Chapman & Chapman (No 2)
[2024] FedCFamC1F 541
•16 August 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Chapman & Chapman (No 2) [2024] FedCFamC1F 541
File number(s): BRC 16816 of 2021 Judgment of: JARRETT J Date of judgment: 16 August 2024 Catchwords: FAMILY LAW – PROPERTY – Alleged loans between applicant and second respondent – Loan documents post-dated – Evidence does not establish loans – Treatment of trusts – Trust not alter-ego of applicant – Competing valuation evidence for corporate interest – Spousal maintenance – Applicant able to pay spousal maintenance Legislation: Family Law Act 1975 (Cth) ss 72, 75(2), 79(4)
Income Tax Assessment Act 1936 (Cth)
Cases cited: Browne v Dunn (1893) 6 R 67
Goodwin & Goodwin (1990) 14 Fam LR 801
Kennon v Spry (2008) 238 CLR 366
Trevi v Trevi (2018) FLC 93-858
Division: Division 1 First Instance Number of paragraphs: 185 Date of hearing: 12 & 13 January 2023, 22 March 2023, 11 & 12 January 2024 Place: Brisbane Solicitor for the Applicant: Litigant in person Counsel for the First Respondent: Ms Carmody (11 & 12 January 2024) Solicitor for the First Respondent: DV Lawyer (12 & 13 January 2023 and 22 March 2023)
Michelle Porcheron Lawyers (11 & 12 January 2024)Solicitor for the Second Respondent: Litigant in person Solicitor for the Third Respondent: No appearance ORDERS
BRC 16816 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MR CHAPMAN
Applicant
AND: MS CHAPMAN
First Respondent
MS BARRIE
Second Respondent
N PTY LTD
Third Respondent
ORDER MADE BY:
JARRETT J
DATE OF ORDER:
16 AUGUST 2024
THE COURT ORDERS THAT:
1.Within thirty (30) days of the date of these orders:
(a)the applicant shall cause any mortgages against the property situate at O Street, Town P, Region Q, New Zealand to be discharged and released;
(b)the applicant and the first respondent shall do all acts and things and sign all documents as may be necessary to transfer to the first respondent the applicant’s right, title and interest in and to the Town P property free of all encumbrances; and
(c)the applicant hereby indemnifies the first respondent from any liabilities with respect of the said property extant at the date of these orders.
2.From the date of these orders and until settlement of the Town P property pursuant to order 1 hereof:
(a)the applicant is prohibited, and an injunction hereby issues restraining the applicant from further encumbering the Town P property without the express written consent of the first respondent having first been obtained; and
(b)the applicant shall pay all rates, insurance, and other expenses as and when they fall due.
3.Within seven (7) days of the date of these orders, the applicant and first respondent shall do all acts and things and sign all documents necessary to:
(a)distribute any balance standing to the credit of any joint bank accounts held by the applicant and the first respondent to the first respondent; and
(b)close any joint bank accounts held by the applicant and the first respondent.
4.Within ninety (90) days of these orders, the applicant shall pay the first respondent the sum of $496,300.
5.In the event the applicant does not pay the first respondent the sum required by order 4, then the parties shall forthwith do all acts and things, sign all documents and give all consents necessary to place on the market and procure the sale of the real property situated at R Street, Suburb C in the following manner:
(a)the property shall be listed for sale by private treaty with such real estate agent as is agreed between the parties and failing agreement within fourteen (14) days from the date of these orders the real estate agent will be as nominated by the then President of the Real Estate Institute of Queensland at the request of the parties or either of them;
(b)the list price of the property shall be such amount as is agreed between the parties and failing agreement within fourteen (14) days of the date of these orders the list price will be as nominated by the real estate agent;
(c)the sale price of the property shall be such amount as is agreed between the parties and failing agreement any offer to buy the property that is at least 95% of the list price shall be accepted by the parties as the sale price;
(d)the parties are to co-operate in every way with the real estate agent in relation to the marketing of the property for sale including making the key readily available, allowing inspection of the property at all times reasonably requested by the agent and ensuring that the property is clean, neat and in good order at the time of inspection by any prospective buyer;
(e)upon agreement being reached for sale of the property the parties shall execute the contract of sale and all other documents necessary to complete the sale of the property including all transfer documentation forthwith upon its submission to them by the agent or their solicitor;
(f)the contract of sale shall provide for completion within 30 days after the date of the contract;
(g)the proceeds of sale of the property shall be paid in the following manner and priority:
(i)payment of the agent’s commission and advertising or other expenses, if any, payable on the sale;
(ii)payment of the legal costs and outlays relating to the sale;
(iii)payment of any expenses to be reimbursed under orders 5(d);
(iv)the sum of $496,300, or so much of it as is possible, to the first respondent; and
(v)the balance, if any to the applicant;
(h)neither party shall encumber the property without the consent in writing of the other party or any mortgagee;
(i)the applicant shall keep the property in a good condition pending sale;
(j)the applicant shall make the property available for inspection upon the request of the real estate agent;
(k)the applicant will cause to be repaired any damage to the property caused by him, such repair to be at his expense; and
(l)the applicant shall have the sole right to occupy the property until the property is sold and during such right of occupation the applicant shall be responsible for all mortgage payments, rates and outgoings of the property as they fall due up to and including the settlement date.
6.In the event that R Street, Suburb C property is not sold by private treaty pursuant to order 5 on or before six (6) months from the date of this order then the applicant and the first respondent shall do all acts and sign all documents as are necessary to sell the Ashmore property by auction and the following shall apply:
(a)the property shall be listed with the agent appointed under order 5(a) (hereinafter called “the auctioneer”) for sale by auction within a further three (3) months;
(b)the parties shall execute all documents requested by the auctioneer for sale of the property by auction;
(c)the reserve price of the property shall be such amount as is agreed between the parties and failing agreement being reached between the parties twenty-one days prior to the auction, then the reserve price shall be nominated by the auctioneer;
(d)the parties shall each pay to the auctioneer one half of any sums requested for advertising or auction expenses and if one of the parties pays all of the expenses, that party shall be reimbursed from the proceeds of sale in respect of one half of such payments before any division between the parties;
(e)the parties shall give such instructions as are necessary to a solicitor to prepare a contract of sale and provide it to the auctioneer prior to the auction no later than the date sought by the auctioneer;
(f)the parties agree to co-operate in every way with the auctioneer in relation to the sale by auction including allowing inspection of the property at all times reasonably requested by the auctioneer and ensuring that the property is clean, neat and in good order at the time of any inspection and on the day of auction;
(g)that the parties attend at the auction and negotiate with the highest bidder in the event of the reserve price not being reached;
(h)the sale price of the property shall be any amount in excess of the reserve price but in the event of the reserve price not being reached the sale price of the property shall be such amount as is agreed between the parties or failing agreement any offer received after the auction to buy the property at a price that is at least 95% of the reserve price shall be accepted by the parties; and
(i)that upon agreement being reached for sale of the property, orders 5(e) – 6(l) inclusive shall apply.
7.In the event that the property is not sold at the auction pursuant to order 6 or within fourteen (14) days after the date of the auction by further negotiation, then the parties shall cause a further auction of the property to be held within four (4) months after the date of the first auction and for that purpose the provisions of order 8 shall apply.
8.All previous orders for spousal maintenance are hereby discharged.
9.Commencing with the first payment being made no later than seven (7) days from the date of these orders and ending on the day which is 365 days after the date of these orders, the applicant shall pay to the first respondent by way periodic spousal maintenance the sum of $750 per week and for that purpose:
(a)the first respondent shall forthwith notify the applicant in writing of the method by which she shall receive each weekly payment from him; and
(b)the applicant shall make the payments required by this order by the method so notified by the first respondent.
10.Otherwise, all other outstanding applications and responses are dismissed.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Part XIVB of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish an account of proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under a pseudonym has been approved pursuant to subsection 114Q(2) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
JARRETT J:
These proceedings concern property adjustment and spousal maintenance between Mr Chapman (the applicant) and Ms Chapman (the first respondent). Having regard to the relief sought by the first respondent, two further parties have been joined to the proceeding, Ms Barrie (the applicant’s mother and the second respondent) and N Pty Ltd (the third respondent).
Broadly, the issues in the proceeding concern the identification of the property available for division between the parties, their contributions to the acquisition, conservation and improvement of the property as it presently exists, the matters that might lead to an adjustment of the contribution-based entitlement for the parties and whether the applicant has made proper disclosure of his financial position from time to time.
Although she filed no response in the proceedings, in her affidavit of evidence-in-chief filed on 22 December 2022 the second respondent seeks that a property referred to in the evidence as the T Street property be transferred from a trust with which she is associated, to her. That is not an order that this court can make in the context of this proceeding.
The third respondent seeks no relief.
