TOSCANI & TOSCANI
[2020] FamCA 5
•15 May 2020
FAMILY COURT OF AUSTRALIA
| TOSCANI & TOSCANI | [2020] FamCA 5 |
| FAMILY LAW – PROPERTY SETTLEMENT – proceedings to alter property interests – long marriage of approximately 38 years – where the marriage is ongoing and the parties continue to reside together – where the husband is represented by a case guardian – assessment of contributions – where husband made a significant contribution at the commencement of the marriage – where husband made a contribution to the wife’s daughter – where there is a dispute relating to the treatment of loans incurred pursuant to Div 7A of the Income Tax Assessment Act 1936 (Cth) – where an indemnity in respect of a guarantee is sought – where the Court considers the husband has made a contribution of 52 per cent to the parties’ property – where there is no adjustment pursuant to s 75(2) of the Family Law Act 1975 (Cth) – where there is a limited maintenance order. |
| Administration and Probate Act 1958 (Vic) Pt IV Duties Act 2000 (Vic) s 44 Evidence Act 1995 (Cth) ss 13, 63(2)(b), 67, Sch s 3 Pt 2 Income Tax Assessment Act 1936 (Cth) Div 7A Income Tax Assessment Act 1997 (Cth) s 102-5 Family Law Act 1975 (Cth) ss 75(2), 79, 79(1), 80, 80(1)(k), 81, 114 Family Law Rules 2004 (Cth) r 6.10 Trustee Act 1958 (Vic) s 28(2) |
| Grace Buncle Pty Ltd v Ralph Lauren No 57 Pty Ltd [2018] QSC 24 Stanford v Stanford (2012) FLC 93-518 |
| Young JA, Croft and Smith, On Equity (Lawbook Co, 2009) |
| APPLICANT: | Ms Toscani |
| RESPONDENT: | Mr Toscani |
| FILE NUMBER: | MLC | 10120 | of | 2016 |
| DATE DELIVERED: | 15 May 2020 |
| PLACE DELIVERED: | Melbourne |
| PLACE HEARD: | Melbourne |
| JUDGMENT OF: | Hartnett J |
| HEARING DATE: | 9-12 December 2019 |
| FURTHER WRITTEN SUBMISSIONS OF THE HUSBAND | 18 December 2019 |
| FURTHER WRITTEN SUBMISSIONS OF THE WIFE | 24 December 2019 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Dickson QC and Ms Byrnes |
| SOLICITOR FOR THE APPLICANT: | Clancy & Triado |
| COUNSEL FOR THE RESPONDENT: | Mr North SC and Dr Smith |
| SOLICITOR FOR THE RESPONDENT: | Lander & Rogers |
Orders
Within 90 days hereof, the husband and the wife do all such acts and things necessary to transfer to the wife at the expense of the wife the unencumbered matrimonial home situated at and known as L Street Suburb K in the State of Victoria being the whole of the land more particularly described in Certificate of Title Volume ... (‘the Suburb K property’).
Within 90 days hereof, the husband and the wife do all such acts and things necessary to transfer to the wife the property situated at and known as N Street Suburb M in the State of Victoria being the whole of the land more particularly described in Certificate of Title Volume ... Folio ... (‘the Suburb M property’). The wife pay the stamp duty assessed on the transfer and indemnify the husband in respect thereto and the husband pay and indemnify the wife in respect of any capital gains tax payable by him on the transfer of his share to the wife. The legal costs and conveyancing costs, including disbursements, be paid by the wife.
The husband be permitted to occupy the Suburb K property and the Suburb M property (together with the wife), with such rights of occupancy to terminate, at the wife’s election, upon the wife providing the husband 60 days’ notice in writing to vacate.
Within 180 days of the date of these orders (‘due date’), the husband pay or cause to be paid to the wife the sum of $ 1,861,337 (‘the payment’) and in default, interest be paid on the payment or so much of the payment outstanding calculated monthly at the rate prescribed by the Family Law Rules 2004 (Cth) from the due date until the whole of the payment is made.
The wife’s payment pursuant to order 4 herein be secured by way of a fixed and floating charge in favour of the wife over P Pty Ltd.
The wife hereby retain free of claim from the husband and the husband relinquish any claim against:-
(a) her interest in Q Pty Ltd;
(b) her loan to Q Pty Ltd;
(c) her Motor Vehicle 1;
(d) her jewellery and her personal effects;
(e) her bank accounts; and
(f) her loans to her daughter Ms J.
The husband hereby retain free of claim from the wife and the wife relinquish any claim against:-
(a) his shares in:-
(i)R Pty Ltd;
(ii)P Pty Ltd;
(iii)T Pty Ltd;
(iv)S Pty Ltd;
(v)GG Limited; and
(vi)JJ Holdings Limited;
(b) his unpaid present entitlements in the R Trust;
(c) his loan to R Trust;
(d) his study desk and personal effects; and
(e) his bank accounts.
The husband pay and indemnify the wife and keep the wife effectively indemnified with respect to all taxation liabilities incurred by her on all payments made to her by the husband or any of the trusts and entities controlled by him pursuant to these orders.
The husband pay all expenses associated with the Suburb K Property and the Suburb M property or all or any property acquired by the wife in substitution for same, including but not limited to rates, water rates, insurances, land tax, utilities, pool cleaners, gardeners and property maintenance expenses for so long as he shall remain in occupation of either the Suburb K property and/or the Suburb M property or all or any property acquired by the wife in substitution for same or for a period of 180 days from the date of this order or for such further period as may occur before the husband’s compliance with order 4 herein, whichever is the last in time.
Whilst living in the Suburb K property and/or the Suburb M property or for a period of 180 days from the date of this order or for such further period as may occur before the husband’s compliance with order 4 herein, whichever is the last in time, the husband pay or cause to be paid to the wife by way of maintenance for the wife the sum of $24,000 per calendar month with the said sum to increase on 1 July each year from 2020 onwards in line with the CPI index and the said sum to be deposited directly into a bank account to be nominated by the wife.
The husband and the wife together retain the household contents of the Suburb K property and the Suburb M property and divide by agreement such contents should they so desire and in what proportion they desire. Failing agreement such contents shall be divided equally between them with the husband to retain his study desk and his personal effects. In the event of one of the parties predeceasing the other, the surviving party shall retain ownership of all the household contents not otherwise provided for in these orders.
The parties do all such acts and things and sign all such documents as and when required to give effect to these orders.
The husband’s attorneys, Mr A, Mr B and Mr E are hereby authorised to:-
(a) do any acts and things to be done by the husband;
(b) sign any documents to be signed by the husband; and
(c) exercise all rights conferred upon the husband pursuant to these orders.
These orders be binding on the parties’ respective heirs, legal personal representatives (including but not limited to attorneys), executors, administrators and assigns.
Otherwise, all extant applications be dismissed.
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 Toscani & Toscani 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 MELBOURNE |
FILE NUMBER: MLC 10120 of 2016
| Ms Toscani |
Applicant
And
| Mr Toscani |
Respondent
REASONS FOR JUDGMENT
Preliminary
This proceeding commenced on 18 October 2016 upon the Applicant wife (‘the wife’) making application for final property orders and spousal maintenance pursuant to Part VIII of the Family Law Act 1975 (Cth) (‘the Act’). The wife’s right to maintenance is a separate matter to the consideration of property adjustment as between the husband and the wife, albeit it is inextricably linked to the outcome of the manner and division of property as between the parties.
The background to the beginning of the proceeding was the wife’s earlier discovery that the Respondent husband (‘the husband’) had made a Will without her input in 2015. She was shocked to discover that she was not the husband’s power of attorney nor executor. She requested that the husband provide her copies of his Will and Power of Attorney but he failed to do so. In 2017, in a Codicil to his Will, the husband removed the wife and her daughter Ms J as beneficiaries under his Will. Given the husband’s poor health amongst other things, the wife became very concerned for her financial situation, particularly if the husband were to die. She also became concerned about her daughter Ms J’s, and her granddaughter X’s, financial position if she were to die. Thus she commenced these proceedings, albeit the marriage remains intact and a source of dependability and enjoyment to both parties.
In July 2019, it became necessary to appoint a case guardian for the husband due to his poor health, in particular the cognitive impairment caused by his suffering from dementia.[1] On 25 July 2019, orders were made by Her Honour Justice Johns appointing Mr B as case guardian for the husband (‘the case guardian’) pursuant to r 6.10 of the Family Law Rules 2004 (Cth) (‘the Rules’).
[1]Toscani & Toscani [2019] FamCA 581, [5].
The trial proceeded in December 2019. Following the trial, each of the parties filed further Written Submissions.
The orders ultimately sought by the wife were as follows:-
1.That the husband and the wife do all such acts and things necessary to transfer to the wife at the expense of the wife the unencumbered matrimonial home situate at and known as [L Street, Suburb K] in the State of Victoria being the whole of the land more particularly described in Certificate of Title Volume ... (“the [Suburb K] property”);
2.That the husband and the wife do all acts and things necessary to transfer the property situated at and known as [N Street, Suburb M] in the State of Victoria being the whole of the land more particularly described in Certificate of Title Volume ... Folio ... (‘the [Suburb M] property’) to the wife and the wife pay the stamp duty assessed on that transfer and the husband pay and indemnify the wife in respect of any capital gains tax payable by him on the transfer of his share to the wife;
3.That the husband be permitted to occupy the [Suburb K] property and [Suburb M] property (together with the wife), such rights of occupancy shall terminate, at the wife's election, upon the wife providing the husband 28 days’ notice to vacate;
4.That the husband pay to the wife $2,756,043 within 90 days of the date of these orders;
5.That the husband pay and indemnify the wife and keep the wife effectively indemnified with respect to all taxation liabilities incurred by her on all payments made to her by the husband or any of the trusts and entities controlled by him pursuant to these orders;
6.That the wife’s payment pursuant to order 4 be secured by way of a fixed and floating charge in favour of the wife over [R Pty Ltd, R1 Pty Limited and P Pty Ltd];
7.That the husband pay all expenses associated with the [Suburb K] Property and the [Suburb M] property or all or any property acquired by the wife in substitution for same, including but not limited to rates, water rates, insurances, land tax, utilities, pool cleaners, gardeners, and property maintenance expenses;
8.Whilst living in the [Suburb K] properties [sic], that the husband pay or cause to be paid to the wife by way of maintenance for the wife the sum of $40,000 (forty thousand dollars) per calendar month with the said sum to increase on 1 July each year from 2019 onwards and in line with the CPI index and the said sum to be deposited directly into a bank account to be nominated by the wife. Upon the husband ceasing to reside in the [Suburb K] property, the payments reduce to $24,000 per calendar month for a period of one year after the husband vacates the property; and
9.That these orders be binding on the parties respective Heirs, Legal Personal Representatives (including but not limited to Attorneys), Executors, Administrators, and Assigns.
