BENCE & BENCE
[2020] FamCA 748
•20 August 2020
FAMILY COURT OF AUSTRALIA
| BENCE & BENCE | [2020] FamCA 748 |
| FAMILY LAW – PROPERTY – final orders – where the parties were married approximately 26 years – where the parties have two children – where the husband alleges the parties owe over $8 million to third parties evidenced by promissory notes signed by him – where none of those parties intervened in the proceedings – finding that the alleged debts should not form part of the net asset pool – where the husband’s lack of full and frank disclosure was an issue at trial – finding that the husband failed to disclose numerous business investments and interests – where the parties’ contributions throughout the relationship are assessed as equal – adjustment made as a result of the husband’s lack of disclosure – s 75(2) adjustment due to income earning disparity – final property orders to be made for a 55/45 division in the wife’s favour. |
| Evidence Act 1995 (Cth) ss 55, 56, 131, 135, 140 Family Law Act 1975 (Cth) ss 79, 75 Family Law Rules 2004 (Cth) pt 13 |
| Bevan & Bevan [2013] FamCAFC 116; (2013) FLC 93-545 Britt & Britt (2017) FLC 93-764 Chang & Su [2002] FamCA 156 Chapman & Chapman [2014] FamCAFC 91; (2014) FLC 93-592 IMM v The Queen (2016) 257 CLR 300 In Marriage of Black (1992) 106 FLR 154 In Marriage of Giunti [1986] FLC 75 In Marriage of Mezzacappa (1987) 90 FLR 350 Kannis & Kannis (2003) FLC 93-135; [2002] FamCA 1150 Kowaliw and Kowaliw (1981) FLC 91-092 Phe & Leng [2019] FamCAFC 17 Stanford v Stanford (2012) 247 CLR 108 Stone & Stone [2015] FamCAFC 18 Watson & Ling [2013] FamCA 57 Weir and Weir (1993) FLC 92-338; [1992] FamCA 69 |
| APPLICANT: | Ms Bence |
| RESPONDENT: | Mr Bence |
| FILE NUMBER: | MLC | 11283 | of | 2017 |
| DATE DELIVERED: | 20 August 2020 |
| PLACE DELIVERED: | Melbourne |
| PLACE HEARD: | Melbourne |
| JUDGMENT OF: | Johns J |
| HEARING DATE: | 29, 30, 31 July and 1 August 2019 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Dickson QC with Mr Matta |
| SOLICITOR FOR THE APPLICANT: | Barbayannis Lawyers |
| COUNSEL FOR THE RESPONDENT: | Dr Ingleby |
| SOLICITOR FOR THE RESPONDENT: | Berger Kordos Lawyers |
IT IS NOTED that publication of this judgment by this Court under the pseudonym Bence & Bence has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).
| FAMILY COURT OF AUSTRALIA AT MELBOURNE |
FILE NUMBER: MLC 11283 of 2017
| Ms Bence |
Applicant
And
| Mr Bence |
Respondent
REASONS FOR JUDGMENT
Introduction
Ms Bence, the wife, and Mr Bence, the husband, seek orders for the adjustment of their property interests pursuant to s 79 of the Family Law Act 1975 (Cth) (“the Act”). The parties shared a long marriage that spanned approximately 26 years. There are two children of the relationship, both of whom are now adults.
There is no dispute that the parties had little at the commencement of the marriage and that they contributed equally throughout the relationship.
What is the subject of significant controversy is the identification and value of the parties’ interests. That there is dispute with respect to those matters arises as a result of the husband’s non-disclosure of financial material. I will address the issue of the husband’s non-disclosure throughout the judgment.
On either parties’ version of events, the net asset pool is large. Both parties agree that the gross value of their identified assets is approximately $17.5 million. That pool does not include many of the husband’s speculative business interests which were not valued.
Much of the dispute focussed on the husband’s contention that there were debts of approximately $12.5 million to be taken into account in calculating the net value of the parties’ interests. The wife challenged the existence of approximately $8.5 million of that alleged debt, which relates to liabilities the husband asserts arise as a result of three promissory notes executed by him. Curiously, none of the original promissory notes executed by the husband were produced by him during the course of the trial, nor were the creditors allegedly owed monies pursuant to those documents called by him to give evidence.
In addition to those liabilities, the wife submitted that the husband should be solely responsible for repayment of the loan from the National Australia Bank (“NAB”) in the sum of approximately $4 million secured by way of a mortgage on the former matrimonial home, it being her position that those funds were drawn by the husband to pursue his undisclosed investments in Country G and to wantonly and recklessly invest in K Ltd, an entity now in liquidation.
Throughout the proceedings the husband maintained his desire to retain the bulk of the real properties owned by the parties, which have an agreed value of approximately $15 million. In percentage terms, he sought a split of 48/52 in favour of the wife, that adjustment to recognise the husband’s greater income earning capacity.
The wife sought to retain one of the parties’ several properties, as well as a lump sum payment from the husband. She sought a 60/40 division of the pool in her favour. Senior counsel for the wife submitted to the Court that an adjustment in those terms was just and equitable in light of the husband’s non-disclosure of financial material and lack of frankness throughout the proceedings.
These are my Reasons for Judgment with respect to the parties’ competing property applications.
Background
The wife was born in Country G and migrated to Australia in 1987. She is an Australian citizen and is currently aged 56. The wife is a qualified finance professional, although has not worked in paid employment since 1996. Throughout the majority of the relationship she was the primary carer and homemaker for the parties’ two adult children. The wife is currently unemployed and engaged in home duties.
The husband was also born in Country G and migrated to Australia in 1990. He is an Australian citizen and is currently aged 55. The husband is a finance professional, and was the principal income earner throughout the parties’ relationship, his income derived from his employment as a finance professional as well as income from investing in shares and real estate. The husband ceased working as a finance professional in 2005 and thereafter the family was supported by the parties’ investment income.
The parties were married in late 1990 in Country G. The husband deposes the parties separated on a final basis in June 2017, whereas the wife says separation occurred in December 2016. Little turns on that issue and on either account, the parties shared a long relationship.
There are two children of the marriage, Mr B who is aged 26 years and lives independently, and Mr C who is aged 24 years and is in the final years of his university course. Mr C lives with the wife in the former matrimonial home at Suburb M (“Suburb M property”).
At the time of their marriage in 1990 neither party had any assets of significance. The husband had savings of approximately $30,000, which he deposes were applied to some small debts of the wife.
The parties accumulated significant wealth during the marriage. The majority of their investments were held by the Bence Family Trust (“Family Trust”), an entity controlled by the husband. The wife deposes that she had little knowledge of the parties’ finances throughout the course of the relationship, as this was the husband’s domain.
Since separation, the husband’s evidence is that he has returned to operating an accountancy practice on a part-time basis, albeit that when challenged during cross-examination as to the extent of that work, the husband provided little evidence of the accountancy work undertaken by him and did not produce documents to support his claims.
The parties, either personally or through their entities, acquired ten properties during the course of the marriage and those properties continue to be held by them. Those properties comprise the majority of the parties’ financial interests.
It is common ground between the parties that throughout the marriage, the husband remitted funds to Country G to assist his family. In addition to those funds, the husband also remitted monies to Country G to pursue business interests.
The extent of the husband’s business interests in Country G was a contentious issue between the parties and the subject of significant criticism of the husband due to his failure to make full and frank disclosure as to the extent of those interests. I will address those issues in more detail later in the judgment.
In addition to their property interests, the parties were actively engaged in share investments through the Family Trust which was settled in about 2011.
On or about 26 September 2017, the wife left the Suburb M property. The wife deposes she was subjected to economic abuse at the hands of the husband, and that upon physical separation she entered emergency housing. In or around November 2017, the wife obtained an interim intervention order against the husband. As a result, the husband was required to vacate the Suburb M property.
The wife’s application for a final intervention order against the husband was dismissed in June 2018.
The wife filed an Initiating Application in the Family Court of Australia on 31 October 2017. The matter was first listed before Registrar Jenkins on 22 January 2018, with counsel representing the wife and the husband appearing in person. Orders were made providing for the husband to file material in response to the wife’s application.
The wife sought that one half of the income from the parties’ investment properties at V Street, Suburb T (“V Street”), 1 W Street, Suburb T (“1 W Street”), 2 W Street, Suburb T (“2 W Street”) and X Street, Suburb Y (“Suburb Y”) be paid to her. The husband opposed the division of the rental income and brought proceedings in the Victorian Civil and Administrative Tribunal (“VCAT”) to restrain the managing agent from paying to the wife half of the rental income from the property at V Street.
Pursuant to orders made in this Court on 15 February 2018, the husband was restrained from continuing the VCAT proceedings. Further, orders were made by consent that provided for one half of the rental income from the properties at V Street and 2 W Street to be paid to the wife. In addition, orders were made by the Court that the rental income due in respect of the Suburb Y property be held on trust for the parties by the wife’s lawyers.
Orders were also made by consent for the husband to complete and lodge the parties’ taxation returns and as to the application of any taxation refund received following lodgement of those returns. Order 10 of those orders provides as follows:-
10.That the Husband forthwith complete and lodge the taxation returns for the years ended 30 June 2015, 30 June 2016 and 30 June 2017, for the Husband, the Wife and for any corporate entity or trust in which the Husband or Wife have or have had an interest during that period, including any self managed superannuation fund and any taxation refund received as a result of such lodgements, be applied towards NAB account number …45 with the Husband to notify the Wife’s lawyers:
10.1within seven days of the lodgement of any of the aforementioned taxation returns with the Australian Taxation Office and provide the Wife’s lawyers with copies of the same; and
10.2within seven days of receiving any Australian Taxation Office Notice of Assessment and any refund from the Australian Taxation Office.
The wife alleges that the husband breached order 10 of the February 2018 orders. The husband received the taxation refund on 6 June 2018 and deposited the funds into the Family Trust bank account, without informing either the wife or her lawyers of the lodgement of the returns or receipt of the refund. It was conceded by the husband during cross-examination that he had applied only $30,000 of the taxation refund to the loan repayment with the balance applied to meet his expenses, including his credit card liability. Given that evidence, I am satisfied that the husband breached that order.
On 11 April 2018, the matter returned to Court. Procedural orders were made that day, as well as orders providing for the following:-
· Partial property settlement to both parties;
· The husband deliver the Motor Vehicle 1 (registration …) to the wife; and
· The wife deliver to the husband the Motor Vehicle 2 (registration …) and the Motor Vehicle 3.
On 28 June 2018, the matter came before Austin J. Orders were made providing for the sale of the share portfolio held by the Family Trust. The proceeds of that sale were to be applied, by the husband’s solicitors on his behalf, as follows:-
· In payment of costs and expenses of sale;
· In payment of amount(s) currently owed by the parties or either of them to the State Revenue Office for outstanding land tax;
· In payment of the amounts currently owed by the parties or either of them by way of outstanding municipal and water rates and owners corporation fees;
· In payment of the amount currently outstanding on the NAB S Company credit card (number [ending] …66) in the approximate sum of $24,000;
· In payment of the sum of $50,000 to each of the parties; and
· The balance then remaining be paid to the NAB portfolio mortgage account (numbered [ending] …10 and …46).
On 13 May 2019, the matter came before me for a First Day hearing. As a result, I made trial directions that provided for the filing of trial material and setting the matter down for a final hearing.
Material relied upon
The wife relied upon the following material:-
· Outline of case document filed 25 July 2019;
· Further Amended Initiating Application filed 13 June 2019;
· Affidavit of the wife filed 13 June 2019;
· Financial Statement filed 13 June 2019;
· Affidavit of Ms R filed 14 June 2019;
· Affidavit of the wife filed 22 July 2019; and
· Exhibits A-1 to A-16 inclusive, being documents tendered during the course of the hearing.
The husband relied upon the following material:-
· Outline of case document filed 24 July 2019;
· Second Further Amended Response to Initiating Application filed 12 July 2019;
· Affidavit of the husband filed 12 July 2019;
· Financial Statement filed 12 July 2019;
· Affidavit of Mr Q filed 26 July 2019; and
· Exhibits R-1 to R-4 inclusive, being documents tendered during the course of the hearing.
