Woodrow & Woodrow
[2023] FedCFamC2F 608
•25 May 2023
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Woodrow & Woodrow [2023] FedCFamC2F 608
File number: MLC 3698 of 2022 Judgment of: JUDGE CHAMPION Date of judgment: 25 May 2023 Catchwords: FAMILY LAW – Property – Undefended proceedings and non-participation of the Husband – Alteration of property interests – Wife seeking alteration of non-superannuation assets – Just and equitable – Husband’s nondisclosure – Premature appropriation of marital assets for Husband’s own benefit – Alteration of superannuation interests – Order equalising parties’ superannuation interests Legislation: Family Law Act 1975 (Cth) ss 75, 79, 81, 90XT, 106A
Family Law (Superannuation) Regulations 2001 (Cth) Pt VI
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) r. 6.06
Superannuation Industry (Supervision) Act & Regulations 1994 (Cth) rr. 7A.07, 7A.13
Cases cited: Allesch v Maunz (2000) 203 CLR 172; [2000] HCA
Baxter & Baxter [2010] FamCAFC 183
Bain & Bain (deceased) (2017) FLC 93-797; [2017] FamCAFC 164
C & C [2005] FamCA 429
Dickons & Dickons (2012) 50 FamLR 244 [2012]; FamCAFC 15
In theMarriage of Hickey (2003) FLC 93; [2003] FamCA 395
Jabour v. Jabour [2019] FamCAFC 78
Keskin & Keskin [2019] FamCAFC 236
Kessey & Kessey (1994) FLC 92
Kingston & Field (No 2) [2020] FamCAFC 235
Kleine & Kleine [2021] FedCFamC1F 51
Lanceley & Lanceley (1994) 18FamLR 71;
Mallet & Mallet [1984] HCA 21; (1984) 156 CLR 605;
Stanford v Stanford (2012) 247 CLR 10; [2012] FCA 52
Waters & Jurek (1995) FLC 92,365, 82376; [1995] FamCA 101
Division: Division 2 Family Law Number of paragraphs: 93 Date of last submissions: 19 May 2023 Date of hearing: 19 April 2023, 19 May 2023 Place: Melbourne Counsel for the Applicant: Mr Arnold Solicitor for the Applicant: Leslie Family Law Respondent: No appearance ORDERS
MLC 3698 of 2022 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: MS WOODROW
Applicant
AND: MR WOODROW
Respondent
ORDER MADE BY:
JUDGE CHAMPION
DATE OF ORDER:
25 MAY 2023
THE COURT ORDERS THAT:
1.The Wife have leave to proceed with her Further Amended Initiating Application filed on 29 March 2023 on an undefended basis.
2.After no less than seven (7) days from the date of these Orders, the Wife have leave to apply the proceeds from the sale of the property known as B Street, Suburb C in the State of Victoria currently held in trust by Leslie Family Law, solicitors for the Wife, as follows:
(a)75% thereof to the Wife (noting that the Wife has received $20,000 of this amount by way of part property settlement pursuant to Orders dated 19 April 2023); and
(b)25% thereof to the Husband.
3.The Husband forthwith and not later than 14 days from the date of these Orders do all things and sign all documents necessary to transfer to the Wife, at her expense, all his right, title and interest in Motor Vehicle 1, together with any insurances and warranties associated with the vehicle.
4.The Wife and the Husband forthwith do all things and sign all documents necessary to place the property situated at and known as D Street, Suburb E in the State of Queensland being the property more particularly described by Title Reference … the (Suburb E property) on the market for sale (Suburb E sale) and the proceeds of the sale be applied as follows:
(a)Firstly, to pay all costs, commissions and expenses of the sale;
(b)Secondly, to discharge the loan secured by mortgage payable to Australian and New Zealand Banking Group Limited (ANZ);
(c)Thirdly, the sum of $60,000 to Leslie Family Law, solicitors for the Wife, to be held in trust to discharge Capital Gains Tax arising from the sale, to be calculated in accordance with Order 8 herein; and
(d)The balance then remaining be divided:
(i)75% thereof to the Wife;
(ii)25% thereof to the Husband.
5.Pending the sale:
(a)all rental income generated by the Suburb E property shall be applied to the loan secured by mortgage over the Suburb E property, and to give effect to this Order all rental income shall be paid to the Wife; and
(b)the parties shall share equally in payment of all outgoings associated with the Suburb E property.
6.For the purposes of the Suburb E sale:
(a)The Wife shall nominate the listing agent and conveyancer and shall by this Order be authorised to engage the listing agent and conveyancer on behalf of both parties;
(b)The sale price shall be as recommended by the selling agent;
(c)The mode of sale shall otherwise be as recommended by the selling agent;
(d)Both parties shall comply with and follow all directions of the selling agent.
7.These Orders shall be provided to the agent managing the Suburb E property as authorisation for them to change the account where rent received for the property is paid.
8.Upon the sale of the Suburb E property the Husband and the Wife forthwith complete their individual tax returns to ascertain the Capital Gains Tax payable upon the sale and thereafter:
(a)Forthwith provide copies of their relevant tax return and Notice of Assessment to Leslie Family Law;
(b)Leslie Family Law thereafter is authorised to make payment from funds held in accordance with Order 4(c) to the Australian Taxation Office on behalf of each party; and
(c)Any balance remaining or shortfall in the Leslie Family Law trust account shall thereafter be divided between and or paid by the parties in the proportions in accordance with Order 4(d)
9.For the purposes of paragraphs 9 to 24 of these orders:
(a)'The Superannuation Fund' is the Woodrow Super Fund;
(b)The parties are the members;
(c)'The Trustee' is Woodrow Pty Ltd of Woodrow Super Fund of which the parties are directors and shareholders
(d)“The Fund Accountants” are F Pty Ltd
(e)The Wife forthwith request the fund accountants to estimate (in writing) the Capital Gains Tax payable by the Superannuation Fund on the sale of G Street, Suburb H (Suburb H CGT)
(f)“The Wife’s CGT amount” shall be one half (50%) of the Suburb H CGT.
