Worsnop and Worsnop (No. 2)
[2007] FamCA 1315
•9 November 2007
FAMILY COURT OF AUSTRALIA
| Worsnop & Worsnop (No. 2) | [2007] FamCA 1315 |
| FAMILY LAW – PROPERTY SETTLEMENT – The Commissioner of Taxation as intervenor and whether priority to be given to outstanding debt to the Crown – weight to be given to the claim of the non-taxpayer spouse – just and equitable orders per s79 – lump sum spousal maintenance – child support departure application for lump sum payment – decree of nullity of marriage. |
| Family Law Act 1975 (Cth) ss72, 75(2), 79. Child Support (Assessment) Act (Cth) ss117, 123, 124 |
| Hickey & Anor and Attorney-General for the Commonwealth (2003) FLC 93-143 Kowaliw and Kowaliw (1981) FLC 91-092 at 76,643–76,644 Townsend (1995) FLC 92-569 Brown and Greene (1999) FLC 92-873 at 86,360 Robb and Robb (1995) FLC 92-555 Ascot Investments Pty Limited v Harper & Anor (1981) 148 CLR 337 at 355 Biltoft and Biltoft (1995) FLC 92-614 Af Petersens and Af Petersens (1981) FLC 91-095 at 76,669 Hannah and Hannah (1989) 13 FamLR 531 at 537 J and J [1999] FamCA 369 Lindenmayer J, 1992, 6 Australian Journal of Family Law 240 at 246 Norbis v Norbis (1986) FLC 91-712 at 75,178; 165 per Mason and Deane JJ Waters and Jurek (1995) FLC 92-635 at 82,376 et seq V and V (2003) FamCA 106 Stein and Stein (2000) FLC 93-004 Clauson and Clauson (1995) FLC 92-595 Australian Family Law, Butterworths, 1374.4 Vautin and Vautin (1998) FLC 92-827 |
| APPLICANT: | Mrs Worsnop | ||||
| RESPONDENT: | Mr Worsnop | ||||
| INTERVENOR: | Commissioner of Taxation Australian Taxation Office | ||||
| FILE NUMBER: | SYF | 2193 | of | 2006 | |
| DATE DELIVERED: | 9 November 2007 | ||||
| ORDERS MADE: | 7 and 9 November 2007 | ||||
| PLACE DELIVERED: | Sydney | ||||
| JUDGMENT OF: | The Hon. Justice Rose | ||||
| HEARING DATES: | 7-11 May 2007 | ||||
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr P Hallen SC and Ms M Bridger |
| SOLICITOR FOR THE APPLICANT: | JFS Moy, Solicitor |
| COUNSEL FOR THE RESPONDENT: | Mr G Gould |
SOLICITOR FOR THE RESPONDENT: | LAC Lawyers |
| COUNSEL FOR THE INTERVENOR: | Ms A Rees |
SOLICITOR FOR THE INTERVENOR: | Australian Government Solicitor on behalf of the Commissioner for Taxation |
Orders
Property settlement
That the wife forthwith sign all documents and do all acts and things necessary for the purpose of selling the property situate at and known as
[T] being the whole of the land comprised in Folio Identifier […] (“the former matrimonial home”) by public auction conducted by an auctioneer agreed upon between all of the parties or failing agreement as nominated by the President for the time being of the Real Estate Institute of New South Wales at a reserve price of $4,750,000.00 or such other reserve price as agreed upon by all of the parties in writing PROVIDED THAT in the event of there not being a bid at such auction equal to or in excess of the reserve price then the wife shall sell the former matrimonial home at the best price reasonably obtainable by the parties.
That the wife shall apply the proceeds of sale of the former matrimonial home as follows:
(a) Payment of agent’s commission and auction expenses.
(b)Legal costs of sale.
(c)An amount equal to 50% of the remaining proceeds of sale to be paid to the wife.
(d)Payment to the intervenor of the balance of the remaining proceeds of sale subject to the order for lump sum child support which may be made in these proceedings.
That the husband and the wife provide vacant possession of the former matrimonial home to the purchaser of it on or before completion of its sale.
That the husband and wife ensure that the former matrimonial home is open for inspection by real estate agents and/or prospective purchasers upon receiving reasonable notice.
That the husband and wife do all things reasonably necessary to ensure that the former matrimonial home is in a good condition having regard to its current state of repair pending its sale pursuant to the Orders made this day.
That the husband use his best endeavours to pay all council rates, water rates, fire and household insurance premiums and other outgoings in relation to the former matrimonial home until completion of its sale.
That the husband sign all documents and do all acts and things necessary to cause C Pty Limited to transfer to the wife at his expense the motor vehicle currently used by the wife for herself and the four children of the marriage on or before 23 November 2007.
That the husband and wife sign all documents and do all acts and things necessary to cause all funds currently deposited in their jointly controlled monies account to be paid to the intervenor on or before 23 November 2007.
Declare that subject to the Orders made this day each of the husband and wife is the sole owner of all items of personalty in his or her possession, power or control respectively.
Spousal maintenance
That the order for spousal maintenance made 29 September 2006 continue until completion of the sale of the former matrimonial home.
That the application of the wife for lump sum spousal maintenance is dismissed.
NOTATIONS:
A.That the husband and wife have agreed in relation to the items of personalty that he or she shall retain for his or her sole benefit subject to the Orders made this day.
B.That orders will be made in relation to the wife’s application for lump sum child support and Reasons for Judgment published in relation to those proceedings as well as the Orders made this day at 10.00am on Friday, 9 November 2007.
Orders
Decree of nullity of marriage
The application of [THE WIFE] for a decree of nullity of marriage filed 20 April 2007 was heard this day.
The Court was satisfied that [THE WIFE] was present in Australia when his application was filed.
The Court pronounced a Decree of Nullity in relation to the marriage solemnised at Sydney, Australia between [THE HUSBAND] and [THE WIFE] on […] December 1993 on the ground that the marriage is void.
NOTATIONS:
A.If a party to the void marriage proposes to make any application to the Court as to property or as to the maintenance of that party, such application must be made within 12 months of the making of this decree. After that time such an application cannot be made without first obtaining the leave of the Court to do so.
B.The respondent consented to the application of the applicant filed 9 March 2007.
IT IS NOTED IN CONNECTION WITH THESE ORDERS that the judgment of the Honourable Justice Rose delivered this day will for all publication and reporting purposes be referred to as Worsnop and Worsnop
| FAMILY COURT OF AUSTRALIA AT SYDNEY |
File number: SYF2193 of 2006
| MRS WORSNOP |
Applicant
And
| MR WORSNOP |
Respondent
And
| COMMISSIONER OF TAXATION |
Intervenor
REASONS FOR JUDGMENT
Introduction
In these proceedings, the applicant Mrs Worsnop (who for convenience I shall refer to as “the wife”) seeks orders for property settlement, spousal maintenance and departure from child support.
In addition, the wife seeks a decree of nullity of the marriage between herself and the respondent Mr Worsnop (who for convenience I shall refer to as “the husband”).
The husband opposes the orders sought by the wife and seeks an order that her application be dismissed.
The husband does not oppose the wife’s application for a decree of nullity of marriage.
The wife had sought parenting orders. However, I was informed by counsel for the wife and the husband that orders were no longer sought. Accordingly, by consent the pending applications for parenting orders were dismissed.
The intervenor sought orders as set forth in his Amended Application in a Case filed 29 January 2007, subsequently supported by Points of Claim filed 2 April 2007. The orders so sought included inter alia:
(e)The setting aside of the transfer by the husband to the wife of his one-half interest as a joint tenant in the property situate at [T] (“the former matrimonial home”) pursuant to s106B(1).
(f)Declaration that the wife holds her interest as the sole registered proprietor of the former matrimonial home upon trust for the husband, as well as funds held on deposit in the joint names of the wife and the husband upon trust for the husband. The intervenor relied upon a resulting trust.
(g)Funds held in the joint account of the wife and the husband be applied in payment of outstanding liabilities to the intervenor.
(h)That the husband and wife do all things necessary to pay to the intervenor all amounts outstanding for unpaid tax incurred by or either of them and C Pty Limited.
(i)That orders are made pursuant to s90AE(2) to give effect to the last mentioned order.
(j)Orders by way of enforcement requiring the appointment of a trustee for sale of the former matrimonial home.
(k)That the wife produce certain documents. It was an interlocutory issue.
(l)Costs.
Counsel for the intervenor made clear during the hearing, indeed during her oral submissions, that the intervenor no longer sought an order pursuant to s 106B(1); the declaration which I have referred or orders pursuant to s90AE(2). It was accepted by counsel that pursuant to s79, a discretionary power is given to not only alter the interests of the husband and wife in the former matrimonial home and other property, but that an order may also be made requiring the wife to pay to the intervenor direct or to the husband for payment by him to the intervenor, the whole of the net proceeds of sale of the former matrimonial home or such proportion thereof as determined pursuant to the power to make orders for property settlement which are just and equitable.
It was of course emphasised by counsel that the intervenor does not resile from his application that the wife sell the former matrimonial home and that the whole of the net proceeds of sale be paid to the intervenor in partial satisfaction of the outstanding tax liabilities of the husband and C Pty Limited.
Historical background
The agreed history in these proceedings is set out in Exhibit 13 which I reproduce as follows.
The wife was born in Australia in March 1965.
The husband was born in England in November 1965.
The wife and the husband commenced cohabitation in or around late 1991 (the husband says 1992) and were married in December 1993. The parties separated finally on or about 29 November 2005. There were two periods of attempted reconciliation which failed. They have lived separate and apart from each other under the same roof, namely in the former matrimonial home since in or about September 2006.
The parties cohabited for a period of approximately 14 years. The parties have not as yet been divorced from each other.
