Vasil & Vasil
[2023] FedCFamC1F 99
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Vasil & Vasil [2023] FedCFamC1F 99
File number(s): ADC 1397 of 2017 Judgment of: BERMAN J Date of judgment: 24 February 2023 Catchwords: FAMILY LAW – PROPERTY SETTLEMENT – Final orders – where the husband seeks to include a property registered in the wife’s parents names – where the wife disputes any equitable interest in the property – where the wife’s parents were not joined to the proceedings – where the wife made significantly greater financial and non-financial contributions – where the wife’s parents also made significant contributions – where the husband lost $750,000 in share trading – where the wife has the ongoing financial assistance and support of her parents – orders.
FAMILY LAW – SUPERANNUATION – Two pool approach – where the wife’s parents transferred to her superannuation fund $303,317 – where this amount represents almost half of the parties’ total superannuation entitlements – where the wife asserts that the husband diverted his superannuation guarantee paid by his employer in the sum of about $77,000 – orders.
Legislation: Family Law Act 1975 (Cth) ss 75(2)(o), 79, 79(4) Cases cited: Bevan & Bevan (2013) FLC 93-545
Jabour & Jabour (2019) FLC 93-898
JEL & DDF (2001) FLC 93-075
Mallet v Mallet (1984) 156 CLR 605
Norbis v Norbis (1986) 161 CLR 513
Stanford & Stanford (2012) FLC 93-495
Division: Division 1 First Instance Number of paragraphs: 153 Date of hearing: 28 – 30 November, 1 December and 15 December 2022 Place: Adelaide Counsel for the Applicant: Ms Watson Solicitor for the Applicant: Jordan & Fowler Family Lawyers Counsel for the Respondent: Mrs Read Solicitor for the Respondent: Matthew Mitchell Solicitors ORDERS
ADC 1397 of 2017 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS VASIL
Applicant
AND: MR VASIL
Respondent
order made by:
BERMAN J
DATE OF ORDER:
24 February 2023
THE COURT ORDERS:
1.That in full and final settlement of any claim that either party may have against the other for settlement of property or alteration of interest in property pursuant to Part VIII of the Family Law Act 1975 (Cth) (as amended):
(a)within sixty (60) days from the date of these Orders, the applicant shall pay to the respondent, the sum of THREE HUNDRED AND THIRTY THOUSAND, SEVEN HUNDRED AND FORTY ONE DOLLARS ($330,741) (“the settlement sum”);
(b)contemporaneously with the payment of the settlement sum referred to in paragraph 1(a) hereof:
(i)the respondent shall do all things necessary and sign all such documents necessary to effect the transfer to the applicant, all of his estate and interest in the property located at DD Street, Suburb B in the state of South Australia, being the whole of the land comprised and described in Certificate of Title Volume … Folio … (“the Suburb B property”);
(ii)the applicant do discharge in full, mortgage numbers … and … to the Commonwealth Bank of Australia, to the exoneration of the respondent; and
(iii)the applicant do withdraw caveat number …, registered over the title of GG Street, Suburb HH.
2.The applicant shall have as her sole property, free from any claim, right or entitlement of the respondent, the following assets:
(a)the property located at EE Street, Suburb A;
(b)the property located at DD Street, Suburb B;
(c)her interest in R Unit Trust, Ms Vasil Family Trust, J Trust and J Pty Ltd;
(d)her FF Company Shares;
(e)all chattels presently in her possession;
(f)her savings;
(g)her member interest in M Super Fund; and
(h)her member interest in N Super Fund.
3.The respondent shall have as his sole property, free from any claim, right, or entitlement of the applicant, the following assets:
(a)the property located at GG Street, Suburb HH;
(b)his interest in P Pty Ltd;
(c)his shares and other entitlements;
(d)all chattels presently in his possession;
(e)his savings; and
(f)his member interest in U Retirement Trust.
4.That the applicant shall indemnify the respondent in respect of any money that might be payable to the parties’ children.
5.That each party be solely responsible for their separate debts, obligations and liabilities.
6.That a Registrar of the Federal Circuit and Family Court of Australia (Division 1) be appointed pursuant to s 106A of the Family Law Act 1975 (Cth) to execute any document and/or instrument necessary to give effect to these orders in the event of any of the parties refusing or neglecting to execute such document within seven (7) days of the date on which they are required to do so pursuant to these orders, and being requested to do so by any of the other parties or by the other parties’ legal representative.
7.That each party bear their own costs of and incidental to these proceedings.
8.That all extant Applications are removed from the active pending list of cases.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Vasil & Vasil has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
BERMAN J
INTRODUCTION
By Further Amended Initiating Application sealed on 18 October 2022, Ms Vasil (“the applicant”) seeks orders as follows:-
1. That by way of settlement of property or alteration of interests in property:
(a)the [respondent] do forthwith transfer to the [applicant] all his estate and interest in the property situated at [DD Street, Suburb B];
(b) the [applicant] do retain as her sole property:
(i) [EE Street, Suburb A];
(ii)interest in [R Unit Trust, Ms Vasil Family Trust, J Pty Ltd, and J Trust];
(iii) [FF Company] Shares;
(iv) all chattels presently in her possession;
(v) her savings;
(vi) her interest in [M Super Fund];
(vii) her interest in [N Super Fund];
(c) the [respondent] do retain as his sole property:
(i) [GG Street, Suburb HH];
(ii) interest in [P Pty Ltd];
(iii) his shares and other entitlements;
(iv) all chattels presently in his possession;
(v) his savings;
(vi) his superannuation interests;
(d)contemporaneously with paragraph (a) above the [applicant] discharge the [Suburb B] mortgage to the exoneration of the [respondent];
(e)the [applicant] indemnify the [respondent] with respect to funds borrowed from the children’s bank accounts;
(f)there be such cash adjustment between the parties as the Court deems just and equitable.