10.Paragraphs 9 to 20 of this Order are binding on the Trustee.
11.The specified percentage split to be allocated to the Husband out of the Wife's interest in the Superannuation Fund is one hundred per centum (100%) ("the specified percentage").
12.In accordance with Section 90XT(1)(b) of the Family Law Act 1975;
(a)the Husband is entitled to be paid the specified percentage of each splittable payment out of the Wife's interest in the Superannuation Fund; and
(b)the Wife's entitlement and the entitlement of such other person to whom a splittable payment may be made out of the Wife's interest in the Superannuation Fund is correspondingly reduced.
13.This order have effect from the operative time being the beginning of the fourth business day after the day on which a sealed copy of these orders is served upon the Trustee, with the solicitors for the Wife to serve the Orders within fourteen (14) days.
14.The Trustee and the parties in accordance with the obligations set out under the Act, the Family Law (Superannuation) Regulations 2001, and the Superannuation Industry (Supervision) Act & Regulations 1994 shall do such acts and things and sign all such documents as may be necessary to calculate the entitlement and make the payment in accordance with these orders.
15.That the Husband shall do all things necessary, including but not limited to, exercising his request pursuant to r.7A.07(2) of the Superannuation Industry (Supervision) Regulations 1994 for the payment of the transferable benefits out of the Wife's interest in the Superannuation Fund to the Husband in accordance with r.7A.13 of the Superannuation Industry (Supervision) Regulations 1994.
16.The base amount to be allocated to the Wife out of the Husband's interest in the Superannuation Fund is $234,599 less the Wife’s CGT amount in Order 9(f) (base amount).
17.In accordance with Section 90XT(1)(a) of the Family Law Act 1975 whenever the Trustee makes a splittable payment from the interest held by the Husband in the Superannuation Fund the Trustee shall pay to the Wife the amount which is calculated in accordance with Part 6 of the Family Law (Superannuation) Regulations 2001 being the base amount of $234,599 (provided that such base amount shall not exceed the value of the interest determined under Section 90XT(2)), and there be a corresponding reduction in the entitlement that the Husband would have had but for these orders.
18.Paragraph 14 has effect from the operative time being the beginning of the fourth business day after the day on which a sealed copy of these orders is served upon the Trustees, with the solicitors for the Wife to serve the Orders within fourteen (14) days.
19.The Trustee and the parties in accordance with the obligations set out under the Act, the Family Law (Superannuation) Regulations 2001 and the Superannuation Industry (Supervision) Act and Regulations 1994, shall do all such acts and things and sign all such documents as may be necessary to calculate the entitlement and make the payment as cash in accordance with these Orders.
20.The Husband and Wife personally and in their capacity as directors of the Trustee execute any document and do all acts and things as may be necessary to liquidate to cash such of the assets in the Superannuation Fund to make payment as cash to the Wife in accordance with these orders.
21.The Husband and Wife shall do all acts and things and execute any document necessary, including but not limited to, executing any document necessary pursuant to r.7A.07(2) of the Superannuation Industry (Supervision) Regulations 1994 for the payment of the transferable benefits out of the Husband's interest in the Superannuation Fund to the Wife in accordance with r. 7A.13 of the Superannuation Industry (Supervision) Regulations 1994.
22.That the parties personally and in their capacity as directors of the Trustee do all acts and things and execute all documents necessary to complete the year end accounts for the Superannuation Fund to 30 June 2022 and 30 June 2023, comply with audit requirements and lodge the tax returns for the Superannuation Fund for such period.
23.As soon as practicable following the payment of the base amount from the Husband's interest in the Superannuation Fund to the Wife:
(a)The Wife do all such acts and things and sign all such documents as may be necessary to transfer or roll over her superannuation entitlements in the Superannuation Fund into the Wife's nominated superannuation fund;
(b)The Wife do all acts and sign all such documents to:
(i)resign from any office held by her in the Trustee; and
(ii)transfer to the Husband any shares she may hold in the Trustee;
(c)The Wife shall cease to be a member of the Superannuation Fund; and
(d)The Husband personally and in his capacity as the director of the Trustee shall thereafter indemnify the Wife and secure the Wife's release from any liability with respect to the Superannuation Fund.
24.Each party have liberty to apply in relation to the implementation of the orders affecting the parties' superannuation interest.
25.The Wife serve a copy of these orders forthwith upon the Trustee.
26.Pursuant to s. 106A of the Act, should the Husband fail to sign documents or do things necessary to comply with these Orders:
(a)If practicable to do so, a Judicial Registrar of this Honourable Court be and is hereby authorised to execute documents on his behalf; or
(b)If a legal practitioner is required to secure compliance with the Orders, Ms J of T Lawyers or her agent be engaged to execute such document or instrument or do all such things as may be necessary to give effect to these Orders.
27.Unless otherwise specified in these Orders and save for the purposes of enforcing any monies due under these or any subsequent Orders:
(a)each party be solely entitled to the exclusion of the other to all property (including chooses in action) in the possession of such party as at the date of these orders;
(b)insurance policies remain the sole property of the owner thereof;
(c)each party forego any claims he or she may have to any superannuation or related benefits belonging to or earned by the other;
(d)each party be solely liable for and indemnify the other against any liability encumbering any item of property to which that party is entitled pursuant to these orders;
(e)any joint tenancy is hereby expressly severed; and
(f)any joint bank account be divided equally between the parties.
