost of its estimated and approved repairs, which would be $670,000. Yet, I consider those are good facts to remember so as to put all of what happened then, insofar as the respective contributions of the Applicant and the Respondent are concerned, into perspective.
Taking that approach, the Applicant can be considered to have contributed around $860,000 towards the acquisition of the rebuilt property and the Respondent, at that stage, $35,000. I do, however, acknowledge the artificiality of that approach without any evidence of the value of the property after the fire and before the rebuilding started.
The Rebuild of the Suburb X Property
The original house on the Suburb X property was a single story house. After the fire, the Applicant and the Respondent determined to rebuild a larger, two story house on the property. They engaged an architect to draw up plans, commencing in early 2008 and then they engaged a builder to rebuild a much larger house on the block.
The Respondent ran a case that this decision was solely the Applicant’s decision and that he could not stop her. I do not accept that. He clearly acquiesced in it, even if he did not actively come up with the plan himself.
The Applicant and the Respondent disagreed about the amount of money that was spent on the rebuild of the house and the source of the funds that paid for it.
Whilst I have already commented adversely on the credit of the Respondent, at this point I do not hesitate to observe that the Applicant was, in my judgment, also a very poor witness when it came to credibility assessment. Both of these parties, I must say, impressed me as witnesses who would not hesitate to lie about anything if they thought it would help their case to lie or if they thought it would hurt their case to tell the truth. Much of what each of them has said under oath during the course of these proceedings and, particularly, during the trial could not, in my judgment, simply be accepted as truthful at face value. Fortunately, documents, as is so often the case, made it much easier to determine just where the truth lies.
The Applicant steadfastly maintained throughout the proceedings and during the trial that the rebuild cost around $550,000. In her trial affidavit, she asserted that the Respondent had only contributed $100,000 to that. When it was pointed out to her that she had deposed in an earlier affidavit in 2012 that he had contributed $360,000 to the costs of the rebuild she accepted that she had said that. She then said that she was now satisfied that he did not have that much to put in. That was an absurdity as I have already observed that the Applicant’s own evidence established that the Respondent had the equivalent of around $595,000 available in November 2007, some $43,000 of which he spent at around that time on machines and stock.
When the Applicant was asked at the trial where the $550,000 had come from that she had said the rebuild cost, she said that they received $279,000 from the insurance (although, as I have observed, they probably only were left with about $250,000 of that after allowance for out of pocket expenditure, including rent). She also said that she borrowed a further $130,000 secured against the property itself and that she cashed in her pensions in the UK for the equivalent of $71,000 and also utilised that money. Those three totals only add up to $480,000. I consider that probably explains her assertion that the Respondent only contributed $100,000 to the cost of the rebuild.
In contrast, the Respondent steadfastly maintained that the rebuild and new fitout cost around $800,000.
During the trial, the Respondent produced a schedule that became exhibit 1 in the trial. Counsel for the Applicant opposed its admissibility on the basis that it had not previously been disclosed. Notwithstanding that fact, I allowed it in and gave reasons for doing so at the time. Counsel for the Applicant still maintained in his written submissions that I should not give the document any weight. I reject that submission.
The Applicant examined it whilst in the witness box and identified quite a lot of her own handwriting on the schedule. It clearly shows payments for the rebuild and fitout and even dates of payment of some of the amounts. Counsel for the Applicant submitted that I should not accept it as evidencing the cost of the rebuild. It certainly reflects more than $550,000 being spent on the rebuild. It actually particularises, by payments, a total of $685,481 being spent and then, further below on the same document, particularises an actual expenditure of $750,894. It even appears to set out calculations of what the property, after the rebuild, owed the Applicant and listed that at $1,435,894, with the renovations originally done listed as costing $125,000 and the amount contributed from the insurance payout as being only $200,000. There is no reference to further borrowings of $130,000 on that schedule.
Other evidence adduced showed that the additional borrowings of $130,000 were obtained in late March 2009. Those funds might not have been spent on the rebuild, but I am satisfied that even if they were not, they were contributed to the expenditure needs of the Applicant and the Respondent.
Whilst the Applicant, through her counsel, complained that she had not seen that schedule until the Respondent produced it at trial, she did not seek to have the trial adjourned after I admitted it. In any event, although the Respondent did not find it in his documents and take the Applicant to it in cross-examination, he had already adduced in evidence (KJL- 58 to his trial affidavit) another schedule very similar to exhibit 1 setting out progress charges for all things connected with the rebuild, including the original contract sum of $566,000 and numerous variations and other costs, including for some of the fixtures and fittings. The total of that schedule came to $798,774, just under the $800,000 the Respondent was asserting it had cost. The Respondent was never cross-examined on that schedule or its origins. I accept it as the most reliable record of the total costs of the construction of the rebuild and fit out.
I am quite satisfied that the rebuild of the fire damaged house on the Suburb X property cost a lot more than the Applicant was prepared to concede. I am satisfied she was deliberately being untruthful about that to attempt to minimise the true extent of the Respondent’s contribution to the cost of that rebuild.
However, the documentary evidence certainly establishes that the Applicant’s claims about cashing in her UK pensions are correct. She did that in October and November of 2008. The UK bank statement reflects that three deposits totalling £17,000 were made in October 2008, and that the total was then transferred to Australia by the Respondent. £16,500 was deposited in two deposits in late November 2008, attributed to the Applicant, though by the middle of December that same year it had not been transferred to Australia.