The wife and the husband were each married previously. The wife was divorced but the evidence reveals that the husband was not divorced at the date of their marriage to each other.
There are four children of the marriage, namely:
(a)A who is 13 years of age having been born in September 1994 and is a pupil at K School.
(b)The twins, B and C who are 11 years of age having been born in May 1996. They are pupils at P School.
(c)D who is about 20 months old, having been born in January 2006.
The husband has a child by his prior marriage, L who was born in December 1988.
The four children reside with the wife and the husband in the former matrimonial home. L previously resided with the wife and the husband for a time but returned to live in Europe with her mother in December 2006.
At the commencement of the parties’ cohabitation neither had any assets of any substantial value. The only asset of the husband was a Jaguar XJS which he shipped from the UK to Australia, the value of which is not disclosed. The husband had some debts.
When cohabitation commenced the wife and the husband were each employed. The wife was employed by her sister’s company S International Pty Limited. After he arrived in Australia in about 1992 the husband was also employed in that company. The husband left that company in early 1996.
The husband since early 1996 has conducted in his own business. The business was conducted through a number of different companies. One company, C Pty Limited (“[C Pty Limited]”) was the Australian company. That company was registered in February 1996 as an Australian proprietary company, limited by shares. It started business in June 1996. At all times, the sole director and shareholder was the husband. The wife was appointed as the secretary. Each was appointed on 21 March 1996. There is no issue that C Pty Limited is the commercial vehicle by which the husband conducted business activities, or that it is his alter ego.
The business conducted by the husband involved purchasing from the United States electronic parts and systems which were shipped to Australia for assembly and ultimately resale. Initially, the method by which this was done appears to have been relatively straightforward.
In or about 2001 the manner in which the husband conducted the business changed. He commenced to do business using off shore bank accounts and stock trading accounts.
One of the entities through which the husband conducted business from in or about 2000 was C International Limited a company incorporated in Hong Kong in April 2000. It traded from that time under the business name “[W]”.
The wife during the marriage was primarily occupied with homemaking and parenting responsibilities although she assisted the husband and C Pty Limited following its incorporation.
During the marriage the parties bought and sold a number of properties:
(a)P property (Folio Identifier …) purchased in the name of the wife for $270,000.00 (by transfer dated 7 April 1995) with registered mortgage to Citibank Limited of $216,000.00 and the balance from joint savings. The property was sold by the wife for $287,000.00 (by transfer dated 17 November 1995).
(b)O property (Folio Identifier …) purchased in the joint names of the wife and the husband for $340,000.00(by transfer, undated, but apparently given on 4 September 1995) by registered mortgage with Westpac Banking Corporation of $272,000.00 and was sold by the wife and husband for $463,000.00 (by transfer dated 31 October 1997).
(c)W property (Folio Identifier …) purchased in the joint names of the wife and the husband for $1,540,000.00 (by transfer dated 1 May 1998) with registered mortgage to Citibank Limited of $750,000.00 and was sold by the husband and wife for $1,750,000.00 (by transfer dated 28 June 1999).
(d)M1 property (Folio Identifier …) purchased in the joint names on or about 31 July 1998 for $440,000.00 with registered mortgage to Citibank Limited of $308,000.00 and was sold on 24 May 2002 for $485,000.00.
(e)T property (Folio Identifier …) (“the former matrimonial home”) purchased in the joint names of the wife and the husband for $3,450,000.00 (by transfer dated 28 June 1999) with mortgage to Citibank Limited of $2,000,000.00. By transfer dated 5 October 2000 the husband transferred his interest in the T property to the wife for a consideration of $1.00. The value of the husband’s interest at that time was $1.5 million.
(f)C property, England was purchased on 4 February 2004 in the name of the wife (ie her maiden name) for ₤1,300,000.00. The land was registered in the wife’s name on 24 February 2004. The source of the funds included $955,025.00 drawn down on Citibank account number 811526276. There is some dispute as to whether the whole of this amount was spent on the property. The husband asserts that $170,000.00 was used to purchase a motor vehicle. This property was sold in or about February 2006 for ₤1,522,380.12 (AUD$3,670,602.00).
(g)M2 property was purchased by the parties in joint names in or about November 1997 for $555,000.00. The property was subject to a registered mortgage to Citibank Limited securing a debt of $402,000.00. The amount of $98,978.71 was applied from the sale proceeds of O property. The property was sold by undated transfer for $527,500.00.
On or about 7 November 2005 the husband purchased in his sole name the property situated at and known as B (Folio Identifier …). The purchase price of $248,000.00 was drawn down from the Citibank account and secured on the former matrimonial home. The husband asserts that the property is for sale. The husband seeks the proceeds of sale to be paid to the ATO also. There is no evidence that this property is subject to any collateral mortgage that has not been registered.
On 28 October 2005, C Pty Limited as lessee entered into a lease with the husband as lessor of the B property. The term of the lease was three years commencing on 8 September 2005 until 7 September 2008 (with a three year option to renew) with a starting rent of $16,800.00 per annum.
At or about the date of the transfer of the husband’s interest to the wife in the T property the amount in debit in Citibank account number A1 was $179,467.58. There was no debit balance outstanding at that time in Citibank account number A2.
On 2 December 2005 the wife drew down $250,000.00 and placed it in an account in her name.
On 5 December 2005 the husband drew down $167,000.00 from the Citibank account number A1and placed it in an account in his name.
The household expenses during the marriage including school fees were paid using credit cards and a cheque account conducted with Citibank. The husband says that the average monthly expenditure was between $8,000.00 and $15,000.00 (see paragraph 10 of the husband’s Affidavit sworn 19 April 2007).
In late December 2005 or early January 2006 the husband commenced to instruct LAC Lawyers Pty Limited in relation to his matrimonial and taxation affairs. That firm has continued to act for the husband in relation to those matters since that time.
Between 5 January 2006 and 26 February 2007 the husband deposited in the account of his lawyers amounts totalling $1,250,943.57. The husband’s legal costs and disbursements are said to have been (during that period) $1,040,943.57, being the amount paid less $210,000.00 paid to the Australian Taxation Office (“the ATO”).
The Application for Final Orders was filed by the wife on 3 February 2006. The Amended Application for Final Orders was filed by the wife on 20 April 2007. The principal affidavit of the wife is one sworn by her on 19 April 2007. The wife’s most recent Financial Statement is that sworn on 19 April 2007.
In about early February 2006 the solicitors for the husband were instructed to make initial contact with the ATO in order that the husband might commence the process of making a voluntary disclosure of various matters both on his own behalf and on behalf of C Pty Limited. The first contact was made on or about 24 February 2006.
On 3 March 2006 the ATO was advised of the wife’s application.
The Response to the Application for Final Orders was filed by the husband on 1 May 2006. An Amended Response by the husband was filed on 24 April 2007. The principal affidavit of the husband is one sworn by him on 19 April 2007. The husband’s most recent Financial Statement is that sworn on 10 March 2007.
On the application made by the Commissioner of Taxation, an order was made by Judicial Registrar Johnston on 15 May 2006 that he may intervene and become a party to the proceedings. The intervenor’s Amended Application in a Case was filed 29 January 2007. The intervenor’s Points of Claim dated 30 March 2007 have been served. The intervenor’s principal Affidavit is that of Mr X sworn 19 April 2007.
In order to identify and quantify relevant tax shortfalls of income tax in or about May 2006, S Chartered Accountants conducted a prudential audit of the husband and companies in which he was involved or with which he had a relationship between 1992 and 2006.
On 27 July 2006 the wife’s solicitor wrote to the solicitor for the intervenor regarding inter alia the assertion made that the wife may have a “significant tax liability”.
On 28 July 2006 the solicitor for the intervenor wrote to the solicitor for the wife confirming that “at this time the Commissioner is not undertaking any formal audit investigations as to the taxation affairs” of the wife. Since then no suggestion has been made that the position has changed.
Between 4 September 2006 and 30 January 2007 Notices of Amended Assessment was issued by the ATO to the husband covering each financial year from 1996 to 2006.
On 29 September 2006 orders were made that the proceeds of sale of the C property, England together with the interest accrued thereon be remitted to Australia.
On 29 September 2006 orders were made for interim spousal maintenance, interim costs, payments to Citibank and the intervenor.
On or about 18 October 2006 the proceeds of sale and the interest accrued thereon were transmitted to Australia and held in a controlled monies account to be disbursed in accordance with the orders.
On 2 November 2006 there was paid $1,590,303.15 to the second respondent.
On 18 October 2006 the wife’s solicitor received $97,028.00 on account of the wife’s interim costs.
On 30 January 2007 a Notice of Assessment and Liability to Pay Penalty was issued to the husband.
As at 11 April 2007 the husband’s total liabilities said to be owed to the intervenor and claimed in these proceedings is $11,904,168.47.
As at 11 April 2007 C Pty Limited’s total liabilities said to be owed to the intervenor and claimed in these proceedings is $421,756.43.
In respect of paragraphs 49 and 50 the amounts claimed includes general interest charges.
At the present time the wife’s primary asset is the former matrimonial home. The property is valued at $4,750,000.00 and is unencumbered. The proceeds of sale of the C property having been used in part to discharge the debts secured on it.
The wife has continued to live in the former matrimonial home with the four children since separation. The husband has lived there as well since about November 2006.
On 5 October 2006 a child support assessment was issued providing for the husband to pay child support of $2,570.33 per month for the period 1 July 2006 to 31 October 2006 and $2,570.33 for the period 1 November 2006 to 31 January 2008. No application by the husband has been made to review the assessment.
On 30 January 2007, orders were made that after payment of $34,000.00 (being general interest charges by the husband to the intervenor from the joint account created by order made on 29 September 2006) the balance of the funds in that account were then applied by the wife and the husband in partial discharge of all amounts secured by the mortgage over the T property.
