Chih and Chan (No 2)
[2018] FamCA 822
•11 October 2018
FAMILY COURT OF AUSTRALIA
| CHIH & CHAN (NO. 2) | [2018] FamCA 822 |
| FAMILY LAW – PROPERTY – Where each party has property in South Korea – Whether assets are placed in two or three pools – Where a two pool approach is adopted - Where the wife has inherited a part of a large commercial property in South Korea post separation– Whether the wife has a beneficial ownership in the property or holds the property on behalf of her mother – Where the wife does have an interest in the commercial property but there are some restrictions on the wife accessing the capital and income of that property –Where the husband concedes that he made no contribution to the wife’s post separation inheritance and where the wife has made 100 per cent contribution to the first pool - Where the husband’s property in South Korea is subject to a Jeonse – Where an earlier Jeonse was used to purchase the former matrimonial home – Where there has been multiple Jeonses paid throughout the marriage and post separation - Where the current Jeonse is a liability that the husband will be required to pay the tenant of his South Korean property at some future time and is in the nature of a borrowing of a sum certain which should be placed upon the balance sheet – Where the acquisition of the husband’s South Korean property and the Jeonses occurred during the marriage - Where the contributions to the second pool are 70 per cent to the husband and 30 per cent to the wife – Where the contribution to both pools equates to 68.9 per cent to the wife and 31.1 per cent to the husband – Where a 5 per cent adjustment is made in the wife’s favour for s 79(4)(d)-(g) considerations – Where the overall adjustment is 73.9 per cent to the wife and 26.1 per cent to the husband. |
| Family Law Act 1975 (Cth) |
| Calvin & McTier (2017) FLC 93-785; [2017] FamCAFC 125 Ferguson & Ferguson (1978) FLC 90-500 Holland & Holland (2017) FLC 93-798; [2017] FamCAFC 166 Kennon v Kennon (1997) FLC 92-757 Rosati & Rosati (1998) FLC 92-804; [1998] FamCA 38 Soblusky & Soblusky (1976) FLC 90-124 |
| APPLICANT: | Ms Chih |
| RESPONDENT: | Mr Chan |
| FILE NUMBER: | SYC | 3511 | of | 2014 |
| DATE DELIVERED: | 11 October 2018 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Watts J |
| HEARING DATE: | 19 – 20 February 2018; 22 – 23 February 2018 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Fowler |
| SOLICITOR FOR THE APPLICANT: | Cominos Family Lawyers |
| COUNSEL FOR THE RESPONDENT: | Mr Othen |
| SOLICITOR FOR THE RESPONDENT: | Kim & Associates |
Orders
Pursuant to s 79 of the Family Law Act 1975 (“the Act”), an order be made in the terms of paragraphs 2 to 9.
On or before the date which is 42 days from the date of these orders (“the due date”) the husband pay to the wife the sum of $665,166 (“the payment”).
Simultaneously with the making of the payment by the husband to the wife:
3.1.The husband pay all such moneys and do such other things necessary to cause the Commonwealth Bank Viridian Line of Credit account number …14 and the mortgage securing the Commonwealth Bank Viridian Line of Credit against the property at D Street, Suburb C being the land described in Folio Identifier …/…75 (“the Suburb C Property”) to be discharged; and
3.2.The wife sign all documents and do such other things reasonably required (at the cost of the husband) to transfer her interest in the Suburb C Property to the husband.
In the event the husband fails to comply with his obligations pursuant to paragraphs 2 and 3.1 the parties shall, on the request of the wife, forthwith join in doing all things recommended by the Real Estate agent appointed by the parties pursuant to subparagraph 4.1 to list for sale and sell the Suburb C Property together with all improvements, fixtures and fittings on and to the Suburb C Property in accordance with the following arrangements, unless otherwise agreed in writing between the parties:
4.1.The Suburb C Property shall be listed for sale by public auction within 30 days of the due date referred to in paragraph 2 with a real estate agent as agreed between the parties but in default of agreement within 14 days of the due date, with a real estate agent nominated by the President for the time being of the Real Estate Institute of New South Wales on the request of either party (“the real estate agent”);
4.2.The parties shall do all such acts and things and sign all such documents as necessary to procure a sale by way of public auction of the Suburb C Property upon the following terms:
4.2.1.The auctioneer shall be as agreed between the parties and, if there is no agreement, as nominated by the real estate agent;
4.2.2.The auction shall take place within 30 days of the Suburb C Property being listed with the real estate agent; and
4.2.3.The reserve price shall be as agreed by the parties, and if no agreement, either of them is at liberty to approach the Real Estate Institute of New South Wales to request that an appropriate officer nominate a real estate valuer and the parties shall request such valuer to determine the reserve price for the purposes of auction and the parties shall be bound by the decision of the nominated valuer.