The orders ultimately sought by the husband were as follows:-
1. The joint tenancy of the parties in:-
1.1the real property situate at [L Street Suburb K] in the State of Victoria being the land more particularly described by Certificate of Title Volume ... ([Suburb K] property); and
1.2the real property situate at [N Street Suburb M] in the State of Victoria being the land more particularly described by Certificate of Title Volume ... Folio ... ([Suburb M] property);
be hereby severed forthwith and until the implantation of order 3 hereof the parties hold their interests in the said properties as tenants in common in equal shares.
2. That:-
2.1the wife pay to the husband the sum of $3,004,521.55 plus 50% of the single expert fees incurred in these proceedings (the Payment) (or such other amount as may be required to affect a 35% split of the net property interests of the husband and the wife);
2.2within 30 days of the date hereof (the Date) the wife do all things necessary and execute all documents necessary to grant to the husband a mortgage in registrable form over her interest in the [Suburb K] property securing her obligation to make the Payment;
2.3subject to 2.2 the payment shall be due and payable upon the termination or revocation of the license in (4) hereof.
3. On the Date:-
3.1the parties do all such acts and things and sign all documents necessary to cause the [Suburb K] Property to be transferred into the wife’s sole name, at her expense ([Suburb K] Transfer) and until such transfer is perfected the husband hold his interest in the said property upon trust for the wife; and
3.2the parties do all such acts and things and sign all documents necessary to cause the [Suburb M] Property to be transferred into the husband’s sole name, at his expense ([Suburb M] transfer) and until such transfer is perfected the wife hold her interest in the said property upon trust for the husband.
4.Notwithstanding the [Suburb K] Transfer the husband be hereby granted a license to occupy the [Suburb K] property during his lifetime, such license being a registrable entitlement and to be revoked only upon either of:-
4.1the expiration of 60 days after any breakdown of the parties’ marriage, such breakdown to be constituted by one party giving the other party clear written notice that the marital relationship is dissolved, with such license; or
4.2the sale by the wife of the [Suburb K] property.
5.Notwithstanding the [Suburb M] Transfer the wife be hereby granted a license to occupy the [Suburb M] property during her lifetime, such license being a registrable entitlement and to be revoked only upon either:-
5.1the expiration of 60 days after any breakdown of the parties’ marriage, such breakdown to be constituted by one party giving the other party clear written notice that the marital relationship is dissolved; or
5.2the sale by the husband of the [Suburb M] property.
6.The wife hereby retain free of claim from the husband and the husband relinquish any claim against:-
6.1her interest in [Q Pty Ltd];
6.2her loan to [Q Pty Ltd];
6.3the household contents of the [Suburb K] property, save for the husband’s study desk and his personal effects;
6.4her [Motor Vehicle 1];
6.5her jewellery;
6.6her bank accounts;
6.7her loans to [Ms J]; and
6.8such of the contents of the [Suburb M] property as she may wish to retain.
7.The husband hereby retain free of claim from the wife and the wife relinquish any claim against:-
7.1his shares in:-
7.1.1 [R Pty Ltd];
7.1.2 [P Pty Ltd];
7.1.3 [T Pty Ltd];
7.1.4 [S Pty Ltd];
7.1.5 [GG Limited]; and
7.1.6 [JJ Holdings Limited];
7.2his Unpaid Present Entitlements in the [R Trust];
7.3his loan to [R Trust];
7.4his study desk and personal effects; and
7.5his bank accounts.
8.Pursuant to s 114 of the Family Law Act, each of the husband and the wife (and their respective agents and attorneys) be restrained from commencing or otherwise prosecuting any claim for a family provision order (being an application and order pursuant to Part IV of the Administration and Probate Act 1958 (Vic) or equivalent) from the other’s estate;
9.The wife use her best endeavours to relieve the husband of his guarantee made in relation to [Ms J’s real property, and in the event the wife is unable to so relieve he husband of that obligation, the wife indemnify the husband against the guarantee, and make any and all payments, and meet any and all related expenses, related to the said guarantee;
10.The parties do all such acts and things and sign all such documents as and when required to give effect to these orders;
11.The husband’s attorneys, [Mr A, Mr B and Mr E] are hereby authorised to do any acts and things to be done by the husband to sign any documents to be signed by the husband and to exercise all rights conferred upon the husband pursuant to these orders; and
12.The wife’s Initiating Application be otherwise dismissed.
(emphasis omitted)
Essentially, the wife sought alteration of the parties’ or either of their interests in property to achieve an equal division of the property and financial resources (if not found to be property) of the parties, howsoever owned and/or available to each of the parties. The husband, through his case guardian, sought an alteration of the parties’ or either of their interests in property to achieve a division of 65 per cent in favour of the husband and 35 per cent in favour of the wife.
Statements of fact in these reasons are findings of fact on the balance of probabilities.
Material Relied Upon
The wife relied upon, relevantly, the following documents:-
a)an Amended Initiating Application dated 22 March 2019;
b)a trial affidavit of the wife, sworn 1 May 2019;
c)an affidavit in reply of the wife, sworn 12 June 2019;
d)an additional affidavit of the wife, sworn 4 October 2019;
e)a Financial Statement of the wife, sworn 1 May 2019;
f)an affidavit of single expert witness Mr LL, National Executive Director of DD Company, sworn 21 October 2019;
g)an affidavit of single expert witness Mr MM, Executive Director of DD Company, sworn 17 October 2019;
h)two Notices Disputing Fact or the Authenticity of Document, dated 2 August 2019 and 7 August 2019;
i)three further Notices Disputing Fact or the Authenticity of Document, all dated 22 November 2019;
j)a Case Outline dated 16 October 2019; and
k)further Written Submissions filed 24 December 2019.
The husband relied upon, relevantly, the following documents:-
a)an Amended Response to Initiating Application, dated 22 March 2019;
b)a trial affidavit of the husband sworn 29 May 2019;
c)two Financial Statements of the husband, [2] sworn on 29 March 2019 and 29 May 2019, respectively;
d)two affidavits of Mr A, the husband’s son, sworn 29 May 2019 and 11 October 2019, respectively;
e)an affidavit of Mr AA, accountant, sworn 19 August 2019;
f)an affidavit of Professor C, consultant neuropsychiatrist, sworn 6 December 2019;
g)two affidavits of Mr B, case guardian, sworn 23 July 2019 and 3 September 2019, respectively;
h)four Notices to Admit Facts dated 2 August 2019, 7 August 2019, 12 August 2019 and 7 October 2019, respectively;
i)three further Notices to Admit facts, all dated on 22 October 2019;
j)a Case Outline filed 6 December 2019; and
k)further Written Submissions filed 18 December 2019.
[2] Case Outline of Mr B, as Case Guardian for Mr Toscani,
In respect of the material sworn by the husband, a consideration of s 13 of the Evidence Act 1995 (Cth) (‘the Evidence Act’) was necessary.
Section 13 of the Evidence Act is, relevantly, as follows:-
(1)A person who is incapable of understanding that, in giving evidence, he or she is under an obligation to give truthful evidence is not competent to give sworn evidence.
…
(3)A person who is incapable of giving a rational reply to a question about a fact is not competent to give evidence about the fact, but may be competent to give evidence about other facts.
(4)A person is not competent to give evidence about a fact if:-
(a)the person is incapable of hearing or understanding, or of communicating a reply to, a question about the fact; and
(b)that incapacity cannot be overcome.
(5)It is presumed, unless the contrary is proved, that a person is not incompetent because of this section.
…
Professor C, consultant neuropsychiatrist gave evidence in the proceedings that the husband had the necessary competence to give sworn evidence on 29 May 2019, being the day on which he swore his trial affidavit and his last financial statement. The husband at that time could understand a question asked of him, and could answer a question in a way that was understandable, and accordingly, that material was admitted into evidence (a matter conceded by senior counsel for the wife). The Court gives the evidence of the husband some weight, particularly that evidence which was historical in nature and went to the size of his business enterprise in 1981, which was supported by the evidence given by Mr AA. The husband was unable to be cross-examined as to his evidence however. Professor C gave evidence that “for certain historical things relating to [the husband]’ his memories ‘would possibly be reliable”. Where otherwise his affidavit evidence was challenged by the wife’s evidence and/or contrary to those representations made in his biography, written by author Mr G (‘the husband’s biography’), the wife’s evidence and the husband’s earlier representations are preferred. This applied to very little of the evidence.
The single expert, jointly appointed by the parties, was Ms F, forensic accountant. She produced three single expert reports which were before the Court in evidence as contained in affidavits filed 11 September 2019, 15 October 2019 and 16 October 2019. Ms F was cross-examined by each of the parties. She was an impressive expert witness and the Court accepts the totality of her evidence. She provided a proper basis for her opinions and calculations, and the Court proceeds on the basis of her mode and assessment of values.
Background
The husband was born in 1931 and is now aged 88 years. He is in poor health and suffers from dementia with significant cognitive impairment.
The wife was born in 1946 and she is now aged 73 years. She is in good health.
The parties met in 1979 in Suburb NN. At that time the husband was living in Suburb PP, and the wife in the RR City area.
The husband and wife commenced their cohabitation and married in 1981. They have been married for approximately 38 years and 9 months. The marriage is ongoing and the parties continue to live together in the matrimonial home situate at L Street Suburb K in the State of Victoria (‘the Suburb K property’). The wife has stated it is her intention to “remain in the marriage and continue to care” for the husband.[3]
[3] Affidavit of Ms Toscani sworn 12 June 2019, [5].
