Cheung and Cheung and Ors

[2008] FamCA 1050

FAMILY COURT OF AUSTRALIA

CHEUNG & CHEUNG AND ORS [2008] FamCA 1050

FAMILY LAW – PROPERTY – Parties husband, wife and husband’s parents – Married in Taiwan – Property in Taiwan – Moved to Australia – Property in Australia – Issues of legal and beneficial interests in property –Is it parents’ property or husband and wife’s property – Analyses of evidence – Inherent probabilities – Findings against husband and his parents – All property, property of parties – Inadequacy of evidence on property pool – Uncertainty about tax payable – Part VIII assessments – Intended orders

APPLICANT: Ms Cheung

FIRST RESPONDENT: Mr Cheung

SECOND RESPONDENT: C Cheung

THIRD RESPONDENT: Y Cheung

CASE GUARDIAN: Mr Ming

FILE NUMBER: BRF 1286 of 2006

DATE DELIVERED: 27 November 2008

PLACE DELIVERED: Brisbane

PLACE HEARD: Brisbane

JUDGMENT OF: Jordan J

HEARING DATE: 14 July - 1 August 2008 and 21 – 23 October 2008

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Lethbridge SC with Mr Beacham of Counsel

SOLICITOR FOR THE APPLICANT: Jones Mitchell Lawyers

COUNSEL FOR THE FIRST RESPONDENT: Mr Kirk SC

SOLICITOR FOR THE FIRST RESPONDENT: Charles Cooper Lawyers

COUNSEL FOR THE SECOND & THIRD RESPONDENTS: Mr Kent SC

SOLICITOR FOR THE SECOND & THIRD RESPONDENTS: Hopgood Ganim Lawyers

ORDERS

IT IS THIS DAY ORDERED THAT

1. The Application for Final Orders be adjourned to a date to be advised.

IT IS NOTED that publication of this judgment under the pseudonym Cheung & Cheung is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)

I N D E X

THE CONUNDRUM	1
THE PROCEEDINGS	2
BACKGROUND	3
PROPERTY POOL IDENTIFICATIION	10
THE EVIDENCE	10
THE EVIDENCE OF THE WIFE	13
THE EVIDENCE OF THE HUSBAND	14
THE EVIDENCE OF THE SECOND AND THIRD RESPONDENTS	16
OTHER WITNESSES’ EVIDENCE	16
THE DOCUMENTARY EVIDENCE	18
(a)     Documents Generally	19
(b)     Third Party Documents	21
(c)     Private Documents	23
INHERENT PROBABILITIES	26
THE EVIDENCE AS TO THE PERIOD OF COHABITATION	33
CONCLUSION	35
CONSEQUENTIAL FINDINGS IN RELATION TO THE ASSETS AND LIABILITIES OF THE PARTIES	36
(i)     Trust Property	38
(ii)    TA Business Losses	38
(iii)    Loans from Second and Third Respondents and other Family                   Members – Interests in Property	39
THE IDENTIFICATION AND UTILISATION OF THE PROCEEDS OF SALE OF THE S SITE	40
TAXATION IMPLICATIONS	45
PART VIII CONSIDERATIONS	48
FUTURE CONDUCT OF THE PROCEEDINGS	53

FAMILY COURT OF AUSTRALIA AT BRISBANE

FILE NUMBER: BRF 1286 of 2006

MS CHEUNG

Applicant

And

MR CHEUNG

First Respondent

And

C CHEUNG

Second Respondent

And

Y CHEUNG

Third Respondent

And

MR MING

Case Guardian

REASONS FOR JUDGMENT

THE CONUNDRUM

1. This is a case that has taken years to prepare, has cost literally millions of dollars to finance and has occupied no less than four weeks of hearing, not to mention the dozens of appearances which pre-dated the final hearing.  It is, at one level, full of intrigue and complexity, involving vast sums of money in Australia and offshore.  At another level, it is a rather typical property dispute between a husband and a wife, sullied only by the concurrent claims of extended family members to some of the property in issue and further complicated by revenue considerations and the knowledge that, at the execution stage, there are substantial difficulties arising as a consequence of so much of the property in issue being overseas.

2. The central conundrum presented in this case, involves considering the following alternatives:  Is 86 year old C Cheung (the husband’s father) a retired, former lowly Taiwanese public servant supported by his subservient, penniless wife of more than 60 years and dependent upon the largesse of his adult son, Mr Cheung (the husband)?  Alternatively, is the husband’s father a respected, former highly ranked and well-paid Government official and business entrepreneur who has presided over the investment and distribution of tens of millions of dollars for the benefit of the Cheung family group in general and his son, the husband, in particular?

3. Related to that conundrum, is the supplementary issue of the current financial status of the Cheung family group.  Has it enjoyed great financial success from its investments, particularly those in Australia and, more particularly, from the acquisition and sale of a development site on the Gold Coast producing a capital gain of over twenty million dollars, with the consequence that there is now available to the members of the group and to this Court in the context of property proceedings, vast sums of money, a significant portion of which belongs to the husband and Ms Cheung (the wife)?  Alternatively, has the Australian venture been an abject failure leaving the group badly out of pocket and the husband and his wife facing a mountain of debt?

4. The different propositions and questions are stark.  The answers to those questions may largely determine the proceedings before this Court.

THE PROCEEDINGS

1. The proceedings involve four parties, including the husband, 53 year old Mr Cheung; the wife, 52 year old Ms Cheung; C Cheung, the 86 year old father of the husband; and Y Cheung, the 87 year old wife of C Cheung.

2. The wife is the applicant who seeks orders for property settlement, spousal maintenance and costs against the husband and, as against the second and third respondents, pursues declarations as to entitlement to property and asks for consequential orders for the distribution of that property.  She asserts that the husband and the wife retain substantial property in Australia and Taiwan and that the net worth of the husband and wife is in excess of $20 million, and she contends that such property should be distributed by the Court equally between the husband and the wife.

3. In his response, the husband seeks a 70/30 division of property.  However, the case argued by him is to the effect that all the husband and the wife have to show for their efforts of 23 years of marriage is millions of dollars of debt.  He contends that the only equity in any property held by the parties in Australia or Taiwan is held by them on trust for the Cheung family group.  He seeks orders dismissing the wife’s application and for the necessary orders to secure to the Cheung family group what he says is rightfully the property of that group.

4. The second and third respondents seek orders for the dismissal of the wife’s application against them and seek declarations and consequential orders to have their entitlement and that of the Cheung family group to nominated property in Australia and Taiwan, recognised and enforced.  They also seek to recover against the husband and the wife, in particular, large sums of money allegedly lent by them to the husband and to the wife, in the main, in the period since separation.  The most substantial such debt is that allegedly owing by the wife in the sum of $3,225,000.00.  They also seek an order for costs against the wife.

5. The wife disputes any such liability, contending that any funds provided by the second and third respondents were, in fact, sourced from the property or funds of the husband and the wife.

BACKGROUND

1. There is stark and fundamental conflict between the wife, on the one hand, and the husband and his parents, on the other, in almost every aspect of the history of the financial relationship between the four parties.  There is largely uniformity as to the sequence of events, but an absence of agreement about how transactions were funded.

2. The parties married in Taiwan in April 1982.  The wife contends that the parties cohabited for twelve months prior to marriage and that they made joint financial decisions during that period.  The husband denies cohabitation prior to marriage and refutes any suggestion of a merger of finances or joint decision making.

3. There are two children of the marriage, J, who was born in October 1984 and is presently 23 years of age, and H, who was born in February 1991 and is presently 17 years of age.  H is a student who remains dependent upon his parents for support.

4. The wife contends that the parties finally separated in July of 2005, although she acknowledges that there had been difficulties in the relationship for some time prior to separation.  The husband argues that the marriage had effectively come to an end in 2001.  He says the wife lost interest in him, their children and their businesses from that time and that, thereafter, she spent most of her time in Taiwan separated from her family and pursuing her own business interests.

5. It is common ground that the wife did not have any property of significance at the commencement of the relationship.

6. At the time of the marriage, the husband had a registered interest in a home and a 10 per cent interest in a family company called T Company Ltd (hereinafter referred to as “T Company”).

7. There are issues between the parties as to the extent of the husband’s equity in those entities and the sources of finance for such acquisitions.  The wife contends that the company was, in fact, the husband’s and that the other properties and company interests were acquired by the husband using his own funds or the joint funds of the husband and the wife.  The husband maintains that the property was acquired by borrowing funds from his mother and his sister and, further, that he did not outlay any money to acquire his interest in what he describes as his father’s company.

8. At the time of marriage, the husband and wife were each working for R Business, a large electronics company.  It is common ground that the formal remuneration for such employment was modest, but the wife contends that, through his managerial position, the husband received substantial secret commissions from suppliers, enabling him to rapidly accumulate substantial funds.  The husband denies that he took such commissions.

9. In 1981, there was a critical transaction under consideration in Taiwan, which now stands at the very core of the dispute between the four parties.  As matters have transpired, the acquisition in question has provided most lucrative returns and has effectively been the source of funding for the Australian venture and for other business enterprises to be discussed later.  The transaction in issue was finalised on 5 January 1982, when T Company acquired a two-thirds interest in land and some industrial sheds at P Road in Taipei.  It is agreed that the purchase price of that two-thirds interest was NT$11,700,000.00, or something of the order of A$322,000.00.

10. The wife contends that the purchase was funded by the husband using his secret commissions and the savings accumulated by the parties and that T Company was merely the vehicle through which he completed the transaction.  At the same time, the wife argues that the husband entirely controlled T Company, which entity she said was the alter ego of the husband.

11. The husband, on the other hand, contends that he did not provide any of the capital for the acquisition of the P Road property.  He maintains that the decision to buy that property was entirely at the hands of his father, as President of T Company.  He says that the second respondent provided the entirety of the capital used for the purchase of the property.  The husband maintains that T Company was, in every sense, his father’s company and that the second respondent controlled the activities of the company and, from time to time, changed the shareholders’ interests to suit himself and without notice.

12. It is agreed that the husband left R Business in May 1982 and became the General Manager of T Company.

13. In 1984, the P Road property was transferred into the husband’s name solely.  The wife says that that transaction was a reflection of the reality of the situation, that is, that the husband was at all times the beneficial owner and that this transaction merely confirmed his legal title to that property.  The husband responds by saying that the transfer was a family arrangement instigated by the second respondent because of difficulties the second respondent was having with two of his other sons.  The husband observes that the documents recorded that the property was transferred to him for NT$28,700,000.00 but that, at that time, he did not have available to him any such funds and that, in fact, no money changed hands.  The husband maintains that he held and continues to hold any interest in that property on behalf of his father and indicates that he was required to relinquish to his father his seal, chop and letter of authorisation, together with his cheque book, as part of the collateral arrangements put in place at the time of the disputed transfer to the husband.

14. The next significant event was the parties’ decision to migrate to Australia under a business migration programme in February 1989.  The circumstances surrounding such migration are, again, very much in issue.  It is common ground that the parties arrived in Australia with substantial funds.  The wife says that such funds represented monies accumulated by the husband and wife during their relationship.  The husband counters by contending that the money was from the Cheung family group, and principally from his father, and represented funds he held on their behalf to invest in this country for the benefit of the group.  He said that he had declared the money as his own in migration documents only to satisfy the migration requirements of the Australian Government.  He maintains that he held those funds and the property acquired with them for the benefit of others, including the second and third respondents, in particular.

15. In the meantime, arrangements were entered into in Taiwan to undertake a joint venture with a construction company for the development of P Road.  The construction company was to meet the costs of demolition and construction of a ten storey building in consideration of being allocated the fourth to eighth floors of the completed building.  The Cheung family group was to retain the interest in the basement and five remaining floors.  The second respondent says that the property and the development was his.  He informs the Court that he promised the husband the rights to the ninth and tenth floors as a reward for his hard work as general manager for T Company.  On the other hand, of course, the entire property remained registered in the husband’s name and the wife asserts that this reflects the reality.  She says that the husband was responsible for the development and subsequent sale of his interests.

16. The development was completed in 1993 and the sales commenced in March of that year.  By 30 June 1995, the bulk of the apartments had been sold.  Whilst some of the details of the sales have been recorded in documents from the Lands Office, the sale price and distribution of the proceeds of sale have not been disclosed in those records. 

17. The husband asserts that the property was his father’s and that the second respondent organised the sales and that the proceeds were his father’s to do with as he wished.  The husband says that he did not enquire about the father’s return on the venture.  He suggested that such information was none of his business and that it would be entirely inappropriate in Taiwanese culture to enquire about such matters with the head of the family.

