Bush and Bush and Anor
[2009] FMCAfam 457
•22 May 2009
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| BUSH & BUSH & ANOR | [2009] FMCAfam 457 |
| FAMILY LAW – Property – undefended proceedings – non-disclosure – just and equitable. |
| Family Law Act 1975, ss.75(2), 79 |
| A & Z [2006] FamCA 179 Bush & Bush [2008] FMCA Fam 1167 Hickey & Hickey & Attorney-General of the Commonwealth of Australia (Intervener) (2003) FLC 93-143 Norbis v Norbis (1986) 161 CLR 513 Pierce v Pierce (1998) FLC 92-844 Weir (1993) FLC 92-338 Williams & Williams [2007] FamCA 313 |
| Applicant: | MS BUSH |
| First Respondent: | MR BUSH |
| Second Respondent: | [A] PTY LTD |
| Intervenor: | [I] PTY LTD |
| File Number: | SYC 7462 of 2007 |
| Judgment of: | Altobelli FM |
| Hearing date: | 19 February 2009 |
| Date of Last Submission: | 1 May 2009 |
| Delivered at: | Sydney |
| Delivered on: | 22 May 2009 |
REPRESENTATION
| Solicitor-Advocate for the Applicant: | Mr Younan |
| Solicitor for the Applicant: | Equity Lawyers |
| First Respondent: | No Appearance |
| The Second Respondent: | No Appearance |
| Solicitor-Advocate for the Intervenor: | Mr Wahab |
| Solicitors for the Intervenor: | York Family Lawyers |
ORDERS
The First Respondent forthwith vacate the Property R property (Property RProperty R) and that he thereafter remain away therefrom and grant to the Applicant Wife the quiet use and enjoyment thereof.
That the Second Respondent forthwith vacate the Property R property and thereafter remain away therefrom and that he grant the Applicant Wife the quiet use and enjoyment thereof.
That the Second Respondent forthwith transfer to the First Respondent the property situate at and known as Property RProperty R, for on-transfer to the Wife, and:
(a)the Court notes that the Second Respondent is a party to these proceedings;
(b)this order is binding on all parties including the Second Respondent.
Simultaneously with his receipt of transfer of the Property R property from the Second Respondent, the First Respondent transfer to the Applicant Wife the whole of his right, title and interest in the Property R property subject to the existing mortgage.
The First respondent forthwith do all acts and things and sign all such documents as are necessary so as to cause the Second Respondent to transfer to the Applicant Wife all its right, title and interest in the Holden Commodore motor vehicle registration number [Y].
The Applicant Wife retain the furniture, furnishings and personal belongings in her possession.
THAT in the event that either party refuses or neglects to execute any Deed or instrument necessary to give effect to all or any of the Orders made herein the Registrar of the Court be appointed pursuant to section 106A to execute such Deed or instrument in the name of the said party and to do all acts and things necessary to give validity and operation to the said Deed or instrument.
Within 28 days of the orders, the First Respondent pay to the Applicant Wife a sum of $40,000.00.
I DIRECT the Solicitor for the Applicant to within 7 days notify in writing the first and second Respondents of the orders made today.
Leave is granted to the first and second Respondents to make an application before Federal Magistrate Altobelli to stay, vary or set aside these orders within 28 days, such application to be by way of an application in a case with a supporting affidavit.
The orders made today are stayed for 14 days in order to enable the intervenor [I] Ltd and the applicant wife to consider these orders and reasons and to enable the intervenor to make any further application.
The matter be adjourned to 16 June 2009 at 9.30am for mention.
The wife have liberty to restore this matter before me on 14 days notice in relation to orders 11 and 14 of her further amended application filed 20 March 2009, provided such re-listing occurs within 12 months of these orders.
IT IS NOTED that publication of this judgment under the pseudonym Bush & Bush & Anor is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYC 7462 of 2007
| MS BUSH |
Applicant
And
| MR BUSH |
First Respondent
| [A] PTY LTD |
Second Respondent
| [I] PTY LTD |
Intervenor
REASONS FOR JUDGMENT
Introduction
This is an application for alteration of property interests under s.79 of the Family Law Act 1975, commonly known as an application for property settlement. The parties are the applicant who is the wife in the proceedings, the first respondent who is the husband, and the second respondent, [A] Pty Ltd, a company the sole director and shareholder of which is the husband. Also a party to these proceedings is [I] Ltd, one of the wife's creditors who has provided litigation funding to the wife in relation to these proceedings. The husband did not participate in the final stages of these proceedings and hence the hearing proceeded on an undefended basis.
Background
The applicant wife is 29 years old, as is the respondent husband. They married in November 1999, commenced cohabitation on 5 December 1999 and separated on 28 February 2005 after a period of cohabitation of just over five years. They have two children of the marriage, both girls, aged eight and six. The husband and the wife met in Lebanon, though the wife had lived in Australia for some time. As a result of the marriage, the husband migrated to Australia in about May 2000. He initially commenced working in the wife's father's business, a company known as [P] Pty Ltd, which was engaged in the [omitted] business. After a number of years working in the wife's father's business, the husband and the wife established the business known as [A] Pty Ltd. This was, for all practical purposes, the main vehicle through which the business conducted by the husband, also in [omitted], was carried out. During the marriage the parties purchased a home at [M]. When the parties separated in February 2005 the husband moved out of the home and continued to operate the business. The mortgage secured over the former matrimonial home apparently fell into default in late 2006. Early in 2007 the wife and the children moved from the former matrimonial home to live with her parents, where they continue to live today.