At the date of the trial the wife is not in paid employment.
Nullity of marriage
By her Amended Application for Final Orders filed 20 April 2007 the wife seeks a decree of nullity of marriage.
Counsel for the husband informed me that the application was not opposed.
The relevant facts are as follows.
At the time of the marriage between the husband and the wife, which took place in December 1993 at Sydney, the husband was still married to … (“the previous wife”).
The husband was married to the previous wife in April 1998 which took place at the City of Westminster, England.
The marriage between the husband and the previous wife was dissolved by decree nisi made on 16 December 1992 in the Epsom County Court, England.
The decree nisi became absolute on 4 January 2002.
Consequently, I find that at the time of the marriage between the husband and the wife, the husband was lawfully married to another person, namely the previous wife as at that time the decree nisi had not been made absolute.
Having regard to the findings that I have made, I am satisfied that the wife has established that the marriage between herself and the husband is void in that at the time of that marriage the husband was lawfully married to the previous wife.
A decree of nullity of marriage will be made.
Relevant legal principles
It is now well established that generally speaking the approach to be taken to determination of property settlement proceedings, concluding with an order that is “just and equitable”, represents four steps.
The first of which is that the Court should determine the property and financial resources of the parties at the date of the hearing.
Secondly, determine the nature and extent of the respective contributions made by each of the parties whether financial or non financial, including contribution to the welfare of family in the role of home-maker and parent.
Thirdly, determine and assess the relevant matters pursuant to s75(2).
Fourthly, consideration of orders, if any, that should be made that are just and equitable.[1]
[1] Hickey & Anor and Attorney-General for the Commonwealth (2003) FLC 93-143
I will now proceed to make findings in relation to the property of the parties, their respective financial and non-financial contributions and relevant matters (if any) pursuant to s 75(2) of the Act. In addition, I will make findings in respect of the issue of “waste” raised by the applicant.
Property of the parties
Exhibit 14 is an agreed schedule of the property of the parties at particular historical dates including at the date of the hearing. So far as the latter is concerned, the schedule is as follows:
E. At date of hearing Asset Ownership Husband’s value Wife’s value Agreed value T property Wife 4,750,000 4,750,000 4,750,000 B property Husband 262,000 262,000 262,000 Contents of T property Joint 72,603 72,603 72,603 12 items located in container being part of contents of C property Joint 1,830 1,830 1,830 Contents of B property Husband 4,655 4,655 4,655 Balance of funds from sale of boat & sale of C property in LAC controlled moneys a/c Joint 150,065
(as at 09/05/07)150,065
(as at 09/05/07)150,065
(as at 09/05/07)Bank account Husband 8,125 100 8,125 Bank account Wife 100 125 100 Shares in C P/L Husband Not known 2003 Mercedes Benz E55 vehicle Husband 111,200 Addback proceeds of HSBC [USD91,000] Husband **109,694 Addback monies paid by husband to Amex USD36,000 from funds in accounts overseas in A a/c … Husband **67,631 Addback GIC paid to ATO for year ended 30/06/05 Husband **34,718 Addback income tax paid to ATO for husband & C Pty Limited for 30/06/05 & 30/06/06 years Husband **1,590,313
210,000
1,800,313Addback proceeds of sale of golf membership Husband *52,000 Wife asserts that husband has had the benefit of the amounts sought to be added back. The husband denied the addback. Addback monies paid to wife on account of interim costs 178,006.75
(97,000 + 81,006.75)Addback monies paid by husband for legal costs 1,040,943 1,040,943 Addback proceeds of sale of Aston Martin & Porsche 997 vehicles Husband [C P/L] *415,000 Addback proceeds of sale of 2005 Bentley Continental GT & 2004 Mercedes Benz SL65 AMG Husband [C P/L] *326,364 Addback proceeds of sale of Mercedes SL55, Range Rover Vogue & Porsche 997 vehicles *425,000 Addback proceeds of sale of Patek & Rolex Daytona watches, clothes & shoes Husband 35,000 Addback proceeds of sale of shoes, diamond earrings & ring Husband 27,000 Addback proceeds of sale of wine fridge Wife 2,000 2,000 Addback of distributions made in December 2005 (H) *167,000
(W) *167,000(W) *250,000
(H) *250,000(H) $167,000
(W) $250,000Superannuation 28,496 28,498 Total Note: where * occurs there is dispute about whether there should be an addback. Note: where ** occurs there is a dispute about the quantum and whether it should be an addback Liabilities Ownership Husband Wife Agreed value Income tax, GIC & RBA deficit debt Husband *12,031,124
Company’s liability for tax not included ($418,076)(H) 12,031,124
(W) 418,076Credit card ANZ Visa Gold Wife *12,158
Wife alleges liabilities to be taken into account. Denied by husband12,158 12,158 Credit card Westpac Earth Wife *17,828 17,828 17,828 Suncorp Metway – lease on Mercedes Benz Husband *83,998 83,998
There are a number of disputed items described as “add-back” in Exhibit 14 which are the subject of the following findings.
The approach that I will take to a conclusion or otherwise of “add-backs” will follow the guidance provided in Kowaliw and Kowaliw[2]. The effect of the judgment in Kowaliw is that the financial losses which the parties or either of them incur in the course of a marriage:
“…should be shared by them (although not necessarily equally) except in the following circumstances:
(a)where one of the parties has embarked upon a course of conduct designed to reduce or minimise the effective value or worth of matrimonial assets; or
(b)where one of the parties has acted recklessly, negligently or wantonly with matrimonial assets, the overall effect of which has reduced or minimised their value.”
[2] (1981) FLC 91-092 at 76,643–76,644
The conduct referred to in its economic consequences is relevant pursuant to the provisions of s75(2)(o).
A number of Full Court judgments, including Townsend and Townsend[3] and Browne and Green[4] approved Kowaliw as “a well accepted guideline in this jurisdiction”.[5]
[3] (1995) FLC 92-569
[4] (1999) FLC 92-873 at 86,360
[5] Browne and Greene, ibid
Add-back proceeds of HSBC; add-back monies paid by husband to AMEX
An examination of the evidence reveals little controversy regarding the quantum.
There is no doubt that these liabilities were incurred in circumstances where the husband and the wife, as well, continued to lead a luxurious lifestyle. This is not a case where one of them has been frugal or modest in the incurring of expenses, either prior or subsequent to separation.
In those circumstances, I will not provide an “add-back” to the funds represented by these two particular items.
Add-back GIC paid to ATO year ended 30/06/05; add-back income tax paid to the ATO by the husband and C Pty Limited for 30/06/05 and 30/06/06 years
With regard to quantum, I am left in a similar position to my view of the evidence in relation to the add-backs referred to earlier.
The finding that I make is that primary tax was payable regardless of when it was paid. A separate issue is the amount of interest and/or penalties paid to the Australian Taxation Office (“ATO”). During the course of submissions I was not referred to that distinction, so far as the evidence is concerned. Indeed it is apparent from Exhibit 14 that no such distinction is provided, notwithstanding the evidence of notices of assessment.
Accordingly, I do not propose to include these particular “add-backs” for the purpose of calculation of the parties’ net property.
Add-back proceeds of sale of golf club membership
The evidence of the husband, which I accept, is that the proceeds of sale were provided to C Pty Limited as working capital. There is no evidence of substance before me to suggest that funds were not applied in that manner. Clearly it was in the interests of the husband, wife and the intervenor that C Pty Limited be able to continue to trade in order to fund the monthly instalments that were being paid by the husband to the intervenor on account of the outstanding tax liabilities.
It follows that this amount will not be added back in the calculation of the net property of the parties.
Add-back monies paid by husband for legal costs
It is clear from Exhibit 14 that this amount is not a designated disputed item.
However, in the event that there is any controversy in respect of this item, I have determined that the amount involved should be added back. It represented substantially the amounts paid by the husband to his lawyers to meet the expense of his tax advice and implicitly the prudential audit. Certain amounts may also have been paid on account of costs in these proceedings. The former was necessitated solely due to the husband’s actions in not disclosing to the ATO his taxable income. Consequently, it should be regarded as the husband’s notional asset.[6] The latter expense will be likewise included in accordance with established principle.
[6] Townsend, ibid
Add-back proceeds of sale of motor vehicles
There is no issue that the proceeds of sale of the luxury motor vehicles described in Exhibit 14 were applied for the direct and indirect purposes of providing working capital for C Pty Limited and payments to the intervenor on account of outstanding tax liabilities.
The evidence is not sufficiently clear for me to make a finding as to whether or not the proceeds of sale paid to the intervenor were for interest and/or penalty as opposed to primary tax, and/or that money paid to C Pty Limited was not in fact utilised for working capital.
Consequently, I have determined that the amounts represented by the proceeds of sale of motor vehicles will not be included as an add-back.
Add-back of distributions made in December 2005
Following the separation of the husband and wife in about November 2005, each made substantial withdrawals of funds during the following months. The husband withdrew $167,000.00 whilst the wife withdrew $250,000.00.
The wife gave evidence in her primary affidavit of the purposes of the withdrawals and in her oral evidence explained the circumstances.
The wife’s evidence in relation to this matter was plausible. I accept her evidence as to the reason for the withdrawal and the manner in which the amount was applied. Given the luxurious lifestyle that the parties led immediately prior to separation and indeed for many years during their cohabitation, expenditure by the wife was implicitly consistent with that lifestyle.
I also accept the evidence of the wife that she did not have the requisite knowledge at the time of the withdrawal, to appreciate that there was a potential to create unnecessary financial strain to C Pty Limited by the amount that she withdrew. Indeed, the husband did not give any contrary evidence.