18. The wife has been unable to determine the detail of the sale transactions despite her investigations, but she contends that the proceeds of sale were the property of the husband and the wife and that such funds have been used by the husband, firstly, to finance all subsequent acquisitions and business ventures and, secondly, to support what appears to have been a somewhat privileged lifestyle enjoyed by each of the parties and their children.

19. The second respondent says that the proceeds of sale of P Road were paid to the Cheung family investors and that some of the funds were remitted to the husband and the wife in Australia for investment on behalf of the group or by way of loans for the acquisition of property.  He says that, by 1996, the only units still owned by the family were ground floor and basement properties and that those properties were used as collateral for borrowings for subsequent ventures in Queensland.

20. Between 1989 and 1992, the parties acquired a number of residential properties on the Gold Coast.  They each agreed that the funds brought with them to Australia were the source from which they made these acquisitions, with the fundamental difference between them remaining, in that the wife contends that such funds represented their savings, whilst the husband maintains that they were investment funds held on behalf of the Cheung family.

21. As part of his Australian business ventures, the husband incorporated a number of trust and corporate entities over which it would appear he retained control and operated either as a sole director and shareholder, or as a co-director and joint shareholder with his wife.  The husband assumed day to day responsibility for these organisations and undertook all of the key dealings with solicitors, accountants, Councils and any business or joint venture partners.  The wife acknowledges that she had little understanding of the finances and the day to day business operations, but she says that she was consulted by the husband about major ventures and kept informed about the family’s general financial circumstances.  The contention remains whether the husband was completing such transactions on behalf of his family in Australia or on behalf of his family in Taiwan.

22. In 1993, a property was purchased at Y on the Gold Coast in the parties’ name, using either Cheung family investment funds or the savings and sales proceeds belonging to the husband and wife.

23. Documents, the authenticity of which is challenged by the wife, disclose loan facilities provided by each of the second and third respondents in February 1995 to one of the parties’ trustee companies, D Company Pty Ltd (hereinafter referred to as “D Company”) as trustee for the D Family Trust, in the sum of $2.5 million each, or a total of $5 million, with a facility for the company to draw against those funds from time to time to acquire or manage projects.  The husband alleges that the amount currently outstanding under those loans is some $3 million, being $1.3 million principal and $1.7 million interest.

24. The second and third respondents assert that, in November 1996, a second loan facility was established for similar purposes between P Company Pty Ltd (hereinafter known as “P Company”) as trustee for the P Family Trust, and the Cheung family for a total of $13 million.  P Company had been established for the purpose of pursuing a joint venture development project.  The husband was the director and sole shareholder of P Company.

25. In September 1995, the parties purchased a property at R financed from the disputed funds made available from Taiwan.  In the same month, D Company purchased T House, a commercial premises, for the sum of $2,180,000.00, using borrowings from Westpac and the disputed Taiwanese money.

26. In May 1996, S Group Pty Ltd (hereinafter referred to as “S Group”) was incorporated, with the husband as sole director, P Company as a major shareholder and with a number of other investors and shareholders.  In November 1996, the S Group, together with a joint venture partner, purchased the S site for the purposes of redevelopment.  The purchase price of the S Group’s portion of the site was some $11.1 million, with the total cost of the acquisition exceeding $12.5 million, including stamp duty and legal fees.  The S Group secured a $5.5 million loan with QIDC (later Suncorp) and the balance of the funds was secured by borrowings from the Taishin International Bank.  The circumstances surrounding those borrowings are again highly contentious and represent another key issue in the case.

1. The wife’s version on the overseas financing is comparatively uncomplicated.  She says that the parties applied for and received individual loans of NT$95 million, or A$4.26 million each.  She says the loans were secured against properties in Taiwan owned by the husband and the wife, either solely or jointly, including the remaining P Road properties.  She says that it was only after separation that she discovered that the borrowed funds were remitted to the Cheung family members in Taiwan prior to the transfer of those funds back to the parties through P Company to finance the acquisition of S site.

2. The versions of the husband and the second and third respondents are significantly different in a number of material respects.  Firstly, they assert that the Cheung family investors were appraised by the husband of his view that the S site represented a good investment opportunity for the family and that, after discussion, the family decided to proceed with the acquisition.  It is acknowledged by the husband and the second and third respondents that the husband and wife did personally take out loans in Taiwan with the Taishin International Bank, but it is asserted by the husband and the second and third respondents that this was the agreed approach designed to provide some protection for the Cheung family investors.  It is asserted that the fact that QIDC would have a first mortgage over the acquired property caused the family to seek to secure some protection, particularly having regard to the fact that the development was in Australia and the monies borrowed in Taiwan were to be sent to that country.  The second respondent says that the family wanted to ensure that the husband and wife would take responsibility for the borrowed funds, which borrowings were to be secured against Taiwanese property which the husband and the second respondent maintain was the property of the Cheung family group.  The second respondent said that the husband and wife signed documents contemporaneously with the loan documents authorising the Taishin International Bank to deposit the loan monies into accounts in the name of the second and third respondents and one of their sons.  It is asserted that those funds were then on-loaned by the Cheung family to P Company to facilitate the acquisition.  Strikingly, the family effectively doubled the interest rate chargeable to the husband’s company from the rate payable by them to the Bank itself.  It is further asserted that Hickey Lawyers, solicitors in Australia retained by the husband, documented those transactions at that time. 

3. As to repayments on the Taiwanese loans, the wife asserts that the parties utilised portion of the borrowings, together with rental income, for that purpose, whereas the husband and second and third respondents contend that all repayments were met from funds provided by the Cheung family group.

4. Efforts to develop the S site proved problematic and the husband and wife sold some property and funds were borrowed, secured by way of mortgage against the Mproperty and T House, to provide working capital.

5. In January 2003, the S site was sold for $54.5 million.  It is common ground that L Management, which took over the QIDC/Suncorp loan, was paid out some $14.5 million and that, after payment of $13.8 million to the joint venture partner, the S Group received the sum of approximately $22.4 million.  After a further payment to the other S Group Taiwanese investors and the discharge of other liabilities, the sum of approximately $21.5 million was distributed to P Company as trustee for the P trust.  The wife says that such funds represented profit from the venture and that the proceeds were, in fact, the property of the husband and the wife.  She says that the proceeds have subsequently been secreted away or misappropriated by the husband.  The husband argues that the proceeds of sale have been paid to the Cheung family investors to whom they belonged.  He says that the venture was a failure and cost the Cheung family group substantial funds, after taking into account operating costs, borrowings and repayments.  He says that the husband and wife used some of the funds subsequently lent to them by the Cheung family to pursue other unsuccessful business ventures and that the parties, individually and jointly, are indebted to the Cheung family members for a substantial amount of money.

6. As to the proceeds transferred to Taiwan after sale of the S site, the second respondent says that the $20 million was received as partial repayment of monies owing by the husband and wife under the loan facility agreements entered into in 1996.  He contends that there remained at the time of such payment a shortfall of over $3 million owing by the husband and wife.  The second respondent accounts for the movement of funds transferred to Taiwan in his affidavit filed on 11 July 2008 from paragraphs 25 – 38.  In paragraphs 37 and 38, he sets out details of what he describes as a series of loan transactions to the husband and the wife to meet various debts, to finance other business ventures and to provide support.  Of course, the wife maintains that the funds accessed for those purposes were the property of the husband and the wife from the substantial capital gain enjoyed by them from the S venture.

7. There are related issues between the husband and wife about the success and cost of a number of other business ventures undertaken by them during the marriage and subsequent to separation, including the promotion of natural resources, a currency venture, a water business, a beauty services venture and a retail business conducted by the wife in Taiwan known as TA Business.  The husband says that each of those businesses failed and have caused substantial financial strains on the family.  There does appear to have been a pattern of little or no return from these ventures.  The husband says that TA Business, in particular, was undertaken by the wife as her own private venture at a time when she largely abandoned her marriage and family in Australia to pursue her own interests in Taiwan.  He maintains that he advised against the venture and that most of the heavy losses were incurred by the wife after real or effective separation and incurred against his wishes.  He says further that the wife pressured his parents to lend money to her business after separation and he argues that she should bear sole responsibility for the liabilities of that failed business venture.

8. Despite a heavy draw on capital to this stage, the wife, on the other hand, does not accept that the business has failed.  She asserts that the funds used in the business were not borrowed funds from the husband’s parents, but rather they were joint matrimonial funds traced to the S venture.  She says that some of the financial difficulties experienced in the TA Business have been as a result of the untimely denial of access to the parties’ own finances, maintaining that the initial stages of the venture were always going to be capital intensive.  To this day, she maintains that, notwithstanding she has been locked out of her warehouse for non-payment of rent, the brand name established by her is capable of bearing fruit.  She contends that the business venture was a bona fide effort to produce returns for the family and that any losses should be borne equally.

PROPERTY POOL IDENTIFICATION

1. These dramatically opposed accounts of the history of the financial arrangements between the four parties produce entirely different outcomes in terms of the required task of identifying the assets and liabilities of the parties to the marriage.  Indeed, as I indicated at the outset, that task is at the very core of the case before the Court.  On the wife’s account, the parties have enjoyed substantial success in their ventures in Taiwan and Australia, producing a small fortune which, she says, the husband has wrongly repatriated to Taiwan.  She seeks orders designed to secure to herself a return of her half share of such property.

2. The husband says that the vast bulk of the acquisitions and business ventures during the marriage were funded by members of his family for the intended benefit of that group.  He says that such acquisitions and ventures have been singularly unsuccessful and left the husband and the wife in debt and the Cheung family investors badly out of pocket.  He says that, in effect, the only issue for the Court is to determine questions of responsibility for outstanding liabilities.

3. The stark differences in accounts and outcomes would at least potentially render many of the traditional considerations under the provisions of s 79 and s 75(2) of the Family Law Act as academic at best. Nevertheless, it is essential that the Court endeavour to quantify the competing claims in the property identification component of these financial proceedings.

4. The parties are largely in agreement as to the identity of the property in issue and there is some common ground in relation to the liabilities.  However, of course, there are many fundamental differences and the Court needs to address the fundamental matters in issue in this case in relation to the financial history of the marriage and resolve questions of credit before it can sensibly proceed to identify the assets and liabilities to be taken into account in the proceedings.

THE EVIDENCE

1. There is a vast body of evidence in all its forms, including extensive affidavit material, a large volume of documents and three weeks of oral testimony.  On all sides, there appear to have been elements of drama, intrigue and deception.  Each party is able to bring to bear documentary evidence to support their different accounts.  Each side has had to admit to resorting to dishonesty in some of their dealings with one another and/or in their dealings with third parties.

2. The husband and the second respondent are faced with the task of convincing the Court to accept the proposition that it must “trust us when we say we were lying in the past”, for example, when they represented that the husband owned substantial property and funds in Taiwan.  The wife is confronted with the task of convincing the Court that her version of the reality of numerous family, business and financial transactions over a period of almost 30 years should be preferred, notwithstanding her continual assertions and admissions that she has little knowledge of the detail, little understanding of bookkeeping and figures, and was and remains in the habit of signing documents without knowing of, or verifying the contents or purpose of such documents.

3. The credit of all of the key parties has been left damaged through this litigation process.

4. The capacity of the Court to accept at face value the sworn affidavit material of the parties has been seriously undermined by their own testimony about the reliability of those documents.

5. The wife’s affidavit of evidence-in-chief was subjected to stern testing in cross-examination by counsel for the husband and counsel for the second and third respondents.  When troubled by such cross-examination, the wife frequently resorted to explanations such as, she did not carefully or closely read the affidavits before signing them, or excuses such as, she was not good at figures.  These explanations eventually elicited from me a more than rhetorical question relating to which portions of her affidavits are capable of being accepted.  Unfortunately, the husband appeared to suffer from similar habits.  He offered defences which included not carefully reading affidavits or not understanding the need for care because of his asserted lack of appreciation of the significance of what was being discussed.  Indeed, when early difficulties were being encountered by the husband, the case had to be interrupted and the matter stood down to allow him to re-read his affidavits so that he might be given a further opportunity to affirm the truth of the contents of them.  Even after two attempts at this type of exercise, he felt obliged to qualify his affirmation to a proposition that he was satisfied they were “ninety per cent” reliable, thus leaving the Court with the same dilemma of uncertainty relating to which portions of his affidavit evidence were entirely reliable and which portions were not.