2. Costs.
By Further Amended Response to Initiating Application sealed 29 November 2022, Mr Vasil (“the respondent”) effectively seeks orders similar to those sought by the applicant but in addition he also seeks the following:-
…
4.The [respondent] is to be solely liable for and indemnify the [applicant] in respect of the following liabilities:
a. [O Group] debt;
b. [Respondent]’s ATO tax debt.
5.Within 7 days of the date of these Orders the [applicant] do make payment to the [respondent] of $1,000.000.
6.That there (sic) an equalisation of superannuation entitlements of the parties by way of a payment to the [respondent]’s Superannuation fund [U Retirement Trust] from the Superannuation entitlements of the [applicant] in the sum of $150,000.
DOCUMENTS RELIED UPON
The applicant relies upon the following documents:-
(1)Further Amended Initiating Application filed 18 October 2022;
(2)Affidavit of the applicant filed 18 October 2022 (“the applicant’s trial affidavit”);
(3)Financial Statement of the applicant filed 18 October 2022;
(4)Affidavit of Ms MM filed 23 May 2022 (“Real Estate valuations”); and
(5)Affidavit of Ms MM filed 17 December 2021 (“Valuation Report of Mr H”).
The respondent relies upon the following documents:-
(1)Further Amended Response to Initiating Application filed 29 November 2022;
(2)Trial Affidavit of the respondent filed 18 November 2022 (“the respondent’s trial affidavit”); and
(3)Financial Statement of the respondent filed 29 November 2022.
Both parties provided a Case Outline document to assist the Court at the commencement of the proceedings and counsel’s closing submissions were supplemented by updated balance sheets setting out assets and liabilities of the parties.
BACKGROUND
The applicant was born in 1963 and is 59 years of age. The respondent was born in 1970 and is 52 years of age.
Both parties are able to engage in remunerative employment. The applicant commenced working in a family owned business, R Company from about 1990. She has continued her involvement with the business.
The respondent engages in the purchase and sale of products, operates a modest business and retains employment with JJ Company.
The parties met in about 1990 and commenced a relationship in 1992. Following their engagement in 1993, they were married in 1994.
There are three children of the relationship. X born 2006 (“X”) lives primarily with the applicant and will commence her final year of secondary school education in 2023.
The two older children, Mr Q and Mr Y are adults and are financially independent of the parties.
The parties separated in 2016. The respondent considers that the date of separation was 20 November 2016 whereas the applicant asserts that the date of separation was 1 April 2016, being the date that the respondent physically left the former matrimonial home.
There was some consideration of reconciliation between August and October 2016. Nothing turns on the date of separation.
In 1990, the applicant purchased a property at EE Street, Suburb A (“the EE Street property”) for $147,000 using $20,000 of her personal savings and $20,000 provided by her parents. The mortgage of $110,000 was discharged in 1994.
The respondent concedes that at the time of marriage he had no assets of significance.
There is some dispute between the parties as to the extent of gifts of cash, jewellery and wedding presents that they received. Some of the money the parties received from their wedding was used for the parties’ honeymoon. It remains a matter of contention between the parties as to the retention by each of them of jewellery and other wedding gifts.
The evidence in respect of this topic is scant and nothing turns on the issue.
The parties lived in the EE Street property and carried out substantial renovations in 1994. The renovations are likely to have been funded by the applicant obtaining money from her parents in the sum of approximately $140,000. The applicant considers that the money was provided by way of loan but acknowledges that most of the money provided is still outstanding. It is a reasonable finding that after twenty eight years, there will be no demand by the applicant’s parents for repayment, nor does the applicant feel obligated to do so.
The extent of the work undertaken by the respondent is not agreed. The applicant minimises the respondent’s input to providing some paint and at the direction of her father, undertaking some of the physical work. The respondent considers that he assisted significantly with the physical labour.
In 2002, the applicant’s father purchased a property located at Z Street, Suburb A (“the Z Street property”). The status of the property and in particular, whether it should be treated as an asset of the parties, has been the matter of ongoing contention. The applicant’s case is that her father purchased the Z Street property as a future home for him and his wife. However, the property required extensive renovation and the applicant’s parents did not ever take up residence. The parties then took up occupation of the Z Street property in 2007.
The contention of the respondent is that the property was intended to be a gift to the parties and based upon the representation, the parties expended considerable energy, effort and money on the improvement of the property with the intention that it be the family home.
On that basis, the respondent considered that the parties had an equitable interest in the property. That proposition was denied by the applicant.
In late 2002, the applicant purchased a property located at DD Street, Suburb B (“the Suburb B property”) in her sole name. The applicant used personal savings of $41,500, some money held in her children’s accounts and a mortgage loan of $110,000. Prior to settlement, there was agreement that both parties would be joint registered owners of the property.
