Woodham & Woodham (No 2)
[2021] FedCFamC1F 350
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Woodham & Woodham (No 2) [2021] FedCFamC1F 350
File number(s): MLC 13213 of 2019 Judgment of: BENNETT J Date of judgment: 2 December 2021 Catchwords: FAMILY LAW– FINANCIAL – where parties seek final alteration of property interests in respect of small amount of property
FAMILY LAW PRACTICE & PROCEDURE – proportionality – where parties had agreed to fast track principles for hearing including short form reasons for decision
Division: Division 1 First Instance Number of paragraphs: 43 Date of last submission/s: 2 December 2021 Date of hearing: 2 December 2021 Place: Melbourne (via MS Teams) Counsel for the Applicant: Mr Lethlean Solicitor for the Applicant: AFL Kordos Lawyers Solicitor for the Respondent: Sebastian Rubera & Assoc ORDERS
MLC 13213 of 2019 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS WOODHAM
Applicant
AND: MR WOODHAM
Respondent
ORDER MADE BY:
BENNETT J
DATE OF ORDER:
2 DECEMBER 2021
THE COURT ORDERS THAT:
1.The parties do all acts and things to cause the monies held by Sebastian Rubera & Associates, in the sum of $97,563, to be disbursed as follows:-
(a)$28,800 to B School in payment of outstanding school fees for X (T9) and Y (S7);
(b)$64,523.15 to the wife; and
(c)$4,239.85 to the husband.
2.Each party remain liable for their respective tax liabilities which have accrued subsequent to the date of making this Order.
3.The husband retain all of his right, title and interest in C Pty Ltd and the C Trust (“the Trust”) to the exclusion of the Applicant.
4.The husband indemnify the wife in relation to:
(a)any liabilities, both company liabilities and any tax liabilities arising subsequent to the making of this Order relating to C Pty Ltd (ACN: …);
(b)any liability to his parents in respect of the alleged loan of $25,000.
5.Unless otherwise specified in this Order and save for the purposes of enforcing any monies due under this or any subsequent order;
(a)each party be solely entitled to the exclusion of the other to all other property (including choses-in-action) in possession of such party as at the date of these orders.
(b)insurance policies remain the sole property of the owner named therein;
(c)each party be solely liable for and indemnify the other against any liability encumbering any item of property to which the party is entitled pursuant to these orders; and
(d)any joint tenancy of the parties in any real or personal estate is hereby expressly severed.
6.There be liberty to each of the parties to apply to seek further orders regarding implementation of these orders.
7.My ex-tempore reasons for decision this day, when settled, be placed on the Court file and a copy provided to the parties.
8.That the Subpoenaed Documents Clerk of this Registry return any documents produced on subpoena to the owner within 28 days.
9.Otherwise all extant applications be dismissed and the matter be removed from the list of cases awaiting determination in the docket of the Honourable Justice Bennett.
10.That pursuant to Section 81 of the Family Law Act 1975 the parties intend that these Orders shall as far as practicable finally determine the financial relationship between them and avoid further proceedings between them.
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 Woodham & Woodham has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
Ex temporeBENNETT J:
INTRODUCTION
This matter comes before me for final hearing the procedures for which have been curtailed by the parties as described in my earlier reasons for decision published as [2021] FedCFamC1F 348. The hearing and delivery of the short form judgment in writing was accommodated within one day. These are my short form reasons.
The parties agree that it is just and equitable that there be an alteration of property interests between them. Given the breakdown of their relationship, the small amount of liquid capital to which they are jointly entitled at law and the different extent to which each has received or had the benefit of funds since separation, I am comfortably satisfied that it is just and equitable that there be a final alteration of property interest between the parties.
The value of the property which is agreed as divisible between the parties is $247,933, calculated as follows:
(1)Proceeds of sale of former family home $97,563
(2)Part property settlement received by wife $75,000
(3)Part property settlement received by husband $75,000
(4)Part property settlement received by husband $5,000
(5)Defamation settlement proceeds of $70,000
less $45,830 paid to O Lawyers for costs
with balance retained by husband $24,170
Total property (gross) $276,733
(6)less B School
arrears of school fees for 2021 ($28,800)
Total net property $247,933
There was no controversy about the payments which are to be added back. However, having regard to the monies already accessed by the parties or one of them, the liquid asset actually available for division between the parties is the $68,793 which is in trust.