6. On the broader question of the reliability of the respondent’s testimony, I was left troubled by a discrepancy in the testimony presented by the second respondent.  His affidavit of evidence-in-chief purported to provide a detailed account of much of the financial history of the family dating back some 28 years and included quite detailed particulars in relation to a number of matters.  This ability to provide such detailed evidence stood in stark and discerning contrast to his personal presentation and oral testimony before me.  Of course, I appreciate that, in the process of preparation of his affidavit, he apparently had access to extensive documentation.  Allowance also needs to be made for the second respondent’s age and infirmity, but the difficulty for the second respondent and for the Court is the fact that he was apparently not suffering any such deficits when he executed his affidavit of evidence-in-chief on the eve of the trial.  The precise and detailed testimony appearing on the face of the affidavit was replaced by vague, rambling, non-responsive answers and claims of lost recall when he appeared in the witness box.  That uncertainty was often maintained even when he was provided with documents and his own affidavit to refresh his memory.  These observations are not intended as gratuitous criticism of an ailing and aging man, but the stark inconsistency in the second respondent’s apparent ability to recall extensive detail with great precision on the one hand, and his inability to explain many of the most basic propositions on the other, necessarily brings into issue the second respondent’s capacity to have provided the instructions capable of producing the detail appearing in his affidavit.  It raises the question of the extent to which that document might represent someone else’s script.  The contents of the second respondent’s affidavit were, in turn, affirmed by his infirm wife, which necessarily causes one to be somewhat circumspect about the reliance which can be placed on the sworn affidavit evidence of both the second and third respondents.

7. Counsel for the husband and counsel for the second and third respondents each made telling submissions about the significance of the non-production of key potential witnesses by the wife.  It is submitted that the wife failed to provide any explanation for the non-production of witnesses who could have so readily confirmed key aspects of the financial history relied upon by the wife.  It is submitted that adverse inferences should be drawn against the wife in that regard.  Similar valid criticisms were made about the non-production (TA Business documentation) and the late production of other key documents.  The wife makes similar criticisms of the other parties in relation to non-production of documents, which assertion is met by alleging that the wife, in fact, stole all such documents from the husband’s home.

8. Each of the described factors has combined to make the task of the Court in endeavouring to determine which propositions in relation to the substantive issues before it are to be accepted and which are to be rejected, a most difficult one.

9. In an effort to determine the matters in issue in this case, I have taken into account all of the evidence and I have had particular regard to:

   (i)       the credibility of the parties, in particular;

   (ii)the evidence of other witnesses, particularly any witnesses who are more removed from the family dispute;

   (iii)the documentary evidence;

   (iv)the inherent probabilities.

THE EVIDENCE OF THE WIFE

1. As I have indicated earlier, there were several aspects of the wife’s presentation and evidence which were less than satisfactory.  At times, she was exposed as having limited ability to substantiate her claims because of a clear lack of knowledge and understanding of many of the wider family dealings during the marriage.  Her suggestion that she did not read numerous documents before signing them is always a troubling one, but I accept that a complete rejection of that proposition may well be unfair.  It is clear that the wife is not a woman who pays close attention to business details.  Her lack of knowledge of much of the detail of her own principal business, TA Business, is the starkest illustration of that point.  She protested often that she was a designer and not good on figures, and further defended her responses by asserting that she simply trusted her husband.  On all versions, as between the husband and the wife, it is clear that the husband was the person taking responsibility for business decisions because he was the one attending to all of the day to day dealings with solicitors, accountants and financial institutions.  I have little difficulty in accepting the proposition that a wife, in those circumstances, might simply sign business and family documents when requested to do so by her husband.  This is a notion that sits comfortably with one’s experiences in life.

2. Necessarily, however, one is less forgiving when dealing with such propositions when it comes to official documents and declarations and, particularly, sworn affidavit material.  If Courts were to accept assertions that affidavits are signed without reading them, then the very fabric of Courts’ processes would be undermined or destroyed.  In this case, I do not accept such explanations.  The wife is not unintelligent.  She was aware of the significance of the proceedings.  She is represented by a most experienced and reputable legal team.

3. Specifically, I find that the wife was not truthful in her testimony about proceedings instituted by her against the husband and the second and third respondents in Taiwan in relation to adultery, assault and dishonesty complaints.  I reject her account suggesting that she was not proactive in pursuing such matters.  I find that she actively sought retribution against the husband and his parents and hoped to gain tactical advantage by so doing.  Her conduct in these matters and her subsequent false denials do her little credit. 

4. The issue is whether the wife’s credit has been fatally flawed by these matters.  Of course, one aspect of that deliberation is to contrast her credit against those of the other interested parties.  It needs to be observed that, in her oral testimony, the wife was consistent and resolute on the central theme of her case relating to her conviction that the ventures in Taiwan and Australia undertaken by the husband, or the husband and wife jointly, were undertaken using their own funds and efforts for their mutual benefit to the exclusion of others.  The wife was quite convincing on this point, both in the detail and in the telling.

THE EVIDENCE OF THE HUSBAND

1. The husband’s testimony suffers from many of the same deficits as were to emerge through the wife’s evidence, although I take the view that his explanations in a number of areas are less feasible.  He also asserts signing business documents, Government documents and even affidavits without reading or fully understanding the contents.  However, in the husband’s case, he took things much farther.  Whilst, in the main, the wife claimed ignorance, the husband has had to acknowledge regularly signing significant documents, knowing the contents to be false.  He further acknowledges that the specific purpose of such falsified documentation was to deceive.  Those he sought to deceive have included family members, financial institutions and Government agencies.  In many cases, the acknowledged purpose of such dishonesty was to gain financial or other significant advantage.

2. In relation to matters financial, he is unable to plead ignorance.  The husband presented as a man of significant business acumen.  He has clearly embraced and understood the intricacies of the business and corporate world in two countries, under two different cultures.  He has embraced and managed corporate and trust structures.  He has engaged extensively with other business men, accountants, lawyers and Government identities.  It would appear he was, in turn, embraced by Government and business identities.  He has personally overseen a number of large projects involving the utilisation of many millions of dollars of capital.  I found his occasional forays into the excuse of ignorance singularly unconvincing.

1. In relation to much of the family documentation, and particularly that acknowledged to be false, he raises a similar plea to that advanced by the wife.  He contends that his father is, in every sense, the patriarch of the family and that he cannot be questioned.  The husband says that he does what he is told by his father and trusts that his decisions are for the good of the valued members of the family.  There was some support for these propositions based on family dynamics and cultural considerations from the evidence of other family members and the evidence of a Taiwanese lawyer.  Whilst I accept that such explanations for dishonest conduct are feasible to a point, there were features of the husband’s testimony in these areas which I found impossible to accept.  Whilst the notion that questioning or challenging a powerful father figure could present difficulties is a feasible proposition, particularly in a patriarchal society, I am much less able to accept that this astute, adult, Taiwanese/Australian business man would not only happily sign documents and unquestionably follow his father’s bidding, but that he would also happily continue to do so in ignorant bliss, largely unconcerned about the financial consequences for him and his family in Australia.  The husband would ask the Court to believe that he transacted multi-million dollar loans, received multi-millions of dollars of family investors’ money and returned millions of dollars to Taiwan without question and without apparent discussion about the detail of any return for him and his Australian family.  These propositions transcend cultural differences and are contrary to human nature.  For example, it is asserted by the husband and the second respondent that the husband was gifted the ninth and tenth floors of the P Road redevelopment.  However, the husband asks the Court to accept that he had no knowledge of, or interest in the sale prices the other units were achieving and saw fit not to even make enquiries of other family members, which enquiries would have enabled him to have some insight into the value of the interest allegedly gifted to and owned by him.

2. The husband also signed false documents to secure a bank loan in his name for millions of dollars to help finance the S project.  He then proceeded to give that money to his parents, only to have the monies re-borrowed in Australia by the husband’s company, P Company, at twice the interest rate of the original loan to the bank.  In so doing, he left himself and his wife at least indirectly liable to his parents and directly liable to the bank for the same amount, a most peculiar proposition.  His explanation that his parents required some security begs the question as to what security did such arrangements provide for himself and his wife.

3. I cannot and do not accept the husband’s explanation for the execution of a wide range of false documents evidenced in this case.  I cannot and do not accept that he has, at all times, been the innocent and ignorant pawn of his aging parents.  I take the view that, at the very least, the husband was a knowledgeable and active participant in all of the transactions entered into in his name and that he participated in such exercises for actual or potential gain.  I conclude that he has positively sought to deceive a wide range of people and institutions by his dishonest dealings and that he now seeks to deceive this Court by his false denials in that regard.

4. My conclusion that the husband is not a credible witness on a number of key issues in this case is, necessarily, a telling finding.  However, like the discredited wife, he is also entitled to the benefit of my further deliberations on other aspects of the case before final conclusions are drawn on the substantive issues between the parties.

THE EVIDENCE OF THE SECOND AND THIRD RESPONDENTS

1. I have earlier canvassed concerns about aspects of the affidavit material filed by the second and third respondents.  At the end of the day, their testimony, their cases, are necessarily going to stand or fall on my assessment of the reliability of the husband’s largely identical case and the evidence he brings to bear.  In that regard, I must take into account that the second and third respondents do, at least on paper, provide a body of sworn testimony supportive of the husband’s contentions.

OTHER WITNESSES’ EVIDENCE

1. Reviewing the evidence of the other witnesses does not, in the main, take the matter much farther.  The other Cheung family members did tend to corroborate the evidence of the husband and the second respondent.  In some respects, however, the sameness of their evidence was, at times, disconcerting.  Whilst they each confirmed that the father was the overseer and financier of all transactions under review, and that they each fell into line with his demands, each acknowledged participation in, or knowledge of, dishonest family practices.  Essentially, the family members also fall into line with the husband’s account and, in so doing, they are either truthfully affirming the husband’s honest version of the history or, alternatively, they are falsely providing support for the husband’s dishonest account..

2. The wife only called one witness who contributed directly to the debate about factual matters in issue between the parties.  That witness was MR W.  He, at least, has the appearance of being capable of being more objective.  He was a longstanding friend and acquaintance of each of the parties dating back to the commencement of their relationship.  Indeed, the husband and wife are the godparents of each of his children.  Mr W was a manager with R Business in Hong Kong when the husband was a manager in Taiwan.

3. In his affidavit material, Mr W asserted that the husband informed him that he had established T Company for the purpose of supplying parts to R Business.  He said that, at that time, the husband was an extremely generous to extravagant entertainer and was asserting that he was rich because his suppliers took care of him.  Mr W said that the husband was living beyond his modest income as a manager for R Company.  He said that the husband had informed him of his purchase of the P Road property and invited him to become a partner in that venture.  Mr W gave further evidence that the husband did not inform him of any involvement by the parents at the time he proposed the joint venture and that, indeed, the husband never mentioned any family interest in that property in the 28 years of their friendship.

4. Mr W said that he commenced employment with an American company in 1984 and approached the husband with a view of commencing some joint business with him.  Mr W said that the husband informed him that, at that time, he had enough money so that he did not need to work again and that he intended to play golf and enjoy life.

5. Mr W said that he was visited in Hong Kong by the husband in 1991/2 and that the husband informed him during that visit that the P Road property had been developed and that he owned half of the building and that the developer owned the other half.

6. Mr W said that, whilst he was on visits to Australia, the husband informed him that the parties had purchased S site with a view of development and that, again, the husband failed to make any mention of any other family interest in that property.

7. Mr W now resides in Victoria and he presented personally for cross-examination.  He asserted that the husband’s early wealth was acquired by accepting secret commissions.  In doing so, Mr W had to acknowledge that he had, himself, engaged in the practice of taking secret commissions which were not declared.  He said that this was common practice and part of the business culture of Taiwan and Hong Kong at that time.  He said that his earnings as a manager from such secret sources were of the order of US$4,000.00-$5,000.00 per week, or around US$200,000.00 per year.

8. It is appropriate that I record that there were aspects of this evidence which left me troubled.  Firstly and most importantly, the quantum of the secret commissions allegedly paid is quite staggering.  I was not provided with evidence of US$ exchange rates at the time, nor was I provided with estimates of the current value of such payments.  Suffice to say that, US$200,000.00 per year in the late seventies and early eighties would be likely to represent a small fortune.  One measure of its value is to note that it was 40 times greater than the husband’s annual salary as a manager.  I accept that this proposition is one which appears to stretch to the very limit of credibility and warrants careful consideration.