The wife commenced proceedings in November 2006 and, initially, the husband participated. For example, he filed a response, financial statement, and an affidavit all between December 2006 and April 2007. That, however, represents the entirety of the sworn evidence presented by the husband. The history of these proceedings indicates that from about April 2007 the husband became less and less engaged in these proceedings and that there were substantial issues of non-disclosure raised by the wife. A number of interim orders were made relating to disclosure and during this period the husband retained a number of solicitors but they all eventually ceased to act.
Perhaps the main issue that is raised in this litigation is what constitutes the pool of assets? The wife asserts that the husband has failed to disclose the true extent of his assets, resources and liabilities, let alone his income and expenses. It appears that the wife has been put to considerable expense in seeking to gather evidence before the Court about what should comprise the pool of assets. Once the pool of assets has been established on the balance of probabilities, contribution needs to be assessed and in this regard the wife asserts that she has made a greater financial contribution at the commencement and during the marriage, principally because of the generosity of her own parents. There is also an issue about post-separation contribution as the wife bore the main responsibility for the financial upbringing of the children since separation. There is a further issue in this case about future needs. The wife asserts that her needs are much greater than that of the husband and that, on balance, the factors referred to in s.75(2) of the Family Law Act 1975 operate in her favour. At the hearing the wife's Counsel submitted that contribution should be assessed as to 65 per cent in her favour and that a further 10 per cent should be allocated for s.75(2) considerations. The final issue in this case is what the just and equitable order to make under the circumstances is. A particular challenge arises because the major remaining assets consist of the business known as [A] Pty Ltd, and the property owned by the said company at [R]. Whilst it is clear from the evidence that the major assets are owned by [A] Pty Ltd, it is equally clear that the husband as sole director and shareholder controls these assets. The assets in the wife's name are negligible. If the wife is successful in her claim, then she submits that a just and equitable order will involve the transfer to her of assets that are presently in the name of [A] Pty Ltd.
In an earlier judgment in this matter reported as [2008] FMCAfam 1167 I also referred to a number of issues dealing with creditors, both of the husband's company and of the wife.
The wife's evidence in this case was quite substantial. She relied on three affidavits, a financial statement, an affidavit from her father, five affidavits from her former solicitors and three affidavits from Mr B, a forensic valuer.
Even though the matter proceeded on an undefended basis, as required by the authorities, I took into account the evidence that had been filed by the husband, and that consisted of his response and amended response filed 5 December 2006 and 9 March 2007, his financial statement filed 5 December 2006 and his one and only affidavit filed 18 April 2007.
In addition, there was a considerable volume of subpoenaed material, some of which was tendered in evidence.
By way of further background, on 20 December 2007, a time at which the first respondent husband, and second respondent company were both represented, I made orders by consent in the following terms:
1.That until further Order of the Court the Respondents and each of them be restrained from by themselves their servants or agents or otherwise and without the prior written permission of the Applicant from:-
a. Selling, encumbering or granting a mortgage in respect of the property known as Property R, Register Folio [5] & [6];
b. Selling, encumbering or granting a charge or mortgage over any other asset of the Respondents other than in the usual course of business;
c. Guaranteeing any loan or contractual liability of any other person or other corporation or entity;
d. Declaring and or paying a dividend.
2. The matter be adjourned to 9.30am on 8 February 2008 for mention.
Notwithstanding the fact that those orders were made by consent, the first and second respondents played no further role in the proceedings. On 31 March 2008 I set the matter down for an undefended hearing on 15 May 2008. Regrettably, the wife was no longer represented at that time, but Ms Karagiannis from the Legal Aid Commission of New South Wales appeared on her behalf on a duty basis.
On 15 May the wife appeared on her own behalf for the undefended hearing, but was clearly unable to proceed as she was representing herself. I encouraged her to obtain legal advice because of some of the complex issues that clearly arose on the face of this matter. On 11 July 2008 the wife appeared with her solicitor and the matter was again set down for undefended hearing on 28 August 2008. On that date the wife appeared with her Counsel, Ms Winfield, and also on that occasion
[I] Ltd applied to be granted leave to intervene in the property proceedings. The orders I made on 28 August 2008 are as follows:
THE COURT ORDERS THAT:
1. [I] limited is granted leave to intervene in these property proceedings and must file and serve any application or response by 4.00pm on 28 August 2008.
THE COURT NOTES THAT:
2. The Court will give seven days notice to the Intervenor of intention to deliver judgment in the property proceedings.
3. The Court intends to stay the final orders in the property proceedings for 14 days after the making of said orders to enable the Intervenor and the Applicant to consider the orders and reasons, and to enable the Intervenor to make any further application.
I heard the wife's evidence on 28 August and then on 4 November made the following orders:
1. Within 42 days the wife is to file and serve evidence about the extent of any current liability owed by either of the respondents to Citigroup Pty Ltd and Westpac Banking Corporation.
2. Within 42 days the wife is to notify Citigroup Pty Ltd and Westpac Banking Corporation of these proceedings and of the orders sought by her insofar as those orders potentially affect their position as creditors of the respondents, and to file and serve an affidavit of service within 49 days of these orders.