There are no children of the marriage however both parties have children from previous marriages. The wife’s daughter Ms J was born in 1972. Her father left the wife when Ms J was 9 weeks of age. He had no significant involvement in Ms J’s life thereafter. The wife received no financial support from Ms J’s father for the support of Ms J. The wife, prior to meeting the husband, raised Ms J as a sole parent. As a very young child, Ms J attended day care in order for the wife to work in her business, and so support Ms J and herself. From those earnings and monies acquired by her, the wife, in 1973, bought a house in Suburb QQ, RR City in which she and Ms J resided. In 1976, the wife commenced to fund Ms J’s private school education at TT School. When Ms J was aged approximately 7 years the husband and wife met each other. They commenced dating and saw each other on weekends. The husband and wife travelled between their respective homes in Suburb PP and Suburb QQ for a period of approximately 2 years before their marriage in 1981. At that time, Ms J was 8 years and 9 months of age. The husband’s two children from his first marriage, Ms H and Mr A, were aged 21 and 14 years, respectively. Mr A lived with his mother and spent time with the husband. Ms H had moved out of her mother’s home, and spent time with each of her parents as she was able.
Prior to the parties’ marriage they had made a decision to purchase SS Street Suburb ZZ (‘the Suburb ZZ property’). This property comprised 27 acres, being over 11 hectares. The husband, in particular, desired to purchase the property because of its large acreage (he had grown up surrounded by his parents’ market gardens). Suburb ZZ was purchased for the sum of $330,000 by and in the name of R Pty Ltd, a company owned and controlled by the husband. The purchase was subject to a mortgage encumbrance.
The move to the Suburb ZZ property required a relocation of the wife and Ms J from RR City to Melbourne and a change in private school for Ms J. Ms J commenced to attend VV School in Suburb WW. The husband took on the responsibility of paying for Ms J’s private school fees at her new school. Ms J changed her surname to ‘Toscani’ and commenced to call the husband ‘Dad’. She and the husband developed a close and loving relationship, which continues to this day. The husband willingly took on the support of Ms J and treated her as his own biological child. He did not distinguish between her needs and the needs of his biological children Ms H and Mr A.
Asset Pool at Trial
The assets and liabilities of the parties at trial were as follows:-
JOINT ASSETS
VALUE
L Street Suburb K
$11,500,000[4]
N Street Suburb M
$2,900,000[5]
Tax/duties on transfer of Suburb M
($297,448)[6]
Household contents
No value ascribed
SUB TOTAL
E$14,102,552
[4] Valuation of D Company dated 22 July 2019.
[5] Valuation of D Company dated 16 July 2019.
[6] CGT liability for the husband estimated at ($215,698) and Stamp Duty liability for the wife estimated at ($79,750); see affidavit of Ms F filed 16 October 2019 at Annexure “A”, paragraph 2.21.
WIFE’S ASSETS
VALUE
Q Pty Ltd
$39,000[7]
Loan owing to Q Pty Ltd
($22,000)[8]
Business loan(s) to Ms J for CD Company
$357,979[9]
Westpac and HJ Bank Accounts
$210,144[10]
Motor Vehicle 1 $65,000[11] Jewellery
No value ascribed
The wife’s paid legal fees (inclusive of litigation funding payment of $200,000)
E$315,834
SUB TOTAL
E$965,957
[7] Affidavit of Ms F filed 11 October 2019 at Annexure “A”, Appendix J of the Report (pages 64 to 73 of the Report).
[8] Affidavit of Ms F filed 11 October 2019 at Annexure “A”, paragraph 2.6.
[9] Notice to Admit Facts filed 22 November and Response thereto; the wife’s oral evidence.
[10] Tender documents.
[11] Financial Statement of Ms Toscani filed 1 May 2019 at Item 40.
HUSBAND’S ASSETS
VALUE
Loan to R Trust
$8,711[12]
Unpaid present entitlement (‘UPE’) in the R Trust
$4,025,499[13]
Loan to S Pty Ltd
Nil
P Pty Ltd
$11,898,000[14]
Taxation – the husband (FY 2019) (of which $228,097 related to the distribution to the husband from the R Trust)
($233,489)[15]
T Pty Ltd atf M Toscani (1981) Trust (ownership joint with Mr A)
Nil[16]
S Pty Ltd
Nil[17]
GG Limited Shares x 1,806
$7,856[18]
JJ Holdings share x 2,623
$12,721[19]
National Australia Bank account ending #…40
$9,902
The husband’s paid legal fees
E$665,862
SUB TOTAL
E$16,395,062
[12] Affidavit of Ms F filed 11 October 2019 at Annexure “A”; affidavit of Ms F sworn 15 October 2019 at Annexure “B”.
[13] Affidavit of Ms F filed 11 October 2019 at Annexure “A”.
[14] Affidavit of Ms F filed 11 October 2019 at Annexure “A”, Appendix G of the Report (pages 53 to 57 of the Report).
[15] Tender documents.
[16] Affidavit of Ms F filed 11 October 2019 at Annexure “A”, Appendix I of the Report (pages 61 to 63 of the Report).
[17] Affidavit of Ms F filed 11 October 2019 at Annexure “A”, Appendix H of the Report (pages 58 to 63 of the Report).
[18] Financial Statement of Mr Toscani filed 29 May 2019 at Item 38.
[19] Financial Statement of Mr Toscani filed 29 May 2019 at Item 38.
TOTAL:
E$31,463,571
HUSBAND’S FINANCIAL RESOURCES
VALUE
The R Trust (inclusive of shares held in R1 Pty Limited and R Pty Ltd)
$4,261,000
TOTAL (Including the husband’s financial resources)
E$35,724,571
Contributions at Commencement of Cohabitation
In around August 1981 the parties had the following assets and liabilities:-
a)the wife:-
i)a property in DE Street in Suburb QQ, a suburb in the RR City area (‘the DE property’). The wife had purchased this property in her sole name in 1973. No other facts as to the purchase are known. The wife’s equity in this property in August 1981 is unknown. There was no evidence of value;
ii)a one half share of a business commenced by the wife in partnership with one other in 1967. The wife worked in this business. Its value at around August 1981 was somewhere approaching $89,000 on the evidence provided;
iii)a small share portfolio of unknown value;
iv)modest savings.
b)the husband:-
i)a property at FG Street Suburb PP (‘the FG Street property’). The husband had purchased this property in his sole name in 1978 for $69,500 subject to a mortgage. In 1981,[20] the husband sold the FG Street property for approximately $114,500 (an increase of $45,000 on the purchase price) less the amount due on the mortgage. The net proceeds of sale after paying out, in particular, the mortgage, is unknown. There was no evidence of value;
[20] Affidavit of Mr Toscani sworn 29 May 2019, [31].
ii)his interest in the R Trust of which R Pty Ltd was the corporate trustee (‘the R Business’). The R Business had been established by the husband. In around 1960 the husband began to distribute products which were manufactured by a Queensland company called HH Company. Soon afterwards, in 1962, he commenced the precursor to the R Business. Initially, the business sold a small number of products. It then increased the number of products for sale. In the early 1970s the R Business began to manufacture its products. From around the time it commenced manufacturing, the R Business began to distribute its products to markets in Victoria, New South Wales, South Australia and New Zealand. In 1976 the husband moved the business to a large two-storey office and warehouse building in Melbourne. At the time of the parties’ marriage, the R Business was well established in terms of its manufacturing and retailing operations. The business had offices in Victoria and Queensland and employed approximately 85 people. The R Business had, however, no banking arrangements in place to provide a proper financial structure to continue to grow the business. As Mr AA put in, being the accountant for the R Business from 1981 to 1995 (and from 1998 to 2004)[21] “[t]he business has tried to grow but it only grew as much as its retained earnings allowed and sooner or later it kept running out of money.” Despite this, its value at that time was considerable, and in the sum of $1,340,618, as asserted by Mr KK, an accountant engaged by the husband. That value included the equity in the Suburb ZZ property. In response to that claim of value, the evidence of Ms F was, relevantly, as follows:-
[21] Exhibit ‘A2’ tendered in Court by the wife – Notice Of Intention To Adduce Evidence under s 67 of the Evidence Act 1995 (Cth) together with extracts of evidence in a book written by Mr G, extracts of evidence page 176.
…Assuming that it is appropriate to simply aggregate the identified loans to the other net assets at book valuation, the calculation is correct. However, in the event that the related entities had offsetting liabilities, the calculated value is somewhat meaningless.[22]
Ms F’s further evidence was that:-
Using the inflation calculator per abs.gov.au, determines that $1,340,618 at 30 June 1981 is worth $5,386,074 as at 31 March 2019 ($1,340,618 / 28.4 x 114.1)…[23]
iii)some ancillary savings.
[22] Affidavit of Ms F sworn 16 October 2019, 3.8.
[23] Affidavit of Ms F sworn 16 October 2019, 3.9.
Contributions during Cohabitation
Following the marriage, the wife sold the DE property and the share portfolio held by her, as referred to at paragraph 23 of these reasons. The wife applied the proceeds of sale of her Suburb QQ property and share portfolio to purchase furnishings for the Suburb ZZ property; to pay for Ms J’s costs; and to contribute toward her own living and personal expenses. She deposited additionally some money (unquantified) with the former State Bank of Victoria (‘the State Bank’), on which she earnt interest.
As a consequence of taking up residence in the Suburb ZZ property, the wife began to commute from the property to her business in RR City, 3 days each week. That was a significant distance. The husband commuted daily to his then workplace in Melbourne. In the year following the marriage, the wife sold her interest in her business and loaned the sum of $89,000 (being the proceeds and her savings with the State Bank) to the R Business. The wife was paid interest on the funds she so contributed at a commercial rate. By 2017 the wife had been repaid the entirety of her capital advance.
The move to the Suburb ZZ property had required a sale of the wife’s long-term, income-earning, business. The husband and the wife were both keen for the wife to pursue activities closer to home. The husband was desirous of the wife assisting him in the social aspects of the operation of his business, and in her, in a limited role, liaising with staff in a public relations type role. The wife was keen to be involved in this way and otherwise to run the very large home and gardens, to parent Ms J, and to engage in the many home duties as described hereafter.