4.3.In the event the Suburb C Property is not sold at any auction held pursuant to these orders or by private negotiation within 14 days after the said auction then the parties shall do all acts and things and sign all necessary documents to procure a further auction to take place within a further 35 days of that date with a reserve price which is 5 percent lower than the reserve price for the previous auction and otherwise upon the same terms and conditions as applied to the first auction.
4.4.In the event the bidding at any auction which takes place pursuant to these orders does not reach the reserve price the parties shall negotiate with the highest bidders or any other interested party and use their best endeavours to effect the sale of the Suburb C Property at a price which is not more than five per cent (5 per cent) below the reserve price or at such other price as the parties may agree in writing.
4.5.The parties shall co-operate in every way with the nominated real estate agent, including (without limiting the generality of the foregoing):
4.5.1.Making all keys available to the real estate agent and allowing inspection of the Suburb C Property at all reasonable times requested by the real estate agent;
4.5.2.Doing or saying nothing to hinder or prevent a sale from being effected;
4.5.3.The husband shall ensure that the Suburb C Property, including the grounds, are in a neat, clean and well maintained condition at the time of inspection by the real estate agent and any prospective purchasers;
4.5.4.Signing all documents reasonably requested to be signed by the real estate agent in relation to the listing for sale of the Suburb C Property; and
4.5.5.Agree to engage a solicitor or conveyancer and failing agreement, such person to be appointed by a nominee of the President of the Law Society of New South Wales for the time being.
4.6.The contract for sale of land for the sale of the Suburb C Property shall contain such reasonable terms and conditions as may be agreed between the parties, or in default of agreement, as advised by the solicitor or conveyancer acting on the sale.
4.7.The husband shall pay all costs required to be paid to implement any requirement in paragraph 4 and, in relation to any such costs paid to the Real Estate Institute of New South Wales for the purposes of nominating a real estate agent or valuer, to the real estate agent for advertising expenses, to the auctioneer for auction fees, to any valuer appointed under this order for valuation fees and to any solicitor or conveyancer engaged to act for the parties on the sale, and the husband shall be entitled to be reimbursed such amounts from the sale proceeds of the Suburb C Property as a cost of sale.
4.8.Upon completion of the sale of the Suburb C Property the proceeds of the sale shall be applied in the following order and priority:
4.8.1.subject to paragraph 5.2, in payment of the amount required to discharge the Commonwealth Bank Viridian Line of Credit and the mortgage over the Suburb C Property;
4.8.2.In payment of all real agent’s commission and auction expenses (if any);
4.8.3.In payment of all legal or conveyancing costs and expenses on sale;
4.8.4.In payment of all rate adjustments (subject to paragraph 5.1);
4.8.5.Reimbursement to the husband of any amounts paid by him as referred to in subparagraph 4.7;
4.8.6.In payment to the wife of 665,166/1,250,000 of the balance provided that in the event the gross sale price for the Suburb C property exceeds $1,250,000 this amount shall be increased by 73.9 per cent of the difference between $1,250,000 and the gross sale price and in the event that the gross sale price for the Suburb C property is less than $1,250,000, this amount shall be reduced by 73.9 per cent of the difference between $1,250,000 and the gross sale price; and
4.8.7.In payment of the balance to the husband.
Pending the transfer or sale of the Suburb C property pursuant to these orders:
5.1.The husband shall pay as they fall due all rates, taxes, building and legal liability insurance premiums to keep the Suburb C property insured in the joint names of the parties to its full insurable value, and other outgoings in relation to the Suburb C Property;
5.2.The husband shall pay as they fall due any amounts which require payment in respect of the Commonwealth Bank Viridian Line of Credit and the mortgage over the Suburb C Property and any arrears in respect of the regular repayments in relation to these liabilities;
5.3.The husband shall maintain the Suburb C property in a clean, tidy and well maintained state and condition; and
5.4.Neither party shall withdraw funds against the Commonwealth Bank Viridian Line of Credit without the prior written consent of the other party.
