Ceoi & Ek
[2007] FamCA 1316
•9 November 2007
FAMILY COURT OF AUSTRALIA
CEOI & EK [2007] FamCA 1316
FAMILY LAW - APPEAL – PROPERTY – Disputed asset pool where there were third parties’ interests – The husband appeared in person on appeal and due to the difficulties this presented, the Full Court took the approach of itself analysing and identifying any errors of the trial judge – Appeal allowed on the basis that the trial judge had:
- Incorrectly calculated the husband’s interests in certain properties;
- Incorrectly stated that “the matrimonial property was agreed to”;
- Wrongly relied upon evidence to conclude that the husband had greater assets than disclosed;
- Implicitly concluded on inadequate evidence that undisclosed assets of $3.2 million existed;
- Made contradictory findings about the effect of third parties’ evidence on the property interests of the husband; and
- Failed to deduct the interests of the husband’s mother, sister and other investors from the value of certain properties
On the re-exercise of discretion, the parties’ assets were divided into two pools, the first being the pre-separation assets acquired in Australia and other interests totalling approximately $1.25 million. The second pool of assets consisted of the husband’s post-separation assets and overseas assets, totalling approximately $470,000.
Due to:
- Significant uncertainties about the husband’s financial affairs;
- The husband’s conduct of his financial affairs without proper records;
- Uncertainties about the husband’s interest in the second pool of assets; and
· Consistent with the trial judge declining to make a s 75(2) adjustment
the Full Court determined it was just and equitable to divide the first pool of assets as to 60 per cent to the wife, leaving the husband with 40 per cent of the first pool and the entirety of the second pool of assets.
COSTS APPEALS – The Full Court dismissed the husband’s appeals against costs orders made in relation to an unsuccessful application for a stay of the property orders, and in relation to the Deputy Commissioner of Taxation’s involvement in the property proceedings – The husband’s stay application was almost entirely unsuccessful and he did not provide any grounds to challenge the order – It was the husband who sought the joinder of the Deputy Commissioner of Taxation and no error had been shown in the trial judge awarding costs against the husband
Family Law Act 1975 (Cth)
CDJ v VAJ (1998) 197 CLR 172; (1998) FLC 92-828; (1998) 23 Fam LR 755
Devries v Australian National Railways Commission (1993) 177 CLR 472; (1993) 112 ALR 641
E and G [2002] FamCA 475
Fox v Percy (2003) 214 CLR 118; (2003) 197 ALR 201
Hickey and Hickey (2003) FLC 93-143; (2003) 30 Fam LR 355
Monte and Monte (1986) FLC 91-757
Neil v Nott (1994) 121 ALR 148; (1994) 68 ALJR 509
State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (In Liq) (1999) 160 ALR 588; (1999) 73 ALJR 306
Weir and Weir (1993) FLC 92-338; (1992) 16 Fam LR 154
Whisprun Pty Ltd v Dixon (2003) 200 ALR 447; (2003) 77 ALJR 1598
APPELLANT: MR CEOI
RESPONDENT: MS EK
FILE NUMBER: BRF 1868 of 2003
APPEAL NUMBER: NA 45 of 2006
DATE DELIVERED: 9 November 2007
PLACE DELIVERED: Melbourne
PLACE HEARD: Brisbane
JUDGMENT OF: Bryant CJ, Kay and Warnick JJ
HEARING DATE: 1 August 2007
LOWER COURT JURISDICTION: Family Court of Australia
LOWER COURT JUDGMENT DATE: 19 May 2006
LOWER COURT MNC: [2006] FamCA 356 REPRESENTATION
COUNSEL FOR THE APPELLANT: In person
SOLICITOR FOR THE APPELLANT:
COUNSEL FOR THE RESPONDENT: Mr Galloway with Ms Harris
SOLICITOR FOR THE RESPONDENT: Smith & Associates ORDERS
1. The property appeal be allowed in part.
2.Orders 3 and 4 of the orders made by the Honourable Justice Barry on 19 May 2006 be set aside and in lieu thereof it is ordered and declared:
(a)The second respondent Ms L holds her interest in the property situated at R Street on trust for the first named respondent husband;
(b)Unless the husband pays the sum of $112,600 to the applicant wife within 30 days, the R Street property is to be sold forthwith and the net proceeds of sale after payment of costs and expenses attendant upon the sale are to be divided as to one third to the applicant wife and the remainder to the husband;
(c)As between the parties, any capital gains tax payable by the parties arising from the sale of the R Street property is to be met as to one third by the wife and two thirds by the husband;
(d)In order to effect a sale, the husband and the second named respondent are to sign all documents and do all things necessary to transfer their interest in the R Street property to the wife to be held by her on trust for sale; and
(e)The wife’s solicitors are to handle the conduct of the sale.
3.The wife forthwith sign all documents and do all things necessary to reconvey the property situated at T Street to the husband and the second named respondent.
4.The parties be at liberty to file written submissions concerning the appeal against the order made by the Honourable Justice Barry on 29 September 2006 that the husband pay the wife’s costs of the proceedings and in relation to the costs of this appeal as follows:
(a)The husband to file and serve his submissions within 21 days;
(b)The wife to file and serve her submissions in response within 14 days thereafter; and
(c)The husband to file and serve any submissions in reply within 7 days thereafter.
5. The appeals be otherwise dismissed.
IT IS NOTED IN CONNECTION WITH THESE ORDERS that the judgment of the Full Court delivered this day will for all publication and reporting purposes be referred to as CEOI & EK.
THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT BRISBANE
Appeal Number: NA 45 of 2007
File Number: BRF 1868 of 2003
MR CEOI Appellant
And
MS EK Respondent
REASONS FOR JUDGMENT
1.This is the husband’s appeal against property orders made by Barry J on 19 May 2006. The husband has also filed supplementary appeals against an order made on 21 September 2006 dismissing the husband’s application dated 30 August 2006 for a stay of the orders and ordering the husband to pay the costs of that application, and against orders made on 29 September 2006 that the husband pay the costs of the Deputy Commissioner of Taxation and the wife’s costs of the property proceedings.
2.The husband appeared for himself in the appeals and is presumably the author of the documentation that supports the appeals. Much of that documentation does not follow in any logical sequence and at times it becomes difficult to determine precisely what is the nature of the appellant’s complaints. We are conscious however, of the observation of the High Court in Neil v Nott (1994) 121 ALR 148; (1994) 68 ALJR 509 where their Honours said at ALR 150; ALJR 510:
A frequent consequence of self representation is that the court must assume the burden of endeavouring to ascertain the rights of parties which are obfuscated by their own advocacy.
3.This difficulty was recognised by counsel for the respondent wife when in his written summary of argument he said:
6.The husband is a now self represented litigant. Perhaps for this reason, it is not easy to discern the purpose of the orders that he seeks, or the grounds of appeal on which he relies.
4.At the hearing of the appeal the husband, who had already filed one written summary of argument handed up a document headed “The Appellant’s Submissions of Appeal”. It runs into 32 pages plus annexures and asserts, in a rambling way, a series of areas where the trial judge made errors. We think the most disciplined way to attack this appeal is to make our own analysis of the judgment and identify areas where it could properly be argued that the trial judge fell into error. We adopted this approach without any apparent complaint from counsel for the respondent wife in the course of hearing the oral submissions on the appeal. We identified a number of areas that appeared to us to be troublesome in the judgment and asked Mr Galloway, counsel for the wife, to comment upon them.
5.It should be noted that neither the second named respondent who is the appellant’s mother nor the Deputy Commissioner of Taxation appeared at the hearing of the appeal.
BACKGROUND
6.The husband was born in December 1952 and the wife was born in January 1958. They married in March 1976 and commenced cohabitation on the day they were married. There was one child born of their marriage in November 1986. He presently lives with his father but his mother frequently provides for his needs.
7.The parties separated under the one roof in November 2001. In December 2002 the wife left the former matrimonial home. The marriage was dissolved in August 2003.
8.In her amended application for final orders the wife listed her usual occupation as home duties and in her updated financial statement filed on the same day she described herself as unemployed. In his affidavit in response the husband described himself as a missionary and investor. The wife deposed that she had worked for the majority of the time that she was married, primarily as an administrator and teacher. The husband asserted that she was a sales assistant.
9.It was common ground that a few years into the marriage the husband undertook some theological studies and then began to preach, travelling throughout the world raising monies from donations. The wife asserted that the husband had channelled unknown amounts of money into unknown assets throughout the world investing sometimes in his own name and sometimes in the names of himself and persons who appeared as co-owners but whom, it was asserted, held their interest in various properties on the husband’s behalf.
10.The wife deposed that sometime after the end of the parties’ relationship she saw a document in the husband’s handwriting that was a list of addresses for a large number of real properties throughout the world. She was unable to recall the details of the document other than the list totalled $3,912,863.00. She deposed that:
… it was quite a shock to discover that we were millionaires and that I knew so little about the husband’s business. When I confronted him about this document, he took the document from me. I have not seen the document since.