The Respondent concedes that the Applicant cashed these in and contributed them to their needs. He says those payments equalled $71,000. Accordingly, I accept that the Applicant contributed this amount to the costs of reconstruction of the Suburb X property.
The Respondent asserts that of the sum of approximately $250,000 that the parties received from the insurance company for what were not ‘out-of-pocket’ expenses, only about $200,000 was used on the rebuild. The entry of “Insurance - 200000” on exhibit 1 appears to corroborate or at least lend support to that assertion. However, in his trial affidavit, the Respondent asserted that none of the payments of $98,409 received “prior to 2 May 2008” were disbursed to the reconstruction and that the “majority of this was for out of pocket expenses and contents loss or damage”. I do not accept this claim by the Respondent.
As I have already determined, I am satisfied that they received about $250,000 on the insurance claim that was not spent on “out of pocket expenses”. In his trial affidavit evidence, the Respondent asserted that around $245,000 was received in three payments on 1 May 2008, 2 May 2008, and 29 August 2008. From exhibit 1 and KJL-58, it appears that most of the significant expenditure on the reconstruction began in late April-early May 2008. I am satisfied that the insurance money not spent on “out-of-pocket” expenses (around $250,000) was contributed to the re-construction of the Suburb X home. As I have already observed, some $35,000 of that was for contents that the Respondent had brought into the relationship.
In March 2009, as observed already, the Applicant borrowed another $130,000 from the Commonwealth Bank and that was put into an ANZ account and drawn down on very quickly. In his trial affidavit, the Respondent expresses doubt that all of this money was spent on the reconstruction of the Suburb X home. I am not in a position on that evidence alone to say that it was or it was not. In any event, as I have already observed, I have no basis for finding that it was somehow diverted away from the needs of the Applicant and the Respondent and am satisfied that it was spent on the expenditure needs of the parties. It is to be recalled that by this borrowing they had around $1,283,000 in total debt secured by mortgages over real property, as well as the financing of over $100,000 of the purchase price of the boat, to service. All that debt alone would have required many thousands of dollars to be repaid in interest and principal repayments each month.
Accordingly, I accept that over the period from late 2007 through to March 2009, the Applicant received and paid out just under $300,000 in insurance money (with around $50,000 of that being spent on rent and out of pockets), $71,000 from her cashed in pensions in the UK and a further $130,000 borrowing against the equity in the Suburb X property that took the debt owing and secured by mortgage over the Suburb X property to $550,000. As such, little had been paid off the principal debt secured since the first amount of $424,000 had been borrowed.
I am also satisfied that the rebuild and fit out of the Suburb X property cost a total of around $800,000 and that at least $350,000 of the money used to pay the total of those expenses came from the Respondent from his borrowings against the L Ltd property in the UK, and with the Respondent contributing a further $200,000 from those borrowings to the needs of the parties in those times. He also had contributed around $45,000 from the borrowings to the purchase of machines that they were trying to sell in Australia
Loans from L Ltd
The Respondent has also steadfastly maintained throughout these proceedings that he caused L Ltd to borrow the money that it did in late 2007 to contribute it towards the expenditure needs of the parties after being asked to do so by the Applicant. As I have pointed out, the borrowing was put in place before the fire and just after the purchase of the Suburb GG land. I am satisfied that the money was borrowed to be used to contribute towards the development of the Suburb GG land, but that it was then actually contributed to the costs of the rebuild and refit of the Suburb X house after the fire and the parties changed their plans.
Again, the Respondent maintained a case that it was the Applicant’s decision alone to go down this path and that she insisted he borrow the money and then lend it to her. I do not accept this. I am satisfied that he was a willing participant in these plans and went along with them completely.
The Respondent has maintained that he got advice from L Ltd’s accountants in the UK that his private use of the money borrowed by L Ltd would attract significant tax consequences, but that if the money was borrowed and repaid on commercial terms in the name of the Applicant, a “non-related” party to the company, this would not attract the tax liability.
The Respondent asserted that all of this was made known to the Applicant and that she agreed to “borrow” money from L Ltd on such commercial terms, with the agreement that it would be paid back upon sale of the property without significant cost to the parties. The Respondent said that he even dictated a written document that the Applicant signed acknowledging the “debt” she owed to L Ltd. He did not produce that document and said that it had disappeared and cannot be found.
There is evidence that in the L Ltd accounts for the financial year ending 2012 that the Applicant and TPL are recorded as debtors, owing L Ltd £222,386 (approximately $534,000 at the exchange rate of $2.40/£1).
The Applicant has always denied that this was the arrangement. She has always denied that she “borrowed” money from L Ltd. I do not accept her denials as honest. I am quite satisfied that both the Respondent and the Applicant knew that when the money that was needed by them to undertake the development work they planned was sourced by L Ltd borrowing from a bank in the UK and then transferred to them in Australia, that it would be recorded in the financial accounts of L Ltd as loans to the Applicant and TPL as a consequence of the tax advice obtained from L Ltd’s accountants and that it would be required to be repaid to L Ltd at some point in time in order to avoid adverse tax consequences in the UK.