RELEVANT HISTORY
The parties commenced cohabitation in 2003 by which time the husband had been a professional sportsman for two years. He retired in 2013. The parties together participated in media productions and bought and sold a number of properties in quick succession. They were remunerated and received capital growth on their properties. However, a combination of high holding costs, mortgage payments, private school fees and generally living beyond their means has eroded their capital so that very little remains for division between them.
IMPRESSIONS OF THE PARTIES
Neither party was cross examined before me but each were visible throughout the hearing. Each answered some questions directly and I have seen the parties and interacted with them at earlier hearings or mentions.
In the parenting proceedings the family was accurately described as being enmeshed in high parental conflict of excruciating intensity. In these financial proceedings, counsel agreed that their respective clients were each beset by interpersonal resistance. I am not entirely sure what is meant by that term. However, insofar as it may encompass habitual behaviour whereby one party resists and defies or opposes the actions of the other without rational regard to likely consequences, that description would accord with my observations. Counsel were comfortable with me recording that the parties had exhibited questionable judgement and behaviours and that both have underlying mental health issues.
PARTIES APPLICATIONS AND AMBIT OF DISPUTE
The applicant wife seeks a 70/30 division of property in her favour. The husband seeks a 55/45 division in his favour.
The husband alleges that between 24 June 2019 and 21 July 2019 his parents, Ms E and Mr F Woodham, lent the parties $25,000 in five instalments of $5,000 transferred to the company. These advances are detailed in the affidavit of the husband’s mother sworn 9 April 2020 at [6] and were said to be made when the parties were in dire financial difficulty. The wife concedes the monies were advanced but does not concede the advance was by way of loan or that $25,000 is repayable to the husband’s parents. Consistently with the husband’s case that those monies are repayable to his parents, he offers the wife an indemnity in relation to payment to his parents. He does not seek, in written submissions[1] or made orally by Mr Rubera at the hearing, to have the $25,000 characterised as a liability which decreases the value of divisible assets or amount of money available for division between the parties. Instead, it is submitted that the fact that his parents extended a loan of $25,000 when the parties were in dire financial circumstances is a contribution made by him and otherwise, the liability to his parents should be taken into account as a factor under s75(2) of the Family Law Act 1975 (Cth) (“FLA”).
[1] Written submissions of the husband sealed 01/12/2021 01:51 PM.
All that now remains is the proceeds of sale of the former family home, which funds are held in trust by the husband’s solicitor, and the joint debt owing to B School. Of the $247,933 notionally divisible between the parties, the wife has received $75,000 by way of part property settlement and the husband has received $104,170 by way of part property settlement ($75,000 + $5,000) and the balance of the defamation settlement ($24,170). As indicated, the add backs were not contentious.
Apart from add backs, there are further adjustments required. First, to meet the liability of the parties to B School and, second, for the wife to reimburse the husband for having paid all of the fees of Ms G when it was agreed that the wife would be liable for one half of those fees.
It is agreed that the arrears of school fees payable to B School is a joint and several liability of the parties. The wife’s proposal is that the debt to B School be met as to $11,440 by her and the balance of $17,160 to the husband. The wife justifies the disproportionate liability for the debt to B School on the basis she paid $5,000 to the school on 8 July 2021 from child support arrears received as a lump sum. The husband concedes that the wife did pay $5,000 to the school earlier this year so the outstanding balance should be met disproportionately.
The wife proposes that the husband be solely liable for his and her share of debt to the school and that be met from any funds to which the husband is entitled and otherwise met from his own resources. However, if I determine that the wife is to be responsible for any part of the school fee debt, she proposes that amount not be paid from her share of the proceeds of the family home. She will assume the liability but wants to be able to negotiate with B School about terms of repayment. I do not consider the wife’s proposal to be viable given that the debt is a joint and several liability and, therefore, recoverable against either party.