9. Further, there is evidence that Mr W has helped the wife financially.  Obviously, he might experience some difficulty in recovering his loans to the wife if she is not successful in these proceedings.  At the same time, the prospect that he would lie to the Court as a consequence was not a proposition put to him and, in any event, I have difficulty with the notion that the man who presented before me would be likely to volunteer to give evidence and to fly from Melbourne to make himself available for cross-examination for the purpose of fabricating a case against a previous lifelong friend and the godfather to his children.

10. Further, during Mr W’s presentation before me and whilst under cross-examination, I observed Mr W to appear to be intelligent, precise, certain and credible.  I could not detect in his evidence or his presentation any inconsistency or motives to fabricate his testimony.

11. The evidence of Mr W corroborates the case of the wife in a number of key material particulars, provides a premise for some of her propositions and strikes at the heart of much of the husband’s case.

THE DOCUMENTARY EVIDENCE

1. I have already highlighted many of the difficulties for each of the parties in the area of documentary evidence.  They each suffer in this area from, at times, at best, a lack of attention to detail and, on other occasions, as a consequence of knowingly executing documents containing false assertions.

2. In the scheme of these proceedings, there is a vast array of documentation and each party is able to bring to bear a number of documents which provide support for his or her respective case or, alternatively, undermine the propositions being advanced by the opposing party.

3. The complexities of this case and the particular problems created by the vast bodies of conflicting documentary evidence are, perhaps, best illustrated by reference to one document argued by each of the parties to be critical to the determinations in this matter.  Paradoxically, all sides argue that the particular document provides compelling evidence in support of each of the competing claims.  The document in question is the 1989 Migration Application, (LC-4) to the wife’s affidavit filed 10 July 2008.

4. The document was one submitted by the parties in 1989 to support of their applications to migrate to Australia on a business migration program.  In that document, the husband was asserting to the authorities that he was, indeed, a wealthy man who would propose to migrate to Australia in possession of almost one million dollars of his own funds.  It is further asserted in that application that the husband set up his own company, T Company, and that his position was that of Managing Director of that company, with his wife as a Director.  It was asserted that the turnover of the company was A$1.5 million.  In the same document, the husband confirmed ownership of Taiwanese property and substantial funds in the Taipei banks and he volunteered copies of title deeds for verification.

5. Of course, these assertions made to the Australian authorities are consistent with the wife’s case and suggest that the husband was either lying to the Australian authorities in 1989, or he is lying to this Court in 2008.  Counsel for the wife relies heavily on this document and goes so far as to suggest that the husband is now estopped from asserting anything to the contrary.

6. Paradoxically, counsel for the husband and counsel for the second and third respondents, rather than regarding this document as fatal to their respective cases, contend that it is a document which disproves the key element of the wife’s case.  The telling feature of that document, as far as they are concerned, is not what was included in it, but what was not.  As was highlighted by Mr Kent SC for the second and third respondents, the husband made an unsuccessful application to migrate in 1987 and the application attached to the wife’s affidavit was a second attempt.  Mr Kent makes the obvious point that the parties would be ensuring that they put their very best foot forward when applying for a business visa to Australia.  He further submits that, if the husband was, in fact, the legal and beneficial owner of P Road as asserted by the wife, it is inconceivable that that property would not have been included in the list of assets.  The property was not included in that list and the force of this submission is very apparent.

7. The inconsistencies emerging from the assertions contained in this document illustrate clearly one of the many difficulties in this case.  It is partly consistent and partly inconsistent with critical aspects of each of the versions being advanced in this case.  At the end of the day, it is difficult to determine what conclusion can be drawn from this document.

   (a)      Documents Generally

8. Some documents necessarily tend to carry more weight than others.  Private documents and family documents for family purposes, whilst they are entirely capable of being accepted at face value, are, at the same time, not subject to external scrutiny.  On the accounts of the husband, the second respondent and other family members, many family documents in this case are alleged to have been prepared and executed containing deliberate falsehoods.  They maintain that some, like the minutes of the 1981 family meeting discussing the acquisition of P Road, should be believed, and yet those executed evidencing the husband’s actual ownership of P Road should be disbelieved.

9. The wife, on the other hand, contends that the 1984 records properly reflect the husband’s real ownership and capital contributions and are a true reflection of the realities of that time.

10. The loan application to the Taishin Bank executed in 1996 for the S project borrowings contains assertions by the husband as borrower and the second respondent as guarantor, which are potentially very telling.  In those documents, the husband asserts ownership of substantial property in Taiwan, including the remaining P Road property.  He asserts substantial rental income from the Taiwan properties and identifies himself as the chairman of T Company.  The second respondent, on the other hand, makes no claim to any interest in P Road, describes himself as a director only of T Company and asserts that he does not receive any rental income.  These declarations made by the husband and the second respondent are entirely consistent with the wife’s account in this case and fundamentally strike at the core of the husband’s case.

11. On the other hand, I need to properly consider other documents drafted and executed in the 1990’s which tend to support the husband’s account.  It is clear that instructions were given to Hickey Lawyers from time to time and, in particular, in 1996, which produced documentation which appears at face value to confirm arrangements between the husband and wife in Australia and the second and third respondents in Taiwan, which would see the second and third respondents providing finance for ventures in Australia managed by the husband and the wife.

12. The point made on behalf of the husband and the second and third respondents is that these instructions and documents were issued long before any deterioration in the relationship between the husband and wife and, when read in conjunction with earlier documents, debunk the wife’s theories.

13. The wife challenges the authenticity of these documents but is confronted with the fact that, at face value, the documents appear bona fide and they do provide corroboration for the husband’s account.  In endeavouring to explain their existence, the wife theorized that the solicitors must have been parties to an exercise to deceive.  There is no basis upon which this Court could draw such a serious inference and I formally record that I reject that theory.

14. However, whilst the wife has not been able to establish any illegitimate collaboration involving the lawyers, I have not, in my mind, been able to rule out other possibilities.  Whilst it is clear that instructions were issued to Hickey Lawyers in 1996, there are aspects of the case which cause me to be somewhat circumspect in accepting such documents at face value.  Firstly, once you have admitted executing multiple documents containing false information for the express purpose of deceiving to gain some advantage, it is difficult or impossible to discern where such behaviour might begin and where it might end.  The husband and second respondent freely admit embarking upon such exercises to deceive family, to deceive Government agencies and to deceive financial institutions.  It is, in my view, not inconceivable that they may have been capable of concocting plans and executing documents designed to disenfranchise the wife in the event the marriage broke down long before there was any sign of such matters coming to pass.  Alternatively, it is not possible in my view to rule out the proposition that was put to the husband during the trial, that is, that his motivation for embarking upon certain transactions, utilizing corporate structures and third parties, including family members, and executing false documents, was to avoid revenue obligations.  Despite the husband’s denials, such propositions do provide another possible explanation with the prospect that those devices used for one purpose in the past can now be utilized for the purpose of frustrating the wife’s claim to property settlement.  The prospect of the husband using solicitors and documents prepared by them for such purposes, without disclosure to them, is not a fanciful proposition.

    (b)      Third Party Documents

15. The documents which I place most reliance upon are not those created internally for family purposes, but those prepared for commercial, official or semi-official purposes and which are provided to third parties.  The consequences of falsifying internal family documents are usually of little moment, as evidenced by the casual attitude of the husband and second respondent to the prospect of regularly making false representations in such documents.  Commercial and Government documents are often the subject of some level of scrutiny and the consequences of falsification can be significant in a commercial, civil, or even criminal sense.  Such documents are inherently more reliable.

16. In my view, the telling third party documents in this case include the following:

    (i)The share register entries for T Company (LC-2 of the wife’s trial affidavit and as attached to the affidavit of Mr TH filed on 10 July 2008).  These documents evidence the substantial growth in the husband’s shareholding in T Company, particularly at the critical times of 1981 and 1984, at which time the share registry disclosed the asserted level of the husband’s capital contribution and shareholdings so as to see him as the major shareholder and thus able to control the activities of the company.

    (ii)The records of sales of P Road units prepared from sales records retained by the Taiwanese Lands Office, which holds records of all acquisitions and transfers of land.  In those documents, the husband is recorded as the full owner of the bulk of the P Road units sold.

    (iii)The application for business migration is potentially a document of great significance, although I refer to my earlier deliberations and the conflicting conclusions which might be drawn from that document.

    (iv)I take particular account of the discovered Taiwanese income tax returns where, year after year, the husband again declared to the Taiwanese Government his ownership of the P Road property and the receipt of rental income.

    (v)I take further particular account of the documents executed by the husband and the second respondent (LC-53 to the wife’s trial affidavit filed on 10 July 2008) at the time they were negotiating and guaranteeing respectively the very substantial loan of NT$95 million in the husband’s name with the Taishin Bank in 1996.  Tellingly, in those documents, the husband asserts he was Chairman of both T Company and the S Group and that he contributed the bulk of the paid-in capital to each of those companies.  He asserted ownership of the remaining P Road properties, in addition to the other properties in dispute at K Road and H Road, inconsistent with his evidence before me.  He asserted ownership of other investments to a value of NT$200 million and an annual income of NT$8 million, which included the rental income, apparently, from the Taipei properties referred to above.  Mr Kirk SC, no doubt fully appreciating the potential significance of this document and the reliance the wife would seek to place upon it, endeavoured, in part, to explain it away by asserting the need to make allowance for the fact that anyone would be inclined to describe his circumstances in the most favourable possible light when approaching a lending institution.  However, in my view, this document cannot be explained away as an exaggeration of the extent of one’s wealth.  It either truly represents the husband’s position, as contended by the wife or, alternatively, it represents a gross fabrication.  This is not a case of exaggerating the value of property owned.  This is a case of falsely asserting to a lending institution that one has substantial property and substantial income sufficient to induce a bank to lend substantial funds in the expectation that the borrowings are secure when, on the husband’s case, he, in fact, owned absolutely nothing and had not received an income for 20 years.

    What is, perhaps, even more striking about these documents is the information contained in the form submitted and signed by the second respondent.  It needs to be observed that this was an application to support very substantial borrowings indeed, measured in terms of many millions of Australian dollars in 1996.  The second respondent was putting himself forward to the financier as a guarantor of that substantial loan.  In such circumstances, he could have no interest in understating his worth and, as both Mr Kirk SC and Mr Kent SC have submitted in other contexts, obviously the second respondent would be motivated to put his very best foot forward to provide value to his offer to the bank to guarantee his son’s loan.

    Of course, I appreciate that, if the husband had lied to the bank about his chairmanships and ownership of P Road, the second respondent was hardly likely to make inconsistent representations to the bank.  However, the second respondent’s failure to assert such ownership is not, in my view, the key information to be drawn from this document.  Its significance is in another area.

    This timely document represented the clearest possible opportunity for the respondent to identify his alleged wealth in the context of guaranteeing finance.  This document represents an opportunity to solve the conundrum identified by me at the commencement of this judgment.  This is where the second respondent could have recorded details consistent with his asserted very substantial wealth associated with his lofty Government post, substantial inheritance, corporate management and entrepreneurial skills.  This document had the potential to clearly demonstrate the folly of the wife’s claim that he was a comparatively poor, retired public servant.

    What emerges from this document is far from what one would have expected if the claims of the second respondent and the husband were true.  I have already acknowledged the argument that he could hardly claim ownership of the remaining P Road properties, given his son’s false assertions, but everything about this document tends to support the wife’s version and discredit that of the husband.  It needs to be borne in mind that this document was executed by the second respondent not long after the completion of the sale by the father of the vast bulk of units redeveloped and sold allegedly by the father through the early nineties.  This is also the man who inherited a hotel chain.  What is disclosed on the face of the document is ownership of an office and a retail shop of comparatively modest value.  There is no mention of any interest in property in Australia, the proceeds of sale of units, or loans to the parties.  The document speaks of a man of modest means, a very modest income and even more modest lifestyle in the form of living expenses.  It is inconceivable that the husband and the second respondent would see fit to understate the second respondent’s wealth and income.

    (c)Private Documents

1. There are also some other documents at the other end of the scale which can be quite telling.  Having observed upon the elevated status of formal documents, there are some arguments to suggest that the least formal documents of all are also likely to be inherently reliable.  I take the view that much can be gleaned from the least formal documents discovered in this case.  Private documents written in an unguarded way, reflecting private thoughts and communications between family members without likely forensic or evidentiary value, are inherently reliable.  Ordinarily, there would seem to be little purpose in family members fabricating the content of private communications between them.  In this matter, I refer to two private letters written by the husband and the second and third respondents.  Those letters have been translated as documents number 7 and 9A in the bundle of documents which now form part of Exhibit 36.  Those letters need to be read in the context of the husband’s contention that he always had very little and his father was always wealthy and the wife’s assertions to the contrary.