Within 14 days the husband do all acts and things and sign all documents required to transfer the Japanese car registered number … to the wife.
The parties are to divide the jointly owned furniture evenly by agreement and failing agreement by a pick a pile method.
That:
8.1.The court allocate, as required by s 90MT(4) of the Family Law Act 1975, a base amount of $47,917 to Ms Chih (“the wife”) out of the interest of Mr Chan (“the husband”) in E Superannuation, member number …75 (“the Fund”).
8.2.Pursuant to s 90MT(1)(a) of the Family Law Act 1975, whenever E Superannuation makes a splittable payment out of the interest of the husband in the Fund, the Trustee shall:
8.2.1.Pay to the wife the entitlement calculated in accordance with Part 6 of the Family Law (Superannuation) Regulations 2001; and
8.2.2.Make a corresponding reduction in the entitlement the husband would have had in the Fund but for this order.
8.3.This Order has effect from the operative time.
8.4.The operative time for this Order is 4 business days after the date of service of a sealed copy of the Orders on the Trustee of the Fund.
8.5.The Trustee of the Fund do all such acts and things and sign all documents as may be necessary so that, in accordance with the obligations set out under the Family Law Act 1975 and the Family Law (Superannuation) Regulations 2001, the Trustee can calculate the entitlement of, and make payment to, the wife in accordance with this Order.
Each party be solely entitled to the exclusion of the other to all property, assets, chattels and superannuation in their respective names or possession as at the date of these orders and that each party indemnify the other in relation to any debt associated with any asset that is kept by each of them respectively.
In the event that either party refuses or neglects to sign any document required to be signed to comply with this Order, a Registrar of the Family Court of Australia is hereby appointed to execute all Deeds and documents in the name of the husband or wife and do all acts and things necessary to give validity and operation to this Order pursuant to s 106A of the Family Law Act.
Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Chih & Chan (No. 2) has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).
| FAMILY COURT OF AUSTRALIA AT SYDNEY |
FILE NUMBER: SYC 3511 of 2014
| Ms Chih |
Applicant
And
| Mr Chan |
Respondent
REASONS FOR JUDGMENT
INTRODUCTION
The husband and wife each seek a different property settlement order.
The parties were born in South Korea and moved to Australia in 2000. There are two children of their 14 year marriage, X, born in 2002, who is currently 16 years old and Y, born in 2004, who is currently 13 years old.
Both parties received financial assistance from parents who live or did live in South Korea. The husband received a gift of real estate from his father nine months before the parties’ marriage and gifts of cash during the marriage. The wife received a post separation inheritance of an interest in a valuable property after the death of her father and a further transfer from her mother of part of her mother’s interest in that property.
Both parties assiduously but unremarkably contributed their personal exertion in the roles they respectively played in the marriage. The wife initially sought to establish that her contribution was made significantly more arduous by the conduct of the husband, however, this claim was abandoned by counsel in final submissions.
APPLICATIONS
The full text of the orders sought by the wife and the husband are set out at Schedules 1 and 2 respectively.
The husband seeks a property settlement order which provides that:
6.1.The wife transfer to him her interest in the property at D Street, Suburb C (“the Suburb C property”);
6.2.He take over the existing loans secured against the title to the Suburb C property and pay the wife $267,500;
6.3.The wife receive $45,000 from the husband’s superannuation entitlements; and
6.4.Each party shall otherwise retain and be responsible for their own property, superannuation and liabilities in Australia and South Korea.
The wife seeks a property settlement order which provides that:
7.1.The husband pay her the sum of $1,368,498;
7.2.She transfer her interest in the Suburb C property to the husband;
7.3.The husband discharge the current debt on the Suburb C property;
7.4.Superannuation be evenly split (using a base amount of $47,917);
7.5.The husband transfer a motor vehicle to the wife; and
7.6.If the husband does not pay to the wife the amount in paragraph 7.1, then there be provisions for a default sale (noting that unless the Suburb C property sold for substantially more than its agreed value the wife would not receive the sum of $1,368,498 as sought).