I am satisfied that it is proper to provide that whatever contribution I decide should be made by a party to the outstanding liability to B School be deducted from the share of funds (if any) to be received by that party. There are sufficient funds for them to do that and those payments will result in the debt to B School being extinguished.
The parties retained Ms G for therapy at a cost of $3,080. The wife agreed at the time that the husband would pay Ms G’s professional fees up front and she would reimburse the husband the sum of $1,040. This was reflected in the Order made on 24 April 2020. It follows that the sum of $1,040 ought to be paid from any monies to be received by the wife to the husband.
Once the debt to B School is met, the liquid asset to be divided between the husband and the wife is $68,763. The final orders sought by the parties[2] adopt different formulae for how the $68,793 is to be divided.
[2] Exhibits “W1” and “H4”.
In addition there is C Pty Ltd (ACN …) (“the company”) which is the corporate trustee for the C Trust (“the trust”). It is agreed that the company has no intrinsic value. There is no evidence before me of any loan accounts payable by the trust to either of the parties. There is no evidence of either or both of the parties having any liability to the trust. The company does not trade in its own right.
The husband alleges that the company and trust are behind in accounts and its obligation to file taxation returns. In particular:
(a)The financial statements for the trust are two years behind with the last financial statement being the statement for the 2018/2019 financial year;
(b)The taxation returns for the trust are two years behind with the last taxation return lodged being the return for the 2018/2019 financial year;
(c)There are six BAS statements outstanding; and
(d)There is GST outstanding for disposition of plant and equipment which the husband estimates at $20,000.
The wife proposes she will take the company and the trust “as is”. That is she will be solely responsible, to the exclusion of the husband, for any professional fees and expenses associated with preparation of financial statements, taxation returns, BAS statements, and payment of GST and income taxation.
The wife seeks that the company and the trust be retained by her which will involve the following transactions:
(a)To change the appointor of the trust from the husband to the wife by supplemental deed contemplated by clause 49 which provides for the husband (as current appointor) to nominate an alternative appointor by a deed;
(b)To have the husband resign as sole director and secretary of the company; and
(c)For the husband to transfer to the wife his shareholding in the company.
The wife concedes she does not know the current state of trust accounts in terms of liabilities of the trust to either of the parties or the indebtedness of either of the parties to the trust.
The wife proposes to fund preparation of the documentation to effect the above transactions from her income or capital. She estimates the cost of preparation of documents to be less than $400 and the fees to lodge such documents would be $600.
The husband proposes to retain the company and the trust and does not seek any adjustment in relation to the delinquency in accounts. He will indemnify the wife in relation to all liabilities of whatsoever nature or kind of or pertaining to the company and/or the trust. The wife will give the same indemnity to the husband if she is successful in retaining the company and trusts structures as part of her entitlement to a final alteration of property interests.
The wife’s legal fees[3] to date are $125,021 of which $98,643.80 is unpaid.
[3] “W2” Costs Notice.
The husband’s legal fees[4] invoiced to 21 July 2021 and paid are $103,704.89. The total from 22 July 2021 to date are also paid. The husband asserts that $23,242.71 of his legal fees were paid from the proceeds of the defamation claim and the balance of his legal costs have been paid by his parents. It is asserted on his behalf that the husband is indebted to his parents to repay monies expended on his legal fees. There is no evidence from the husband’s parents, or either of them, to that effect.
[4] “H3” Costs Notice.
Mr Lethlean (for the wife) contends that the contribution based entitlement of the parties should be assessed as equal. Mr Rubera (for the husband) contends that the contribution based entitlement of the parties should be assessed at 45/55 in favour of the husband. Mr Rubera justifies the greater contribution by his client based on:
(a)The husband’s greater income during the relationship including his most remunerative years as a professional sportsman;
(b)Unspecified accruals to his Super Fund 1 Account for two or so years prior to commencing cohabitation with the wife. This entitlement was surrendered during the marriage as described in correspondence dated 27 January 2021 from the Sports Association;
(c)A gift of $50,000 by the husband’s parents to the parties in December 2017 in respect of which the husband’s mother provides details[5]; and
(d)The loan of $25,000 from the husband’s parents advanced in instalments from 24 June 2019 to 21 July 2019 in respect of which the husband’s mother also provides details.