11.The husband was asked about the wife’s allegations in evidence in chief:
MR HODGES: Now, what your former wife says is that she recalls seeing a document in your writing showing that you had assets of AUD$3,912,863. What do you say about that? Did you ever prepare a document which should [sic] you had assets of $3,912,863? Do you want to read that first [paragraph 69 of the wife’s affidavit]? --- No, sir, I don’t remember.
12.In cross examination the husband was asked:
MR GALLOWAY: Do you have no recollection of writing down your assets on a piece of paper? --- I would say sometimes but it may not be like 3,000,000. I don’t think that’s true.
13.It was then put that the number was so specific that the document existed to which the husband replied:
No, that’s not true, you’ve got to produce the document or else I can’t…
14.There then followed some confusing questions and responses as follows:
MR GALLOWAY: I have to produce it, do I? --- I can’t remember, sorry.
Yes. You see, you wrote it down. I suggest to you, because you were recording, as best you could, the true value of what you and she owned? --- I can’t remember that until I see the documents.
Yes, alright. Well, let me ask it another way. You could assure his Honour, could you not, that you would not have created a false document, before your Honour? --- In what sense a false document?
Well, you wouldn’t have written down a document that said $3,900,000 just to fool your wife, would you? --- But, until I see the document, but I have written there or not. You have to prove that first, sir.
Yes, alright? --- Because or else is wasting time.
I take it you don’t believe your wife when she says what she has written there? --- How can I believe her when she said $3,000,000 one time and $60,000,000 – 30 or 60,000,000 in the financial report in her first lawyer’s, documents.
I see, alright? --- So, how can I believe her.
Yes? --- And how can I believe her when she said I have financial director since early day and that lady she mentioned was from Taiwan and that she only came into our co-workers’ relationship --- Alright? --- Only after migration. So, how can I believe her.
Alright? --- I can’t believe her what she is saying.
15.The existence of the document and its probative value was not referred to by either counsel in the course of final addresses.
16.Counsel for the wife produced a document headed “Matrimonial Property (Final Version)” that was tendered to the trial judge in the course of final addresses and which formed the basis for much of the discussion that took place at the conclusion of the trial. It was agreed that the schedule identified relevant properties and the value to be attributed to those properties but there remained in contention the extent of the husband’s interest in the properties and the extent to which the pool of assets should be adjusted for other asserted debts of the husband being in particular, his indebtedness to the Australian Taxation Office and amounts owed on credit cards at the time of the parties’ separation.
17.The schedule read as follows:
No. Description Tenancy/
ControlWife’s
ValueHusband’s
ValueAgreed
ValueCurrent
Mortgage
ValueAgreed
Net Value1. [1 S Street]
Tenants in
Common
Husband &
Wife$330,000 $375,000 $352,500 Nil $352,500 2. [2 S Street]
Joint Tenants
Husband &
Wife$440,000 $475,000 $457,500 $200,000
(Aussie
Home
Loans)$257,500 3. [R Street] Joint Tenants
Husband & [his
Mother]$335,000 $335,000 $335,000 Nil $335,000 4. [T Street] Tenants in
Common
Husband & [his
Mother]$300,000 $340,000 $320,000 Nil $320,000 5. [Lots 1 & 2,
USA]Solely Husband $61,165
(sale
price)$61,165
(sale
price)$61,165
(sale
price)N/A $61,165
(In
husband’s
control –
E$50,000
paid to 3rd
Respondent)6. [Condominium,
USA]
(net proceeds
of sale)Solely Husband
$13,142
(sale
price)$13,142
(sale
price)$13,142
(sale
price)N/A $13,142
(In
husband’s
control)7. [Time Share,
USA]Solely
Husband$19,745
($14,800
USD)$19,745
($14,800
USD)$19,745
($14,800
USD)Nil $19,475
(In
husband’s
control –
property
still exists)8. [1 E Street,
Malaysia]Husband & 2nd
Respondent$55,140
(RM
155,000)$55,140
(RM
155,000)$55,140
(RM
155,000)$38,848
(RM
109,740)
(EON)$16,292 9. [2 E Street,
Malaysia]Husband & [his
Mother]$56,920
(RM
160,000)$56,920
(RM
160,000)$56,920
(RM
160,000)$23,413
(RM
66,140)
(Alliance)$33,507 10. [N Street,
Malaysia]Husband & [his
Mother]$55,140
(RM
155,000)$55,140
(RM
155,000)$55,140
(RM
155,000)Nil $55,140 11. [B Street,
Malaysia]Husband & [his
Mother]$32,020
(RM
90,000)$32,020
(RM
90,000)$32,020
(RM
90,000)Nil $32,020 12. [B C Street] Tenants in
Common
Husband &
[Ms J L]$337,000 $337,000 $337,000 $261,970 $75,030 13. [P Street] Tenants in
Common
Husband
& his Sister$162,000 $162,000 $162,000
(Property
sold – net
proceeds
realized
on sale =
$42,086)(Paid out
on sale)$42,086
(In
husband’s
control)14. [L Street] Tenants in
Common
Husband
& his Sister$165,000 $165,000 $165,000
(property
sold – net
proceeds
realized
on sale =
$44,452
+ $3,875
- refund of
commission)(Paid out
on sale)$48,327
(In
husband’s
control)15. [F Street]
(proceeds of
sale)Husband’s
companyNK (Property
sold – net
proceeds
realized
on sale =
$26,824
+ $1,221
– refund of
commission)(Paid out
on sale)$28,045
(In
husband’s
control)16. [B T Street] Joint Tenants
Husband
& [Ms Y C]$185,000 $185,000 $185,000 $138,760
(RESI)$46,240
(Property
still exists)17. Volvo sedan Wife $20,000 $20,000 $20,000 Nil $20,000 18. Toyota Camry
SedanHusband’s
company$8,000 $8,000 $8,000 Nil $8,000 19. Telstra Shares
(600)Wife $2,400 $2,400 $2,400 N/A $2,400 20. Northern
Territory
Corporation
BondsWife $3,000 $3,000 $3,000 N/A $3,000 21. Furniture Husband $11,555 $11,555 $11,555 N/A $11,555 22. Jewellery Wife $2,000 $2,000 $2,000 N/A $2,000 23. Bank of
Queensland
InvestmentHusband’s
company$500 $500 $500 N/A $500 24. Bank Account
(various)Husband $14,413 $14,413 $14,413 N/A $14,413 25. [Husband’s
Company]Husband $261 $261 $261 N/A $261 26. [USA based
organisation]Husband $2,965 $2,965 $2,965 N/A $2,965 TOTAL $1,798,563
18.It was the wife’s case that the extent of the husband’s wealth could not be quantified given the possible breadth of his investments worldwide and his asserted failure to provide proper books of accounts concerning the conduct of his business. She asserted that where properties had been acquired in the joint names of the husband and other persons such as his mother or sister, the probability was that the husband was entitled to the entire equity in the properties and the other persons, whose names appeared on title, were only there for “tax purposes” and had no true beneficial interest in the property.
19.It was the husband’s case that he had made a full and frank disclosure of all of the assets. The persons who were co-owners with him in various properties were entitled to have their interest in those properties properly acknowledged.
20.The wife sought orders that all of the equity in items 1 to 4 inclusive should be transferred to her and that the interest of any co-owners in those properties should be ignored. This would entitle her to receive assets to the value, she calculated, of approximately $1,265,000.
21.It was the husband’s case that the divisible pool of assets should be seen to be worth approximately $1,138,000 and the wife should receive assets to the value of $290,000.
22.Ultimately the trial judge accepted the wife’s case in its entirety and granted her the orders she sought. Those orders required the husband’s mother to transfer to the wife her interest in the R Street property where she was registered as a joint tenant with the husband, and her interest in the T Street property where she was registered as a tenant in common with the husband. The orders also required the husband transfer to the wife his interest in those properties as well as his interest in the two properties at S Street.
23.The only one of the four properties to be transferred to the wife that was encumbered was the property at 2 S Street which had an agreed first mortgage to Aussie Home Loans in the sum of $200,000. Whilst the orders remain silent as to liability for the mortgage, it is apparent from the calculations appearing in the trial judge’s reasons for judgment that the wife was to assume liability for that mortgage once the property was transferred to her.
24.Of the 16 interests in real estate disclosed in the list of assets:
·Items 12, 13, 14, 15 and 16 were all acquired by the husband post separation;
·Items 8, 9, 10 and 11 were said by the husband to be properties purchased by his mother from 1991 in Malaysia in her name and the husband’s name, and which were “funded mainly from her own money”. He deposed that he made some contributions to assist the mother to repay the mortgage in later years when he had a better income;
·Items 5, 6 and 7 were investments acquired in the United States during the course of the marriage. Item 5 was sold shortly prior to the trial and $50,000 from the proceeds of sale was used to partly discharge the husband’s obligations to the Australian Taxation Office.