Of course, a major issue in this case, is the fact that these “loans” from L Ltd have never been repaid. The Respondent maintains that they must be. With respect to the Respondent, that cannot happen even if the Court agreed that it should. There is not enough money available to repay them and no property that can be sold to provide sufficient money to repay them. I will return to this issue later in these reasons.
Business Activities of the Applicant and the Respondent during their cohabitation
Another company, TU Pty Ltd (“TU”), was registered in Australia in February 2008 by the Respondent.
The evidence supports a finding that the Applicant and the Respondent continued running the business of importing and wholesaling products through TPL, but also began to market and sell machines called “TU machines” imported from Europe, and some other products imported from China, through TPL, C Pty Ltd and TU. The Applicant and the Respondent worked together in what became a joint enterprise. Significantly, I am satisfied that there was never a strict delineation of the business of each of the corporate entities they ran during this time and that records that were kept do not accurately reflect the exact performance of each separate corporate entity.
There is no dispute that the TU machines were very expensive, with individual units selling for around $35,000. Not a large number were sold by the parties.
Further Significant Developments
After the rebuild at the Suburb X property finished in early 2009, the Applicant and the Respondent moved back into that property along with the Respondent’s teenage son, ST. At times, one of the Respondent’s young adult daughters also lived with them. The relationship between the Applicant and the Respondent’s children was never very close. Indeed, those relationships were fractious.
The parties attempted to sell the Suburb X property at auction in May 2009. I am satisfied that they probably considered that necessary to reduce debt and to attempt to further the plans to develop the Suburb GG land. However, the auction of the Suburb X property was unsuccessful.
Evidence supports a finding that in September 2009, the parties started the development of the Suburb GG property in earnest. They had held it as vacant land for over two years, with enormous holding costs incurred in respect of the servicing of the loan that was taken out to buy the land in the first place.
Presumably, to obtain funds to progress the development of the Suburb GG property, the parties sold the commercial unit that was owned by their self-managed superannuation fund in December 2009. The property was sold for $445,000 plus GST, and after settlement, $478,936 was deposited into the super fund’s bank account. Of course, the liability pertaining to the original borrowings to purchase that property in the first instance remained outstanding and payable by the parties. The sale proceeds could not be used to discharge that debt because of the superannuation regulatory regime.
The Applicant asserts that they received accounting advice that they could develop the Suburb GG property by way of a Joint Venture between her (as the property was in her sole name) and their self-managed superannuation fund. She said that she went ahead and acted on that advice. The Respondent has denied that any such advice was obtained or that he was party to any agreement for the self-managed superannuation fund and the Applicant to develop the Suburb GG property by way of a Joint Venture.
I am satisfied that the Applicant considered herself lawfully entitled to undertake the development through a Joint Venture between herself and the self-managed superannuation fund. I am also satisfied that the Respondent was aware of that, too. I consider his denials of knowledge of this to be false.
As things turned out, evidence given at the trial by an accountant expert in superannuation satisfied me that the Joint Venture arrangement was not lawful. The superannuation fund was not entitled to enter into a joint venture with the Applicant to develop a property registered in her name. That fact, in addition to other matters that will be referred to further in these reasons, led me to make the interim orders I did to cause the parties’ self-managed superannuation fund to be brought back to compliant status. That was achieved. The parties’ self-managed superannuation fund is back in order, to the express satisfaction of the Australian Tax Office (“ATO”).
The parties’ only child, KK, was born in 2009. By agreement between them, the Respondent principally ran the business of TPL from that time on until the separation of the parties, with the Applicant principally caring for their child and also working on managing the development of the Suburb GG property.
The Applicant asserted that the Respondent was not as successful in running TPL as she had been. The raw figures presented by the company’s accounts provide some prima facie support for that assertion, but on closer examination that support evaporates.
The gross takings recorded for the 2009 financial year were $578,242 with gross profit after costs of sale being $164,436. After expenses which included large amounts spent on advertising, marketing and travel, the company made a loss of $67,094 that year. The gross takings recorded for the 2010 financial year were only $241,148 with gross profit after costs of sale being $63,337. After expenses which included large amounts described as directors fees and management fees, as well as advertising and travel, the company made a loss of $129,404 that year. The gross takings recorded for the 2011 financial year were even lower at $153,843, with gross profit after costs of sale being $119,669, based on much lower expenditure on stock (or machines). After expenses which were much more restrained, the company made a profit of $16,699 that year.
I am simply not satisfied that either the Applicant or the Respondent was a successful business operator. None of the companies, TPL, C Pty Ltd, LM, or L Ltd made much profit in the years of the relationship of the Applicant and the Respondent. There is evidence that in the 2010 financial year the parties clearly obtained at least $80,000 out of TPL in directors’ fees and management fees. It is to be remembered that the Respondent had caused around $550,000 to be transferred to Australia from the L Ltd borrowings at the end of 2007 and I am satisfied that quite a lot of that money found its way into TPL accounts. The Applicant also adduces evidence that she asserts shows that over a three year period from 2007 to 2010, over $315,000 was transferred out of TPL accounts into DEPL, LM, PQ and another company called UV. She did say that the “inter company transactions were complicated to take advantage of tax losses”.