The wife provided considerable assistance to the husband in the promotion of the R Business. She did all that was requested of her by the husband, and did so graciously and willingly for a period in excess of 30 years. She attended business dinners with the husband and entertained the husband’s dinner guests. She attended upon suppliers and at other business meetings with the husband. The husband and wife travelled interstate and overseas regularly for holidays and as part of the promotion of the business. During their absences, Ms J would be cared for by the wife’s parents or she would stay with close family friends who also from time to time travelled for business. When they did so, the husband and wife would care for their daughter. The husband paid to the wife a monthly amount of money originally by way of salary from the R Business. Thereafter, the wife received a monthly cheque paid by the husband to the wife from his personal income. The wife applied such money received to pay for the living expenses of the household which included the husband, wife and Ms J. The husband paid all other outgoings for the Suburb ZZ property and for Ms J’s education at VV School.
The wife was considerably involved and spent much time in the development and maintenance of at least two acres of gardens. The parties also planted large fruit orchards and the husband cultivated a very large vegetable garden.
The husband, wife and Ms J worked on the Suburb ZZ property on Saturdays. Whilst the husband worked extensive hours in his business, the wife also worked long hours and six days a week maintaining the gardens of the Suburb ZZ property and attending to all the home duties. The Suburb ZZ property comprised not only a large acreage but a large home and the wife was meticulous in her maintenance of that home. She had spent, at the commencement of the parties’ marriage, considerable time organising the interior design and furnishings for the home. She and the husband were both very proud of their home and it was a place where the annual Christmas party for the business was held, and a place to which staff, friends and family were invited.
The wife cooked dinner for the husband each evening, often making extra food so the husband could take a meal to work the next day for himself and some of his senior staff. The fruit and vegetables produced on the Suburb ZZ property were gifted regularly to staff, family and friends. The annual Christmas party required some months in preparation of the property before, and the cleaning and packing up following the event. The event was a catered event for some 200 to 300 staff members and their family.
The wife purchased the husband’s clothes for him, washed and ironed his clothes and laid them out every morning for him to wear.
Ms J assisted the parties in the maintenance of the Suburb ZZ property both after school and on weekends. She was responsible for maintaining the stables that had been built, as well as training and caring for horses that had been given to her. In 1990, the wife had withdrawn $52,000 of the $89,000 she loaned to the R Business and with those funds, improved the property by financing the building of stables and facilities. In 1991, Ms J moved out of the Suburb ZZ property, having finished a university degree and having obtained a full-time job in Sydney. She continued her interest in horse riding, which had been a shared interest of the wife and Ms J, and which had provided significant enjoyment to the husband over the years that the family resided in the Suburb ZZ property. The family had a shared passion for horses. The husband and wife owned race horses, and had some success, travelling both interstate and overseas in pursuit of that interest.
By notice dated 3 December 2019, the wife gave notice under s 67 of the Evidence Act that she intended to adduce evidence in respect of previous representations made by the husband in his biography. The wife placed such evidence before the Court, relying upon s 63(2)(b) of the Evidence Act and cl 4 and cl 6 of Pt 2 of the Dictionary to the Evidence Act. Those representations supported her affidavit evidence, from which the history of her contributions (as set out in these reasons) has derived.
In the foreword to the husband’s biography, the husband said the following as to his family:-
As I grow older I am even more conscious of the importance of family. I am constantly strengthened and sustained by the love and support of my wife [Ms Toscani], with whom I have enjoyed life to the fullest for almost 30 years; my children [Ms H, Mr A and Ms J], who fill me with pride; and my beautiful grandchildren [Z, Y] and our newly born [X] who bring [Ms Toscani] and me unimagined joy and pleasure.[24]
[24] Exhibit ‘A2’ tendered in Court by the wife – Notice of Intention To Adduce Evidence under s 67 of the Evidence Act 1995 (Cth) together with extracts of evidence in a book written by Mr G, extracts page ix.
Later in the husband’s biography, the following is recalled:-
[Mr Toscani] and [Ms Toscani] acquired a spacious home on 12 hectares at [Suburb ZZ], an outer suburb of Melbourne. [Ms J], who was nine at the time, moved school from [RR City] to [Suburb WW]. This required some adjustments but she coped well.
To maintain her personal and financial independence, [Ms Toscani] continued her involvement in her business. Then, after a successful 16-year partnership she somewhat reluctantly disposed of her interest in the business.
She had no regrets, however, as she set about enjoying life at [Suburb ZZ], supporting [Mr Toscani] with his business and seeing [Ms J] grow up in a rural environment and begin to look on [Mr Toscani] as her dad.
[Ms Toscani] deeply appreciates [Mr Toscani’s] generosity, the manner in which he looked on [Ms J] as his daughter and his acceptance of [Ms J and Ms Toscani’s] interest in horses.[25]
The [Suburb ZZ] property gave [Mr Toscani] the opportunity to become a farmer again and he grew various crops, and established a small orchard…
…
[Suburb ZZ] became the venue for the company’s annual staff Christmas party. [Mr Toscani] and [Ms Toscani] loved these days and seeing the joy on the faces of the employees’ children as they received a gift from Santa and enjoyed other treats.
Overseas and interstate guests and suppliers were often entertained at [Suburb ZZ]. [Ms Toscani] was a gracious hostess and had a flair for making her guests feel welcome and a part of the family. And the business was enhanced as a result.[26]
[25] Exhibit ‘A2’ tendered in Court by the wife – Notice Of Intention To Adduce Evidence under s 67 of the Evidence Act 1995 (Cth) together with extracts of evidence in a book written by Mr G, extracts of evidence page 119.
[26] Exhibit ‘A2’ tendered in Court by the wife – Notice Of Intention To Adduce Evidence under s 67 of the Evidence Act 1995 (Cth) together with extracts of evidence in a book written by Mr G, extracts of evidence page 121.
In the year following Ms J’s departure from the Suburb ZZ property, the parties determined to sell the Suburb ZZ property and relocate to Suburb K. The wife directed the preparation of, and assisted in preparing the home, gardens, out-buildings, stables and equestrian facilities for auction. The auction was held in 1998 and the Suburb ZZ property sold for $1,010,000. The parties had lived there for approximately 17 years.
The husband and wife then moved to rental accommodation in Suburb K. In about 1999, they purchased, in their joint names, the property situate at L Street Suburb K in the State of Victoria (‘the Suburb K property’). Following the purchase of this property, the parties demolished the then existing dwelling and engaged an architect to design a new home. They also engaged a landscape designer to design the layout and construction of the garden and pool area. The cost of rebuilding the new home was approximately $1,900,000 and the building took two years to complete. These monies were additional to the approximate $1,500,000 purchase price. The wife was often on the building site at 7.30am, and was extensively involved with this project.
In 1999, the parties also purchased a property at N Street Suburb M in the State of Victoria (‘the Suburb M property’). The parties purchased this property in their joint names. The purchase price was approximately $1,000,000. In 2012, the husband proposed to encumber the property. The need for the advance of mortgage funds secured over the Suburb M property was a need to make funds available to the R Business. The husband had a loan agreement of $750,000 drawn up and required the wife to sign same. The wife found herself under pressure from the husband, Mr AA, the business accountant, and others to sign the documents which the husband wished her to sign. The wife sought her own legal advice and indicated to the husband that she would not sign the documents as requested by him. The wife offered to lend the R Business money from her superannuation. That offer was declined.
Mr A, Ms H and Ms J were given keys for Suburb M to enable their use of that property. Throughout the marriage the wife has embraced the husband’s children (as he has Ms J) and their respective partners and children as part of the extended family. She has held many dinners, lunches, Christmas days and special family celebrations. The extended family have shared family holidays both in Australia and overseas, paid for by the husband and wife.
During the parties’ occupation both past and ongoing of the Suburb K property and the Suburb M property, the wife has attended to the majority of the cleaning tasks with the assistance of professional cleaners. Likewise, she attends to many of the gardening tasks with the assistance of a gardener. The husband continues to attend the business some three days each week, because he wishes to. He is encouraged in his attendance by both the wife and Mr A, with Mr A looking after him on those occasions to the extent that is necessary. The husband is treated with great dignity, respect and kindness by all in his home and workplace.
In the years the parties lived at the Suburb ZZ property the R Business continued to grow with its revenue increasing significantly. The business had moved from its Melbourne premises in around 1982, to larger premises in Suburb W, and then again to larger premises in Suburb V. The husband worked very hard in the R Business and was clearly an astute and successful businessman.
Mr AA’s evidence as to the R Business upon his commencement of employment in 1981 was as follows:-
9. When I commenced employment with [R Business], it was to my knowledge a market leader. It had an extensive range of products to suit nearly every type of crop, and from small scale to large scale farms. It had a National dealer network, which financially sometimes supported it in cooperative advertising. From my experience working in the agriculture sector, a National dealer network takes many years to create and maintain. [R Business] had a national profile in key markets throughout Australia, and primarily on the east coast. [R Business] had distribution centres (warehouses) in Melbourne, Sydney and Brisbane, with local assembly carried out in Melbourne and at [Suburb BC] in Brisbane. [R Business] was distributing in Adelaide and South Australian [KL region] through [GH Town\, in Western Australia through [XX Company], and in Tasmania through [YY Company] [R Business] also had a New Zealand distributor who represented it at the New Zealand National Field Days.
10. In addition to local component suppliers, [R Business] had in place a large network of sophisticated European componentry suppliers, many of whom were at the technical forefront of the industry. [R Business] cooperated with European manufacturers to test their componentry in the harsh Australian conditions. In 1981, [R Business] was sending product managers to exhibitions in Europe, New Zealand and the United States of America, and employed a professional for product testing and design purposes. From my experience in the agricultural sector, it takes significant time and effort to establish and maintain overseas supplier networks.
…
14. In 1981, [R Business] had a product range which were designed for a wide range of crops throughout Australia. This allowed it to sell products to different markets through all seasons of the year.