[5] Affidavit of Mr E Woodham sworn 9 April 2020.
The parties clearly benefitted from the generosity of the husband’s parents. The husband’s mother refers to the $50,000 being provided to “Mr and Mrs Woodham in the Christmas period of 2017 […] as a gift and not as a loan.” I regard the $50,000 as funds to which the husband and wife were equally entitled notwithstanding that they came from his side of the family. I do not regard the other matters as justifying a finding that the contributions by the parties, in all capacities, were anything other than equal and I make that finding.
SECTION 75(2) FACTORS
The husband has repartnered with Ms H who is 31 years old and employed as a professional earning (he thinks) less than he earns. The wife has not re partnered.
As indicated, it is conceded both parties have underlying mental health vulnerabilities.
In relation to an adjustment for s75(2) factors, counsel for the wife submitted that the fact that the wife is 51 years old and the husband is 40 years old should attract an adjustment in the wife’s favour because she has a lesser working life ahead (s75(2)(a)). Further, she earns less than the husband. The wife is self-employed or employed in partnership. She also has a contract with J Company. The wife says she earns $60,000 per annum. The husband earns about $122,000 per annum at the moment (s75(2)(b)).
Counsel for the wife sought an adjustment under s75(2)(c) and (o) on the basis that the children are relatively young and the mother is the sole carer and the asset pool is so very small.
Counsel for the wife sought an adjustment of 20%. However, if I decide that the wife can have the company and the trust, Mr Lethlean would reduce that adjustment to 10%.
The husband sought an adjustment in his favour in respect of his liability to repay his parents $25,000 (s75(2)(b)). Mr Rubera contends that the husband is emotionally fragile and referred to two affidavits which he submitted commented relevantly on the husband’s capacity to work. Dr K is the husband’s treating psychologist referred through the Sports Association. Dr K reported that the husband presented with mental health issues as a result of ongoing “verbal attacks, threats and abusive messages” from the wife, coupled with being alienated from his children and financial stresses associated with ongoing legal proceedings which have led to a decline in his overall functioning and a decreased capacity to work. Dr L is a Consultant Psychiatrist whose specialist care the husband is under. Dr L’s report canvasses the adverse effect of the alienation of the children from him on his mental health. The report makes no specific reference to the father’s income earning capacity or capacity to work.
Mr Rubera sought an adjustment in favour of the father on the basis that the father must repay the $100,000+ that his parents have paid for his legal fees to his parents. However, there is no evidence from the husband or his parents in that regard. The husband asserts that the fact that he does not spend anytime whatsoever with the girls is not a matter for which he bears responsibility. I do not accept that is a submission available under s.75(2). The fact of the matter is that the wife is the sole parent. Mr Rubera submitted that s75(2) matters weighed slightly in favour of the mother and conceded an adjustment of 5% in her favour.
Notably, superannuation has already been divided (s75(2)(f)).
The difficulty which I have with an adjustment being made in favour of the wife under s75(2) is that the wife owes her solicitors $100,000 and the irresistible conclusion is that the proceeds of these proceedings will be applied in reduction of that liability and not on account of the factors under 75(2). Counsel for the wife resisted that analysis by submitting that “people pay legal costs in different ways” or words to that effect. Counsel for the mother invited me to speculate that the wife may reach an accommodation with his instructors to pay the $100,000 owing by instalments and that the wife will benefit directly from any s75(2) adjustment. I cannot assume that will be the case. I do accept that the wife’s liability for legal costs will be able to be reduced by her entitlement under this decision.
The wife seeks the company and trust on the basis that she can utilise past tax losses. I find that to be speculative and doubtful given the correspondence from her own accountants which was tendered and relied upon[6]:
[6] Exhibit W3
Dear Mr M,
I've been asked to provide some guidance as to the valuation of possible Carry Forward Taxation losses within the C Trust.
Such a valuation is at best an educated guess because of the many unknown variable around this situation.
From information provided, I understand.