It appears that a lot of money was shifted around between companies, but the evidence does not convince me that a lot of money was actually made by any of these companies as profit on business activities.
What happened between the parties in 2010, on the evidence, is more difficult to determine. One thing is clear though, substantial funds, that were invested in the bank in the name of the parties’ self-managed superannuation fund, started to be withdrawn and spent by both of them in large amounts.
The Foreign Exchange Contracts
Two foreign exchange contracts were entered into. There is much dispute about the exact circumstances under which this happened. The Applicant asserts the Respondent was responsible for arranging the contracts. The Respondent asserts that the Applicant was very keen to arrange them so as to protect her position in respect of “her” obligation to repay the borrowed money to L Ltd in British Pounds, having regard to currency value fluctuations that were happening in 2010.
Again, I find it difficult to believe one of the parties over the other on this point. I am quite satisfied that both parties knew of and participated in the organisation of the foreign exchange contracts and that each of them is equally responsible for assuming the risks involved. Not only did they take on the risks, but they each obviously agreed for the funds of their self-managed superannuation fund to be utilised in confronting that risk, thus exposing their fund to potential losses.
According to the report of the Court appointed accounting expert, Mr BG, the sum of $436,000 was transferred from an ANZ bank account in the name of the parties’ super fund to an NAB account in May 2010. That amount was then transferred to another NAB account. Two foreign exchange contracts were then entered into with the NAB to purchase two amounts of £130,000 with a maturity date of 29 December 2010.
On 25 June 2010, $57,593 was transferred back into the first NAB super fund bank account. On the same day, that amount was drawn from that account and used to open a term deposit in the name of the parties’ super fund. Apparently, it was 25 per cent security for one contract for £130,000.
A few days later, $59,123 was transferred from the second NAB super fund account to the first one and was used to open another term deposit in the name of the super fund, being 25 per cent security for the other contract for £130,000. These term deposits were the security the bank required for the two foreign exchange contracts entered into.
As sometimes happens, things did not go as the parties hoped they would. The exchange rate went the other way to what the parties had expected and losses were made on the contracts. On 29 December 2010, $32,354 was drawn from the second NAB super fund bank account to fund losses on one of the foreign exchange contracts that they opted not to complete. On 12 January 2011, a total of $236,527 was used to “make good” the other contract for £130,000. $116,137 of that came from the second NAB super account and the balance came from the two term deposits that had been set up as security, including the interest they had earned.
The £130,000, the purchase of which was completed, was deposited into an account in the Respondent’s name on 13 January 2011.
Mr BG gave evidence that investment in foreign exchange contracts can be a legitimate investment for a self-managed super fund. Unfortunately, the super fund lost $32,354 on one contract but effectively exchanged $236,527 for £130,000 on the other. That money was then removed from the super fund’s accounts and spent, over time, by the Respondent. To make the super fund compliant again it had to be treated as a loan to the Respondent and repaid. As I have already observed, by interim Orders, I have ensured that happened in 2016.
However, the evidence that was before me suggests that the Respondent considered that the sum of $32,354 lost on one of the foreign exchange contracts should not be the loss of the super fund but rather be treated as a loan from the super fund to the parties. The evidence shows that in the days immediately following the payment out of the super fund of the sum of $32,354, four payments totalling $30,000 were deposited back into the super fund’s bank account from the parties’ joint ANZ bank account. This was sourced from the money that the Respondent had transferred in to the account that I refer to in paragraph 38 hereof. The Respondent also contends and the evidence lends some support to his contention, that he repaid the balance from the same joint account later in 2011 with a deposit of $3,400.
However, there needs to be consideration of what the Respondent did with that sum of £130,000 that he did deposit to an account outside of the super fund, as it is clear that he did not treat that as a loan in the first instance. I will return to that.
The Funding of the Cost of the Development of Suburb GG
From 7 July 2010, there were other withdrawals from the parties’ NAB super fund bank account, large withdrawals. $30,000 was withdrawn in two transactions that day and another $20,000 was withdrawn the next day. More transactions like that occurred through until the middle of November, by which time $200,000 had been withdrawn out of that particular super fund bank account. What was left then went to pay for the loss on the first foreign exchange contract and also to meet the payment of $116,137, referred to above, towards making good the second contract.
In evidence as exhibit 11 is a schedule prepared by the Applicant setting out what she asserts was spent on the Suburb GG property from when it was purchased. It lists the most significant expenditure in the month of November 2011. Those items total around $250,000 alone. All of the remainder of the expenditure items on the schedule take the total up to just over $400,000.
Whilst I understood the Respondent not to accept that amount was spent on the Suburb GG property, particularly as he pointed out that the Applicant had previously asserted that $280,000 was spent on the Suburb GG development, he did not persuade me with any cogent evidence that the Applicant’s assertions were false, fabricated or without foundation. On the balance of probabilities, I accept that around $400,000 was spent in respect of the Suburb GG property between its purchase, sub-division and development and sale.
The Applicant also asserts she spent all of the money that she drew from the super fund accounts on this development. I accept that she did. I accept that those drawings have now been appropriately treated as borrowings from the super fund and have been paid back since separation and through the intercession and work of the Court appointed expert.
