UNSWORTH & UNSWORTH
[2015] FamCA 199
•3 March 2015
FAMILY COURT OF AUSTRALIA
| UNSWORTH & UNSWORTH | [2015] FamCA 199 |
| FAMILY LAW – PROPERTY SETTLEMENT – Value of property – just and equitable – property acquired before marriage – contributions of the parties during marriage – weight to be afforded to the husband’s contributions and inheritance from his mother’s estate |
| Evidence Act 1995 (Cth) Family Law Act 1975 (Cth) Sale of Land Act 1962 (Vic) | |
| Bevan & Bevan [2013] FamCAFC 116 Chapman & Chapman [2014] FamCAFC 91 Jones v Dunkel (1959) 101 CLR 298 Kessey & Kessey (1994) FLC 92-495 Sinclair & Sinclair [2012] FamCA 388 Stanford v Stanford (2012) 247 CLR 108 Watson & Ling [2013] FamCA 57 Zyk & Zyk (1995) FLC 92-644 | |
| APPLICANT: | Ms Unsworth |
| RESPONDENT: | Mr Unsworth |
| FILE NUMBER: | MLC | 7851 | of | 2012 |
| DATE DELIVERED: | 3 March 2015 |
| PLACE DELIVERED: | Melbourne |
| PLACE HEARD: | Melbourne |
| JUDGMENT OF: | Johns J |
| HEARING DATE: | 16 & 17 July 2014 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Sweeney |
| SOLICITOR FOR THE APPLICANT: | Bancroft Lawyers |
| COUNSEL FOR THE RESPONDENT: | Mr O'Shannassy |
| SOLICITOR FOR THE RESPONDENT: | Berger Kordos Lawyers |
IT IS NOTED that publication of this judgment by this Court under the pseudonym Unsworth & Unsworth has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| FAMILY COURT OF AUSTRALIA AT MELBOURNE |
FILE NUMBER: MLC 7851 of 2012
| Ms Unsworth |
Applicant
And
| Mr Unsworth |
Respondent
REASONS FOR JUDGMENT
INTRODUCTION
These are property proceedings between the parties pursuant to s 79 of the Family Law Act1975 (Cth) (“the Act”). The proceedings arise following the breakdown of the parties’ marriage, which spanned a period of 23 years and produced three children.
The principal issues between the parties for determination are as follows:-
(a)At the commencement of their cohabitation, the husband had interests in real property and his family business. The husband asserts that significant weight should be attributed to his initial contributions. The wife disputes that assertion.
(b)Approximately five years after the parties’ marriage, the husband’s parents transferred to the parties their interest in the husband’s family business and the real property from which that business operated. There is a dispute between the parties as to the value of the interests transferred to them and the weight that should be attributed to the husband as a result of those contributions.
(c)The husband’s mother died in 2009, approximately two years prior to the parties’ separation. The husband inherited real estate and cash from his late mother’s estate. Again, there is a dispute between the parties as to the weight to be attributed to the husband’s inheritance.
(d)The parties each prepared balance sheets setting out their assets, liabilities and financial resources. Whilst the value of their interests was largely agreed, it was evident from those documents that there was a dispute between the parties as to the value of the husband’s superannuation interests. The husband also asserts that anticipated liabilities with respect to proposed repairs to B St should be taken into account in determining the value of the parties’ interests.
It is common ground between the parties that the commercial property from which the business is conducted at B Street, Suburb C (“B Street”) is to be sold. At the time of the hearing there was a significant dispute between the parties as to the manner in which B Street should be sold.
As a result of a fire at the premises at B Street, the parties sought that the matter be listed for mention before me. On 23 February 2015 at that mention hearing I was informed as follows:-
(a)On 4 February 2015 a fire caused substantial damage to the business premises;
(b)The parties have lodged an insurance claim with their insurer;
(c)The quantum of the insurance claim is not yet known;
(d)As a consequence of the damage to the premises the husband will have to relocate his business;
(e)Given the need to relocate the business due to the fire damage, there is no impediment to the property being listed for sale forthwith;
(f)The property will be sold as a potential development site.
The wife’s position at the commencement of the hearing was that she sought a 42.5 per centum adjustment of the parties’ interests. She sought that there be a “global approach” to any adjustment in accordance with the decision of the Full Court in Zyk & Zyk (1995) FLC 92-644.
In contrast to the approach agitated by the wife, the husband sought final orders on the basis that the assets inherited by him from his mother’s estate be excluded from the pool available for division and that the wife receive a 47.5 per centum adjustment of that more limited pool. In the alternative, the husband sought that the wife receive a 30 per centum adjustment of the pool in the event that the husband’s inheritance was included in the pool.
MATERIAL RELIED UPON
The wife relied upon the following material:-
·Case outline filed 15 July 2014;
·Revised case outline of wife dated 16 July 2014 (Exhibit W1);
·Wife’s amended Initiating Application filed 24 March 2014;
·Wife’s trial affidavit filed 28 April 2014;
·Wife’s affidavit filed 6 June 2014;
·Wife’s affidavit filed 15 July 2014;
·Wife’s financial statement filed 28 April 2014;
·Further submission filed on behalf of the wife on 7 August 2014.
The husband relied upon the following material:-
·Outline of case and summary of argument on behalf of the husband for final hearing on 16 July 2014;
·Minute of proposed order dated 16 July 2014;
·Addendum to husband’s outline of case dated 16 July 2014 (Exhibit H1);
·Husband’s (revised and alternative) minute of proposed orders sought (Exhibit H2);
·Amended response to Initiating Application filed 1 April 2014;
·Trial affidavit of the husband filed 28 May 2014;
·Financial statement of the husband filed 28 May 2014;
·Affidavit of the husband filed 11 July 2014;
·Husband’s submissions filed 1 August 2014;
·Husband’s reply to further submissions of wife filed 13 August 2014.
THE HEARING
The hearing commenced before me on 16 July 2014. In accordance with my trial directions, objections to evidence were filed and I ruled with respect to those matters at the commencement of the hearing.
At the commencement of the second day of the hearing, an oral application was made on behalf of the husband for an adjournment of the proceedings to a date after 4 September 2014, that being the date upon which the husband alleged an offer made by D Pty Ltd to the husband to enter into an option for that entity to purchase the commercial property at B Street would expire. I granted leave for the husband to make an oral application but ultimately refused his application for an adjournment. Accordingly, the hearing proceeded.