The parties’ proposals
At the commencement of the hearing, the wife sought orders in the terms of her further amended Initiating Application filed 13 June 2019. In her application, she reserved the particularisation of the orders she sought pending full and frank disclosure from the husband. At the conclusion of the trial, the parties agreed that the wife could provide to the Court a revised minute of proposed orders that she seeks, based on the agreed balance sheet tendered by the parties during closing submissions.
That minute was received by the Court on 9 August 2019 and seeks orders as follows:-
(1)That pursuant to section 78 of the Family Law Act 1975 (Cth) the property situate at X Street, Suburb Y be declared the property of the Wife.
(2)That pursuant to section 79 of the Family Law Act 1975 (Cth), within 90 days from the date of these orders (the Date):
(a)the Husband pay to Barbayannis Lawyers, on behalf of the Wife, the sum of $8,384,680 (the Payment); and
(b)the Husband do all such things and sign all documents to transfer his right, title and interest in 10 Lots on AA Street, BB City, Country G to the wife, free from all and any encumbrances.
(3)That pending the Payment, the Wife have the sole use and occupation of the property situate at CC Street, Suburb M (Suburb M Property).
(4)That contemporaneously with the Payment:
(a)the Husband do all such things, make all such payments and sign all documents necessary to discharge the line of credit in favour of the NAB in the sum of approximately $4,100,000; and
(b)the Wife transfer all her right, title and interest in the following properties to the Respondent Husband, at his expense:
(i) CC Street, Suburb M;
(ii) 1 W Street, Suburb T;
(iii) V Street, Suburb T;
(iv) 2 W Street, Suburb T; and
(v) DD Street, Suburb FF.
(5)That within 60 days of the Payment being made, the Wife vacate the Suburb M property.
(6)That in the event the Husband fails to make the Payment by the Date, then the properties referred to in Order 3 be placed on the market for sale jointly by the Husband and Wife upon such terms and conditions as may be agreed between the parties, and failing agreement upon such terms and conditions as may be nominated by the selling agent and, if a selling agent cannot be agreed between the parties then the selling agent be nominated by the President of the Real Estate Institute of Victoria and the proceeds be applied as follows:
(a) First, to pay the costs and commission of the sale(s).
(b)Second, to discharge the NAB Portfolio facility (accounts ending #…46 and #…10).
(c)Third, to pay any capital gains tax, if any, arising from the sales.
(d)Fourth, to pay to Barbayannis Lawyers, on behalf of the wife, so much of the Payment as is outstanding together with penalty interest calculated in accordance with the Family Law Rules 2004.
(e) Fifthly, the balance to the Husband.
(7)That within 30 days of the date of these Orders, the Husband do all such things and sign all necessary documents to transfer to the Wife 50% of the shareholding in H Pty Ltd held by him or any entity on his behalf.
(8)On or before 30 days from the from the date of these Orders, the Husband shall do all acts and things and sign all such documents as may be necessary to:
(a)Remove himself as a signatory on all bank accounts and other investment accounts held by Bence Holdings Pty Ltd.
(b)Provide to the Wife all folders of documents relating to Bence Holdings Pty Ltd and the Bence Family Trust in his power, possession or control including but not limited to;
(i)Bank statements from NAB for the financial years ending 30 June 2016 and 30 June 2017 and for the 2018 financial year to the date of these Orders;
(ii)Minutes of Bence Holdings Pty Ltd meetings for the financial years ending 30 June 2016, 30 June 2017 and for the 2018 financial year to the date of these Orders;
(iii)All minutes for the Bence Family Trust for the financial years ending 30 June 2016 and 30 June 2017 and for the 2018 financial year to the date of these Orders;
(iv)The Constitution of Bence Holdings Pty Ltd, if applicable; and
(v)The Trust Deed for the Bence Family Trust.
(c)Resign as Director and Secretary of, and transfer to the Wife, or at her direction, any and all of his right, title and interest (including but not limited to the transfer of any shareholding whether individual or joint) in Bence Holdings Pty Ltd;
(d)Appoint the Wife as Appointor of the Bence Family Trust in his stead and for the purposes of this paragraph, the Husband shall provide to the Wife an executed Deed of Appointment of New Appointor of the Bence Family Trust;
(e)Irrevocably surrender and relinquish all of his right, title and interest to the capital and income of the Bence Family Trust whether as a member, beneficiary or otherwise.
(9)That paragraphs (10) to (17) of this Order are binding on the Trustee.
(10)Pursuant to Section 90XJ(1)(c)(i) of the Family Law Act 1975, whenever a splittable payment become payable in respect of [the wife’s] interest in the Self Managed Superannuation Fund (“the Superannuation Fund”) the precise details of which are to be provided by the Husband, the trustee shall pay to [the husband] the amount calculated in accordance with Part 6 of the Family Law (Superannuation) Regulations 2001 being 100% of the Wife’s member balance and there should be a corresponding reduction in the entitlement of the Wife from her Self Managed Superannuation Fund.
….
(16)That each party and the Trustee have liberty to apply in relation to the implementation of the Orders affecting the Husband’s Superannuation interest.
(17)That a copy of these Orders be served forthwith upon the Trustee.
(18)That within 14 days of date of these Orders, the Husband do all acts and things necessary to transfer:
(a)50% of any shares in the name of, and/or beneficially held for, Mr C to Mr C;
(b)the Motor Vehicle 4 to Mr C, at the Husband’s expense;
(c)50% of any shares in the name of, and/or beneficially held for, Mr B to Mr B; and
(d)the Motor Vehicle 5 to Mr B, at the Husband’s expense.
(19)That within 30 days of the date of these Orders, the Applicant Wife do all acts and things necessary to transfer 50% of her shares in the Z Time Share to the Respondent Husband, at his expense.
(20)That the Husband pay and indemnify the Applicant Wife in respect of the liabilities listed under the heading “Liabilities” in the joint Balance Sheet (being exhibit R4).
(21)That the Applicant Wife will otherwise retain:
(a)Her Jewellery;
(b)Motor Vehicle 1;
(c)The property situate at JJ Town, GG Street and HH Street, JJ Town, Country G;
(d)Her Interim Distribution received pursuant to Orders made on 11 April 2018 and 28 June 2018; and
(e)Rental Funds from Suburb Y held in trust by the Applicant Wife’s solicitor.
(22)That the Respondent Husband will otherwise retain:
(a)The property situate at KK Street, Suburb LL;
(b)His bank accounts;
(c)His interim Distribution received pursuant to Orders made on 11 April 2018 and 28 June 2918; and
(d)All other liabilities in his name.
(23)The Husband indemnify and keep indemnified the Wife against any and all liabilities whatsoever in relation to F Pty Ltd and H Pty Ltd whether past, present, future or contingent.
(24)That pursuant to section 106A of the Family Law Act 1975 (Cth), if either party refuses or neglects to do any act of thing or sign any document necessary to give effect to these Orders, a Registrar of the Family Court of Australia at Melbourne be appointed to execute such deed or instrument as is necessary and do such act or thing as is necessary to give validity and operation to that deed or instrument.
(25)Save as otherwise provided and specifically in these Orders, for the purpose of this paragraph “losses” shall mean any damages, loss, claim, action, liability, costs, expenses, outgoings, taxation or payment:
(a)As a separate and additional liability, the Husband shall pay, indemnify and keep the Wife effectively indemnified against:
(i)Any and all creditors of the Husband and his related entities;
(ii)Any and all borrowings of the Husband and his related entities;
(iii)Any and all liabilities to the Australian Taxation Office owing by the Husband and his related entities and any interests, costs or penalties applicable thereto;
(iv)Any and all taxation owing by the Husband and his related entities in all and any other jurisdiction and any interests, cost or penalties applicable thereto;
…
(b)As a separate and additional liability, the Wife shall pay, indemnify and keep the Husband effectively indemnified (save as otherwise provided in these orders) against:
(i)Any and all creditors of the Wife and her related entities but not limited to Bence Holdings Pty Ltd as trustee for the Bence Family Trust;
(ii)Any and all borrowings of the Wife and her related entities;
…
(26)That unless otherwise specified in these Orders and save for the purposes of enforcing any monies due under these or any subsequent Orders:
(a)each party be solely entitled to the exclusion of the other to all property (including choses-in-action) in the possession of such party as at the date of these Orders with the chattels in the Suburb M Property being deemed in the possession of the Wife;
(b)each party be solely entitled to the exclusion of the other to all monies standing to the credit of wither of them in any bank account in their sole name.
…
At the commencement of the trial, the husband sought orders as provided in his second further amended Response to Initiating Application filed 12 July 2019. During final submissions the orders sought by the husband were confirmed to be as follows:-
(1)The total net asset pool including superannuation be divided:
(a)52% to the Wife; and
(b)48% to the Husband.
(2)That within 90 days of the date of the Orders the applicant Wife transfer all her right and interest in the following properties to the Respondent Husband at his expense:
(a)CC Street, Suburb M;
(b)X Street, Suburb Y;
(c)V Street, Suburb T;
(d)2 W Street, Suburb T; and
(e)DD Street, Suburb FF (“the transfers”).
(3)That contemporaneously with the transfers the Respondent Husband will:
(a)Transfer all his right and interest in the property situate at 1 W Street, Suburb T to the Applicant Wife at her expense;
(b)discharge and refinance into his sole name and indemnify the Applicant Wife for the NAB portfolio loans (accounts ending #…46 and #…10); and
(c)make payment to the Applicant Wife in the sum of $2,120,825, subject to the value of the Applicant Wife’s superannuation entitlement.
(4)That within 14 days of the date of the Orders, the Respondent Husband do all acts and things necessary to transfer the Motor Vehicle 5 to Mr B and the Motor Vehicle 4 to Mr C at his expense.
(5)That within 30 days of the date of the Orders, the Respondent Husband do all acts and things necessary to transfer 50% of his shares currently held in H Pty Ltd to the Applicant Wife at her expense.
(6)That the Applicant Wife indemnify the Respondent Husband for 50% of the principal and interest payable to Mr N and Mr P pursuant to the H Pty Ltd promissory notes.
(7)That within 30 days of the date of the Orders, the Applicant Wife do all acts and things necessary to transfer her shares in the Z Time Share to the Respondent Husband, at his expense.
(8)That the Respondent Husband indemnify the Applicant Wife in respect of the 2019 land tax in full and the outstanding council rates.
(9)That the Applicant Wife otherwise retain;
(a)Her Jewellery
(b)Motor Vehicle 1;
(c)Her AB Company Shares;
(d)The Property situate at JJ Town, GG Street and HH Street, JJ Town, Country G;
(e)Her Interim Distribution received pursuant to Orders made on 11 April 2018 and 28 June 2018;
(f)Rental Funds from Suburb Y held in trust by the Applicant’s Wife’s solicitor; and
(g)Her superannuation entitlements.
(10)That the Respondent Husband otherwise retain;
(a)The property situate at KK Street, Suburb LL;
(b)The “QQ” Country G property;
(c)The “RR” Country G property;
(d)His bank accounts;
(e)His Interim Distribution received pursuant to Orders made on 11 April 2018 and 28 June 2018; and
(f)All other liabilities in his name.
(11)Within 14 days of the date of the Orders the Applicant Wife will do and sign all things necessary to:
(a)consent to her removal as a beneficiary of, and consent to not receive distributions from the Bence Family Trust;
(b)tender her resignation as a director of Bence Holdings Pty Ltd;
(c)transfer her shares in Bence Holdings Pty Ltd to our client or his nominee; and
(d)relinquish all right and entitlement in respect of the Trust and Bence Holdings Pty Ltd including any unpaid beneficiary entitlement or credit loan account, if any.
(12)The Respondent otherwise pay, be solely liable for and forever indemnify the Applicant against all liabilities (including any taxation liabilities) whether past, present or future of the following:
(a)The Bence Family Trust; and
(b)Bence Holdings Pty Ltd.
(13)That pursuant to Section 106A of the Family Law Act 1975 (Cth), if either party refuses or neglects to do any act or thing or sign any document necessary to give effect to these orders, a Registrar of the Family Court of Australia be appointed to execute such deed or instrument as is necessary and do such act or thing as is necessary to give validity and operation to that deed or instrument.
