Husband’s Appeal Against Order To Pay $12m from Family Business to Ex-Wife Upheld

Keywords: Family Law Act, s79(2), 79(4); contributions; assessment of business assets; distribution of matrimonial property; appeal against original property orders.

Introduction
The case of Turner and Anor [2016] FamCAFC 121 (8 July 2016) (May, Ainslie-Wallace & Cronin JJ) heard the husband’s appeal against an order made by Macmillan J that the wife be paid a lump sum of $12 million following an undefended hearing, whereby the husband failed to participate in the proceedings ‘in any meaningful way’.  The order was made in respect of an asset pool of $25 million, largely comprising of the husband’s minority interests in a family-owned private company and unlisted public company.

The basis of the appeal was that the trial judge did not come to a just and equitable determination, required in family law property proceedings pursuant to s 79(2) of the Family Law Act 1975 (“the Act”), and erred in the judge’s determination of the husband’s interest in and level of control over the finances of the companies.

Background

Following a 19-year marriage and one child (age 17), the husband separated from the wife and left the matrimonial home. The husband was an employee, shareholder, director and Chairman of the Board of Turner Holdings (“TH”). He was also a director, shareholder and the Company Secretary of Turner Pty Ltd (“TPL”), which was a family-owned and controlled investment vehicle. The wife had the role of a homemaker and primary carer for their child.

The wife commenced proceedings in 2013. From the outset, the husband was totally ‘unwilling to grasp the reality and inevitability of the wife’s entitlement to property settlement’. The trial judge placed emphasis on the husband’s failure to ‘participate in the proceedings’ and his failure to meet his obligations of disclosure, particularly those in the corporate valuation exercise.

The husband appeared on first mention along with the second named defendant, TPL, which was represented by its solicitor. Three days before the final hearing the husband sent an e-mail to the trial judge’s associate concerned that the financial information presented by the wife was ‘grossly exaggerated’ and requested a telephone call to discuss the matter. Following a reply sent by the Registry explaining it was not appropriate for him to communicate with the chambers of the Judge, the husband failed to appear and was unrepresented at the final hearing.

The trial Judge agreed with the wife’s submissions that the ‘way in which the husband conducted proceedings, his failure to provide full and frank disclosure and his refusal to co-operate with single experts in the case’ are relevant considerations in relation to the identification and valuation of the property. The Court therefore accepted the wife’s valuation of property and an expert forensic accountant, that the parties’ assets were valued at just over $25 million. After considering the relevant provisions of s 79(4) of the Act (dealing with contributions made during marriage in determining a property settlement), the trial judge determined that the husband should pay the wife a $12 million lump sum.

The Appeal

The husband appealed the orders made by Macmillan J arising out of property, as well as spousal maintenance and child support proceedings. Following the husband’s total lack of participation in the trial, the wife, perhaps unsurprisingly, submitted that the husband had his opportunity to participate and should not subsequently be heard to complain about the outcome.

An essential aspect of the appeal was the value of the husband’s interest and the control he held within the companies. The husband challenged two main findings of the trial judge that:

• The husband could access funds sufficient to pay the sum ordered whilst still retaining his shareholdings, so it was not necessary to apply a discount; and
• The husband would most likely have the support of the other shareholders for the purposes of implementing the payment to the wife.

In the reasons, the trial judge acknowledged that due to the husband’s lack of participation she had ‘no way of knowing how he proposed to meet his obligation to the wife or arrange his affairs’.

The Full Court was not clear as to how the trial judge found that the total value of the property (excluding superannuation) was approximately $25 million. The trial judge had accepted the expert’s valuation of the husband’s interest in TPL at approximately $10.6 million and his interest in TH at $3.6 million. The Parties were otherwise limited to $1.12, to which the wife already had $1.05 million. Therefore, excluding the company interests, the husband’s interests were minimal.

The husband submitted that the trial judge drew an inference that there would be no sale, and that her Honour was in error in doing so because the $12 million could not come from any source other than through the disposal of shares.

Further, it was submitted that the absence of evidence could not support the positive conclusion that the husband would retain his shares. As a minority shareholder, it was not open to conclude that the husband could access money other than through dealings with his shareholdings and there was no evidence of whether the other shareholders would assist.

The only inference open to the trial judge, according to the husband, was that the husband would have to sell his shares or alternatively borrow, as there were no other assets that could possibly provide the sum as ordered. Thus notwithstanding his absence from the proceedings before the trial judge, the husband argued that the trial judge did not come to a just and equitable determination. The wife argued that there was no onus on her to produce evidence about a possible sale of shares. She submitted that the trial judge applied her broad discretion pursuant to s 79 of the Act correctly.

Decision on Appeal

The Full Court agreed with the husband’s submission that there was some onus on the wife seeking orders in an undefended hearing to establish, on the balance of probabilities, that the fixed money order could be met from sources other than the sale of shares if she was urging the court to ignore otherwise probable deductions. The Full Court found the trial judge failed to note that access to funds in TH required co-operation from other shareholders and therefore her Honour was in error for concluding that no discount should be applied. Thus the appeal was allowed and the case remitted for re-hearing.