It is uncontroversial that the Suburb B property was used as an investment property and rental income was derived.
In late 2004, J Pty Ltd was incorporated and became the trustee of the J Trust. The applicant and her siblings used J Pty Ltd to further the interests of R Company.
In early 2007, the respondent incorporated P Pty Ltd (“P Pty Ltd”) which was utilised by him to undertake an importing business. In mid-2007, the respondent then caused P Pty Ltd to purchase warehouse premises located at GG Street, Suburb HH (“the Suburb HH property”).
The Suburb HH property was purchased for $400,000 with the entirety of the purchase price funded by a mortgage loan. The loan was approved only on the basis that the Suburb B property was taken as collateral security.
Following the birth of X, agreement was reached with the applicant’s father that the family would take up residence in the Z Street property. Whilst not the subject of agreement, the applicant’s position is that her father agreed to renovate the property on the condition that the parties would pay rent of $400 per week and any money spent by them in further renovations would be offset against the rent owed.
The respondent does not accept the applicant’s version of events but does not deny that considerable renovations were undertaken by the applicant’s father in anticipation of the parties’ occupation of the Z Street property.
There is no agreement as to the basis upon which the parties later undertook further renovations to the property and the landscaping of the gardens. The applicant would seek to minimise the efforts of the respondent.
To a significant degree, the parties’ inability to agree on the extent of their joint and several contributions to the Z Street property are dwarfed by the generosity of the applicant’s father.
The family remained living in the Z Street property until separation in April 2016. Following the respondent leaving the property, the applicant and the children remained living there until they moved to the DD Street property in early 2018.
There is some contention as to the extent that each party kept and maintained separate financial arrangements.
In general, it appears that the parties viewed their separate interests in real estate as their own property notwithstanding that there was, by necessity, an intermingling of their separate financial resources.
It was broadly intended by the parties that the respondent would be responsible for maintaining the mortgage commitment on the Suburb HH property of $4,000 per month from his wages and other financial resources.
In mid-2010, the M Super Fund was established. The trustee of the fund is OO Pty Ltd (“OO Pty Ltd”) and the applicant is one of four members of the fund. As at 30 June 2021, her member entitlement was $47,589.
At times during the ownership of the Suburb HH property, the respondent fell into mortgage arrears. In 2011 the respondent needed $59,514 to meet his commitments and agreement was reached with the applicant that money would be redrawn from the surplus funds available from the Suburb B property mortgage.
A more significant financial issue arose in early 2015 when the applicant became aware that the respondent was again in arrears of mortgage payments on the Suburb HH property. Upon receiving a mortgage default notice indicating an intention by the bank to cause the Suburb HH and Suburb B properties to be sold in order to discharge the outstanding liability, the respondent used some personal savings but principally borrowed the sum of $230,000 from S Pty Ltd as trustees for the R Unit Trust (“R Company”) to discharge the outstanding liability.
The husband was made redundant in 2015 from his employment with JJ Company and received a redundancy payment of $208,000. Of that sum, $185,000 was repaid to R Company.
The respondent returned to work with PP Pty Ltd (“PP Pty Ltd”), which had purchased JJ Company, and he remained employed with PP Pty Ltd until mid-2022.
In late 2016, the respondent established QQ Super Fund (“KK Super Fund”). Contributions to the respondent’s super fund came from JJ Company and then PP Pty Ltd pursuant to the superannuation guarantee payments. The applicant has calculated that at the very least, there should be a sum of approximately $77,000 in one or other of the respondent’s superannuation funds, whereas in the RR Super Fund and the KK Super Fund, there are nil balances.
Following separation, the respondent took up residence in the Suburb HH property although it is conceded that the premises are not suited for residential occupancy. The applicant and children moved in to DD Street in 2018 but I find that the applicant had control over the Z Street property and her continued residence in the DD Street property was in reality, a fiction. It is likely that she and the children spent most of their time living in the Z Street property.
In 2016 the parties enrolled X at TT School and she commenced tuition in 2018. There is no agreement as to the basis upon which X’s private school fees would be paid. The contention of the applicant is that the parties agreed they would each pay one half of the school fees and associated costs and charges, whereas the respondent says that following separation he could no longer afford to contribute to the high level of school fees and indicated that whilst he would not oppose X remaining at her new school, he would not make any contribution.
It is not controversial that between 2018 and 2022, the applicant has paid a total of $142,184 in private school fees and will maintain X at her current school until the conclusion of her secondary school education in 2023.
The applicant does not pursue any claim by way of a departure order for non-periodic child support in respect of X’s tuition fees and associated charges.
The respondent is currently assessed to pay child support at the annual rate of $13,260. Arrears stand in the sum of $2,535.
IS IT JUST AND EQUITABLE TO ALTER THE PROPERTY INTEREST OF THE PARTIES?
In Bevan & Bevan (2013) FLC 93-545, the Full Court considered at [73] that the decision in Stanford & Stanford (2012) FLC 93-495 (“Stanford”) could be reduced to three “fundamental propositions” 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; and
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.