The matter was heard over two days. Each of the parties was represented by counsel.
The only witnesses were the husband and the wife and each was cross-examined.
On 25 July 2014, being a week after the hearing concluded, the matter was listed for mention before me as a result of a request by the husband’s solicitor. At that mention hearing, counsel for the husband sought leave to withdraw submissions he had made in his closing address with respect to the provisions of s 27 of the Sale of Land Act 1962 (Vic) and the terms of the mortgage secured over the title to B Street.That application was not opposed by the wife.
Due to the wife’s counsel being unavailable at that mention hearing, I made directions for the filing of written submissions with respect to the issues raised on behalf of the husband. Each of the parties filed submissions in accordance with those directions.
As noted above, the matter was listed for further mention before me on 23 February 2015 to enable the parties to inform me as to the fire that occurred at B Street and the impact of that event on how the sale of that property should proceed.
In determining the matter, I have applied the standard of proof as provided in s 140(1) of the Evidence Act 1995 (Cth); that standard is the balance of probabilities.
I have read all documents upon which the parties have relied and the exhibits tendered during the hearing. I have also had the benefit of observing the demeanour of the parties when giving their evidence in court.
THE LAW
The parties’ competing property applications are to be determined in accordance with the provisions of Part VIII of the Act. The High Court considered the approach to be adopted in the determination of proceedings pursuant to s 79 of the Act in the decision of Stanford v Stanford (2012) 247 CLR 108. At [121] the High Court said that “the power to make a property settlement order must be exercised ‘in accordance with legal principles, including the principles which the Act itself lays down’”. Section 79(2) of the Act provides that a court should not make an order for property settlement unless it is satisfied that it is just and equitable to do so.
That decision has been considered in detail by the Full Court in Bevan & Bevan [2013] FamCAFC 116 (“Bevan”) and more recently in Chapman & Chapman [2014] FamCAFC 91.
In Bevan at [73] the Full Court referred to the three “fundamental propositions” laid down by the High Court which should guide trial judges in approaching the task under s 79. They were summarised as follows:-
1.Determination of a just and equitable outcome of an application for property settlement begins with the identification of existing property interests (as determined by common law and equity);
2.The discretion conferred by the statute must be exercised in accordance with legal principles and must not proceed on an assumption that the parties’ interests in the property are or should be different from those determined by common law and equity;
3.A determination that a party has a right to a division of property fixed by reference only to the matters in s 79(4), and without separate consideration of s 79(2), would erroneously conflate what are distinct statutory requirements.
Accordingly, in determining competing applications pursuant to s 79, the Court is required to:-
· Identify the parties’ respective legal and equitable interests in property;
· Determine whether, in accordance with s 79(2), it is just and equitable to make a property settlement order having regard to the parties’ existing interests;
· Determine all relevant contributions of each of the parties;
· Identify and weigh against each other the matters set out in s 79(4)(a) to (c) inclusive; and
· Consider the matters contained in s 79(4)(d) to (g) inclusive and make a determination as to what, if any, alteration should be made to the entitlements of the parties earlier assessed on account of their contributions, particularly having regard to the provisions of s 75(2).
The Act does not prescribe the order in which the matters in s 79(4) are to be considered. The circumstances of individual marriages as to their nature and form differ; how parties have organised and lived within the marriage are factors which may be relevant in the exercise of the discretion pursuant to s 79(2) of the Act.
The Court’s approach may be less compartmentalised than was previously the case and a more “holistic” approach, as described by Murphy J in Watson & Ling [2013] FamCA 57, adopted.
At the commencement of the case, it was conceded by counsel for each of the parties that an order was necessary in this case and each asked the Court to make orders adjusting the parties’ interests. There was no challenge to the proposition that it was just and equitable to make orders for property settlement. In circumstances where it is agreed that the parties will no longer have the joint use and enjoyment of their property, I am satisfied that it is just and equitable to make orders for an adjustment of their interests.
THE PARTIES
The husband was born in 1955 and is aged 59 years. He is a company director and operates a business (“business”).
It is agreed between the parties that the husband will retain the business following their property settlement.
The wife was born in 1962 and is aged 52 years. She is currently employed in the business; that employment will cease upon the conclusion of these proceedings.
The wife was diagnosed with breast cancer in 2008. In June 2014 the wife had a double mastectomy. At the time of the hearing the wife was recuperating from that surgery and was not working.
The wife has worked in the business since the parties’ marriage in 1990 and her responsibilities included managing payroll and creditors. It was her evidence that she was uncertain as to her future employment prospects given that her only work experience in the past 24 years had been in the business operated by the family. I accept that evidence.
The parties married in 1990 and separated under the one roof on 22 November 2011.
The parties divorced on 12 May 2013 and the husband left the former matrimonial home on 20 May 2013.
The parties have three children: Ms E aged 23 years, Mr F aged 21 years and G aged 16 years. Ms E and Mr F are independent, each having obtained qualifications and having gainful employment. Ms E lives with the wife and Mr F lives with the husband.
G lives with the wife and at the time of the hearing was in Year 10 at H School.
THE ASSET POOL
At the commencement of the hearing, each of the parties provided a balance sheet.
The balance sheet relied upon by the wife, being Exhibit W1, provides as follows:-
Property
1.
I Street, Suburb J
$1,050,000.00
2.
Wife’s part property
$ 980,000.00
3.
Husband’s part property
$ 80,000.00
4.
Monies held by Bancroft Lawyers – Trust Account
$ 20,000.00
5.
Monies held by K Solicitors – Trust Account
$ 219,200.00
6.
Mr Unsworth Pty Ltd
$ (45,111.00)*
7.
Unsworth Pty Ltd Trust
$ 80,712.00
8.
Wife’s superannuation entitlement
$NIL
9.