3. The matter be adjourned to 19 December 2008 at 9.30am for mention.
4. The wife have leave to provide to the creditors referred to above a copy of these orders and these reasons.
5. Parties have leave to restore on seven days notice.
My reasons for judgment are found at [2008] FMCAfam 1167.
The matter came back before me on 19 February 2009 in order for the wife to deal with the matters raised in my judgment referred to above. The solicitor appearing for the wife tendered the subpoenaed documents dealing with the issues raised in my judgment and also sought leave to further amend the wife's application to seek an order that the second respondent company vacate the Property R property and the wife be granted occupation of the same. Once an affidavit of service relating to that further amended application was filed, I proceeded to publish these reasons, subject to the orders I made above in relation to [I] Ltd.
These proceedings have not only been expensive for the wife, but very protracted. I have available to me a substantial number of affidavits of service provided to me either by professional process servers, or by various solicitors acting for the wife, all attesting to compliance with directions about notifying the first and second respondents of the orders that I have made, including the dates of the various undefended hearings that were allocated for this matter. I am satisfied that, under the circumstances, all that could be done has been done to notify the first and second respondents of these proceedings. Indeed, the evidence the wife gave me on 28 August 2008 indicates that she has not infrequent contact with the husband arising out of him spending time with the children of the marriage. The last contact was just a few days before 28 August 2008 when, according to the wife, he was aware of the proceedings and they had a conversation about his desire to provide financially for her and the children. Indeed, according to the wife, the husband specifically acknowledged that he had been served with some Court documents and asked her whether she was considering bankruptcy. I accept the wife's evidence in this regard. All of the evidence before me indicates that the husband is aware of these proceedings but, for whatever reason known only to him, has chosen not to participate in the proceedings. After I deal with the issues, provide reasons, and make orders, I will give to the husband the opportunity to set aside the orders I make. But of course an application to set aside orders can only be dealt with on the evidence. The husband will, no doubt, need to confront the quite substantial evidence before the Court, all of which indicates he is well aware of these proceedings. But all of this, of course, is a hypothetical matter and will be dealt with, in due course, as and when the need arises.
Orders sought by wife
The final orders sought by the wife at the hearing are found in her further amended application filed 20 March 2009. I set out those orders as follows:
6. The First Respondent forthwith vacate the property and that he thereafter remain away therefrom and grant to the Applicant Wife the quiet use and enjoyment thereof.
7. [A] Pty Ltd (ACN [1]) be joined as a party to these proceedings.
7A. That the Second Respondent forthwith vacate the Property R property and thereafter remain away therefrom and that he grant the Applicant Wife the quiet use and enjoyment thereof.
8. An order that the the Second Respondent forthwith transfer to the First Respondent the property situate at and known as Property R, for transfer to the Wife, this being deemed an appropriate sum to satisfy in part the outstanding matters between the parties to these proceedings and:
8.1 The Court note that [A] is a party to these proceedings;
8.2 This order is binding on all parties including the Second Respondent.
9. Simultaneously with his receipt of transfer of the Property R property from the Second Respondent, the First Respondent transfer to the Applicant Wife the whole of his right, title and interest in the Property R property subject to the existing mortgage.
10. In the alternative to Orders 8 and 9 as sought herein, the First respondent pay to the Applicant Wife the sum of $110,000.00 within 28 days of these Orders and the said sum be charged against the Property R property and the Applicant Wife be permitted to lodge a caveat on the title of the Property R property, to be withdrawn at such time by the Applicant Wife upon payment of the said sum from the First Respondent.
11. Pursuant to section 117 of the Child Support (Assessment) Act 1987, there be a departure from the administrative assessment of child support payable from the First Respondent to the Applicant Wife for the children [X] born in 2000 and [Y] born in 2002 as follows:
11.1 For the period 26 September 2007 top 16 November 2020 the annual rate of child support be set at $26,000.00 and subject to 11.2 below, this amount to be apportioned equally between the children;
11.2 The annual rate of child support be increased each year in accordance with variation in the Consumer Price Index.
12. The First respondent forthwith do all acts and things and sign all such documents as are necessary so as to cause the Second Respondent to transfer to the Applicant Wife all its right, title and interest in the Holden Commodore motor vehicle registration number [Y] and any other motor vehicles either owned or leased by the Companies and that the First Respondent cause the Companies to assign to the Applicant Wife all policies of insurance in respect of those motor vehicles.
13. The Applicant Wife retain the furniture, furnishings and personal belongings in her possession.
14. The First Respondent pay the Applicant Wife the sum of $800.00 per week by way of spousal maintenance.
15. In the event that either party refuses or neglects to execute any deed or instrument necessary to give effect to these orders, the Registrar or Deputy Registrar of the Family Court of Australia at Sydney be appointed pursuant to section 106A of the Family Law Act to execute the said deed or instrument in the name of that party and do all acts and things necessary to give validity and operation to the Deed or instrument.
16. Within 28 days of the orders, the First Respondent pay to the Applicant Wife a sum of $40,000.00 from bank accounts held by the First Respondent and/or under his control.
At the hearing Ms Winfield, Counsel for the applicant, indicated on behalf of the wife that the wife preferred order 6, in preference to
order 10. In addition, the wife did not press orders 11 and 14, but asked that this application be stood over to a later date. I accept the necessity for this in the circumstances of this case, and accordingly will adjourn consideration of orders 11 and 14 for mention for six months but with liberty to restore on 14 days' notice if the need arises.