However, the money from the super fund was not all that was spent on Suburb GG. The parties clearly needed more funds to complete the work. There is no dispute that the Commonwealth Bank mortgage over the Suburb X property was refinanced again through borrowings from the ANZ bank in late November 2010, coinciding with the pressing need for substantial funds to complete the work.
An amount of $825,000 was borrowed and used to pay out the $550,000 owing to the Commonwealth Bank and it provided the parties with an additional amount of around $280,878 that was paid into the parties’ joint account. This took their total liabilities to in excess of $1,500,000. The evidence in the form of bank statements shows that the entire $280,878 was drawn out of that joint account within just over five months of its receipt.
It appeared, at first glance, that the Respondent would have the Court find that the Applicant secreted that money away somewhere for her own benefit. I do not. I am satisfied that the money was either spent on the costs of developing Suburb GG or the family’s other expenditure needs at the time. In fact, the Respondent does agree that the money was “largely utilised by the Applicant in drawings” and used in TPL and meeting the costs of the Suburb GG development, but he also asserts that she has not disclosed statements from a bank account that was in her own name into which he said she was depositing some of these funds. Notwithstanding that assertion, I am still not persuaded, in all of the circumstances of this case, that the Applicant has secreted funds away from the superannuation fund or the additional monies advanced by the ANZ bank against the Suburb X property, or that she has them hidden or invested in property not disclosed by her.
The British Pounds Account of the Respondent and the Balance of the Superannuation funds
As already observed, the Respondent put £130,000 into an account in his sole name in January 2011. That was nearly a year before he and the Applicant separated. The Applicant would have the Court find that the Respondent spent all that on himself. I do not make such a finding.
I am satisfied that an amount of £15,000 was transferred to the UK in March 2011 and most likely utilised to meet a margin call on the L Ltd loan borrowed in November 2007. There was no dispute that the loan in the UK secured against the real property was one where the principal debt secured was not allowed to exceed a particular set percentage of the value of the property. At or around this point, the bank clearly obtained a fresh valuation of the property and found the value had dropped such that the safety margin for the bank had decreased, requiring an injection of funds to bring down the principal amount owed and restore the margin of security for the bank. That amount was £15,000.
I am also satisfied on the evidence that up until the end of January 2012, the Respondent had transferred, in various amounts over that time, another £65,000 into another NAB account in his own name and then used that money to meet expenditure needs of the Applicant and the Respondent in that time. Those needs included servicing the loans the parties had that were secured by mortgage on the Suburb X and Suburb GG properties and the boat. There is evidence that those loan repayments alone were about $12,000 per month during that time. The expenditure also included the payout figure on the debt secured over the boat. That amount paid in or around January 2012, to discharge that debt, I am satisfied, was $34,000.
There is evidence that at the time of separation, which for this purpose is said to have been February 2012 when the parties began living in separate residences, the Respondent had around £43,000 or the equivalent of $67,000 left from the original £130,000 that was sourced from the superannuation account. I accept that. It did not appear to be challenged by the Applicant. The Respondent’s evidence shows £21,000 in four separate transactions transferred into a bank account in his name from February through to April 2012. It does not show what happened to the balance.
(B) the carer entitled to child support;
by the making of, or the refusal to make, the order; and
(ii) to:
(A) the liable parent; or
(B)any other child or another person that the liable parent has a duty to support;
by the making of, or the refusal to make, the order; and
(iii)to any resident child of the parent (see subsection (10)) by the making of, or the refusal to make, the order.
Section 3 of the Assessment Act provides, in respect of the duty of parents to maintain their children, the following:
Duty of parents to maintain their children
(1) The parents of a child have the primary duty to maintain the child.
(2)Without limiting subsection (1), the duty of a parent to maintain a child:
(a)is not of lower priority than the duty of the parent to maintain any other child or another person; and
(b)has priority over all commitments of the parent other than commitments necessary to enable the parent to support:
(i) himself or herself; and
(ii)any other child or another person that the parent has a duty to maintain; and
(c) is not affected by:
(i) the duty of any other person to maintain the child; or
(ii)any entitlement of the child or another person to an income tested pension, allowance or benefit.
As I have said, I consider the Applicant to be appropriately assessed as earning an income, or having the capacity to earn an income, for child support purposes, of $28,000 per year for the period commencing 1 July 2012 through to the end of this current financial year, namely 30 June 2018.
For the Respondent, I have determined I am satisfied that his income for child support purposes in these same years should be regarded as follows:
2013 $42,000
2014 $14,000
2015 $8,000
2016 $8,000
2017 $13,000
2018 $37,000
I do not consider that he had an earning capacity greater than that which I assess him as having earned in those years. I am satisfied of that, particularly having considered the provisions of s 117(7B) of the Assessment Act.
The Applicant set out in her Financial Statement of 27 November 2015 average weekly expenses of $127 that she said she has solely for the child. None of those were challenged by the Respondent. The Applicant did not include in that schedule any amount for accommodation expenses. I would allow $100 of the rent she pays as being in respect of the child’s needs.
She has not included any motor vehicle or transport expenses, nothing for entertainment and hobbies, nothing for holidays, nothing for medical or dental expenses, nothing for books, nothing for gifts, nothing for chemist and pharmaceutical.