…
During final submissions, counsel for the husband conceded that the wife could retain the QQ Country G property, being 10 Lots on AA Street, BB City, Country G. It was also conceded by the husband that the wife could retain the Family Trust.
Legal principles
The parties’ competing property applications are to be determined in accordance with the provisions of Part VIII of the Act. The High Court considered the approach to be adopted in the determination of proceedings pursuant to s 79 of the Act in the decision of Stanford v Stanford (2012) 247 CLR 108. At page 121 the High Court said that “[t]he power to make a property settlement order must be exercised ‘in accordance with legal principles, including the principles which the Act itself lays down’”.
Section 79(2) of the Act provides that a court should not make an order for property settlement unless it is satisfied that it is just and equitable to do so.
The decision in Stanford has been considered in detail by the Full Court in Bevan & Bevan [2013] FamCAFC 116; (2013) FLC 93-545 (“Bevan”) and Chapman & Chapman [2014] FamCAFC 91; (2014) FLC 93-592.
In Bevan at [73] the Full Court referred to the three “fundamental propositions” laid down by the High Court which should guide trial judges in approaching the task under s 79. They were summarised as follows:-
1.Determination of a just and equitable outcome of an application for property settlement begins with the identification of existing property interests (as determined by common law and equity);
2.The discretion conferred by the statute must be exercised in accordance with legal principles and must not proceed on an assumption that the parties’ interests in the property are or should be different from those determined by common law and equity;
3.A determination that a party has a right to a division of property fixed by reference only to the matters in s 79(4), and without separate consideration of s 79(2), would erroneously conflate what are distinct s statutory requirements.
(Emphasis in original)
Accordingly, in determining competing applications pursuant to s 79, the Court is required to:-
·Identify the parties’ respective legal and equitable interests in property;
·Determine whether, in accordance with s 79(2), it is just and equitable to make a property settlement order having regard to the parties’ existing interests;
·Determine all relevant contributions of each of the parties;
·Identify and weigh against each other the matters set out in s 79(4)(a) to (c) inclusive; and
·Consider the matters contained in s 79(4)(d) to (g) inclusive and make a determination as to what, if any, alteration should be made to the entitlements of the parties earlier assessed on account of their contributions, particularly having regard to the provisions of s 75(2).
The Act does not prescribe the order in which the matters in s 79(4) are to be considered. The circumstances of individual marriages as to their nature and form differ; how parties have organised and lived within the marriage are factors which may be relevant in the exercise of the discretion pursuant to s 79(2) of the Act.
The Court’s approach may be less compartmentalised than was previously the case and a more “holistic” approach, as described by Murphy J in Watson & Ling [2013] FamCA 57 at [13], adopted.
It was conceded by the parties at the commencement of the proceedings that orders were necessary and each asked the Court to make orders adjusting their interests in property; neither party challenged the proposition that it was just and equitable to make orders for a property settlement. In circumstances where the parties agree that they will no longer have the joint use and enjoyment of their interests, I am satisfied that it is just and equitable to make orders for the adjustment of those interests.
Issues in dispute
The issues that emerge from the parties’ competing applications which require determination are:-
· As to the identification and valuation of the parties’ interests:-
A.Whether there is a debt owing by the parties to L Pty Ltd, an entity owned and controlled by the husband’s business associate, Mr N in respect of an alleged loan in the sum of $2 million. The husband contends that loan is evidenced by a promissory note signed by him and that the amount now outstanding in respect of that loan is $5,064,391;
B.Whether there is a debt owing by the husband in respect of promissory notes executed by him in favour of investors in H Pty Ltd. The husband alleges that the sum of $3,460,227 is owing with respect to those liabilities;
C.Whether the NAB Portfolio Mortgage which has a balance of $4,018,046 is a joint liability of the parties or the husband’s alone, it being the wife’s contention that that liability arose as a result of the husband’s reckless and speculative investments and his investment in undisclosed ventures in Country G.
·Whether there has been significant non-disclosure by the husband and if so, the impact of that conduct upon the adjustment of the parties’ interests.
·What adjustment should be made in favour of the wife in respect of s 75(2) factors.
The hearing
The final hearing commenced before me on 29 July 2019 and proceeded over four days. Each party was represented by counsel throughout the proceedings.
At the commencement of the hearing, the husband sought to raise objection to two parts of the wife’s evidence. The first objection was in respect of the affidavit of the wife’s treating psychologist, Ms R, that affidavit sworn and filed 14 June 2019. Annexed to that affidavit were two reports of Ms R, the first dated 20 December 2017 (Annexure B) and the second dated 12 June 2019 (Annexure C).
Counsel for the husband objected to that affidavit, submitting that it was inadmissible on three bases, being:-
· First, the affidavit has no probative value, the reports annexed to it simply providing an account of information provided to Ms R by the wife;
· Second, the evidence contained in the affidavit is not relevant to the issues in dispute; and
· Third, there is no evidence as to the providence of the report, that is, there is no material before the Court as to the circumstances in which Ms R’s reports were requested or produced. This part of the objection was not seriously pressed by the husband’s counsel.
In response, senior counsel for the wife submitted that the affidavit of Ms R is relevant. One of the issues in dispute relates to the wife’s future earning-capacity and her capacity to engage in employment. It was submitted that the reports of Ms R detail the wife’s symptoms of anxiety and depression and the treatment of those symptoms; as such the affidavit contained evidence relevant to the issues before the Court.
In support of that submission, reliance was placed on the decision of the Full Court in Britt & Britt (2017) FLC 93-764 (“Britt”). There the Full Court confirmed that the admissibility of evidence subject to other exclusionary provisions is governed by ss 55 and 56 of the Evidence Act 1995 (Cth) (“Evidence Act”).
Section 55 of the Evidence Act provides that evidence that is relevant in a proceeding is evidence that, if it were accepted, could rationally affect (directly or indirectly) the assessment of the probability of the existence of a fact in issue in the proceeding.
Section 56 of the Evidence Act provides that except as otherwise provided by the Act, evidence that is relevant in a proceeding is admissible in the proceeding.
At paragraph 30 of the judgment in Britt, the Full Court referred to and relied upon the decision of the High Court in IMM v The Queen (2016) 257 CLR 300. At paragraph 40 of that decision, French CJ, Kiefel, Bell and Keane JJ explained:-
Because evidence which is relevant has the capability to affect the assessment of the probability of the existence of the fact in issue, it is “probative”. Therefore, evidence which is relevant according to s 55 and admissible under s 56 is, by definition, “probative”. But neither s 55 nor s 56 requires that evidence be probative to a particular degree for it to be admissible. Evidence that is of only some, even slight, probative value will be prima facie admissible, just as it is at common law.
(Emphasis added)
Having referred to that decision in Britt, the Full Court confirmed at paragraph 31 that:-
Thus, evidence that is probative, even slightly probative, is admissible because it could rationally affect the determination of an issue. For it to be inadmissible it must lack any probative value.
The husband challenged the wife’s evidence that she did not have capacity to work. At paragraph 63 of his trial affidavit he denied that allegation. The two reports of Ms R annexed to her affidavit recount the wife’s reports to her as to the circumstances leading up to and following the breakdown of the parties’ marriage. It sets out the wife’s allegations that she was a victim of family violence at the hands of the husband, that she has been abused both financially and emotionally. Importantly, it also provides Ms R’s assessment of the wife, that she suffers from anxiety and depression and that she suffers from anxiety and fear arising from her experience of her relationship with the husband. Senior counsel for the wife submits that that evidence is relevant to the assessment of the wife’s capacity to work. I accept that submission.
Having regard to the evidence contained in Ms R’s affidavit, and the issues before the Court, I ruled that in accordance with the principles enunciated in Britt that the evidence of Ms R has some probative value and was therefore admissible.
The second objection raised on behalf of the husband related to paragraph 53 of the wife’s affidavit in reply filed 22 July 2019. There the wife gives evidence as to a document provided to her by the husband in about July 2016 in which the husband lists the parties’ interests. That document does not refer to any liabilities. The wife annexes to her affidavit at Exhibit B-13 a copy of the document which she deposes was produced by the husband as part of a settlement proposal (Exhibit A-2, page 104).
It was submitted on behalf of the husband that the document was produced by him as part of a settlement proposal and as such is a privileged document. Accordingly, the husband sought to have paragraph 53 and the annexure struck out of the wife’s affidavit. He relied upon s 131(1) of the Evidence Act to support his contention that that evidence is inadmissible.
In response, it was submitted on behalf of the wife that the wife’s evidence falls within the exceptions to that privilege pursuant to s 131(2)(g) of the Evidence Act. That section provides that such evidence is admissible if:-
evidence that has been adduced in the proceeding, or an inference from evidence that has been adduced in the proceeding, is likely to mislead the court unless evidence of the communication or document is adduced to contradict or to qualify that evidence;
The wife’s position in relation to the alleged debts is contained at paragraph 65 of her trial affidavit where she deposes:-
Throughout these proceedings, the Husband has maintained, that he and I have significant debts being to the National Australia Bank, to Mr N [sic] (or his entities) and as a result of two other promissory notes executed by him. The Husband has failed to establish the veracity of these debts and he never made me aware of these alleged debts during the course of our marriage.
The husband responded to the wife’s evidence at paragraph 64 of his trial affidavit wherein he deposes:-
I refer to paragraph 65 and deny that the Applicant Wife was not aware of these debts.
It was submitted on behalf of the wife, that given the husband’s assertions as to the wife’s knowledge of the alleged debts, the Court may be misled if the document objected to is not available to the Court.
The Full Court considered the application of s 131(2)(g) of the Evidence Act in the decision of Phe & Leng [2019] FamCAFC 17. There the Full Court noted that there is both a broad and a narrow approach considered by the authorities in relation to the application of that section. As to the two approaches, the Court held:-
43.It would appear that proponents of the narrow view would read into the words of the first element of s 131(2)(g) of the Evidence Act namely, “evidence that has been adduced in the proceeding, or an inference from evidence that has been adduced in the proceeding” additional limiting words such as “and that makes the privileged communication or document an issue in the proceedings.” There is no basis for doing this. The plain words in the subsection cannot be ignored. The first element of the subsection on its face applies to any evidence or inference from evidence already adduced.
44.There is also no basis to presume that the legislative task miscarried. Some supporting the narrow approach argue that the other exceptions in s 131(2) of the Evidence Act are confined (see Emmett J in Brown at [181]). However, the “broader” approach is still significantly confined by the need for there to be a likelihood that the court will be misled unless the privileged communication is adduced. The broader construction of s 131(2)(g) of the Evidence Act does not open the “floodgates”. In any event, s 135 of the Evidence Act provides a discretion to refuse to admit evidence if its probative value is substantially outweighed by the danger that the evidence might be unfairly prejudicial to a party, be misleading or confusing, or cause or result in an undue waste of time. In this case, admitting the evidence was not an undue waste of time. The issue of the loan was important because the net assets of the parties were $304,662 and would have otherwise been $449,662 had the loan not been included.
(Emphasis in original)
The issue of whether or not the liabilities contended for by the husband are genuine is the greatest controversy between the parties. The husband positively asserts that he has liabilities as a result of promissory notes executed by him. Further, he positively asserts that the wife was aware of those liabilities. The document sought to be relied upon by the wife is a document she alleges was produced by the husband prior to the parties’ separation when they were engaged in settlement discussions. That document makes no reference to the liabilities now contended for by the husband. Having regard to the issues in dispute, I determined that there was a likelihood that the Court would be misled were that document omitted from evidence. Accordingly, I ruled that paragraph 53 of the wife’s trial affidavit and Exhibit B-13 to that affidavit were admissible.
Following the determination of those objections, senior counsel for the wife proceeded to open his client’s case. The wife and her witness, Ms R were cross-examined. The husband and his associate, Mr Q were also cross-examined.
On the final day of the trial, a joint balance sheet was tendered by counsel for the husband (Exhibit R-4). That document identifies the parties’ interests and value of those interests. It also identifies the contentious issues within the parties’ asset pool.
During closing submissions, it was agreed between the parties that the wife could tender an amended Minute of Proposed Order in light of the adjustments made to the agreed asset pool on the final day of the hearing. That Minute of Proposed Order was received by the Court by email from the wife’s solicitor on 9 August 2019.
