NSW Ex-wife demanding equity in newly formed business

Discussion in 'Family Law Forum' started by OptionalSettings, 14 July 2019.

  1. OptionalSettings

    OptionalSettings Well-Known Member

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    My ex-wife is claiming she has a right to equity (or payment of some kind) in a company I formed 2 years after we separated.

    Some quick background - while we were married I developed a piece of software in my spare time. We separated two years ago and reached a financial settlement via court order six months ago. The software was not mentioned in the settlement. Three months ago I formed a Limited company that will use the software as part of it's service. The company has received a small investment giving it a valuation under $1m.

    My ex is now claiming she should receive equity because I developed part of the software while we were married and she supported me. The software was developed in my own spare time while I was working full time. My ex made no financial or intellectual contribution to the software or the newly formed business.

    Would she have any claim on the IP or be able to make any other claim on the software as an asset from the marriage or the business?
     
  2. Rod

    Rod Lawyer
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    This is a potential problem for you.

    No claim to IP, but maybe to some 'value' the software has.

    I'd be arguing the software had no value at the time of creation, and only post separation did value accumulate.

    ATM, you have the asset and if she wants anything she only has two choices:
    1. You give her go away money
    2. She initiates court action.
    Up to you as to which is the better option.
     
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  3. OptionalSettings

    OptionalSettings Well-Known Member

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    Thanks Rod for the answer. What if the software was to be made open source and freely available?

    Could I not also argue that the software was in an unusable state at the time of separation? Really it had no value at that point beyond being an idea.
     
  4. sammy01

    sammy01 Well-Known Member

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    HOLD on... Property / asset division is done and dusted. At the time of separation the thing was worth nothing, so wasn't included in the asset division. Since then you've put work into it and made it a winner.... Nope, she's got nothing as far as family law goes. NOTHING...

    Business law? I know nothing about, but I'd be thinking she isn't named on any of the company documents? Mate she is on a hiding to nothing....

    So do you have kids from the marriage? Tell her she will see an increase in child support. Nope mate, don't even tell her that. Just refuse to discuss. She can go see a solicitor and pay a solicitor to tell her that she is barking up the wrong tree
     
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  5. Tremaine

    Tremaine Well-Known Member

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    I agree with sammy01. The property settlement is done and dusted and they’re not easy to change. You are better off just ignoring her until her application to change to property settlement is sitting in front of you, which probably won’t happen if she gets legal advice and has any concept of how much such an application will actually cost her in the long run.
    Until it’s on an initiating application in front of you, the best option is to just ignore her.
     
  6. hshkara

    hshkara Well-Known Member

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    This is a really interesting scenario.

    When you finalised the property settlement, it was under the premise that everything that you own or owe is disclosed to the other party.

    In your example, I am assuming you did not disclose that you were developing the software.

    However, the question is, was there a value to the software at the time you did the property settlement? i.e. if you did the property settlement on 1 January 2019, what was the value of the software at that time? Did it have a commercial value? If someone were to purchase it on that day, how much would they pay for it?

    Those questions are hard to answer and you may say that there is no value to it as it was not completed and there was no real IP value in the software.

    However if there is a value ascertained to the software at that time, a court may find that you have deceived the other party and the court by failing to disclose.

    You can see more info in this article that talks about obligations of disclosure and failure to provide disclosure in family law.
     
  7. Rod

    Rod Lawyer
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    Not true, see post by @hskara
     
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  8. OptionalSettings

    OptionalSettings Well-Known Member

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    Thanks for the different view points. To date no one has purchased or licensed the software and no one has used the service. Really this was just a side project or a hobby, I've always worked on side projects, that's just what a lot of coders like to do in their spare time. My ex was always aware that I worked on these projects.

    At the end of the day what is the worst case scenario? Would my ex need to file some kind of complaint against me and build a case, I could settle or I'd need to defend it and basically it would come down to who had the most convincing argument and maybe the courts would order I pay some amount based on value at time of settlement?
     
  9. Atticus

    Atticus Well-Known Member

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    Having final orders already, your ex wife would need to see a solicitor to explore her options, one of which would probably be to accuse you of non disclosure & seek either a 'settlement' or go away money as Rod put it, or the chances of ( and cost involved) in the success of an initiating application ti bring it back to court...

    I recommend you seek legal opinion yourself....In my mind, if she is going to claim that it's an asset that she should somehow share in, then I think it reasonable that she also shares in the time & cost involved in it's development. General principal being if an asset is considered joint, then so are costs that may be associated with it... The exception perhaps being a pre separation windfall like a lotto win or inheritance, which this is not
     
  10. Atticus

    Atticus Well-Known Member

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    Also, I would think one of the deciding factors around non disclosure may come down to

    1) What was the assets worth AT TIME OF SETTLEMENT & if it actually had a real value
    2) Which part of Rule 13.04 FAMILY LAW RULES 2004 - RULE 13.04 Full and frank disclosure would she be claiming you were negligent in

    Was it an incoming earning asset at time of settlement for example
     
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