I am satisfied that the reasonable weekly expenditure requirements for the Applicant in respect of her support of the child would be at least $300 and that it would have been at least that much since 1 July 2012. Even the Respondent, who had the child in his care substantially less time than the mother did, asserted in his Financial Statement that his reasonable weekly expenditure on the child was $91 and he, too, did not include in that any amount for accommodation costs. Because of the greater time the child spends with the Applicant (10 nights per fortnight as opposed to 4 with the father), her total weekly expenditure requirements would clearly exceed the Respondent’s. Indeed, I consider it entirely reasonable to assess her expenditure requirements in respect of the child to be more than double the Respondent’s reasonable expenditure requirements in respect of the child.
In total, the Respondent set out his weekly expenditure (not including credit card repayments and child support) to be $437 which is equivalent to $22,724 per year. I consider that to be an understatement of his real needs.
The Applicant set her expenses out to be $504 per week (not including credit card repayments and repayments of money owing to her mother and rent said to be part of the expenses of TPL). Clearly, that is an understatement of her total weekly expenditure needs.
For the six financial years 2013 to 2018, my income assessments for them result in a total for the Applicant of $168,000 and $122,000 for the Respondent. That is a ratio of 58/42 expressed as a percentage. Considering that each party’s own personal expenditure needs during that time might reasonably be considered at comparatively equal, I consider for that period of time it to be just and equitable for the Applicant to bear the greater burden of financially supporting the child, as I am satisfied that she actually has done.
However, if her weekly expenditure needs in respect of the child have been some amount in excess of $300 and the Respondent’s weekly expenditure needs in respect of the child have been around $150 (including an amount for accommodation needs for the child, which I assess as less for the Respondent), then she has had expenditure needs for the child of at least $150 greater than the Respondent has.
If one is going to share that burden justly and equitably for this six year period that I am considering, then that difference of at least $150 per week should be borne in the same ratio of 58/42 over the entire period. $150 per week annualised and multiplied by six years equals $46,800. 42 per cent of that amount is $19,656.
That is equal to $63 per week averaged over six years. Indeed, I consider it appropriate to increase that amount to around $20,000 having regard to the acknowledgement that the Applicant’s expenditure requirements for the child probably exceeded $300 per week. That merely increases the weekly average amount to $64.10.
Whilst I acknowledge that the Respondent would probably argue that he should not be assessed as being liable to pay $64.10 per week for some years during which I have accepted that he has only earned, realistically, $8,000 per year, given that he argues that he should be assessed as being liable to pay nothing for those years, the fact that he has actually paid nothing or next to nothing in those years means that any order the Court makes pursuant to s 118 of the Assessment Act actually fixing the annual amount of child support payable for these six years, will result in an immediate arrears coming into existence (as there apparently is already) upon such an order being made. That arrears will have to be paid out of existing capital that is settled on the Respondent in the property proceedings or future income. It will be offset by credit given for any amount of child support he has actually already paid in the same period.
I do consider these facts to ameliorate the argument that the Respondent did not earn enough in any one or two of those years to meet child support payments of $64.10 per week and any notion that averaging the amount over five years works an injustice to the Respondent. I do not consider that it does.
$20,000 child support contribution towards the financial support of a growing child over six years is not a great amount. It would not be, in my judgment, unjust or inequitable to make orders that give rise to that sort of immediate debt in terms of child support owing for this six year period, given the capital the Respondent is going to retain as a result of these property settlement proceedings.
As for the future, I am prepared to set the Respondent’s annual income for child support purposes at $37,000 until the end of the 2019 financial year having regard to the income he could expect to continue receiving from L Ltd and also from a Transition to Retirement Pension from his superannuation interests if that is what ultimately happens. If it is not, and he takes all of his superannuation as a lump sum, setting his child support income at that for that period, as I have already observed, is not unjust and inequitable in any event as he has access to a great deal more money straight away. I will also set the Applicant’s annual income for child support purposes at $28,000 until the end of that same 2019 financial year having regard to her continued operation of the business through TPL. From the that time on, I consider it appropriate to allow the administrative provisions of the Assessment Act to again determine the appropriate level of child support to be paid.
I am also minded to secure the payment of child support for the periods in which I am making departure orders using an appropriate order.
Is it “otherwise proper” to make such orders?
Section 117(5) of the Assessment Act provides that in determining this question the Court must have regard to:
(a)the nature of the duty of a parent to maintain a child (as stated in section 3) and, in particular, the fact that it is the parents of a child themselves who have the primary duty to maintain the child; and
(b)the effect that the making of the order would have on:
(i)any entitlement of the child, or the carer entitled to child support, to an income tested pension, allowance or benefit; or
(ii)the rate of any income tested pension, allowance or benefit payable to the child or the carer entitled to child support.
Having regard to the nature of the duty of a parent to maintain a child, I am satisfied that the orders I am considering making are “otherwise proper”. As for the effect that the making of such orders would have on the Applicant’s pension entitlement, there is little evidence about this before me. However, to the extent that my orders might reduce her entitlement to a pension or other income tested benefit or allowance, I do not consider that to create an injustice or an “improper” situation.
Accordingly, I am satisfied that the child support orders I am considering making are “otherwise proper” as that term is used in s 117 of the Assessment Act.