2. The first document is a letter written by the second and third respondents to the husband on 20 June 1992.  The most telling features of this letter, as interpreted, are as follows, in the context of some complaints by the second and third respondents to the husband about another son:

   “. . . Actually he is perfidious and has forgotten that you cleared the debts for him, you introduced him a job, you set up a company for him and helped him earn dozens of million dollars (NT$).  You also bought him a house/houses, and so on … They don’t know you are really a dutiful son.  You are the child who cares us most and have been providing for our living expenses for many years.  You also care and support your brothers and sisters . . .”

3. There was dispute between interpreters whether there is an equivalent of “living expenses” in the Taiwanese language and a suggestion that a more appropriate translation of those words would be the much more equivocal “providing us with support for many years”.  I simply note that two qualified accredited interpreters certified that the correct translation was “providing for our living expenses”.  However, leaving that particular point to one side, this apparently unguarded letter contains propositions fundamentally inconsistent with the cases mounted against the wife, to the effect that, after he left R Business, the husband had limited or no income for the next 20-odd years and little apparent capacity to acquire property for himself, much less to acquire property for family members and provide any financial support for his parents who, in any event, were clearly not in need of any such support on the basis of the husband’s case.

4. The second letter is an undated one written by the husband to his parents in much more recent times and reads as follows:

   “Dear father and mother,

   I am very sorry to have let you worry about me.  Although in the past twenty years I gained admiration for [Cheung] family, now the situation of property is not good and the market won’t go up.  The loan interest rate is three times higher than rental.  I must sell the properties immediately.  We are poor since our childhood and hope to have some properties.  But now the situation is out of our control.  A lot of large enterprises have closed, which was not owing to their capital was less than debts but the interest was too much to pay.

   I would like father to remember that if we will be bankrupt or won’t be able to pay the interests in the future we will have to give a big discount for sale.  It will be not only shameful but also still need pay the debts.  I have displayed many advertisements and started to sell the land.  As the land is too big and price is a big figure I have to be very careful.  It will be fine if it is solved well otherwise the debts in Taiwan cannot be discharged.  I cannot sleep every night and worry about it.  However, worry can not solve problems I have to face it and actively find ways to solve it.  In the table below I put a symbol ‘five star’ to express the order of the properties which can be sold immediately to pay bank interests and also reduce the interests.  Don’t sell if they cannot be sold for the expected prices or the prices are lower than the figure mortgaged to banks.  (For example, the basement 1 should be rent out at once)

   [The Husband]

   I will explain more on the phone.”

5. The document is clearly referring to property in Taiwan, assets which are allegedly the property of his father.  This is the father who supposedly one does not question, much less direct.  However, to the contrary, the content and tone of this letter is one of instructions about what to sell, what to rent, when to sell and the prices to be sought.  These are the directions of the man in control.  At the other end of the time-line, the suggestion that “we are poor since our childhood” appears inconsistent with the assertion that the family enjoyed substantial wealth from the father’s high government position and entrepreneurial skills.

6. These unguarded letters strike at the very heart of the cases advanced by the husband and the second respondent.

7. Another telling document, in my view, is Exhibit 32, a fax sent by the husband to Hickey Lawyers on 19 December 2003.  It is a letter of instruction purportedly signed by the husband, the parties’ daughter J and the third respondent, but actually signed by the husband in place of his mother.  It directs Hickey Lawyers on issues relating to the distribution of no less than $12 million from the S site sale proceeds in the event of the husband’s death.  The instruction is to have the $12 million divided equally between the husband’s wife, each of his children and to his parents in four equal shares.  Whilst a will from the mother subsequently emerged in similar terms, and it could be argued that the fax was a reflection of the mother’s instructions for her will, I prefer to take the view that this document should be taken at face value and note that it evidences the fact that the husband was giving direct instructions which were acted upon dealing with extremely large sums of money under his control to the benefit of his family as he saw fit.  I prefer the view that the mother’s will followed merely to give effect to the husband’s directions, given that she was holding the money at the time.  It is certain that the terms of the distribution of this vast sum of money to the husband’s Australian family in such large proportion is more consistent with my interpretation, than with the proposition the third respondent would distribute such wealth to the husband’s Australian family, to the apparent exclusion of all other close family members, including the grandchildren, living with her in Taiwan.  Why would she be so willing to give nine million dollars of her money to the husband’s family, including three million dollars to his estranged wife and three million dollars for a 12 year old boy, to the exclusion of so many others?  One could more readily understand such bequests if they were, in fact, from a husband/father to his wife and children.

8. At the end of the day, the totality of the documentary evidence does not provide the foundation for clear determinations in one direction or the other.  Indeed, much of the competing documentary evidence serves to cloud the issues for determination as each party is able to garner some support from individual documents.  Some of the documents I have identified appear to present the wife with significant difficulty.  However, on balance, I have taken the view that the bulk of the more inherently reliable documents do provide telling support for key components of the wife’s case.

INHERENT PROBABILITIES

1. Finally, in determining which version of the history I should accept, I take account of the inherent probabilities and improbabilities of the propositions being advanced.  Again, like almost every aspect of this case, an examination of the versions advanced by each of the parties poses problems for those advancing that case.

2. In relation to the wife’s case, as all sides have argued, success in her case is at least partially dependent upon her ability to convince the Court about the husband’s accumulation of wealth between 1978 and 1982 and his subsequent ability to acquire P Road.  It is not contested that the husband received but a very modest wage from his employer and such income was entirely insufficient to provide surplus capital of any significance.  The wife’s case is based upon the premise that the secret commissions, which the husband denied receiving, were received by him and that they were sufficient to finance not only property acquisitions, but also the savings transferred to Australia.  There is no direct evidence of any receipt of income from his role with T Company, although, logically, even on his own version, he would have had to have received some remuneration between 1982 and 1989, as he had to support himself, his wife and one child during that period.  This aspect of the case was not explained by the husband or explored by the wife.  On that basis, she is left to argue that what the husband would have received during the period from 1978 to 1989 was very substantial indeed.  Any commissions or other income would have had to have been sufficient to fund the acquisitions, savings and expenses referred to above.  

3. I have already commented on some improbable aspects of Mr W’s story and, on the wife’s case, the husband would have been required to receive even substantially more than the improbable amounts referred to by Mr W.

4. The wife’s reliance upon these bald propositions is a matter requiring the closest possible scrutiny.  If rejected by the Court, as was submitted by counsel for the husband and the second and third respondents, the wife’s case is left with fundamental deficits.

5. Of course, the wife is able to rely upon a significant body of documentary evidence which, if accepted at face value, records the husband’s legal and actual ownership and management of Taiwanese properties, T Company, P Road and the funds transferred to Australia.  Time and time again the husband has asserted, in a wide range of documents over an extended period of time, that the properties now in issue were his.  The husband clearly knows the difference between registered ownership and actual or beneficial ownership, as he has protested as much as part of his own case.  I find that the husband’s declarations to the world at large that he owned or held interests in property were intended by him to convey an assertion of actual ownership.  He failed to disclose any qualification to the representation and, indeed, any disclosure that he held such properties only in trust for others would have defeated the purpose of most of such documentation prepared by him.

6. Whilst the wife’s case is confronted with some substantial challenges in these areas, there is, in my view, an even longer list of improbabilities to be examined in relation to the accounts provided by the husband and his father.

7. Before identifying and discussing the matters I have taken into account against the husband under this head, I do need to confirm that I am well aware of the proposition that one needs to be properly attuned to the fact that different cultures produce different customs and practices and that caution is necessary before drawing conclusions about the implications of different conduct in different cultures.  I have endeavoured to apply such discipline to my deliberations in this case.  In the same vein, I need to acknowledge that some of the individual features of this aspect of the case identified by me may be generally equivocal or marginal, and specifically quite arguable on these cultural considerations.  As a consequence, I have seen fit to take account of all of these individual matters of different potential significance and then sought to consider what broader conclusions might be drawn from the totality of the effect of these factors of different weight.

8. Subject to those qualifications, I have had particular regard to the following matters when considering the inherent probabilities of the Cheung family version of matters which required the Court to accept that the second respondent was wealthy and all-powerful within his family and that the husband is now largely penniless and unable to meet his debts.

   (i)The wife asserts that the second and third respondents have always been comparatively poor.  The second respondent asserts that, when he retired from high Government office, he was a wealthy man.  Through the last three decades, on his account, he has had control of many millions of dollars to do with as he wished.  To the extent that one is able to judge such matters, I observe that he certainly has not presented as a man with the trappings and lifestyle of the multi-millionaire.  I have earlier made comments about his declarations to the Taishin Bank.  Exhibits 23 and 24 are photographs of what appear to be most modest residential and business premises and are far from indicative of great wealth.  When a house was purchased in the husband’s name around 1980, that house was shared as a residence by at least four adults, including the husband, the second and third respondents and the husband’s sister.  I am sensitive to the different tendencies in different cultures, but the sharing of what I gather was a quite modest home by four adults is, at least, potentially incongruent with the notion that the husband’s parents would have had access to enough wealth to acquire a much more substantial property for the four adults, or a separate property for their own accommodation.  The third party documents I have seen consistently portray the second respondent as a man of comparatively modest property and modest means.  Apart from the contentious family documents and dealings, I have not heard of anything or observed any documents which are independently indicative of wealth, or a wealthy lifestyle, on the part of the second and third respondents.

   (ii)Whilst I accept the patriarchal nature of Taiwanese society is a proposition common in many, if not most countries in the world, I am left a little troubled by the extensions of those notions as argued in this case.  The second respondent retired in the 1970’s.  It appears that his wife was largely occupied as a housewife and a mother of a large family.  Yet, notwithstanding this background, the husband and the second respondent ask the Court to accept that, almost 30 years after his retirement, when the second respondent is well into his 80’s and in failing health, he continues to take sole responsibility for all major commercial decisions in Taiwan and overseas involving millions of dollars without challenge from the husband or any other interested Cheung family investors.  The second respondent was a public servant.  The third respondent was a housewife.  At the time T Company was incorporated and P Road was purchased, the second respondent was approaching 60.  When P Road was developed, the second respondent was in his 70’s, and the T House and S development projects were transacted through the second respondent’s late 70’s and well into his 80’s.  The third respondent was of a similar age and, perhaps, even greater frailty.  The husband, on the other hand, received a tertiary education and gained qualifications.  In 1977, he worked for an export company and later that year joined R Business, as its first employee in Asia.  He quickly became a manager and director.  His responsibilities included the establishment of operations in East Asia, including Japan, Korea, Hong Kong, the Philippines and Taiwan.  He was 26 years of age at the time T Company was incorporated and had obviously acquired significant experience by that time.  The husband would have been literally at the peak of his powers during the critical periods covering the development of P Road and the acquisition and management of T House and the S development.  Importantly, after the mid-90’s, all of the major projects and all of the capital investments were undertaken in Australia.  The husband was in Australia during those periods.  The second respondent remained in distant Taiwan.  In terms of probabilities, I pose the following question:  What presents as the most likely scenario?  Were these projects driven and controlled by the remote, aging, retired public servant in Taiwan, or were they conducted under the management and ownership of the younger, qualified, appropriately experienced business man with English speaking skills on the spot in Australia?  I believe the probabilities weigh heavily in favour of the latter.

   (iii)On a related topic, further inferences may be drawn and probabilities considered when examining another feature of the history.  A review of the conduct of the two contenders as controllers of the Cheung wealth at key moments is informative.  The two key stages of accumulation of wealth were, firstly, in the early and mid-nineties in Taiwan during the development and subsequent sale of the P Road units and, secondly, in Australia between 1996 and 2003, when the S property acquisition and joint venture were on foot.  Literally millions of dollars were at stake during those two key periods.  The husband’s version is that the father was effectively the financier and controller of these exercises.  What does the history reveal?  Does it indicate that during the father’s P Road development, the son had the appearance of being the largely uninvolved, distant observer in Australia?  Did the second respondent actively oversee the investment of millions of dollars on the S project?  The evidence would appear to indicate that each of those questions should be answered in the negative.  Between March 1993 and May 1995, the husband made no less than seven extended trips to Asia and it is to be noted that the timing of those trips appeared to coincide with significant sales activity.  Obviously, such exercises would be entirely unnecessary from a business point of view if the second respondent was in control of the whole project.  On the other hand, whilst millions of dollars were at risk in Australia, I am unaware of the father travelling to Australia at any time to oversee, monitor or review the progress of the joint venture.  Similarly, I am unaware of any impediment for the father to do so until his recent decline of health.  Of course, if the project was his son’s, there would be little need or incentive for the father to travel to this country.