The husband’s withdrawal of $167,000.00 appeared to have been made immediately prior to him travelling overseas with his then girlfriend. In the circumstances of other parties to a marriage who led a more modest lifestyle and the expenditure by a spouse of the amount that the husband withdrew in these proceedings, even if only in part for private purposes, may have led to a finding that the amount withdrawn was financially reckless. The husband, of course, was aware that in December 2005 he had a potential tax liability and that money should have been set aside to meet it. However, each of the parties blindly continued with seeking to maintain at all times the same luxurious lifestyle that they had led during the period of cohabitation, even after disclosure had been made by the husband to the intervenor and to the wife’s lawyers, except that the husband did subsequently sell a number of expensive motor vehicles and other personal property.
In those circumstances, I have determined not to include the subject amounts as add-backs for the purpose of calculation of the net property of the husband and wife.
Liabilities
Income tax - husband
The amount of the undisputed and enormous tax liability of the husband is $12,031,124.00. That amount includes interest and penalties.
I have determined to consider the treatment of this liability in the course of my conclusion regarding the exercise of discretion in making orders that are just and equitable, given the unusual facts in this case.
Therefore, the personal tax liability, quite apart from the tax liability of C Pty Limited for which the husband will be undoubtedly responsible, will not be included in the net property of the husband and wife. In relative terms, the only significant property is the former matrimonial home which has an agreed value of $4,750,000.00.
The case for the wife is that she should be left with retention of the former matrimonial home albeit, that it was recognised by senior counsel for the wife in his submissions that such an order was unlikely.
The case for the intervenor and the husband is that orders should be made requiring the wife to sell the former matrimonial home and the whole of the net proceeds of sale provided to the intervenor in partial satisfaction of the tax liabilities.
Ultimately, for the purpose of determining the proceedings pursuant to s79, I have a wide discretion to make orders that are just and equitable. Consequently, in the peculiar facts of this case, I have concluded that it is preferable for all relevant findings in respect of the tax liabilities to be considered in the course of my conclusion, rather than on the issue of whether or not the tax liability should be categorised as an “add-back”.
I will now proceed to make findings of fact in relation to the circumstances that gave rise to the tax liability of the husband and indeed that of C Pty Limited. I will also make findings in relation to the issue raised by the intervenor, namely that the wife knew, or ought to have known, of the tax liability or the potential for it at all relevant times.
The wife’s case is that the husband did not inform her of his non-disclosure of income for tax purposes, nor was she in possession of knowledge to make her so aware, or that she ought to have been aware.
The case for the husband is that he did inform the wife, whether directly or indirectly, that he was not disclosing income or held funds including off shore accounts he was not disclosing for tax purposes.
Clearly an issue of credit arises regard portions of evidence of the parties’ conflict.
I have determined to accept the evidence of the wife wherever it conflicts with that of the husband in relation to these factual issues. I accept the evidence that the wife did not know nor ought to have known the husband’s non-disclosure of income or funds held in bank accounts which were not disclosed by him for tax purposes. My reasons are as follows.
Whilst the written case outline lodged on behalf of the husband does not represent evidence, nonetheless one of its purposes is that the issues for trial are made clear, subject to further evidence that may be adduced during the course of the trial.
The husband was well represented by experienced and competent counsel.
In the husband’s case outline document,[7] it is not contended that the wife knew or ought to have known of the husband’s non-disclosure of income for tax purposes. No doubt, if counsel’s instructions had been different, then the issue would have been raised in the case outline document.
[7] Lodged by facsimile transmission, 3 May 2007
It became clear during the course of the trial that the case for the husband mirrored that of the intervenor. The case for the intervenor was that irrespective of actual or imputed knowledge of the wife of the husband’s non-disclosure of income for tax purposes, an order should still be made for the wife to sell the former matrimonial home and apply the whole of the net proceeds of sale in partial satisfaction of the husband’s tax liability. The intervenor, through counsel, nonetheless maintained its approach that the wife knew or ought to have known of the non-disclosure of income for tax purposes.
The primary affidavit of the husband, being his Affidavit sworn 19 April 2007, is noteworthy for lack of evidence of the husband informing the wife that he had not disclosed income that should have been disclosed for tax purposes, nor that he had a real or potential liability for tax that he had avoided.
The only possible relevant evidence given by the husband in that affidavit is as follows:
“On numerous occasions over the past 5 years or so the wife would say to me in words to the effect ‘Why don’t we buy more properties in Australia to provide for our future financial security’. I would respond in words to the effect ‘There is no point in us buying more properties because the taxman may take them all’.”[8]
[8] paragraph 57
That evidence, even if accepted by me, does not amount to information being given by the husband to the wife that he had not disclosed income for tax purposes. The husband does not suggest in that evidentiary material that he informed the wife that he avoided the payment of tax or that he has non-disclosed taxable income which is likely to result in tax liabilities.
During the course of cross-examination by senior counsel for the wife, the husband maintained that he had informed the wife about tax or a potential tax liability and that the conversation or conversations in that regard should have been in his affidavit.
The husband also gave evidence that he had informed the wife in about the year 2000 that he had established an account in the Isle of Mann, that he “can put in dodgy money there, funny money”. The husband said that those alleged conversations were also not in his affidavit, but that they were important matters, and that the omissions from his affidavit were due to either the fault of his lawyers or that he did not carefully read his affidavit before he swore it.
In addition, the husband denied that he had not told the wife of any financial action on his part which had the effect of not properly declaring income to the ATO.
I do not accept the oral evidence of the husband in relation to information that he allegedly gave to the wife with regard to his description of funds deposited in accounts in the Isle of Mann, or that he had informed the wife of his tax or potential tax liability. Absent evidence to the contrary, I do not accept that the husband’s lawyers may have been at fault in the drafting of the husband’s affidavit whereby very significant evidence was omitted, nor do I accept that the husband was so careless in the reading of his affidavit before swearing it that he overlooked the omission from the affidavit of the conversations to which I have referred.
During the course of her evidence, the wife denied being informed of “funny money” alleged by the husband or, of any circumstance which should have alerted her to the fact or given her knowledge of the husband’s failure to pay tax or to disclose taxable income. Each of the husband and wife agreed that the husband did say on occasions to a group of people, which included the wife, words such as “I’ve had to pay my tax”.
The husband also agreed that the wife had no reason to reject the transfer by him to her of his interest in the former matrimonial home.
The wife had given evidence that so far as she was concerned, she understood that the husband had issues with third party commercial creditors and consequently the former matrimonial home and other property had been purchased in her name. However, so far as she was concerned the husband was very successful in his sole control of the business activities. He agreed that the wife had every reason to think that the company was “doing very well” under his leadership.
It must be remembered that at all material times the wife was solely devoted to running the home of the husband and wife and their children, as well as the husband’s daughter of his prior marriage for some years. For his part, the husband exercised sole control and management of the business activities of C Pty Limited. They led a luxurious lifestyle for many years. I accept the evidence of the wife that the establishment of the off-shore bank accounts was from her viewpoint, part and parcel of the manner in which the husband conducted his business activities with her full confidence and reliance upon him.
My observation of the wife whilst giving her evidence, her answers and the manner of answering whilst under cross-examination, leads me to accept her as a witness of truth and reliability. In contrast, I found the husband’s evidence to be unreliable. It was a very serious allegation for the husband to make that he had told the wife about money in the off-shore accounts fitting the description “funny money” or “dodgy money”. No such evidence was given by him in his primary affidavit.
In addition, he does not deny the evidence of the wife that from time to time she suggested that money might be more worthwhile spent upon the acquisition of property for investment, rather than expensive motor vehicles or overseas travel.
I accept the submission made by senior counsel for the wife that adverse to the credit of the husband, was the cross-examination of the wife by his counsel to the effect that an American Express card statement showing a debit balance of approximately $100,000.00 for 2005 is an example of the wife’s extravagant spending. Yet, it became apparent that such expenditure was not extravagant at all, having regard to the particular items of expenditure that were involved. That was ultimately conceded by the husband.
There is a certain irony in the cross-examination of the wife that took place in relation to that matter given that in August 2005 a cruiser was purchased by the husband for $1,100,000.00.
I also accept the submission made by senior counsel for the wife that it was not put to the wife in relation to the issue of “knowledge”, that she knew that money should have been paid to meet income tax obligations was used for different purposes.
A relevant matter so far as the alleged knowledge of the wife is concerned, and agreed to by the husband in his evidence, is that on occasions he had said to her, as well as to others that he had paid tax or had to pay tax. The wife was entitled to believe him.
Consequently, as I have earlier stated, I find that the wife did not know nor ought to have known that the husband had failed to meet his tax obligations for the periods of time which has resulted in his and C Pty Limited’s current tax indebtedness.
Credit cards - ANZ and Westpac (wife)
I accept the evidence of the wife in relation to her credit card indebtedness which was not the subject of detailed challenge.
It may well be that those items of expenditure were extravagant, however, such expenditure was consistent with the lifestyle that each of the parties have continued to lead. That has included the continued use of expensive motor vehicles rather than the sale of them to reduce ongoing expenses albeit with more modest motor vehicles.
Suncorp Metway – Mercedes Benz lease (wife)
I accept the evidence of the husband that he is committed so far as this motor vehicle lease is concerned.
I make the same observations in relation to this matter as those which appear in the preceding paragraphs dealing with the wife’s credit cards.
Consequently, both the credit card indebtedness of the wife and the motor vehicle lease will remain in the calculation of the net property of the parties.
There is no dispute in relation to the inclusion of the Mercedes Benz motor vehicle as the property of the husband. Consequently, the liability it creates pursuant to the lease should also be included.