PROCEDURAL BACKGROUND
Initially, this proceeding concerned applications for parenting orders, property adjustment and spousal maintenance.
On 7 September 2022 the application came before the Court for case management hearing. All outstanding applications were listed for a three-day trial to commence on 28 November 2022. Trial directions were made to prepare the matter for that proposed trial. However, the respondent did not file her trial material in accordance with the directions and she required leave of the Court to rely upon any of it.
On the morning of the trial, the respondent, by her solicitor-advocate, made an oral application to adjourn the trial on the basis that given that her application for leave to rely upon her trial material was refused (for reasons I gave on that day), it would be prejudicial to her for the trial to proceed. The applicant sought for the trial to proceed undefended. The respondent was ultimately granted leave to rely on portions of several affidavits she had filed earlier in the proceedings. As matters turned out, however, only the application for parenting orders proceeded. The property adjustment and spousal maintenance applications were adjourned to a trial on 12 and 13 January 2023. On the first respondent’s application, the second and third respondents were joined to the proceedings.
The parenting application concluded on 28 November 2022 and I delivered judgment and made parenting orders on 30 November 2022.
On 12 January 2023 the trial of the balance of the proceedings commenced. There was no appearance by or on behalf of the second or third respondents. Appearance by telephone for the second respondent had been alluded to in the November 2022 hearing but no formal application for such an order had been made.
The applicant relied upon affidavits sworn by him and filed on 30 September 2022 and 22 December 2022. He relied upon affidavits of evidence-in-chief by his mother Ms Barrie (filed on 22 December 2022) and his aunt, Ms U (filed on 21 December 2022). He relied upon a number of valuations of real property and entities with which he was associated. The applicant also relied upon his financial statement filed on 24 December 2022.
The first respondent relied upon an affidavit of evidence-in-chief deposed by her and filed on 20 December 2022. She also sought to rely upon an affidavit of her solicitor-advocate that annexed the valuation report of Mr V of W Valuers. She relied upon her financial statement filed on 21 December 2022.
Cross-examination of the applicant commenced and it revealed some outstanding disclosure issues, which were resolved overnight.
On 13 January 2023, the second respondent appeared by video link. The Court was not satisfied that was appropriate given that the respondent was a witness of credit. The trial was adjourned to 22 and 23 March 2023 to allow the second respondent to appear in person. The applicant was still under cross-examination when the trial was adjourned.
Between 13 January 2023 and 22 March 2023, the applicant filed three affidavits without leave, one by Mr Z, an accountant, (filed on 27 January 2023), one by Mr AA, forensic accountant (filed on 10 March 2023) and one by Mr BB, accountant, (filed on 15 March 2023). On 22 March 2023 he was granted leave to rely on the affidavits, but the trial was adjourned to 8, 9 and 10 August 2023 with a costs order in favour of the first respondent. Consequent upon the new evidence adduced by the applicant, there was also an order for the two forensic valuers, Mr V and Mr AA, to confer by 2 June 2023.
On 8 August 2023, the court was informed that the first respondent’s solicitor-advocate had taken ill and could not conduct the first respondent’s case. The application was adjourned.
On 4 September 2023 the matter was before me for case management. The first respondent’s solicitor advocate was still unwell and the application was adjourned to 11 and 12 January 2024 for trial. Directions required the parties to file updated financial statements by 18 December 2023 and updated case outlines by 8 January 2024, the latter being to update the orders sought by the parties.
Eleven and 12 January 2024 represent the fifth time the matter had been listed for trial. On this occasion the first respondent was represented by counsel, instructed by new solicitors. The applicant continued to represent himself, as did the second respondent. There was no appearance for the third respondent.
The applicant expanded the material he relied upon to include the three affidavits the subject of the grant of leave on 22 March 2023 as well as two further affidavits by him filed on 10 and 18 March 2023 and an updated financial statement filed on 12 December 2023. The first respondent relied upon an updated financial statement filed on 19 December 2023. The second respondent relied upon her affidavit filed on 22 December 2022.
ASSETS, LIABILITIES AND FINANCIAL RESOURCES
There are significant disputes between the parties as to their nett financial position. On the applicant’s case, the parties’ liabilities exceed their assets. On the respondent’s case, the assets exceed the liabilities by a margin of some $2,400,000 of which she currently retains about $400,000.
I find that the parties’ assets, liabilities and financial resources as at the date of the hearing before me are as follows:
ASSETS O Street, Town P (J) $223,516.00 Chapman Family Trust (A) (50%): CC Street, Suburb DD, City EE $75,472.00 T Street, Town FF 1/6th interest $164,405.00 GG Property, Town HH 50% interest (A) $175,000.00 R Street, Suburb C (A) $1,500,000.00 JJ Pty Ltd (A) $500,019.00 Motor Vehicle 1 (FR) $21,420.00 Bank accounts (A) $2,064.00 Bank accounts (FR) $676.00 ANZ account (J) $116.00 ADDBACKS Motor Vehicle 2 (A) $1,000.00 Legal costs (A) $190,000.00 $2,853,688.00 LIABILITIES Mortgage 1 on O Street, Town P (J) $24,972.00 Mortgage 2 on O Street, Town P (J) $18,327.00 Mortgage on GG Property, Town HH (A) $99,608.00 Mortgage on CC Street, Suburb DD (A) $59,123.00 Mortgage R Street (A) $1,191,121.00 Loan from JJ Pty Ltd (A) $296,278.58 Student Loan (FR) $2,449.00 Car Loan (FR) $14,223.00 $1,706,101.58 SUPERANNUATION Superannuation Fund 1 (A) $83,962.00 Superannuation Fund 2 (A) $21,347.00 Superannuation Fund 1 (FR) $3,240.00 Superannuation Fund 3 (FR) NIL $108,549.00 Nett non-super assets $1,147,586.42 Nett assets (incl super) $1,256,135.42
Unless I have stated elsewhere in these reasons, the values set out above are agreed. Although the parties claim to have superannuation interests in New Zealand, neither put any effort in their evidence or their submissions into addressing whether those interests were in fact each a superannuation interest for the purposes of the Family Law Act 1975 (Cth). I have assumed, as the parties seem to have, that they are.
A description of the contentious issues as to the property pool, and my determination of them, follow.
GG Property, Town HH, Queensland
The applicant’s evidence about the circumstances concerning the purchase, conservation and improvement of the Town HH property is unimpressive and consists of little more than assertion by him. He says that aside from the amount of $30,000 contributed by him in 2007 he has made no other contribution to this property. He says that the second respondent contributed $77,000 as a deposit including stamp duty and they secured a loan for the balance purchase price from ANZ Bank in the amount of “some $300,000”. He swears that between 2007 and 2010, the second respondent contributed an additional $50,000 to the loan repayments, bringing the mortgage balance to some $250,000 and that she has made all mortgage repayments for this property. The property is a holiday letting and the applicant says that it has been running at a loss with the rental income attributed to the mortgage and outgoings.
The applicant asserts that the second respondent has made “all financial contributions to the property including mortgage repayments and interest. She has also undertaken upkeep of the property including grounds maintenance and cleaning”.
The second respondent gives evidence about this property in her affidavit of evidence-in-chief filed on 22 December 2022. She swears that she has loaned the applicant $147,179 between 2009 and 1 June 2022. The amount is constituted by the applicant’s half share of the amounts she says she has paid in respect of the property for things like mortgage repayments (principal and interest), maintenance and cleaning costs and capital improvements. She says that “it was agreed” when the property was purchased that the outgoings would be shared equally. However, the applicant gives no such evidence. He does not suggest that there was an agreement for the parties to equally share the costs and expenses of the property as his mother alleges.
The second respondent swears that during the period between 2009 and 29 April 2022 she “utilized (sic) her own funds” to make the necessary payments. She says that her bank statements make out her claims and that some of them have been produced to the first respondent’s lawyers. She then swears that annexed to her affidavit is a “transaction summary from [GG Property] Accounts to further evidence some of my contributions over an assortment of years”. She also attaches a balance sheet that she says shows the total contribution that she has made.
The problem with the transaction documents that the second respondent annexes to her affidavit (MB-9) is that they are incomplete and contradict each other. There is a document said to be a balance sheet recording the second respondent’s “Capital”. Its provenance is not explained. Next, is a document entitled “Account Transactions [Accrual]” for a period said to be “1/9/2009 to 2/12/2022”. It has a number of columns and purports to record (I surmise) payments that the second respondent alleges that she has made. However, whilst some entries have a very basic description of the payee, many do not or have descriptions that are not self-explanatory. The second series of “Account Transactions [Accrual]” cover a period (1/07/2009 to 18/12/2022) that overlaps the period covered by the first set of documents, but with different entries and results. The third covers another overlapping period, but again with a different result. Whilst the individual transactions within the transaction statements do not appear to overlap, how some are included in one document but not another covering the same period makes me think that there are some real difficulties either with the evidence of the applicant and the second respondent on the one hand or the accounting system used by whomever it is that keeps the records on the other.