(Emphasis as per original)
The parties each seek orders for settlement of property on the basis that they consider their separate interests in property cannot be properly reflected by the application of common law and equitable principles. It is a relevant consideration that the parties are not agreed as to how property should be apportioned between them. The applicant seeks to divide the net non-superannuation property of the parties as to 70/30 in her favour, whereas the respondent seeks an equal division of property together with an equalisation of the parties’ superannuation interests.
In circumstances where the parties commenced cohabitation in or about 1994 and separated in 2016, I consider that it is just and equitable for an order to be made pursuant to s 79 of the Family Law Act 1975 (Cth) (“the Act”).
TABLE OF ASSETS
I find the agreed and disputed assets of the parties to be as follows:-
Assets
DESCRIPTION APPLICANT’S VALUE RESPONDENT’S VALUE EE Street, Suburb A $1,100,000 $1,100,000 DD Street, Suburb B $650,000 $650,000 GG Street, Suburb HH $545,000 $545,000 Applicant’s interest in R Company & related entities $135,320 NK Respondent’s interest in P Pty Ltd Nil Nil Partial Loan repayment from Ms UU $5,000 $5,000 Respondent’s 2016 tax refund $72,090 KN Respondent’s motor vehicles $13,300 $13,300 Applicant's FF Company Shares $563 $563 Respondent’s JJ Company Shares NK $2,347 Applicant’s jewellery Nil $65,000 Respondent’s jewellery retained by applicant Nil $15,000 TOTAL $2,521,273 $2,396,210 Liabilities
DESCRIPTION APPLICANT’S VALUE RESPONDENT’S VALUE Suburb B mortgage ($3,809) ($3,809) Applicant’s tax debt at separation ($68,000) Nil Respondent’s O Group debt ($59,847) ($59,847) Respondent’s Westpac Credit card debt Nil ($4,000) TOTAL ($131,656) ($67,656) Superannuation
DESCRIPTION APPLICANT’S VALUE RESPONDENT’S VALUE Applicant’s interest in M Super Fund (as at 30 June 2021) $47,589 $47,589 Applicant’s interest in N Super Fund (as at 30 June 2021) $476,973 $476,973 Respondent’s interest in U Retirement Trust $226,000 $226,000 TOTAL $750,562 750,562 Applicant’s interest in R Company and related entities
By joint instruction dated 4 September 2020, Mr H (“Mr H”) was jointly instructed to undertake a Single Expert valuation of the interests of the applicant in R Company and associated entities, and for the respondent in P Pty Ltd.
Mr H finalised his valuation report on 16 December 2021.
Mr H was instructed to value the interests of the applicant held personally or by any other entity in respect of the following entities:
·R Unit Trust
·S Pty Ltd
·Ms Vasil Family Trust
·J Trust
·J Pty Ltd
·K Trust
·N Pty Ltd
·L Pty Ltd
·K Pty Ltd
·M Super Fund
·OO Pty Ltd
·N Super Fund
Mr H summarises the ownership structure at paragraph 13.6 of his valuation report as follows:-
13.6Ownership Structure
13.7From a big picture perspective, the position seems to be as follows – The business known as [R Company] was established by the [applicant]’s parents. In approximately [mid-]2012, the business was licenced by the [applicant] and her siblings via related Family Trusts to conduct the business from premises owned by entities associated with the [applicant]’s parents. Agreements relating to the use of stock and plant & equipment owned by the parents were also negotiated.
13.8It is apparent that adherence to, and accounting for, the agreements has not necessarily been applied as set out in the agreements.
13.9In my opinion, the agreements may not have been commercial in context of the underlying profitability of the operation.
13.10The [applicant] and her siblings have established additional entities which appear to have been used to minimise some employment taxes and to acquire materials outside contractual arrangements with a supplier. In an endeavour to (attempt to) ensure these arrangements were effective (In my opinion the employment arrangement may not be effective), I assume the relevant entities were structured to be controlled differently to the trading entity.
13.11While it is not for me to determine the ultimate beneficial ownership of the entities in question, the intent may well be different to the superficial legal position.
(Emphasis as per original)
Of the entities that Mr H was instructed to consider, he notes at paragraph 1.3 of his valuation report that the following entities were not the subject of valuation:
·S Pty Ltd – Corporate Trustee with no net assets in excess of share capital.
·L Pty Ltd – is an entity that does not hold any assets and appears not to have traded.
·K Pty Ltd – receives a fee from R Unit Trust which passes through to the K Trust. There is no net assets recorded in the financial statement of the company other than paid up capital of $2.
·OO Pty Ltd – is the trustee of M Super Fund and does not have any separate assets.
·N Pty Ltd and K Trust – are entities in which the parties do not appear to have any interest although, the respondent identified that the trust received a trust distribution from J Trust (an entity controlled by the applicant) in 2015.
·N Family Trust – is likely to be erroneously described and in reality, the entity is in fact the VV Family Trust which is an entity associated with the applicant’s brother.
·P Pty Ltd – being the trading entity of the respondent, was not able to be valued because no financial records were provided that would enable a valuation to be undertaken.
In any event, other than the value of the Suburb HH property being brought to account, the applicant does not seek to bring to account a value to be attributed to the respondent’s interest in P Pty Ltd.