Husband’s superannuation entitlement
$ 134,755.00
Total Assets
$2,559,556.00
I Street Mortgage
$ (74,400.00)
Net Property (excl B St)
$2,445,156.00
B Street
L Pty Ltd – B Street, Suburb C
$4,500,000.00
Mortgage on B Street
$(1,200,000.00)
Capital Gains Tax
$ (870,000.00)
Net Asset Pool
$4,875,156.00
*Subject to further accounting evidence as to the method of calculation
The husband’s balance sheet was set out in Exhibit H1 and it provides as follows:-
Assets
Husband asserts
Wife asserts
Notes
Proceeds of sale left from: M Street (FMH) (inherited) N Street[1]
E $220,000
Includes recently inherited assets held on trust by K
On Trust for parties by Bancroft Lawyers
Balance after costs, each party contributed $20,000. To be held on account liabilities as per minutes.
Wife’s Partial Property Settlement[2]
$1,000,000
Husband’s Partial Property Settlement[3]
$ 100,000
$40,000 of this applied to mortgage on I Street.
Mr Unsworth Pty Ltd & Unsworth Pty Ltd Services (Aust) P/L
($45,111)
$80,712
$35,601
Conclusion of Q Valuers of 11 March 2014
Unsworth Pty Ltd Services Superannuation Fund
$118,601
Consists of shares: $83,570 & cash: $45,031
Other Liabilities
Other business liabilities including superannuation liability, B St Floor repairs and Replace Fire Service
$57,637
The full extent of outstanding claims is not known
Sub Total
$1,416,565
Without B Street and I St Suburb C
B Street SUBURB C
B Street, Suburb C[4]
Mortgage
CGT on sale
Net
Purchased pre marriage in 1988
$4,500,000
($1,200,000)
($878,000)
$2,422,000
Value assumes sale to D Pty Ltd. Owned by L Pty Ltd T’ee for the L Unit Trust & all units owned by R Pty Ltd.
30 Jan 2014 valuation by First Valuation Group at $4,000,000
HUSBAND’S MOTHER’S ESTATE
I Street, Suburb J
NAB Mortgage$1,050,000
($74,450)
$975,555Valuation by First Valuation Group (30.01.14). See Footnote 4
SUMMARY OF ALL ASSETS
Assets
Husband asserts
Wife asserts
Notes
All other assets
$1,416,565
Includes husband’s late in marriage N Street inheritance of $650,000
B Street[5]
$2,422,000
Assumes sale at $4,500,000 with 2016 settlement
I Street
$975,555
Late inheritance by husband
TOTAL ALL ASSETS
$4,814,120[6]
[1] 2/55 N Street, Suburb P was inherited by the Husband on his mother’s death on 21 December 2009 and was sold post separation for $650,000 unencumbered. $100,000 was used to pay outstanding liabilities of the business and $
[2] Part of the proceeds of sale of N Street OF $650,000 is included in this payment to the wife.
[3] The Husband used $40,000 from his $100,000 part property settlement to reduce the mortgage for I Street, Suburb J, included at $100,000 so the mortgage balance is included at balance prior to payment.
[4] There is an offer to purchase the B Street property open to be accepted until 4 July 2014, and accepted by the husband, for an amount of $4,500,000 on a 23 month settlement with a deposit of 25 per cent and subject to a condition of successful due diligence within 60 days of contract. This will attract Capital Gains Tax of approximately $870,000.
[5] Note that 30 Jan 2014, market valuation at $4,000,000
[6] The Husband does not included the $5,000 or so the wife holds from child endowment savings as he seeks that this be applied to G’s forthcoming trip.
Consideration of those balance sheets discloses three issues between the parties with respect to the pool.
The first issue relates to the value of the husband’s superannuation entitlements. At the commencement of the hearing the husband asserted that the value of his interest in the Unsworth Pty Ltd Services Superannuation Fund (“the superannuation fund”) was $107,376, comprising of shares valued at $64,438 and cash of $42,938. The wife challenged that assertion and at the commencement of her case alleged that the value of that interest was $134,755.
During the hearing the husband amended his position and in Exhibit H1, being the addendum to his case outline, the husband alleged that the value of his interest in the superannuation fund was $118,601.
The husband was cross-examined in relation to the assets in the superannuation fund. During cross examination he conceded that the superannuation fund has shares in CBA (1000), Wesfarmers (142), Telstra (400) and CM. In addition to the share portfolio, the husband confirmed that cash was held at the bank. The husband confirmed in evidence that the value of shares and cash held by the superannuation fund was that set out in Exhibit W3, being $135,033. I am satisfied on the basis of the husband’s concessions given during cross-examination that that is the value to be attributed to the superannuation fund.
The second issue between the parties with respect to their interests was whether certain liabilities with respect to B Street should be included in the calculation of the value of the parties’ interests.
In his outline of case dated 11 July 2014, the husband asserted that there were liabilities of $10,000 related to floor repairs at B Street and $20,000 related to the replacement of the fire service at B Street. At the commencement of the hearing the husband tendered an addendum to his outline of case (Exhibit H1) in which he sought that the following liabilities be taken into account:-
1.Plumber $ 8,800
2.Fire service replacement $35,000
3.Floor repairs $10,000
4.S Group (Mr BB) outstanding invoices $ 1,837
5.Consulting as to valuation and CGT $ 2,000
Total $57,637
The wife takes issue with those alleged liabilities. It is her case that there should be no allowance for the alleged liabilities set out in Part A of Exhibit H1.
The husband was cross-examined with respect to those alleged liabilities. In cross-examination, he conceded that his trial affidavit is silent as to the alleged liability with respect to the fire service replacement. There is no evidence before me which would satisfy me as to the need for a replacement of that nature to be undertaken. That view is bolstered by the husband’s concessions during cross-examination that the purchaser of B Street is likely to be a developer, in which case the building is likely to be demolished.
The wife was also cross-examined with respect to the repairs allegedly required at B Street. The wife noted the husband’s assertion as to the pressing need for the floor repairs but stated that, in fact, the floors have been in need of repairs for the past 8 to 10 years. The wife’s evidence was that she had no knowledge of any requirement to replace the fire service at B Street.
Throughout her evidence the wife impressed as a truthful and forthright witness who made appropriate concessions when required. In contrast, I observed the husband to be a witness who was fixed in his views, made concessions only grudgingly and had a propensity to overstate aspects of his case.
The husband’s evidence with respect to the repairs allegedly required at B Street and therefore the liabilities in relation to those repairs is an example of the husband’s efforts to embellish his position so as to advance his own interests. There is no evidence before me as to the need for repairs to B Street and indeed, given the concessions made by the husband that the property is likely to be purchased by a developer, there is seemingly little sense in undertaking such repairs, even if they are required. Further, there is no admissible evidence as to the likely costs of the proposed repairs.