I have concluded that it is the former, rather than the latter. I reach that conclusion, in part, because both the applicant and the second respondent relied upon a written loan agreement which both conceded had been executed by them years after the alleged loans began to accrue. That is despite the applicant swearing in his affidavit of evidence-in-chief that (at para 164), “On or about 1 June 2022, I borrowed $147,179.43 from my mother”. That is demonstrably not true.
This demonstrates that the applicant and the second respondent are not above manufacturing evidence when they think it will suit their purposes. Their conduct, and specifically the second respondent’s conduct in that respect, robs her evidence about this particular alleged loan of all probity.
I find that the applicant and the second respondent are joint owners, at law and in equity, of the GG Property and that they each have a one-half interest in that property. I am not satisfied on the balance of probabilities that the second respondent is owed any money by the applicant in respect of the GG Property as they allege. I so find.
N Pty Ltd
The third respondent was incorporated in 2004. It does not seem contentious that the applicant is the sole director of this company. A company extract generated on 26 June 2021 shows that 99 shares in the company are held by Chapman Family Trust and 1 share is held separately by the applicant. This could not have been the case at the company’s inception, as it was incorporated in 2004 and the Chapman Family Trust did not exist until 2010.
The third respondent owns real property at CC Street, Suburb DD, New Zealand. It is common ground that the third respondent is the legal owner of this property. It is also the debtor in respect of the mortgage registered over the property.
It also owned a property at Suburb KK, City EE which was apparently sold in late 2013.
It is the first respondent’s case that the Suburb DD property should be treated as if it belongs to the applicant. That means that she must establish that the third respondent holds its legal interest on trust for the applicant. But there is no basis in her evidence for such a finding. At best her evidence is, “In my recollection [Mr Chapman] owns the apartment, his mother has nothing to do with the apartment which in the paper trial (sic) saying that his mother is a 50% share in the real property situated at [CC Street, Suburb DD]”.
Although the applicant (together with the trustees of the Chapman Family Trust) is a shareholder of the third respondent, that gives him no proprietary interest in the assets of the company. There is simply no evidence upon which I could make a finding that the third respondent holds the Suburb DD property on trust for the applicant.
It was put in closing submissions for the first respondent that I should treat the assets of the third respondent as being the assets of the applicant because he treated it as his and did what he wanted with it. The problem with this submission is that, aside from the first respondent’s assertions about this, there is no evidence to support it. Nor was it put to the applicant in cross‑examination that he treated N Pty Ltd or any of its assets as his own. In those circumstances, the first respondent cannot advance a case that should have been put to him squarely: Browne v Dunn (1893) 6 R 67.
However, notwithstanding all of this, on the applicant’s own concession, he is entitled to half of this property (presumably as a beneficiary of the Chapman Family Trust). The first respondent contends he is entitled to 100% of the value of the property. The applicant’s concession should be preferred to the first respondent’s contention. I find that the applicant is entitled to at least a 50% legal and beneficial interest in the Suburb DD property.
The applicant’s concession about this matter brings me to the Chapman Family Trust.
Chapman Family Trust
Chapman Family Trust was established by a deed of trust executed pursuant to New Zealand law and dated 8 November 2010. The settlor was the applicant and the trustees were the applicant and his aunt, Ms U.
The applicant, as settlor of the trust, has the power to appoint and remove trustees. Pursuant to clause 17.2 of the trust deed, he may transfer that power to such other person or persons as he may nominate by deed or will. By a deed entitled “Deed of Appointment of New Appointor” executed on 10 August 2011, the applicant purported to appoint the second respondent as an “additional appointor” of the Trust, however I doubt that the appointment is efficacious. In that respect, I make the following observations:
(a)the deed was executed in New Zealand and the laws of New Zealand apply to it. There is no evidence before me about those laws;
(b)the subject trust deed permits the applicant to transfer his powers of appointment (see cl. 17.2) but the text of that clause is inapt to permit a sharing of the power to appoint;
(c)apart from one refence in cl. 17.4 to the “holders” of a power to appoint, there is no reference to the power to appoint being exercised jointly by more than one appointor;
(d)there are no provision in the trust deed to regulate the exercise of the power to appoint in the case of multiple appointors, as there is, for example, in the case of multiple trustees.
By the deed, the applicant does not purport to resign as an appointor of the Trust. Its purpose seems to be to appoint the second respondent as a co-appointor of the Trust, something, for the reasons I have expressed above, probably cannot be achieved. It is also noteworthy that this deed lists the second respondent as a third trustee of the trust, suggesting she was appointed trustee at some time prior to 10 August 2011 although there is no evidence of that.
In paragraph 161 of the applicant’s affidavit of evidence in chief he swears that he and the second respondent are joint trustees and the second respondent is the appointor of the Trust. That deposition is consistent with the second respondent at some point being appointed as a trustee of the trust. It also recognises (perhaps implicitly) that there is only one appointor of the trust. However, if that is what was intended by the deed of 10 August 2011, that purpose was not accomplished by that deed.
Ms U does not appear to be a trustee of the Trust any longer. Although there is no clear evidence of this, her evidence-in-chief seems consistent with that idea (see paragraph 4 of her affidavit filed on 21 December 2022).
Ms Barrie gives no relevant evidence about the Chapman Family Trust.
The potential beneficiaries of the Trust are the applicant, any of his children, his parents, any of his siblings and their issue, his aunt Ms U and others. The applicant (as the settlor of the Trust) has power to appoint or remove any person or class of persons as beneficiaries of the Trust. The first respondent was and is not within any of the object classes of the Trust.
The trustees have absolute discretion to pay or allocate both income and capital to any or all of the discretionary beneficiaries as they might in their absolute discretion determine. Further, the trustees have power to resettle all or any part of the trust fund upon the trustees of any other trust which includes among its beneficiaries any one or more of the beneficiaries of the subject trust.
According to the trust deed, the trustees’ powers must be exercised unanimously and, whilst there is a rule against self-benefit, a power or discretion vested in the trustees may be exercised in favour of a trustee who is also a beneficiary, by the other trustee or trustees.
There are three other trust documents which have apparently been disclosed to the first respondent. The first is alleged to be a signed but undated Retirement of Trustee of Ms U from 2014. This document is not in evidence.
The second document is said to be entitled “Memorandum of Guidance for Trustees 20/06/2017 re Income and assets of the Trust”. I have examined this document in greater detail later in these reasons. The third document is said to be entitled “Email from [Mr Chapman’s] accountant stating no tax returns have been filed nor has the Trust an IRD number and belief the Trust only has shareholding in [N Pty Ltd] 28/06/2021”. It is not in evidence. There are no minutes of any meetings of the trustees in evidence.
In closing submissions, the first respondent advanced the case that I should find that the Chapman Family Trust is the alter-ego of the applicant. The submission was not developed by reference to the principles that might be applied to determine whether such a finding was open and should be made. However, I take that submission to mean that because the applicant has control of the trust and is free to do with it as he pleases, I should treat the property subject to the trust as the applicant’s property available for consideration this application.
The question of whether the property of the trust is, in reality, the property of the applicant is a matter dependent upon the facts and circumstances of the case including the terms of the trust deed: Goodwin & Goodwin (1990) 14 Fam LR 801 at 805; Kennon v Spry (2008) 238 CLR 366 at [58].
Here, the evidence reveals that not only are there potential beneficiaries and trustees other than the applicant (the second respondent and Ms U, for some) but that capital contributions had been made by the second respondent to the trust. I have set out below my finding concerning the second respondent’s contribution of an interest in a property at Town FF to the trust.
The evidence does not sustain a finding that the trust is an alter-ego of the applicant. At best the evidence demonstrates that the trust is controlled by the applicant but not entirely for his own purposes. I find that he remains the appointor of the trust and there are no “additional appointors” because such a course does not appear to be authorised by the trust deed. There is no evidence of any law of New Zealand that would authorise an additional appointor absent a provision in the trust deed permitting that course.
In my view, the Chapman Family Trust exists for the benefit of the applicant and the second respondent, not just the applicant. It is probably the case that the applicant utilises the trust and the benefits it provides to a greater extent than does his mother, but that, of itself, is no warrant for treating the trust’s property as the sole property of the applicant. I so find.
However, the applicant’s concession that he is entitled to half of the Suburb DD property owned by the third respondent, can only be made on the basis that, in reality, the trust is the vehicle of the applicant and his mother equally (despite its discretionary nature) and the applicant is entitled to half of its assets. I so find.