DOCUMENTS RELIED UPON
The documents relied upon by each party are set out in Schedule 3. In addition, a volume of documents were tendered during the hearing.
SHORT HISTORY
The husband was born in South Korea in 1969 and is 49 years of age.
The wife was born in South Korea in 1974 and is 44 years of age.
The parties married in February 1999.
The parties came to Australia in July 2000.
In 2002, the parties’ first child, X, was born and is 16 years of age.
In 2004, the parties’ second child, Y, was born and is 13 years of age.
The parties separated on a final basis on 30 June 2013.
THE WIFE’S PROPOSED “KENNON” CLAIM
At the outset of the hearing, the wife indicated that part of her case in respect of contributions was based upon an argument that the husband’s conduct had made her contributions significantly more arduous.
It was understood that that assertion was founded on the decision of the plurality in Kennon v Kennon (1997) FLC 92-757 where Fogarty and Lindenmayer JJ said the following about when conduct is relevant in financial matters (at 84,294):
Put shortly, our view is that where there is a course of violent conduct by one party towards the other during the marriage which is demonstrated to have had a significant adverse impact upon that party's contributions to the marriage, or, put the other way, to have made his or her contributions significantly more arduous than they ought to have been, that is a fact which a trial judge is entitled to take into account in assessing the parties' respective contributions within s 79…. In the above formulation, we have referred only to domestic violence… but its application is not limited to that.
However, it is important to consider the “floodgates” argument. That is, these principles, which should only apply to exceptional cases, may become common coinage in property cases and be used inappropriately as tactical weapons or for personal attacks and so return this Court to fault and misconduct in property matters — a circumstance which proved so debilitating in the past.
The wife in her written evidence provided much material in relation to the husband’s conduct which included allegations of physical assault and coercive and controlling behaviour. The husband in evidence in reply disputed most of what the wife said in her written material. Both parties were cross examined at some length in relation to these matters. That cross examination led me to doubt some of the things which the wife had said and some of the things which the husband had said in relation to specific parts of their conduct.
However, when counsel for the wife was invited to address the court in final submissions in relation to the wife’s Kennon claim, and in relation to credit findings more generally, he said:
….in terms of the Kennon claim, your Honour, our position is, having had a look at the state of the evidence and the Kennon cases, I expect that we won’t be able to bring this within the type of exceptional case that is required to get over the Kennon threshold.
Subsequently, counsel for the wife reiterated that he was no longer arguing a Kennon case.
Counsel for the wife then referred to the evidence of the husband’s conduct towards the wife, which were allegations of a coercive and controlling kind, and said:
…the evidence of the wife are relevant as contextual evidence for what we would say is a very significant contribution by the wife in terms of homemaker and parent…..direct conduct as to how the husband thought the wife should perform and what she should do in her capacity as homemaker and parent. I am not talking about the assaults.
As the plurality made clear in Kennon, the principal to be applied in the majority of cases is that matrimonial fault in the general sense is not able to be taken into account under s 79 of the Act (see Soblusky & Soblusky (1976) FLC 90-124; Ferguson & Ferguson (1978) FLC 90-500).
What counsel for the wife seemed to be suggesting was that somewhere between not taking fault into account as the general starting position and establishing that there is an exceptional case where violent or other conduct has made a party’s contributions significantly more arduous, there is a middle ground in which conduct can be considered as relevant when assessing what property settlement order should be made. Counsel for the wife did not cite any authority in support of his submission and I am not aware of any. As discussed during submissions, to entertain the proposition that he asserted would be, in the word used by the plurality in Kennon, to open the “floodgates”.
In addition, counsel for the wife did not develop, by way of reference to the contested evidence, what findings should be made as a basis for the submission by him that regard should be had to the expectations and conduct of the husband, to contextualise the contributions made by the wife in the role of homemaker and parent.
I, accordingly, have no regard to the body of evidence in this case about the respective fault based conduct of the parties in the proceedings, which might only have had relevance if the wife’s Kennon claim had not been abandoned.
CREDIT
Once the Kennon claim was abandoned, neither counsel for the parties sought that any credit finding be made in relation to either of the parties. I accept that it was not necessary nor appropriate to do so.