Given the recent fire at B Street and the concession that the property is to be sold as a development site, I am satisfied that the liabilities claimed by the husband with respect to the fire service replacement and the floor repairs should not be included in the calculation of the value of the parties’ interests.
The husband asserts that there is a liability of $2,000 with respect to consulting as to valuation and CGT. The husband’s trial affidavit is silent in relation to that issue and again there is no admissible evidence before me as to that liability. I will not include that liability in the parties’ balance sheet.
The liabilities with respect to the plumber and outstanding invoices to the S Group are not liabilities referred to in the husband’s trial affidavit or in his Financial Statement filed 28 May 2014. In circumstances where there is no evidence before me as to those liabilities, I will not include them in the parties’ balance sheet.
The third issue relates to the amounts received by each of the parties by way of partial property settlement. Orders made by consent on 10 May 2013 provide that from the proceeds of sale of the properties at M Street and N Street the wife be paid the sum of $1,000,000 and the husband be paid the sum of $100,000 by way of partial property settlement. Those are the amounts allowed by the husband in his balance sheet.
Following the sale of M Street, a dispute arose between the parties as to the disbursement of the proceeds of sale of that property as well as to the manner in which the sale of N Street was to be conducted.
Notwithstanding the terms of the orders of 10 May 2013, the husband asserted that the sale proceeds should be applied to various debts of the business prior to payment to the parties of their entitlements pursuant to those orders.
As a result of what the wife alleged was the husband’s non-compliance with the May 2013 orders, she caused a Contravention Application to be filed. The matter was resolved by the parties and orders were made on 14 November 2013 that the parties each cause the sum of $20,000 to be transferred to the wife’s solicitor to meet costs of valuation with respect to the parties’ property and the business. As a result of those payments, it is said on behalf of the wife that the amounts actually received by way of partial property settlement were $980,000 to the wife and $80,000 to the husband. The husband concedes that the parties each paid the sum of $20,000 as ordered on 14 November 2013 for the purposes of obtaining valuations.
I am satisfied that, notwithstanding the terms of the May 2013 orders, the reality for each of the parties is that they received the amounts referred to in the wife’s balance sheet by way of partial property settlement. Accordingly, they are the amounts I will allow in the formulation of the parties’ balance sheet.
Otherwise, there is little difference between the parties’ respective balance sheets, save that that prepared on behalf of the wife provides a rounding of figures and deals with the assets adopting a global approach. On the basis of my findings, the parties’ legal and equitable interests for the purposes of the orders I am asked to make are as follows:-
Property
1.
I Street, Suburb J
$1,050,000.00
2.
Wife’s part property
$ 980,000.00
3.
Husband’s part property
$ 80,000.00
4.
Monies held by Bancroft Lawyers – Trust Account
$ 20,000.00
5.
Monies held by K Solicitors – Trust Account
$ 219,200.00
6.
Mr Unsworth Pty Ltd
$ (45,111.00)
7.
Unsworth Pty Ltd Trust
$ 80,712.00
8.
Wife’s superannuation entitlement
$NIL
9.
Husband’s superannuation entitlement
$ 135,033
Total Assets
$2,519,834.00
I Street Mortgage
$ (74,400.00)
Net Property (excl B Street)
$2,445,434.00
B Street
L Pty Ltd – B Street, Suburb C
$4,500,000.00
Mortgage on B Street
$(1,200,000.00)
Capital Gains Tax
$ (870,000.00)
Net Asset Pool
$4,875,434.00
INITIAL CONTRIBUTIONS
At the commencement of the cohabitation, the husband was employed in the business. At that time, the husband had an interest in the following:-
(a)A minimal equity in the property at T Street, Suburb U (“T Street”);
(b)A shareholding in the entity through which his parents operated the business (then known as V Pty Ltd);
(c)A shareholding in L Pty Ltd (“L”), the entity which was the registered proprietor of B Street;
(d)A one third interest in the property at I Street, Suburb J (“I Street”) in which his parents held a two-thirds interest and which was subject to a mortgage; and
(e)An interest in a business known as W Pty Ltd.
No evidence was adduced as to the value of the husband’s interests at the time of the commencement of cohabitation.
Nonetheless, the husband endeavoured to adduce evidence that would support a finding that the value of his interest in the business was substantial at the commencement of cohabitation.
To that end, the wife was cross-examined by counsel for the husband as to whether or not the business was “a substantial business” at the commencement of the parties’ cohabitation. The wife’s evidence was that at that time, the business operated from a large premises and was an established business. She did not concede that it was substantial. It was her evidence that at the commencement of the parties’ cohabitation she was responsible for the payment of wages and that there were about 30 employees who worked in the business on a casual, part-time or permanent basis. She stated that currently the business has between 20 and 30 employees. Further, the wife conceded in cross-examination that between 1990 and 1995 the business’s growth was “on an upward trajectory”.
As noted above, the wife impressed as an honest witness who was willing to make concessions where appropriate. I accept her evidence as to the position of the business at the commencement of cohabitation; that is, that it was an established business. In circumstances where no evidence was adduced as to its value at that time, I am not in a position to make any findings as to its value or whether it was “substantial”, as was urged by the husband.
The wife did not hold any assets of significance at the commencement of the parties’ cohabitation.
At the time of the marriage, the husband was a qualified tradesman and worked in the business.
Upon the parties’ marriage, the wife commenced employment in the business, assisting with marketing and management of functions as well as administrative duties, including the payment of wages.
Following their marriage, the husband sold his interest in T Street, which, as previously indicated, he held at the time of the parties’ marriage. The net proceeds of the sale, a sum of between $20,000 and $30,000, were applied by the parties to the purchase of a property at X Street, Suburb Y. That property was registered in the parties’ joint names.
The parties sold X Street in 1998 and then lived in a rental property in Z Street, Suburb J.
In May 2000, the parties purchased in their joint names the matrimonial home at M Street, Suburb J for the sum of $600,000. They lived in that property until their separation in 2013.
Pursuant to orders made by consent in May 2013, M Street was sold in July 2013 for the sum of $1,325,000. The sale proceeds were applied, in part, towards partial property settlement to the wife of $980,000 and to the husband of $80,000.