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 a pseudonym has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
JUDGE CHAMPION:
INTRODUCTION
Ms Woodrow (Wife) has made an application for an alteration of property interests pursuant to s. 79 of the Family Law Act 1975 (Cth). Mr Woodrow (Husband) is the respondent.
The matter proceeded on an undefended basis
The Husband did not appear at the hearing. The Wife applied to proceed on an undefended basis.
For three reasons, I was satisfied that the Husband had had an opportunity to be heard in this proceeding and had decided not to take advantage of that opportunity.
First, as to his knowledge of the proceeding, the Husband appeared at a directions hearing on 22 June 2022. The Court (a Judicial Registrar) made consent orders on 22 June 2002 to prepare this matter for trial. Apart from his appearance at the directions hearing on 22 June 2022, The Husband did not otherwise participate in this proceeding. He did not comply with the consent orders made on 22 June 2022. Among other matters, despite orders, he made no financial disclosure.
Second, as to his knowledge of this proceeding, from time to time during the course of this proceeding, the Husband communicated directly with the Wife’s lawyers particularly as to the sale arrangements for real estate they jointly owned. On 4 July 2022, the Husband emailed the Wife’s solicitor as to the proposed sale of property in Suburb H. He suggested K Company as the selling agent. On 6 July 2022, he again emailed the Wife’s lawyers to nominate particular real estate agents to sell jointly owned property. Except to note that the sale of the Suburb E property did not proceed, the Wife accepted each of the Husband’s real estate agent recommendations: (the Wife’s Affidavit [73] – [74]).
Third, the Wife’s lawyers produced satisfactory evidence that they had kept the Husband informed of this proceeding such that he knew of the orders sought, the material relied on and the hearing date.
On 10 February 2023, Ms L (a lawyer from the firm of solicitors who acted for the Wife) filed an affidavit of service. Among other matters, Ms L deposed at [19] that:
On 30 January 2023, the respondent husband telephoned our office to advise of his position in these proceedings.The respondent husband repeated that the matter was quite “simple” and that everything should be divided equally. He should [sic.] could not afford to continue payments for our client’s care. At the date of affirming this affidavit, the respondent husband has not filed any responding material outlining his position.
[As written]
At the trial before me, the Wife’s solicitor, Ms Paula Leslie, gave sworn evidence that since a compliance and readiness hearing on 15 February 2023 (at which The Husband did not appear) she had notified the Husband of the trial date. Her evidence was that she had forwarded relevant documents including the Wife’s orders sought in her further amended application and the Wife’s trial affidavit to the Husband’s residential address both by registered mail and by email on 29 March 2023 and again by email on 14 April 2023: Ex A1. As to Ms Leslie’s knowledge of The Husband’s residential address, her evidence was that the Husband had told her the residential address. I accept her evidence.
When the Court may proceed on an undefended basis
With reference to The Husband’s non-appearance at the trial, the relevant principle is that the court must afford an opportunity to a party to be heard. A court cannot force a party to take advantage of that opportunity. In Allesch v. Maunz (2000) 203 CLR 172, [38]- [40] (cited with approval in Kleine & Kleine [2021] FedCfamC1F 51 at [21] (Altobelli J)) the High Court held:
[38] […] Having regard to the circumstances in which the initial proceedings took place in the absence of Mr Allesch (the appellant), it is worth emphasising that the principle just described does not require that the decision-maker actually hear (or receive the submissions of) the party potentially liable to be adversely affected. Sometimes, through stubbornness, confusion, misunderstanding, fear or other emotions, a party may not take advantage of the opportunity to be heard, although such opportunity is provided. Affording the opportunity is all that the law and principle require.
[39] Decision-makers, including the courts, cannot generally force people to protect their own rights, to adduce evidence or other materials, to present submissions or to act rationally in their own best interests. This consideration may be especially relevant in relation to the Family Court where emotions, often engendered by the highly personal issues involved, can sometimes cloud rational thought.
[40] Nor are courts obliged to delay proceedings indefinitely because one party, although proved to be on notice of the proceedings, refuses or fails to appear in person or to be represented by a lawyer or some other individual permitted to speak for them who can explain the need for an adjournment. The rights of other parties are commonly involved. In the Family Court, the rights of non-parties (especially children) may be affected. Additionally (as this court has itself accepted), the rights of the public in the efficient discharge by courts of their functions must be weighed against unreasonable delay in concluding litigation.
[Footnotes omitted]
The Husband was on notice of this proceeding. I was satisfied that the Husband had had an opportunity to be heard and that he had decided not to take advantage of that opportunity. As a result, the matter proceeded on an undefended basis.
The fact that the matter proceeds on an undefended basis does not mean the applicant party is entitled as of right to the orders he or she seeks simply because the other party does not appear. In a property proceeding, such as this case, the court must be satisfied that any orders that are made are appropriate, just and equitable: Lanceley & Lanceley (1994) 18FamLR 71, 80.
Further, after hearing, the court notified the parties (including the Husband) that it sought clarification on certain issues. As a result, the matter was relisted on 19 May 2023. The Husband did not appear on 19 May 2023.
The Court does not have any substantive material as to any orders for which the Husband contends in the proceeding. I note that he had told lawyers for the Wife that he believed everything ought to be divided equally (Ms L’s affidavit, 10 February 2023).
THE APPLICATION
By her further amended application dated 27 March 2023, the Wife seeks orders altering the parties’ interests in property. In broad terms, the Wife seeks orders providing for the distribution of the value of the parties’ non-superannuation assets in the proportions of 75% to her and 25% to the Husband. As to the superannuation pool, the Wife broadly seeks an order equalising the parties’ superannuation.