Consideration of whether any adjustment to contributions assessed entitlements is necessary in order to arrive at orders that are “just and equitable” in the property settlement proceedings
The Respondent is 62 years of age. His mental and physical health is not good. Although he did not put medical evidence before the Court for the trial, I have seen him in Court many times over the last few years. Apart from being an emotional “wreck”, he could not stand for long because of back pain. As I have said, I do not consider that he has a good earning capacity other than to earn passive income from his investments.
The Applicant is 51 years of age and, from my observation, in reasonable health. At the time of the trial, she was earning a relatively small income from her business that she has operated for many years and I anticipate that likely to continue into the future. I consider she has a better earning capacity than the Respondent.
I am satisfied that between the Applicant and the Respondent they have around $987,152 worth of superannuation and net property interests (including the amounts notionally added back and treated as property already received by each of them in this property settlement) .
The Applicant owes her mother a couple of hundred thousand dollars for the money she borrowed from her to pay legal fees and other expenses. The Respondent owes his former solicitor a couple of hundred thousand dollars. Clearly, they do not have the immediate capacity to repay those debts, let alone the debt owed to L Ltd. They also have some credit card liabilities, one of which I am partly taking into account in determining the adjustable ‘pool’.
Looming large though is the very significant issue of the potential liability to the UK tax authorities in respect of the money that L Ltd loaned to the parties, ostensibly through the Applicant. Though not being totally satisfied that the Respondent will incur that tax liability, I acknowledge that there is a substantial risk that unpaid tax, interest and penalties anywhere in the range of $221,133 to $294,333 might be assessed as a consequence of this property settlement determination. That is equal to 22 per cent to almost 30 per cent of the total value of the “pool” of net property interests. It is a very substantial matter to take into account at this stage of the process and although I am satisfied that there is a real risk of there being a substantial tax liability as opined by the English accountant, I am not completely convinced the Respondent will put himself in a position where the circumstances giving rise to it are made known to the UK tax authorities or that he will inevitably pay such liability. For this reason, I am not prepared to treat it as a debt actually owing or to make an adjustment in the order of 22 per cent to 30 per cent of the “pool” in the Respondent’s favour because of the existence of this risk. I would discount it considerably at this stage.
The Applicant has the principal responsibility of caring for their child since separation and will continue to have that principal responsibility into the future, at least another 9-10 years.
The Respondent will be providing child support to the Applicant in a lump sum for a period covering the last several years in an amount determined to be just and equitable. That will be around $20,000. He will also have ongoing liability to pay child support to the Applicant for those 9-10 years to come. At what amount that will be is not easy to predict, save that I would not expect it to be much. I am satisfied that the child support the Respondent will pay will not go very far towards meeting the real costs the Applicant has had, and will have in financially supporting their child.
This part of the discretionary process is not a mathematical exercise. It simply cannot be. My consideration of these matters and all the other matters set out under s 90SF(3) of the Act causes me to consider that an adjustment of 13 per cent in favour of the Respondent from that arrived at after consideration of their respective contributions would allow orders to be framed that are just and equitable, having regard to all of the matters set out in s 90SM(4) of the Act. Such an adjustment would bring the percentages pursuant to which the “pool” of net property (including amounts notionally added back for money already had as “part property settlement”) and superannuation interests is to be divided between the Applicant and the Respondent to 60 per cent to the Respondent and to 40 per cent to the Applicant.
The “Pool” for division and Application of a 60/40 percentage division
I have already discussed the matters relating to the determination of the property interests of the parties that are to be divided between them.
The most substantial “asset” of the parties is the money that is held on trust for their self-managed superannuation fund. As at 30 June 2017, it was calculated to equal $566,486 made up of $269,356 being the Respondent’s interest and $297,130 being the Applicant’s interest. That is equal to a ratio of 52.45 to 47.55 in favour of the Applicant.
As I have said already, I have determined that an order should be made that the Applicant be repaid out of the superannuation fund the sum of $1,500 that she personally paid that was a debt of the fund. That would bring the fund down to $564,986 and would take the Applicant’s interest to $296,335 and the Respondent’s interest down to $268,650
I have already said that I am satisfied that the Respondent’s interest in L Ltd is worth $318,000.
The Applicant has her interest in TPL that was valued at $19,559 and she has TU machines that I accept are valued at around $32,000.
Each party has already received $10,000 each from the proceeds of sale of their motor boat that I consider is properly treated as “part property settlement” already received by them.
I am satisfied that the amount of $47,711 spent by the Respondent on legal fees in these and related proceedings should be notionally “added back” or included as “part property settlement” already received by him.
I am also satisfied that the sum of $7,701 of joint funds spent on paying L Ltd’s accountants should also be notionally “added back” or included as “part property settlement” already received by the Respondent.
Similarly, the small sum of $495 that was paid to accountants from money held for both parties but for services provided by those accountants in respect of the Respondent’s own interests in this case should also be notionally “added back” or included as “part property settlement” already received by him.
I am satisfied that this “pool” should be divided as to 60 per cent to the Respondent and as to 40 per cent to the Applicant and that final orders reflecting this percentage division will be able to be made “just and equitable” as between the parties.