CHRONOLOGY
The husband was born in 1969.
The wife was born in 1974.
On 8 May 1998, the husband received an apartment in City G, South Korea (“the N apartment”) as a gift from his father.
The parties married in February 1999.
The husband was unemployed from the beginning of the marriage until December 2003.
From 1999 until 2005, the husband’s parents made gifts worth $100,000 which were used for the parties’ living expenses.
The parties moved to Australia in July 2000.
The parties’ first child, X, was born in 2002.
In December 2003, the husband commenced work at P Firm.
The parties’ second child, Y, was born in 2004.
In 2005, the N apartment block in South Korea was demolished and the S apartment block was constructed on the same site. The husband purchased an apartment in the redevelopment for 219,800,000 Korean Won or approximately $270,000 (at the exchange rate at that time). After the completion of the construction of the apartment, the husband’s parents became the husband’s tenants.
In 2005, the husband’s parents paid the husband the first Jeonse (discussed below) on the S apartment.
In 2005, the husband’s parents made a gift of $55,000 to the parties.
In June 2005, the father was made redundant from P Firm and was unemployed until he commenced work at a consulting firm in October 2005.
In February 2006, the husband left the consulting firm and began work at T Company from February 2006 until March 2008.
On 10 July 2006, the parties purchased D Street, Suburb C for $615,000.
In April 2008, the husband began work at W Company.
In 2008, the husband’s parents made a gift of $98,000 which was used for mortgage repayments.
On 2 August 2010, the husband received the second Jeonse.
In April 2012, the father stopped working at W Company and commenced employment with Q Company.
On 28 July 2012, the husband received a third Jeonse.
On 27 June 2013, the husband received a redundancy payment from Q Company of $24,201.11.
The parties separated on 30 June 2013.
On 3 April 2014, the wife’s father died without leaving a will. The wife received $60,000 from her mother sometime after his death.
On 15 July 2014, the wife’s late father’s commercial property was divided as to a 5/14th share to the wife, a 5/14th share to the wife’s brother and a 4/14th share to the wife’s mother.
On 26 August 2014, the husband received the fourth Jeonse.
In October 2014, the father began working as a manager at the Z Church.
In October 2015, the wife and children moved into rental accommodation for which the wife paid rent of $530 per week.
On 4 August 2016, the husband received the fifth Jeonse.
The wife received $74,000 from her brother (I do not know the date) to assist her in legal costs and living expenses.
THE JEONSE
The S Apartment in South Korea is owned by the husband and is currently tenanted using the South Korean “Jeonse” system. Instead of paying periodic rent, a tenant will pay a significant lump sum “deposit” with the average deposit being an amount of approximately 70 per cent of the market value of the property. Upon the termination of the tenancy, the Jeonse is repaid to the tenant but the landlord has the use of the significant lump sum for the duration of the tenancy. The landlord is able to wholly or partly fund the repayment of the Jeonse to the outgoing tenant from the new Jeonse from an incoming tenant.
When the S apartment was completed in 2005, the husband tenanted the property to his parents and received a Jeonse from them of AUD $530,000.
On 10 July 2006, the parties purchased D Street, Suburb C for AUD $615,000. The husband says that the property was acquired with the AUD $530,000 Jeonse (wife’s case is $510,000) and a loan of AUD $150,000 from the Commonwealth Bank of Australia (“the mortgage”).
On 2 August 2010, a second Jeonse was paid by a tenant worth AUD $462,000. From that Jeonse, AUD $46,000 was used to pay the mortgage with the remaining deposit used to partly discharge the husband’s parents’ Jeonse.
On 28 July 2012, a third Jeonse was paid by another tenant worth AUD $442,000. From that Jeonse, AUD $26,520 was used to pay the mortgage with the remaining deposit used to partly discharge the second Jeonse.
On 26 August 2014, a fourth Jeonse was agreed to with the existing tenant. This Jeonse was an additional 70,000,000 Korean Won and the husband placed this sum in a Korean bank account. At that time, the Jeonse was AUD $634,000.
On 4 August 2016, a fifth Jeonse was agreed to with the existing tenant. This Jeonse was an additional 150,000,000 Korean Won more than the fourth Jeonse and when that sum was received by the husband he placed it in a Korean bank account. At that time, the Jeonse was AUD $882,500.