25.It is perhaps convenient to note how daunting a task it has been for the trial judge as it is for the Full Court to deal with the quantum of evidence provided by each of the parties in these proceedings. The affidavit material with annexures occupies approximately 1,300 pages. The trial was conducted over seven days and involved the use of an interpreter on behalf of the second named respondent (the husband’s mother). For many of the witnesses English was a second language and some of the oral testimony given is extremely difficult to understand. By way of example, in final addresses the husband’s mother acting for herself is asked by the interpreter to make submissions. The extent of the submissions is as follows:
INTERPRETER: Well, I do want to bring up two things in Court today. Two days ago I said something that was not quite correct, and well, it was because I wasn’t sure about those two things at the time. Well, there’s – [the husband’s company], well, that really exists, but well at the time we already signed, put down our signature, but the work ceased and I wasn’t aware of that…
And as for that piece of land, at first I thought that it was funded by me, by my assets. But then I found out that actually it was from my daughter, she loaned the money. Yes, I’d like to apologise to the Court, I said those things before I had a clear picture of what actually happened. At that time I was in [Malaysia] and I wasn’t sure what they did over here in [Australia]. Well, my daughter is a bit more clear about this matter than myself.
26.His Honour then said to the wife’s counsel:
HIS HONOUR: I didn’t quite follow the corrections that she was making, what does that relate to? Did you understand that?
MR GALLOWAY: Your Honour, no, I didn’t, I have to say to you…and that will be another submission that I am going to make, your Honour is left no wiser, and indeed probably, with respect, less so about that issue…
HIS HONOUR: Just one moment. Mr Hodges, are you able to enlighten me as to the thrust of what [Ms L] was saying?
MR HODGES: No, your Honour. No your Honour, I haven’t spoken to [Ms L] in the – since yesterday afternoon on any matters.
Mr Galloway then returned to his final submissions.
27.Another example of the difficulty the trial judge faced could be seen in the evidence given by the witness Ms J L who gave evidence by way of telephone from Canada. Ms J L had sworn an affidavit in which she deposed that in June 2004 she and the husband decided to purchase an investment property in Queensland together on a 50/50 basis. She forwarded AUD$80,000 by way of bank draft to a firm of solicitors in Queensland. Part of her cross examination read as follows:
MR GALLOWAY: Do you own property with other people? --- No.
Alright.When were you last in Australia? --- September.
I see? --- Last year
September of ’05. Alright. Did you --- ? --- Yes, September, yes.
Did you go and look at your real estate? --- Yes, yes.
And did you speak to [the husband] about it? --- Yes, because I keep asking when he can return my money or probably can, you know, send the, you know, the (indistinct) he sell to me.
Why are you both on title to that land? --- Sorry?
Yes. Why are you both on the title; that is, why do you both own it, why isn’t it just you? --- You mean why I invest this house with him, right?
Yes? --- Yes, just now we say together I live so far away and I don’t know about housing and he’s my old friend, then he go this (indistinct) so that’s why I need somebody to tell me, so I think it’s better for me to, you know, invest with another people. That’s why, you know, I finally decide to join him at that house.
THE TRIAL JUDGMENT AND ERRORS IDENTIFIED
28.The trial judge commenced his judgment by identifying the orders sought by each of the parties. His Honour then listed the various properties that were owned jointly by the husband with third parties, and identified that the husband’s case was that the pool of assets with an agreed value of $1,798,563 should be reduced for various liabilities in addition to being reduced by one half of the equity in the properties he jointly owned with others. His Honour noted that the wife’s case was that the properties held in joint names were sham transactions and the joint ownerships should be disregarded.
29.His Honour stated that the husband’s counsel had asserted that the pool of assets, after making allowances for the interests of the third parties and for various other liabilities, was reduced to $1,138,852. His Honour indicated that he could not reconcile that figure with calculations provided to him but did not find it necessary to do so.
30.It is perhaps appropriate to point out that there is an error in the manner in which the trial judge calculated the reductions proposed by the husband. The trial judge set out a table of the husband’s asserted reduced value in several items of real estate taking into account the interests of third parties. His Honour made the following calculations as to the husband’s claimed interest in the properties:
Reductions as proposed by the husband Reduced value of
husband’s interest
[R Street] – 50 per cent of $335,000
$167,500 [T Street] – 50 per cent of $320,00
$160,000 [B C Street] – counsel for the husband referred to Ms J L’s evidence that she is owed $65,000. Deducting $65,000 from the agreed equity of $75,030 leaves a sum of $15,030 [sic], 50 per cent of which is $7,565.
$7,565 [P Street] – 50 per cent of $42,086
$21,043 [L Street] – husband’s equity $15,788 (Husband’s sister said she is owed $16,750 because she advanced that money at the time of the property’s acquisition. Reducing the equity by this amount and dividing by two leaves the husband’s interest valued at $15,788 and not $48,327 as shown in the schedule.)
$15,788
[F Street] – net equity shown $28,045 but of that sum the husband has spent money on carpets for 2 S Street totalling $7,000. This should come off the equity reducing the equity to $21,045. One half of the balance equity of $21,045 is $10,522 [approximately].
$10,522 [B T Street] – husband’s equity $8,265
This amount is reduced as Ms Y C’s evidence [is that] she is owed $26,950 together with interest at 6.47 per cent. Counsel for the husband calculates this from 1 July 2004 to a total of $29,711. Deducting this from the agreed equity of $46,240 leaves an adjusted equity of $16,529, one half of which is $8,265 [approximately].
$8,265 TOTAL $423,584 31.The actual addition of the reduced value of the husband’s interest identified by the trial judge totals $390,683, not the sum of $423,584 as identified by the trial judge. The correct figure needs to be deducted from the agreed value of the properties to ascertain the extent of the husband’s claim to have the pool of assets reduced.
32.In the agreed pool of assets described in paragraph 17 above, those properties the husband asserts should have reduced values, are given the following values:
R Street $335,000
T Street $320,000
B C Street $75,030
P Street $42,086
L Street $48,327
F Street $28,045
B T Street $46,240
Within the greater asset pool, the total value of these assets is $894,728.
33.The proposed reduction in the size of the asset pool on behalf of the husband can be calculated as follows:
The agreed value of the asset pool $894,728
Less the amount that he asserts as his equity in the pool ($390,683)
Leaving the amount by which the pool is to be reduced as: $504,045
34.In addition to these reductions claimed by the husband, his counsel had also asserted that the pool should be reduced by:
·The extent of the tax debt incurred during cohabitation of $75,142;
·Monies owing on the husband’s Camry motor vehicle of $13,000; and
·A credit card liability at the date of separation of $68,119.
35.The total reduction in the pool being asserted by the husband’s counsel was $660,306 which would leave a pool of assets of approximately $1.14 million to be divided between the parties.
36.His Honour then identified the wife’s case to a claim of 70 per cent of the larger asset pool as being:
… on the basis that the husband had not made proper disclosure and the principal enunciated in Weir v Weir [(1993) FLC 92-338; (1992) 16 Fam LR 154] should apply. If the court accedes to this submission it would be on the basis that the husband has undisclosed assets overseas and/or the joint holdings with other parties are in effect sham transactions.
37.His Honour turned to the joinder of the husband’s mother in the proceedings acknowledging that she was under the joint disability of being illiterate and not speaking English. His Honour noted the joinder of the Deputy Commissioner of Taxation at the insistence of the husband. It was further noted that part way through the trial the Australian Tax Office announced that it was withdrawing from proceedings as all but $1,500 of the tax debt had been paid by the husband.
38.His Honour then dealt with the evidence of the wife’s psychiatrist, Dr K, regarding the wife’s capacity to work, and his Honour noted that the report was out of date and that he was not going to place much weight upon it. The trial judge concluded however, that in the fullness of time the wife would be able to find employment but it was not likely to be high paying employment in view of her limited qualifications.
39.His Honour then assessed the wife’s evidence saying he accepted that she was kept in the dark by the husband on financial issues during the period of the relationship.
40.His Honour then turned to examine the financial history of the acquisition of several pieces of real estate in particular the property at R Street. His Honour accepted the wife’s evidence which said:
When we brought this property, the husband told me that the property was to be held in his and his mother’s joint name [sic], even though we were responsible for funding its purchase. The husband explained that this was for tax purposes. I accepted what the husband said.
41.His Honour found that the history of mortgage repayments relating to the acquisition of R Street demonstrated the mortgage was paid regularly from a bank account in the name of the husband and the wife. His Honour noted that a house was built on the property after a contract was signed for its construction by the wife on behalf of the husband and herself. His Honour found that payment for extensions and renovations were met by the husband and the wife and not by the husband’s mother. The home was occupied until 2001 as the parties’ matrimonial home. After 2001 it was rented out and the rental income was retained by the husband for his own benefit.
42.His Honour detailed some further property transactions relating to properties no longer held by the parties and concluded:
In almost every instance the wife’s claims are corroborated by independent documentation.
43.His Honour accepted the wife’s assertion that the husband had used various combinations of his name to register land dealings, open bank accounts and the like. His Honour said:
I have no doubt the use of different names did not occur randomly or by accident. It may have served other purposes but at the very least it has been a means utilised by the husband to make it difficult to discover the true state of his financial affairs.
