Distribution of the asset pool | Lynch & Kershaw & Ors

Ms Lynch (Ms L) and Mr Kershaw (Mr K) separated in June 2009 after 14 year relationship/marriage.  Ms L commenced proceedings in the Family Court of Australia (Court) for property orders.

The parties differed in their assertions of what the value of the asset pool was and raised the following issues:

1.         What was the value of Mr K’s businesses; and

2.         Whether the assets of Mr K’s new wife should be included in the asset pool for purposes of distribution between Ms L and Mr K.

Valuation of businesses

An order was made for the parties to obtain a joint expert valuation of Mr K’s businesses.

Mr G was appointed as the single expert witness and was instructed to carry out the valuation of the businesses.  However, Mr G never completed the valuation.  Mr G provided a report to the Family Court in which he stated he could not complete a valuation due to the lack of documents and discrepancies in information provided by Mr K, and Mr K’s attempts to deliberately frustrate the process. 

Ms L asserted that the businesses were worth double the amount of the value that Mr K had attributed to his businesses. 

The new wife’s assets

The other main issue in dispute was whether any of the assets in Mr K’s new wife’s name should be added to the asset pool for the purpose of distribution between Ms L and Mr K. 

Ms L contended that Mr K had ‘covertly’ transferred $100,000 to his new wife and that these funds were applied to the purchase of a property in the new wife’s sole name.  The new wife subsequently sold the first property and purchased a new property using the funds from the sale of the first property.  It was discovered that further funds had been transferred to the new wife by Mr K in an effort to deplete the asset pool. 

Despite Mr K and his new wife denying these allegations, the trial Judge found them both to be untruthful witnesses. 

The trial Judge was satisfied on the balance of probabilities and also satisfied beyond reasonable doubt that the funds in the new wife’s bank account came from Mr K and that the property in the new wife’s name was beneficially owned by Mr K by way of a resulting trust and therefore should be included in the asset pool for distribution.

Distribution of the asset pool

However in the absence of an expert report, the Judge could not make a finding regarding the value of the businesses and was therefore unable to ascertain what the available asset pool was for distribution.  The trial Judge made orders favourable to Ms L, with Ms L receiving the majority of the property and cash. The trial Judge also noted that if Mr K felt aggrieved by the decision, then he had nobody to blame but himself.  Mr K should have cooperated with Mr G and provided all information that the expert requested.

Lavan Legal comment

It is important to have any business valued for the purposes of Family Court proceedings, in the absence of an agreed value.  There is an ongoing duty on all parties to provide full and frank financial disclosure.  A risk of failing to provide full and frank disclosure can result in a party receiving less than their entitlements and a possible costs order being made against them.

If you consider any of the above to be relevant to you, or are separated and have subsequently entered in a new relationship, you may wish to seek legal advice.