Mr H identified that there were significant accounting irregularities in respect of the financial interrelationship between R Company and other associated or connected entities. However, the applicant’s contention is that on the worst case scenario as presented by Mr H, the total of her interests in the valued entities is $135,320. The respondent does not seek to challenge that approach.
Z Street property
The respondent’s initial position is that the applicant’s father purchased the Z Street property for him and his wife. However, the applicant says that when the applicant’s mother indicated that she did not wish to move into the Z Street property, her father then allowed the parties to take up occupation.
As discussed, there is no doubt that substantial renovations were undertaken to the property by the applicant’s father prior to the parties taking up occupation. I also accept that over the years, the parties expended considerable effort financially and physically to significantly improve the property with the last substantial improvements being undertaken in or about 2016.
The position of the respondent was that the parties held an equitable interest in the property.
It is an aspect of this long litigation, that the respondent had maintained his position that the Z Street property should be considered as property of the parties. Given the value of the property as against other property held by the parties, to have Z Street included in the pool of property, the applicant’s parents would have needed to be joined to the proceedings to enable the respondent to assert his claim of equitable interest.
There is scant evidence of the applicant’s father having gifted the Z Street property to the parties or at the very least, the applicant. The applicant’s parents were not called to give evidence and in cross examination the applicant was not seriously challenged as to the circumstances in which she continues to occupy the property.
There is little doubt that the parties spent considerable money on improving the Z Street property although, even that aspect of the financial circumstances of the parties is uncertain given the applicant’s contention that it was her money and the resources of her family that enabled the parties to undertake improvements to the property.
The contention of the applicant has merit if considered against her assertion that because of substantial and ill-advised share trading losses by the respondent, he was not able to contribute to the family finances.
It is an agreed position that the Z Street property is not included in the assets of the parties however, I consider that the applicant’s ability to reside in the property and enjoy its considerable amenity is a financial resource to her. As previously considered, the fiction created by the applicant that her principle place of residence was the EE Street property was transparent nonsense.
Loan to Ms UU
The applicant sought to bring to account $7,000 that the respondent admitted he had provided to a family member. The respondent admitted in evidence that he had received $5,000 and that whilst $2,000 remains outstanding, it is unlikely there will be further repayment to him.
Given the respondent’s concession, I have brought back to account the sum of $5,000.
Respondent’s 2016 tax refund
The respondent acknowledges that he received a tax refund of $72,090 however, the money has been spent. Again, given the conduct of the respondent in him incurring substantial share trading losses on an ongoing basis, there is some temptation to add back the 2016 tax refund. However, I do not consider that the tax refund should be added back in circumstances where it has been spent.
It may well represent a factor to be brought back to account as a contribution or perhaps a factor pursuant to s 75(2)(o) of the Act but there was no attempt in cross examination to better understand how the money was spent and given that I do not propose to undertake a financial audit of the parties financial affairs, I propose to exclude the tax refund received by the respondent from the asset pool.
The applicant’s jewellery
The applicant acknowledges that she had jewellery of reasonable value however, given the financial circumstances of the family arising from the respondent not being able to make meaningful financial contributions, the applicant contends that she sold the jewellery to her brother for cash.
The respondent does not accept her story and refers to photographs where the applicant appears to be wearing some of the disputed jewellery.
The applicant’s evidence on the topic did not impress. In the absence of evidence establishing the sale of jewellery, it is likely that the applicant retains her jewellery.
The difficulty arises from the lack of evidence as to value.
I am not able to bring to account a value for the applicant’s jewellery.
The respondent’s jewellery
The respondent asserts that the wife retained his jewellery to the value of $15,000. The applicant denies that she had the respondent’s jewellery, but it was sold. Despite my finding that her evidence was unreliable on the topic, again there is no evidence that would enable me to bring a valuation figure to account.
WW Company debt / respondent’s history of share trading
The applicant accepts that as at separation, the respondent had a significant WW Company debt. The current balance, of which is now agreed, at $59,847. The respondent seeks that the current balance be brought to account as a liability however, that approach is resisted by the applicant given her contention that the current debt arises as a consequence of the undisclosed share trading losses of the respondent.
Respondent’s share trading losses
The applicant contends that from about 2010 to the end of the parties relationship, the respondent was preoccupied with share trading that resulted in cumulative losses in excess of $750,000.
The applicant relies upon the income tax returns of the respondent to substantiate her stated position that the respondent was effectively unable to control his share trading activities even when it was apparent that his share trading losses exceeded his income.
From 2010 until 2015, it is likely the respondent suffered trading losses totalling $737,408. In the 2014 financial year alone, the respondent declared a taxable loss of $162,978.
It is apparent that the respondent was aware of the adverse consequences of his conduct as evidenced by correspondence forwarded to the ATO in 2015 claiming financial hardship and enclosing a statement setting out trading losses of $192,357.
A consideration of the respondent’s taxation returns disclose that whilst employed with JJ Company, the respondent earned an income of approximately $160,000 per annum.
The further contention of the applicant is that the respondent diverted superannuation guarantee payments from JJ Company to another account which was also utilised for share trading. The applicant also believes that further money received by the respondent by way of redundancy when JJ Company was taken over by PP Pty Ltd, save for the sum of $188,000 utilised by the respondent to repay monies borrowed by the applicant from R Company, also was lost on ill-advised share trading activity.