44.His Honour then turned to consider a loan application signed by the husband on 12 February 2004 seeking to increase the husband’s borrowings from RAMS which listed the husband’s assets as follows:
[1 S Street] $350,000
[2 S Street] $550,000
O/S and interstate [properties] $1,500,000
Home contents (insured value) $100,000
2000 Toyota Camry $18,000
Total assets $2,518,000
It listed the liabilities as:
Mortgage to Aussie [Home Loans] $200,000
USA credit cards $2,000
Total liabilities $202,000
45.The husband had asserted that the figure entered for “O/S and interstate [properties]” was an error and should have read $150,000. He asserted that the handwriting was that of the loans officer and the husband did not pick up the error because of his poor eye sight. The matter was the subject of significant cross examination. The trial judge’s finding was:
I disbelieve the husband’s account as to the claim an extra zero was mistakenly added to the value of his overseas and interstate assets.
This is not to say that his overseas and interstate assets were valued at $1,500,000 at the relevant time. There is a element of hyperbole about the estimates of value given for other properties – a common enough practice I would have thought when trying to impress a lender that the borrower is a good credit risk.
…
I disbelieve the husband’s explanation that he told the loans officer $150,000. It is likely the document he completed was reasonably accurate, though somewhat inflated as the figures in loan application forms frequently are.
46.His Honour then made a general assessment of the wife’s evidence saying that apart from her being less than entirely frank about the extent of her relationship with one Mr D B, his Honour had no reason to doubt the accuracy of the wife’s testimony.
47.His Honour then turned to the husband’s case, dealing first with some medical evidence called by the husband that asserted that the husband had some impaired cognitive functioning. His Honour concluded from his own observations of the husband over the duration of the trial that he did not accept the husband’s claims of cognitive impairment. His Honour stated that he was confident that the husband could earn high income through his prayer meetings and other fundraising efforts of a like kind.
48.His Honour concluded that he was confident that the self assessments that the husband had put forward to the Australian Taxation Office as to his income for the period 1997 to 2004 would be a serious under estimate of his earnings.
49.The trial judge accepted the wife’s evidence that whenever the family visited Malaysia they carried large sums of cash with them which they proceeded to give to the husband’s mother, and further his Honour accepted the wife’s account that she regularly accompanied the husband’s mother to the bank to enable such cash to be deposited into the husband’s mother’s account.
50.His Honour gave several pages of reasons as to why he would not accept the husband as a witness of credit.
51.His Honour then described the process he was obliged to undertake in property proceedings, that being to:
·Ascertain the assets and liabilities of the parties;
·Determine in which [sic] proportion the net assets of the parties should be divided having regard to the factors enumerated in section 79 of the Family Law Act [1975 (Cth)];
·Determine whether there should be further adjustment as to the percentage division between the parties on account of section 75(2) factors; and
·Determine that the result arrived at by the above process is in all circumstances a “just and equitable” result.
52.Although ultimately nothing turns upon it in this appeal, the description of the process by the trial judge is slightly inaccurate in that the second of the four steps has been traditionally to determine a division of the assets based on considerations of the factors enumerated in ss 79(4)(a), (b) and (c), and the third step is to determine what further considerations are relevant under the balance of the factors requiring consideration under s 79(4) including by reference, the relevant s 75(2) factors. See Hickey and Hickey (2003) FLC 93-143; (2003) 30 Fam LR 355:
39.The case law reveals that there is a preferred approach to the determination of an application brought pursuant to the provisions of s 79. That approach involves four inter-related steps. Firstly, the Court should make findings as to the identity and value of the property, liabilities and financial resources of the parties at the date of the hearing. Secondly, the Court should identify and assess the contributions of the parties within the meaning of ss 79(4)(a), (b) and (c) and determine the contribution based entitlements of the parties expressed as a percentage of the net value of the property of the parties. Thirdly, the Court should identify and assess the relevant matters referred to in ss 79(4)(d), (e), (f) and (g), (“the other factors”) including, because of s 79(4)(e), the matters referred to in s 75(2) so far as they are relevant and determine the adjustment (if any) that should be made to the contribution based entitlements of the parties established at step two. Fourthly, the Court should consider the effect of those findings and determination and resolve what order is just and equitable in all the circumstances of the case: Lee Steere and Lee Steere (1985) FLC 91-626; Ferraro and Ferraro (1993) FLC 92-335; Davut and Raif (1994) FLC 92-503; Prpic and Prpic (1995) FLC 92-574; Clauson and Clauson (1995) FLC 92-595; Townsend and Townsend (1995) FLC 92-569; Biltoft and Biltoft (1995) FLC 92-614; McLay and McLay (1996) FLC 92-667; JEL and DDF (2001) FLC 93-075 and Phillips and Phillips (2002) FLC 93-104.
53.His Honour then asserted:
The matrimonial property was agreed to and is contained in a document handed up by counsel for the wife during the course of his final submissions.
54.What was in fact agreed to was the value of the assets contained in the schedule, not that those assets comprised “matrimonial property”. The husband at all times asserted that the parties’ interest in those properties was significantly less than their total value.
55.His Honour then identified without comment that the husband was claiming liabilities in his Statement of Financial Circumstances of approximately $800,000. His Honour then said:
Presumably to this the husband would contend that he owes a further $80,000 for the monies borrowed from [Ms P C] in January this year.
In relation to that amount I accept the woman describing herself as [Ms P C] gave evidence by phone link from Taiwan. I am unable to conclude that a combination of her evidence together with the evidence of the husband reflects a genuine loan transaction. Having regard to the husband’s behaviour generally it is at least equally probable that the $80,000 represents monies earned by the husband during the period of six weeks that he was in Taiwan conducting prayer meetings.
56.We should interpose that ultimately nothing turns upon the rejection by the trial judge of Ms P C’s evidence if we accept (as we do) that the tax liability incurred in relation to the tax years when the parties were cohabiting should have been properly allowed by the trial judge as a liability to be shared by the parties. It matters not whether the husband paid the liability from his own resources or by borrowed funds if the tax liability is itself reflected in the list of assets which are ultimately divided between the parties.
57.His Honour then turned to evaluate the various contributions of the parties, stating in particular that the properties in Australia held in joint names with other parties (identified as numbers 12 to 16 in the schedule of assets) were all acquired post separation and the wife had made no direct financial contribution in relation thereto.
58.His Honour concluded:
If I could be satisfied the husband has made accurate disclosure of his financial position I would apportion the property on account of section 79 factors in the range of 60/40 in favour of the husband.
59.His Honour then turned to identify and invoke the principles his Honour said were established by the Full Court in Weir and Weir (1993) FLC 92-338; (1992) 16 Fam LR 154 which his Honour summarised as being:
i.A party to proceedings has a duty to make a full disclosure of his or her financial affairs;
ii.Where there is clear evidence of non-disclosure, the Court should not be unduly cautious of making findings in favour of the innocent party; and
iii.Once there is sufficient evidence to support a finding that a party has not made a full disclosure, the Court has jurisdiction to make an order in relation to unidentified and undisclosed property.
60.His Honour then said that there were three reasons why he concluded that the husband had greater assets than disclosed. The reasons being:
·The documents [sic] seen by the wife where the husband totalled assets at $3.9 million;
·Statements made to the wife orally and in writing (refer Exhibit 10) that properties are solely owned by the husband;
·The statement contained in Annexure 33 of the wife’s trial affidavit that he has $1,500,00 (sic) in assets overseas and interstate. This statement was made in February 2004, well after separation and almost 12 months after proceedings were first instituted.
61.We interpose to comment that the statement made by the husband that jointly owned properties were owned solely by him does not demonstrate that there is a larger pool of assets than that identified in the agreed schedule headed “Matrimonial Property (Final Version)”. It merely demonstrates that the equity claimed by the husband is larger than he was asserting before the trial judge.
62.The statement that he gave the bank in February 2004 that showed the two S Street properties with a value of $900,000 and other real estate holdings “O/S and interstate” of $1.5 million, making total real estate holdings at a gross value of $2.4 million, was described by the trial judge as having an element of hyperbole, and is equally consistent with the gross value of the real estate contained in the agreed schedule (approximately $2,650,000).
63.Apart then from the general unsatisfactory nature of the husband’s evidence the only basis left to the trial judge to make any finding that the husband had substantial undisclosed overseas assets was the wife’s recollection of the total sum noted in a document, said to be written in the husband’s hand, and said to be found by her at some unidentified time after the parties separated.
64.The totality of the evidence accepted by the trial judge relating to that document is contained in paragraph 69 of the wife’s first trial affidavit, part of which has already been reproduced above:
After the end of our relationship, I recall seeing a document in the husband’s handwriting. In this document the husband had listed off addresses for a large number of real properties throughout the world. Next to each address he wrote down a value for that property and sometimes a fraction. Whilst I do not remember the specific values, I recall that the total that had been given by the husband of the assets that he believed we owned was three million nine hundred and twelve thousand eight hundred and sixty three dollars (AUD$3,912,863.00). Naturally, it was quite a shock to discover that we were millionaires and that I knew so little about the husband’s business. When I confronted him about this document, he took the document from me. I have not seen the document since.