THE BUSINESS
The husband’s parents commenced operation of the business in 1962.
In 1986 a company known as V Pty Ltd was registered for the purpose of operating the business. The husband and his parents were the directors and shareholders of that entity. V Pty Ltd later changed its name to Unsworth Pty Ltd Services (Aust) Pty Ltd (“Unsworth Pty Ltd”).
In 1988 L Pty Ltd (“L”) was registered. The husband and his father were appointed directors of L. The shares in L were held by the husband and his parents.
In October 1988, L purchased the property at B Street. B Street was purchased for the sum of $780,000.[7] Monies were borrowed from the National Australia Bank in order to facilitate that purchase. In addition, further sums were borrowed from the National Australia Bank to fit-out B Street to enable it to house the business.
[7] Husband’s affidavit filed 11 July 2014, paragraph 7, Annexure PAU3.
Business commenced operation from B Street in about August 1989.
There is no evidence before me as to the equity held by L in B Street at the time of the commencement of the parties’ cohabitation. However, the husband’s evidence indicates that there was a significant mortgage liability attached to that property at the commencement of cohabitation.[8]
[8] See paragraphs 32 and 33 of the husband’s trial affidavit filed 28 May 2014 (“the husband’s trial affidavit”).
In October 1995, the husband’s parents resigned their positions as directors of Unsworth Pty Ltd and transferred their shares held in that entity to the husband and the wife. The wife was appointed a director of Unsworth Pty Ltd. Thereafter, the husband and the wife were the directors of Unsworth Pty Ltd and the husband held two of the three issued shares and the wife one of the three issued shares in Unsworth Pty Ltd.
Again, there is no evidence before the Court as to the value of the business at the time of the husband’s parents transferring their interest in it to the parties.
In 1996, following the resignation by the husband’s parents of their interest in Unsworth Pty Ltd, the husband’s parents also resigned from their position as directors of L, the entity that holds the B Street property. Further, they transferred their shares in L to the husband and the wife.
As a consequence, the husband and the wife, through L, hold the B Street property. There is no evidence before the Court as to the value of B Street or the value of the equity of L in that property at the time of the transfer to the parties in 1996.
In 2012 the business was the respondent to proceedings in the Federal Circuit Court initiated by the FairWork Ombudsmen. Those proceedings were brought in relation to claims by former employees of the business of underpayment of employee entitlements. As a result of those proceedings, which were concluded in 2013, the business was required to pay penalties of approximately $21,000 in addition to legal costs of those proceedings.
The husband was highly critical of the wife in his trial affidavit and sought to sheet home to the wife responsibility for the Federal Circuit Court proceedings initiated against the business, as well as many other failings of the business. For example, it was the evidence of the husband that the wife’s actions or inactions lead to:-
·The failure of the business to win a tender for the purchase of a business;
·The loss of a contract with this business;
·The claims against the business made by the Fair Work Ombudsman;
·The loss of the a contract with AA School.[9]
[9] See paragraphs 61, 63, 64 and 84 to 86 of the husband’s trial affidavit.
The wife denied the husband’s allegations with respect to the poor performance of her role in the business. It was her evidence that the parties had worked shoulder-to-shoulder in the business since the commencement of their marriage, that the husband had worked very hard and for long hours, and that she too had worked long hours in the business. That evidence was not challenged during cross-examination of the wife.
It was common ground between the parties that upon the birth of the parties’ children. the wife assumed primary responsibility for their care. In addition, she continued to work in the business. The husband assisted with the care of the children to the extent that the demands of the business would allow.
Notwithstanding the husband’s sworn evidence in his trial affidavit criticising the wife’s performance of her role in the business, his counsel conceded when opening his client’s case that the husband does not seek any adjustment as a result of the wife’s “negative contribution”, nor to criticise the wife for her efforts in the business.
Whilst the husband’s counsel was prepared to make that concession, the same could not be said of the husband when cross-examined. When asked if he stood by his criticisms of the wife, the husband maintained that they were “the facts that occurred” and that he was not seeking to criticise the wife but simply to state the facts.
The husband was unwilling to make appropriate concessions with respect to the wife’s contributions to the business. That was the flavour of much of the husband’s evidence and it did not reflect well upon him.
In April 2013, following the parties’ separation, the wife resigned as a director of Unsworth Pty Ltd. The wife continues to hold one of three issued shares in Unsworth Pty Ltd. The other shares are held by the husband.
Following the wife’s resignation from Unsworth Pty Ltd, the husband commenced operation of a new entity, Mr Unsworth Pty Ltd (“Mr Unsworth Pty Ltd”). The husband is the sole director and shareholder of Mr Unsworth Pty Ltd. Mr Unsworth Pty Ltd has conducted the business since that time.
The wife conceded through her counsel that the husband had an interest in the business at the commencement of the marriage and that the husband’s parents transferred to the parties their interest in the business and B Street in 1995 and 1996 respectively. However, the wife does not accept that significant weight should be placed upon those contributions. The wife points to the fact that there is no evidence as to the value of those interests at either the commencement of the marriage or at the time of the transfers in 1995 and 1996.
Further, it is submitted on behalf of the wife that the husband was in a position to produce documents and adduce evidence that may have assisted the Court with respect to these matters. In particular, the wife is critical of the failure of the husband to call evidence from his accountant, Mr BB, who is a friend of the husband’s and who has managed the affairs of the business since the 1970s in his capacity as an accountant.
It was submitted on behalf of the wife that Mr BB may have been in a position to give evidence as to the whereabouts of critical documents, such as the documents related to the acquisition of B Street, the finance obtained with respect to that purchase and the equity held in B Street at the time of its transfer to the parties in 1996. Alternatively, if those documents have been disposed of, Mr BB could have given evidence to that effect. It was also submitted on behalf of the wife that Mr BB may have been in a position to give evidence as to the position of the business both at the time of the parties’ marriage and at the time of its transfer to the parties in 1995.