The respondent did not deny the broad thrust of the applicant’s contention although he did seek to offset some of the share trading losses by his ability to obtain a tax deduction against his income. The respondent considers that overall, the sum of $250,000 properly represents the cumulative tax deductions received by him.
I find that the applicant’s assessment of the cumulative consequences of the respondent’s share trading activities is reliable and likely to provide some support for the broad position adopted namely, that despite the respondent’s ability to generate significant income during the last ten years of the relationship, the financial support for the family largely fell to her.
It is also a relevant consideration that during the period of the respondent’s share trading, whilst the applicant expressed her concern that the respondent did not seem able to provide financially for the family, she only became aware of the full extent of the respondent’s financial mismanagement following separation when the respondent was obligated to make full and frank disclosure once litigation had commenced. As such, the WW Company debt should be considered as a remnant liability the respondent’s share trading activities and should be his responsibility.
Superannuation interests of the parties
The parties are agreed as to the value of their separate superannuation interests.
The applicant seeks that each party retain their superannuation entitlements without adjustment. The respondent seeks that there be an adjustment between the parties to equalise their interests.
The applicant has an agreed interest in N Super Fund of $476,973.
The fund was initially set up by the applicant’s parents however, in 2012/2013 the applicant became a member of the fund with a transfer to the applicant, from her parents within the fund, of $303,317. A further $83,774 was represented as a personal contribution of the applicant even though the parties concede that the contribution did not come from the applicant’s financial resources.
As at 30 June 2013, the applicant’s member balance was $387,092 and the evidence supports the applicant’s contention that other than an annual allocation of investment income, she has made no direct contributions nor has there been any withdrawals. Accordingly, other than the interrelationship between the applicant and her family but in particular her parents, the applicant’s current member balance can be readily traced back to the funds transferred from the applicant’s parent’s member balance to her member balance.
Whilst the applicant is not pursuing an addback in relation to her contention that but for the respondent diverting the superannuation guarantee levy paid by JJ Company to the respondent in the total sum of about $77,000, it is likely that the respondent would have had a credit balance in his self-managed superannuation fund over and above his interest in his U Retirement Trust fund.
EVIDENCE OF THE PARTIES
It has been a long expressed concern of the respondent, that the applicant was recalcitrant in her preparedness to make full and frank discovery.
The proceedings have been ongoing since 2017. The respondent properly highlights the various Court Orders made for the parties to provide discovery and disclosure from as early as 18 May 2017.
I accept that there was resistance by the applicant to provide all of the documents required by the respondent. To some extent, the applicant’s opposition was based upon her view that the categories of documents required by the respondent were onerous and unnecessary.
A particular focus of the respondent was to seek documents that establish the extent of the financial relationship between the applicant and members of her family, in particular, R Company and the K Trust.
The respondent refers to email communication from the applicant advising him that instructions had been given to her solicitors not to provide any further documents as may be requested by him.
The level of mistrust by the respondent is highlighted by his erroneous contention that the applicant may have adopted an alias of “Ms NN” to hide assets. The respondent admitted that there was no substance to the assertion.
The progress of the proceedings and the ability of the Court to deal with the matter more efficiently, was impaired by the delay in the applicant providing the necessary documents to Mr H.
The respondent initially relies upon his Financial Statement filed 10 July 2018. The respondent filed an updated Financial Statement on 29 November 2022. The documents are wholly inadequate and provides no assistance as to his income, expenditure, assets and liabilities. It was only under cross examination that the respondent gave some information about his current business activities. The Financial Statements filed 16 May 2017, 10 July 2018 and 29 November 2022 contain the same information and detail.
A consideration of the respondent’s Trial Affidavit does not reveal any acknowledgment of the substantial losses incurred from his share trading. The amount squandered by the respondent was significant and the consequence of the resultant impecuniosity of the respondent has relevance in considering what weight should be given to the applicant’s assertion that the financial obligation of maintaining the family fell predominantly to her.
Neither party impressed as a reliable witness.
I do not accept the applicant’s explanation as to the sale of her jewellery and her denial that she has retained jewellery belonging to the respondent. Similarly, I have found that the applicant at all material times has lived primarily in the Z Street property with the two children rather than the fiction of her residence in EE Street.
As considered, the respondent cannot claim any moral high ground given his manifest non‑disclosure of the extent of his share trading losses, the manner in which he utilised superannuation contributions, together with the uncertainty as to his current employment with PP Pty Ltd and his alternate business arrangements.
I am however satisfied, that Mr H was able to properly assess the applicant’s interest in the R Group and as such, an adjusted pool of assets can be determined. Given that the parties are in broad agreement as to the chronology of events, my finding that the parties presented as unreliable witnesses is of limited consequence.
ADJUSTED PROPERTY POOL
Assets
DESCRIPTION APPLICANT RESPONDENT EE Street $1,100,000 DD Street (joint) $650,000 GG Street Suburb HH $545,000 Applicant’s interest in R Company & related entities $135,320 Partial Loan repayment from Ms UU $5,000 Respondent’s motor vehicles $13,300 Applicant's FF Company Shares $563 Respondent’s JJ Company Shares $2,347 TOTAL $1,885,883 $565,647
Liabilities
DESCRIPTION APPLICANT RESPONDENT Suburb B mortgage ($3,809) Applicant’s tax debt at separation ($57,355) TOTAL ($61,164) Superannuation
DESCRIPTION APPLICANT RESPONDENT M Super Fund $47,589 Applicant’s interest in N Super Fund $476,973 Respondent’s interest in U Retirement Trust $226,000 TOTAL $524,562 $226,000 METHODOLOGY
The net non-superannuation pool of property is in the sum of $2,390,366. The total of the parties’ superannuation interest is in the sum of $750,562.