Revised property of the parties
Consistent with my earlier findings in relation to disputed items in Exhibit 14, I find that the property of the parties is as follows:
E. At date of hearing Asset Ownership Agreed value T property Wife 4,750,000 B property Husband 262,000 Contents of T property Joint 72,603 12 items located in container being part of contents of C property Joint 1,830 Contents of B property Husband 4,655 Balance of funds from sale of boat & sale of C property in LAC controlled moneys a/c Joint 150,065
(as at 09/05/07)Bank account Husband 8,125 Bank account Wife 100 Shares in C P/L Husband 2003 Mercedes Benz E55 vehicle Husband Total $5,249,378 Liabilities Credit card ANZ Visa Gold Wife 12,158 Credit card Westpac Earth Wife 17,828 Suncorp Metway – lease on Mercedes Benz Husband 83,998
Contributions of the parties
There was little challenge to the evidence in chief of the parties in relation to their financial and non-financial contributions including the contribution in the role of homemaker and parent.
My findings in relation to the parties’ contributions are as follows.
The wife
The wife’s initial contributions were negligible as she did not have any property of significance beyond her clothing and personal effects.
During the period of cohabitation of the parties the wife made financial contributions in various categories.
The wife was engaged in employment from the commencement of cohabitation until shortly prior to the birth of the parties’ first child. I infer that the wife’s income was utilised towards meeting the parties’ general and personal living expenses, absent evidence to the contrary.
In addition, the wife provided part-time assistance in the operation by him of the business activities of C Pty Limited for a period of about two years commencing in 1996. That work included preparing purchase orders and assisting in the packing and cleaning of equipment.
The wife proceeded to purchase either in her sole name or jointly with the husband various real estate and as a consequence granted mortgages as security for funding of real estate purchases as well as secure lines of credit utilised principally by the husband for commercial activities.
The wife also made an indirect financial contribution by the carrying out or the supervision of real estate renovation and decoration.
In addition, the wife participated directly or indirectly in landscaping to the former matrimonial home and supervision of gardeners.
The wife ensured that the parties’ homes were suitably maintained.
The wife made a contribution to the welfare of the family in the role of homemaker and parent. In that regard, the wife carried out a range of domestic work, albeit with domestic assistance with a cleaner.
The wife attended to the care, upbringing and supervision of the children of the marriage on a daily basis.
Further, the wife made a contribution as homemaker and parent in the care and attention provided to the husband’s daughter from a prior marriage.[9] The husband’s daughter lived with the parties and the four children for a period of about three years during the course of attending secondary school.
[9] Robb and Robb (1995) FLC 92-555.
The husband
As with the wife, the husband’s initial contributions were negligible. I accept the husband’s affidavit evidence that at the commencement of cohabitation he had personal belongings and was in debt. The amount was not stated.
During the period of cohabitation the husband made financial contributions represented by him employment in a … sales business operated by the wife’s sister and subsequent to 1996 the husband’s own business activities.
The husband established and maintained business activities centered upon the purchase from the United States of America of electronic parts and systems and then the shipping of those parts and systems to Australia for assembly and re-sale. His conduct of business activities for some years involved the use of offshore bank accounts and stock trading accounts.
The husband utilised C Pty Limited as the commercial entity for those business activities.
The husband is also engaged in share dealing.
There is no issue that the husband worked very hard in these business activities as was readily conceded by the wife during the course of her oral evidence.
The husband purchased real estate jointly with the wife, or in his own name, or otherwise attended to all necessary matters of finance and conveyancing in relation to real estate purchase by the wife.
The net proceeds of sale generated by the sale of such real estate was directed by the husband generally in concert with the wife towards the purchase of other real estate.
The husband has applied his income and other funds at his disposal in meeting living expenses, liabilities and lifestyle at a luxurious level.
The wife conceded that the husband made a contribution to the welfare of the family in the role of homemaker and parent.
Subsequent to the separation of the parties and in particular since they have lived separate and apart from each other under the same roof in the former matrimonial home, the husband made a further contribution in the role of homemaker and parent. So far as that contribution is concerned, evidence is set forth in more detailed fashion in contrast to the evidence of that particular category of contribution made prior to separation. The husband’s evidence is set forth in his Affidavit sworn 19 April 2007, paragraph 52. I accept it, as it was not the subject of challenge and is given in a detailed, plausible fashion.
In summary, the husband has shared the care of the four children with the wife. The husband has driven them to and from school, assisted with homework, attended to the youngest child, engaged with the children in a variety of ways as set forth in the husband’s affidavit.
In conclusion, subsequent to the parties’ separation the husband has continued to provide substantial financial support for the children by continuing to pay private school fees for the older children, meeting the cost of all living expenses.
Assessment of contributions
There is no issue that each of the husband and the wife applied himself or herself to the fullest extent in making the various contributions, the subject of my findings.
Counsel for the husband and wife submitted that the parties’ respective contributions should be assessed as being equal.
My own independent review of those contributions leads me to the same conclusion.
Consequently, I find that on a global basis, the financial and non-financial contributions of each of the husband and wife including in the role of homemaker and parent are assessed as equal.
Relevant matters pursuant to section 75(2)
I make the following findings in relation to relevant matters pursuant to the provisions of s75(2).
The wife and husband are 41 and 42 years of age respectively. Each of them is in good health.
The income of the wife is $1265.00 per week. The wife’s sources of income are: $165.00 per week for family tax benefit; and $1105.00 per week paid by the husband pursuant to the interim maintenance order made 29 September 2006.
The wife has the property described in paragraph 136. The wife also estimates that the husband meets household expenses estimated as $650.00 per week. The wife’s oral evidence in relation to her ongoing actual estimated reasonable weekly commitments was vague, uncertain and unreliable.
The wife has the physical and mental capacity for appropriate gainful employment in general office work reflecting her previous experience in assisting the husband in his business activities. However, I find that the wife currently does not have the ability to exercise that capacity for employment given her commitments in the daily care of the four children whose ages range from 13 years to 21 months.
The wife gave vague evidence of her willingness to seek employment including in the fashion industry. However, no evidence was given by her or any other witness of precisely the nature and extent of that employment, the reasonable prospects of availability even now or in the foreseeable future, let alone the range of income that the wife may be able to achieve.
The husband’s income amounts to an estimated $2079.00 per week. The sources of that income are the salary paid by C Pty Limited of $1724.00 and rental income of $355.00 paid by that company.
The husband has the property and financial resources described in paragraph 136.
The husband has the physical and mental capacity to be engaged in his current employment whereby he conducts the business activities of C Pty Limited of the purchase and arrangements for assembly and resale of electronic parts and systems. The husband has demonstrated a capacity to be hard-working and very successful in the development and establishment of those business activities which have involved international transactions. The husband developed those business activities as a start-up business producing what must obviously have been a high turnover to fund the luxurious lifestyle that the parties have enjoyed over many years. There is considerable doubt as to his business future in view of the enormous tax liability that both he and C Pty Limited have incurred, to which earlier reference has been made.
Currently, the parties are each substantially engaged in the care of the four children of the marriage, although the primary care of them has been provided by the wife.
Although, parenting orders were no longer sought by the parties, realistically it is the wife who will have the primary care of the four children given the circumstances whereby the husband will need to be fully committed in his business activities or other employment, depending upon the extent of arrangements (if any) that he can make with the intervenor for the payment or settlement of his outstanding tax liabilities, regardless of the orders for property settlement that may be made.
Each of the parties has commitments for her or his support and the support of the four children as reflected in their respective financial statements, with the exception that it is difficult to make findings of the approximate amounts of the wife’s current actual reasonable expenses for her support.
Each of the parties has superannuation entitlements as described in paragraph 178.
The parties have enjoyed a luxurious standard of living. That is reflected in the homes that they have purchased and occupied from time to time both in Australia and in the United Kingdom as well as the lifestyle they have led.
The issue of what is currently a reasonable standard of living will need to be balanced against the enormous tax liability of the husband and C Pty Limited and the priorities in that regard.
The issue of spousal maintenance in terms of increasing the earning capacity of the wife will be subsequently considered in the course of the determination of her pending application for lump sum spousal maintenance.
I will consider the effect of any proposed order for property settlement so far as its impact on the ability of the intervenor to recover the amount of the tax indebtedness in my conclusion.
The matter of the contribution by the wife to the income earning capacity and financial resources of the husband will be considered in the course of determining her application for lump sum spousal maintenance. Similarly, the duration of the marriage and extent to which it has affected the wife’s earning capacity.
The wife desires to continue her parenting role so far as it is possible to do so given her willingness to seek unspecified form of employment to improve her financial position. It is implicit from the evidence of the husband that he also desires to continue his care of the four children of the marriage, subject to his business or employment commitments.
The husband pays child support in accordance with the assessment of $508.00 per week and other child related expenses.
There is an understandable absence of the likely cost of alternative accommodation of the husband, the wife and the four children of the marriage given that an important issue for determination in these proceedings is whether it is just and equitable for there to be an order requiring the wife to sell the former matrimonial home and in the event there is such an order, the amount and proportion of the net proceeds of sale which will be required to be paid to the intervenor in partial satisfaction of the tax indebtedness of the husband and C Pty Limited.
Assessment of relevant section 75(2) matters
I have determined that I will not make an adjustment in favour of the wife having regard to relevant matters pursuant to s75(2) for the following reasons.
My findings in relation to the wife’s ongoing primary responsibility for the care of the four children of the marriage together with her lack of income and income earning capacity for the foreseeable future represent matters to which significant weight would ordinarily be given.
So far as the parties’ net property position is concerned, it is clear that the wife’s financial position in that regard far exceeds that of the husband. The wife is the sole registered proprietor of the former matrimonial home which is unencumbered and has an agreed value of $4,750,000.00. It is the parties only significant property. The husband is the sole registered proprietor of the B property and the parties have a joint controlled monies account. However, the value of the B property and the funds in the controlled monies account pale into insignificance by comparison with the massive liability of the husband together with C Pty Limited of the indebtedness to the ATO.