The affidavit of the Wife sworn on 27 March 2023 was read: all references in these reasons to ‘the Wife’s Affidavit’ are references to her affidavit made on 27 March 2023. Her evidence was unchallenged.
STATUTORY FRAMEWORK
Pursuant to s. 79 of the Act, the Court has a discretion to make such order altering the parties’ interests in property as the Court considers appropriate. The Court must not make an order under this section unless it is satisfied in all the circumstances it is just and equitable to make the order: s. 79(2). If the Court is satisfied that it is just and equitable to make an order, the Court must take into account the matters set out in s. 79(4) and, further pursuant to s. 79(4)(e), relevant matters referred to in s. 75(2).
JUSTICE AND EQUITY
The Wife seeks an alteration of the parties’ property interests in order to ‘finally determine’ the financial relationships between them: s. 81 of the Act. The parties are the joint proprietors of a property in Suburb E (in the Region N area of Brisbane; Suburb E property) and, before its sale were, the joint proprietors of a property in Suburb C (Suburb C property). It would be unjust and inequitable not to sever their joint interests and contrary to the Court’s obligation to do so.
THE 4-STEP APPROACH
In theMarriage of Hickey(2003) FLC 93-143; [2003] FamCA 395 at [39] (which has continued as a matter of substance to be applied notwithstanding legislative change: see, i.e. Keskin v. Keskin [2019] FamCAFC 236 at [44]), the Full Court set out a four step approach which continues to be applicable:
First, the court should make findings as to the identity and value of the property, liabilities and financial resources of the parties at the date of the hearing.
Second, the court should identify and assess the contributions of the parties within the meaning of s 79(4)(a), (b) and (c) and determine the contribution based entitlements of the parties expressed as a percentage of the net value of the property of the parties.
Third, the court should identify and assess the relevant matters referred to in s 79(4)(d), (e), (f) and (g), (the other factors) including, because of s 79(4)(e), the matters referred to in s 75(2) so far as they are relevant and determine the adjustment (if any) that should be made to the contribution based entitlements of the parties established at step two.
Fourth, the court should consider the effect of those findings and determination and resolve what order is just and equitable in all the circumstances of the case:
Step 1: Property Interests
First, it is necessary to identify, the existing legal and equitable interests of the parties in property: Stanford v Stanford (2012) 247 CLR 108 at [37]. Identifying the non-superannuation property and the superannuation interests in two pools, those interests are as follows:
ASSETS Ownership Value Remaining proceeds from sale of B Street, Suburb C VIC Joint $314,960 D Street, Suburb E QLD Joint $700,000 Animal Wife $10,000 Motor Vehicle 1 Husband $33,000 Motor Vehicle 2 Husband $19,500 NAB account ending #...91 Wife $4,786 ANZ Progress Saver #...79 Husband $794 Assets subtotal E$1,083,040 LIABILITIES ANZ Residential Investment Loan #...42 Joint E($345,000) Liabilities subtotal $345,000 Total (assets - liabilities) E$738,040
SUPERANNUATION Type of interest Member Value Woodrow Self-Managed Superfund Self-managed fund Wife $48,956 Remaining proceeds from sale of G Street, Suburb H Joint $469,198 Super Fund 1 Accumulation Husband $12,050 Super Fund 2 Accumulation Wife $33,146 Superannuation subtotal E$563,350 E$738,040 Total (assets – liabilities+ super) including superannuation and non-superannuation assets E$1,301,390
In late 2022, there was a sworn valuation of $650,000 for the Suburb E Property: (the Wife's Affidavit [75]). The Wife in fact estimates that the Suburb E Property has a higher value of $700,000. As the Suburb E property is to be sold and the sale proceeds distributed on a percentage basis the difference between the sworn valuation and the Wife’s estimate may not be of significance. Some of the other assets and values are asserted by the Wife without contradiction from the Husband: I accept the Wife’s unchallenged and uncontradicted evidence as it is neither inherently improbable nor inherently incredible: Bain & Bain (deceased) (2017) FLC 93 at [112].
Step 2: Contributions
Section 79(4)(a) and (b) requires the Court to take into account the financial and non-financial contributions, direct and indirect, to the acquisition, conservation or improvement of property. Section 79(4)(c) requires the Court to take into account the contribution made “to the welfare of the family [...] including any contribution made in the capacity of homemaker or parent.”
The parties had a 17-year relationship. They commenced cohabitation around 2004. They were married in 2015. They separated on a final basis by October 2021. The Wife then moved out of the house they both lived in. In late 2022, she secured her own rental property. They are not divorced. The parties do not have any children together.
The Wife has two adult children from a previous relationship. Her affidavit did not expressly deal with whether the Husband had provided any financial support to her adult children from a previous relationship. At trial, the Wife submitted that the Husband had not provided any financial support to her children from a previous relationship.
The outset of the relationship
At the relationship’s commencement, the Husband had no assets of significance. The Wife jointly owned a Suburb M property with her former partner of 21 years. The Suburb M property was valued at approximately $600,000 (with a loan of $500,000). Following the end of her previous relationship, the Wife retained ownership of the Suburb M property. Following its sale in 2005, only $10,000 remained: there was no evidence as to how the $100,000 equity in the Suburb M property diminished to $10,000 in a short time. The Wife applied the $10,000 residue to furnish the parties’ first rental property: (the Wife's Affidavit, [10]).
During the relationship
The Husband “largely controlled household finances with limited to no consultation” with the Wife: (the Wife’s Affidavit [15]).
From about 2005 – 2015 (for the first 10 years of the parties’ relationship), the Wife worked as an administration officer. Since 2020 (following an inheritance she received and is described below) she has owned and worked in her own business. Until 2017 the Husband worked as a tradesperson on a casual basis. Although employed on a casual basis, the Husband performed substantial shift work and overtime. In 2017, he secured work as full-time tradesperson with O Company.