Issues
Having regard to the background set out above, the issues in the case are as follows:
(1)Having regard to the wife's allegations that the husband has engaged in non-disclosure, what is the pool of assets and liabilities?
(2)How should contribution be assessed, both as at the date of cohabitation and marriage, and as at the date of separation?
(3)Should there be an adjustment under s.75(2) in favour of the wife, and if so, for how much?
(4)What is the just and equitable order to make in the circumstances of this case, particularly having regard to findings made about ownership and control of assets?
Applicable Law
This matter proceeded to an undefended hearing. The Full Courts’ decision in A & Z [2006] FamCA 179 at paragraphs 54-73 contains a comprehensive discussion about the procedure to be adopted at an undefended hearing.
The preferred approach to the determination of an application under s.79 of the Family Law Act is set out in a passage found in the Full Court’s decision in Hickey & Hickey & Attorney-General of the Commonwealth of Australia (Intervener) (2003) FLC 93-143 at 39.
The Full Court states that there are four inter-related steps:
a)Identify and value the property, liabilities and financial resources of the parties; and
b)Identify and assess the contributions of the parties and express them as a percentage of the net value of the property; and
c)Identify and assess the other facts relevant under s.79(4)(d)-(g) including s.75(2) and determine the adjustment (if any) to be made to the contribution entitlements at step two; and
d)Consider the effect of the above and resolve what order is just and equitable in all the circumstances.
One of the legal issues that arises is whether I should adopt a global or asset-by-asset approach to contribution. The authority in this regard is, the High Court’s decision in Norbis v Norbis (1986) 161 CLR 513 per Wilson and Dawson JJ at 534-5. It is clear from this statement of the law that either approach is available to me, in part or in whole. My discretion in this regard should be exercised having regard to the facts of this case.
Another issue in this case is how, precisely, I should weigh and assess the initial contribution of the parties in bringing property into the marriage. In this regard, I need to consider the decision of the Full Court in Pierce v Pierce (1998) FLC 92-844. A useful recent decision of the Full Court examines its earlier decision in Pierce v Pierce together with a later case. In Williams & Williams [2007] FamCA 313 the Full Court states as follows at paragraphs 26, 27, 28, 29 and 32:
26. We think there is force in the proposition that a reference to the value of an item as at the date of the commencement of cohabitation without reference to its value to the parties at the time it was realised or its value to the parties at the time of trial, if still intact, may not give adequate recognition to the importance of its contribution to the pool of assets ultimately available for distribution between the parties Thus where the pool of assets available for distribution between the parties consists of say an investment portfolio or a block of land or a painting that has risen significantly in value as a result of market forces, it is appropriate to give recognition to its value at the time of hearing of the time it was realised rather than simply pay attention to its initial value at the time of commencement of cohabitation. But in doing so it is equally as important to give recognition to the myriad of other contributions that each of the parties has made during the course of their relationship.
27. In Pierce v Pierce when speaking of the relevance to be paid to initial contributions the Full Court (Ellis, Baker and O’Ryan JJ) referred to Fogarty J in Money v Money (1994) FLC 92-485 at 81,054; (1994) 17 Fam LR 814 at 816:
…respective contributions of the parties over a long period of marriage “offset” the significance which might otherwise be attached to a greater initial contribution by one party…ultimately, when it comes to the trial such a contribution is one of a number of factors to be considered. The longer the marriage the more likely it is that there will be latter factors of significance and in the ultimate the exercise is to weigh the original contribution with all other, later, factors and those later factors, whether equal or not, may in the circumstances of the individual case reduce the significance of the original contribution.
28. The Full Court (Ellis, Baker and O’Ryan JJ) then said at [28]:
In our opinion it is … a question of what weight is to be attached, in all the circumstances, to the initial contributions. It is necessary to weigh the initial contributions by a party with all other relevant contributions of both the husband and the wife. In considering the weight to be attached to the initial contribution, in this case of the husband, regard must be had to the use made by the parties of that contribution.
29. Pierce v Pierce was a case in which the husband brought in $200,000 cash into the relationship. He applied that money towards the purchase of a matrimonial home. He was employed throughout the marriage and supported the wife who, whilst in some paid employment primarily attended to domestic tasks and taking care of the children. The Full Court assessed the parties’ respective contributions to a pool of $320,000 as 70 per cent in favour of the husband and 30 per cent in favour of the wife at the end of a 10 year relationship.
32. In Hunt v Zuryn (2005) FLC 93-226; (2005) 34 Fam LR 169 the Full Court (Kay, May and Boland JJ) allowed an appeal in a property case where a pool of assets of $1.12million had been assessed for contribution purposes as 75 per cent in favour of the husband and 25 per cent in favour of the wife. The Court in allowing the appeal indicated that an assessment of 75:25 fell outside the realms of an acceptable range saying at 79,730; 170:
Such an assessment ought adequately recognise that much of the parties’ wealth can be attributed to the capital growth in the assets introduced by the husband at the commencement of the marriage but at the same time bringing into consideration a myriad of other contributions each made in the course of their relationship.
Accordingly, I must not only identify the contributions of each party, but also assess the weight to be attributed to these contributions having regard to many factors including what has occurred afterwards.