I am satisfied that there is much force in the submissions made on behalf of the wife with respect to this matter. It is the husband’s case that significant weight should attach to his initial contributions and to the contributions that have been made through the transfer of the business and B Street to the parties. The wife concedes the fact of the transfers but disputes the weight to be attached to those contributions. The husband asserts that those contributions had significant value. However, the husband has failed to present evidence to support that assertion. In those circumstances, whilst I may have regard to the fact of the transfers and the potential springboard effect of those assets to the parties’ wealth at the time of the hearing, I have no evidence before me that would support the contention made by the husband that they were “substantial” contributions that would attract a significant adjustment in favour of the husband.
The husband was cross-examined as to his relationship with Mr BB. During cross-examination the husband confirmed that Mr BB acted as the accountant for the husband’s father and continues to act as the husband’s accountant. The husband confirmed that Mr BB would be in a position to give evidence as to the success of the business since the husband has operated it and its success during the period the business was controlled by his parents. The husband confirmed that Mr BB has prepared the financial returns for the business for a period of between 18 to 19 years.
Having regard to the concessions made by the husband as to the degree of Mr BB’s involvement in the operation of the business over a long period and his likely knowledge as to the success or otherwise of that business over the period of the parties’ marriage, I am satisfied that the failure of the husband to call Mr BB in circumstances where he seeks an adjustment for the contribution of the business and B Street is a significant omission. I am satisfied that the husband has had opportunity to provide evidence as to the value of his interests at the commencement of the marriage and as to the value of the interest transferred to the parties by his parents. He could have either secured documentation which supports his allegations or alternatively, if such documentation was not available, provided evidence of his enquiries in relation to that documentation.
There is almost a complete absence of documents which must have existed and may well still exist that would have supported the allegations of the husband as to the weight to be attributed to his contributions. It may be inferred that the absence of that evidence and the absence of any explanation for the failure to adduce that evidence is referrable to recognition that the evidence would not have assisted the husband’s allegations (per Jones v Dunkel (1959) 101 CLR 298).
It was submitted on behalf of the husband that the transfers in 1995 and 1996 by his parents to the parties of their interest in the business and B Street was a significant direct contribution to the parties’ assets made by or on behalf of the husband in accordance with the principles enunciated by the Full Court in Kessey & Kessey (1994) FLC 92-495.
I am satisfied that the transfer by the husband’s parents of their interest in the business and B Street provided a platform from which the parties were able to develop their wealth. As such, those transfers are contributions to be taken into account on behalf of the husband. However, in the absence of evidence as to the value of those interests at the time of their transfer I am unable to make any findings as to whether such transfers were a significant contribution as submitted by the husband.
THE HUSBAND’S INHERITANCES
In 1997 the husband’s father passed away. In July 1998, following his death, the husband and his mother became the joint owners of I Street (they each previously holding a one-third interest together with the husband’s father in that property).
The husband’s mother passed away in December 2009. The husband was the sole beneficiary of his mother’s estate. The husband inherited from the estate of his late mother the following:-
·Her half interest in the property at I Street which has a total value of $975,600;
·The property at N Street which was sold by the husband in late 2013 for the sum of $650,000; and
·Cash in the sum of approximately $250,000 of which remained $36,000 after discharge of the mortgage of $214,000 on I Street.
Upon the sale of N Street, the sale proceeds were paid to the parties pursuant to court order as partial property settlement.
The husband asserts that the value of the assets inherited by him (being approximately $1.6 million) comprises approximately 34 per cent of the parties’ available assets. The husband maintains that his interest in those assets is a direct contribution by him. Further, it is submitted that the wife has made no contributions to those assets.
That submission does not take into account the fact that the husband held an interest in the I Street property at the commencement of the parties’ cohabitation. At that time he held a one-third interest in I Street. Upon the death of his father, the husband held a one-half interest in the I Street property. The husband’s interest in that property was mortgaged in about 2005 to provide a bond to the husband’s late-mother to enable her to obtain a position in a nursing home. There is no dispute between the parties as to those matters. I am satisfied that the husband inherited assets valued at approximately $1,173,800, comprising of the half interest in I Street ($487,800), N Street ($650,000) and cash after discharge of mortgage ($36,000).
In her trial affidavit filed 28 April 2014, the wife deposes at paragraph 19 as to her commitment to the husband’s mother in regularly visiting her and in ensuring that the parties’ children maintained their relationship with their paternal grandmother. That evidence was not challenged.
The husband seeks that his inherited assets be quarantined from the pool of assets available for division between the parties. The wife opposes that approach.
In the decision of Sinclair & Sinclair [2012] FamCA 388 Cronin J provided a helpful review of a number of cases which considered the approach to be adopted where parties receive inheritances, such as that received by the husband, for the purpose of providing guidance in determining what is just and equitable in such circumstances. That review of those cases highlights the wide discretion the Court has in determining what is just and equitable in such cases. They also highlight the importance of not fettering the judicial discretion.
The parties have shared a marriage which has spanned a period of almost a quarter of a century. Notwithstanding the husband’s criticisms of the wife’s contributions in his trial affidavit, those matters were not pressed during the hearing and indeed appropriate concessions were made by the husband’s counsel as to the wife’s contributions to the business and to the family. The evidence of both parties supports the view that each contributed individually and jointly to the growth of the business, the acquisition of their home and the maintenance of their existing assets (including the I Street property). In addition, both parties contributed to their family as parents and homemakers.
I am satisfied that the breadth of the contributions made by each of the parties over such a long period supports a global approach to the adjustment of their property pool. That approach will ensure that the parties’ varying contributions over the many years of their marriage are appropriately assessed and recognised.
Having said that, there is no question that the inheritance received by the husband in 2009 is significant and must be recognized in the assessment of the parties’ contributions.
THE SALE OF B STREET
At the commencement of the hearing it was agreed between the parties that B Street be sold; at issue was the terms upon which such sale be effected.
The parties have obtained a single expert valuation of B Street which values it at $4,000,000.
Prior to the commencement of the trial the husband negotiated with an entity known as D Pty Ltd (“D Pty Ltd”) in relation to the sale of B Street.
In his affidavit filed 11 July 2014, the husband deposed that on 11 June 2014 D Pty Ltd forwarded to the husband an offer to acquire an option to purchase B Street upon the following conditions:-
·the option term to be for a period of 60 days;
·the proposed purchase price to be the sum of $4.5 million excluding GST;
·the deposit to be paid is 25 per cent ($1.125 million);
·the date of settlement is to be 24 months; and
·the sum of $10,000 to be payable upon execution of the option agreement.