   (iv)Further, one poses the question about the probability of the notion that the Cheung family investment group would continue to put so much faith in the husband and trust him with all, or the bulk of their investment capital in distant Australia in a way which deprived them of control and access to such capital.  This blind trust had its origins in 1984, when, at least on paper, they all willingly vested in the husband control of T Company and ownership of P Road.  This trust continued after his departure to Australia with one million dollars in 1989 and right through to recent years.  During that time, the husband continued to control much, if not all of the alleged wealth of the Taiwanese family group, including most recently in the form of the millions of dollars of proceeds of sale of the S site.  I am aware of the substantial movement of funds offshore from Taiwan to overseas destinations, including Australia, as was suggested by family witnesses, as a consequence of the uncertainty surrounding Taiwan and that region during the 1980’s and early 1990’s.  However, I seriously question the likelihood of the family investors continuing to leave themselves so exposed in the ongoing circumstances of this case.  The husband left them and moved to Australia in 1989, supposedly with over a million dollars of their money.  What did he do with it?  What investments did he make for the benefit of the Chueng family investors?  His first “investment” was the purchase of a $470,000.00 home for himself and his wife in Queensland.  That outlay for a Queensland home 20 years ago would suggest that it was a most substantial residence indeed.  Next, the husband purchased a vacant block of land.  In 1991, he purchased a property at C, which resulted in losses and litigation between the husband and the wife and the second and third respondents.  Despite this apparent fall out, the family continues to leave much of its wealth in the hands of the husband.  In 1993, he purchased what clearly appears to have been an even more elaborate home in prestigious Y estate for $650,000.00, again a very substantial sum indeed for a residential property 15 years ago.  If he was using the Taiwanese investors’ money, what were they standing to gain from these transactions providing the husband and his wife luxurious coastal accommodation?  What benefits/returns did the family receive from such acquisitions?  The husband says he was not working in any paid employment and was obviously living off the investors’ money.  After six years, they had not received any returns.  Why would they support the acquisition of T House?  Why did they allow “their” property in Taiwan to be used as security for the S site development?  Whilst the husband was enjoying a wealthy lifestyle at their expense in Australia, the group was left with the privilege only of meeting finance repayments.  The Taiwanese family investors did not receive even the opportunity for any return on their capital until 14 years after the husband left Taiwan.  Even at that time, according to the husband, they did not receive any profit on their investment, but rather only some return as a partial repayment of the costs of the financing of the Australian ventures.  The capital appreciation in the S venture was, according to the husband, insufficient to cover the costs of the exercise, including the costs of finance.  I will review what happened to that “return” subsequently.  Of course, if P Road was, indeed, the husband’s property, as he asserted in so many documents, it would be much easier to understand what happened in Australia.  The husband saw opportunity here and he owned P Road and was aware of its potential.  He subsequently used the proceeds of sale of that property to finance his Australian acquisitions and the remaining P Road properties have been available as partial security for his borrowings necessary to complete transactions in Australia.

   (v)There is a well-known saying in Australia, an adaptation of which is particularly apt in this case.  If the husband looks like, talks like, behaves like and lives like a wealthy man, then the chances are he is.  If he looks like, talks like and behaves like a poor man, he probably is.  The wife contends that the parties were independently wealthy.  The husband suggests that he did not have any property of significance independently of his father.  He says he has not earned an income for over 20 years.  The money he arrived in Australia with was either his, or the property of others.  What is the picture observed by the world at large?  Clearly, the acquisition of luxury homes for himself and his wife points in one direction.  Mr W says that the husband informed him that he was wealthy enough not to need to work or seek employment.  What is to be observed?  The husband had not been in paid employment in the almost 20 years he has been in this country.  Yet, without apparent income, the husband and the wife continued to live in luxury homes; the husband and the wife mixed with the wealthy and the influential; the husband regularly played golf; the husband and the wife entertained extravagantly; the husband and the wife travelled extensively, flew business class and invariably stayed at expensive hotels.  The parties paid $10,000.00 per month for a rental property on the Gold Coast and spent $100,000.00 to furnish it.  At the time of separation, the husband and his wife owned seven luxury cars.  Is this the lifestyle and are these the acquisitions of the trusted son, dutifully investing his family’s money for their advantage, or do such matters have the appearances of the indulgences of a wealthy man, comfortable in the knowledge that he and his family can afford and justify such expenditure because of the extent of his wealth?

   (vi)Related to such matters, I refer to the inherent probability of features of the funding of the wife’s lifestyle and failing business pursuits.  The husband would have the Court believe that he became largely estranged from his wife around 2001.  He says that she was extravagant in the extreme and inept in her business ventures.  At the same time, however, on his version, he happily continued to fund his estranged wife’s extravagance and failures with “his father’s money” for the next four years.  Exhibit 18 is a collection of the wife’s Visa card accounts with NAB.  This is only one of two credit cards the wife had available to her between 2001 and 2005.  The monthly statements for the NAB card alone make rather extraordinary reading.  The wife was seen to have regular monthly expenses on that card of $30,000.00, $40,000.00, $50,000.00 or $60,000.00 or more.  She is seen to be regularly paying tens of thousands of dollars for luxury hotel accommodation.  The wife was to tell the Court that portion of those expenses was incurred by the parties jointly or for family purposes, but she acknowledged that a significant portion of the expenses was incurred by her alone.  The total NAB credit card expenditure from May 2000 to December 2005 was $1,234,000.00.  The limited credit card records of the CBA account push that total over that period to $1,460,000.00 or close to $300,000.00 per year.  The husband complains about such extravagance, but what does history show he did?  He continued to regularly discharge his wife’s credit card debt using “his family’s” funds.  Reluctant spouses paying for their partners’ extravagances out of joint funds is not an uncommon notion.  Continuing to meet such extravagances for year after year, using the funds of others, is not such a likely prospect.  Using his father’s funds to indulge literally millions of dollars on his estranged wife’s extravagances would be tantamount to misappropriation.  That such misappropriation would be from a respected, if not feared father, beggars belief.

   (vii)On another related topic, it is common ground that the wife’s venture in TA Business has been a most costly exercise requiring large sums of capital without sight of any return, at least in the short term.  The husband and the second respondent ask the Court to believe that, notwithstanding the husband has always been of the belief that the TA Business venture was ill-conceived and doomed to failure, notwithstanding that the second and third respondents were aware of the failure of the marriage, the wife’s abandonment of their son and grandchildren and the wife’s extravagances, and notwithstanding that the wife had seen fit to institute legal proceedings against them, that this aging couple have freely parted with no less than three million dollars of their own money by way of unsecured loans to their estranged daughter-in-law.  This is, in my view, a most improbable proposition.  Of course, if the source of such funds “lent” to the wife were, in fact, the joint funds of the husband and the wife from their S venture, the second and third respondents might feel entirely constrained to give to the wife what was rightfully hers, notwithstanding all of the above.  The answer would appear obvious.

   (viii)Finally, it is telling to observe upon an exercise of tracing the proceeds of sale of S property.  What did the second respondent and the family group do with their $20 million?  This is the group that trusted the husband with their money without return for 14 years.  This is the group who was out of pocket because they met the repayments on the husband’s and wife’s loans to the Taishin Bank.  The proceeds returned to the group were insufficient to discharge the loan obligations to the second and third respondents.  There was a shortfall of over $3 million.  Yet what did they do with the proceeds?  They gave them straight back to the husband and the wife.  The couple who were once so worried about borrowing against “their” P Road properties and the sending of funds offshore to Australia that they saw the need to enter into elaborate financing arrangements as security, now sent millions of dollars straight back to the husband and the wife without security to spend on credit cards, luxury rental properties, the acquisition of three luxury cars, to pursue a series of failing business ventures and in payment of legal expenses.  The payers, once so cautious, suddenly appear most cavalier with their millions and the payees positively wanton.  These vast sums of money, measured in millions, were “lent” to the husband and the wife when, according to the husband and the respondents, the parties had absolutely no capacity to repay any of it.

1. The experts endeavoured to analyse the accounts and calculate a profit on the joint venture but were unable to agree.  There was disagreement about quantum and deductions, particularly those claimed by related entities (P Company and D Company).  There was also dispute about the cost of servicing the overseas debt.  The inherent problems identified by the experts in relation to that issue included an assessment of the impact of fluctuating exchange rates.

2. The end result is that precision in this case will always be impossible.  The husband and the second and third respondents provided instructions and the experts, Mr JB and Mr DH, conducted an analysis on the basis of documents and records now tainted by my determination that many of the structures and documents created by the husband and the second respondent were part of arrangements put in place and designed to perpetuate the falsehood that the husband had no interest in the Australian venture and that he was acting on behalf of, and utilising various corporate structures, for the benefit of the Cheung group in Taiwan.  Having totally rejected that notion, documents, records and books of account prepared on that premise cannot be relied upon.  The starkest illustration of the point is the fact that, after having received and distributed the entire proceeds of sale of the S site, the second respondent asserts in paragraph 81 of his affidavit filed on 30 May 2008 that there was a shortfall as the payments of all of the proceeds to him were exceeded by the loan repayment obligation necessary under the family loan facility agreement.  That is the peculiar agreement where the husband and wife chose to transfer the money they had borrowed from the Taishin Bank to the family, only to borrow it back from the Cheung group through P Company at double the interest being charged by the bank.  The second respondent suggests that the shortfall was in excess of three million dollars.  These discredited propositions advanced by the husband and the second respondent colour all that is presented by them, or on their behalf, in relation to both the profits from the venture and the distribution of the proceeds.

3. Adopting a necessarily broad approach, the most appropriate staring point, in my view, is to observe that, whilst there is a difference between the experts as to what constituted the profits from the S venture, an impossible mission in the circumstances, there is now common ground as to the quantum of the proceeds repatriated to Taiwan.  It has been agreed between the experts that the proceeds of sale of S site available to the parties were $20,423,028.00.

4. It seems to me that this sum fairly represents the return available to the parties after meeting the costs of sale and discharging its obligations to third parties.  I intend to use that figure as the starting point in the exercise to determine what portion of the proceeds of sale should now be brought into account.

5. What further clouds the issue is the fact that it is clear that the proceeds of sale were the only source of funds available to the parties from which they funded their various business ventures and their living expenses and, indeed, as the source of funding of some of the wife’s legal expenses and, necessarily, all of the husband’s legal expenses.  In that regard, I refer to paragraph 37(d) of the affidavit of the second respondent of 11 July 2008, which refers to the fact that, as at that date, $400,000.00 of the S site proceeds was utilised to pay the husband’s legal fees and those of the second and third respondents.  Necessarily, the bulk of those expenses were incurred by the husband to that time.  Obviously, the wife should not be required to pay or contribute to those costs.

6. My task is further complicated by observing that, in this case, scant regard was paid by any of the parties to the detail of the outgoings from 2003, apart from the very thorough analysis of the wife’s credit card spendings.

7. In my view, there necessarily needs to be a close analysis of issues relating to the extent of the proceeds of sale of S site repatriated to Taiwan, the details of the dispersement of those funds and the determination of the quantum of any remainder not utilised by or on behalf of the parties to the marriage to this time.  These processes are essential in determining the quantum which might be properly added back as part of the assessment process.

8. Whilst much pre-trial effort was applied to this task by the parties, and it is acknowledged that the wife has been operating under a distinct disadvantage in that regard, this was an issue that barely rated a mention during the course of the trial. 

9. The second respondent purported to account for the dispersement of the proceeds, both those which remained in Australia and those repatriated to Taiwan.  I have referred to those portions of his affidavit material earlier in this judgment.  At the trial, he was not questioned about such matters in any real detail.  Further, whilst the husband and the wife were questioned selectively and in a general sense about aspects of their activities and expenditure after the proceeds were released, the specifics of the dispersement of funds were not explored with them. 

10. I fully appreciate that counsel were operating under the limits of their respective cases conducted on instructions.  The wife was fairly asserting that the monies were not repatriated to Taiwan and subsequently dispersed at her direction.  Whilst there is documentary evidence available to support the movement of funds, there is very little independent evidence to verify the alleged expenditure and detail was limited.  Counsel for the husband was hampered by his own client’s case based on the false premise that the entire proceeds were the property of his father to do with as he wished and claimed little knowledge of the dispersements.  His counsel was further hampered by the notion that, as there was nothing left to distribute between the parties, there was, perhaps, little value in exploring how the property of the second and third respondents had been utilised.