65.Accepting for the moment the accuracy of the wife’s evidence in that she saw a “list [of] addresses for a large number of real properties throughout the world”, that of itself is equally consistent with the documents described in the agreed schedule. Whilst it seems remarkable that the wife would remember down to the last cent the value ascribed in total to the properties listed, no cross examination of her was conducted and the matter was not the subject of any comment in final addresses. The mere existence of such a document ought not have lead the trial judge to a conclusion that there existed a vast pool of assets accumulated by the joint efforts of the parties, so vast that it would make it appropriate for the wife to receive a property settlement of $1.3 million based on a finding that her contribution entitlements were 40 per cent of whatever the pool of assets was. That would entail the finding by the trial judge that there existed, on the balance of probabilities, a pool of assets in excess of $3.2 million available for division between the parties. No such finding was made, nor does it appear to us that there was any evidence to support such a finding.
66.Weir and Weir (above) is a case in which it was asserted that the husband’s unaccounted for cash dealings affected the validity of the value of a quarry business which was a significant asset for division between the parties. The Full Court said that it was clear from the trial judge’s findings that the husband had not made a full and frank disclosure of his financial affairs, in particular his cash dealings. The Full Court then went on to say at FLC 79,593; Fam L R 158:
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.
…
We should have thought that the Court’s jurisdiction to make an order going beyond the identified property arises once there is sufficient evidence to support a finding that the party has not made a full disclosure of his or her assets.
The difficulty then arises of what orders should be made.
67.The Full Court in that instance then rejected the view expressed by an earlier Full Court in Monte and Monte (1986) FLC 91-757 that the court was still obliged to make a finding as to the existence and value of the undisclosed property.
68.The general principal in Weir and Weir (above) that the court should not be unduly cautious about making findings in favour of an innocent party does not allow the court to act carte blanche to make whatever property order otherwise seems just and equitable on the basis there may exist an unknown pool of assets.
69.In E and G [2002] FamCA 475, Kay and Coleman JJ commented on a submission that Weir and Weir (above) enabled the Court to hold that because of the open-ended finding in respect of the husband’s hidden assets and hidden income, the wrongful exclusion of $35,000 worth of liabilities was not a material error, saying:
52.[Counsel] relied upon the sentiments expressed in Weir (1993) FLC 92-338; [(1992)] 16 Fam LR 154 and similar cases recently fully discussed in [C v S] [2002] FamCA [156] where reference was made to Stein v Stein (1986) FLC 91-779; 11 Fam LR 353; Mezzacappa v Mezzacappa (1987) FLC 91-853; 11 Fam LR 957; and Black and Kellner (1992) FLC 92-287; 15 Fam LR 343.
53.In Black and Kellner the appellant had submitted that, absent findings as to the extent of his wealth, the order made by the trial judge was plainly unjust. The Full Court rejected that submission, effectively saying that where a party failed to make a full and frank disclosure that enabled the Court to ascertain the extent of their wealth, the party could not show how the result reached was manifestly or plainly unjust.
54.In Weir [and] Weir (1993) FLC 92-338; [(1992)] 16 Fam LR 154 the Full Court (Nicholson CJ, Strauss and Nygh JJ) dealt with an appeal against the refusal by the trial judge to make orders in respect of unascertained property because he could not quantify it. The Court said at FLC 79-593; Fam LR 128:
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.
55.In our view the approach outlined in those cases as to open-ended findings about financial resources and undisclosed income has to be tempered by the likely realities of the parties. Thus in [C v C] [2000] FamCA 366 uncertainty surrounded the wife’s earning capacity. That uncertainty was brought about by the unsatisfactory nature of the wife’s evidence. [Justice Kay], with whom Coleman and Hannon JJ agreed said:
31.True it is, as his Honour says, that because of the wife’s non-disclosure he cannot be sure of her financial position but, in my view, he could be sure that whatever the non-disclosure was in the scheme of this family and the financial circumstances surrounding it, the differential was not so great as to absorb those matters which clearly favoured the wife in respect of s 75(2) factors, namely the capital disparity, the superannuation disparity and, to a lesser degree, the income earning disparity.
56.Those sentiments are applicable to this case. The likely extent of the undisclosed resources of the husband has to be estimated by reference to the general circumstances of the case. There has to be an air of reality about their probable extent.
70.As unsatisfactory as the husband’s evidence was on many aspects of his financial affairs, in our view there was inadequate evidence for the trial judge to conclude that an undisclosed pool of assets of a vast magnitude existed.
71.The trial judge then went on to evaluate the husband’s mother’s evidence, concluding that she was not a reliable witness. His Honour said that he was more persuaded by other evidence of the husband’s assertions that he was the sole owner of the two properties in which the mother had an interest in Australia namely the R Street and T Street properties.
72.The husband’s sister was a co-owner of the properties at P Street and L Street. Those properties had been sold and the husband had received the whole of the proceeds of sale of approximately $90,000 but was asserting that his interest in the proceeds of sale was no more than $37,000, the balance belonging to his sister. Whilst expressing no precise conclusions about the claims of the husband to the sister’s entitlement, the trial judge said:
Generally speaking I found the evidence of [the husband’s sister] to be inconsistent, confusing and unreliable.
73.The trial judge next evaluated the evidence of Ms J L who we previously commented swore an affidavit and was cross examined by telephone from Canada. The trial judge said:
… it is possible the investments [Ms J L] has made with the husband are genuine investments ... I am not prepared to disbelieve the evidence of [J L] …
74.These findings are to be contrasted with his Honour’s findings towards the conclusion of his judgment where he said:
As noted I am unable to determine what interest the husband has in the properties with [Ms J L] and [Ms Y C]. There is insufficient evidence produced by the wife to satisfy me the husband is the sole owner of these properties and they are sham transactions.
On the other hand because of my disbelief of the husband’s evidence I am not prepared to accept the veracity of his witnesses [Ms J L] and [Ms Y C], such that I can be satisfied to the requisite standard of proof that they hold the 50 per cent interest.
75.It appears to us that these two findings are contradictory and mutually exclusive. If the evidence is credible and is not disbelieved then it ought be accepted.
76.Ms Y C had filed an affidavit in which she deposed that:
In or around 2004 [the husband] approached me with the view to invest in a property in Queensland. I was interested in this idea and agreed to invest in that property with him on a 50/50 basis.
Ms Y C then deposed that on 14 April 2004 she signed a contract for the purchase of the property at B T Street in the State of Queensland and detailed having made a total payment of $53,900 towards her obligations under the contract. She said:
I extended these funds on the understanding that [the husband] would refund me half of this amount in the sum of $26,950 after the sale of his investment property in Geelong in the State of Queensland [sic].
She had a signed Acknowledgement of Debt from the husband in the sum of $26,950 which was bearing interest at the rate of 6.47 per cent per annum from 1 July 2004.
77.Ms Y C was cross examined over the telephone. As with Ms J L, the trial judge concluded that it was possible the investment with the husband was genuine but whilst he was not prepared to accept her evidence unhesitatingly, similarly he was not prepared to disbelieve her evidence.
78.Ultimately, his Honour concluded that he was cynical as to why it was only after separation the husband had acquired properties jointly with the other parties.
79.His Honour then made a series of observations about written submissions he had received from the husband’s counsel and when referring to four properties in Malaysia that had been purchased by the husband and his mother since 1991. His Honour said:
I accept four properties were purchased jointly with his mother at the addresses as given. I am not accepting of the claim that it was mainly the mother’s money particularly having regard to the wife’s evidence of the husband and the wife regularly handing over to the mother large sums of cash over a lengthy period of time.
80.His Honour then turned to give consideration to s 75(2) factors concluding that the wife had limited experience and few qualifications and would find it difficult to obtain high paying employment. His Honour expected that she would obtain employment but such employment was likely to be for a modest remuneration. He rejected the husband’s claim that he was in desperate financial straits and said that he expected that with the cessation of the proceedings the husband would once again earn considerable income.
81.His Honour declined to make any adjustment on account of s 75(2) factors. His Honour then returned to the contribution issue and the manner in which the pool of assets should be divided, saying:
As indicated, in normal circumstances I would apportion the assets of the parties 60/40 in favour of the husband. However, I am more than satisfied that the husband has not given proper disclosure and that it is likely that he has significant other assets that remain undisclosed. It is likely such assets are to be found overseas and held in bank accounts by persons associated with his church group.
82.His Honour rejected the husband’s claim to take account of his credit card debts, saying:
There is no evidence that they relate to liabilities incurred in the course of the matrimonial relationship or are otherwise debts which common practice indicates would normally be taken into account.
83.His Honour’s manner of dealing with the asserted debt on the motor vehicle of $13,000 was to disregard both the value of the car at $8,000 and the debt of $13,000 by removing both from the pool of assets. His Honour said that the liability:
… was not properly established but in light of the uncertainty on this aspect I propose to disregard this asset.