Because the Husband worked shift work and overtime, the Wife’s evidence was that “I was responsible for most, if not all, homemaker and household tasks”: (the Wife’s Affidavit [12]).
For most of the period of the relationship, the Wife’s evidence was that the Husband earned “2 to 3 times my income”: (the Wife’s Affidavit [12]). Also, for most of the period of the relationship, the Wife’s income was deposited in the parties’ joint bank account. Each party also maintained a separate bank account. Funds were transferred from the joint account to the Wife for daily household expenditure.
In 2009, the parties purchased land for $140,000 in Suburb C (Suburb C property). In due course, the Suburb C property became the matrimonial home. Modest savings and a first homeowner’s grant was applied towards the purchase price. An ANZ bank loan for $330,000 met the balance of the purchase price and provided funds to build a house on the property: (the Wife’s Affidavit [13]). Unknown to the Wife, the Husband registered the Suburb C property solely in his own name.
In 2013, the Trustee of the parties’ self-managed superannuation fund (SMSF) purchased a Suburb H property (Suburb H property). In mid-2015, a dwelling was built at the Suburb H property. The Trustee of the SMSF leased the property for approximately $1,430 per month. The rental income was deposited into the SMSF’s bank account and serviced a NAB loan.
In late 2016, the parties purchased an investment property for approximately $330,000 in Suburb P Queensland (Suburb P property). The purchase was entirely funded by a loan.
As a result, by mid-2017, the parties owned three real properties, either personally (Suburb C and Suburb P) or through the SMSF (Suburb H). According to the Wife’s Affidavit, the Suburb P property and the Suburb H property were consistently tenanted.
By two payments in 2018, the Wife received an inheritance of approximately $480,000 following the death of a relative, Ms Q. At [22] of the Wife’s Affidavit, the evidence was that the inheritance funds were deposited into the parties’ joint ANZ bank account and were applied as follows:
(a)$10,000 for the purchase of an animal by the Wife;
(b)$80,000 for renovations at the Suburb C property;
(c)$30,000 for an outstanding loan payment on Motor Vehicle 3 solely in the Wife’s name;
(d)$16,000 for Motor Vehicle 4 solely in the Husband’s name;
(e)$140,000 for the repayment of the ANZ loan;
(f)$85,000 toward the purchase of an investment property in Suburb E (Suburb E property); and
(g)$50,000 for renovations to the Suburb E property
The balance of the inheritance was retained in the ANZ account for the payment of living expenses, bills, and rates for the properties.
In 2019, the Husband purchased and registered in his name Motor Vehicle 5 for $11,000. He purchased Motor Vehicle 6 for an unknown amount. The Husband regularly bought and sold motor vehicles through the parties’ relationship.
In 2019, the parties purchased the Suburb E property for $430,000. The Wife’s inheritance from her relative provided $87,000 towards the purchase price. A loan with R Company funded the balance of the purchase price.
By mid-2019, the outstanding ANZ home loan balance had reduced to $169,667. However, by late 2021 the loan had increased to $307,351. I will return to this issue below.
In 2020, the Wife’s inheritance from her late relative also allowed her to cease working for wages and to establish her own business “S Business”, in which she received varying levels of income: (the Wife’s Affidavit, [2]).
In late 2020, the parties refinanced the Suburb P and Suburb E property loans with ANZ for the total sum of $672,000.
In mid-2021, the Wife sold her Motor Vehicle 3 for $19,000 cash. She deposited that money into the parties’ joint ANZ bank account in mid-2021. Only following the production of documents by way of a subpoena served on the ANZ bank, the Wife learned that these funds had been transferred on the same day from the joint account into the Husband’s personal ANZ bank account.
In mid-2021, the Husband acquired Motor Vehicle 1 under a novated lease, which was used by the Wife.
In mid-2021, the parties sold the Suburb P property for approximately $385,000. Following the discharge of the loan with ANZ, the balance of the sale proceeds approximated $44,800. In mid-2021 the Husband transferred $41,000 of these proceeds into his personal ANZ account without the Wife’s knowledge: (the Wife’s Affidavit [30]).
The couple separated in October 2021.
Events following separation
In late 2021, the Husband transferred $19,000 to the Wife from the sale of Motor Vehicle 3.
In mid-2022, the Husband purchased Motor Vehicle 2 for $19,500. The Wife has no knowledge of how he funded this purchase.
In late 2022, the Trustee of the SMSF (see below) sold the Suburb H property for $560,000.
In late 2022, the Suburb C property (an asset the parties jointly owned) was sold for $657,000.
The Wife’s solicitor holds the proceeds of both sales (the Suburb H property and the Suburb C property) in a lawyer’s trust account pending court order: (the Wife’s Affidavit [42]).
In early 2023, the Husband submitted a hardship application to ANZ seeking relief as to the outstanding home loan of the Suburb E property. The Wife seeks an order to sell the Suburb E property so that the outstanding ANZ home loan may be discharged and to avoid accruing interest: (the Wife’s Affidavit [45]).
In early 2023, both parties authorised the payment of about $4,500 for outstanding expenses relating to the SMSF from the funds held in trust by the Wife’s solicitor.