The liability to the ATO cannot be considered merely in terms of the husband’s personal liability.
Section 75(2)(ha) refers to a matter which has prominence in these proceedings, namely:
“The effect of any proposed order on the ability of a creditor of a party to recover the creditor’s debt, so far as that effect is relevant.”
The indebtedness to the ATO will of course be increasingly more difficult to satisfy because of the corresponding increase in the entitlements of the wife so far as orders for property settlement are concerned. That is due to the amounts involved being $12,031,124.00 together with $418,076.00 being the tax liability of C Pty Limited which is the alter ego of the husband. The husband has been the sole director of that company at all material times and there is no dispute that in that capacity he is also liable for his debt.
Whilst I found that the indebtedness to the ATO did not arise in circumstances of which the wife had knowledge or ought to have known, nonetheless the weight that I am required to attribute to it in the circumstances described lead me to the conclusion that I will not make an adjustment in favour of the wife having regard to my findings in respect of relevant matters pursuant to s75(2).
Conclusion
Earlier in this judgment I assessed the respective contributions of the husband and wife as equal.
Given the highly unusual circumstances in this particular case the practical result of that assessment is an equal entitlement to the net property of the parties represented by the former matrimonial home. That is in circumstances whereby the only other significant property being the B property and the jointly controlled monies account will be applied by the husband in partial satisfaction of the outstanding tax indebtedness. The other exception relates to contents of the former matrimonial home and other items of personalty which are the subject of agreement between the husband and wife in relation to their division.
The net property of the parties to which I have referred excludes the husband’s outstanding tax indebtedness to the ATO for himself personally and C Pty Limited. The net property of the parties is dwarfed by the stunning magnitude of that tax indebtedness. As is apparent from Exhibit 14 described in the judgment the relevant amounts are $12,031,124.00 in respect of the husband’s personal liability and a further $418,076.00 being the tax liability of C Pty Limited.
There is little doubt that the husband has been a brilliant businessman in developing business turnover of a magnitude of millions of dollars in a relatively short period of time in circumstances where the business so developed and maintained by him was a start-up business.
As a result of the business success enjoyed by the husband, the husband and wife were able to lead a luxurious lifestyle both in England and in Australia featuring high priced real estate, exotic motor vehicles, first class travel and a general lifestyle befitting the “Tales from the Arabian Nights”.[10]
[10] Sinbad, Aladdin, Scherezade
Unfortunately, for the husband and wife and their four children of the marriage there has been a fatal flaw in the manner in which the husband has controlled his business activities due to his failure to disclose taxable income over several years. Following the husband’s voluntary disclosure to the ATO early in 2006 a Prudential audit has been carried out. The result has been the tax indebtedness to which I have referred that has plunged the financial affairs of the husband and wife to grim depths.
By far the most significant property of the husband and wife is the former matrimonial home. The sole registered proprietor is the wife by dint of the husband transferring to her his interest as a joint tenant for the consideration of $1.00 on 5 October 2000. The evidence is that the purpose of the transfer was to protect the property from the potential claims of third party commercial creditors. I have accepted that evidence.
I have also made findings that the wife neither knew nor ought to have known of the husband’s failure to disclose taxable income, whether in offshore accounts or otherwise. I have preferred the evidence of the wife to the husband in relation to those matters of evidence in that regard in which they have conflicted.
An outstanding critical issue for the purpose of consideration of making of orders pursuant to s79 that are just and equitable as between the husband and wife is the treatment of the tax indebtedness of the husband and the rights of the intervenor with the consequential weight to be given to his claim.
This is not a case where the third party must be kept informed or given appropriate notice as the relevant third party in these proceedings is the intervenor.[11]
[11] Ascot Investments Pty Limited v Harper & Anor (1981) 148 CLR 337 at 355
The Full Court in Biltoft and Biltoft reviewed the relevant authorities regarding the approach to be taken to the interest of third party creditors, particularly unsecured creditors.[12]
[12] Biltoft and Biltoft (1995) FLC 92-614
With regard to the discretion that the Court has in determining the weight to be given to unsecured liabilities, it was held in Biltoft:
“Notwithstanding the general practice which has developed, the Court has indicated that it may properly determine not to take into account or to discount the value of an unsecured liability in certain circumstances. Such liabilities would include but are not limited to a liability which is vague or uncertain, if it is unlikely to be enforced or if it was unreasonably incurred.”[13]
[13] ibid at 82,127
In Biltoft the Full Court approved the judgment of Nygh J in Af Petersens and Af Petersens[14] in which it was held:
“…nor, as has been pointed out earlier, is there anything in the decision of the High Court in Ascot Investments Pty Limited v Harper & Harper to suggest that this court cannot make an order dividing the assets of the parties because such a division might hamper a third party in his or her chances of recovery of a debt.”
[14] Af Petersens and Af Petersens (1981) FLC 91-095 at 76,669
The critical issue that arises is the question of priorities, that is to say, the priority which should be given to satisfaction, so far as it is possible to do so, of intervenor’s claim in relation to the outstanding tax indebtedness of the husband as opposed to claims of the wife.
In Biltoft it was further held in that regard, that:
“There is no requirement that the rights of an unsecured creditor or a claim by a third party must be considered and dealt with prior to the court making an order under s79, nor is there a rule of priority as between a creditor claimant and a spouse. Those rights, however, cannot be ignored. They must be recognised, taken into account and balanced against the rights of a spouse.” [emphasis added]
It was submitted on behalf of the intervenor that the first instance decision in Hannah and Hannah,[15] is authority for the proposition that the Court has a duty to protect the revenue of the Commonwealth. Arguably, the dicta in that case was obita as observations in relation to the position of the Deputy Commissioner of Taxation were in the context of settlements of property which had the effect of defeating such claims. Indeed, the cases referred to in that judgment make that clear. The material issues for consideration in Hannah related to the position of unsecured third party commercial creditors on the ground of miscarriage of justice due to fraud and suppression of evidence in the context of s79A(1) of course raise different principles for consideration not alluded to in the written submissions on behalf of the intervenor in these proceedings.
[15] Hannah (1989) 13 FamLR 531 at 537
Counsel for the intervenor appropriately referred me to the unreported judgment of the Full Court in J and J.[16]
[16] J and J [1999] FamCA 369
The Full Court’s judgment was directed to the consideration that applies to a trial judge in determining not only liability for the penalties as between the parties arising out of a tax avoidance process, but also “the benefits indirectly gained by the wife in having the pool of assets otherwise increased as a result of the availability of funds which would otherwise have been paid out in tax also have to be considered”.
The Full Court proceeded to also state that “unless there were compelling circumstances to the contrary, a just outcome demanded that the wife take the good with the bad”.[17]
[17] ibid, pp 110-111
In my view, those extracts from the Johnson was directed to the emphasis in the “consideration” that must be given by the trial judge to the claim of the unsecured third party creditor which in that instance was the ATO, as in the present case. Otherwise, the decision was made on the particular facts in that case but did not establish any further matter of principle. Should it be interpreted otherwise, then it would clearly clash with the guidelines in such Full Court judgments as Townsend and Browne and Greene[18] which clearly set out exceptions to taking “the good with the bad”, such as reckless financial conduct by a party to a marriage. The principles of stare decisis no doubt would have been considered and applied by the Full Court in either Johnson (by reference to Townsend) or in Browne and Greene (by reference to Johnson).
[18] ibid
Lindenmayer J (as he then was) published an article which provided a legal analysis in relation to what has been called the “roller coaster” principle and the concept of “sexually transmitted debt”. In the course of his interesting analysis of the issues, he made a number of pertinent observations in relation to “a question of priorities: wives or unsecured creditors”.[19]
[19] Lindenmayer J (1992) 6 Australian Journal of Family Law 240 at 246
Lindenmayer J summarised the problem as follows:
“The most important concepts here are those of necessity and balance. It would appear unfair that a spouse who has been employed over a long period of time in home duties should be arbitrarily relegated to a position of priority below that of an unsecured creditor to such an extent that his or her claim under s79 of the Act is diminished or even extinguished altogether. Similarly, spouses who allow the property of the marriage to be maintained in the sole name of their partner often find themselves the victims of what has become known colloquially as ‘sexually transmitted debt’ and are left in a position far worse than those who hold joint legal title in the property. It seems unfortunate on the face of it then that mothers and wives should be forced to pay the price for what often are ‘the sins of the fathers’. But the public policy argument is by no means so simply stated or one-sided.
Balanced against the rights of the spouse is the fact that the Family Court has in the application of the basic rule, already shown a preparedness to assign liabilities to one party alone or to discount a liability altogether where appropriate. Neither can it be said that spouses are by any stretch of the imagination always ‘innocent’ victims of their partners’ dealings. Spouses have often enjoyed the pre-insolvency prosperity and lifestyle that their partners’ business ventures have brought. Having previously received the benefits of such success, the so called ‘roller coaster’ principle dictates that they should thus be prepared to share in the ‘downside’ of such ventures.”
In relation to the “roller coaster” principle, Chisholm J commented in Re Sabri: ex parte Brien and ANZ Banking Group Limited:
“There is force in this as a general proposition, but in my view it cannot be taken as an absolute rule, if only because it treats all marriages as the same. Its force is less than overwhelming in cases where one spouse misleads the other, or fails to alert the other to the true position.” [emphasis added][20]
[20] Re Sabri: ex parte Brien and ANZ Banking Group Limited (1997) FLC 92-732 at 83-871
As previously referred to, I have made findings that the wife was neither complicit in the failure by the husband to disclose taxable income, nor did she have knowledge of it or ought to have had such knowledge.