84.His Honour went on to say that it was notable that counsel for the husband did not attempt to quantify the liabilities of the husband other than to ask the Court to have regard to the interests of third parties involved in real property interests with the husband.
85.We pause to note that the husband’s counsel had certainly submitted that a proportion of the tax debt attributable to the years of cohabitation should be brought into account and treated as a liability of the parties. It was accepted that part of the tax debt could be attributed to the following years:
1998 $63.00
1999 $17,855.55
2000 $16,379.66
2001 $16,383.86
2002 $15,620.44
2003 $17,685.22
86.Whilst separation occurred under the one roof in November 2001, the actual physical separation did not occur until the wife left the former matrimonial home in December 2002. The trial judge made no findings as to either the continuation or cessation of the wife’s contribution as homemaker and parent whilst she and the husband remained separated under the one roof. Absent any findings and having regard to the requests of the parties that we re-exercise the discretion, we think it safe to assume that there were elements of mutual support being provided during the period they remained living separately and apart under the one roof. We conclude that the trial judge fell into error in placing the entire burden for the debts with the husband and failing to give an adequate explanation as to why he reached that outcome. We think it is appropriate that the tax debts that were incurred prior to the final physical separation should be seen as a joint liability. There is no challenge to the calculation put forward by counsel for the husband in his final submissions to the trial judge that the appropriate sum was $75,142.
87.The trial judge then indicated that he did not accept that the husband’s mother had any interest in the R Street or T Street properties.
88.The trial judge noted that the wife was not seeking any orders for a settlement of the properties the husband held jointly with his sister, Ms J L or Ms Y C nor any of the properties held by the husband with his mother in Malaysia.
89.Having made those findings his Honour then reiterated that he was confident that the husband had significant assets which had not been disclosed. The trial judge readjusted the pool of assets in the agreed schedule by removing the value of the motor vehicle leaving a value of $1,790,563, and without allowing any mathematical discount for the interests of the husband’s mother, his sister, Ms J L or Ms Y C in relation to the jointly held property, his Honour determined that the wife’s claim of approximately $1.3 million would leave the husband with assets of approximately $500,000. His Honour said:
It may be that some of the property is the property of [Ms Y C], [Ms J L] and [the husband’s sister]. It is also probable the husband has other undisclosed assets.
…
In the whole of the circumstances I am satisfied orders in these terms represent a just and equitable result.
His Honour did not however, further describe why it was appropriate that the wife should receive such a hugely disproportionate share of the readily identified assets.
90.We think it is appropriate to comment at this stage that the parties’ equity in the visible pool of assets was not $1,790,563 as found by the trial judge. It was necessary to discount from the pool of assets the interests of the husband’s mother, sister and the other investors, in properties other than the R Street and T Street properties. As indicated, the trial judge did not reject the evidence of Ms J L or Ms Y C. Whilst his Honour was critical of the husband’s sister’s evidence, he did not make any findings concerning her interest in the P Street or L Street properties. The trial judge made no finding that the husband’s mother was not entitled to a share of the Malaysian properties.
91.Absent any adverse findings on those matters, the pool of assets should have been reduced to reflect the interests of the various co-owners.
92.As to the interest of Ms J L as a co-owner of the property at B C Street, the husband’s counsel’s submission at trial was that the husband had put in no funds and that he owed Ms J L $67,560. This was reflected in his Honour’s reasons for judgment in the calculations under the heading “Reductions as proposed by the husband” for B C Street. His Honour said:
Counsel for the husband referred to [Ms J L’s] evidence that she is owed $65,000. Deducting $65,000 from an agreed equity of $75,030 leaves a sum of $15,030 [sic] 50 per cent of which is $7,565.
93.It is correct that the agreed equity was $75,030 but determining exactly what the extent of Ms J L’s claim was to a disproportionate share in that equity is not so simple.
94.Ms J L’s affidavit evidence was that in December 2004 she forwarded a bank draft of $80,000 to Baker Johnson Lawyers who were handling the conveyance. She then said rather confusingly (sic):
Annexed hereto and marked with the letter “B” is a reprint of Baker Johnson Lawyers Trust Account showing monies forwarded into the Trust Account by me including the sum of $80,000 referred to above and a further sum of $70,000.
I also paid funds into the Bank of Queensland account referred to above [being a joint account opened with the husband to facilitate the acquisition of an investment property]. These monies have been used for the upkeep of the property, mortgage repayments on the property and personal expenses (including living expenses) of [the husband] which have been authorised by me. Annexed hereto and marked with the letter “C” is a bank account statement showing a $19,900 I made earlier this year.
95.Ms J L went on to assert that the husband currently owed her $67,559.83, an amount which reflects “his portion of the 50 per cent investment in the property”. It is clear that the solicitors’ statement of account dated 22 July 2005 to the husband and Ms J L acknowledges the receipt of $80,000 from HSBC and is consistent with an advice from HSBC of a line of credit extended to her. The Baker Johnson Lawyers letter also speaks of monies being returned to Ms J L in the sums of $44,860.34 and $4,071.14. The bank account statement from the Bank of Queensland in the joint names of Ms J L and the husband confirms a deposit of $19,900 on 11 January 2005. It is not evident from the documents annexed to Ms J L’s affidavit how she calculates the sum of $67,559.83 as the amount that is owed by the husband to her.
96.At the commencement of Ms J L’s oral evidence, documents were tendered from HSBC which would indicate that in addition to the $80,000, the sum of $70,000 was forwarded to Baker Johnson Lawyers on behalf of Ms J L on 22 April 2004. The oral evidence given by Ms J L in cross examination throws no further light on how she calculates the extent of the husband’s indebtedness to her. At its highest, the evidence indicates that she has advanced $169,990, comprising the $80,000, $70,000 and $19,990, and has had returned to her $48,931, comprising the $44,860 and $4,071, leaving the extent of her investment in the joint venture to be $121,059. Ms J L acknowledges in her affidavit that the husband has put $5,000 into the joint venture leaving her contribution exceeding the husband’s by $116,059. If the terms of the venture were such that the husband was obliged to account to Ms J L for one half of her investment before profits were otherwise divided between them then he would owe her $58,030.
97.Given that Ms J L’s evidence was not rejected it would have been appropriate for the trial judge to reduce the pool of assets by the extent of Ms J L’s interest in B C Street.
98.There would also have needed to have been an allowance made in respect of Ms Y C’s interest in the B T Street property, which the husband claimed would reduce his equity by about $38,000. Further, the husband’s sister’s interests in the proceeds of the P Street and L Street properties, would reduce the husband’s equity by about $53,500.
99.In summary, we consider that his Honour's reasoning was flawed in that:
(i)He wrongly calculated the reductions proposed by the husband to the schedule of properties tendered by the wife's counsel;
(ii)He wrongly stated that “the matrimonial property was agreed to”;
(iii)He wrongly relied upon evidence of statements made by the husband to the wife that properties in which other persons' names were on the title were solely owned by the husband to conclude that the husband had greater assets than disclosed, when all those statements demonstrated was that the husband's interest in some properties on the agreed schedule was greater than he claimed;
(iv)Implicitly, he concluded on inadequate evidence that undisclosed assets of the order of $3.2 million net, existed;
(v)He made contradictory and essentially mutually exclusive findings about the effect of the evidence of Ms J L and Ms Y C as to their interests in property held with the husband; and
(vi)He failed to deduct from the full value of properties in the agreed schedule the interests of the husband's mother, sister and other investors in properties other than the R Street and T Street properties.
100.We conclude that the appeal should be allowed.
OTHER ISSUES
101.As we have already indicated, given the confused nature of the Notice of Appeal and more particularly the appellant husband’s written submissions in support of the appeal, it has been necessary for us to endeavour to understand the gravamen of his complaints. Much of the husband’s written material shows a misunderstanding of the trial and appellate process. An example of this can be seen in part of his written submissions where he said:
The appellant needs more time to refute all these serious errors in the judgment and to gather evidence and documents to prove the judge is wrong. Judgment should not be by hearsay but by documentary evidence. It takes time to gather evidence.
On the grounds of not enough time, there was not enough time for the appellant to present evidence in the court session. The appellant was not given the opportunity to share freely in conclusion of the court session. It was because of not having enough time that things were not clearly presented. Also, the opposition party lawyers have given the appellant little time to answer questions. The appellant was distracted by too many questions.
102.It is apparent from the documents contained in the appeal books that the property proceedings were on foot prior to March 2004. The trial took place over four days in November and December 2005 and was continued over three days in February 2006. Each party was represented by counsel. We were not referred to any passage in the transcript where the husband’s counsel complained to the trial judge of a lack of opportunity to properly present his case.
103.The evidence at the trial consisted not only of the documentary evidence produced but also the oral testimony of the various witnesses. The trial judge was entitled to evaluate and rely upon the oral evidence.
104.The purpose of the trial, and to a lesser degree the appeal, is to determine, in accordance with law, on the balance of probabilities and in accordance with the oral and documentary evidence presented, the facts as asserted by each party. It appears to us that is exactly what Barry J attempted to do. That required his Honour to evaluate the credit of the parties given the significant areas where their evidence contradicted each other, especially concerning the husband’s cash earnings.