A significant issue in this matter was the alleged non-disclosure of the First and Second Respondent. Attempting to deal with non-disclosure often puts the other spouse to considerable difficulty with regards to investigating their financial affairs. The Full Court in Weir (1993) FLC 92-338 at 79,593–4 made the following statement regarding the duty to disclose and the Court’s powers where non-disclosure has been found:
This Court has pointed out in a line of cases leading up to the recent decision of the Full Court in Black and Kellner (1992) FLC 92-287, 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 Giunti and Giunti (1986) FLC 91-759, and Mezzacappa and Mezzacappa (1987) 11 Fam LR 957; (1987) FLC 91-853. 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, which follows from his Honour's findings in this case, 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…
We appreciate that this is something of a broad brush approach, but, as we have said, where there is clear evidence of non-disclosure as there was here, the Court should not be unduly cautious about making findings in favour of the other party. It has been said by one commentator (O'Ryan and Broadfoot, 5th National Family Law Conference Handbook, p 249) the failure to disclose undermines the whole process of adjudication of proceedings for a settlement of property in that the court is unable to identify the property of the parties, to properly assess contribution, or to properly assess s 75(2) factors.
What is the pool of assets?
I make the following findings about what constitutes the assets and liabilities in this matter:
Schedule of assets and liabilities
| Assets | Value | |
| 1 | Sale proceeds former matrimonial home | Not Known |
| 2 | Wife’s NAB account | $245 |
| 3 | Wife’s household contents | $2,000 |
| 4 | Husband’s household contents | $7,000 |
| 5 | Property R (H) | $350,000 |
| 6 | [A] Pty Ltd (H) | $200,000 |
| 7 | [A] Pty Ltd motor vehicles | $23,582 |
| 8 | Husband’s interest in [S] | $36,000 |
| 9 | [A] Group Pty Ltd | Not Known |
| 10 | [H] Pty Ltd | Nil |
| TOTAL ASSETS | $618,827 | |
| Liabilities | ||
| 1 | Mortgage over Property R | $241,116 |
| 2 | Wife’s Amex Card | $300 |
| 3 | Wife’s CBA Mastercard | $3,827 |
| 4 | Wife’s debt to [I] Ltd | $146,858 |
| TOTAL LIABILTIES | $392,101 |
In relation to the assets I observe and make findings as follows:
a)In relation to item 1 I accept the wife’s evidence that the home was sold by the mortgagee and that she does not know what, if any, the net sale proceeds were. Under the circumstances the most likely scenario is that there were no net sale proceeds after the discharge of the mortgage on settlement.
b)Items 2 and 3 are based on the wife’s own evidence.
c)Item 4 is based on the husband’s evidence in his financial statement sworn 29 November 2006. I will accept this figure as an admission by the husband.
d)Item 5 is owned by [A] Pty Ltd and the value is based on the evidence of Mr B, a registered valuer, in his affidavit sworn 11 September 2007.
e)Item 6, [A] Pty Ltd, is a company the sole director and shareholder of which is the husband. Mr B values the company at $200,000 in his affidavit sworn 11 September 2007. The valuation is based on trading figures and not a balance sheet so has no regard to the assets and liabilities of the said company.
f)Item 7 represents the net value of motor vehicles recorded as the property of [A] Pty Ltd and is based on the affidavit of Mr B sworn 26 October 2007. It is important to note that the value is a net value i.e. the known liabilities attributable to each vehicle have already been deducted in arriving at the valuation.
g)Item 8 refers to the husband’s interest in [S] Pty Ltd and is based on the evidence of Mr B in his affidavit sworn 11 September 2007. The husband has a 50 percent shareholding in the company, and is a director of the same. The figure of $36,000 represents the husband’s interest in the said company.
h)Item 9 refers to [U] Group Pty Ltd and is based on the evidence of Mr B in his affidavit sworn 11 September 2007. The husband is the sole director and shareholder in this company. Mr B is unable to value the business but he said at paragraph 5 of his report under the heading of Summation the following
The lack of financial records makes it impossible to place a value on this business however with a turnover estimated at $246,000 per annum, a quantity of showroom stock, cash at bank and a realisable value on the fixtures I believe that this business would have had a value in the market place.
It should be noted that financial records which were provided were incomplete, there were no cheques or cashbook from which private expenditure could be established, no deposit records were provided in order to establish the service of income and wages – records were non existent.
There would also appear to be no provision for superannuation and it cannot be established as to whether the companies taxation commitments have been met.
The issue of rent of the premises is not addressed anywhere within the documents except for 1 payment of $800.00 on the 25th January 2007.
Money has moved backwards and forwards into this account from [A] Pty Ltd, “Savings”, and numerous other undisclosed sources which without banking records cannot be identified.
Until proper financial records are presented for examination no value can be assessed on this business.
If full information was received on the background and current records of the retail shop a better grasp of the situation may be obtained at least as to its value at the date of closure.
i)Item 10, [H] Pty Ltd, is based on the evidence of Mr B in his affidavit sworn 11 September 2007. The husband is one of two directors and shareholders in this company. At page 6 of his valuation Mr B concludes that this company has no market value and that any value to the proprietor would be incorporated into the value of [A] Pty Ltd.