The evidence
In determining the matter the relevant standard of proof is the balance of probabilities. Section 140 of the Evidence Act provides that, without limiting the matters the Court may take into account in applying that standard of proof, the Court must take into account:-
·The nature of the cause of action or defence;
·The nature of the subject matter of the proceeding; and
·The gravity of the matters alleged.
I have read all documents upon which the parties have relied and the exhibits that were tendered during the hearing. I have also had the benefit of observing the appearance and demeanour of the witnesses when giving their evidence in Court.
In making my findings, I have given careful consideration to all of the evidence, the nature of the proceedings, the seriousness of the allegations made and the consequences that flow from those findings.
The Wife’s Evidence
The wife was cross-examined by counsel for the husband for a period of approximately one-and-a-half hours. There was no serious challenge to her evidence. The wife impressed as an intelligent and responsive witness who sought to directly answer the questions put to her. At times she exhibited frustration at the matters put to her, particularly in relation to the husband’s actions with respect to the transfer of monies to his family in Country G.
Throughout her evidence, the wife was steadfast in her denial that she had any knowledge of monies advanced to the parties by or on behalf of Mr N or L Pty Ltd. She was also clear in her recollection that the parties financed the construction of the former matrimonial home at Suburb M by the sale of shares.
In circumstances where there was no serious challenge to the wife’s evidence I am satisfied that she was a witness of truth.
Ms R
Ms R is the wife’s treating psychologist. There was no challenge to her professional qualifications or expertise. Her two reports were annexed to the affidavit sworn by her and filed 14 June 2019.
Ms R was cross-examined by counsel for the husband. Her responses to questions were direct and forthright and I accept her as a credible and truthful witness.
The Husband’s Evidence
The husband was cross-examined over three days by senior counsel for the wife. Throughout that period I observed his evidence to frequently be unreliable and implausible. On other occasions I found the husband to be an evasive and non-responsive witness. At times, the husband adopted an entirely cavalier approach to the Court and towards his duty to make full and frank disclosure.
For example, at the commencement of cross-examination, the husband was questioned as to his compliance with Court orders. On 15 February 2018 orders were made partially by consent. Order 10 of those orders provides that the husband complete and lodge the taxation returns for the husband, the wife and any corporate entity or trust in which they have an interest and any taxation refund received as a result of such lodgement be applied towards a specified NAB loan account.
During cross-examination the husband gave evidence that, notwithstanding the terms of that order, he had applied $30,000 from the taxation return to the specified NAB account and the balance to the payment of other expenses, including his credit card. When challenged as to his failure to comply with the terms of the Court order by not applying the whole of the refund to the loan account the husband responded that it was his belief that he had complied with the order as some of the taxation return had been applied to the NAB account. The husband appeared dismissive of the matter and demonstrated no contrition nor acceptance of responsibility for his breach of that order.
The husband demonstrated a similarly cavalier attitude towards his responsibilities to make full and frank disclosure. His attitude towards those obligations appeared to be “catch me if you can”; unless presented with direct evidence as to an interest or investment, the husband appeared to disregard his obligation to make full and frank disclosure regarding such interest.
An example of that approach was in relation to the husband’s evidence as to his interest in the Country G dairies. The husband’s trial affidavit is silent as to any interest in a farm business in Country G. It was through cross-examination that the husband divulged that he and his brother had established a business known as “BF Company” in 2017. The husband’s evidence in relation to that interest was that the business is currently dormant and that he had invested approximately $10,000 into the enterprise.
When challenged, the husband conceded that he had disclosed no documents in relation to that business. The husband admitted that he had undertaken some planning towards the establishment of a farm business in 2017 and that indeed there had been business plans developed.
In addition to that business, the husband also divulged during cross-examination that he was involved in the acquisition of a primary industry facility in Country AF. Again, he had made no disclosure in relation to that venture.
Later in the cross-examination, the husband disclosed that he was involved in the development of a range of other businesses in Country G including D Bank, AG Finance and a building supply business. When challenged, the husband conceded that there were signed agreements in relation to the development of the bank, including a distribution agreement dated 7 February 2019 and Binding Heads of Agreement between F Pty Ltd (an entity in which the husband holds a 50 per centum interest) and AG Finance signed on 10 December 2018. The husband acknowledged that none of these ventures had been disclosed to the wife or her lawyers.
Throughout his evidence the husband appeared dismissive of his obligation to make full and frank disclosure. It was submitted by senior counsel for the wife and I accept that unless the husband was asked precisely the right question, he would provide little information as to his business activities. As a result of the manner in which the husband gave his evidence, I am satisfied that he is an unreliable witness and that his evidence should be treated with caution.
On the first day of his evidence, the husband was cross-examined as to his activities in his accounting practice. The husband stated that his income from that practice was deposited into the Family Trust NAB account #...32. When presented with the statements for that account the husband could identify only one deposit which he said related to his accountancy work, being a deposit for $3,300 from Dr TT in June 2017. His explanation for there being only one such deposit was that that related to the only “completed transaction” undertaken by him. That evidence raised more questions than it answered in terms of the husband’s business activities and income. Whilst it was his evidence that he had five or six clients and that he was undertaking tax agent work, the husband produced no documents in relation to those endeavours.
As a result of the husband’s approach, I was left with the impression that the husband was attempting to conceal his activities and mislead the Court as to the nature and extent of his many business interests and his income from those endeavours.
It was conceded by counsel for the husband that the husband’s recall of events was not completely reliable and further that there were clearly examples that he had not disclosed relevant matters. Further examples of the husband’s unreliable evidence are referred to elsewhere in these reasons.
Having regard to the totality of the husband’s evidence I am satisfied that he was not a witness of truth. Throughout the course of his evidence he was evasive, non-responsive and at times his evidence was frankly unbelievable. As a result, where his evidence conflicts with that of the wife, I prefer her evidence.
Mr Q
Mr Q is a barrister and business associate of the husband. Mr Q swore and filed an affidavit in support of the husband on 26 July 2019. He there deposed as to his role in witnessing the promissory note executed by the husband in favour of L Pty Ltd on 1 July 2007, as well as the promissory notes executed by the husband in favour of Mr TT, Mr N and Mr P, all dated 15 March 2007. Mr Q also deposed as to his role in appearing for L Pty Ltd and Mr N at the mediation which occurred on 3 May 2019.
Mr Q was cross-examined by senior counsel for the wife on the third day of the hearing.
Mr Q confirmed during his oral evidence that he did not render a fee for his appearance at the mediation and that it was Mr N who requested that he appear on that occasion. Mr Q stated that he appeared on the basis that there would be no fee payable if the matter did not resolve. Further, Mr Q stated that when undertaking work for Mr N, he was paid a success fee sometimes, usually at the end of a transaction.
As to the circumstances of his attendance at the mediation, Mr Q stated that the only documents provided to him by Mr N were the Family Trust’s bank statements. It was his evidence that he accepted Mr N’ explanation that those bank statements proved L Pty Ltd’s payment to the husband. Mr Q stated that he did not seek any additional supporting documents from his client which might prove the alleged debt.
Mr Q denied that he was aware of the wife’s position in relation to the alleged debt; that is that she denied the existence of the alleged debts to L Pty Ltd and Mr N. If not to prove the alleged debts, it is unclear for what purpose Mr Q appeared on behalf of L Pty Ltd and Mr N at the mediation. I found Mr Q’s evidence regarding the circumstances as to his attendance at the mediation and his role at the mediation to be unconvincing.
Mr Q also confirmed that he had on previous occasions acted on behalf of the husband. He confirmed that he sent emails to the letting agent of the W Street properties on behalf of the husband in relation to the dispute at VCAT. Mr Q gave evidence that he did not charge the husband for his services on that occasion.
Although he confirmed his belief that he has a good memory, Mr Q was unable to recall other occasions on which he had acted for the husband.
When questioned about his role in witnessing the promissory notes, Mr Q’s evidence was that he had witnessed five or six such promissory notes.
During his oral evidence Mr Q acknowledged receipt of a letter from the wife’s lawyer dated 9 May 2019 (Exhibit A-2, page 33) in which he had been requested to confirm that he had personally witnessed the promissory notes and that he personally attended the husband’s business premises at KK Street, Suburb LL (“KK Street”) for that purpose. Mr Q confirmed during his oral evidence that he did not respond to that correspondence. His explanation for his failure to respond to the letter was that he had probably overlooked the correspondence.
As to the date upon which he witnessed the promissory notes, Mr Q confirmed that he witnessed the L Pty Ltd promissory note on 1 July 2007 in the husband’s KK Street offices. That evidence directly conflicts with the evidence of the husband.
Later in his oral evidence, Mr Q confirmed that he is a close friend of the husband’s. Indeed, it emerged during his cross-examination that Mr Q had been assisting the husband in funding his legal costs of these proceedings. Mr Q confirmed that on 9 July 2019 he had forwarded an email to the husband’s lawyer regarding his undertaking to cover the husband’s fees and arrangements to transfer funds to the lawyers account (Exhibit A-15).
Mr Q also confirmed that he had been involved in other business transactions with the husband, including in relation to the development of XX Pty Ltd and J Ltd.
Mr Q was an unimpressive witness. At times his recall of events was poor and parts of his evidence, particularly in relation to the arrangements for his attendance at the mediation, were implausible. That he had no knowledge of the position of the wife in relation to the alleged debt to L Pty Ltd or Mr N was unbelievable. Similarly, given his role as counsel representing L Pty Ltd and Mr N at the mediation, his failure to seek further documentation from Mr N which might otherwise prove the alleged debts was implausible.
As noted above, Mr Q’s evidence as to the circumstances of the execution of the promissory notes conflicted with the evidence of the husband. Having regard to all of those factors, in my view Mr Q’s evidence must be treated with significant caution.
The asset pool
During closing submissions, counsel for the husband tendered a joint balance sheet (Exhibit R-4) which identifies the respective positions of the parties in relation to the value or existence of the assets and liabilities of the relationship as follows:-
Asset Legal Title Husband’s Value Wife’s Value CC Street, Suburb M Joint $9,500,000 Agreed X Street, Suburb Y Wife $1,105,000 Agreed V Street, Suburb T Joint $1,900,000 Agreed 1 W Street, Suburb T
Joint
$1,400,000
Agreed
2 W Street, Suburb T
Joints
$1,500,000
Agreed
DD Street, Suburb FF
Joint
$520,000
Agreed
KK Street, Suburb LL
Husband
$225,000
Agreed
Bence Family Trust Share Portfolio Husband $33,100 Agreed AB Company Shares Wife $11,000 NIL Motor Vehicle 1 Wife $45,000 Agreed Motor Vehicle 2 Husband $8,000 Agreed H Pty Ltd Shares Husband NK NK F Pty Ltd Husband (50%) $65,000 NK 10 Lots on AA Street, BB City, Country G Husband $701,000 Agreed NN Street, PP Town, Country G Husband $180,248 Agreed JJ Town, GG Street & HH Street, JJ Town, Country G Wife $65,000 NK Bank Accounts Husband $26,000 Agreed Jewellery Wife $50,000 NIL Z Time Share Joint $20,000 NK Interim Distribution Husband $66,500 Agreed Interim Distribution Wife $66,500 Agreed Rental Funds from Suburb Y held by Wife’s Solicitors Joint $27,000 Agreed Liabilities NAB Portfolio Mortgage (account ending #…46 & #…10) Joint $4,018,046 NIL L Pty Ltd Loan (construction of Suburb M property) - $5,064,391
NIL 2019 Land Tax Joint Agreed $140,695 Owners Corporations Fees Husband $5,330 Agreed Outstanding Council Rates Joint $28,000 Agreed Gas & Electricity – Suburb M property Wife Agreed $4,017 Water & Council Rates – Suburb Y property Wife Agreed $16,495
Contingent Liabilities H Pty Ltd Promissory Notes Husband $3,460,227
NIL Superannuation MM Retirement Fund Wife NK $140,000 ATO Unclaimed Superannuation Husband $48,684 Agreed NET ASSETS $4,825,831 $17,297,495
What follows are my findings with respect to the disputed items in the tendered balance sheet.