15. In 1981, [R Business] had in place a comprehensive spare parts system in each distributions centre, which were supported by dedicated service/parts advisers. [R Business] was an early industry adopter of microfiche spare parts listings. It was also an early industry adopter of Telex communications, which [Mr Toscani] regularly used to negotiate business arrangements with overseas and regional partners, and the facsimile communications followed soon after.[27]
[27] Affidavit of Mr AA sworn 19 August 2019.
In around 2008, Mr AA assisted FF Company in their conducting of an assessment of the continuity of the activities of the R Business between 1982 and 2007, for the purpose of assessing whether the shares in R1 Pty Limited continued to carry their ‘pre CGT status’ following the corporatisation of the business in 2002. In doing so, Mr AA applied the “same business test” as provided for in the relevant taxation legislation.[28] The analysis concluded that the R Business was “…the same business” in 2007 as it was in 1982.[29] Further matters pertaining to the R Business are as set out in the evidence of the single expert.
[28] Affidavit of Mr AA sworn 19 August 2019, [19].
[29] Affidavit of Mr AA sworn 19 August 2019, [22].
The husband operated and solely controlled the R Business and did not discuss any of its financial data, growth or direction with the wife despite the wife making requests of the husband from time to time to provide her with information. The financial arrangements that existed, and continue to exist between the parties, are that the husband pays all household, maintenance, gardening, and education (of the three grandchildren) bills and otherwise gives to the wife a cheque each month for her to pay the parties’ various living expenses and other incidental expenses. The monthly amount received by the wife is $24,000, as is appropriate given the evidence as to her needs.
Husband’s Health
In the early 1990s the husband underwent surgery for gall bladder removal. He had a five day hospital stay. In 2005 the husband was diagnosed with bowel cancer. He underwent surgery and remained in hospital for approximately two and a half weeks. His follow up treatment involved undergoing a colonoscopy every three months for the next three years. Additionally, in 2005, the husband also suffered a heart murmur which requires regular monitoring and medication. In around 2012 the husband underwent surgery for a hip replacement which required a seven day hospital stay. In around 2013 the husband was diagnosed with Parkinson’s disease by his neurologist who prescribed ‘Madopar’ (Levodopa; Benserazide hydrochloride) to improve his physical balance. In June 2015 the husband’s heart murmur worsened and he underwent major cardiac surgery. He spent four days in the intensive care unit and around two weeks on the ward. In mid-2016 the husband was diagnosed with Alzheimer’s disease by his neurologist. In 2017 it was discovered that the husband’s replacement aortic valve was leaking. His medication was varied and his condition continues to be monitored via regular cardiograms. In December 2017 the husband suffered a mild stroke. He was taken by ambulance to hospital and remained in hospital for a few days. Throughout all of these medical occurrences the wife has provided extensive support to the husband. That support has included remaining with him for large periods throughout his hospital stays; transporting him to and from hospital and various medical appointments; keeping friends and family informed as to his progress; nursing him back to recovery on his return home; accompanying him to some medical appointments; and liaising with medical specialists. She has provided consistent and ongoing care for him and since 2015 has become the sole driver in the family. In the more recent years, when the husband has suffered numerous falls as the Parkinson’s disease has progressed, and he has become quite frail, her care duties have increased and become more complex. This is compounded by the significant decline in the husband’s mental function. The wife’s evidence as to husband’s functioning in May 2019 is as set out in paragraph 84 of her affidavit sworn 1 May 2019. It reads as follows:-
[Mr Toscani] is now quite frail. He is able to shave and shower by himself, but in many other respects he is dependent on me for his physical care. I prepare most meals. [Mr Toscani] has lost muscle control so he often knocks things over and drops things. I am there to assist him. I do all of his washing as his clothes become soiled when eating. I turn down his bed each evening. I dispense [Mr Toscani’s] medication 3 times a day. This requires me to follow up repeat prescriptions both with doctors and the pharmacy to dispense the medication. [Mr Toscani] is so dependent on me that he often worries when I have to go out for an appointment. He telephones me constantly when I am out of the house, asking where I am. I am caring for [Mr Toscani] on a full-time basis and I am happy to continue to do so for as long as he wants me to.
Evidence of Professor C
The evidence of Professor C is as contained in his affidavit sworn on 6 December 2019. Professor C was cross-examined as to this evidence by senior counsel for the wife.
Professor C first commenced seeing the husband in May 2016. The husband then presented with a diagnosis of Parkinson’s disease and cognitive impairment. On 4 February 2019 Professor C conducted a cognitive assessment of the husband in the context of a number of concerns that the husband’s treating neurologist had. That assessment suggested there had been a decline in the husband’s cognitive functioning consistent with a dementia.
Professor C interviewed the husband on 18 and 22 July 2019. He completed, on 18 July 2019, the Neuropsychiatry Cognitive Screening tool with the husband and observed that the husband’s score was lower than in February 2019 indicating a further decline in the husband’s cognitive functioning. He concluded in July 2019 that the husband did not have the cognitive capacity to make informed decisions regarding his financial affairs, nor to make a Will, and nor to make decisions as a director of a company or understand a trust and/or companies.
Robb & Robb (1995) FLC 92-555 and the husband’s support of Ms J
Senior counsel for the husband argued that there should be an adjustment of property interests in the husband’s favour relying on the above authority. He argued that because the husband had made substantial contributions toward Ms J’s support in circumstances where it was not his legal responsibility to do so, and indeed was the responsibility of the wife, these many years later there should be an alteration of the parties’ property interests to acknowledge this contribution.
The Court is not of the view that this single contribution should be isolated and result in an alteration of property interests as between the parties in the husband’s favour. Both parties have made substantial and valuable contributions in differing spheres throughout their marriage.
The direct and indirect financial, emotional and physical support provided by both the husband and wife to Ms J has continued into adulthood, and has extended beyond Ms J to include Ms J’s daughter, X. X was born in 2009. Her parents separated when X was four years of age. At that time Ms J and X commenced to live with the husband and wife at the husband’s suggestion. They stayed for a period of some nine months. Ms J then purchased, as sole registered proprietor, a property in MN Town (‘the MN Town property’) for $2,020,000. She invested $1,000,000 of her own money into the purchase of the property. The husband acted as guarantor with the bank for the loan advanced to Ms J to complete the purchase and Ms J now pays approximately $2,000 each month in principle and interest repayments in respect of that loan, with the husband voluntarily paying an additional monthly repayment in the sum of $4,950. Ms J and X occupy this property.
Of course, the parties’ contributions to Ms J as an adult are not the satisfaction of a legal obligation owed by either of them. It is acknowledged by the wife that the husband made contributions to the support of Ms J as she approached nine years of age until she turned 18 years of age in the manner described in these reasons. The wife also applied monies of her own to the support of Ms J. The husband’s contribution to Ms J’s support in those years before her becoming an adult was but one of a myriad of contributions made by each of the parties throughout this very long and ongoing marriage. It was, for the husband, a very rewarding contribution.
The parties’ generosity has extended to other family members, including their grandchildren. There are three grandchildren. Additional to X are Mr A’s children, Z and Y. The private school fees of each of the grandchildren are paid by the husband out of the monies derived by him from 100 per cent of the distributions of the R Trust. That level of distribution has been a constant over many years.
Matters going to the asset pool and orders
Capital Gains Tax
The Suburb M property is not the wife and husband’s principle place of residence and is therefore a Capital Gains Tax (‘CGT’) asset pursuant to s 102-5 the Income Tax Assessment Act 1997 (Cth) (‘ITAA 1997’). There has been no breakdown of the marriage so there is no CGT rollover relief.
It is conceded by the wife that CGT will be payable by the husband on the transfer of his interest to the wife. Likewise, stamp duty will be payable by the wife upon any transfer.
The Court shall make an allowance for the CGT and stamp duty costs in respect of the imminent transfer of the Suburb M property from the joint proprietorship of the parties to the wife solely.[30] Accordingly, those liabilities appear in the assets and liabilities of the parties, in the form of a table as set out in paragraph 22 of these reasons.
[30]Rosati & Rosati (1998) FLC 92-804, 6.36(2).
Jewellery and House Contents
No expert valuation evidence was before the Court. Whilst the wife ascribed an estimated value to these items of property in her Financial Statement of 1 May 2019, without valuation evidence and on that evidence alone, the Court cannot determine an appropriate and genuine value. Some items of jewellery would clearly be gifts, but there was no evidence as to those matters. The wife continues to use and enjoy her jewellery within the marriage. She shall retain it. The parties will continue to use and enjoy their household contents in both the Suburb K property and the Suburb M property within the marriage. Those contents can be divided between the parties equally or in some other agreed manner when, and if, the circumstances arise making that necessary. Otherwise, the survivor of them will retain such household contents as then exist. This is a just and equitable approach to these items of property in the context of this ongoing marriage.
Gifts to Family Members
During the course of the proceeding and as referred to by Ms F, a sum of approximately $332,510 could not initially be accounted for. It transpired in the proceeding that such monies had been gifted to various family members which included three of the husband’s brothers, the husband’s children, Mr A’s wife, and Ms J. There was also included a $110,000 contract variation payment to Mr A. The application of these funds was explained and the monies had been applied, not surprisingly, as directed by the husband. No adjustment is necessary in respect of these funds.
Monies given to Ms J by the Wife
Following Ms J’s purchase of the MN Town property, the wife advanced to Ms J the sum of $150,000 – $200,000 to enable Ms J to further renovate the property. Those monies derived from the wife’s superannuation entitlements and shares. The wife has not requested repayment of these monies from Ms J and no loan arrangements were put in place. It is the wife’s evidence that such monies are not intended to be owed by Ms J to her, and that the advance of funds were by way of gift to Ms J from the wife. The Court accepts that such funds have been gifted to Ms J and are not a loan to be included in the parties’ asset pool.
The wife also advanced to Ms J further sums for the establishment of her business known as ‘CD Company’, which included a salary component for Ms J in the sum of $6,000 a month. The total monies so advanced to Ms J by way of this business loan remain in the sum of $357,979,[31] the wife’s evidence at trial being that Ms J had returned $110,000 of further loan monies back to her mother in June or July 2019.[32] The wife’s evidence as to the monies advanced for the business was that such monies were a loan, although she then gave some contradictory evidence that the unquantified salary component was not a loan by saying “[m]y expectations would have been that would have been a gift.”[33] That evidence contradicted her answer to the Notice to Admit Facts dated 22 November 2019 wherein the wife admitted that all the monies advanced for the purposes of the business were a loan. It would appear on the totality of the evidence that the monies advanced for the establishment and ongoing costs for the business was a loan and that Ms J owes such monies to the wife.[34]
[31] Amended Balance Sheet of the wife dated 24 December 2019.