105.In final addresses the husband’s counsel conceded his client’s answers in cross examination were less than satisfactory.
106.The answers of the husband given in cross examination about a document he had written prompted this observation by the trial judge in his reasons for judgment:
When being questioned as to the contents of Annexure 10 to the wife’s affidavit the husband’s evidence bordered on the bizarre. It was put to the husband he was the author of the handwritten letter. He replied (transcript 212) “Maybe some words added to it”. At transcript 213 he said “I would say even it’s possible I believe she would have forged my signature”. He then went on to claim the wife had added a zero where the figure $1,000 appears in the document.
I am more than satisfied Annexure 10 is entirely in the handwriting of the husband.
107.Our reading of that passage in the transcript reinforces the conclusion of the trial judge that the husband’s credit had serious difficulties.
108.In Devries v Australian National Railways Commission (1993) 177 CLR 472 at 479; (1993) 112 ALR 641 at 645, Brennan, Gaudron and McHugh JJ said (footnotes omitted):
More than once in recent years, this Court has pointed out that a finding of fact by a trial judge, based on the credibility of a witness, is not to be set aside because an appellate court thinks that the probabilities of the case are against - even strongly against - that finding of fact. If the trial judge's finding depends to any substantial degree on the credibility of the witness, the finding must stand unless it can be shown that the trial judge “has failed to use or has palpably misused his advantage” or has acted on evidence which was “inconsistent with facts incontrovertibly established by the evidence” or which was “glaringly improbable”.
109.Whilst there have been several caveats expressed in subsequent decisions about the dangers of over relying upon a judge’s ability to accurately determine questions of credit based upon demeanour (see State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (In Liq) (1999) 160 ALR 588; (1999) 73 ALJR 306; Fox v Percy (2003) 214 CLR 118; (2003) 197 ALR 201; and Whisprun Pty Ltd v Dixon (2003) 200 ALR 447; (2003) 77 ALJR 1598), the principle expressed in Devries (above) binds us in the manner by which we should approach our appellate task.
110.It was abundantly open to the trial judge to accept the wife’s evidence in preference to that of the husband and his witnesses in areas where she could be seen to be giving not improbable or inherently unreliable testimony.
FURTHER EVIDENCE
111.At the commencement of the hearing of the appeal the husband sought leave to adduce further evidence pursuant to the provisions of s 93A(2) of the Family Law Act1975 (Cth) (“the Act”) which provides that an appellate court may receive further evidence on questions of fact.
112.The principles upon which the court should exercise it’s discretion were discussed by the High Court in CDJ v VAJ (1998) 197 CLR 172; (1998) FLC 92-828; (1998) 23 Fam LR 755. In summary those principles enable the court to admit further evidence where that evidence, if accepted, would demonstrate that the order and judgment are erroneous. Essentially, the court needs to be persuaded that admission of the further evidence would have lead to a different outcome in the proceedings than that which was reached.
113.Further, there are a number of discretionary issues that need to be considered including whether the evidence was available at the trial and whether there was an adequate explanation as to why it was not presented. When we dismissed the application we indicated that we would give our reasons as part of the principal judgment.
114.The materials sought to be introduced as further evidence fell into a number of different categories. The first series of documents show that in July 1989 the wife became registered as proprietor of land in Malaysia occupying 229m2. Her interest was shown as being 2/39. There is no evidence as to the value of her interest in this land. The husband asserted that the title searches demonstrated that the wife had been the beneficiary of her father’s estate and that she had failed to make a full and frank disclosure of her entitlements under that estate. We are not persuaded that the failure of the wife to disclose what amounts to a 5 per cent interest in a small block of land in Malaysia (even presuming that she knew of her entitlement) would have had the slightest bearing on the outcome of the proceedings before the trial judge.
115.Another document within this first series of documents sought to be relied upon was a copy of a transfer of land in Malaysia allegedly to the husband’s mother on 4 August 1967. The transfer identifies the address of the land. However, no issues raised by the trial judge in his judgment appear to turn upon whether or not the husband’s mother may or may not have been the owner of some land in Malaysia in 1967.
116.The next document sought to be relied upon was a copy of the husband’s will dated 8 February 1999. The husband asserted that it was written by the wife. In the will the husband differentiates between various items of real estate describing some as “my share in property” and others as “my property”. The husband sought to introduce the will as evidence that at all times he acknowledged the title of other persons to share in some of those properties.
117.There was no doubt that the husband had held himself out in some circumstances as only being entitled to less than the entire beneficial interest in several of the items the subject matter of the dispute before the trial judge. We are not persuaded that the presence or existence of the will, had it been drawn to the attention of the trial judge, would have lead to any different outcome in relation to the trial judge’s findings on these issues. In any event we were not given any explanation as to why the will was not introduced into evidence at the trial.
118.The next series of documents purport to show movements of money from the bank account of Ms P C. The fact that those movements occurred was never an issue between the parties in the proceedings. What was an issue was whether the monies advanced by Ms P C in fact belonged to her, or whether they belonged to the husband. The production of documents showing the movement of those monies would have little probative value in relation to determining that issue.
119.The next set of documents sought to be relied upon were similar documents from Ms J L showing the movement of monies from Canada to Australia. Once again the issue was not whether those monies had been transferred but rather what was the source of the funds. Ultimately, the trial judge determined that he was not going to disbelieve Ms J L in relation to her evidence and accordingly the introduction of these documents into evidence now adds nothing to the findings of the trial judge.
120.The next document sought to be relied upon was an affidavit of Ms Y C concerning her investment with the husband in the B T Street property. Ms Y C had already filed an affidavit in the proceedings and was cross examined. The trial judge did not disbelieve her evidence and the material now sought to be relied upon takes the matter no further.
121.The next set of material sought to be relied upon were identity documents relating to Ms E C. The only additional document that was not already in evidence was a photocopy of a page of Ms E C’s passport. There are no findings by the trial judge relating to Ms E C, who was apparently the joint owner of at least one bank account in the United States entitled “[the husband] aka [E C]”. The trial judge made no findings about the existence or otherwise of Ms E C and it had been conceded by counsel for the wife in final addresses that she may indeed be a real person. Counsel for the wife said:
It may be that [E C] is a real person. [E C] may have no knowledge that her name is being used, maybe she does. We don’t know. We are groping in the dark, doing the best we can.
But your Honour would be interested to see that number 22, an account with [E C] exists in Texas. This good lady lives somewhere in New York. Your Honour, item 18 shows that there is an aka [E C]. Now, it is possible that that could be taken to mean that it is a co-signatory account that [E C], that is from New York, and accounts jump all over the United States. From New York, to Arcadia, what seems to be California – perhaps that is Canada, I can’t tell you – to Texas, to Corona, California and of course then they are all over Asia, and all over the world.
122.The further proof by the husband of the existence of Ms E C as a real person would not in our view have made any impact at all on the outcome of the proceedings.
123.The next set of documents sought to be relied upon show that the husband had entered into an arrangement with Impact Capital to help fund his litigation. We fail to see the relevance of the existence and extent of those arrangements to the issues that the trial judge had to determine.
124.In the course of the trial judge’s reasons for judgment, when evaluating the earning capacity of each of the parties his Honour said:
I am confident the husband can earn a high income through his … prayer meetings and other fundraising efforts of a like kind. There is no reliable evidence of any of the funds ever being channelled into charitable works.
125.The husband sought to introduce into evidence before us six documents on this issue. One document purports to show that the husband made donations to a company (not registered as a deductible gift recipient for tax purposes) of $435.00 for the year ending 30 June 2005 and another for $60 for the year ending 30 June 2006. The other four documents seek to confirm that the husband has donated:
·An unknown sum to earthquake relief through a Taiwanese Church;
·To a Californian company to support mission work in China; and
·To the religious institution near Melbourne “during the time his family lived here”.
126.The existence of those documents, had they been before the trial judge, may have led to a finding that “other than in the most minimal amounts, none of the husband’s funds had ever been channelled into charitable works”, but would not otherwise have reflected on the key finding which was the husband’s capacity to earn income. The failure of the husband to substantiate any claim he may have made as to spending his income on donations to charities, was not one of the myriad of reasons provided by the trial judge as to why he did not accept the husband as a witness of credit. The existence or otherwise of these documents would not have made the slightest difference to the outcome of the proceedings.
127.The husband also sought to introduce into evidence a series of letters from Canning Weil MacGillivray Halligan Solicitors addressed to himself and his mother concerning a proposed transfer of the property at T Street to the husband’s company as trustee for the husband’s company’s Trust. It was common ground that the transfer never took place. The existence of these documents which were written in 2003 and which were clearly available at the trial, would not in our view, have led to the trial judge reaching a different conclusion as to the extent of the husband’s mother’s beneficial interest in either the T Street property or the R Street property.