At paragraph 2 of that affidavit the husband deposed that he had negotiated the period for settlement down to 22 months from 24 months, with settlement due on 1 May 2016. The letter of offer signed by the husband is annexure PAU1 of the husband’s affidavit.
The husband was cross-examined as to when he signed the letter of offer from D Pty Ltd. The husband’s evidence was that he had signed the letter on 4 July 2014. The husband confirmed in his evidence that he made the handwritten amendments to the letter amending the proposed settlement date to 22 months, being 1 May 2016. During cross-examination the husband was asked whether he was able to produce any evidence confirming D Pty Ltd’s acceptance of that counter-offer, with the amended settlement date. The husband was unable to produce any evidence confirming D Pty Ltd’s acceptance of his proposal.
Further, during his evidence the husband confirmed that a draft of an option agreement has not been provided to him. The husband has not been paid the option fee provided in the letter of offer, being the sum of $10,000. The husband was asked whether he could produce any document in which he informed the wife that he had signed the letter of offer from D Pty Ltd. He was unable to do so.
It was submitted on behalf of the husband that the position with respect to the offer from D Pty Ltd would be known by 4 September 2014, that being the expiration of the 60-day period in which it would have the right to enter into an option agreement with the husband. However, the husband was unable to produce any document confirming that such option agreement was to be entered into by 4 September 2014. As noted above, the husband could not produce any document evidencing acceptance by D Pty Ltd of the amended proposal of the husband, signed by him and said to be forwarded to D Pty Ltd on 4 July 2014.
The wife was critical of the manner in which the husband has negotiated with D Pty Ltd. The wife’s criticisms of that negotiation can be summarised as follows:-
·The husband has produced no documentary evidence of any acceptance by D Pty Ltd of the husband’s counter-proposal said to have been forwarded to D Pty Ltd on 4 July 2014;
·The husband has not at any stage prior to 4 July 2014 informed the wife of this proposal to make that counter-offer; and
·The wife does not agree to the proposed settlement date, being 1 May 2016.
The husband’s evidence was that upon the settlement of the sale of B Street, he will need to obtain suitable premises from which to operate the business. He estimates that it may take at least 12 months for him to locate such premises and to obtain the necessary permits to conduct the business from those premises. It was on that basis that he submitted that the proposal to D Pty Ltd of a 22-month period for settlement was appropriate. The wife takes issue with that position.
The husband was cross-examined as to when it had been agreed between the parties that B Street should be sold. The husband confirmed during cross-examination that he has known since April or May of 2014 that B Street was to be sold and that he would need to look elsewhere for suitable premises for the business.
The wife submits that she should not be forced to wait up to two years for the fruits of the litigation. She is currently living in rental accommodation. The wife wishes to re-house herself and requires a property settlement in order to be able to finance the purchase of suitable accommodation for herself and the parties’ child.
The issue of the timing of the sale of B Street occupied significant time at the hearing. The fire which has recently razed the premises from which the business was conducted has obviated the need for the determination of that issue. It is now conceded by the husband that he must relocate the business and that B Street should be sold as a development site. There is now no impediment to an immediate sale of B Street. Further, it is agreed between the parties that there should be a percentage adjustment of the proceeds of the insurance claim arising as a result of the fire.
Accordingly, I will make orders that provide for an orderly sale of B Street at auction, with settlement of such sale to be within 60 days or such other period as agreed between the parties.
CHATTELS
The husband sought orders for the return of chattels he alleged were in the wife’s possession and which he was entitled to pursuant to orders made 10 May 2013. The chattels sought included unspecified “coffee table books”, “cookbooks”, “gifts” from the H family, ornamental vases and religious items.
The wife was cross-examined with respect to this issue. The wife conceded during cross-examination that she would make available family photographs for copying or alternatively, would provide digital copies of those photographs. I am satisfied that it is appropriate to make orders facilitating the provision of the photographs to the husband for copying.
With respect to the gifts, ornamental vases and cookbooks, the wife indicated that she did not know the items to which the husband referred. The husband’s application provides no detail as to the items sought; for example, there is nothing in his application to identify the author or title of the books sought. Similarly, there is no description of the gifts or vases sought. In the absence of particulars as to the items sought and evidence that the wife has those items, I am not in a position to make orders with respect to the return of those items.
As to the religious items, the wife’s evidence under cross-examination was that the husband had already taken most of those items and that of those removed by him, he retained the silver setting whilst the wife retained that made of stainless steel. The wife’s evidence was that the husband had taken the most expensive and beautiful of the religious items. Again, in the absence of evidence as to the specific items sought by the husband and having regard to the wife’s evidence that there has already been a division of the religious items, I will not make any further orders regarding those items.
SECTION 79(4) FACTORS
The parties have had a long marriage. It is the evidence of both parties that they have worked hard in the business. Further, it was their evidence that the parties have led a modest existence; their children have attended State schools, they have had few overseas holidays during the period of their marriage and their income has been reinvested in the business.
Upon the birth of the parties’ children, the wife was primarily responsible for their care and for the maintenance of the home. The husband conceded that the wife had performed her role as homemaker and parent admirably. The wife continued to meet her responsibilities in that regard during the period when she was diagnosed with breast cancer in 2008. The wife continues to perform that role, notwithstanding her recent surgery in June 2014.
Since separation the wife has continued to have primary responsibility for the care of the parties’ child. During that period, the wife has lived in rental accommodation whilst the husband has lived rent free in the property inherited from his mother’s estate.
Having regard to the parties’ evidence with respect to their contributions in the business and to the family, I am satisfied that each party has contributed to the best of their ability in their respective roles.
As noted earlier in this judgment the husband has made direct financial contributions to the parties’ assets by way of the inheritance received from his mother’s estate. Further, I am satisfied that the transfer of the business and B Street to the parties by the husband’s parents in 1995 and 1996 are contributions deserving of recognition.
Whilst the value of the business and B Street at the time of their transfer to the parties in 1995 and 1996 is unknown, I am satisfied that the transfer of those assets to the parties provided them with the opportunity to earn income and grow their asset base. It is significant that the B Street property is the most substantial asset in the pool of assets available for division.
Having regard to those matters I am satisfied that the adjustment in percentage terms must reflect the greater contributions by the husband than those of the wife.