[32] Oral evidence of the wife dated 9 December 2019, transcript page 36.
[33] Oral evidence of the wife dated 9 December 2019, transcript pages 28-29.
[34] Oral evidence of the wife dated 9 December 2019, transcript page 36.
The Guarantee
As described at paragraph 51 of these reasons, the husband is a guarantor for a loan of approximately $1,220,018 secured by a property owned by Ms J. The husband thus has a contingent debt liability. The mortgage debt itself shall continue to be attributed to Ms J until such time, and if, the guarantee is called up. That will occur only when stipulated conditions are not met. Thus this contingent liability of the husband will not become an actual liability, if ever, until default. In those circumstances, it should not appear as a debt liability in the table of assets and liabilities of the parties as argued for by the husband. It is not a debt of the parties or either of them.
In closing submissions senior counsel for the husband sought, for the first time in the proceeding, an order that:-
the wife use her best endeavours to relieve the husband of his guarantee made in relation to [Ms J’s] real property, and in the event the wife is unable to so relieve the husband of that obligation, the wife indemnify the husband against the guarantee, and make any and all payments, and meet any and all related expenses, related to the said guarantee.
The husband relied upon s 80(1)(k) of the Act,[35] which is as follows:-
General powers of court
(1)The court, in exercising its powers under this Part, may do any or all of the following:-
…
(k)make any other order (whether or not of the same nature as those mentioned in the preceding paragraphs of this section), which it thinks it is necessary to make to do justice…
[35] Supplementary Written Submissions of the husband dated 18 December 2019, [6].
Senior counsel for the husband argued that s 80 of the Act provides the necessary power and that such an order is ‘appropriate’ as contemplated by s 79(1) of the Act.[36]
[36] Supplementary Written Submission of the husband dated 18 December 2019, [8].
Senior counsel for the wife submitted that the Court was without power to make an order whereby the wife indemnified the husband in respect of the guarantee.
It is clear the wife could indemnify the husband were the mortgage liability to be that of the parties themselves. It is also clear that the Court is not being called upon to make an order that will affect the ability of creditors of the parties to recover their debt. The difficulty for the husband is that this mortgage debt is not of the parties’.
There was no evidence before the Court from Ms J as to this matter, and nor were there any documents in the form of the guarantee itself (so that the Court could discern its terms) and/or Ms J’s mortgage documents with her bank. The matter of an indemnity was not raised in the evidence given, nor in the cross-examination of the wife. Indeed the wife had no opportunity to place evidence before the Court, given that such an order was proposed in closing submissions. The only pertinent evidence as to any possible issue was that of Mr B, when asked as to whether the husband’s monthly contribution to Ms J’s mortgage (being in the sum of $4,950) would be ongoing following the conclusion of this proceeding. His answer was “I’m not sure about that one.”[37]
[37] Oral evidence of Mr B dated 9 December 2019, transcript page 70.
The husband’s is a contingent liability. No liability of the husband has crystallised under the guarantee and nor may it ever do so. The guarantee the husband has given is not property of either of the parties. It has not been called up and become a debt of the husband that requires inclusion in the asset pool.
The Court finds a lack of satisfactory evidence going to the making of an order in the terms sought, even were it to assume it is within power to do so. The Court cannot be satisfied that it is reasonably appropriate and in all the circumstances just and equitable to make the order sought by the husband. Whilst the wife may, by virtue of the orders the Court makes, have the means to meet any debt that might crystallise as a consequence of the guarantee, how, in all the circumstances, would that be appropriate, just and equitable on the state of the evidence? The parties discussed this arrangement and agreed to put it in place. The arrangement may be limited by the terms of the guarantee itself. Any debt would in the first instance become that of Ms J, whose ability to meet it is unknown by the Court.
The Court shall not make the order sought.
Trust as Property Issue
The question of whether the R Trust is property for the purposes of the Act was in issue. The question turned on the capacity of the husband. Whilst he remains a director of the trustee company and shareholder of 99.9 per cent of the shareholding, an appointor of the R Trust and beneficiary, his loss of capacity has meant a loss of control of the R Trust.
Since his incapacity, the husband has lacked the requisite power such as to effect a lawful distribution of property to himself. The husband conceded that prior to his incapacity, the trustee company and R Trust were owned and directly controlled by him through his powers as appointor pursuant to an amendment (by amended deed) to the trust deed on 13 August 2012. However, that has changed. I accept and adopt the following from the husband’s submissions dated 12 December 2019:-
(a)The husband is/was a director of the trustee company. However, upon the husband losing capacity, his director’s office was vacated once he became of ‘unsound mind’.[38] Clause 90 of the trustee company Constitution reads as follows:-
90.In addition to the circumstances in which the office of a Director becomes vacant by virtue of the Act or by virtue of any other order made under the Act, the office of a Director shall become vacant if:-
[38] Document entitled ‘Summary of Argument As To Trust As Property’ handed up by the husband in Court on 12 December 2019, [21].
…
(4)dies or becomes of unsound mind or a person whose person or estate is liability to be dealt with in any under the law relating to mental health;
(Emphasis in original)
(b)Even if the husband’s position had not been expressly vacated pursuant to the trustee company Constitution, an incapacitated director is unable to exercise his (sic) director’s powers on his behalf. The powers of a directorship cannot be delegated by way of a power of attorney.[39] In Mancini v Mancini [1999] NSWCSC 799, His Honour Bryson J held:-
[30]… The office of a director is a personal responsibility, and can only be discharged by the person who holds the office. If there is any exception, it must be found in the constitution (sic) of the company and in some authorisation there found to act by an alternate or other substitute or delegate. The office of a director is not a property right capable of being exercised by an attorney or other substitute or delegate of the person holding the office; many rights as shareholder can be distinguished in this respect because they are rights of property; and
(c)In light of the above, since his incapacity, the husband is no longer a director of the trustee company, and as such no longer directly controls the trustee.[40]
[39] Document entitled ‘Summary of Argument As To Trust As Property’ handed up by the husband in Court on 12 December 2019, [23].
[40] Document entitled ‘Summary of Argument As To Trust As Property’ handed up by the husband in Court on 12 December 2019, [24].
Likewise, since his incapacity, the husband can no longer act as appointor nor guardian of the R Trust.
As set out in the submissions of the husband dated 12 December 2019 which I accept and adopt:-
(a)In Grace Buncle Pty Ltd v Ralph Lauren No 57 Pty Ltd [2018] QSC 24,[41] His Honour Bond J stated:-
[41] Document entitled ‘Summary of Argument As To Trust As Property’ handed up by the husband in Court on 12 December 2019, [28].
[62]It is true that there is a general rule that a trustee must not delegate its duties or powers. The principle which underlies this rules is that the trustee, being a person appointed to an office of personal trust and confidence, must act personally. However, the operation of this rule is not absolute. The law has recognized (sic) that delegation is permitted where it is expressly authorise by the trust document; where it is specifically authorised by statute; and where, speaking generally, the delegation is to perform a purely ministerial act or, subject to certain conditions, is dictated by the necessity of the case.
(b)The Respondent submits that the position of appointor of a trust is similarly a personal position which cannot be delegated.[42] The learned authors of On Equity (Lawbook Co, 2009), Young JA, Croft and Smith stated as follows:-
[8.860]In considering the delegation of powers of appointment, the distinction between powers amounting to virtual ownership, powers involving personal discretion and powers involving merely “ministerial” acts must be borne in mind. In the case of a power which involves a discretion (and, at least impliedly, most do), there can be no delegation, regardless of whether the power is fiduciary or non-fiduciary. …
(c)In the present case (addressing the exceptions to the bar on trustees delegating their power listed by His Honour Bond J above)[43]:-
32.1the trust Deed does not authorise the appointor to delegate his powers;
32.2it is noted that s 28(2) of the Trustee Act 1958 (Vic) [‘the Trustee Act’] does provide a trustee with the power to delegate their authority to an attorney, but only [in] relation to trust property outside of Victoria. It is further notes that this provision does not extend to the position of an appointor; [and]
32.3the relevant powers to the question of overall control of the trust (being the removal of additional appointors and the trustee) are not mere ministerial acts.
[42] Document entitled ‘Summary of Argument As To Trust As Property’ handed up by the husband in Court on 12 December 2019, [29]
[43] Document entitled ‘Summary of Argument As To Trust As Property’ handed up by the husband in Court on 12 December 2019, [32].
The Court does not find that the director now solely controlling the trustee company, namely Mr A, and/or Mr AA and/or Mr E (Mr AA and Mr E being the other appointors of the R Trust) are the ‘puppets’ of the husband as described by the Full Court of the Family Court in Harris & Dewell and Anor (2018) FLC 93-839 at [67]:-
It should be accepted that the principles emerging from the High Court and from the decisions of this Court to which reference had been made permit of a finding that property ostensibly that of a trust can be treated as property of a party for s 79 purposes where evidence establishes that the person or entity in whom the trust deed vests effective control is the ‘puppet’ or ‘creature’ of that party. The metaphor is used to connote a situation where the person or entity with control (the “puppet”) does nothing without the party (the “puppet master”) controlling or directing that person or entity.
The Court accepts the evidence of Mr A that he would not make a payment as requested by his father, to his father, if such payment would adversely affect the business.
Whilst the husband now lacks the necessary control of the trust for it to be considered his property for inclusion in the assets and liabilities of the parties, the trust continues to be a considerable financial resource available to the beneficiary husband.