The husband freely conceded during the course of cross-examination by senior counsel for the wife that his conduct of non-disclosure was reckless in the extreme. The husband also agreed that his email to the wife in December 2005 and passing between their respective lawyers in January 2006 dealing with the possible resolution of issues between them did not mention his potential liability to the ATO.
Consequently, not only did the husband engaged in reckless financial conduct but the wife truly was the “innocent” victim of his dealings. Without her realising it, the wife enjoyed the lifestyle created by the financial management by the husband of his business activities which did not involve paying tax. However, the wife was not placed in the position where she could make a choice. It is clear from part of the wife’s evidence, which I have accepted, she was not intoxicated by all aspects of a glamorous lifestyle, in that it was common ground between the husband and the wife that the wife on occasions did suggest to the husband that the purchase of real estate would be a better investment than spending money on further expensive cars and overseas travel.
Consequently, my approach is to making orders that are just and equitable is to balance the claim by the intervenor against the contributions made by each of the husband and wife as well as my assessment that there should not be an adjustment in favour of the wife having regard to relevant s75(2) matters. The husband implicitly submitted that there should be an adjustment in his favour whereby all of the net proceeds of sale of the former matrimonial home were paid to the intervenor. The husband’s approach on this issue was identical to that of the intervenor.
I follow the Full Court’s judgment in Biltoft in that the application of principle does not provide for priority to be given to the intervenor’s claim. Indeed, there is no provision in the Family Law Act which would support such a priority unlike in bankruptcy where a debt to the Crown does have priority.
As is made clear by the provisions of s79(2), orders for property settlement should only be made if it is just and equitable to do so.
Consequently, my task is to make orders that are just and equitable. That phrase in s79(2) is not given precise definition in the Act, nor in any reported judgments of which I am aware. Rather, it is the weight that a trial judge may determine should be given to particular aspects of s79(4) (incorporating s75(2)) to arrive at the necessary conclusion of “just and equitable” on the basis that such conclusion is within “the generous ambit within which reasonable disagreement is possible”.[21]
[21] Norbis v Norbis (1986) FLC 91-712 at 75,178; 75,165 per Mason and Deane JJ; Waters and Jurek (1995) FLC 92-635 at 82,376 et seq
In doing so, I have given much weight to the fact that the outstanding tax indebtedness of the husband is a debt to the Crown and implicitly there is a public interest issue that so far as it is reasonably possible to do so given the terms of s79 and the wide discretionary power that is given to make orders that are just and equitable having regard to other relevant matters pursuant to s79(4), orders should be made that enable partial satisfaction of that indebtedness of the only significant property of the parties. I have taken that approach also bearing in mind the matters to which I have referred in paragraphs 218 to 224, but also that the wife unwittingly continued to have the benefits of a lifestyle which for some years was enhanced by the failure of the husband to disclose taxable income to the intervenor.
APPLICATION BY THE WIFE FOR LUMP SUM SPOUSAL MAINTENANCE
The wife has sought an order that the husband pay to her the sum of $219,544.00 by way of lump sum maintenance in accordance with her Amended Application for Final Orders filed 20 April 2007.
As the wife’s amended application makes clear, the lump sum that has been sought has been “calculated on a weekly payment of $1115.00 for the next four years and discounted by 3%”.
Section 72 contains provisions which make a party to a marriage liable to maintain the other party to the extent that the first-mentioned party is reasonably able to do so, if and only if, that other party is unable to support herself or himself adequately. The threshold question is related to one or other of the circumstances set forth in s72. In these proceedings the relevant circumstance is:
“(a)by reason of having the care and control of a child of a marriage who has not attained the age of 18 years.”
The section also draws attention to relevant matters as set forth in s75(2).
Currently, both the husband and the wife have the care and control of the four children of the marriage. Their ages range from 13 years to 21 months.
I have made findings that in the foreseeable future following the sale of the former matrimonial home it is more probable than not that the wife will have the primary care of the four children. I also found that the wife does not have a current capacity to earn income and her aspirations to do so in the foreseeable future are vague and general, which was not the subject of more specific evidence in relation to the nature and extent of the employment, as well as the range of income which is likely to earn.
In view of the practical consequences of the orders for property settlement will be made whereby the wife will receive, apart from items of personalty, half of the net proceeds of sale of the former matrimonial home, it is strongly arguable that the wife does not meet the threshold test for the purpose of making an order for lump sum maintenance sought by her or even periodic maintenance. That is because the wife will have an amount equal to half of the net proceeds of sale of the former matrimonial home which having regard to its agreed market value of $4,750,000.00 unencumbered, would result in her receiving $2,375,000.00 less selling costs. That forecast result is based upon the agreed market value, as there is no evidence before me to indicate that the eventual sale of the former matrimonial home may be for a selling price more or less than the agreed value.
Whilst one might take the view that an applicant for spousal maintenance should be able to adequately support himself or herself due to having at their disposal the sum of $2,375,000.00 without any significant liabilities or extraordinary aspects of living expenses, I will nonetheless proceed to consider the relevant matters pursuant to s75(2) in order to conclude as to whether or not I should exercise the discretionary power to make an order for maintenance as provided in s74(1).[22]
[22] V and V (2003) FamCA 106
The wife and the husband are each aged 42 years.
I refer and rely upon my previous findings in relation to the income, property and financial resources of each of the parties as well as their respective capacities for appropriate gainful employment.
As previously referred to, the wife will be the parent most likely to have the primary future care or control of the four children of the marriage.
I also refer to and rely upon my previous findings in respect of the commitments that each of the husband and wife have for his or her own support as well as for the four children of the marriage. Due to the finding I have made earlier, I cannot conclude even on an approximate basis, the amount of the wife’s reasonable weekly expenses.
The parties have led a high standard of living for many years.
The wife will be in a position to afford a good standard of living having regard to the amount that she is likely to receive from the proceeds of sale of the former matrimonial home, to which earlier reference has been made.
I appreciate that that standard of living will be impacted upon by the need to accommodate the four children of the marriage having regard to the parlous financial position of the husband. However, child support is a separate issue as has been emphasised in Stein and Stein[23].
[23] Stein and Stein (2000) FLC 93-004
There is no evidence before me, for the purpose of making a finding, that the payment of maintenance to the wife would increase her earning capacity by enabling her to undertake a course of education or training or to establish herself in a business. Obviously, the greater amount of the sums that the wife increases the opportunity for investment to return higher income. However, that must be seen in the improved financial circumstances that the wife will soon find herself in as a consequence of the property settlement orders that will be made.
In respect of the order sought by the wife such order, if made, will reduce the ability of the intervenor to recover the outstanding tax indebtedness. That is a relevant matter having regard to the huge amount of tax involved and the terms of the property settlement orders, whereby the intervenor will receive the remaining half of the net proceeds of sale of the former matrimonial home, subject to any order for spousal maintenance that may be made and/or order for lump sum child support.
The parties cohabited for a period of approximately 12 years and have had four children. The duration of the marriage and births of the four children have adversely affected the wife’s earning capacity.
Pursuant to the property settlement orders that will be made, the wife is likely to have the sum of $2,375,000.00 in liquid funds together with personal property. The wife’s outstanding personal liabilities are minimal by comparison.
Child support has been paid by the husband. I refer to and rely upon my previous findings.
The evidence of the wife does not enable me to make findings as to the aspirations that she may have regarding the cost of alternative accommodation or whether she has a preference, at least in the immediate future, to invest the large amount that she will receive as her proportion of the proceeds of sale of the former matrimonial home, prior to considering her options with regard to purchase of alternative accommodation and/or investment of funds to return income. It is understandable that the wife did not give that evidence having regard to the complexities of the property settlement proceedings and the orders sought, by both the intervenor and the husband, that the whole of the net proceeds of sale of the former matrimonial home be paid to the intervenor in partial satisfaction of the husband’s outstanding tax indebtedness. Nonetheless, that does not alter the situation referred herein.
Conclusion
I have concluded that the application of the wife for lump sum spousal maintenance will be dismissed for the following reasons.
In these proceedings I have followed the conventional approach to the wife’s application in that it is first necessary to consider whether the wife has met the threshold of s72 and, if the answer is in the affirmative, to then proceed to consider the relevant matters pursuant to s75(2) and my findings in relation to those matters. That may then lead me to conclude that the wife is unable to adequately support herself, and if so, to then consider the amount of periodic maintenance that may have to be paid by the husband depending upon his ability to pay. That approach may then lead me to consider an order for payment of a lump sum in accordance with the principles set forth in Clauson and Clauson.[24] This would then lead to contrast the approach that I should take to the issue of whether or not lump sum spousal maintenance should be ordered by reference to what some commentators have described as “the broad view”[25], the subject of the judgment of the Full Court in Vautin and Vautin.[26]
[24] Clauson and Clauson (1995) FLC 92-595
[25] AFL Butterworths, 1374.4
[26] Vautin and Vautin (1998) FLC 92-827
In my view the wife has not met the threshold for the purpose of s72.
Notwithstanding the lack of income and capacity to earn income for the foreseeable future as well as the wife’s ongoing primary care of the four children of the marriage, once there has been completion of the sale of the former matrimonial home in accordance with the orders that will be made pursuant to s79, the wife will have funds of $2,375,000.00 less selling costs and comparatively negligible liabilities represented by her credit card indebtedness totalling approximately $30,000.00.
Subject to any application for costs and whether any such application may be successful, the wife will have to meet her costs of the entire proceedings in accordance with the general principle provided in s117(1). That is a consideration, and I do not attach any weight to it especially as no submissions were made in that regard.
The wife has not satisfied me that, notwithstanding she will have the amount of approximately $2,375,000.00 in the near future, she will be unable to adequately support herself.