The superannuation interest of the parties are significant however, the significant issue of the acquisition and subsequent accumulation of the applicant’s interest in N Super Fund is a factor that requires separate consideration.
Accordingly, I propose to adopt a two pool approach.
CONTRIBUTIONS OF PARTIES
The Court is required to make orders that are just and equitable when adjusting the interests of the parties in the division of property.
I am required to consider the direct and indirect financial contributions made by the parties to the acquisition, conservation or improvement of the property (s 79(4)(a) of the Act), the contributions other than a financial contribution made directly or indirectly by the parties to the acquisition, conservation or improvement of the property (s 79(4)(b) of the Act) and the contribution made by the parties to the welfare of the family in their capacity as parent and homemaker (s 79(4)(c) of the Act).
The parties commenced cohabitation at about the time of their marriage in 1994 and separated in 2016. There are three children of the relationship, only one of whom is under the age of 18 years.
The applicant continues her involvement in the family business. It is likely that she will retain her employment and that both she and her siblings will assume a greater level of involvement as the applicant’s parents cease their involvement.
The circumstances in respect of the respondent are a little more uncertain but he retains employment with PP Pty Ltd until mid-2023 and whilst there is an assertion by him that he has some health considerations which may adversely impact his ability to maintain and/or secure employment, it is likely that the respondent will maintain employment either in the industry in which he currently works or by the development of other remunerative business practices.
I am able to find that whilst there is some contention between the parties as to the care arrangements for the children during the period of cohabitation, it is likely that the applicant took on a greater proportion of the care arrangements for the children.
Other than the significant financial mismanagement of the respondent arising from his share trading activities, the parties generally used their best endeavours to provide for the family and to promote the care, welfare and development of the children.
In considering the evaluation of contributions of the parties, I am careful not to assume a starting point that presupposes the equality of contributions.
In Mallet v Mallet (1984) 156 CLR 605, Wilson J said as follows:-
15.… . However, equality will be the measure, other things being equal, only if the quality of the respective contributions of husband and wife, each judged by reference to their own sphere, are equal. The quality of the contribution made by a wife as homemaker or parent may vary enormously, from the inadequate to the adequate to the exceptionally good. She may be an admirable housewife in every way or she may fulfil little more than the minimum requirements. Similarly, the contribution of the breadwinner may vary enormously and deserves to be evaluated in comparison with that of the other party. It follows that it cannot be said of every case where the parties reside together that equal value must be attributed to the contribution of each. That will be appropriate only to the extent that the respective contributions of the parties are each made to an equivalent degree. …
In Norbis v Norbis (1986) 161 CLR 513, Mason & Deane JJ said as follows:-
16.Although it is natural to assess financial contributions under s.79(4)(a) by reference to individual assets, it is also natural to assess the contribution of a spouse as homemaker and parent either by reference to the whole of the parties’ property or to some part of that property. For ease of comparison and calculation it will be convenient in assessing the overall contributions of the parties at some stage to place the two types of contribution on the same basis, i.e. on a global or, alternatively, on an “asset-by-asset” basis. …
I am obliged to consider the contributions of the parties not at the date of separation but rather at the date of trial. Circumstances may arise where pre-separation contributions will be treated differently to those made either prior to separation or after separation. It is not an arithmetical exercise.
The parties were focused on securing a financial future for the family.
In the decision of Jabour & Jabour (2019) FLC 93-898, the Full Court did not favour an approach which attempted to quarantine property contributions but rather considered that the contributions of each of the parties, especially in circumstances where there was a long period of cohabitation, should be a single exercise and not the subject of separate and individual assessment of each contribution.
In JEL & DDF (2001) FLC 93-075 at 88,334, the Full Court summarised the approach which should be taken when considering and evaluating the contribution made by the parties:-
152.It seems to us that the following general principles can be said to arise from the cases referred to in these reasons, namely:
(a) There is no presumption of equality of contribution or “partnership”.
(b)There is a requirement to undertake an evaluation of the respective contributions of the husband and the wife.
(c)Although in many cases the direct financial contribution of one party will equal the indirect contribution of the other as homemaker and parent, that is not necessarily so in every case.
(d)In qualitatively evaluating the roles performed by marriage partners, there may arise special factors attaching to the performance of the particular role of one of them.
(e)The Court will recognise any such special factors as taking the contribution outside the “normal range” in the sense that the phrase was understood by the Full Court in Maclay (supra).
(f)The determination of an issue of whether or not a “special” or “extra” contribution is made by a party to a marriage is not necessarily dependent upon the size of the asset pool or the “financial product”. When considering such an issue, care must be taken to recognise and distinguish a “windfall” gain.
(g)Whilst decisions in previous cases where special factors were found to exist may provide some guidance to judges at first instance, they are not prescriptive, except to the extent that they purport to lay down general principles.