THE “L PTY LTD LOAN”
In August 2005, the parties purchased the former matrimonial home in Suburb M, Victoria. In 2007 the residence at the Suburb M property was demolished and a new dwelling constructed. There is a dispute between the parties as to the costs of construction of the new dwelling and how funds were sourced to meet those costs.
The husband contends that the construction costs for the dwelling exceeded $5.1 million and that he borrowed the sum of $2 million from L Pty Ltd, an entity owned and controlled by an associate, Mr N to assist in financing them. Further, the husband contends that loan is evidenced by a promissory note signed by him in favour of L Pty Ltd.
The wife challenges the husband’s assertions as to the construction costs, it being her contention that the parties expended approximately $2 million on the construction of the dwelling. Further it is her position that those costs were met from the proceeds of the parties’ share trading and investments. The wife denies the allegation that monies were borrowed from L Pty Ltd to finance the construction costs.
a. The Cost of Construction
During closing submissions the husband’s counsel acknowledged that the husband was seriously challenged as to the value of the construction costs.
The husband prepared and produced two ledgers to support his contentions as to the construction costs. Those ledgers were annexed to the wife’s affidavit filed 22 July 2019 at B-8 (Exhibit A-2, pages 45 - 55). The ledgers contain a list of payments alleged to have been made from a NAB account (…32) between August 2005 and November 2013 which total $2,374,404 and payments made to an “outside bank account” totalling $110,000.
Included in the amounts drawn from the NAB account are the sum of $159,000 which the husband asserts is for stamp duty and $206,000 being the deposit on the Suburb M property. Clearly, those payments do not relate to the construction of the dwelling, notwithstanding the husband’s assertions to the contrary.
The nine pages in the husband’s ledger relating to the NAB account contain dozens of cash payments across the period as well as many more categorised simply as “material”. It is impossible to discern as to who or what those payments relate. During cross-examination the husband conceded that the ledgers were prepared by him only three to four weeks prior to the hearing. When asked as to the bases for the entries noted as cash payments, the husband stated that he relied upon his recall of those transactions to create the ledgers, notwithstanding that they were payments allegedly made between 2007 and 2013. Given the number of alleged cash transactions, the period over which they were said to have occurred and the passage of time since those transactions were said to have occurred, I find the husband’s evidence regarding those transactions to be implausible.
The husband was further cross-examined in relation to alleged payments to a concreter, Mr SS. The husband recorded in the ledger that Mr SS was paid the sum of $70,000 on 30 October 2007 (Exhibit A-2, page 46). However, when presented with statement number 26 for the parties’ NAB Home Loan account #…46 (Exhibit A-16), the husband conceded that the payment from the NAB Account #...32 was in fact made to that home loan and not Mr SS. Similarly, the husband conceded that the alleged payment in the sum of $23,000 to the concreter on 31 October 2007 was in fact a transfer to the parties’ home loan.
Eventually the husband conceded that his ledgers were an attempt by him to reconstruct records of transactions related to the costs of the construction of the dwelling. The husband noted that when creating the ledgers he had few documents available to him. The husband produced no primary source documents to support his contentions as to the construction costs.
The wife contends that the construction of the dwelling at the Suburb M property cost approximately $2 million and that those costs were met from the income of the parties’ share trading and other investments.
In support of her contention as to the quantum of the construction costs, the wife relied on the building permits and insurance certificate for the construction.[1] The parties were “owner/builders” and as a result did not enter into contracts relating to the construction. The building permits for the site note the building costs to total $1,816,500. Further, the parties held construction insurance which estimated the contract value of the construction to be $2 million.
[1] Exhibit A-1, pp 64 – 82.
The evidence of the husband as to the amount expended on the construction of the dwelling was unconvincing. His attempt to reconstruct ledgers to justify his assertions as to the amount spent was obviously flawed. It was not until cross-examination that the husband conceded his ledgers included amounts for the deposit on the Suburb M property, stamp duty and mortgage payments. Further, his evidence that the ledgers were based upon his recollection of cash payments made, in some instances, more than 10 years ago, was unbelievable. Having regard to those matters, I prefer the wife’s evidence as to the costs of the construction.
b. Monies Allegedly Advanced by L Pty Ltd
At paragraph 15 of his trial affidavit, the husband deposed that he borrowed the sum of $2 million from L Pty Ltd in July 2007. At paragraph 17 of his trial affidavit, the husband deposes that the construction of the dwelling at the Suburb M property was funded from three sources, namely a NAB account in the name of the Family Trust, a Commonwealth Bank Visa credit card and cash.
The husband was questioned as to where the monies advanced from L Pty Ltd were deposited. The husband’s oral evidence was that those funds were applied to share trading and received as cash. No documents were produced by the husband evidencing receipt of funds from L Pty Ltd or Mr N.
The husband was cross-examined extensively as to the circumstances of the alleged loan from L Pty Ltd. During cross-examination he modified his evidence stating that that sum had been borrowed from L Pty Ltd “up to” 2007, rather than in July 2007 as he deposed in his trial affidavit. The husband was also cross-examined as to the dates upon which monies were advanced to him by L Pty Ltd. The husband’s oral evidence was that he had received a series of advances from L Pty Ltd, including cash payments. When asked as to the amount of cash advanced by L Pty Ltd, the husband initially stated that he had received “about” $100,000.
On the second day of the hearing, the husband changed his earlier oral evidence and stated that he received approximately $200,000 in cash from L Pty Ltd, which he applied to the payment of tradesmen.
The husband confirmed that Mr N has signed no document to evidence the alleged loan and that the only documentary evidence of the alleged advances was the copy of the promissory note signed by the husband.
The husband confirmed during cross-examination that he was in regular contact with Mr N, undertaking work for him and that Mr N is a close friend. Notwithstanding that apparently close relationship and the husband’s requests that he intervene in the proceedings, neither L Pty Ltd nor Mr N did so; save for engaging Mr Q to appear on their behalf at the mediation of this matter, they have taken no action to recover the alleged loan.
The husband asserted that the parties’ liability under the alleged loan to L Pty Ltd was accruing interest of approximately $32,000 per month. Notwithstanding the extent of that growing liability, it was the husband’s evidence that he was not concerned by that debt or the fact that the family was going backwards financially.
The husband provided no security to either Mr N or L Pty Ltd with respect to the alleged loan nor was there a loan agreement or any other document executed by or on behalf of L Pty Ltd evidencing the loan. No interest payments have ever been made by or on behalf of the husband in respect of the alleged loan.
The husband contends that the balance currently outstanding under that loan is $5,064,391.
The husband was cross-examined in relation to bank statements in the name of the Family Trust for account #...32, which were produced by Mr Q, who appeared as counsel representing L Pty Ltd and Mr N at the parties’ mediation in May 2019. Those statements relate to the period 1 March 2007 to 12 October 2007 inclusive, and are annexed to the wife’s affidavit sworn 22 July 2019 at annexure B-1 (Exhibit A-2, pages 12 – 20). The husband could provide no explanation as to how Mr Q came into possession of the banking records for the Family Trust, an entity controlled by the husband, although he conceded that he had shown the bank statements to Mr N. The husband denied ever providing bank statements for the Family Trust to Mr Q.
The statements produced by Mr Q at the mediation disclose the following deposits by “L Pty Ltd” into that account:-
· 13 March 2007 Internet transfer L Pty Ltd $820,000
· 11 May 2007 Internet banking L Pty Ltd $200,000
· 26 June 2007 Internet banking L Pty Ltd $250,000
· 22 August 2007 Internet banking L Pty Ltd $300,000
· 27 August 2007 Internet Transfer L Pty Ltd $30,000
· 28 August 2007 Internet Transfer L Pty Ltd $20,000
· 30 August 2007 Internet Transfer L Pty Ltd $30,000
· 14 September 2007 Internet Transfer L Pty Ltd $100,000
The husband was cross-examined in relation to each alleged transfer of funds to the Family Trust from “L Pty Ltd” recorded in the statements. The husband conceded that those transactions did not occur, that there was no transfer of funds to the account by L Pty Ltd.
Annexure B-2 to the wife’s affidavit filed 22 July 2019 (Exhibit A-2, pages 21 – 29) is a copy of the bank statements produced under subpoena by NAB for the same account, Family Trust #...32, for the period 1 March 2007 to 12 October 2007 inclusive. These are the statements for the same period as those produced by Mr Q during the parties’ mediation. The statements produced by the bank do not record any transfer of funds to the account by Mr N or “L Pty Ltd” for the dates referred to above.
It was conceded on behalf of the husband that the statements produced by Mr Q at the mediation had been altered, the effect of those alterations being to give the impression that funds had been transferred to the Family Trust by L Pty Ltd.
Ultimately, it was conceded by the husband and I accept that the bank statements were altered in an attempt to mislead the wife at the mediation as to monies allegedly advanced by L Pty Ltd. The bank statements produced at the mediation were forged; that this was so only became apparent upon inspection of the bank statements produced by NAB. Whilst conceding those matters, the husband maintained that he did not have any hand in the attempt to mislead the wife. Further, he stated that he did not become aware of that attempt to mislead the wife until some weeks after the mediation.
Given the elaborate attempt to mislead the wife, which included the alteration of banking records and the engagement of Mr Q to represent L Pty Ltd’ interests to prove the alleged debt at the parties’ mediation, I do not accept the husband’s evidence that he had no knowledge of the deception. The documents altered were bank statements to the NAB accounts for the Family Trust to which only the husband had access; he is the only party in these proceedings who has an interest in proving the alleged debts.
c. The Promissory Note
The husband alleges that he executed a promissory note on 1 July 2007 in relation to the alleged loan from L Pty Ltd. The terms of the promissory note record that a loan in the sum of $2 million together with interest of 8.05 per centum per annum is payable by the husband to L Pty Ltd, with the maturity date being 30 June 2022 (“the L Pty Ltd note”). A copy of the L Pty Ltd note was tendered to the Court (Exhibit R-1, pages 20-24). The original promissory note was not and has never been produced by the husband.
The wife disputes the validity of the L Pty Ltd note.
During his oral evidence the husband confirmed that he prepared the promissory note on his home computer. It was his evidence that he nominated the execution date as 1 July 2007 and typed that date into the document. Although the document bears that date, the husband conceded during his oral evidence that he could not recall when the document was actually executed, indicating that it was likely a few weeks within that date.
That the husband has not produced the original promissory note executed by him was the subject of criticism by the wife. He was cross-examined as to why the original document had never been produced. The husband’s evidence was that he located the copy of the promissory note at his offices in KK Street. He confirmed that those copies had always been held by him at his workplace, which he considered was a safe place to store documents.
The husband could provide no explanation for the loss of the original document stating that it was his “guess” that the original document remained at the former matrimonial home. Orders were made on 15 February 2018 permitting the husband to attend the former matrimonial home in the company of police in order to “collect his financial documents in the study”. The husband did attend the property and during the proceedings raised no issue as to his ability to access the premises. Further, following his attendance at the property the husband filed no additional applications to access the former matrimonial home in order to locate the missing documents. The husband maintained that he located a copy of the promissory note at his offices in March 2018. The husband denied the allegation that the promissory note was a product of recent invention.
The witness to that promissory note, Mr Q deposed at paragraph 3 of his affidavit that he witnessed the L Pty Ltd note on 1 July 2007 at the husband’s office in KK Street. During cross-examination Mr Q confirmed that evidence.
When put to him that he did not witness the L Pty Ltd note on 1 July 2007, Mr Q denied that allegation.
I am satisfied that there is a conflict between the evidence of the husband and Mr Q as to the circumstances in which the L Pty Ltd note was executed. Given that conflict, I have significant doubts as to the circumstances and time at which the document was created and executed.
d. Conclusion
Having regard to the totality of the evidence in relation to the alleged loan from L Pty Ltd, I am satisfied on the balance of probabilities that it is not a liability of the parties to be taken into account in the calculation of their joint interests.
The husband has produced no documents evidencing receipt of monies from L Pty Ltd or Mr N. The ledger relied upon by the husband is a document created specifically for the purposes of bolstering the husband’s assertions as to the costs of construction of the Suburb M property. The husband has sought to reconstruct transactions and the inaccuracies in that document were easily demonstrated during cross-examination.