Conclusion as to contributions
As to contributions in Dickons & Dickons (2012) 50 FamLR 244 [2012]; FamCAFC 154 at [21] (cited with approval by the court in Jabour v. Jabour [2019] FamCAFC 78 at [64]) the Court held that I must approach the “assessment of contributions holistically”. The Court held:
Those same principles can be expressed as saying that the requirements of the section are met by approaching the assessment of contributions holistically and by analysing the nature, form, characteristics and origin of the property currently comprising that to which s 79 applies, and, in turn, analysing the nature, form and extent of the contributions (of all types) contemplated by s 79). That task is also undertaken by reference to the nature and form of the particular marriage partnership manifested by the particular circumstances of this particular marriage. Is it, for example, a relationship, as Deane J put it in Mallett at CLR 640–1; ALR 222; Fam LR 473 “…where the parties have adopted the attitude that their marriage constituted a practical union of both lives and property…” or is it, for example, a union where parties lived very separate domestic and financial lives?
The Initial Contribution
The Wife brought assets of $10,000 to the relationship at its commencement. The Husband did not bring any assets of substance to the relationship although at the time of the commencement of the relationship, the Husband held some superannuation of an unknown amount.
The Wife’s inheritance
Relatively late in the relationship in 2018 (about year 14 of a 17-year relationship) the Wife received a substantial inheritance of $480,000 on a relative’s death. That inheritance was equal to approximately 65% of the non-superannuation total asset pool (480,000/738,040 = 65%) at the time of trial. There was no submission put that the Wife’s inheritance should be quarantined from the asset pool. Although it is to be remembered that the assessment of contributions is a holistic (not a mathematical) exercise, if the inheritance were quarantined and contributions otherwise calculated 50:50; that would lead to an alteration of property interests 82:18 in favour of the Wife.
Inheritances are generally treated as contributions made by or on behalf of the person receiving them unless there is a clear intention that the inheritance or gift was to both parties: Kessey & Kessey (1994) FLC 92 at 81,850. I treat the inheritance as a contribution made by the Wife. Further, as Riethmuller and Smith note in Family Law, it is “not unusual for the court to attribute greater significance to more recent contributions” (2022, 7th ed.) at [26.450].
On the balance, taking into account the parties myriad contributions over their lengthy relationship, I assess the Wife’s contributions as 65% of the value of the parties’ interest in property and the Husband’s contributions at 35% of the value of the parties’ interest in property in the non-superannuation property pool. In dollar terms, the Wife’s contribution is assessed to be $221,412 more than the Husband’s. I wish to emphasise that the assessment of the Wife’s contributions at 65% is a holistic assessment as to which the inheritance is but one part of that holistic assessment.
Step 3: Section 79(4)(d), (e), (f) and (g) factors
Each of the parties is 53 years old.
Parties’ earning capacity
The Wife works full time in her own business. In the financial year ending 30 June 2022, she earned approximately $45,000. The Husband is a full-time tradesman. In the financial year ending 30 June 2022, he earned approximately $117,000. The Husband’s current earnings are approximately 2.5 times the Wife’s earnings. The Wife has greater future needs because of a significant gap in her earning capacity relative to the Husband’s earning capacity. This matter warrants some adjustment of property interests by reference to the relevant considerations set out in s. 75(2)(b) and (g).
The Husband’s non-disclosure and the his premature appropriation of marital assets for his own benefit – s. 75(2)(o)
The Husband defaulted in his obligation to make financial disclosure under specific court orders made on 22 June 2022: see also rr. 6.06(3) and 6.06(5) of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth). His failure to make full disclosure is not solely of procedural or theoretical concern. For reasons explained below, I find that he has prematurely appropriated substantial marital assets for his own personal benefit. His non‑disclosure means that he has not provided the court with a proper picture of his financial circumstances.
First, between mid-2019 and late 2021, the Husband made substantial unilateral withdrawals from the parties’ joint ANZ loan account. Over the period of the withdrawals, the loan debt grew by nearly $138,000. The ANZ loan grew from $169,667 (2019) to $307,351 (2021) ($307,351 less $169,667 = $137,684). The Wife had no knowledge or input as to the Husband’s series of unexplained withdrawals: (the Wife’s Affidavit [25]). The Husband’s unilateral withdrawals from the loan account approximated $120,000 or more. It may be that the loan-debt grew in part because of accruing unpaid interest and not just because of the Husband’s unilateral withdrawals.
Second, following the Suburb P property’s sale in mid-2021 the Husband unilaterally transferred $41,000 from the joint account to his personal account: (the Wife’s Affidavit [30]; Annexure W-3 (ANZ bank account statements)).
The Husband had the power to explain his withdrawals from the ANZ loan account and his transfer to his personal account of proceeds from the sale of the Suburb P property. The Wife’s evidence as to those matters was unchallenged. I accept her evidence. The Husband did not explain his actions to the court.
In Kingston & Field (No. 2) [2020] FamCAFC 235 at [106]:
[106] Under well established guidelines [authorities omitted] property settlement orders may make more generous provision for one party if it is inferred the other party improperly failed to fully disclose his or her financial affairs. However, when a trial court infers a party’s failure to disclose, it is worthy of consideration whether the failure relates to assets or income, because the receipt of undisclosed income over a period of time, without more, does not necessarily permit an inference to be drawn that the money is stashed away and available at will to the recalcitrant party. Just because an inference may be drawn does not mean it always must or should be drawn.
[Emphasis added]
I am satisfied that I should draw an inference that the Husband has prematurely appropriated marital assets for his own benefit.
As a result of the Husband’s premature appropriation of marital assets for his own benefit (by withdrawals from the joint bank account and the appropriation of Suburb P property sale proceeds) there ought be a further adjustment in the Wife’s favour pursuant to s. 75(2)(o). Although I am not able to quantify precisely the amount the Husband has prematurely appropriated for his own benefit the amount is significant relative to the value of the total marital assets. I may make a more generous provision for the Wife in circumstances in which the Husband has failed fully to disclose his financial affairs: Kingston at [106].
SUPERANNUATION
Legal principles
In proceedings under s.79, the court may also make orders in relation to the superannuation interests of spouses: Part VIIIB, Division 3. Any order must be just and equitable: s. 79(2); C & C [2005] FamCA 429 at [47].