The current Jeonse is in the sum of AUD $889,654. Both parties wished that the Jeonse be treated differently on the balance sheet and that issue is discussed below.
APPROACH
In this matter my task is to:
64.1.Identify according to ordinary common law and equitable principles and then value the property, assets, financial resources and liabilities of the parties;
64.2.Determine whether it is just and equitable to make an order altering those interests and if so;
64.2.1.Identify relevant contributions and assess them;
64.2.2.Consider relevant matters referred to in s 79 of the Act;
64.3.Determine what order adjusting the property, assets and liabilities of the parties is just and equitable.
BALANCE SHEET
Because of the somewhat complex submissions that have been made in relation to the balance sheet, it is useful as a starting point to set out the agreed consolidated balance sheet that was handed up prior to the commencement of final submissions (Exhibit 13). It is in the following form:
Assets
Item no.
Title
Description
H value
W value
1
J
D Street, Suburb C NSW
$1,250,000
$1,250,000
2
H
S Apartment, City G, South Korea
$1,186,206
$1,186,206
3
W
J Property, City G, South Korea
$2,262,319
N/A
4
H
CBA Bank Account (#...02)
$837
n/k
5
H
ANZ Bank Account (#...01)
$26
n/k
6
H
L Bank Account (#...78)
$34
n/k
7
H
L Bank Account (#...07)
$0
n/k
8
W
Westpac Bank Account (#...27)
$1,465
$1,465
9
W
CBA Bank Account (#...42)
$214
$214
10
W
M Bank Account (#...01)
$214
$214
11
H
K Bank Account (#...13)
$51,057
$51,057
12
W
Bond
$2,120
$2,120
13
W
Funds held by wife's mother
$69,239
N/A
14
H
Japanese car
$17,000
$17,000
15
H
European car
$8,000
$8,000
16
J
Furniture & personal effects
$6,000
$6,000
17
H
K Bank proceeds - Jeonse income
$0
$209,915
18
H
L Bank Account (#...78)
$0
$18,203
19
H
Joint line of credit
$0
$59,947
20
H
Paid legal fees
$155,000
21
W
Paid Legal fees
$167,469
N/A
22
H
E Super
$105,023
$105,023
23
W
F Super
$9,189
$9,189
Liabilities
Item no.
Title
Description
H value
W value
24
J
Home mortgage
$179,963
$179,963
25
H
Total Bond repayable to South Korea tenants
$889,654
N/A
26
W
Personal loan from mother
$0
$60,000
Exhibit 13 also contained an assertion by the husband that the wife was entitled to a sum of $120,000 per annum as a financial resource from monies earned upon the J property (Item 3).
How many pools?
Each of the parties submitted that there should be more than one pool. It was the wife’s position that there should be two pools; it was the husband’s position that there should be three.
Item 3 is a commercial property in South Korea. Item 13 are funds held by the wife’s mother and item 21 are legal fees paid by the wife’s mother. The wife argues that these items have as their source a post separation inheritance following the wife’s father’s death and the transfer to her of part of the commercial property inherited by her mother.
In the wife’s case outline (Exhibit 2), counsel for the wife submitted in respect of item 3:
The husband has made no contribution to the wife’s interest in this property and it is submitted that the Court should exercise its discretion to exclude it from the property pool – see Bonnici v Bonnici (1992) FLC 92-272; Bishop v Bishop [2013] FamCAFC 138.
The Full Court has recently re-emphasised that it is wrong as a matter of principle to refer to any existing legal or equitable interest in property of the parties or either of them as being “excluded” from considerations in applications for orders pursuant to s 79 of the Act (see Calvin & McTier (2017) FLC 93-785; Holland & Holland (2017) FLC 93-798). During the hearing, counsel for the wife did not press the position contained in the wife’s case outline and instead submitted that items 3, 13 and 21 should be placed in a separate pool so that contributions to those assets could be considered discretely.
I accept the contention that it would be appropriate to place the assets which the wife has received after the separation from her father’s inheritance into a separate pool for the purpose of considering contributions. They shall be placed in pool one.