The bank statements produced on behalf of L Pty Ltd at the parties’ mediation had been altered to give the impression that L Pty Ltd had transferred funds to the Family Trust; the documents produced under subpoena by the bank confirm that no such transfer of funds occurred on the dates alleged. That was conceded by the husband.
In my view, the husband’s contention that Mr N or L Pty Ltd would advance to the husband a sum of $2 million without security or any loan documentation is fanciful. Moreover, that the alleged lender would not seek to recover that liability, particularly when on notice of the proceedings as between the husband and the wife and the denial of that liability by the wife, beggars belief.
Seemingly the only attempt by the lender, L Pty Ltd, to recover the debt was at the mediation when altered documents were produced on its behalf in an endeavour to prove the debt. Had monies been advanced by L Pty Ltd, it was clearly within its power to produce evidence as to the advance of those funds. Neither the husband nor L Pty Ltd have produced any evidence which would support a finding as to the existence of the alleged debt.
Given the husband’s evidence as to his close relationship with Mr N, which includes him acting as his accountant and preparing financial statements for his entities, that there is no documentary evidence produced by Mr N or L Pty Ltd to prove the alleged loan supports a finding that that liability does not exist.
Accordingly, I will not include that alleged liability in the parties’ balance sheet.
THE H PTY LTD PROMISSORY NOTES
In addition to the monies allegedly due to L Pty Ltd arising from the promissory note executed by the husband in favour of that entity, the husband also contends that there is a contingent liability of $3,460,227 arising from promissory notes he executed in favour of Mr N, Mr TT and Mr P.
Notwithstanding the husband’s initial claims in respect of Mr TT, as noted at paragraph 26 of the husband’s affidavit filed 12 July 2019 the husband conceded that Mr TT had forfeited his entitlement to call upon the alleged debt as a result of the transfer of his shares in H Pty Ltd to a third party.
The husband’s evidence is that he established an entity known as H Pty Ltd in 2006 for the purpose of acquiring an interest in a company known as BD Company. This company holds an interest in a primary industry facility in Country AC.
At paragraph 20 of his trial affidavit the husband deposes that in order to acquire that interest, H Pty Ltd needed to raise at least $10.5 million. To that end, the husband deposes that in order to attract Mr P, Mr N and TT as investors in the enterprise, he offered to underwrite their investments for a 15 year period, and executed promissory notes in favour of each of them to secure their investments. He deposes that Mr P invested the sum of $1 million, Mr N $1,571,000 and Mr TT $2 million in the venture.
The husband’s evidence is that he executed promissory notes in favour of each of those investors in respect of the amounts invested by them on 15 March 2007 (Exhibit R-1, pages 60-72). The terms of the promissory notes included that:-
· The husband promises to pay the recipient of the note the principal sum advanced, together with a fixed return of two percent per annum;
· The principal amount advanced will only be due and payable up to 15 years from the date of the issue of the promissory note, being 15 March 2023; and
· In the event that the holder of the promissory note issues a demand for the payment of the principal and fixed return, the shares held by the holder in H Pty Ltd are to be transferred to the husband.
The husband deposes in his trial affidavit that each of Mr P, Mr N and Mr TT deposited the investment funds into a trust account maintained by VV Solicitors (Exhibit R-1, page 74).
As with the L Pty Ltd promissory note, the original promissory notes alleged to have been executed by the husband in relation to the H Pty Ltd investments have not been produced.
The husband’s evidence is that he prepared each of the H Pty Ltd promissory notes. All three notes are dated 15 March 2007, the same date upon which the husband deposes they were executed at paragraph 22 of his trial affidavit. However, during cross-examination the husband’s evidence was that in fact the documents were “effective” from that date but not signed on the date they bear. Further, it was the husband’s evidence that all four promissory notes tendered in the proceedings, including the L Pty Ltd note, were executed on the same day.
Again, the husband’s evidence in relation to the execution of the H Pty Ltd promissory notes is in direct conflict with that of Mr Q, who confirmed during his oral evidence that the documents were executed on the dates they bear.
The husband’s evidence in relation to the H Pty Ltd promissory notes was implausible. Apart from the inconsistencies in the evidence of the husband and Mr Q as to the circumstances in which the promissory notes were executed, that none of the alleged arms-length investors have taken action to protect their interests, particularly given the husband’s evidence that he sent or gave a copy of the promissory notes to those investors, raises significant doubt as to whether the documents were created as alleged by the husband.
I am satisfied on the balance of probabilities that the H Pty Ltd promissory notes were not executed by the husband on the date alleged. Further, in the absence of any evidence as to a call upon those promissory notes by the holders, which includes Mr N who has had notice of these proceedings and briefed counsel to appear at the mediation, I am not satisfied that the alleged liability is a debt to be taken into account in the calculation of the parties’ interests.
That view is bolstered having regard to the husband’s evidence as contained in his Financial Statement filed 9 March 2018 (Exhibit A-4). At Part K of that document, the husband’s creditors, Mr N, Mr P and Mr TT are not identified. The only disclosure of those liabilities is at paragraph 53 where the husband records that he has a liability for personal loans of $6,607,738. The husband was challenged in relation to that document and it was put to him that those liabilities did not exist and it was only as the case progressed that he invented the liabilities arising under the promissory notes. That the husband provides no particulars as to his creditors in his Financial Statement is troubling, particularly given his qualifications as a finance professional. The omission of those matters in my view gives force to the submissions made on behalf of the wife as to the existence of those liabilities.
It was conceded by counsel for the husband during closing submissions that there is no evidence before the Court that the H Pty Ltd liability is currently due and payable. In my view, there is similarly significant doubt that there is a contingent liability arising as a result of the promissory notes alleged to have been proffered by the husband to the investors.
Accordingly, the alleged liability arising as a result of those promissory notes will be omitted from the parties’ balance sheet.
THE SEPARATION AGREEMENT
My findings in relation to the L Pty Ltd loan and the promissory notes are bolstered having regard to the terms of the separation agreement alleged to have been produced by the husband during the parties’ discussions around the time of their separation.
The husband was cross-examined as to the genesis of the separation agreement the wife alleges he provided to her in about July 2016.[2] It was submitted on behalf of the husband at the outset that the document was inadmissible as it was privileged on the basis that it contained a settlement proposal. As noted earlier, I ruled that the document was admissible.
[2] Affidavit of wife filed 22 July 2019, para 53.
When cross-examined about the separation agreement later in the hearing, the husband denied that he had prepared the document and stated that he first saw that document when it was annexed to the wife’s affidavit. Given that evidence, the husband was asked why at the commencement of the hearing his counsel challenged the admissibility of that document on the basis that it was part of a settlement proposal. The husband could provide no explanation for that application made on his behalf. The husband’s evidence was that the wife was lying as to the circumstances of her receipt of that document. He denied that he had created the document.
The husband’s evidence in relation to the separation agreement was unconvincing. The husband could provide no plausible explanation as to how the document came to be produced or indeed if not produced by him or someone on his behalf, why objection had ever been taken to the document on the basis that it contained without prejudice settlement proposals. The detail contained in the separation agreement is information personal to the parties and information only they would likely have access to. For example, at recital 1 it notes the parties’ marriage certificate number. Given the detail in the document, I am satisfied on the balance of probabilities that it is a document likely prepared by or on behalf of the husband. I prefer the evidence of the wife as to how she came into possession of that document, namely that it was a document provided to her by the husband.
The parties’ assets and liabilities are listed in paragraph 2 of the separation agreement (Exhibit A-2, page 108). The only liability there noted is the parties’ outstanding mortgage to NAB in the sum of $4,100,000. There is no reference in the separation agreement to any liability to L Pty Ltd, Mr N, Mr TT or Mr P arising from the promissory notes executed by the husband.
Having regard to the above I am satisfied on the balance of probabilities that the separation agreement was a document prepared by the husband for the purposes of his negotiations with the wife. Given that document makes no reference to the husband’s asserted liabilities under the promissory notes, it supports a finding that those alleged liabilities were not in existence at the time the document was provided to the wife and are not liabilities to be taken into account in the calculation of the parties’ interests.
NATIONAL AUSTRALIA BANK PORTFOLIO MORTGAGE
The parties have loans from NAB secured over the Suburb M property by way of a portfolio mortgage account (“Portfolio Mortgage”). At the time of the trial the liability with respect to the Portfolio Mortgage totalled $4,018,046.
The wife submits that that liability should be the responsibility of the husband. It is her position that there was no monies owing on that facility in 2008. Since that time the husband has withdrawn approximately $4 million, sums of which have been transferred by him to Country G for undisclosed ventures and otherwise applied towards his investment in K Ltd. The wife submits the husband has engaged in a wanton or reckless disbursement of those funds and as such, should be responsible for that liability.
a. Transfers to Country G
The wife alleges that the husband remitted a total of $1,178,301 to Country G via an account in the name of the Family Trust, those funds having been transferred to that account by the husband from the Portfolio Mortgage.
The wife asserts that the monies drawn by the husband from the Portfolio Mortgage were drawn without her knowledge or consent.
The husband denies the wife’s allegations. He deposes at paragraph 40 of his trial affidavit that the Portfolio Mortgage loan facility in the sum of $4.2 million was obtained in July 2006 so as to consolidate a number of other loans. He deposes that the parties’ properties at Suburb M, Suburb FF, KK Street and Suburb T are security for that loan.
The husband provided to the wife his reconciliation of the Portfolio Mortgage (Exhibit A-2, page 56). During cross-examination the husband confirmed that following the deposit of $4.2 million into the Portfolio Mortgage on 29 April 2008, the balance outstanding on that facility was zero. Further, the husband confirmed that the source of funds for that deposit was the parties’ margin facility.
The parties’ margin facility was held with AD Company and the statement for the period ending 30 April 2008 (Exhibit A-16) discloses that the parties’ equity in that account as at that date was $6,856,248.07. Further, that statement confirms that on 29 April 2008 the sum of $4.2 million was transferred to the Portfolio Mortgage.
The husband conceded during cross-examination that the Portfolio Mortgage was not drawn upon for a period of approximately three years following the deposit in April 2008. The husband also confirmed that following the withdrawal of those funds from the AD Company margin account he continued to trade in shares, albeit that he asserted that those transactions were not successful.
It was also conceded by the husband during cross-examination that the wife did not ever transfer funds from the Portfolio Mortgage facility to accounts held in the Family Trust.
The NAB statement for the Portfolio Mortgage (#…10) (Exhibit A-1, page 123) for the period ending 4 October 2011 discloses that a total of $820,000 was drawn from that account in four separate transactions. During cross-examination the husband confirmed that he had drawn that amount from the account and transferred the funds to the Family Trust account and to his share account.
Although initially the husband disputed the amount alleged by the wife, he did not produce any evidence as to what he says was the correct quantum of funds transferred by him to Country G.
During cross-examination, the husband admitted that monies had been transferred by him to Country G for use as “working capital” and “other things”. He also admitted that he had not quantified the amounts remitted to Country G by him for those purposes. The husband also acknowledged that the wife had to issue subpoenae for the production of documents in order to obtain bank statements and vouchers to ascertain the amounts transferred to Country G by him.
In circumstances where the husband does not challenge the amount alleged by the wife, I am satisfied that he caused $1,178,301 to be drawn on the Portfolio Mortgage and transferred to Country G.
It is the wife’s position that the husband should assume responsibility for that part of the mortgage liability in circumstances where he has failed to disclose the nature and extent of his interests in Country G.
The husband admitted that he commenced investing in Country G in 2012.
The husband’s evidence is that he holds a 50 per centum share of F Pty Ltd, a company registered in Country G. Around 2012, the husband commenced purchasing plant and equipment including trucks for use by F Pty Ltd in Country G. The husband annexed to his trial affidavit at R-9 (Exhibit R-1, pages 98-124) copies of photographs of machinery purchased by him together with his schedule estimating the value of that machinery. The husband’s estimate was that the machinery was valued at $118,000.
During his oral evidence the husband disclosed that F Pty Ltd had been undertaking building supply works with a company, WW Company. He admitted that he did not disclose the contract with WW Company. He stated that that contract expired in 2015 and was not renewed. He also gave evidence that the last machine purchased by him was acquired in 2015.