It is possible to find, and I so find, that the husband has not properly disclosed his true financial circumstances, either personally or through his various corporate business entities. My finding is based on the evidence of Mr B in his affidavit of 17 September 2007. A close reading of this affidavit indicates that Mr B did the best he could to value the assets under extremely difficult circumstances. The husband was clearly uncooperative and very selective in what disclosure he did make. The finding of non-disclosure is also based on the evidence provided by Londi Gramelis, the wife’s former solicitor, in her five affidavits sworn between 24 August 2007 and 31 October 2007. All of the above evidence leads me to conclude that the husband’s approach to disclosure was indifferent and/or cavalier. I am not satisfied that the true value of the husband’s wealth, either personally or through his corporate entities, is known to the court. It is apparent, however, that the wife has been put to extraordinary effort and expense in obtaining the evidence that she has and which is represented in the findings I have made above.
Item 1 of the liabilities is a figure apparent from documents produced on subpoena by Citibank Pty Ltd and tendered in evidence.
Items 2 and 3 of the liabilities are based on the wife’s own evidence.
Item 4 represents the amount of the judgment debt obtained in District Court of NSW proceedings 4588/08 between [I] Pty Ltd and the wife. [I] Pty Ltd is a litigation funder and has been joined to the proceedings with the consent of the wife, and is a creditor interested in the outcome of the proceedings.
The wife asserted that I should include in the balance sheet the costs order made against the husband and in her favour on 1 April 2008 following a costs assessment. On that date Registrar Chayna ordered the husband to pay the wife’s costs of $35,101.60 payable by 30 April 2008. When one has regard to the affidavit evidence of Londi Gramelis referred to above, the making of such a costs order is not surprising. However I will not include it in the balance sheet for present purposes. The liability would create a double-entry in any event – an asset of the wife, and a liability of the husband. It arises post-separation. To include it would add unnecessary complexity to the assessment of contribution. It is questionable whether it is an asset of the wife that could ever be recovered and converted into cash in the circumstances of this case.
I acknowledge that it is possible that there are other liabilities of the husband, either personally or through his corporate entities, that are not known to the court. The husband’s financial statement of 29 November 2006 makes reference to liabilities in excess of $1 million including the mortgages over the [M] and Property R properties. I am satisfied, however, that some of these liabilities have already been dealt with above. For example the mortgagee sale of [M] accounts for the mortgage secured over it.
I have up to date evidence of the current liability secured over Property R. The valuation of motor vehicles undertaken by Mr B already deducts known liabilities attributable to those vehicles. In relation to the other liabilities asserted by the husband (e.g. business creditors $326,969.71) I am satisfied that there is no evidence to establish the same on the balance of probabilities. I am satisfied that the husband has had every opportunity to participate in these proceedings but has, for whatever reason known only to him, declined to do so. In those circumstances I am not prepared to accept the mere assertion of debt contained in his financial statement. However, it should be noted that I am also not including in the balance sheet for present purposes many of the assets that the husband discloses in the said financial statement, and I do so on the basis of preferring the later evidence of Mr B about the value of the husband’s corporate interests.
The pool of assets and liabilities therefore consists of:
Total Assets $618,827
Total Liabilities $392,101
Net Assets $226,726
It is, of course, somewhat misleading to treat the net pool of assets as only being $226,726. It includes the wife’s post-separation liability to [I] attributable to her legal fees. The husband has not contributed to this in a direct sense, and he is certainly not personally liable for the same. An application for costs since 1 April 2008 might follow these proceedings.
The wife does have superannuation of $1,500 but I propose to exclude this on the basis that it is such a small proportion of the property pool. There is evidence to indicate that the husband has superannuation (wife’s affidavit sworn 10 December 2007 paragraph 15) but he has not disclosed the same.
Assessing contribution
In this section of my judgment, unless I specifically indicate to the contrary, or unless the context clearly indicates to the contrary, I make the following findings.
The wife met the husband when she travelled with her parents and sisters to Lebanon for a holiday in November 1998. She was introduced to the husband who was a distant cousin. Earlier that year the wife's father had given to her for her exclusive use a Honda Prelude motor vehicle, though it remained registered in the name of her father's company, [P] Pty Ltd. She retained this vehicle for her exclusive use until about February 2001, with all expenses being met by her father's company.
The wife and her family travelled again to Lebanon in November 1999, staying for about six months. On 25 November 1999 the wife married the husband and they lived in a property owned by her father in Beirut. The wife's parents paid most of the cost associated with the wedding. In May 2000 the husband and the wife returned to Australia, the husband's entry being on a temporary visa. They lived in a fully furnished three-bedroom penthouse apartment in [X], provided at no cost by the wife's father. The wife returned to her previous employment with her father's company. The wife's father provided the husband with his first job in Australia and he was trained in [omitted]. As part of the husband's conditions of employment, the wife's father's company provided him with a vehicle.
In August 2000 the husband and wife moved out of the [X] accommodation and commenced living in rented accommodation at [N]. However, the generosity of the wife's parents continued and they paid the bond and the first two weeks rent. The husband and wife had, by then, saved up enough money to purchase their own furniture. The first child was born in December 2000. In February 2001 the wife's father provided to his daughter, the wife in these proceedings, a Holden Commodore motor vehicle in substitution for the Honda Prelude motor vehicle.
In about May 2001 the wife's father offered, in effect, to assist the wife and husband to purchase their first home, on the basis that he would provide 20 per cent of the purchase price by way of deposit. Settlement of the purchase of what became the former matrimonial home in [M] took place on 31 August 2001. The purchase price was $350,000 of which $53,000 was provided by the wife's father, $10,000 from joint savings, $7,000 from the first home owner's grant and $280,000 from Wizard Home Loans. Any further expenses relating to the purchase, including stamp duty, was paid from joint savings.