T Street, Town FF
According to the applicant’s evidence, this property is held by “the trust”. Title documents for this property are not in evidence but it is not in dispute that there are three groups of people each holding a one third interest in the legal title to the property. The first group is Ms U and Mr LL, the second is Mr MM, Ms U and Mr NN and the third group is Ms Barrie, Mr Chapman (the applicant) and Ms U as trustees of the Chapman Family Trust.
The applicant’s evidence is that this property was purchased by the second respondent, her husband, her sister, her sister’s partner, and her brother in 2001 in equal shares. An interest was then transferred to the trust in 2013.
The applicant’s case is that he has not made any financial contributions to this property and his mother has made all of them. Consequently, he says that he has, “estimated its value within the trust to be nil as I have not contributed financially towards the acquisition or maintenance of this asset”.
The second respondent gives evidence that is largely consistent with that of the applicant. Annexed to her affidavit if evidence-in-chief is a letter (addressed to the applicant) from an organisation described as “[OO Law Firm]” which, I presume is a law firm that purports to practice in New Zealand. The purport of the letter is to provide advice as to whether under New Zealand law, “the interest that the Trust owns in the house at [Town FF] would be relationship property”. The author opines, “It is my view and in terms of New Zealand Law the property is definitely not relationship property and it was never acquired for the use of the relationship and does not meet the definition of relationship property”. The definition of “relationship property” is not set out and what it meant by that term is not explained.
Curiously, the letter from OO Law Firm says that “After receiving some legal advice the property was transferred to the [Chapman] Trust which was set up to protect the interest of [Mr Chapman’s] mother [Ms Barrie]. The Memorandum of Wishes attached confirms this.”
Attached to the letter is a document entitled “Memorandum of Guidance for Trustees [Chapman] Family Trust”. The nature of that document is not explained. What effect, if any, it might have, legally or otherwise, upon the exercise of the discretions vested in the trustees of the trust is not explained.
The memorandum is said to be “from” the applicant, not the second respondent. It records that:
1. This memorandum sets out my wishes concerning the [CHAPMAN] FAMILY TRUST (“Trust”) which I request you to take into account in the administration and management of the Trust.
2. I have set up the Trust for the general purpose of ensuring that my family’s wealth is owned through one coherent ownership vehicle and to ensure that members of my family are able to benefit from the capital and income of the Trust from time to time. To this end, my will provides that upon my death my residuary estate shall pass to the Trust.
These paragraphs are inconsistent with the statement that the trust was set up to protect the interests of the second respondent. Despite the assertions of the applicant, all the memorandum does is to express a desire on the applicant’s part that upon his demise, the reasonable needs and requirements of the second respondent are met from the trust and if she predeceases him, then the reasonable needs and requirements of his aunt, Ms U.
The letter from OO Law Firm is of no value. The contribution of the Town FF property was a contribution of property to the trust by the second respondent.
The first respondent contended that I should attribute a 1/6th interest in this property to the applicant. The basis for this argument was unclear given the first respondent’s submissions that the trust is an alter-ego of the applicant and that the trust held a 1/3rd share.
However, consistently with the applicant’s concession about his interest in the Suburb DD property, it seems to me that his interest in the Town FF property (via the trust) is a 1/6th interest rather than a zero interest. I so find.
JJ Pty Ltd
The second respondent swears she and her husband established the company in 1992. Indeed, an ASIC company extract in evidence demonstrates that it was incorporated in Australia in 1992.
She swears that the applicant “commenced using [J Pty Ltd] when he moved to Australia in 2019 for receiving income.” What that means is not clear. The applicant gives no evidence about it.
The second respondent swears that “There was a loan from me to the company of $l50,336” and it had carried forward tax losses. She says that between 2019 and 2022 the company ownership “remained in my name whilst the loan from me to the company was repaid.” She says that the loan was repaid from revenue generated for the applicant’s commissions although she contends that those funds were used by the applicant and the first respondent for living expenses. That is to say, she contends that the applicant repaid the company’s loans from his commission but she then gave the repaid funds to the applicant and the first respondent to live on. There are documents annexed to the second respondent’s affidavit said to evidence this, but they are far from self-explanatory and do not, on their face, provide support for the second respondent’s assertions.
She swears that “[Mr Chapman] utilized the carried forward tax loss against his income”, although how that was achieved is not explained.
The applicant became a director of the company in early 2021. An ASIC company extract printed on 4 July 2021 shows that the second respondent is the sole shareholder, holding the two issued shares in the company.
The applicant swears that in April 2022 he purchased JJ Pty Ltd from the second respondent for an initially agreed price of $250,000. He swears that they entered into a loan agreement on 27 April 2022 reflecting that amount. This agreement is not in the evidence. He swears that subsequently “we both realised that the company was worth less than we had agreed” and he and the second respondent consequently agreed to reduce the purchase price “to some $135,000, with the full purchase funded with a loan from my mother to myself”. However, none of this appears in the second respondent’s evidence. The only agreement referred to in her evidence is the agreement for $135,000 and that agreement was documented in a sale agreement dated 29 April 2022. The second respondent exhibits what she says is the loan agreement between she and the applicant. The agreement is dated 29 April 2022 but contrary to her evidence that it was signed on 1 June 2022 (so after the loan was made on 29 April 2022), it appears to have been back-dated to 29 April 2022. The agreement provides that repayment is due on 20 July 2032.
The parties disagree about the valuation of this company. The company carries on a business through the applicant, or perhaps alternatively, the applicant carries on business through the company. The purpose of the business is to facilitate the applicant generating income through a contractor arrangement with a company called PP Pty Ltd, to build up a short term and long‑term rental property portfolio and to trade and invest in shares and derivatives.
The first respondent relied on a report of Mr V. It purports to value the company at $690,000. The applicant was given leave to rely on an adversarial report of Mr AA. At this point it is necessary to point out that neither party made any effort to prove many of the factual matters relied upon by both experts. Most significantly is the proposition that the income of the company is generated by reason of a contract with PP Pty Ltd. Apart from being attached to the report of Mr AA, it is not otherwise proved in the evidence by the applicant.
Notwithstanding this, no objection was taken to either report and the parties seemed to be content to conduct the case on the basis that the factual underpinnings of the experts’ reports were more or less true. I am not so content.
Mr V was not able to be cross-examined. His report valued the business undertaken by the company, not the shares in the company, which is the asset owned by the applicant. In this respect the opinion of Mr V is of little assistance.
Mr AA valued the company (rather than its business) at $500,019.00. He noted that the applicant owed the company $296,278.58 and so the applicant’s nett interest in the company as a shareholder was $203,740.42. Mr AA was cross-examined.
After pointing out that Mr V had not valued the shares in the company, Mr AA observed that the company derived its income from two sources – the efforts of the applicant pursuant to a contract with PP Pty Ltd and separately, share trading activities. The company had no other customers or clients and it was only the applicant that provided services on behalf of the company. This created substantial risk for the company such that the conclusion that the company had some goodwill or business value was wrong. The company generated no earnings beyond the commercial remuneration payable to the applicant for his personal exertion. After pointing out some other flaws in Mr V’s report, Mr AA identified that the appropriate valuation methodology for the company’s business was an asset value approach. He discounted a market value or business income-based approach because in his view, the business was not saleable and the relationship between the company and the applicant on the one hand and PP Pty Ltd on the other is akin to an employment arrangement. On the underlying net assets valuation approach, Mr AA opined that the applicant’s shares in the company had a value of $500,019.
I accept Mr AA’s opinion over that of Mr V. I accept the criticisms made of Mr V’s approach by Mr AA. Mr V does not seem to have given any consideration to the proposition that given that the applicant is the company’s sole source of income and given that there is only one client, the prospect of the company having any saleable business is implausible.
I find that the value of the applicant’s shares in JJ Pty Ltd is $500,019.
I have dealt with the applicant’s indebtedness to the company later in these reasons.
Motor Vehicle 1 and associated loan
The respondent contends this vehicle has nett equity of $5,000 on the basis of the applicant’s previous loan application in 2019. The applicant contends this was included in the valuation of JJ Pty Ltd. Certainly it is included in his instructions to Mr AA (see page 29 of 66 of Mr AA’s affidavit). It is clear that it was taken up in the valuation of the company when one has regard to the balance sheet used by Mr AA for his valuation (page 26 of his report). To include this item in the above table as the first respondent contends would be to count it twice.
ADDBACKS
There are four items to deal with under this heading.
The first concerns Motor Vehicle 2 that the applicant says was sold for nil value. The respondent points out that the applicant previously ascribed a value of $1,000 to this vehicle. It is unclear why the applicant sold it for nil value when he previously asserted it had a value of $1,000. No adequate explanation was given by the applicant for the disposal of the vehicle for no consideration. This amount should be added back into the property pool as a premature distribution of assets otherwise available for distribution in these proceedings, notwithstanding it nominal sum.
The remaining items are three groups of payments that the first respondent contended should be added back into the pool as premature distributions of the parties’ assets.