11. The difficulty for the Court is that, of course, it has entirely rejected the cases of the husband and the second and third respondents and is left with a deficit on the evidence as to the application of the proceeds of sale of S site.

12. As is apparent from their submissions, counsel for the wife have been set upon a particular course.  They have focussed upon the gross proceeds of sale repatriated to Taiwan, contended that the husband and the respondents have fundamentally failed to provide full and frank disclosure and argue that, in the circumstances, this Court should adopt the robust approach justified in a number of cited cases.  They base their client’s case and the orders sought upon an add-back of the full amount repatriated to Taiwan.  As an adjunct to that argument, they suggest that, at least notionally, the proceeds retained by the husband and the second and third respondents would have provided returns sufficient to meet at least some of the expenditure incurred by the parties after the sale of S site.

13. Before turning to the merits of that approach generally, I am entirely satisfied that it is appropriate to focus upon the proceeds of sale of S site repatriated to Taiwan as an appropriate staring point.  That sum became the property of the parties to deal with as they wished, subject only to any revenue obligations.  Having said that, I now turn to the supplementary issue, that is, the suggestion that the entire amount repatriated should now be added back to the property pool

14. Whilst I am more than prepared to be robust in appropriate cases, I must nonetheless strive to do justice to each of the parties.  This is not a court of damages or sanction.  It is not my role to punish the husband or to compensate the wife on the ground that I have concluded that the husband has sought to deceive. The husband remains entitled to a judgment which properly recognises his rights to property settlement.

15. To write back the entire proceeds of sale of S site and award half of those to the wife would result in her being unjustly enriched, for a wide range of reasons which need to be explored, both in this context and in relation to other matters to be addressed later.  Firstly, in relation to the adequacy of evidence issues, there are aspects of the case known and unknown which highlight the injustice of such an approach.

16. It is known that the bulk of the proceeds of sale were transferred to Taiwan in January 2003.  It is assumed on the evidence as it stands that those proceeds represented the principal, if not the sole, source of capital available to the parties at that time.  I am unaware of the parties being in receipt of any other income from other sources in the years before or subsequent to that date.

17. What is known is that the proceeds of sale were at least the primary source for the following agreed ventures:

    i.         A natural resources project.

    ii.        A development in South Taiwan.

    iii.      A currency venture in Perth.

    iv.       A hospitality business in Taiwan.

    v.         A unit in Bangkok.

    vi.       A beauty services project.

    vii.      A water project.

    viii.     Perhaps, a substantial investment in Taiwan stocks.

    Each of these ventures were, apparently, unsuccessful and the costs associated with those ventures are likely to have been drawn down from the S venture capital.  The wife acknowledges involvement in all, or most of those projects and one would hope that she would have some appreciation of the costs involved.

18. It is known that the wife was paid at least two million dollars from the S venture proceeds to establish the TA Business.  It is clear, even from her own evidence, that much more has been spent on this business, including funds utilised from the sale of the Taipei apartment and from the sale of jewellery.  Additional funds were utilised and those funds may be sourced from loans the wife secured from family and friends and/or from further drawings against capital.  It is unclear, for example, whether the $150,000.00 referred to in paragraph 37(e) of the second respondent’s affidavit filed on 11 July 2008 was utilized in the wife’s business or whether it was applied to other purposes.

19. It is also clear on the case of each of the parties that there has been substantial expenditure incurred in relation to securing and paying for the younger child’s schooling in the United States. 

20. In addition, the proceeds of sale of S site appear as the only likely source available to finance the extravagant lifestyle enjoyed by the parties, which has apparently included, in more recent times, the acquisition of three new luxury cars, half a million dollars spent on rental and the extraordinary expenditure disclosed on the wife’s credit cards over and subsequent to that period.  On the evidence, I am simply presently unable to rule out the proposition canvassed in sub-paragraphs (h) – (k) of the aforesaid affidavit, which suggests that the parties were capable of spending over four million dollars of the proceeds on lifestyle requirements.

21. Ignoring all of the above very real expenditures would result in the wife being unjustly enriched by being able to access a substantial portion of the proceeds prior to the trial, on the one hand, but argue that she should now be entitled to a full share of the gross proceeds remitted as valued prior to the parties’ substantial drawings.

22. I am concerned that I cannot do justice to either of the parties on this key issue as the evidence currently stands.  I need to arrive at a fair figure for the amount to be added back, so that I might then properly calculate the property and entitlement of each of the parties, and then contemplate the range of remedies which might be considered.  Given the parties acknowledged involvement in most of the above projects, given the establishment of some of the expenses listed and the likelihood of others, I am hoping that there may be scope for agreement or comprises on much or all of the expenditure set out in the affidavit material.  In the absence of agreement, there may be the need for further submissions and, regrettably, the prospect of further evidence.

23. With the benefit of my findings and rejection of any allowance for the liabilities to family members and any interest paid or payable thereon, the accountants and/or the parties should be able to arrive at some form of consensus in relation to the quantum of the remainder of the proceeds of sale of S site after taking account of agreed expenditure post-January 2003.  Of course, there needs to be a cut off point in relation to expenditure on living expenses, perhaps as at the date of separation in July 2005.  The relevant time is when the wife was denied access to the parties’ funds and found herself borrowing funds from third parties to meet her private and business expenses.  It would be inappropriate to make any allowance for deductions from the proceeds drawn down by the husband after that point, apart from those applied to meet the costs and outgoings in relation to the parties’ properties and in the education of their son.  Deductions for the husband’s living expenses, including rental, would result in the wife being required to meet her own expenses and subsidise those of her estranged husband.

24. Once that exercise is completed, the Court should be in a position to include a more accurate and fairer figure for the available remainder to be notionally added back into the property pool.  Until that is done, the Court is unable to calculate the size of the property pool, unable to determine what the wife’s portion thereof is in dollar terms, and unable to determine what orders are to be made.

TAXATION IMPLICATIONS

1. The next great challenge in this case relates to the need to address revenue considerations.  There are potentially very significant taxation implications flowing from my determinations in this case.  The arrangements put in place by the husband have enabled the husband (and the wife) to avoid any personal income tax obligations in this country in relation to the business ventures purportedly conducted by the parties for the benefit of the Cheung family group in this country and in Taiwan.

2. I have determined that the parties contributed all of the capital and effort in relation to the Australian ventures and that they remain entitled exclusively to the returns on those investments.  The parties are Australian citizens and they are liable to meet tax obligations under Australian law.

3. The experts agree that taxation obligations will arise if the Commonwealth acts on the findings made by this Court, or if it makes similar assessments.  It is agreed that each of the parties would be obliged to include the proceeds of sale of S site in their assessable income and that such income would be taxed on the appropriate individual marginal rate.  Mr DH calculated that the approximate tax liability would be of the order of $5,300,000.00, a figure adopted by Mr JB on the basis of the assumptions made by Mr DH.  It was agreed that the assessment might be the subject of penalty and interest provisions.  It was submitted that such penalties might be most substantial indeed, in the circumstances, and potentially be measured in further millions.  Tax may also be payable on both the capital gain and income enjoyed from the P Road development.  This, too, could be a most substantial assessment, particularly if penalties and interest are applied over the period since that development.

4. The difficulty for the Court is that no such income tax assessments have been made to date.  This substantial uncertainty impedes the capacity of the Court to calculate the net value of the property available to distribute between the parties.

5. It is submitted on behalf of the wife that any taxation payable on the returns from the S development should be met by the husband alone.  The proposition is that, to date, the husband has taken the benefit of that money and failed to account to the Australian Taxation Office for it.  It is suggested that his deception of the Court and the Australian Taxation Office and the removal of the funds offshore, should support a waste argument.  I agree that where it is determined that one party cannot readily meet tax obligations and the other can, it might be appropriate to make orders designed to structure the distribution of properties and financial responsibilities in a way which casts the burden on one of the parties. However, in my view, there would need to be proper adjustments to reflect the disproportionate responsibility for the liabilities.

6. In their submissions in this matter, counsel for the wife asked for much more.  They suggested any tax liability should be met from the husband’s share of the net assets.

7. In my view, such a proposition would, again, result in the wife being unjustly enriched.  The wife is contending that the entire net proceeds of twenty million dollars should be added back and that she should receive half of those funds.  If tax is properly payable on that sum acquired by the parties, then it cannot be the case that I should proceed on the basis that the wife should be credited with ten million dollars tax free and that the husband should meet all of the obligations from his ten million dollars.  Obviously, if it was intended that the parties should enjoy an equal distribution of property, that would not be achieved by such orders.  Similarly, if tax is and was payable on the returns from the P Road development, in avoiding such obligations the parties have each received the benefit which has flowed to them as a consequence of their joint use of the gross return to acquire other property and meet their living expenses.  It cannot be argued that the husband only enjoyed the benefit and that he alone should meet any responsibility.

8. Mr Kirk SC submits on behalf of the husband that, should the Court make the findings I have now made, it is obliged to refer the matter to the Attorney-General’s Department for proper assessment.  He argues that I should make that referral before the Court proceeds to make final orders.  Mr Kirk SC contends that I should pursue that course for a number of compelling reasons, including observing that it is necessary, in furtherance of the duty upon Courts, to ensure that the revenue laws of the Commonwealth are not evaded by litigants (P and P (Tax evasion) (1985) FLC 91-605) and, further, in acknowledgement of the rights of third parties whose interests might be affected to be heard. On the latter point, Mr Kirk SC argues that there is the likelihood that the Commissioner would require all or most of the Australian property to meet the parties’ taxation obligations. He submits further that I should not make orders which might pre-empt that process. Finally, Mr Kirk SC submits that, until and unless the taxation consequences in this case are assessed, the Court is not in a position to determine the parameters of the property pool to be considered. Of course, I am acutely aware of one of the likely consequences of proceeding in the way suggested by counsel for the husband. Assuming the worst of the husband, he could be adopting some scorched-earth approach to the matter. Having failed to convince the Court that it should accept his falsified account of the financial history, which would have seen the wife deprived of any property settlement, he remains in the happy position to, nevertheless, defeat her claim by manoeuvres which might alienate property which could have otherwise been available to the Court. He has ownership and control of substantial real estate in Taiwan. He retains the remainder of the S site sale proceeds. He appreciates that there are substantial difficulties ahead of the wife and the authorities in executing against such overseas property. He would appreciate that the Commissioner will be likely to seek to execute against the Australian property as a first option. On current projections, the parties’ equity in the Australian properties would be extinguished to meet the estimated assessments. Whilst the husband has not secured the Australian property to himself through the Cheung family arguments, he is in a strong position to retain millions of dollars of offshore investments and the wife will be left with nothing. Whether or not that is the purpose of the husband’s proposals in this regard, that outcome is, in any event, the reality facing the wife and this Court.

1. Notwithstanding my concerns, I must not allow my second guessing of the husband’s motives to distract me from my task of properly assessing the parties’ interest in property and the rights and obligations attaching to that property.  I must seriously consider the Court’s duty to protect the revenue of the Crown.  It is clear that the parties have enjoyed a most privileged lifestyle and acquired substantial wealth, in part as a result of the use of funds which should have been charged to meet revenue obligations.  If tax is payable on the sale of the units and receipt of income from the P Road development, these obligations could date back to the early nineties and the consequence of avoiding revenue obligations thereafter may have made a material difference to the capacity of the parties to acquire property and wealth in Australia.  Similarly, I am informed that the tax obligations not met in relation to S site are likely to be measured in the millions of dollars.

2. I have sympathy for the wife’s position.  I acknowledge the peril she faces because of the movement offshore of so much of the property of the parties.  However, if tax is payable, it should be paid.  I am simply unable to ignore that reality and my related obligations to those who properly meet their tax responsibilities.  I should not make decisions or orders which enable either of these parties to avoid their obligations.  I take the view that I cannot be deflected from that course by the knowledge that the husband may have compounded his default by further taking the law into his own hands by moving offshore much of the property available, so as to further avoid his obligations.  If the conduct of the parties in the past was wrong, and the conduct of the husband in moving funds offshore was wrong, then I should not compound those wrongs by making orders which are calculated to, or have the effect of, placing the remaining property beyond the Crown’s reach.

3. Most importantly, given the probable scope of the tax obligations in this case, over and above capital gains tax obligations, I am at a loss to know how I can complete the essential component of this exercise, that is, evaluating the net worth of the parties.