That view is bolstered when one considers the inheritance received by the husband from his mother’s estate late in the parties’ relationship. That inheritance of assets valued at approximately $1,173,800 represents approximately 24 per centum of the total asset pool of $4,875,434.
It was submitted on behalf of the husband that the appropriate adjustment having regard to the husband’s contributions is 75 per cent to the husband and 25 per cent to the wife. It was submitted on behalf of the wife that an appropriate adjustment having regard to the parties’ respective contributions was 65 per centum to the husband and 35 per centum to the wife.
The contributions of the husband do require appropriate recognition, albeit not at the level agitated for on behalf of the husband. In my view the position submitted by him does not appropriately reflect the contributions made by both parties’ over the course of their 25-year marriage.
I am satisfied having regard to all of the many and varied contributions made by the parties that an adjustment in the husband’s favour of 68 per centum is appropriate. That is a 36 per centum adjustment in the husband’s favour which in dollar terms represents approximately $1,755,000 (based on a pool of $4,875,434). That adjustment recognises the contribution of the husband’s inheritance, the transfer to the parties of the business and B Street and the husband’s interest in I Street at the commencement of the parties’ relationship.
SECTION 75(2)
The wife is aged 52 years. Although employed in the business, she has recently undergone a double mastectomy and was not working at the time of the hearing. In her Financial Statement filed 28 April 2014 the wife discloses an income of $375 per week from her employment in the business.
The wife has worked in the family business since the parties’ marriage. She was cross-examined as to her future employment prospects; her evidence was that she intended to seek work although she was uncertain as to her ability to secure work given her long history of employment in the family business.
It was submitted on behalf of the wife that her future employment prospects are limited having regard to her health issues and her lack of employment experience beyond that of work in the family business. I accept those submissions. I am satisfied that the wife’s future employment prospects are likely to be adversely affected by a range of factors including her age, her health and the fact that her experience is limited to that of working in a family business for the past 24 years.
The husband is aged 59 years. He will continue to operate the business following the conclusion of these proceedings. The husband is paid a management fee from the business. In addition, he receives a number of benefits from the business including the provision of food, the use of a motor vehicle and the payment of telephone expenses. I am satisfied that the husband will continue to enjoy an income and provision of those benefits from the business.
It is agreed between the parties that the husband will also retain his interest in the superannuation fund, valued at approximately $135,000. Given his age, the husband may be in a position to access those funds within a few years.
The wife has the primary care of the parties’ 16 year-old daughter G, who was in Year 10 at the time of the hearing. Whilst the husband meets payments of some expenses for G, such as her telephone account, clothing and other incidentals, the wife will continue to be principally responsible for her support at the conclusion of these proceedings.
The husband has been in a position to meet his legal expenses from his income. The wife has depleted capital in order to meet those expenses. Her Financial Statement discloses that as at 28 April 2014, approximately $900,000 remained of the $980,000 paid to her by way of part property settlement.
Having regard to the above matters, I consider that there should be a s 75(2) adjustment in favour of the wife to take into account the disparity in the parties’ income-earning capacity, the fact that the wife will have the primary care of their daughter and the fact that the husband will retain the superannuation fund.
I am satisfied that in all of the circumstances an adjustment of 7 per cent in favour of the wife is appropriate. Based on a pool valued at $4,875,434 the value of that adjustment is approximately $341,280.
SUPERANNUATION
Neither party sought an adjustment of their superannuation interests. Each party sought an order that the husband retain his interest in the superannuation fund. Both parties also included the superannuation interest in their balance sheet as an asset to be retained by the husband.
The Court is obliged to consider whether there should be an alteration of the superannuation interests even in circumstances where the parties do not seek such alteration.
I am satisfied that an order providing for the husband’s retention of the superannuation interest is just and equitable in circumstances where he is aged 59 and is likely to be able to access his interest earlier than the wife. Further, I am satisfied that such order is appropriate in circumstances where the wife seeks funds in order to re-house herself and the parties’ child and where the husband is already living rent-free in the inherited I Street property.
CONCLUSION
Accordingly, taking into account the matters within s 79(4) of the Act, I am satisfied that there should be a division of assets on the basis that the husband receive 61 per cent and the wife receive 39 per cent of the pool.
The parties agree that B Street is to be sold. Further they agree that there should be a percentage adjustment of the proceeds of their insurance claim with respect to that property. I will make orders to that effect.
It is also agreed between the parties that the wife should receive $100,000 from the funds currently held upon trust for the parties by K. The orders will reflect that agreement and an adjustment will be made from the sale proceeds of B Street to ensure a percentage division of the parties’ interests on the basis of a 61/39 split.
From the pool of assets excluding B Street, the wife will retain the following:-
(a)Partial property settlement $ 980,000
(b)Payment from K $ 100,000
TOTAL $1,080,000
The pool excluding B Street is valued at $2,445,156 and 39 per cent of that pool is $953,610. As the wife will receive $126,390 more than she is otherwise entitled from the assets excluding B Street, that sum must be deducted from her entitlement to the proceeds of sale of B Street.
The husband will retain the following from the pool of assets excluding B Street:-
(a)I Street $1,050,000
Less $74,400 $ 975,600
(b)Partial property settlement ` $ 80,000
(c)Monies held by Bancroft $ 20,000
(d)Balance of K monies $ 119,200
(e)Unsworth Pty Ltd $ 80,712
(f)Mr Unsworth Pty Ltd $ (45,111)
(g)Superannuation $ 135,033
TOTAL$1,365,434
The husband will receive an additional $126,390 from the wife’s share of the proceeds of sale of B Street.
At the mention hearing before me on 23 February 2015, neither party made submissions as to the reserve price for B Street. At the time of the hearing it was common ground that the single expert had valued B Street at $4 million. Subject to further submissions on behalf of the parties, I propose to fix the reserve at such amount as is agreed between the parties. In the event that the parties do not agree to that approach, I will provide further reasons for judgment in relation to the reserve price upon hearing submissions in relation to the same.
In the circumstances of the case, having regard to all of the matters set out above, I consider the orders I propose to make will be a just and equitable result as between the husband and the wife.
I certify that the preceding one hundred and fifty-seven (157) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Johns delivered on 3 March 2015.
Associate:
Date: 3 March 2015
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