Notwithstanding his estimate as to the value of the machinery in Country G contained in his trial affidavit, the husband conceded during cross-examination that on 30 May 2018, the estimate of value provided by him to the wife’s lawyers with respect to that machinery was $300,000.
When questioned as to his disclosure in relation to F Pty Ltd and the acquisition of machinery, the husband stated that he had disclosed invoices in relation to the machinery. The husband conceded that he had produced no financial statements, tax returns or balance sheets for F Pty Ltd, it being his assertion that he was not doing anything “substantial” there, notwithstanding his earlier admissions as to the significant sums expended by him on machinery.
Further, it emerged during his cross-examination that F Pty Ltd had as recently as 10 December 2018 entered into a Binding Heads of Agreement with XX Pty Ltd regarding a proposed joint venture to establish a banking business in Country G to be known as “D Bank” (Exhibit A-13). The husband did not disclose his interest in that venture.
Similarly, the husband made no disclosure regarding the shareholders agreement between J Ltd and Bence Pty Ltd regarding the development of a business to supply quality produce in Country G. The husband confirmed during his oral evidence that that agreement was signed in March 2019. The husband acknowledged during cross-examination his involvement in that venture which was sufficiently advanced, such that the chairman of J Ltd issued a media release dated 17 December 2018 (Exhibit A-13) which states in part:-
…Through its partner, F Pty Ltd of Country G who have extensive experience there, the venture will have a guaranteed market from start-up. The opportunity in re-creating the supply of quality produce in Country G is highly attractive.
The husband also conceded during cross-examination that in March 2019 a sole distribution agreement dated 7 February 2019 had been executed by J Ltd (Country G) Ltd and Bence Pty Ltd (and “all its associates including” F Pty Ltd) (Exhibit A-13). The husband acknowledged that he had not disclosed that agreement.
When asked whether he had other interests in Country G, the husband disclosed that he was endeavouring to develop a building supply business and that he had an interest in a farm in one of the countries. He also disclosed that he was exploring a new business venture.
The husband was asked whether he had interests in hotels or casinos and he responded that that was a “wild dream”. Senior counsel for the wife put to the husband a prospectus prepared in relation to the development of a hotel/casino in Country G (Exhibit A-14). The husband admitted that that prospectus was prepared in 2015 or 2016 and that he had put the proposal together with his brother.
I am satisfied that the husband has a number of business endeavours that he is pursuing or has pursued in Country G. I am also satisfied that notwithstanding those ventures progressing to the stage of acquiring plant and equipment (F Pty Ltd), the establishment of corporate structures (Bence Pty Ltd) and the preparation and execution of agreements, the husband has not disclosed those interests.
Only when presented with documents during cross-examination did the husband divulge his interests in various businesses or proposed developments in Country G. The extent of those interests and their value is not known. I am satisfied that the wife has been deprived of the opportunity to value those interests due to the husband’s failure to disclose them.
The obligation on parties to provide full and frank disclosure is set out in Part 13 of the Family Law Rules 2004 (Cth) (“the Rules”). These rules provide that the parties have a general ongoing duty to the Court and the other parties to the proceedings, to provide full and frank disclosure of all relevant information. In relation to financial matters, the Rules provide further specificity in relation to a party’s disclosure obligations.
A long line of judicial authority places an obligation on parties to provide to each other full and frank disclosure of their relevant financial affairs. The consequences of a party failing to comply with disclosure obligations has been considered by the Full Court. In Weir and Weir (1993) FLC 92-338 (“Weir”), the Full Court said at 79,593:-
This Court has pointed out in a line of cases leading up to the recent decision of the Full Court in In Marriage of Black (1992) 106 FLR 154, that it is the duty of a party involved in property proceedings in this jurisdiction to make a full disclosure of their financial affairs. See also In Marriage of Giunti [1986] FLC 75, 548 and In Marriage of Mezzacappa (1987) 90 FLR 350. It is clear enough from his Honour's findings in the present case that the husband had not done so and had in fact pocketed the proceeds of a substantial number of cash sales. It is obvious that in most cases of this nature it is difficult enough for the other party to establish that fact let alone establish the quantum of what has been taken.
It seems to us that once it has been established that there has been a deliberate non-disclosure…then the Court should not be unduly cautious about making findings in favour of the innocent party. To do otherwise might be thought to provide a charter for fraud in proceedings of this nature.
Further, the Full Court in Kannis & Kannis (2003) FLC 93-135 said the basis for the non-disclosure of a party is beside the point; the duty to disclose is absolute. The Full Court continued at paragraph 51:-
… Where the Court is satisfied the whole truth has not come out it might readily conclude the asset pool is greater than demonstrated. In those circumstances it may be appropriate to err on the side of generosity to the party who might be otherwise be seen to be disadvantaged by the lack of complete candour.
Senior counsel for the wife submitted that it was open to the Court to find that the extent of the parties’ interests will never be known as a result of the husband’s failure to make full and frank disclosure. As a result, the wife sought orders that the husband retain his Country G investments and that he be responsible for that part of the Portfolio Mortgage attributable to monies transferred by him to Country G.
Given the blatant and extensive non-disclosure by the husband with respect to his business interests and investments in Country G, I am satisfied that that approach is warranted. By the conclusion of the husband’s evidence, it was clear that he had broad and extensive business interests in Country G; substantial funds had been applied by him to the acquisition of plant and equipment. In addition, it was evident that he was actively pursuing the development of a produce supply business and a bank. That agreements had been drawn and executed indicates that those ventures were well advanced. The husband put no evidence before the Court with respect to those ventures and it was left to the wife to pursue proceedings in Country G to secure documents in order to ascertain the husband’s involvement in those projects.
In circumstances where I am satisfied on the balance of probabilities that the husband has drawn upon the Portfolio Mortgage to invest in Country G and has failed to disclose the nature and extent of those investments, I am also satisfied that it is appropriate that he be responsible for that amount of the Portfolio Mortgage that relates to the transfers to Country G, being the sum of $1,178,301. Given that position I will also remove the husband’s interest in F Pty Ltd from the balance sheet as the value of that interest, which will be retained by the husband, is not known.
b. K Ltd
The balance of the Portfolio Mortgage allegedly drawn by the husband relates to his investment in K Ltd. It was only during cross-examination that the husband disclosed his interest in that entity. He stated that he invested approximately $2.7 million in that venture, those funds originally sourced from the Portfolio Mortgage. It was conceded by the husband that those funds were applied to the acquisition of shares and the advance of a loan to K Ltd. The husband’s evidence was that he was given “security bonds” which had a face value of $60 million in the company to secure his investment. The husband stated that he had since transferred those bonds to Mr Q, stating they were worthless.
K Ltd is now in liquidation and a circular to creditors dated 18 October 2016 from the liquidator discloses that the husband is an unsecured creditor of the entity, having loaned $1,781,226 to K Ltd (Exhibit A-9).
It was submitted on behalf of the wife that the husband should be responsible for the balance of the Portfolio Mortgage, being approximately $2.8 million which relates to the husband’s loans to and investment in K Ltd. She submitted that the husband had acted recklessly, negligently and wantonly as was contemplated by the Court in Kowaliw and Kowaliw (1981) FLC 91-092 (“Kowaliw”) in advancing funds to K Ltd. Given that the Portfolio Mortgage was the source of funds for the husband’s investment in K Ltd, it was submitted on behalf of the wife that that part of the mortgage liability should be sheeted home to the husband.
During cross-examination the husband was challenged as to the due diligence undertaken by him in relation to K Ltd prior to investing. The husband’s evidence was that he had made enquires in relation to the primary industry facility to satisfy himself as to the value of the investment. It was his view that it was a worthwhile investment. The husband confirmed that he had undertaken no other due diligence.
One of the principals of K Ltd was Mr ZZ. The husband confirmed that Mr ZZ was responsible for the establishment of the Board of K Ltd and was involved in securing investors for the project.
The husband confirmed that he had undertaken no enquiries as to Mr ZZ’s bona fides prior to investing. The husband acknowledged during cross-examination that Mr ZZ had been jailed on two occasions for fraud and conceded that had he made enquires of Mr ZZ he would have discovered that history. The husband agreed that he had erred in failing to make those enquires. The husband conceded that his investment in K Ltd was “a disaster”.
The issue for determination is whether the husband’s failure to make those enquiries is the type of reckless and wanton behaviour which would give rise to the mortgage liability in relation to that investment falling to the husband. The husband opposes that course.
It was submitted on behalf of the husband that throughout the marriage the parties had both worked extremely hard to accumulate assets, with the result that the gross value of their interests is now valued at approximately $17.5 million. To achieve that result the husband has made many good business decisions over the course of the relationship. The K Ltd investment is what was described by the husband’s counsel as a “bad call” by him and one that should be shared between the parties just as the many good calls had been shared by them. Counsel for the husband submitted there was a gap in the wife’s contentions regarding the husband’s decision to invest in K Ltd as she had adduced no evidence from investment consultants or strategists to confirm that it was a wanton or reckless investment. Had that investment been profitable, it was submitted that the wife would have sought to share in the fruits of the investment.
In my view, the husband’s involvement in K Ltd was an endeavour by him to acquire assets so as to improve the parties’ overall financial position. Family funds, being the Portfolio Mortgage were applied to that endeavour. That the husband was pursuing investments was known to the wife; the husband had disclosed his drawings on the mortgage in the separation agreement. I am satisfied that had the K Ltd investment been a profitable venture the wife would have sought to share in the profits from that venture. I am satisfied that the husband was imprudent in failing to make inquiries as to Mr ZZ’s credentials. However, I am not persuaded that his actions were wanton or reckless as was contemplated by Kowaliw.
That being the case, I am satisfied that it is appropriate that that part of the Portfolio Mortgage attributable to the K Ltd investment, being the sum of approximately $2.8 million is a joint liability of the parties.
Property at JJ Town Country G
The property at JJ Town, Country G is owned by the wife and her parents. The wife deposes that she holds a one-third interest in the property. The wife also deposes that the property is currently occupied by a step-sibling who has resided there for a period of approximately 20 years. The wife’s evidence is that she has no access to the property and does not hold a controlling interest in it.
The husband asserts the value of the wife’s interest to be $65,000. The wife attributes no value to the property. There is no evidence as to the value of the wife’s interest in that property. As a result, the value of the wife’s interest, if any, is not known. As a result, that item will be removed from the balance sheet.
AB Company Shares
The husband asserts the wife holds shares in AB Company valued at $11,000. The wife denies that allegation. It was conceded by the husband’s counsel that the husband had failed to produce any documents evidencing shares held by the wife in that entity. Having regard to that concession, that item will not be included in the parties’ balance sheet.
Jewellery
The husband asserts that the wife holds jewellery valued at $50,000. The wife denies that allegation. Again there was no evidence as to value of the wife’s jewellery. Accordingly, this item will be removed from the balance sheet.
Z Time Share
The parties jointly hold an interest in the Z Time Share. That interest permits them to have four weeks per year at that holiday resort. The husband asserts the value of the parties’ interest to be $20,000 whilst the wife does not attribute a value to the interest. The wife’s position was that the timeshare interest should be divided equally between the parties, the effect being that each party will have the opportunity to spend two weeks at the timeshare resort.
The husband seeks to retain that interest.
In circumstances where there is no evidence as to the value of the parties’ interest in the timeshare, I am satisfied that it is just and equitable that the parties’ entitlements to the timeshare be divided equally between them as sought by the wife. Given that determination, the item will be removed from the balance sheet.
MM Retirement Fund
The wife holds an interest in a self-managed superannuation fund, the MM Retirement Fund. The wife’s case is that she has accrued entitlements valued at $140,000 in that retirement fund. The husband’s position is that the value of the wife’s entitlements in that fund is not known.
The wife seeks orders that the husband retain the superannuation interest. During closing submissions it was acknowledged by senior counsel for the wife that whilst the wife believes her entitlements in the fund should have a value of approximately $140,000, there was no evidence to support that contention. It was acknowledged that the wife does not know what has occurred within the superannuation fund.
The documents related to the fund are in the husband’s possession and have not been disclosed. It is against that backdrop that she seeks an order that he retain that interest and ultimately that the value attributed to it be the sum of $30,000, being the amount currently held by the fund.