After moving into the home the husband and the wife carried out renovations.
The origins of [A] Pty Ltd are found in discussions between the husband, the wife, and the wife's father in mid-2002 when the husband was actually encouraged to set up his own business, initially on weekends. This proved successful and together with his daytime job the husband and wife were able to start generating a much greater income. Towards the end of 2002 the husband and wife agreed that they would leave the wife's father's company and establish their own business which became known as [A] Pty Ltd. Since shortly after inception the business has employed at least six casual employees. The business initially traded from the former matrimonial home and then from a rented factory unit. The wife was involved in various activities within the business as well as caring for the first child, and then the second child who was born in November 2002. In about August 2003 the husband and wife returned to the wife's father the vehicle that he had so generously provided, and they purchased their own Holden Commodore using funds redrawn from their mortgage facility.
The Property R property was purchased in about September 2004 in the name of [A] Pty Ltd. The purchase price was $347,000. In order to finance the purchase the husband and wife refinanced their existing loan over the former matrimonial home. They borrowed a total of $440,000 which was used to refinance the existing debt. The sum of $162,651 was available to the parties and the company had further funds available to it of $34,700. It is important to note here that it is not clear from the wife's evidence whether the Property R property was also used as security for moneys advanced to complete the purchase. On balance, I think that it was so used. For example, whilst I have doubts about the husband's financial evidence generally, he does refer to a liability over the Property R property in his one and only financial statement. Moreover, even on the wife's evidence it does not disclose how the full $347,000 purchase price, together with the out-of-pocket expenses and stamp duty relating to the purchase, was funded entirely by the refinance. Having said that, the effect of this transaction was quite significant. The former matrimonial home was mortgaged to a much higher level than previously. The evidence does not permit me to find what equity was left as a result of the refinance. But subsequent events indicate that whatever the equity was, it was not enough to prevent a later mortgagee sale. Conversely, equity appears to have been created in the Property R property, even though that was owned by the second respondent company, of which the husband was for all practical purposes the sole owner.
Separation took place a few months later in February 2005. The husband left the former matrimonial home. He promised the wife that he would pay the mortgage payments to ensure that the wife and children would be able to continue to reside there. In December 2006 the wife learned from the mortgagee that the mortgage repayments had not been made for six months and hence the mortgagee was proposing to exercise its power of sale. In January 2007 the wife and the children moved out of the former matrimonial home and commenced living with her parents in [G]. At some stage later the former matrimonial home was sold by the mortgagee, but I was directed to no evidence which explains what happened with the sale proceeds. I am left with the wife's own evidence that if there were any net sale proceeds she did not receive the same.
If one puts aside the benefits to the husband and wife arising out of the generosity of her parents, this is a relatively short marriage during which two children were born and in which both the husband and the wife worked industriously in contributing towards the acquisition of their assets either held jointly, in each name individually, or held through various corporate entities. I am left in no doubt that the wife contributed on an equal footing to the establishment, operation and subsequent growth of the husband's business up until the date of separation. She assisted with office duties thus freeing him up to do other matters more within his expertise. She was the principal homemaker and parent. If there had been nothing else, contribution at the date of separation would have been equal. There is no presumption to that effect. It is the conclusion I reach as a result of the evidence filed.
However, the contribution made through the wife as a result of the generosity of her parents is substantial. The wife's parents provided the husband with a job, accommodation and the opportunity to get started. They provided 20 per cent of the purchase price of the former matrimonial home, that is, 100 per cent of the equity. That equity was then, in effect, invested into the Property R property, even though the wife had no interest in that property. The sum of $53,000 contributed by the wife's parents represents just under 10 per cent of the known gross asset pool and just under one-quarter of the known asset pool. On behalf of the wife, her Counsel Ms Winfield submits that when one has regard to a contribution up until the date of separation, as well as the wife's contribution since the date of separation, her contribution should be assessed at 65 per cent. I agree with that assessment. Indeed, it may well be conservative under the circumstances. Even though between the date of separation and the date that the wife vacated the former matrimonial home in anticipation of the mortgagee sale the husband was paying the mortgage, the fact is that since then his level of support for the wife and children has been minimal. Moreover, if the wife receives 65 per cent it is of the known asset pool and because of the matters to which I have referred to above it is quite likely that there are other assets that the husband has not disclosed and which, if disclosed, would reduce the actual percentage received by the wife below 65 per cent. There is also evidence to indicate that in the post-separation period not only has the husband not disclosed his assets, but the husband has sought to increase his liabilities. For example, in April 2007 the wife discovered that the husband had encumbered the motor vehicle she drives by way of a commercial hire-purchase agreement with Westpac as a result of which the first and second respondents raised $20,000. The husband does not disclose what the $20,000 was used for.
Having regard to all of these matters, I am satisfied that it is just and equitable for contribution to be assessed in favour of the wife to the extent of 65 per cent.
Assessing section 75(2) considerations
Both parties are of equivalent age and appear to be in good health. The wife's income, property and financial circumstances are very modest indeed and she has the care of children that prevents her from expanding on her limited capacity for employment. She has worked before and I am satisfied she will work again, but her income earning capacity will always be limited. For all practical purposes, the wife is dependent on Centrelink benefits. By contrast, the husband is self-employed. In his one and only financial statement sworn 29 November 2006 he deposes to an average income of $586 per week. However, the evidence of Mr B, valuer, presents a picture of a complete intermingling of company and personal finances as between the husband and [A] Pty Ltd. When this is considered in the context of the non-disclosure or very selective disclosure in which the husband has indulged, I am not prepared to find that his income is as stated in his financial statement. Indeed, the evidence indicates that his income, property and financial resources are greater than he discloses and that his capacity for employment is far greater than he asserts.