128.The next document the husband sought to rely upon was a document dated 1 June 2007 being a calculation by the husband’s accountant of the profit arising out of the sale of the L Street and P Street properties. In the trial judge’s reasons for judgment one of the matters his Honour identified as being relied upon to demonstrate the husband’s lack of credit was an exchange that had taken place between the trial judge and the husband’s counsel on 1 December 2005 compared with information that was provided by counsel in February 2006.
129.When the matter was adjourned in late 2005 an application was made to restrain the husband from dealing with anticipated proceeds of sale of the L Street property. His Honour asked how much was going to be realised on the sale to which counsel for the husband replied:
My client tells me a few thousand dollars will be cleared.
When the matter resumed in February 2006 counsel for the husband informed the trial judge that $44,000 had been received on settlement. The trial judge observed in his reasons for judgment that:
I find the husband deliberately misled the Court with the information given to his counsel on 1 December 2005.
130.The document that was now sought to be relied upon did not provide any insight to the question asked by the trial judge of what was going to be realised on the sale of the property. The document purports to show the profit that has arisen out of the transaction rather than the amount of funds that would be available to the vendor at settlement. Whilst there may be room to argue that there was a misunderstanding in relation to what information the trial judge wanted and what information the husband via his counsel thought appropriate to provide, and that this throws doubt upon the finding that the husband deliberately misled the Court on 1 December 2005, in the context of the myriad of adverse credit findings, clarification of this issue would not in our view have led the trial judge to reach a different conclusion as to the husband’s credit. Accordingly we declined to admit the evidence.
131.The final document sought to be relied upon was a letter from the home loans manager at RAMS Home Loans dated 25 January 2006 which said inter alia:
I wish to confirm that, as per the information disclosed by you, it has now been noted on the file of the above loan that the value of international investments listed in the application at $1,500,000 was incorrectly stated and should have been listed as $150,000.
132.The letter does no more than confirm that after the matter had been raised in the proceedings the husband took steps to notify RAMS that it was his view that they had made a mistake when filling out his loan application. The letter does not amount to any admission by RAMS that the person who filled out the form had in fact made a mistake. The letter is not in affidavit form and the relevant loans manager was never called to give evidence in the proceedings. We have not had our attention drawn to any explanation as to why the loans manager was not called to give evidence given that the accuracy of the loan document was a matter of some conjecture at the hearing.
133.It is for the reasons given above that we dismissed the husband’s application to admit further evidence.
OUTCOME
134.Both parties indicated to us that if we found appealable error in the judgment made by the Barry J, then the preferable course would be for the Full Court to endeavour to determine the proper outcome rather than to remit the matter for a retrial. We understand the wisdom of that approach having regard to the potential horrendous costs of retrying this dispute.
135.For the reasons given above, we are of the view that the trial judge’s conclusions concerning the possible existence of an undisclosed pool of assets cannot safely stand. Nor are we able to approach the matter on the basis that the parties’ interests in the proven assets is of the value found by the trial judge.
136.We think the safest way of dealing with the unresolved issues is to approach the matter by dividing the identified pool of assets into two segments. The first pool of assets should consist of the pre-separation assets that were acquired in Australia. They are the two S Street properties, R Street, and T Street. Those four properties have an agreed value of $1,465,000 although the property at 2 S Street is subject to a mortgage of $200,000. There should also be incorporated into this first pool of assets:
Wife’s car $20,000
Wife’s Telstra shares $2,400
Wife’s Northern Territory Corporation Bonds $3,000
Husband’s furniture $11,555
Wife’s jewellery $2,000
Husband’s savings (various bank accounts) $14,413
Husband’s interest in
USA based organisation $2,965
137.These assets total $56,333 and together with the value of the four properties listed above at $1,465,000, gives a gross asset pool of $1,521,333. Offset against this gross pool should be the mortgage on 2 S Street of $200,000 and the tax debt of $75,142. This leaves a pool of assets of approximately $1,246,191.
138.The second pool of assets should consist of:
The husband’s interests in the United States
properties (items 5 to 7 on the schedule) $97,782
The Malaysian properties
(items 8 to 11 on the schedule, gross agreed value) $134,959
The husband’s interest in the post-separation
Australian assets (items 12 to 16 inclusive, 23 and
25 on the schedule, gross value however thehusband asserts that his interest is significantly less) $240,428
The total of this second pool of assets is $473,169.
139.Speaking in broad terms the two pools of assets thus created are worth approximately $1.25 million and $470,000 respectively.
140.Due to:
·The significant uncertainties about the husband’s financial affairs as a result of the credit findings, which appear to have been reasonably open to the trial judge;
·The manner in which the husband has conducted his finances without proper records; and
·The great uncertainties which surround the extent of the husband’s interest in the second pool of assets
we conclude, consistent with the trial judge’s findings as to the relative future earning capacities of each of the parties, that a just and equitable outcome to the proceedings would see the wife receive 60 per cent of the first pool of assets, being assets to the value of approximately $750,000, and the husband retaining the balance of that pool and the entire second pool. In reaching that conclusion we recognise that the wife has made very significant contributions to the first pool of assets but that her contributions to the second pool are more difficult to ascertain given the uncertainties as to its size and the fact that much of it was acquired post separation.
141.In addition to the motor vehicle, Telstra shares, Northern Territory Corporation Bonds and jewellery which have a combined value of $27,400, the wife would have to receive real estate assets to the value of $722,600 to fulfil her entitlement to $750,000 of the first asset pool. If the wife retains the two S Street properties she will have real estate assets to the value of $610,000. In order to obtain the balance of her entitlement, the R Street property would need to be sold and from the proceeds of sale the wife would have to receive a further $112,600. This is approximately the equivalent of one third of the agreed value of the R Street property.
142.The wife would therefore be left with:
Real estate $610,000
Car, shares, bonds and jewellery $27,400
Cash $112,600
Total $750,000
143.The husband would retain the balance of the assets being:
T Street $320,000
2/3 of R Street (approximately) $223,000
Furniture, savings and
interest in company (approximately) $29,000
Total $572,000
In addition to this $572,000 from the first pool of assets, the husband will retain up to $470,000 from the second pool of assets less any entitlements of the various co-owners and any debt he may owe for monies allegedly borrowed to pay the tax debt.
144.The appropriate order would be that the orders transferring the T Street and R Street properties to the wife be set aside and that the husband retain his interest in the T Street property. Further, the husband have thirty days to pay to the wife the sum of $112,600 and in default the R Street property be sold and the wife receive one third of the net proceeds of the sale of the property after payment of any expenses attendant upon the said sale. Such an order would accommodate any rise or fall in the value of the R Street property as against the agreed value. The parties would need to share any capital gains tax implications in relation to the sale of that property in accordance with their respective equities, that is two thirds of any capital gains tax liability should be met by the husband and one third by the wife.
145.The orders and declarations concerning the husband’s mother’s interest in the T Street property are no longer appropriate as that property is to remain with the husband.
THE COSTS APPEALS AND THE COSTS OF THE APPEAL
146.There are three costs orders the subject of appeal. The costs order of the unsuccessful application for a stay of the trial judge’s orders made on 21 September 2006 by Barry J, and the costs order involving the Deputy Commissioner of Taxation made on 29 September 2006 also by Barry J, seem to be discrete orders that can be dealt with as part of this judgment. The order that the husband pay the wife’s costs of the trial as part of the 29 September 2006 costs orders, was predicated on a different outcome to the property proceedings than will result from this appeal judgment and as such we will not determine this issue now.
147.In relation to the stay proceedings, we see no reason to interfere with the trial judge’s exercise of discretion. The application was almost entirely unsuccessful and the Notice of Appeal contains no grounds that seek to challenge the costs order.
148.In relation to the costs order involving the Deputy Commissioner of Taxation (“DCT”), the husband asserts in his written submissions that the DCT’s costs should be “paid from the pre-divorce proceedings property pool”. The DCT was joined as a party to the proceedings by the husband after the DCT had obtained a judgment for outstanding income tax and had threatened to commence bankruptcy proceedings against the husband. There was a dispute between the husband and the wife as to how the tax debt could be met. The husband wanted to sell off some of the Australian assets that the wife was anxious to have transferred to her in the property proceedings. The wife played no part in the joinder of the DCT to the proceedings. The tax debt was eventually paid by the husband and the DCT was discharged from the proceedings.
149.The DCT sought indemnity costs against the husband but the trial judge decided to award party-party costs.
150.Even though we have held that part of the tax debt should be shared between the husband and the wife, nothing has been advanced to us that would persuade us that the trial judge was in any way in error in allowing the DCT’s claim for costs against the husband. As such we will not interfere with the costs order that the husband pay the costs of the DCT.
151.We advised the parties that we would invite written submissions on the balance of the costs appeal, being the order that the husband pay the wife’s costs of the trial proceedings, and on the costs of the appeal when we delivered our reasons in the principal appeal.
I certify that the preceding one hundred and fifty one (151) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court
Associate:
Date: 9 November 2007
Key Legal Topics
Areas of Law
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Family Law
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Equity & Trusts
Legal Concepts
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Appeal
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Costs
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Remedies
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Constructive Trust
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