No submissions were made on behalf of the husband in relation to that issue.
Absent evidence as to the value of other assets in the fund, I accept the wife’s submission and will attribute the sum of $30,000 as the value of the retirement fund.
The Asset Pool
Based on my findings, the parties’ legal and equitable interests for the purposes of the orders I am asked to make are as follows:-
Asset Legal Title Value CC Street, Suburb M Joint $9,500,000 X Street, Suburb Y Wife $1,105,000 V Street, Suburb T Joint $1,900,000 1 W Street, Suburb T
Joint
$1,400,000
2 W Street, Suburb T
Joints
$1,500,000
DD Street, Suburb FF
Joint
$520,000
KK Street, Suburb LL
Husband
$225,000
Bence Family Trust Share Portfolio Husband $33,100 Motor Vehicle 1 Wife $45,000 Motor Vehicle 2 Husband $8,000 H Pty Ltd Shares Husband NK 10 Lots on AA Street, BB City, Country G Husband $701,000 NN Street, PP Town, Country G Husband $180,248 Bank Accounts Husband $26,000 Interim Distribution Husband $66,500 Interim Distribution Wife $66,500 Rental Funds from Suburb Y held by Wife’s Solicitors Joint $27,000 Liabilities NAB Portfolio Mortgage (account ending #…46 & #…10) Joint $2,839,745 2019 Land Tax Joint $140,695 Owners Corporations Fees Husband $5,330 Outstanding Council Rates Joint $28,000 Gas & Electricity – Suburb M property Wife $4,017 Water & Council Rates – Suburb Y property Wife $16,495 Superannuation MM Retirement Fund Wife $30,000 ATO Unclaimed Superannuation Husband $48,684 NET ASSETS $14, 347,750
Section 79(2) factors
Both parties seek orders for the adjustment of their property pursuant to s 79 of the Act. There was no challenge to the proposition that it is just and equitable to make orders for property settlement. Accordingly, in circumstances where the parties have shared a long marriage and it is agreed by them that they will no longer have the joint use and enjoyment of their interests, I am satisfied that it is just and equitable to make orders for adjustment of their interests.
The Parties’ Initial Contributions
It was common ground between the parties and I accept that neither had any assets of significance at the commencement of the relationship.
Contributions during the Marriage
Again, it was common ground that the parties’ contributions during the course of their long marriage were equal. Both parties worked hard and contributed to the best of their abilities in their respective roles within the marriage, the husband as principal breadwinner and the wife as homemaker. I am satisfied, having regard to the concessions made and the evidence before the Court that each party contributed to the best of their abilities to the acquisition, conservation and improvement of their interests and to the welfare of their family. Accordingly, I am satisfied that the parties’ contributions are equal.
Section 75(2) Factors
The husband is aged 55 years and is a finance professional. He has the capacity to earn income as a finance professional as well as in the pursuit of his various business interests.
The wife is aged 56 years and is a homemaker. She has not been engaged in paid employment since approximately 1996. Since separation, the wife has been treated for anxiety and depression and in the latter part of the marriage was hospitalised for treatment of her condition. It was conceded by the husband’s counsel during closing submissions that there was little prospect of the wife resuming employment having regard to her age.
Neither party is responsible for the support of another person.
The husband seeks that there be an adjustment in favour of the wife on the basis of a 52/48 split as a result of the relevant matters pursuant to s 75(2).
The wife seeks a 60/40 adjustment in her favour. An adjustment in those terms is sought pursuant to s 75(2)(o) as a result of the husband’s non-disclosure of material facts.
I have already identified the non-disclosure by the husband of the nature and extent of his investment and interests in Country G. In addition to those matters, the wife contended that there was non-disclosure by the husband in relation to the extent of his interest in H Pty Ltd.
The husband deposes at paragraph 25 of his trial affidavit that he was issued 37,800,000 shares in H Pty Ltd. Further, at paragraph 38 of his Financial Statement filed 12 July 2019, he disclosed that he holds 37,800,000 shares in H Pty Ltd.
Although the husband’s trial affidavit is silent as to any direct investment into H Pty Ltd by him, the H Pty Ltd reconciliation schedule annexed to that affidavit (Exhibit R-1, page 78) discloses that in fact the husband invested $1,850,000 into H Pty Ltd on 13 March 2007. The husband confirmed during cross-examination that he had indeed invested that amount in H Pty Ltd. When questioned where in his trial affidavit he had disclosed that investment, the husband could not recall whether or not he had made disclosure of that investment. I am satisfied that he had not.
Whilst the husband disclosed at paragraph 25 of his trial affidavit that he held 37,800,000 shares in H Pty Ltd, the H Pty Ltd reconciliation statement produced by VV Solicitors (Exhibit R-1, page 76) discloses that on 8 December 2006 he was issued 37,770,000 shares and on 13 March 2007 he was issued a further 9,045,000 shares in H Pty Ltd.
During cross-examination the husband was questioned as to the extent of his shareholding in H Pty Ltd and was unable to confirm the number of shares held by him in that entity. When questioned as to whether shares had been sold by him the husband’s evidence was that nothing had been sold recently.
The husband conceded that he would have records in relation to the share transactions in H Pty Ltd “somewhere” and, most likely, at his office. He acknowledged that he had only disclosed the shares received by him as part of the initial allocation of shares in H Pty Ltd. He did not disclose that he had invested $1.85 million of the family’s money (resulting in the allocation of a further 9,045,000 shares to him) into that venture or that he had subsequently transferred shares held by him in that venture. He stated that he did not know how many shares he held in H Pty Ltd as he had not checked that detail prior to the commencement of the trial.
The husband’s evidence with respect to shares held by him in H Pty Ltd was unimpressive. I am satisfied on the balance of probabilities that he has failed to disclose the number of shares held by him in H Pty Ltd; it was only during cross-examination that he divulged that significant sums had been paid by him to acquire additional shares in that venture. Given the husband’s failure to make disclosure in relation to his interest in H Pty Ltd, it is impossible to ascribe a value to that interest.
During closing submissions, counsel for the husband conceded that “there are clearly examples of matters which have not been disclosed by [the husband] and which should have been”.
It was submitted on behalf of the wife that as a result of the husband’s deliberate non-disclosures, the Court should not be unduly cautious in making findings in favour of the wife, as was contemplated by the Full Court in Weir.
The Full Court in Chang & Su [2002] FamCA 156 helpfully summarised the relevant authorities in relation to non-disclosure and confirmed that it is open to a court to take a more robust view to the adjustment of parties’ interests in circumstances where there has been non-disclosure, the effect of which has been to hamper the identification and value of the parties’ assets.
The issue of non-disclosure was contemplated more recently by the Full Court in Stone & Stone [2015] FamCAFC 18. There the Full Court was required to consider the trial Judge’s adjustment of eight percent in favour of the wife based upon s 75(2) factors. A significant aspect of that adjustment was based upon the husband’s non-disclosures which left the Court in doubt as to whether he had undisclosed assets, financial resources or income. The Full Court there confirmed that the approach of the trial Judge to take into account non-disclosure as a matter relevant to s 75(2) was correct as such non-disclosure was relevant to the determination of future income and earnings and also as to whether the husband had other assets undisclosed and undiscovered. The Full Court confirmed that the trial Judge’s approach of providing “a hedge” against the husband having successfully concealed further assets or income was one open to him in the determination of the adjustment pursuant to s 75(2).
Senior counsel for the wife contended that there similarly should be an adjustment in favour of the wife in this case as a result of the husband’s non-disclosure. It was as a result of those matters that the wife contends that she should receive a 60 percent adjustment in her favour.
I have already addressed the issue of the husband’s non-disclosure of his Country G interests by apportioning to him responsibility for that part of the Portfolio Mortgage liability that relates to his transfer of funds to Country G.
At issue, is what is the impact of the husband’s non-disclosure in relation to his interest in H Pty Ltd. I am satisfied that the husband has failed to make disclosure of the nature and extent of his interest in that entity. As such the value of that interest and any income earned therefrom is unknown. Further, as a result of the husband’s non-disclosure in relation to his Country G interests and H Pty Ltd, there is significant uncertainty as to whether there are other undisclosed assets that have not been taken into account in the calculation of the parties’ interests. Taking into account his non-disclosure of his interest in H Pty Ltd and the consequential difficulty in ascribing a value to that interest, I am satisfied that it is appropriate to make an adjustment for the husband’s non-disclosure pursuant to s 75(2)(o) of the Act. However, in my view such adjustment cannot be to the extent agitated for by the wife, given the adjustments I have made to the balance sheet as a result of the husband’s non-disclosure of his Country G interests.
Conclusion
Having regard to the disparity in the parties’ income-earning capacities, coupled with the non-disclosure by the husband as identified herein, in my view justice and equity requires that there be an adjustment of 55 percent to the wife and 45 percent to the husband.
Both the husband and the wife sought to retain the property at Suburb Y. That property is registered in the name of the wife and is the only parcel of real estate sought to be retained by her. In circumstances where the wife has held that property since its acquisition, and absent any evidence that would satisfy me that it is just and equitable to alter that ownership, I propose to make orders that the wife retain that property.
The husband sought to retain all other parcels of real estate save for the property at 1 W Street which he proposes be transferred to the wife. The wife does not wish to retain that property. Given neither party seeks to retain that property, I will order that it be sold.
The other contentious issue relates to shares held by the husband in H Pty Ltd. Notwithstanding the uncertainty as to the extent of the husband’s interest in that entity, the wife during closing submissions confirmed that she seeks a transfer of one half of those shares. She further seeks an indemnity from the husband in relation to any liability arising as a result of his acquisition of those shares.
Given my findings as to the husband’s non-disclosure in relation to his interest in H Pty Ltd and the adjustments I have made in favour of the wife pursuant to s 75(2)(o) of the Act to take into account that non-disclosure, I do not consider it appropriate to make any orders regarding the transfer of shares in that entity. Accordingly, the husband will retain his interest in H Pty Ltd and be responsible for any liabilities arising as a result of his acquisition of that interest.
It is common ground between the parties that the husband should transfer to the parties’ adult children the motor vehicles driven by them and shares held by him on their behalf. Accordingly I will make orders to that effect.
As a result of the above findings the wife will retain assets valued at $1,977,600, comprising of the Suburb Y property ($1,105,000) and the rental proceeds held by her solicitors in respect of that property ($27,000), the BB City properties ($701,000), the Family Trust ($33,100), the Motor Vehicle 1 ($45,000) and the interim payment received by her ($66,500). Hence, the husband would be required to pay to her the sum of $5,913,662, based on a pool of $14,347,750.
Based on the pool of assets as identified at paragraph 222 above, an adjustment in those terms would result in the wife receiving assets valued at $7,891,262.50 and the husband receiving assets valued at $6,456,487.50. The husband would retain his interest in F Pty Ltd and H Pty Ltd and assume responsibility for that part of the NAB Portfolio Mortgage attributable to his Country G investments.
Although the husband sought to retain all of the real properties save for 1 W Street, that proposal was made on the basis that the liabilities he contended were in existence were accepted by the Court. As a result of my findings in relation to those matters the value of the parties’ pool is significantly greater than that asserted by the husband. Given that position, it is likely that properties in addition to 1 W Street will need to be sold in order to make the adjustment in favour of the wife.
Unfortunately the husband has not identified which of the real properties should be sold in order to pay to the wife her entitlements. Save for the Suburb M property, it is likely that a sale of any of the other real properties will give rise to capital gains tax liabilities. Neither party has sought to adduce expert evidence as to the calculation of capital gains tax in the event of the sale of the properties. Further, there is no evidence before the Court as to any costs likely to be incurred upon the sale of the properties. A realisation of properties will crystallize those liabilities and impact the pool of assets available for division between the parties and therefore, the calculation of the payment to the wife.
In the absence of evidence as to the likely quantum of those liabilities, I am not in a position to formulate specific orders to give effect to the adjustment of the parties’ interests. That being the case, I will provide the parties with a draft form of order and give each the opportunity to make submissions as to the appropriate form of orders for the division of the parties’ interests.
I certify that the preceding two hundred and fifty-five (255) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Johns delivered on 20 August 2020.
Associate:
Date: 20 August 2020
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