(h)It is ultimately the exercise of the trial Judge’s own discretion on the particular facts of the case that will regulate the outcome.
(i)In the exercise of that discretion, the trial Judge must be satisfied that the actual orders are just and equitable, and not just the underlying percentage division.
The applicant came into the relationship with the EE Street property which is now valued at $1,100,000. The applicant makes the point that the property now represents almost one half of the total asset pool.
The parties were also able to reside rent free in the Z Street property between 2007 and 2016 however, to some significant degree those considerations are offset by my finding that the parties expended their own money to effect renovations and improvements to the property.
A significant issue is the extent to which weight can be given to the post separation financial contribution of the applicant in the payment of private school fees in the sum of $142,184.
It is acknowledged that the respondent’s child support was modest.
There is no agreement between the parties as to the circumstances by which X attends her current private school.
Whilst the evidence is scant, on balance I find that the parties did have an agreement that X would attend her current school and as such, the burden of the private school fees has fallen unfairly to the applicant.
I bring to account the continued generosity of the applicant’s parents but also have regard to the serious financial impact on the parties arising from the respondent’s undisclosed share trading.
I do not consider that the respondent’s conduct should be considered as a negative contribution even though it was wanton and reckless but rather, as a result of his activity, the financial burden to support the family fell more heavily on the applicant.
It could not be said that the share trading losses incurred by the respondent could be categorised as the normal ebb and flow of life. The share losses were significant and the extent of which was not disclosed to the applicant.
I consider the contributions of each of the parties holistically and having regard to the net non‑superannuation asset pool in the sum of $2,390,366, I assess the contributions of the parties as 70/30 in favour of the applicant.
SECTION 75(2) FACTORS
The respondent currently has employment until mid-2023 and thereafter, there is some uncertainty as to his future employment. The evidence does not enable me to make a finding other than that there is some risk and uncertainty to his future employment prospects.
The applicant receives income from her self-employment and continued involvement with the R Company group of entities and she also receives rental income from the EE Street property and now the DD Street property.
X will complete her secondary school education in 2023. The applicant estimates that the future tuition fees and related costs will be in the sum of $33,000. It is reasonable to assume that the respondent will not contribute towards those school fees.
A significant factor is the ability of the applicant to reside permanently in the Z Street property.
The respondent contends that the applicant’s parents are elderly and upon their death, the applicant together with her siblings, will receive a significant inheritance.
No evidence has been presented that would give an indication as to the wealth of the applicant’s parents nor was there any attempt to obtain a copy of their will or present any evidence that would give an indication of their intention.
I am able to bring to account that the applicant’s parents have been generous in their support and it is conceded by her that they have paid the sum of $275,000 in respect of the applicant’s legal fees, noting the applicant’s concession that they are unlikely to require her to repay monies provided by them.
I note that the applicant asserts she has borrowed funds from the children’s bank accounts which amount to about $94,000. The applicant does not now seek to bring this to account other than by way of an assertion that at some point she may feel obliged to repay the children.
The issue did not assume significance in the proceedings and whilst the applicant’s assertion is noted, given the paucity of evidence, I do not bring that aspect of the applicant’s case to account.
I am satisfied that there should be an adjustment in favour of the respondent of 7.5 per cent which brings to account the superior financial circumstances of the applicant going forward even though she will have responsibility for the balance of X’s school fees.
SUPERANNUATION
The applicant’s total superannuation interest is $524,562. The respondent’s total interest is $226,000. The total of their separate superannuation entitlements is in the sum of $750,562. Of that sum, almost the entirety of the applicant’s interest in N Super Fund of $476,973 derives from the contribution made by the applicant’s parents.
It could not be considered that their contribution to the applicant’s member entitlement was anything other than a gift to her.
I accept the applicant’s evidence that she has had little further involvement with the fund and as such the current balance in the N Super Fund can be traced directly to the initial contributions made.
It cannot be said that the contributions of the parties are equal.
I consider that there should be a 70/30 adjustment in favour of the applicant.
The superannuation entitlements of each of the parties are by way of accumulation funds and given that they are of similar age, there is still a significant period of time before either of the parties satisfies a condition of release.
I consider that each of the parties should retain their separate superannuation interests which broadly represents a 70/30 division in favour of the applicant.
CONCLUSION
The total net non-superannuation asset pool is $2,390,366.
The applicant retains the following property:-
EE Street, Suburb A $1,100,000 DD Street, Suburb B $650,000 Applicant’s interest in R Company $135,320 Applicant's FF Company Shares $563 Total Assets $1,885,883 Less liabilities Suburb B mortgage ($3,809) Applicant’s tax debt ($57,355) Total Liabilities ($61,164) Net balance retained by applicant $1,824,719
62.5 per cent of the net non-superannuation asset pool, the applicant is to retain $1,493,978.
On the basis that she retains net property to the value of $1,824,719, less her entitlement of $1,493,978, the applicant is to pay to the respondent the sum of $330,741 by way of a settlement sum. It is reasonable that the applicant has 60 days to pay the settlement sum to the respondent.
I make orders as appear at the commencement of these reasons.
I certify that the preceding one hundred and fifty-three (153) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Berman. Associate:
Dated: 24 February 2023
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