The C & C Full Court held that the “preferred approach to the determination of property settlement cases must be to prepare in addition to the list of items of property […] a separate list containing any superannuation interest or interests”: C & C at [62]. I must assess the parties’ contributions to the superannuation interest. I must also consider the parties’ future superannuation prospects. I must consider the overall justice and equity of the ultimate award (including any proposed splitting order or the need for such an order): C & C, [64]. Further at [66] the C & C Full Court noted:
the following matters may well be relevant: the relationship between years of fund membership and cohabitation; actual contributions made by the fund member at the commencement of the cohabitation (if applicable), at separation and at the date of hearing; preserved and non-preserved resignation entitlements at those times; and any factors peculiar to the fund or to the spouse’s present and/or future entitlements under the fund.
Finally, in C & C, at [70], the Full Court held that there may need to be an adjustment given the value of the parties’ superannuation interests “relative to the other property of the parties” (emphasis added). That is, in circumstances in which the non-superannuation property and superannuation are calculated as separate pools for any ultimate order under s. 79 to be just and equitable, the order must take into account the totality of the parties’ asset situation, both as to non-superannuation property and superannuation assets.
The facts of this case
Woodrow Pty Ltd (Trustee) is the trustee of the parties’ SMSF. The parties established the SMSF in 2012. The parties are the sole directors and shareholders of the Trustee. The parties were the only members of the SMSF.
The Wife’s evidence was that at the commencement of the cohabitation in 2004 the Husband “held some superannuation”: (the Wife’s Affidavit, [9]). There was no evidence as to its amount.
In mid-2012, the Husband rolled over his superannuation of approximately $84,000 into the SMSF. The Wife rolled over $20,000 from various funds into the SMSF: (the Wife’s Affidavit, [17]). As of 2012 (the date of the SMSF’s establishment), the parties had been in a relationship for approximately eight years. Doubtless, the Husband’s higher earnings in the period 2004 – 2012 led to him having a higher superannuation balance to roll over into the SMSF than did the Wife as at 2012. I infer that that the Husband earned most of his superannuation of $80,000 rolled into the SMSF in 2012 during the currency of the parties’ relationship (2004 – 2012).
In 2013, the Trustee purchased the Suburb H property for $320,000 funded as follows: $20,000 from the Wife’s superannuation; $100,000 from the Husband’s superannuation and the balance was borrowed: (the Wife’s Affidavit [16]). At all times, the Suburb H property was the SMSF’s principal asset.
The financial reports of the SMSF in the year ending 30 June 2021 were in evidence: Ex A2. The 2021 SMSF financial report (FY2021 report) confirms the SMSF’s only substantial asset was the Suburb H property. The unrealised value of the Suburb H property was then $482,289 but it remained subject to mortgage. The FY2021 report valued the net assets of the SMSF at $398,357 with allocations to individual accounts of $349,401 to the Husband and $48,956 to the Wife. Beside the Wife’s generic statement in evidence that the Husband controlled the parties’ financial affairs, the evidence did not explore the reasons for the significantly unequal allocations between the members’ accounts in circumstances in which the SMSF’s assets had grown in for the most part because of the capital appreciation of the Suburb H property. The parties’ initial contributions were in a ratio of 4:1 ($80,000 from the Husband; $20,000 from the Wife). By FY2021, individual allocations were in a ratio of approximately 7:1 ($349,401 for the Husband and $48,956 for the Wife). It is likely employer superannuation contributions made by the Husband between 2012 – 2021 were much greater than the Wife’s contributions because his earnings averaged 2-3 times her earnings. Nonetheless, I find that over a long relationship the Wife had made substantial indirect contributions to the Husband’s accumulation of his superannuation interests because of her contributions as the person who performed all household tasks: Cf. Baxter & Baxter [2010] FamCAFC 183 at [45].
In late 2022, the Trustee of the SMSF sold the Suburb H property for $560,000. Its purchase price had been $320,000 in 2013: (the Wife’s Affidavit, [40]). Since its sale, the Suburb H property’s net sale proceeds ($469,198) are the SMSF’s principal asset. Besides the net proceeds of the sale of the Suburb H property, there are no other assets in the SMSF. Although the proceeds are SMSF assets, the proceeds from the sale of the Suburb H property are held in the Wife’s lawyer’s trust account pending Court order.
Adopting the 4-step approach in Hickey, as to step 1 the superannuation assets are as set out in the balance sheet earlier in this judgment.
In identifying the assets, I have not amended the table presented in the Wife’s Outline of Case. That table ought not to be misread. The actual total value of assets in the fund is $469,168: the proceeds of the sale of G Street, Suburb H. The amount of $48,956 allocated to the Wife’s individual member account is subsumed within $469,198.
As to step 2, because the extent of the evidence is only that the Husband held some pre-cohabitation superannuation (and there was no evidence as to its amount) I find that its value was likely to be modest having regard to the amount of $80,000 rolled into the SMSF in 2012 after 8 years of the relationship. Having regard to the parties’ myriad contributions of a financial and non-financial nature over a long relationship, I find that the parties’ contribution to the superannuation assets was equal.
As to step 3, both parties are 53 years old. An overall adjustment in the Wife’s favour would be appropriate because of the Wife’s relatively lesser future earning capacity. Nonetheless, having regard to the adjustment I intend to make as to the non-superannuation assets, I do not propose to make an adjustment in the Wife’s favour as to the superannuation interests more generous to her than the equalising order she sought.
As to step 4, in conclusion, I am satisfied that it is just and equitable to make an order in line with the order that the Wife seeks to equalise the parties’ superannuation: $234,599 (half of $469,198).