The first is a group of transfers from JJ Pty Ltd to QQ Company which the first respondent summarised as totalling $288,000. I accept the applicant’s evidence that QQ Company is an independent brokerage firm used by JJ Pty Ltd for the purposes of its share trading activities. Whilst the first respondent was able to isolate transfers of funds from JJ Pty Ltd’s account to QQ Company, she did not identify transactions the other way. She argued that these one-way transfers were evidence of the applicant dissipating the company’s assets ahead of any property adjustment between she and the applicant.
However, the applicant’s evidence was that whilst there were transfers to QQ Company, there were also transfers from QQ Company back to JJ Pty Ltd. In his affidavit in reply filed on 22 December 2022 the applicant provided JJ Pty Ltd’s activity statements issued by QQ Company. They are long and, on their face at least, complex statements. They were not explained. Nonetheless, I am comfortably satisfied from my perusal of them that they demonstrate transactions between the entities totalling hundreds of thousands of dollars. The first respondent’s solicitor-advocate (and subsequently, counsel) did not seek to take these up with the applicant and have their intricacy unfolded. I accept the applicant’s explanation about these transfers and reject the first respondent’s submissions about them. Consequently, I do not include this sum as an add-back.
The second amount sought to be included as an add-back is the sum of transfers, totalling $287,074, from JJ Pty Ltd to the applicant above his usual salary. The first respondent contends in her affidavit that these transfers were made to an undisclosed account. It was, however, put to the applicant and accepted in cross-examination that these transfers were in fact made to the applicant’s Commonwealth Bank account which had been disclosed in the proceedings. The applicant explained in his evidence that withdrawals above his salary were recorded against his shareholder loan account. This is the shareholder loan account identified by Mr AA in his report and which appears on the balance sheet used by Mr AA for the purposes of his valuation.
The applicant’s evidence about these withdrawals in cross-examination was that he had to withdraw significant amounts from JJ Pty Ltd for legal fees. He thought the sum was “close to $200,000”. In his affidavit of evidence in reply filed on 22 December 2022 he said this about the relevant withdrawals:
87. These withdrawals from [JJ Pty Ltd] are all to my fully disclosed [#...08] account, as opposed to an unidentified account as alleged by the respondent.
Withdrawals over and above my salary from [JJ Pty Ltd] are recorded against my shareholder loan account.
At the end of the financial year a shareholder salary can be paid to offset my debt to the company.
I make the point that shareholder salary is an expense and whilst increasing my personal income (and tax) would significantly decrease the company valuation based on the Capitalisation of Future Maintainable Earnings Method by 2.5 times the value of the expense.
The withdrawals are not savings, but rather applied to legal fees and valuation costs (Estimated at well over $170,000 since June 22) [R Street] Mortgage (over $1,800 per week), payment to [Ms Chapman] ($897 per week including child support), and repayment of loans to [Ms Barrie] ($1,000 per week).
A few observations about this evidence are necessary. Whilst the applicant suggests that amounts taken by him from the company might be regularised in the company accounts by paying him a shareholder’s salary at the end of the relevant financial year, that has not been done in this case. It is clear that he has opted for them to remain as loans, subject to a Div 7A loan agreement with the company. In that respect, I have evidence from Mr Z, accountant for JJ Pty Ltd who gives evidence that there is a written loan agreement made pursuant to Division 7A of the Income Tax Assessment Act 1936 (Cth) between the company and the applicant. The agreement was signed on 9 June 2022. Mr Z says, “I can confirm [Mr Chapman] has a Division 7A loan for amounts owing to [JJ Pty Ltd] of $296,278.58 as of the 31 December 2022”.
The applicant argues that if the advances are treated as a shareholder salary that will find reflection in the company’s accounts as an expense and would reduce the value of the company derived by capitalising its nett maintainable earnings. This evidence was given before Mr AA produced his report and the applicant obtained leave to rely upon it. Given the applicant’s reliance upon Mr AA’s evidence and my acceptance of it, this point takes the applicant nowhere.
However, Mr AA’s value for the company includes the shareholder’s loan owed to it by the applicant (see schedule 5.3). Had the relevant funds not been withdrawn by the applicant from the company’s account, the nett value of the applicant’s interest in the company’s value would have been the same as the value determined by Mr AA for the company, which would have remained the same assuming, of course, that the funds taken by the applicant as shareholder’s or director’s loans would have remained in the company’s cash account. There is no evidence that the assumption would not hold true.
The funds paid by the applicant for legal fees should be added back: Trevi v Trevi (2018) FLC 93-858. If they had not been paid away by the applicant, they would have been available for distribution between the parties, either as cash in the applicant’s hands or as part of the value of the applicant’s nett interest in JJ Pty Ltd. Doing the best that I can, I fix that amount at $190,000, which is “close to $200,000” and “well over $170,000”.
The funds expended on mortgage repayments for R Street and the weekly payments to the first respondent are reasonable expenditure on the part of the applicant. Those payments are sufficient to account for the balance between the amount owed to the company ($296,278.58) and the legal costs ($190,000).
I have included the applicant’s loan to JJ Pty Ltd in the table above. I have also included $190,000 as an “add-back”.
The third group of payments is a series of transfers from JJ Pty Ltd to the second respondent. A table of these transfers was produced in the first respondent’s affidavit totalling some $201,770. The applicant, in his affidavit, contended that this table was incorrect and that the most significant transaction (of $100,000) was entered wrongly. I accept his evidence about that.
The second respondent gave evidence that the funds taken by her from the company were taken in repayment of a loan from her to the company that existed when the applicant commenced using JJ Pty Ltd for his own purposes. She annexed to her affidavit of evidence-in-chief what appears to be financial records kept by the company demonstrating payments by the company to her (or perhaps more accurately withdrawal of company finds by her from the company’s account). Her withdrawals exceed the opening balance of the loan by $13,775.81. That sum (rounded to $13,776) appears as a loan due from the second respondent to the company in the balance sheet used by Mr AA for the purposes of his valuation. None of this was challenged by the first respondent except in the most general way. The second respondent was not challenged on her evidence about these transactions or the existence of the loan in the books of the company. There is no basis for including these monies as an add-back to the property available for distribution between the parties.
DISPUTED LOANS
The applicant argued that several loans allegedly advanced by the second respondent to him should be brought to bear on the balance sheet. Each of these loans purported to be the subject of a written “loan agreement”. There are four loans at issue, described in the evidence as:
(a)the Motor Vehicle 3 loan;
(b)purchase of JJ Pty Ltd loan;
(c)GG Property loan; and
(d)R Street loan.
In each case, the written loan agreement post-dates the relevant advance, in one case by years and in other cases by months or weeks. The loan agreement purporting to establish a loan in respect of the money paid by the second respondent in respect of the applicant’s Motor Vehicle 3 purports to have been made on 1 May 2019 and signed on that day. However, both the applicant and the second respondent accepted that it was not drawn and executed until 2022 (see for the second respondent – p.62 of Transcript 11 January 2024). The applicant’s cross-examination is not so clear but see (pp.19-20 of Transcript 11 January 2024). I have set out the details of the alleged loan in respect of the GG Property expenses and its associated loan agreement above. The loan agreement that purports to record a loan by the second respondent to the applicant for the purchase price of the shares in JJ Pty Ltd bears the date 29 April 2022 but was executed according to the second respondent’s testimony, on 1 June 2022. Similarly, the loan agreement that purports to be in respect of a loan used by the applicant to fund a deposit on a parcel of real property at R Street, Suburb C bears the date 9 April 2022 but was not signed by either party until 16 May 2022.
The second respondent accepted in cross-examination (eventually) that the four loan agreements between she and the applicant were executed so as to protect her assets in these proceedings. That is to say, they were brought into existence so as to evidence the alleged loans.
The written agreements are all in the same form and aside from some minor variations, are to the same effect. They all have the same number of clauses. Save for the document relating to R Street, they all provide for repayment of the loan by a date in either June or July 2032.
To the extent that each of the four loan agreements purport to be binding contracts between the applicant and the second respondent they fail because they are unsupported by consideration (past consideration is no consideration) and they do not purport to be executed as deeds.
What is left therefore is to determine whether there were any advances by the second respondent to the applicant and the nature of any advances so found. I have already dealt with the claims relating to GG Property above.
The first respondent accepts that the second respondent made a payment to help payout the remaining debt of Motor Vehicle 3 held by the applicant in 2019. The amount paid was just over $80,000. She contends however, that the applicant has since sold the car for over NZ$70,000 (as he confirms in his evidence) “and he has since made sufficient repayment to his mother to cover this debt”. The first respondent contends that of the myriad of payments from JJ Pty Ltd to the second respondent reflected in the company’s bank accounts some must have gone to this loan. However, I am not so satisfied and I find that it is probably the case this loan has not been repaid. The payments specifically identified by the first respondent as going from JJ Pty Ltd to the second respondent I have dealt with above. No other payments, unexplained or otherwise, were identified.