4. I appreciate this is a decision which has potentially catastrophic consequences for the parties.  The referral and assessments could take years.  The costs and penalties associated with this exercise are likely to be financially crippling.  Whilst this prospect was squarely raised by counsel for the husband at the hearing, I intend to invite the parties to make further submissions prior to any referral to determine whether there is any other appropriate way to deal with this aspect of the case.

PART VIII CONSIDERATIONS

1. Having concluded that I am presently unable to properly determine the asset pool and, therefore, unable to proceed to make final orders, I have nevertheless determined that it is appropriate and in the interests of these parties that I should proceed to consider and, if proper, determine other matters in issue in this case.  I have read and heard and considered all of the evidence to be produced in relation to the financial history and the contributions of the parties.  Whatever be the future of this matter, I believe it is desirable to provide the parties and their legal representatives with as much as is possible and it is similarly preferable to avoid any unnecessary uncertainty.  Of course, ordinarily, issues of contribution and entitlement are not considered until the Court has determined the size of the estate.  This is necessary to enable the Court to measure any percentage adjustment between the parties against the size of the estate.

2. As the case presently stands, it appears likely that the estate of the parties will be measured in terms of millions of dollars, subject to revenue considerations.  I have concluded that it is appropriate that I should share with the parties my current views on the evidence in relation to the history of the contributions.  These assessments and intimations are based on extensive evidence and deliberations.  In the main, they are self-contained assessments which would be unaffected by the Court’s ultimate determination as to the size of the estate.  I propose to incorporate the conclusions I have reached in this judgment for the information and benefit of the parties.  Further submissions may be appropriate later if it is to be argued that my current views might be affected by final determinations as to the size of the estate.  I would, however, not entertain further submissions in relation to my findings of fact on the evidence now set out below.

3. These observations arise in the context of a very long relationship/marriage of some 24 years duration.  I find that each of the parties applied him or herself diligently over that period in their various roles for the welfare and financial advancement of the family.  As I have observed in another context, the husband was the principal driver of the business side of the marital partnership.  However, it is clear that the wife’s role in that regard was not insignificant.  I accept she was consulted about major decisions; she was at various times allocated direct roles as a shareholder in, and director of a number of the corporate entities; she was required to attend business meetings from time to time; she was required to bear the burden of substantial borrowings in her name to facilitate many acquisitions.  I accept that the husband entertained extensively in Australia as part of his approach to business and that the wife was a very proactive participant in those exercises.  As the parties endeavoured to diversify from 2001, the wife played a significant, and at times leading role in a number of the parties’ business pursuits.  The wife was also the joint owner with the husband of much of the real estate acquired during the marriage and clearly discharged a number of the responsibilities in relation to the acquisition, maintenance and improvement of those properties.

4. I accept that the parties shared in the responsibilities associated with raising the two children and that, at least until 2001, the prime responsibility for the children and the household fell to the wife.  At times, the care of the children and the household would have been quite burdensome, given the extensive travel and business commitments of the husband.  I accept that there was some shift in responsibilities around 2001 as the wife began pursuing ancillary business opportunities, including some which required her to spend more time in Taiwan.  I reject the husband’s evidence that this was some form of abandonment of responsibilities and rather view those events as an agreed change of emphasis within the marriage partnership, not uncommon in relationships as children grow older and become more independent.

5. Save for any disparity in initial contributions, I regard this marriage as a real partnership of effort, where each of the parties applied their considerable abilities and efforts jointly towards the advancement of the family for their joint benefit and to the benefit of their children.  As a consequence of their joint efforts, the parties and their children have enjoyed a privileged lifestyle and have accumulated substantial property.  I cannot and do not find that the efforts of one of the parties has any greater value than the other and I conclude that the contributions of each of the parties to the acquisition, maintenance and improvement of property and to the welfare of the family during the 24 years in question should be determined to be equal.  On that consideration alone, the property and liabilities of the parties should be distributed equally.

6. I need to next consider whether there should be any adjustment to the entitlement of the parties on account of any property and financial resources introduced by the parties into the relationship.

7. It is common ground that the wife did not have any property of substance at the time the relationship commenced.

8. The husband had an interest in a home which pre-dated the relationship.  He had also established T Company by that time, which was to be the vehicle for the purchase of P Road.  That property was purchased in January 1982.  Consistent with my earlier findings, that purchase took place well after the relationship commenced in 1981.  The husband had been working for R Business since 1978 and I find he had been receiving substantial commissions over that period in terms of the evidence of the wife and Mr W referred to earlier.  I find that the parties pooled their income and accumulated savings and commission during the 12 months or so leading up to the purchase of P Road.  The wife says that the parties were further assisted by an advance at that time from her brother.  It is impossible 27 years after the event to accurately specify the break-up of the funding of the purchase of P Road in 1982.  The purchase price was NT$11.7 million, or the equivalent of about A$700,000.00.  Suffice it to say that I am satisfied that the bulk of the funds were provided by the husband sourced to his secret commissions acquired between 1978 and the commencement of 1982.  In turn, as a matter of logic, it is likely that a substantial portion of those funds contributed by the husband would be attributable to his period of employment pre-dating the commencement of the relationship.  Greater precision is not possible on the evidence presented.

9. In terms of the evaluation of the significance of the disparity in initial contributions, it firstly needs to be acknowledged that P Road provided a critical foundation for what followed in financial terms in both Taiwan and Australia.  It was the primary source of funds for the Australian ventures and the remaining units helped secure the borrowings necessary for the S project.  At the same time, the wife had been making relevant contributions, including financial contributions, for some time prior to the acquisition of P Road.  Most importantly, much of the financial benefit which has flowed from the ownership of P Road followed from the decision to redevelop that property and from the implementation of those plans.  Those decisions were made and implemented in 1989 and through the early nineties, more than eight years after the relationship commenced, and the bulk of the returns from that development emerged from sales in 1992 and 1993, more than 10 years after the relationship commenced, and from rentals which have been earned throughout the entirety of the marriage.

10. Whilst the husband’s initial contribution remains of significance, the value of that contribution is to be measured in the context of the broader history of contributions made by the parties over the full period of this marriage of some 24 years.  I observe that the foundation property was acquired after the commencement of the relationship, albeit that part of the funding was contributed by the husband from his efforts pre-dating the relationship.  Further, most of the value added to that property was added many years into the marriage at a time when the parties were, in other respects, making contributions of equal value.  Further, the proceeds of sale of the apartments were, in turn, transferred to Australia and used by the parties to acquire some residential properties in their joint names, with the result that legal and beneficial ownership became merged, as did the efforts of the parties to the acquisition, maintenance and improvement of those properties acquired many years after marriage and many years before separation.  Similarly, it is to be noted that the most substantial transaction throughout the entire period of the marriage, which resulted in by far the most substantial gain to the parties, was a venture covering the years 1996 to 2003, when, for many years, the parties had been applying themselves diligently to the task of advancing their fortunes.  The disproportionate gains from the S venture had the tendency to overshadow so much that came before it.

11. I am satisfied that the wife, in particular, applied very substantial effort to the various business ventures undertaken by the parties between 2001 and 2005, and particularly so in relation to the TA Business venture.  Although the parties have enjoyed little or no benefit from those ventures, as I have said earlier, I am satisfied that those efforts represented genuine and legitimate endeavours designed to further improve the parties’ financial position and I conclude that the lack of return does not detract from the extent of the wife’s contributions in those areas.

12. At the end of the day, in the context of all that happened over 24 years and, in particular, having regard to the substantial undertakings of the parties in Australia, where they spent the bulk of their time (16 years) and applied the bulk of their efforts, the disparity of the initial contributions should, in my view, attract only a comparatively modest adjustment in the husband’s favour.  To that end, I have concluded that, as the case presently stands, an adjustment of the order of 5 per cent would be appropriate.  That observation is necessarily subject to the final assessment as to the value of the estate.  I should say that my views on the limited nature of the adjustment justified are very firm and are unlikely to be affected by anticipated movements in the size of the estate to emerge after the further investigations to be undertaken.

13. I next turn to those factors set out in s 75(2) of the Family Law Act which require consideration on the facts of this case. This aspect of the case is more problematic, given the unresolved nature of the matter as to the net value of the parties. Necessarily, any adjustment under this head does need to be measured against the size of the estate. Further, some of the considerations might have different application, depending on the outcome of any referral.

14. Subject to those reservations, I am again satisfied that it is appropriate that I provide the parties with my observations on this issue, as the case currently stands.

15. I note that the parties are each in their early fifties and are of reasonable to good health.  I find that each of the parties has a demonstrated capacity to pursue business and investment activities capable of providing returns sufficient to support comfortable lifestyles.  Neither party has been in paid employment for well over 20 years, but they each present as having a wide range of business experience which, if applied appropriately, might afford them the opportunity to secure income more than sufficient for their needs.  Subject to issues of recovery add-backs and, most importantly, taxation, the parties should have access to property and capital measured in the millions of dollars, sufficient to ensure that all of their respective needs are met. 

16. The youngest child is but a few months short of turning 18 and, to the extent he is able to do so, he is likely to look to each of his parents for ongoing help in his early adult years.

17. The matters identified are not such as to give rise to the need for some adjustment to what would otherwise be the proper entitlement of the parties.

18. In all the circumstances, after taking account of the matters set out in s 79(4) and s 75(2) of the Family Law Act, I have determined that, as the case presently stands, a proper distribution between the parties would be one which divides the total net value of the property as to 55 per cent to the husband and 45 per cent to the wife.

FUTURE CONDUCT OF THE PROCEEDINGS

1. Regrettably, given the fundamental nature of the matters currently beyond the capacity of the Court to determine in relation to, firstly, the extent of the remainder of proceeds to be taken into account and, secondly, the extent of the taxation burden to be borne by the parties, this matter now needs to stand adjourned part-heard.

2. I intend to invite submissions in relation to the future conduct of these proceedings in relation to the resolution of the issues identified on the question of any referral of the papers and on the issue of what orders should be made pending the finalisation of these proceedings.

3. On the issue of the add-back of the proceeds of sale of S site, my reference back to the parties and their legal representatives includes the need to receive further submissions and/or further evidence, so as to enable the Court to finalise this aspect of the judgment.  To assist the parties, I set out below the nature of the intended enquiry.

4. That is, given the following findings and determinations of the Court:-

   (a)That the proceeds of sale of the S site made available to the parties were $20,423,028.00; and

   (b)That the Court intends to add back into the property pool such portion of that amount as represents the remainder after deduction of those amounts properly paid to, and expended by, the parties consistent with the Court’s determination set out in paragraphs 160 to 170 of the judgment.

   (i)What are the expenditures agreed?

   (ii)What is the quantum of the expenditures agreed?

   (iii)What are the expenditures in contest?

   (iv)What is the quantum of the expenditures in contest?

5. Finally, for the benefit of the parties, I intend to explain the type of orders and processes I would intend to put in place on my present view, based primarily upon my determinations to date and upon my expectations as to the future.

6. Once the quantum of the remainder of the proceeds is evaluated, I intend to treat that as an add-back and include it in the notional property pool.  I intend to incorporate all of the property of the parties as determined by me both in Australia (including T House) and Taiwan (excluding the parties’ daughter’s property by agreement).  I intend to take account of all commercial liabilities and disregard all liabilities to family members.  I intend to make proper allowance for capital gains tax payable on the sale of assets.  I intend to deduct any assessments made in relation to tax, interest and penalties that might arise as a result of any referral.

7. Once the asset pool is then assessed, on my present view, I would intend to make such distribution as would result in the wife receiving 45 per cent of the net value of the estate and the husband 55 per cent thereof.

8. I am persuaded that, in the circumstances of this case, the form of orders proposed in the wife’s submissions is appropriate, that is, that there should be a head order for the payment of a lump sum reflecting 45 per cent of the value of the estate, followed by such supplementary orders as are open and necessary to give effect to that order.

9. Given the husband’s conduct and the fact that so much of the property is offshore and under the husband’s control, it would be my intention to make such orders as are necessary and open, to secure to the wife all of the remaining property in Australia.

10. I appreciate the perils facing the wife as a consequence of my determinations, accompanied as they now are by the prospect of substantial delay, particularly those concerns in relation to any further alienation of, or dealings with property, the subject of these proceedings, particularly property overseas.  However, that has been a peril facing the wife from the outset.  Success at trial was never likely to guarantee certainty in relation to enforcement.  Of course, I will entertain submissions about orders that might be put in place in the meantime, particularly in relation to Australian property.

I certify that the preceding two hundred and ten (210) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Jordan.

Associate:     

Date:              27 November 2008