The value to the husband as a beneficiary of the R Trust is effectively the same as its value when he controlled the R Trust. Prior to his incapacity, the husband’s interest was $4,261,000. The R Trust owns what has always been described as the husband’s business. Mr A referred to the R Business in his evidence as a business “…owned by dad.”[44] The husband owns 99.9 per cent of the shareholding in the trustee company and the R Trust has been administered such that all distributions flowed and flow to the husband. The evidence of Mr A was that will continue for so long as it does not affect the operation of the business. The evidence of Mr A was also, relevantly, that “…every time my father has requested money, I’ve transferred it.”[45]
[44] Oral evidence of Mr BB dated 10 December 2019, transcript page 128.
[45] Oral evidence of Mr BB dated 10 December 2019, transcript page 127.
Evidence of Ms F and Division 7A
The R Trust is a discretionary trust, established by deed dated 28 March 1980. R Pty Ltd was, at inception, the corporate trustee. The husband was appointed as guardian and appointor of the trust on 1 May 1981, and had the power to appoint and remove the trustee.
R Pty Ltd had been incorporated on 16 February 1976. An ASIC extract dated 22 July 2019 detailed that the issued capital was held by the husband as to 99 per cent with Mr A holding a one per cent share for the benefit of the husband.[46] The directors of R Pty Ltd were the husband and Mr A.[47] R Pty Ltd acted only in its capacity as trustee. The R Trust was the entity through which the R Business was run.
[46] Affidavit of single expert witness, Ms F, sworn 11 September 2019, Appendix E at E.15.
[47] Affidavit of single expert witness, Ms F, sworn 11 September 2019, Appendix E at E.16.
The company restructured in 2002 to its current operating structure. R1 Pty Limited was incorporated on 8 March 2002. An ASIC extract dated 22 July 2019 detailed that R Pty Ltd was the sole shareholder of the company,[48] the shares being held on a non-beneficial basis for the benefit of the R Trust.[49] The directors of R1 Pty Limited are the husband and his son Mr A.[50] Mr A is employed as the Chief Executive Officer and Managing Director of the R Business. R1 Pty Limited and Controlled Entities comprise R1 Pty Limited and R2 Pty Limited, which is 100 per cent owned by R Pty Ltd. Ms F referred to this as the ‘Consolidated R Group’. The directors of R2 Pty Limited are the husband and Mr A.[51]
[48] Affidavit of single expert witness, Ms F, sworn 11 September 2019, Appendix F at F.2.
[49] Affidavit of single expert witness, Ms F, sworn 11 September 2019, Appendix E.
[50] Affidavit of single expert witness, Ms F, sworn 11 September 2019, Appendix F at F.3.
[51] Affidavit of single expert witness, Ms F, sworn 11 September 2019, Appendix F, at F.8.
A Deed of Appointment of Guardians and Appointors, dated 23 August 2012 detailed the appointment of Mr AA and Mr E as additional guardians and appointors of R Trust. Messrs. AA and E were previous directors of, as well as business advisors for, entities in the R Group.[52] Mr AA gave evidence in the proceeding that he had no knowledge of his appointment and certainly had never acted pursuant to such appointment.
[52] Affidavit of single expert witness, Ms F, sworn 11 September 2019, Appendix E at E.4.
One hundred per cent of the income of the R Trust has been distributed to the husband.[53] In relation to the R Trust income and beneficiaries, Ms F stated at paragraph E.9 and paragraph E.10 of Appendix E to her first report:-
E.9On the basis of the statement by the husband in his affidavit sworn on 29 May 2019, the trust income being distributed solely to the Husband over the six years ended 30 June 2019 and the inclusion of the Husband as one of the three Appointors, I have assumed that the Husband ultimately has the power to control the trust and I have attributed 100% of the value of the trust to the Husband. However, this may be a matter for legal determination by the Court.
E.10Beneficiaries of the trust include the [OP Charity], being the “Specified Beneficiary”, and the Husband’s children as “Central Persons”. Other general beneficiaries include the Husband and Wife, in addition to the spouses and other relatives and entities associated with the Central Persons.
[53] Affidavit of single expert witness, Ms F, sworn 11 September 2019, Appendix E at E.8.
Ms F, using a “net asset backing approach”, which she considered “… to be appropriate for the trust as its activities are limited to investment”,[54] attributed the value of E$4,261,000 to the husband for his interest in the trust.
[54] Affidavit of single expert witness, Ms F, sworn 11 September 2019, Appendix E at E.13.
In relation to the valuation methodology for R1 Pty Limited and Controlled Entities, Ms F’s evidence was as follows:-
As the Consolidated [R Group] conducts an actively trading business, the capitalisation of future maintainable earnings is prima facie the appropriate valuation methodology to apply. A review of the earnings of the business over the three years ended 30 June 2018, forecast for the year ended 30 June 2019 and budget for the year ending 30 June 2020 indicates that the business generates a positive level of maintainable earnings at the valuation date... For the purpose of valuing the interest held by the [R Trust] in the Group I have adopted a maintainable earnings methodology.[55]
(Reference omitted)
[55] Affidavit of single expert witness, Ms F, sworn 11 September 2019, Appendix F at F.35.
In her detailed analysis of the enterprise value of R1 Pty Limited and Controlled Entities, Ms F estimated the aggregated maintainable earnings to be $3,685,000, the capitalisation rate to be ‘5.0’ and the total enterprise value of the Consolidated Group (using an earnings before interest and tax basis) to be $18,430,000.[56]
[56] Affidavit of single expert witness, Ms F, sworn 11 September 2019, Appendix F/4.
Ms F was advised of the fact that the parties have not separated and their marital relationship is ongoing. As a result, she noted in her first report at paragraph 2.8 that:-
…the marriage breakdown rollover provisions available under Section 126-5 of the Income Tax Assessment Act 1997 or concession regarding the franking of deemed dividends under Section 109RB will not apply.
P Pty Ltd
P Pty Ltd was incorporated on 4 May 1977.[57] The directors and shareholders of the company are the husband and Mr A, Mr A holding his share for the benefit of the husband.[58]
[57] Affidavit of single expert witness, Ms F, sworn 11 September 2019, Appendix G at G.2.
[58] Affidavit of single expert witness, Ms F, sworn 11 September 2019, Appendix G at G.3.
P Pty Ltd is a corporation whose purpose is to receive funds earned by R1 Pty Limited in the running of the R Business.[59] Funds paid to P Pty Ltd have been drawn by the husband from the corporate entity and reflected as a loan in the financial accounts. This arrangement has given rise to issues relevant to Div 7A of the Income Assessment Act 1936 (Cth) (‘ITAA 1936’) as undistributed funds resulting from the movement of money between the R Trust and P Pty Ltd could be deemed to be dividends and taxed accordingly. The assets of the company at the valuation date were comprised of unpaid present entitlements owing by the R Trust,[60] as well as loans owed from other related entities.[61]
[59] Oral submissions for the wife dated 9 December 2019, transcript page 22.
[60] Affidavit of single expert witness, Ms F, sworn 11 September 2019, Appendix E.
[61] Affidavit of single expert witness, Ms F, sworn 11 September 2019, Appendix G at G.4.
Ms F considered the “net asset backing approach” to be appropriate in valuing P Pty Ltd, as “…it does not carry on a business activity.”[62]
[62] Affidavit of single expert witness, Ms F, sworn 11 September 2019, Appendix G at G.6.
Ms F attributed the value of $11,898,00 to the husband for his interest in P Pty Ltd.[63]
[63] Affidavit of single expert witness, Ms F, sworn 11 September 2019, Appendix G/2.
Ms F’s evidence as to the loans owed to/by the various entities at 30 April 2019 included:-
a)The [R Trust] owed [P Pty Ltd] $6,794,521, of which I am advised that $6,714,099 relates to an unpaid present entitlement which arose prior to 16 December 2009 and has been quarantined from the ongoing compliance issues of Division 7A of the [ITAA 1936]… and the residual is subject to a loan agreement with conforms with the requirements of Division 7A;
b)The [R Trust] owed [R1] Pty Limited $711,013 which relates to net funds advanced in 2018 and 2019. For the purpose of my report, I assumed that the loans were repaid or a complying loan agreement was entered into pursuant to Division 7A…;
c)R1 Pty Limited owed P Pty Ltd $5,103,553;
d)The R Trust owed Mr Toscani $4,034,160; and
f)P Pty Ltd owed Mr Toscani $363.
Ms F stated that the tax payable on payment of a $4,034,160 fully franked dividend from R1 Pty Limited to the R Trust, to allow repayment in full the loan owed to the husband at 30 April 2019,[64] would be as follows:-
[64] Affidavit of single expert witness, Ms F, sworn 16 October 2019, Annexure A at 2.9.
Franked amount $4,034,160 Franking credits(a) $1,728,925 Gross amount $5,763,085 Tax payable at 47% $2,708,650 Less: Franking credits ($1,728,925) Tax payable $979,725 (a) Per the 2018 income tax return the company had $5,361,978 franking credits, sufficient to pay a fully franked dividend.
(Citation altered)
P Pty Ltd had retained earnings of $11,898,381 as at 30 April 2019.[65] Ms F provided a table calculating the tax payable on a fully franked dividend of $11,898,381 as at 30 April 2019 as follows:-
[65] Affidavit of Mr KK sworn 29 May 2019, [14]-[21].
Franked amount $11,898,381 Franking credits(a) $5,099,306 Gross amount $16,997,687 Tax payable at 47% $7,988,913 Less: Franking credits ($5,099,306) Tax payable $2,889,607 (a) Per the 2018 income tax return the company had $7,351,861 franking credits, sufficient to pay a fully franked dividend.
(Citation altered)
Ms F noted the Group did not have sufficient cash available to allow repayment of the $6,700,000 loan owed by the R Trust to P Pty Ltd and the $5,100,000 loan owed by R1 Pty Limited to P Pty Ltd.[66]
[66] Affidavit of single expert witness, Ms F, sworn 16 October 2019, Annexure A at 2.13
Ms F’s evidence was:-
a)…[R1] Pty Limited does not have the immediate cash available to pay a $4 million dividend to the [R Trust] or repay the $5.1 million loan owed to [P Pty Ltd], with cash at bank at 30 April 2019 being $1.35 million. Alternative sources of funding, via sale of assets or external loans may need to be considered;[67] and
b)in addition, the loan owed by the [R Trust] to [R1] Pty Limited of $711,013 at 30 April 2019 will need to be repaid before the earlier of the due date of lodgement or actual date of lodgement of the 2018 and 2019 (where relevant to the amounts loaned) income tax return of [R1] Pty Limited, which would require the payment of a further dividend to be paid by the company to the trust to allow repayment in full, or a loan agreement entered into compliant with Division 7A, with a dividend paid by the company to the trust to cover the minimum repayment.[68]
[67] Affidavit of single expert witness, Ms F, sworn 16 October 2019, Annexure A at 2.9,
[68] Affidavit of single expert witness, Ms F, sworn 16 October 2019, Annexure A at 2.10.