I am not persuaded that the applicant owes the second respondent $135,000 for the purchase of the shares in JJ Pty Ltd. According to the evidence of the second respondent the applicant was using the company as his own from about 2019. The applicant became a director of the company in early 2021. He does not claim to have purchased the shares until April 2022. Whilst there is a written loan agreement between the applicant and the second respondent in respect of what they contended is the purchase price for the shares, the agreement is not effective at law. There is no evidence that its terms reflect the terms that were orally agreed between the applicant and the second respondent and there is no probative evidence (as distinct from assertions of conclusion) from either of them from which I could determine that there was in fact a loan, or the terms of it.
To a large extent, the same observations can be made about the evidence of the applicant and the second respondent in respect of the payment the second respondent is alleged to have made by way of deposit for the property at R Street. Neither party gives any probative evidence of the discussions had between them or the oral conversations had between the lead to the making of the agreement for the loan. The written agreement is ineffective. It purports to be more than a record of the earlier oral agreement, but rather the loan agreement itself. It is not supported by consideration and was not executed as a deed.
The second respondent points to four payments she alleges she made to JJ Pty Ltd which when aggregated account for $388,000 of the $396,000 deposit required by the applicant when he purchased R Street. She argues that she had the necessary funds available for the loan as a result of the sale of real property by her in Town HH, Queensland in early 2022. However, there is no evidence incorporates her claim that she had this money available to her. In her submissions she says that the funds were transferred from “[RR Company] to [Barrie Trust] to [Ms Barrie] and then to [Mr Chapman] through [JJ Pty Ltd]”. However there is no evidence that corroborates these claims.
The second respondent further says in submissions that the transactions are “well documented and can be evidenced through [JJ Pty Ltd’s] bank statements coming from my personal account”. She refers to annexure MB-11 to her affidavit of evidence-in-chief. However, those bank statements do not bear out her claims. Whilst there are four deposits as claimed by her referenced in those bank statements, only two (one made on 7 April 2022 and the other on 13 May 2022 for a combined total of $108,000) are referenced to “[MB]” or “[Ms Barrie]”. The other two transactions identified by her in those bank statements (accounting for $280,000) are not able to be identified as deposits from the second respondent or one of her interests. She does not put in evidence any of her own bank statements or any statements of the entities referred to in her submissions demonstrating the payment out of those accounts of the funds she alleges she loaned to the applicant.
Whilst there is no doubt that the applicant purchased the property at R Street in early 2022, I am not at all persuaded on the balance of probabilities that the second respondent loaned to him the sum of $396,000 for the deposit to purchase that property.
Leaving aside the Motor Vehicle 3 loan, I am not satisfied on the balance of probabilities that the second respondent has made any of the advances to the applicant as alleged by them. Neither the applicant nor the second respondent give any probative evidence about these advances. The evidence they do give consists of unparticularised assertion. That, coupled with the evidence that the applicant and second respondent put money into and took money out of JJ Pty Ltd essentially at will, and the loan agreements brought into existence for the purpose of creating evidence to support the applicant’s case leads me to have grave doubts about the veracity of the evidence from the applicant and the second respondent about these “loans”.
Even if I am wrong about that and the three purported loans should be treated as such I would not include them or the Motor Vehicle 3 loan as a liability of the applicant to the second respondent in these proceedings. There are two reasons.
First, I cannot be satisfied that they have not been repaid in part or in full. In her written submissions delivered at the conclusion of the trial (Exhibit 6), the second respondent submitted in respect of the loan for the deposit of R Street, the loan for the purchase of JJ Pty Ltd and the Motor Vehicle 3 loan that the applicant had been making regular repayments on a monthly basis. These repayments are not sworn to and there is no accounting for them in any of the material. That the second respondent submitted that there have been repayments tends to show that even if loans were made as the applicant and the second respondent allege, the outstanding balances of the loans cannot be as they now claim.
Consistently with the submissions of the second respondent that there have been some repayments of these loans is Exhibit 4. That is a list of transactions said to represent payments from the applicant to the second respondent between 16 February 2017 and 17 November 2022, the payments totalling $742,857. In cross examination the applicant accepted that most of the payments set out in the table were made by him to the second respondent although there was a group of payments between 25 November 2019 and 13 August 2020 that he said were made by JJ Pty Ltd to the second respondent that were not payments by him and there were a group of transactions between 23 November 2021 and 19 April 2022 that were not correct. But he otherwise accepted the accuracy of the schedule which demonstrates payments of a little less than $200,000 from him to his mother and in respect of which there is simply no explanation.
The onus of proof is on the applicant to demonstrate not just that these alleged liabilities exist, but the level of the indebtedness. He has not discharged the onus upon him to demonstrate those matters on the balance of probabilities.
Second, even if the alleged loans exist, I am not satisfied that they are ever likely to be repaid. I reach that conclusion because:
(a)there was no attempt to enter into binding loan agreements before the loans were apparently advanced from the second respondent to the applicant;
(b)save for the agreement in relation to the R Street deposit, which has no repayment date (notwithstanding it is the largest of the alleged loans), inconsistently with the written submissions of the second respondent that the applicant has been making repayment of these loans, the agreements provide for no repayments of principal until 2032;
(c)although the funds for Motor Vehicle 3 and the GG Property were allegedly advanced some time ago now, and despite provisions in the document relating to the Motor Vehicle 3 loan for the payment of interest on a monthly basis, there is no evidence of such interest payments having been made. The highest the evidence gets is that the applicant may have paid the second respondent some payments of $4,000 per month between June 2022 and December 2022.
Even if there are loans between the applicant and the second respondent as alleged by them, I find that it is highly unlikely that the applicant will ever be called upon to repay those loans to the second respondent.
CONSIDERATION
The applicant was born in New Zealand, moved to Australia in 1984 and returned to New Zealand in 2001. In the circumstances I have described below, he returned to Australia in 2019 and has resided here ever since. He is a finance professional by occupation and has worked in the financial services industry in both New Zealand and Australia.
The first respondent was born in Country SS and moved to New Zealand in about 2007. She too has resided in Australia since 2019. She holds a tertiary qualification conferred in 1994, although she says that her qualifications are not recognised in Australia and further study is required to meet Australian standards.
The parties commenced their relationship in 2009 in New Zealand. They commenced cohabitation in 2010, were married in 2011, and separated on a final basis on 30 April 2021. Their relationship spanned some 12 years. They have two children together, aged 8 and 7.
At the commencement of the relationship, the first respondent had no assets of any significance.
Prior to the parties’ relationship the applicant had a company called TT Ltd. After a change of name consequent upon an arrangement with an Australian business, the company was known as UU Ltd. The applicant was a director and owned 30% of the company, he says comprised of 1% ownership by him personally and 29% owned by the Chapman Family Trust.
In late 2018 voluntary administrators were appointed to UU Ltd. The company was subsequently wound up. Whilst the applicant swears that “A total of $398,000 continues to be owed by me” he does not say how that debt has arisen. He does not seek to include it in the balance sheet in these proceedings.
The applicant’s evidence is that at the commencement of the relationship he had:
(a)the residential unit at CC Street, Suburb DD, New Zealand owned by N Pty Ltd, but to which he says he contributed NZD$59,250 and the second respondent NZD$15,750;
(b)a residential unit in Suburb KK, New Zealand, also owned by N Pty Ltd and to which he says he contributed NZD$43,000. He contends that NZD$21,500 of that was a loan to his mother to enable them to own 50% each (notwithstanding that it was owned by the company);
(c)a residential unit in Town HH, Queensland (described in the evidence as the GG Property) registered in joint names with the second respondent and to which he says he had contributed AUD$30,000;
(d)savings of NZD$100,000;
(e)a motor vehicle, since sold; and
(f)superannuation (in New Zealand).
The applicant had a HECS debt, he says of about $25,000.
In her evidence-in-chief, the first respondent agreed with the applicant’s suggestion that the Suburb DD unit had nett equity of approximately $35,000 of which the applicant and second respondent each owned 50%. The first respondent’s contribution was therefore $17,500.
The applicant estimated in his evidence-in-chief that the Suburb KK unit had nett equity of approximately $168,000 at the commencement of cohabitation. He provides a balance sheet from the third respondent purportedly as at 31 May 2012 to support his contention. However, I have two issues with this document. First, it does not provide evidence of value. At the very best, it is an estimation of value by the third respondent company (and thereby indirectly from the applicant or the company’s accountant) for the purposes of a balance sheet. It is in that sense no better than the applicant’s assertion of value. Second, the date of the balance sheet is some two years after the commencement of the relationship. No evidence was led about the change in value of the property between 2010 and 2012 or how much the various loans secured by the property were paid down in that period. The document therefore does satisfy me that the unit had the value ascribed to it by the applicant as at the commencement of the relationship.