Counsel for the husband asserts that there should be a separate pool for the husband’s S Apartment (Item 2), the husband’s interest in the K Bank Account (Item 11), the K Bank proceeds/Jeonse income (Item 17) and the bond repayable to the South Korean tenants (Item 25).
The history of the husband’s acquisition of these assets and liability is of some complexity and is connected to the financial history of the parties during the time that they were together. Whilst the opportunity to acquire these assets may have had as its genesis, a property gifted to the husband in the year before the parties married, the S apartment came into existence six years after the parties married and the income from the apartment including the Jeonses were closely linked to the acquisition of the Suburb C property. These assets and liability are of a different nature to the wife’s post separation inherited assets. There is no particular advantage of placing these assets in a separate pool in order to consider the parties’ contributions. Accordingly, I will include them in the general pool of assets, namely, pool two.
In relation to the respective superannuation interests of the two parties (Items 22 and 23), it was agreed that the superannuation would be split evenly between the parties and left in the general pool.
Pool one
The determined values for the items in pool one are set out in bold in the table below. The reasons for each determination are set out under the table:
| Item No. | Title | Description | H value | W value | Agreed / Determined | Value |
| 3 | W | J Property, City G, South Korea | $2,262,319 | Nil | Determined | $2,262,319 |
| 13 | W | Funds held by wife's mother | $69,239 | Nil | Determined | $0 |
| 21 | W | Paid Legal fees | $167,469 | Nil | Determined | $0 |
| Total | $2,262,319 | |||||
The draft balance sheet does not include the wife’s obligation for part of the inheritance tax which is owed on the J property in the sum of approximately $113,000 but which the evidence suggests will be paid off from the proceeds of the rental income of the property by October 2019. There are two remaining tax instalments, namely, 48,456,400 Korean Won due on 31 October 2018 and 47,128,200 Korean Won due on 31 October 2019 (Exhibit E of the wife’s mother’s affidavit). This is the equivalent of $57,480.90 and $55,905.39 respectively (843 Won to 1 AUD).
Item 3
On 3 April 2014, almost a year after the parties separated, the wife’s father died without leaving a will. Amongst the wife’s father’s estate was a commercial property at J, City G, South Korea (“the J property”) the total value of which is in excess of AUD $6,000,000. Korean intestacy law provides that the wife would have been entitled to a 4/14th share of the property. On 15 July 2014, an agreement was lodged in South Korea by the wife, the wife’s mother and the wife’s brother, to effect the legal transfer of the ownership as to a 5/14th share to the wife, 5/14th share to the wife’s brother and a 4/14th share to the wife’s mother. The wife’s legal interest in this property equates to a value of AUD $2,262,319.
A central issue at the hearing was whether or not regard should be had to the value of the wife’s interest in this property. Counsel for the wife submitted that the J property should not be given any value because, notwithstanding the legal ownership, the wife has no beneficial interest in this property. At [253] and [254] of the wife’s affidavit of 6 December 2017, she states:
253. I have no expectation to receive (and do not receive) any of the rental income from the [J property], during my Mother’s lifetime. This is because it is considered highly inappropriate according to Korean cultural custom and practice, for an adult child to expect (or even discuss) the division of property left by a deceased parent, with their surviving parent.
254. As a result, the income generated by the [J property] is wholly retained by my Mother for her own use and benefit absolutely and will continue to be retained by my Mother, during her lifetime.
In support of this position, counsel for the wife referred to two affidavits of Ms B (a South Korean Attorney who was called by the wife to give expert evidence). Ms B, in her affidavit dated 16 February 2018, states:
11.There can be cases that an inherited property may have the outward appearance of being owned or held in the names of several parties, but in reality, the property will be owned and controlled by one of those parties.
…
13.In the event of a dispute, the Court will make a decision based upon the evidence which reflects the reality. For example, in this case, I have sighted copies of current lease agreements for the [J Property] which the Applicant Wife’s Mother (Ms [O]) has executed in her sole name as Lessor and received the rental income from the tenants of this property into her bank account and used the rental income at her discretion. In my experience, this would be persuasive evidence that in reality the Applicant’s Mother is in control of the [J property].
….