Ms F’s evidence as to the ability of the husband to obtain funds from the R Group was as follows:-
a)[R1] Pty Limited could lend funds to the Husband under commercial terms compliant with s 109N of the [ITAA 1936], which includes minimum yearly repayments. As at 30 April 2019 the company had cash at bank of $1,352,540. Should additional funds be required to be paid to the Husband it may be that the company may need to source third party funds;
b)[P Pty Ltd] could pay $363 to the Husband tax free with further funds being paid by way of a franked dividend to him, as sole beneficial shareholder of the company, or by the Husband borrowing funds under commercial terms compliant with s 109N of the [ITAA 1936], which includes minimum yearly repayments. [P Pty Ltd] has no available funds, however, and would require [R1] Pty Ltd and/or the [R Trust] to repay the loans owed to it, which in turn requires the sourcing of funds; or
c)the loan/ unpaid present entitlements owed by the [R Trust] to the Husband could be paid to him tax free, however in order to repay the loan the trust would need to access funds. The trust, as sole shareholder, could receive a franked dividend from [R1] Pty Limited or the trust could obtain additional commercial loans, subject to the requirements of Division 7A [of the ITAA 1936], from [R1] Pty Limited and/or [P Pty Ltd]. Alternatively, the trust could source third party funds to allow the repayment of the loan to the Husband, tax free.
The husband’s senior counsel argued that the tax liability of $979,728 should be included in the asset pool as a liability which must be repaid, no matter the time or method of payment. In the instance of the forgiveness of the relevant inter-corporation loans as an immediate prospect, he argued the tax would be crystallised and require inclusion in the asset pool, consistent with the principles in Rosati & Rosati (1998) FLC 92-804.
The evidence of Ms F was that were the Div 7A loans between P Pty Ltd and the R Trust to be forgiven, the immediate taxation consequence would be significant and the better approach would be to manage the obligations pursuant to Div 7A over time. I accept the unchallenged evidence of Ms F that such action would not be financially prudent. That evidence of value therefore does not assist.
The R Business has been the parties’ source of income throughout the entirety of their marriage and continues to be so. There was no evidence that the parties or either of them, and/or Mr A, Mr B or Mr E would sell this asset shortly or in the medium to longer term. There is no risk to be taken into account as a relevant s 75(2) of the Act factor.[69]
[69]Rosati & Rosati (1998) FLC 92-804.
The R Business will continue to be managed and effectively controlled by Mr A. Its income continues to be significant. The operating profit for the Consolidated Group for the financial year ending 30 June 2019 was $3,337,322.[70] The issue for the Court is the means by which the husband shall secure the funds necessary to pay out the wife. The evidence as to this was not so clear nor complete that the Court should make any allowance for a taxation liability.
[70] Oral evidence of Ms F dated 11 December 2019, transcript page 156.
It is not necessary that there be a declaration of dividends, with consequential taxation liability, for the husband to fund a payment to the wife. Indeed the husband did not put before the Court the certainty of a withdrawal of funds by him by way of dividend. It is open to the R Trust to source third party loans which are available to it in the provision of a facility to R1 Pty Limited in excess of $4,000,000 to allow repayment of the loan to the husband free of tax.
In Rodgers & Rodgers [2015] FCWA 5, a case with factual similarities to the present case, Her Honour Crisford J at first instance determined to deal with a matter such as this by concluding that because of the uncertainty about the appropriate quantification of the future impost to a party in his retention of the family business, and need to manage the Div 7A issues, that liability would not be included in the asset pool although it was a matter Her Honour determined to take into account pursuant to s 75(2) of the Act.
On appeal by the husband, [71] the Full Court of the Family Court of Australia allowed the appeal but not in respect of the trial judge’s refusal to deduct a calculation of the total future taxation payable by a corporation which the parties controlled so as to arrive at a net value of the parties’ property. The Full Court found that “not of itself, an error of law.”[72] Furthermore, the Full Court found it within discretion for Her Honour to treat the liability as a matter to be considered by reference to s 79(4)(e) of the Act.[73]
[71]Rodgers & Rodgers (No.2) (2016) FLC 93-712
[72]Rodgers & Rodgers (No.2) (2016) FLC 93-712, [42].
[73]Rodgers & Rodgers (No.2) (2016) FLC 93-712, [42].
The Court shall adopt the same approach here. The quantum of the taxation liability which shall not be incurred immediately, and indeed may never be incurred, is not capable of being included in the asset pool.
A similar analysis applies to the taxation liability of P Pty Ltd in the sum of $2,889,607. There is no suggestion that company shall be wound up. The husband’s argument must be that the amount of tax has crystallised and is owing by him, not that it is a contingent taxation liability for him to succeed in the circumstances of this particular case, and by reference to what is just and equitable as between the parties. He fails in that regard.
Testamentary Estates
In closing address, senior counsel for the husband also sought an order that:-
Pursuant to s 114 of [the Act], each of the Husband and the Wife (and their respective agents and attorneys) be restrained from commencing or otherwise prosecuting any claim for a family provision order (being an application and order pursuant to Part IV of the Administration and Probate Act 1958 (Vic) (or equivalent) from the other’s estate.
In so far as it is practicable the Court is required to make orders that will finally determine the financial relationships between the parties to the marriage and avoid further proceedings between them.[74]
[74]Family Law Act 1975 (Cth), s 81.
In exercising its powers under Part VIII of the Act, the Court may make orders as set out in s 80 of the Act, which include an order which the Court thinks is necessary to make and to do justice as between the parties.[75]
[75]Family Law Act 1975 (Cth), s 80(1)(k).
Is this injunctive order necessary for that purpose? The Court determines that it is not. The parties’ marriage is ongoing. Indeed, senior counsel for the wife submitted, quite properly, in closing to the Court, that it should not be concerned as to s 81 of the Act in the circumstances of this case. The parties’ respective positions in the future are uncertain and unknown. The value of their rights is unknown, as submitted by senior counsel for the wife. Justice as between the parties is not served by an order of this nature.
Section 75(2) of the Act Matters
The factual matters going to this consideration are canvassed throughout these reasons.
Throughout the continuance of their marriage each of the parties will share in the future earnings of the R Business. The husband will have the financial impost of responsibility for the ongoing management of the Div 7A issues.
The wife is younger than the husband and is in good health. She may have many years ahead of her in relation to which she will need support. She will have, as a result of these proceedings, a significant capital sum available to her to provide for her future living needs, her accommodation being secure, valuable and debt free. The husband shall have his interest as a beneficiary of the R Trust and entitlements in the R Trust, a considerable financial resource available to him. The operating profit of the R Business will amply provide for the husband’s needs together with those items of property that shall be retained by him.
No adjustment shall be made to either party as a result of these matters.
Conclusion
The Court is urged by the parties, who submit it is just and equitable, to, under s 79(1) of the Act, make an order “…altering the interests of the parties to the marriage in the property” as envisaged by the High Court of Australia in Stanford v Stanford (2012) FLC 93-518.
Even though the parties’ marriage continues, the Court is of the view that it should make orders pursuant to s 79(1) of the Act as sought by the parties. The husband is now mentally and physically incapacitated. He has no testamentary capacity and the effect of the codicil to his Will of 2017 was to not make provision in his Will for his wife, nor her daughter Ms J.
The making of orders under s 79 of the Act will, on the evidence and as submitted by senior counsel for the husband, “promote the continuance of this particular marriage.”[76] There is clearly a need to re-organise the parties’ financial affairs in a just and equitable way to each, whilst allowing them to keep their marriage intact.
[76] Oral Submissions on behalf of the husband dated 12 December 2019, transcript page 192.
Although Ms F had some reservations as to the value of the R Business being $1,340,618 in 1981, senior counsel for the wife did not really cavil with that figure. That capital sum, expressed in 2019 dollars, was said to be $5,386,074. That is approximately 15 per cent of the current asset pool and financial resources of the husband. Such capital sum provided a “springboard” for the parties’ acquisition of future wealth.[77] It was a very significant capital contribution that cannot be completely overlooked by all of the contributions made by both parties over the course of their marriage. However, the length of the marriage, the wife’s extensive contributions, as detailed, and her onerous caring obligations of recent years are significant counter-balancing contributions. In the exercise of the Court’s discretion I find the husband has made a contribution of 52 per cent to the property, and what has very recently become, the financial resources of the husband when that which was his long held property ceased to be so by virtue of his mental incapacity.
[77] As that expression is used, for example, in Rosati v Rosati (1998) FLC 92-804.
There is no adjustment for s 75(2) of the Act matters.
The wife shall receive 48 per cent of the asset pool of the parties and financial resources of the husband. That is a sum of $17,147,794. The wife shall have real property with a total value of $14,400,000 less stamp duty of $79,500 leaving $14,320,500. That is coupled with her retention of her own assets in the sum of $965,957. The total of these sums is $15,286,457. Accordingly, a cash payment from the husband to the wife is required in the sum of $1,861,337. Such an outcome is just and equitable.
The wife should additionally receive by way of spousal maintenance, at least until she receives a capital sum with which to support herself and meet her needs, in the event she and the husband were no longer residing together, the sum of money she currently receives to pay for the needs of the household. A greater sum is not justified on the evidence. Whilst the parties continue to live together, the household arrangements such that the wife receives the sum of $24,000 each month to pay for the parties’ needs and the husband attends to other payments should continue with the certainty an order provides which the discretion of an attorney does not. That arrangement will provide certainty, clarity and stability to the ongoing marriage.
I certify that the preceding one hundred and twenty one (121) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Hartnett delivered on 15 May 2020.
Associate:
Date: 15 May 2020
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