As to that equalising order there are two issues.
First, it appears likely that the sale of the Suburb H property will have been a CGT event creating a tax liability for the SMSF. The parties ought equally to share that tax liability. The base amount will have to be reduced so that the Wife contributes equally to any CGT liability for the SMSF (Order 9(f)).
Second, the parties separately hold modest amounts of additional superannuation: the Husband has approximately $12,050 with Super Fund 1. It was submitted that the Husband’s balance was disclosed by him in approximately late 2022. The Wife has $33,146 with Super Fund 2, which was disclosed by her in an updated financial statement (approximately March 2023). The issue is whether these separately held amounts should be taken into account in any equalising order as to superannuation. I have decided not to take those amounts into account on the basis of my satisfaction that the Husband has not made up-to-date disclosure of any amounts he holds in superannuation. The passage of time since he disclosed his personal superannuation outside the SMSF and income means that his superannuation is likely to have increased since late 2022. In contrast, the Wife has provided to the Court an updated financial statement.
Further, there is the significant evidence that the Husband has prematurely appropriated to himself significant marital assets by unilateral withdrawals from the joint account and the appropriation of the sale proceeds of the Suburb P property. That appropriation of property to himself is likely to exceed any benefit which accrues to the Wife by not taking into account the slightly higher amount she holds in her individual superannuation account on an equalising order. I will make an order that a base amount of $234,599 out of the Husband’s interest be allocated to the Wife less provision for 50% of the CGT liability (Orders 9(f) and 16).
CONCLUSIONS
I propose to make the orders largely as set out in the Wife’s further amended initiating application.
Although it is not the purpose of the section to “equalize the financial strength of the parties" (Mallet & Mallet [1984] HCA 21; (1984) 156 CLR 605, 638) or “invite a process of social engineering” (Waters & Jurek (1995) FLC 92,365, 82,376; [1995] FamCA 101), I consider that an alteration to the property the parties is appropriate and just and equitable.
As to the non-superannuation assets, as set out above, I have assessed the Wife’s contributions as 65% of the value of the parties’ interest in property. A further alteration to the parties’ non‑superannuation assets is just and equitable by reference to the parties’ different future earning capacities [s. 75(2)(b) and (g)]. It is also appropriate under s. 75(2)(o) because of the Husband’s actions by appropriating for his own benefit a premature distribution of the marital assets by substantial withdrawals from the parties’ joint bank account and by his sole retention of the proceeds of the Suburb P property.
These relevant factors cumulatively mean that there should be a further adjustment in the Wife’s favour of 10%, or a further $73,804, as the Wife sought in her amended application as to the non-superannuation assets.
The orders will provide for the distribution of the value of the parties’ non-superannuation assets in the proportions of 75% to her and 25% to the Husband. There will be CGT payable on the sale of the Suburb E property. The orders will make provision for the payment of the CGT before the final distribution of the proceeds of sale for the Suburb E Property (order 4(c); order 8).
There will be a separate order for the Husband to transfer the Motor Vehicle 1 to the Wife. The Husband will retain ownership of the Motor Vehicle 2.
As to the superannuation assets, although the Husband made a greater financial contribution to the superannuation pool, I assess the contributions as approximately equal given the Wife’s non-financial contributions over the course of a long relationship. It seems likely the Husband earned most of his superannuation contributions during the currency of the relationship. If, in fact, the Husband made more than a 50% contribution because of his pre-relationship superannuation, I would still adjust the parties’ interests and equalise superannuation because of s. 75(2)(o) considerations. In particular, some adjustment in the Wife’s favour is just and equitable because of the Husband’s premature appropriation to his own benefit of significant marital assets even taking into account the adjustment I have made as to non-superannuation assets. It is just and equitable that the parties’ superannuation in the SMSF be equalised, which was the order the Wife proposed.
Approaching the matter holistically, my conclusions result in an outcome where the Wife ought to retain assets worth 75% of the overall value of the parties’ non-superannuation assets, a total sum of $553,530. The Husband ought to retain assets with 25% of the overall value of the parties’ non-superannuation assets being a total sum of $184,510. The difference between the parties’ ultimate positions would accordingly be $369,020. As to the superannuation assets, superannuation in the SMSF will be equalised. For that purpose, the base amount to be allocated to the Wife out of the Husband’s interests will be $234,599, less the Wife’s CGT amount.
Mechanics as to the Orders
I propose to proceed in accordance with the Wife’s minute of proposed orders.
As to non-superannuation assets, funds held in the lawyers’ trust account as to the Suburb C property will be distributed 75% to the Wife and 25% to the Husband. The Suburb E property will be sold forthwith (and after expenses and CGT) the proceeds will be distributed 75% to the Wife and 25% to the Husband. The Wife will have responsibility for the sale process for the Suburb E property.
As to superannuation assets, the critical order is that there will be a base amount allocated to the Wife out of the Husband’s interest in the SMSF of $234,599 less provisioning for the CGT, which will equalise the value of the parties’ superannuation interests in the SMSF. As all SMSF assets are cash assets, this can be readily achieved. On the transfer of the bank amount to her, the Wife will resign from any office she holds with the Trustee and transfer to the Husband any shares she may hold in the Trustee. The mechanism adopted in the orders is that 100% of the Wife’s interest in the superannuation fund is to be allocated to the husband (order 11) and contemporaneously a base amount expressed in dollar terms is to be allocated to the wife out of the Husband’s interest (order 16). She will roll out her entitlement into a fund other than the SMSF. There will be no orders altering superannuation interests as to modest residual amounts that the Husband holds in Super Fund 1 and which the Wife holds in Super Fund 2.
I certify that the preceding ninety-three (93) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Champion. Associate:
Dated: 25 May 2023
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