The wife has the care of two young children. The husband pays the children's school fees, but does not otherwise pay child support. The mother wishes to continue in her role as parent, and I consider that appropriate. Even if I award to the wife the 10 per cent s.75(2) adjustment that her Counsel seeks, the net effect of the orders that I make as a result of this judgment will still be to place the wife in a very modest financial situation, and that assumes that she is able to actually enforce the orders to be made. Her entitlement under the property settlement is certainly not going to be a matter that would militate against awarding s.75(2) factors in her favour.
Clearly this is a case where the s.75(2) considerations favour the wife. Her Counsel seeks an adjustment of 10 per cent, and I am prepared to award the same. Indeed, I would have considered a higher s.75(2) adjustment had I been requested, particularly in view of the findings of non-disclosure I make. In any event, it is just and equitable to award the wife 10 per cent under s.75(2) of the Act.
A just and equitable order
The conclusion that I reach based on an assessment of contribution and future needs is that the wife should receive 75 per cent of the pool of assets. This is somewhat artificial, of course, because she owes so much to her litigation lender. But an even greater problem is that the major assets, the property at Property R, and the business operated by the husband are both operated by the husband through the company known as [A] Pty Ltd. The evidence indicates that the company actually trades from the Property R property.
I am satisfied that, for all practical purposes, [A] Pty Ltd is owned and controlled by the husband and is his alter ego. The wife seeks an order that the second respondent company transfer to the first respondent husband its interest in the property and thereafter the husband transfer the property to his wife. In each case the transfers need to be subject to the existing mortgage over the property. The effect of this order would be that the wife would, in theory, have access to the net equity in the property which is $108,884. I am satisfied that the mortgagee has been notified of the proceedings and specifically of the orders sought. I note, in any event, the transfers of the properties will be subject to the mortgage. In my earlier judgment I considered the possibility that the assets of the company itself are charged, but again I am satisfied that these creditors have been afforded procedural fairness and, having chosen not to participate in the proceedings, will, I assume, simply rely on the security they hold. I recognise, as the wife herself must recognise, that the making of the orders that she seeks is fraught with difficulty. No doubt enforcement proceedings may be necessary. The mortgagee and creditors may exercise the remedies available to them if it is not being serviced. Nonetheless, the order sought is just and equitable under the circumstances.
The wife also seeks orders that the second respondent transfer to her its interest in the Holden Commodore motor vehicle that she drives. That order is also appropriate under the circumstances. This particular vehicle was valued by Mr B at $23,000, though it is encumbered by an amount slightly more. Nonetheless, on the evidence before me the company would appear to have the equity in other assets, as well as the cash flow, to be able to disencumber the car and transfer it to the wife. If the first and second respondent choose not to participate in these proceedings, they can hardly be heard to demur over this sort of finding.
The wife seeks a further order for payment to her of $40,000 from the first respondent. Whilst I am not able to find on the evidence that he actually has cash, I am satisfied that he has engaged in non-disclosure and that he is able to make this payment. It will be a matter for the wife as to whether she can enforce the same.
Based on the orders that the wife seeks, she would receive the following assets:
a)her NAB account $245;
b)her household contents $2000;
c)equity in Property R $108,884;
d)a payment from husband $40,000.
A total of $151,129.
By way of contrast, the husband is left with the following:
a)husband's household contents $7000;
b)value of [A] Pty Ltd $200,000;
c)value of [A] motor vehicles $23,582;
d)value of husband's interest in [S] $36,000;
e)undisclosed assets – not known.
Total of $266,582.
Of course the husband would be freed from responsibly for the debt currently secured over Property R of $241,116 but would have to assume responsibility for the liability attributable to the Holden Commodore of $23,804. This leaves him with net assets, as disclosed, of about $242,778.
Viewed from the above perspective, the actual percentage sought by the wife becomes rather academic and her application for the orders is seen in the context of sheer pragmatism. However, not only is the wife's approach pragmatic, I am left in doubt that it is just and equitable under the circumstances, as are the orders sought. The wife, of course, has her own problems to deal with, particularly as regards the liability to [I] Ltd.
Accordingly, the orders I propose to make are as follows: in general terms similar to orders 6, 7(a), 8, 9, 12, 13, 15 and 16 of the orders sought in the further amended application filed 20 March 2009. I adjourn for further consideration to a date being six months hence orders 10, 11 and 14 of the said application. I direct the solicitor for the applicant wife to notify the first and second respondents of the orders that have been made today, within seven days. I grant leave to the first and second respondents to make application before me at any time within 28 days of the date of service to apply to stay, vary or set aside these orders. Such application must be by way of application in a case supported by affidavit. Furthermore, pursuant to my orders of 28 August 2008, I stay the orders that I have made today for 14 days to enable the intervener [I] Ltd, and the applicant wife, to consider these orders and reasons, and to enable the intervener to make any further application.
I certify that the preceding sixty-one (61) paragraphs are a true copy of the reasons for judgment of Altobelli FM
Associate: Anthony Thompson
Date: 19 May 2009
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