·There are approximately $188,000.00 in losses resulting from the 2019 Income Tax Year,
·Approximately $20,00.00 in GST relating to the sale of financed equipment in subsequent years remains outstanding,
·GST has been calculated on a cash basis and
·Financial Statements and Income Tax Returns for the 2020 and 2021 Financial Years have yet to be prepared
Without completing the outstanding Financial Statements, it's impossible to quantify the quantum of losses accrued within the C Trust. Also of concern is the unknown amount of GST payable by the Trustee but estimated at approximately $20,000.00 (This amount may be offset by other GST credits paid after 30th June 2019). Understanding these limitations, I'm assuming the losses available will be per the 2019 Income Tax Return of approximately $188,000.00.
In determining a "commercial" value on such losses there are so many Unkown variables and risk factors to consider including but not limited to.
·The risk Ms Woodham will not be able to access these losses because of stringent taxation laws regarding the use of prior years' losses,
·The ability of Ms Woodham to earn income of a nature (non-personal assertion) that will permit the offsetting of such losses and
·The future marginal taxation rates of Ms Woodham over the coming Income Taxation Years
·Future changes to Taxation laws in relation to Trust Losses
Assuming Ms Woodham.
·Can access such losses,
·Earns income of a nature that allows such losses to be offset
·Earns Taxable income consistently over several years between $45,000.00 and $120,000.00 per annum
Then those losses could equate to a maximum value of $61,100.00 (assuming a tax rate of 32.5%).
This amount however would need to be discounted by the potential GST outstanding (Approximately $20,000.00), the risk such losses may not even be accessible, and the possibility Ms Woodham won't earn income of the nature required to offset these losses. Deducting the $20,000.00 estimated GST outstanding and estimating a discount risk factor of 75% it could be suggested these losses potentially have a value to Ms Woodham of approximately $10,000.00 ($61,000.00 less $20,000.00 * 75%).
As already mentioned, trying to determine any kind of valuation is fraught given the amount of variables.
Happy to discuss or be challenged on any of the assumptions made.
Regards
Mr N
In my assessment, providing the wife with the company and trust is more trouble than it could be worth. It is a recipe for further litigation and disputation between these parties who have already litigated too long and too expensively. I will not accede to the wife’s application in this regard. The company and trust can stay with the husband and he will indemnify the wife in relation to any liabilities arising therefrom. I cannot put a value on the husband’s retention of the trust and company but consider that it is appropriate also on the basis that it has been a vehicle of his continually since its inception whereas the wife’s involvement has been confined.
CONCLUSION ON CONTRIBUTIONS AND S.75(2) FACTORS
Weighing up the competing s75(2) factors, I find that the wife is entitled to an adjustment of 5% in her favour.
On the basis of an overall adjustment of property interests of 55/45% in favour of the wife, I calculate that:
(a)the wife is entitled to $77,203.15 of the balance proceeds of sale of the former family home less $11,440 which must be paid to B School and less $1,040 to reimburse the husband for Ms G’s fees.
(b)the husband is entitled to $20,359.85 of the balance proceeds of sale of the former family home less $17,170 which must be paid to B School plus $1,040 from the wife to reimburse the him for Ms G’s fees.
EFFECT OF DECISION IN REAL TERMS
It is well and good to talk about percentages. However with the very modest amount of assets, such as in this case, it is all the more necessary to have regard at the effect of the order in real money terms. The result is stark. The wife retains practically all of the funds available for division between the parties. I recognise that the husband will be disappointed. However I am satisfied that the outcome is appropriate in the circumstances of this case. The relevant circumstances include the husband having benefited from interim distributions of property (money) to a much greater degree along the way than did the wife. That is, the husband has already had the benefit of most of his entitlement to a final alteration of property interests. He also gets to retain the Trust.
CONCLUSION
I am satisfied that the order set out at the beginning of these reasons is proper and that the alteration of property interests between the parties provided for herein is just and equitable in all the circumstances of the case.
I commend the practitioners for taking the initiative to seek the hearing of this matter be conducted in a manner commensurate with the modest amount of money which remained to be divided between the parties. It was a sound exercise in proportionality which has served their respective clients well.
I certify that the preceding forty-three (43) numbered paragraphs are a true copy of the ex tempore Reasons for Judgment of the Honourable Justice Bennett delivered on 2 December 2021. Associate:
Dated: 19 January 2022
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