The first respondent, in her evidence-in-chief, ascribed no value to the Suburb KK unit. The basis for her belief that there was no value in the unit is unclear. She was not cross-examined about it.
It was also unclear from the applicant’s evidence-in-chief what value he ascribed to the Town HH property as at the commencement of cohabitation, beyond the fact that he contributed $30,000 to its purchase price. The respondent ascribed minimal value to this property as at the date of cohabitation.
The applicant attests to having $100,000 in savings as at the commencement of the relationship. He was unable to provide any supporting documentation. The first respondent disagrees that the applicant had significant savings when they began their relationship. In the absence of any corroborative evidence about these savings, I am not satisfied on the balance of probabilities that the applicant had them.
Counsel for the first respondent submitted that it was difficult to quantify the applicant’s initial contributions, suggesting they might be around $300,000. Notwithstanding that I cannot make definitive findings about the value of the applicant’s property as at the commencement of the relationship. I am satisfied and I find that the applicant made greater initial contributions of property to the parties’ relationship than the first respondent. I accept the first respondent’s submission that the value of those contributions was likely around $300,000 or almost one third of the nett value of the parties’ property as at the date of the hearing before me.
Significantly, the interests in GG Property and the Suburb DD property are still held by the applicant.
It is agreed that during the relationship the applicant was the primary income earner. He worked as a finance professional.
The first respondent was also in paid employment for the majority of the relationship in various fields. She owned and ran a retail business and then a service business. They were both sold and wound up. The first respondent was also employed at the financial services business which the applicant directed, until her employment was terminated in 2018.
It was the applicant’s case that he used his income to meet all of the loan repayments in respect of the real property brought to the relationship by him and in respect of the Town P property bought by the parties at some point, which remarkably, is not revealed by the evidence. Whilst I expect that it was probably so, that does not mean that the first respondent made no contributions to the acquisition or conservation of that property.
The first respondent’s evidence was that she was the primary caregiver for the parties’ children and chief homemaker during the relationship. She deposes to undertaking all of the cooking, cleaning, washing, ironing and shopping as the applicant was rarely home to do those tasks. On the first respondent’s evidence, which I accept, this continued after the birth of their second child. She was involved in taking the children to medical appointments or other commitments.
The applicant acknowledges that the first respondent was primarily responsible for cooking, cleaning and laundry for the household. But he advances three other contentions. The first is that he also contributed to housework including making beds, laundry, cleaning and outdoor maintenance, as well as taking the children to childcare and school. His use of the words “contributed to” implies that the applicant was not the sole performer of these tasks, but rather the first respondent was primarily responsible for them and he helped out from time to time. He does not attempt to quantify his assistance. While I find that the applicant did contribute in the ways that he claims, I am satisfied that his non-financial contributions were significantly less than those of the first respondent.
The applicant’s second contention is that the first respondent has overstated her non-financial contributions because the children were in childcare from a young age. I accept that the parties’ children were in childcare given that, for a majority of the time the parties were together, both were employed full-time. Whilst it is unclear from the evidence that the children were still attending childcare after relocation to Australia, I am satisfied that whatever the case, the first respondent’s evidence about her parent and homemaker contributions during that period ought to be accepted. I found her evidence about these matters compelling.
The applicant’s third contention is that the first respondent has overvalued her non-financial contributions because the homemaking was “done poorly”. I reject this argument. Parties who live together frequently come to understandings about home duties that suit them best. The homemaking performed by the first respondent must have been tolerable to the applicant given they remained in a relationship for some 11 years. In any event, I do not accept the applicant’s argument that the first respondent’s contributions were so poor as to attract little weight in the assessment of the parties’ respective contributions.
In cross-examination the applicant said that the homemaking and childcare duties were shared equally between the parties, but I reject that evidence. The applicant subsequently conceded that for at least part of the time that the parties were together he worked in an office in City EE on a daily basis for at least three years and so would not have been available to the children as much as he had initially contended.
Until 2019 the parties resided in New Zealand. However, in early 2019, almost 9 years into the parties’ relationship, the applicant’s stepfather fell ill. He and the second respondent lived in Town S, Australia. The parties decided to move to Town S in order to assist the second respondent to care for the applicant’s stepfather.
The applicant moved to Town S in mid-2019 with the children. The first respondent, I am satisfied, remained in New Zealand to prepare their apartment there for sale and to arrange storage of their belongings. She continued to work full time but left this employment, by which she earned NZD$62,000 per annum, when she came to Australia in late 2019. The applicant cared for the children in this two-to-three-month period in Town S.
After the first respondent moved to Town S, she returned to a full-time home maker role caring for the children, as well as helping the second respondent with the care of the applicant’s stepfather who was suffering from a health condition. She attests to doing most of the cooking and cleaning of the residence. I accept her evidence about these matters.
From December 2019 until January 2020, the first respondent worked some casual shifts at a hospitality business. The first respondent claims to have been unable to find employment in Australia on any other occasion.
In early 2020 the applicant’s stepfather was placed into residential care. The parties remained living with the second respondent until two months later when they moved to City F and lived in rented accommodation. The applicant had secured full-time employment there. The first respondent continued her full-time care of the children until the parties separated on 30 April 2021.
Upon separation, the parties’ children remained living with the first respondent in the City F rental accommodation. She had no income and was not eligible for any social security benefits in Australia. She had very little in her bank accounts. The applicant permitted her, I find, to withdraw $14,188 for their joint bank account. He paid the rent on the accommodation occupied by the first respondent and the children, although only up to 30 June 2021.
I accept the first respondent’s evidence that the applicant told her that after 30 June 2021 she would be on her own and he would take the children from her. Faced with the prospect of no financial support, or the prospect of social security benefits she determined to return to New Zealand with the children and did so.
In early 2022 the first respondent returned to Australia with the children after a New Zealand court made orders for her to return their residence to Australia. Upon her return, the first respondent and the children lived in rental accommodation in City F. She received $650.00 per week from the applicant, $171 (as at 20 December 2022) per week in child support and she received a weekly $745 payment from the New Zealand government described as an “International Custody Payment”. I accept the first respondent’s evidence that this payment will cease when this hearing concludes.
Until orders were made in this court on 30 November 2022, the children were living primarily with the first respondent. Since then, they have lived in an equal time arrangement with each of their parents.
In mid-2022 the applicant contracted to purchase R Street, Suburb C for a purchase price of over $1,500,000. The deposit and stamp duty were $398,000. He says that was paid by the second respondent. I have dealt with the contention that he borrowed that sum from the second respondent earlier in these reasons. The balance purchase price of approximately $1,200,000 was borrowed from a commercial lender and secured by mortgage over the property.
Since separation the applicant has continued to pay down the mortgages on his various properties and the jointly owned property in New Zealand. What has occurred since separation is largely a continuation of the arrangements prior to separation, save that the parties live in separate households.
Whilst it is agreed that the applicant was the primary income earner in the relationship, I find that the first respondent also made financial contributions that were significant. Her wages earned while the parties lived in New Zealand ranged from approximately one eighth to one quarter that of the applicant.
The applicant suggested in his case outline filed 23 December 2022, that I should come to an overall assessment of contributions of 62.5% in his favour. In a later case outline filed 27 December 2023, and at the trial the applicant submitted that contributions should be assessed at 75% in his favour. How the applicant came to such different figures a year apart when the evidence on contributions remained the same was not explained by him and remains a mystery.
Whilst I acknowledge the initial contributions and financial contributions throughout the relationship made by the applicant, his position clearly does not reflect the evidence of significant financial contributions and greater non-financial contributions by the first respondent.
The first respondent submitted in her case outline filed on 24 December 2022 that contributions should be viewed as equal. In another case outline filed 8 January 2024, the first respondent submitted contributions should be assessed at 70% in her favour. How she too, arrived at such a different figure on the same evidence is unexplained. At the trial, counsel for the first respondent submitted that contributions should be assessed at 55% in the applicant’s favour.
I find that as at the date of the trial the parties’ contributions to the acquisition, conservation and improvement of their property, and their contributions to the welfare of their family should be assessed at 57%/43% in the applicant’s favour. The applicant made some significant, but difficult to quantify, initial contributions. Both parties contributed significantly during the marriage, which contributions were largely mirrored post-separation. Some of the assets possessed by the applicant remain in the parties’ control. That is significant and should not be undervalued.
On the nett assets as found by me, that means that the applicant is entitled to $715,997.19 and the respondent is entitled to $540,138.23.
Neither party suggested that the matters raised for consideration by ss 79(4)(d), 79(4)(f) and 79(4)(g) were relevant to a determination of this case.
The applicant is 46 years of age. There is no evidence before me that he is in anything other than good health.