There is no evidence of proposals, reasonable or otherwise, in relation to the acquisition of alternative accommodation, let alone the estimated range of the cost of such accommodation.
The wife’s estimated weekly financial commitments on a realistic basis, as opposed to either a historical or aspirational basis having regard to a standard of living which was only able to be funded at its high level due to the financial resources of the husband untrammelled by having to pay income tax, are clearly unsupportable.
Consequently, as the wife will shortly be in the position of having $2,375,000.00 less selling costs to be applied at her sole discretion, whether it be towards the cost of alternative accommodation and/or investment to produce income, without any significant current or contingent liabilities, have led me to the conclusion to which I have made reference.
In the alternative, should I be in error in relation to the wife not meeting the threshold issue raised by s72, nonetheless I arrive at the same conclusion that the application of the wife for lump sum spousal maintenance will be dismissed.
My reasons for doing so are:
(a)the weight that I attach to matters set forth in paragraphs 231 to 246, 250, 252; and as a separate consideration;
(b)the reality that the husband does not have the capacity to pay a periodic amount which can be capitalised for a lump sum or the capacity to pay a significant lump sum, regardless of the approach that may be taken in accordance with either Clauson or Vautin.
The simple reason is that the husband has a massive unsatisfied tax liability to the ATO, even allowing for the partial satisfaction of the outstanding amount from the payment of half of the net proceeds of sale of the former matrimonial home. The husband’s position, both from a financial and personal basis, is in jeopardy to say the least.
On 29 September 2006 an interim order for spousal maintenance was made by me. At the time when that order was made, I concluded that the wife was unable to adequately support herself. That position continues and will only be brought to an end upon the wife receiving her half share of the net proceeds of sale of the former matrimonial home. Consequently, I will make an order that continues the operation of the order for interim spousal maintenance until completion of the sale of the former matrimonial home.
It is well established that the rights of third party creditors, whether they be secured or unsecured, should be considered and given appropriate weight.
APPLICATION OF THE WIFE FOR CHILD SUPPORT DEPARTURE ORDER
By her Amended Application for Final Orders filed 20 April 2007, the wife sought child support departure orders. The orders sought are that the assessment of child support issued 31 August 2006 in respect of the four children of the marriage “be varied in an amount other than in the form of period amounts and in the sum of $216,000.00”.
The application notes that “the sum of $216,000.00 has been calculated as the child support for the four children at the rate of $3,000.00 per month for the next six years”.
In addition, the wife sought an order pursuant to s123 of the Child Support (Assessment) Act 1989 that “the husband pay the sum of $275,307.00 in respect of the costs of the school fees for the children”.
Counsel for the wife provided helpful written submissions[27] (“the wife’s written submissions”).
[27] Lodged 11 May 2007
The wife’s written submissions make it clear that the lump sum child support for an increased monthly assessed amount, is in relation to the period 1 November 2006 to 31 January 2008[28], that being the relevant period so far as the application of the wife is concerned, notwithstanding it seems to be conflict by reference to “the relevant period is that from 10 July 2006 to 31 October 2006” that subsequently appears in the wife’s written submissions no doubt by oversight.[29]
[28] ibid, paragraph 1
[29] ibid, paragraph 14
The eldest child attends K School. The schedule of school fees annexed to the wife’s written submissions includes Year 7 (one term); and Years 8 to 12 inclusive totalling $92,470.00.
The twins attend P School and the schedule of school fees sets out the fees payable and anticipated for Year 5 (one term) and Years 6 to 12 inclusive totalling $244,433.34.
The grounds for departure relied upon by the wife are those set out in s117(2)(b)(ii); s117(c)(ia) and (ib). Essentially, those grounds are that the three children should be able to continue to be educated at the schools presently attended by them and in the manner expected by the husband and wife; that the level of child support is inequitable and unjust having regard to the income, earning capacity, and property and financial resources of the husband. In addition, the wife contends that the husband’s current liability should be departed from for a period of six years by way of payment of a lump sum and that a lump sum should also be paid for the purpose of meeting private school fees.
The crux of the application of the wife is the alleged “significant level of uncertainty in terms of his ability to pay child support at any level because of the level of his indebtedness to the second respondent and ongoing commitment to pay that debt”. The second respondent is the intervenor.
The possibilities are raised of the husband facing criminal prosecution and an application that he be declared bankrupt in view of the extraordinarily high level of his tax indebtedness.
It is further contended that, absent an order for a lump sum payment, “there is a high likelihood that the husband will pay no child support to the wife (s125)”.[30]
[30] ibid, paragraph 7
I apprehend from the submissions made on behalf of the other parties to the proceedings that the facts as set forth in the wife’s written submissions and the principles referred to are not in dispute.
Amongst those relevant facts are the following:
(a)The husband and wife have supported the three children attending their current private schools.
(b)The husband has historically and at the time of the trial paid all school fees.
(c)The husband has met the living expenses of the three children and the youngest child since the parties separated.
(d)At the time of the trial the husband was financially supporting the four children and the wife by amounts totalling approximately $600.00 per week.[31]
[31] ibid, paragraph 15
It is not controversial that the husband faces serious level of uncertainty in relation to his future financial position, his capacity to meet the current level of child support that he has been providing both by way of living expenses for the three children, indeed all of the children, as well as ongoing payment for private school fees.
I am satisfied that the grounds relied upon by the wife have been made out.
Having regard to the history of the three children’s attendance at their current schools consistent with the expectations of the husband and wife, they should continue to be so educated.
With regard to the grounds in s117(c)(ia) and (ib), I am satisfied that the ground has been made out with regard to “the income, earning capacity, property and financial resources of the husband”. The reasons are that whilst there is greater strain upon the husband’s available income due to the interim arrangement with the intervenor with regard to monthly payments on account of the outstanding tax indebtedness and his susceptibility for his available property having to be realised and the funds applied in further reduction of the outstanding tax indebtedness, the current level of child support is “inequitable and unjust”. This arises because unlike many other cases, the level of child support currently met by the husband may not be able to be maintained by him. That is due to the as yet unknown arrangements which may be made between the husband and the intervenor for further payments in reduction of the outstanding tax indebtedness, or indeed the proceedings which may be brought by the intervenor to which I have earlier referred.
However, notwithstanding that the grounds for departure relied upon by the wife have been established, as the wife’s written submissions make clear:
“The court must be satisfied:
(i)just and equitable as regards to the children and the parties, and
(ii)otherwise proper to make a particular order under the division.”[32]
[32] ibid, paragraph 13
I am not satisfied that the matters referred to in preceding paragraph have been established. My reasons are as follows.
I accept the evidence of the husband, which implicitly was, that he would apply himself to continue to provide financial assistance by way of child support at such level as he can afford. Much to the husband’s credit, he has continued to provide a good level of financial support, including the payment of private school fees, since his voluntary disclosure to the intervenor that led to the current outstanding tax indebtedness, notwithstanding the obvious significant financial pressures that he has been subjected to in the continued conduct of his business activities. It would have been an easy matter for him to reduce the level of child support that he has provided, whether by way of living expenses and/or school fees, on the basis that all possible available income should be diverted in further payments to the intervenor.
It is recognised in the wife’s written submissions that there is some optimism for the future on matters put to the husband in cross-examination as “he agreed with the proposition that once these proceedings have concluded his business is likely to flourish again”.[33]
[33] ibid, paragraph 16
Indeed, it is submitted that:
“The husband’s income appears to have diminished since the commencement of these proceedings. However, there is nothing to suggest that his very high earning capacity will not attain prior levels once these proceedings have concluded.”[34]
[34] ibid
The submissions on behalf of the wife to which I have made reference in paragraphs 281 to 282 must of course be balanced against the uncertain financial and personal future of the husband to which earlier reference has been made. The party who was in the peculiar position best able to provide further evidence in that regard was of course the intervenor. It is clear that to date the intervenor has adopted a pragmatic approach to the issue of outstanding tax indebtedness by acquiescing in the arrangement for monthly payments in reduction of that indebtedness.
No evidence was given as to the likelihood of bankruptcy proceedings being instituted by the intervenor. It was apparent that the intervenor may consider that issue upon orders being made in these proceedings.
It is possible that should the husband continue to co-operate with the intervenor and make available all relevant property in further satisfaction of the outstanding tax indebtedness, that the intervenor may conclude, also from a pragmatic viewpoint, that nothing is to be gained financially by the institution of bankruptcy proceedings. The husband has certainly supported the orders sought by the intervenor in the proceedings.
With regard to the possibility of prosecution, a brief will be delivered to the Director of Public Prosecutions for consideration in due course.
Consequently, I am not in a position to find that the possibility of the husband facing prosecution or bankruptcy or both is likely to be a probability.
I also give considerable weight to the financial position of the wife which is likely to occur in the near future following the sale of the former matrimonial home and in accordance with the terms of the orders that I have made pursuant to s79. The wife will have at her disposal funds of $2,375,000.00 less selling costs. The wife will have negligible liabilities. Whilst the wife will have to support herself, she will also be in a position to provide ongoing financial support for the three children the subject of the application, apart from support for the youngest child. In that regard, it will fulfil the wife’s joint obligation together with the husband to provide for child support. The level at which she may do so is a matter for her determination and acting upon commercial advice as she may seek to obtain.
Further, I give weight to the proposition of the intervenor that the outstanding tax is an indebtedness to the Crown. In the circumstances, and particularly having regard to the enormous level of that indebtedness, the weight that I attach to it, is greater than the weight which I give to the uncertainties surrounding the husband’s financial and personal position.
Consequently, for the reasons that I have previously given, I am not satisfied that it would be just and equitable with regard to the children and the parties, and otherwise proper to make the order as sought. The application of the wife will be dismissed.
I certify that the preceding two hundred and ninety (290) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Rose
Associate:
Dated: 9 November 2007
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