60 per cent of $987,152 is $592,291. The Respondent already has as follows:
The Respondent’s interest in L Ltd $318,000
The Respondent’s personal possessions $2,000
Notional Add-Backs
Respondent received from Boat sale $10,000
Respondent spent on Legal Fees $47,711
Respondent spent on L Ltd’s accountants $7,701
Respondent spent on C Pty Ltd’s accountants $495
Sub-Total $385,907
Superannuation interest $268,650
Total $654,557
In addition, I take into account the credit card liability of $30,300 that I have allowed in this determination. That reduces the total of his net share of the “pool” to $624,257, leaving him, as things currently stand, apparently having to pay the Applicant $31,966 for her to receive her entitlement as determined appropriate by me. He has little capacity to do that as I see it, as things currently stand. A superannuation splitting order splitting that much of his superannuation to the Applicant is the simplest answer.
Of course, the final step of the process is determining the orders to make and being satisfied that they are, themselves, just and equitable.
Listing for Further Submissions
One of the issues that now confronts the Court in determining the particulars of the Orders that are now to be made is that the 40 per cent division in favour of the Applicant could very well result in her receiving and retaining virtually all of her interest in the form of superannuation. If orders are made that provide for that to be the outcome, the Respondent could determine to retire from the workforce and take all of his superannuation in a lump sum, allowing him to retain his interest in L Ltd and take his superannuation now as cash, whilst the Applicant would have to wait several years, at least, before she can access her money currently secure within the superannuation fund. In the circumstances, that does not appear, at first glance, to be just and equitable.
There are other possibilities. For example, a superannuation splitting order could be made splitting superannuation from the Applicant’s entitlement to the Respondent. He could then take his superannuation as a lump sum in cash and pay some back in cash to the Applicant. However, I am conscious of the fact that the Respondent told the Court he did not want to retire and take all of his superannuation as a lump sum. It might also be that the TU machines should be delivered to the Respondent as he seems better placed to be able to sell them than the Applicant. That way the cash amount he would have to pay the Applicant would increase.
The Court has injunctive powers. They might be able to be used in these circumstances.
I am conscious that I told the Applicant and the Respondent that I would not make final property settlement orders without first publishing my written reasons for my determination and giving them an opportunity to make further submissions to me as to the precise form of orders I should make that I am satisfied are just and equitable. I now consider that particularly necessary given the significant difference between the outcomes that each of the Applicant and the Respondent contended for and the outcome that I have determined is the appropriate outcome. It is to be remembered that each contended that he or she should retain every piece of property, including all of the superannuation, to the exclusion of the other.
I am also aware the Respondent already owes the Applicant’s former solicitors, ML Lawyer, money in respect of orders for costs that have been made against him in their favour and that ML Lawyer were also told by me on an occasion of appearance when I allowed them to intervene to protect their interests in this regard that they would be given notice before my final orders were made, so they could be heard in respect of the final orders that should be made with a view to securing payment of the money they are owed by the Respondent.
I will give them that notice and they will be provided with a copy of these reasons. I will list the matter with a view to hearing further submissions from the parties about the form that the final property settlement orders should take.
In the meantime, I will make orders pursuant to s 118 of the Assessment Act as I have already outlined.
Of course, if either the Applicant or the Respondent decides to appeal from any of the Orders I have decided to make pursuant to s 118 of the Assessment Act, the appeal period in respect thereto runs from the date hereof. As I have not yet made final property settlement Orders, there are no Orders yet in place to appeal from in respect of all these reasons for judgment in so far as they deal with my property settlement determination. The appeal period in respect of the property settlement determination will not begin to run until I make those Orders after I have heard and considered any further submissions the parties may wish to make.
Contempt Applications
Finally, there is one last matter about which I consider I should comment. As I have observed throughout these reasons, I am conscious that each party had outstanding contempt or contravention proceedings against the other as at the time of the trial. Indeed, I was told there are multiple applications pending.
I deliberately determined in the lead up to the trial not to hear those before or with the trial, but rather to adjourn the hearing of them until after I had heard and determined the matter.
The Respondent, particularly, has made much of his view that I should have heard and determined them before the finalisation of the matter. Clearly, he was of the view that the outcome of his applications would necessarily increase the quantum of the ‘pool’ of property available to be subject to adjustment orders, particularly in respect of the proceeds of sale of TU machines by the Applicant and the retention of some of the proceeds of sale of the real properties by the Applicant. Similarly, the Applicant considered that the further amount of money that the Respondent borrowed against the equity in the UK property, which she contends was done by him in contempt of Court, should also be “added back”.
I have now dealt with each of those matters I just mentioned in these reasons and as part of coming to the determination that I have. As can be seen, I did not consider it appropriate to “add back” those amounts.
I am now aware that the Applicant discontinued her outstanding contravention application against the Respondent some months after the trial concluded and that only those filed by the First Respondent against the Applicant remain to be determined. That was, in my view at least, a commendable step. It may nevertheless be too much to hope that the Respondent might now reconsider the merits of proceeding with his contempt applications and determine to discontinue them in the light of these reasons for judgment, but that will be taken up with the Respondent in due course and the matters listed for hearing and determination if he presses them.
I certify that the preceding four hundred and forty-two (442) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Forrest delivered on 25 January 2018.
Associate:
Date: 25 January 2018
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