The respondent is 49 years of age. There is no evidence before me that she is in anything other than good health.
The applicant continues to work in the financial services industry. He describes himself as “head of [a department]” in his most recently filed financial statement. In his evidence in chief, he described himself as a finance professional and paradoxically was “employed as a contractor at [an education company]”.
He provides his services through JJ Pty Ltd and as Mr AA’s evidence makes clear, his relationship with PP Pty Ltd is really akin to an employment relationship. In his financial statement filed on 12 December, 2023 he said that his average weekly income was $7,579 per week consisting of wages, rental income from R Street, rental income from GG Property and the Suburb DD property. He also received income from JJ Pty Ltd and income from three other companies.
I was not assisted by counsel for the first respondent in submissions as to how I should find the applicant’s income and expenditure. There was a broad suggestion that his income was at least $200,000 to $300,000 per annum. Earlier in submissions it was suggested that I should find the applicant’s income at $47,000 per month, or $564,000 per annum on the basis of a draft loan application upon which he was cross-examined. The applicant explained away the application by saying that it was only completed in draft and he never submitted it to the financier. But the form of the document appears to be more than simply a draft. The applicant’s evidence was that the $47,000 per month disclosed in that document was commission and he currently received $7,579 per week, or $394,108 per annum. I accept this as an accurate picture of the applicant’s income at the time of the trial.
I am satisfied on the basis of the applicant’s own evidence that he has an annual gross income earning capacity of at least $390,000, although it may be higher. Figuring out his net income, is an exercise in futility given the state of the evidence and more importantly, the complexity of the applicant’s financial arrangements within JJ Pty Ltd.
On any view of the evidence, the first respondent’s income earning capacity does not approach that of the applicant’s. According to her most recent evidence, she is studying and intends to take-up employment as an educator although she is not yet in a position to do that. That study should take her about one year. Alternatively, she may seek to enrol to study another degree. In early 2021, she completed the requirements to hold a professional licence in another industry although she has not secured any employment as such.
The applicant submitted that an adjustment to the first respondent for s 75(2) factors was warranted in the order of 25%. Counsel for the first respondent confusingly submitted that there should be an adjustment of 60% to the first respondent, which on her figures for contributions would mean she was entitled to 105% of the property pool. I take what counsel for the first respondent to have meant by this submission was that the first respondent should receive 60% of the total pool, thus an adjustment of 15% in her favour on the basis of how she submitted I should find contributions.
Notwithstanding that the applicant conceded an adjustment of 25% would be appropriate (calculated on the much smaller nett value of the parties’ property than determined by me), the adjustment of 15% sought by the first respondent is appropriate. Such an adjustment accords with my own view of the evidence, having particular regard to the far superior income of the applicant and the access to the financial resources and income structuring possibilities he has through JJ Pty Ltd and the Chapman Family Trust. Whilst the applicant’s expenses are only slightly greater than his income (and taking into account those features of his expenditure I discuss further in these reasons with respect to spousal maintenance), the first respondent’s expenses are more than double her income. A 15% adjustment is appropriate in this case.
In addition to the above matters, in reaching this conclusion, I have taken into account the applicant’s closing submissions where he said (p.34 of Transcript 12 January 2024):
[MR CHAPMAN]: The orders I have put forward based on my case outline provide significantly more than the equity I’ve calculated that’s available in the asset pool. They provide cashflow in the short term of $1000 per week for 12 weeks. This will enable [Ms Chapman] to cover her accommodation expenses.
HIS HONOUR: Sorry, the $1000 per week: do you say that that should be paid as property settlement or spousal maintenance?
[MR CHAPMAN]: Spousal maintenance.
Further, the applicant confirmed in his submissions that he would payout the remaining debt secured over the Town P property. How he would achieve that was not stated.
These submissions, and the orders proposed by the applicant demonstrate, I find, a significant ability on the part of the applicant to access financial resources that have not otherwise been identified by him. If that were not the case, one wonders how it is that he could propose orders that “provide significantly more than the equity I’ve calculated that’s available in the asset pool.”
Thus, the first respondent will be entitled to 58% of the property of the parties’ property or $728,558.54 and the applicant 42% or $527,576.88.
ORDERS – PROPERTY ADJUSTMENT
Both parties agreed the first respondent should retain the Town P property unencumbered and that the applicant should pay out the mortgage. Taking into account the first respondent’s other assets, liabilities and superannuation, and giving her the small amount in the parties’ joint bank account, she is still entitled to $496,262.54. There is practical difficulty with the transfer of any superannuation interests by the fact that they are non-Australian superannuation interests and with the transfer of the Suburb DD property and the Town FF property (given it is held as tenants in common with third parties).
Both parties agreed the applicant should retain his interest in JJ Pty Ltd, and the Town HH property. What remains is the equity in the Suburb C property, which without taking into account sale costs is $308,879. The applicant should be given the opportunity to pay out the first respondent’s entitlement. If he cannot do so, the Suburb C property will be sold, the proceeds distributed to the first respondent, and any entitlement still owing to the first respondent (taking into account sale costs reducing the pool of property available for distribution between the parties) will be payable by the applicant within 90 days. There may be a balance that remains to be paid to the first respondent, but that will have to remain a question of enforcement to be answered another day.
In her proposed draft orders, the first respondent sought to discharge certain orders made by the court concerning the payment of the fees of the experts engaged during the course of this litigation. No submissions were made to advance those orders and I can discern no basis for interfering with them. I decline to make them.
I am satisfied that orders reflecting the above matters are just and equitable.
SPOUSAL MAINTENANCE
In the orders she proposed, the first respondent seeks a periodic spousal maintenance order of $750 per week or an order for lump sum spousal maintenance in the sum of $39,000 ($750 per week for 12 months).
The threshold test for spousal maintenance orders is set out in s 72 of the Family Law Act 1975 (Cth):
(1)A party to a marriage is liable to maintain the other party, to the extent that the first-mentioned party is reasonably able to do so, if, and only if, that party is unable to support herself or himself adequately whether…
The test therefore has two components: the applicant for spousal maintenance is unable to support themselves adequately, and the respondent for spousal maintenance has a capacity to pay spousal maintenance.
The first respondent’s financial statement filed 19 December 2023 discloses a weekly income of $836 and weekly expenditure of $1,882. Her income was comprised of child support of $186 per week and “Commodation (sic) promise by [Mr Chapman] for return back to Australia [in] April from NZ from Family court of NZ” of $650 per week. Cross-examination revealed that her child support payments had been increased to approximately $400 per week since February 2023.
The applicant’s financial statement filed 12 December 2023 disclosed payments of $600 per week and $408 per week to the first respondent for “interim order” and child support respectively, but his affidavit acknowledges an interim order requiring him to pay $650 per week as spousal maintenance. In December 2022 he sought for this order to continue for a period of 12 months, but by December, 2023 when a second case outline was filed, he said he only had capacity to pay $200 per week.
The first respondent establishes a need for spousal maintenance. Her income, excluding the interim maintenance she currently receives, is $408 per week. Her expenses as per her financial statement are $1,882 per week. There was a suggestion in cross-examination that she could relocate to somewhere less expensive. The less expensive rental property suggested by the applicant was for $650 per week, $190 less than what she discloses as her rental payments in her financial statement. Taking that at its highest, her expenditure would be $1,692 per week, establishing a need of $1,284 per week. She was not challenged on the balance of these expenses and I find them reasonable.
I have set out earlier in these reasons, my findings about the applicant’s income.
Counsel for the first respondent did not cross-examine the applicant on his expenses, apart from obtaining the concession that they are by and large paid through JJ Pty Ltd. However, no submissions were made on how that should affect the quantum of his expenses given his income was also, in part, derived through JJ Pty Ltd. The applicant’s expenses were $8,176 per week as per his financial statement. Those included two figures which can be taken off, the first being $600 per week he pays in interim spousal maintenance, and the second being $1,000 per week he repays to the second respondent for “Personal loans” given that I have not found the existence of any contractual agreement between the applicant and second respondent. That leaves his expenditure at $6,576 per week, giving a surplus of $1,003 per week. The applicant therefore has capacity to pay spousal maintenance to the first respondent in the amount sought by her counsel at trial, being $750 per week for 12 months.
The applicant’s submissions, extracted above, confirm his ability to pay a periodic payment of at least $1,000 per week for three months. Were it the case that his financial statement was an accurate reflection of his income and expenses, he would not be able to give such an assurance.
I find that an order for periodic spousal maintenance of $750 per week for 12 months is appropriate given, the first respondent’s demonstrated need, the income disparity between the parties and the first respondent’s current studies in order to obtain gainful employment.
DISPOSITION
The orders will be as set out at the commencement of these reasons.
I certify that the preceding one hundred and eighty-five (185) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Jarrett. Associate:
Dated: 16 August 2024
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