20.The Applicant Wife’s case is that although she has inherited a portion of her Father’s estate on paper because of inheritance tax implications, in reality, all the properties of her Father’s estate have been possessed by her Mother and her Mother uses and receives all income from the properties for her own living expenses. Korean customs and social culture are strongly reflected in Korean law, and the Applicant Wife’s case is consistent with Korean customs and social culture.
In addition, at page 10 of her affidavit filed 6 December 2017, Ms B states that:
Usually, unless the children may support their mother, the mother uses the inheritance property for her living as before (before the father’s decease) and the children may share the inherited assets after the mother’s decease. Children demanding division of inherited properties while one of their parents is still alive is a taboo subject in Korea. In Korean customs, the inherited assets are the parents’ properties and therefore the assets are the subject of the parent’s permission and it is hardly the thing for children to demand.
Counsel for the wife also relied upon Ms B’s oral evidence.
Counsel for the wife invited the court to take the evidence of Ms B to mean that the wife doesn’t have a beneficial interest in the property. It was argued that Ms B’s evidence shows that the wife holds the title of the 5/14th share on trust on behalf of her mother, and that ultimately, any interest that comes to the wife will not crystallise until the death of the wife’s mother and will be subject to her mother not taking steps to become sole proprietor in the meantime. Counsel for the wife suggested that the evidence supported a contention that the wife’s mother could at any time insist that her daughter’s interest in this property be transferred to her or that the wife’s mother is able to go to a Korean Court and claim that she has the whole of the legal and beneficial interest in the property.
In response, counsel for the husband submitted that:
82.1.The court cannot apply Korean law or speculate on what a Korean court might do and as there are no court orders or other documents that would suggest otherwise, it must be determined that the wife does have an interest in the J property;
82.2.The property is worth over AUD $6 million and it is an agreed fact that the value of the wife’s legal interest in the J property is AUD $2,262,319;
82.3.Whilst the wife’s mother’s evidence was that she has only been able to pay tax and living expenses out of what she has been getting from the property so far, the inheritance tax liability runs out in 2019, after which she will have available to her all of the rental income from the J property; and
82.4.The wife’s mother has already demonstrated that she can repatriate to her daughter sums of money to Australia from that source.
Counsel for the wife conceded that he had not put to Ms B nor did Ms B specifically say during cross examination that the wife’s mother could take court action against her daughter to have the wife’s interest in the J property transferred to her.
I find that it is of some significance that the wife, her mother and her brother entered into a formal document setting out their intentions as to what were the legal entitlements to this property. With reference to the words “In the event of a dispute” (the opening words of [13] of Ms B’s affidavit set out above), there is no evidence that there is any dispute between the wife, her mother and her brother as to the legal interest in this property or that there is any basis to conclude that the wife’s mother has the right to rescind the written agreement that the three parties have entered into.
Further, on page 11 of her December 2017 affidavit, Ms B states that:
… the mother might agree to adjust the sharing portion of the inherited assets under the condition that the mother could believe in her children (if [the wife] and her brother exercise their legal rights for the real estate which is the sole source of her living, the mother may lose her retirements nest…
This passage seems to speculate that the wife and her brother could use their legal interests in the J property to sell the property against their mother’s wishes.
I do not accept that the effect of Ms B’s evidence is that the wife has no beneficial interest in the J property and the wife’s mother could at any time require the wife to transfer the wife’s legal interest to her. Also, there is no evidence that either woman had that possibility in mind. Whilst Ms B agreed Korean law recognised legal and beneficial interests in property, she gave oral evidence indicating that:
If one is insisting that the owners on registration and the actual owners are different, that party has to prove with the documents that, for example, taxation, or management, or how the money is spent, or other detailed documents, to prove that in reality the property is owned by B [the person asserting a beneficial interest].
It is not contentious that the wife’s mother, who lives in South Korea, conducts the day to day management of this commercial property.
I find that:
89.1.The wife currently has the legal ownership of a 5/14th share of the J property and that position cannot be altered without her consent;
89.2.At the current time, particularly when her mother is managing the income from the J property to pay inheritance tax, the wife does not have access to any regular income stream from her 5/14th share in this property;
89.3.The liability to pay inheritance tax will be extinguished in October 2019;
89.4.In accordance with Korean custom, children who receive inherited property whilst one of their parents is still alive have a moral/cultural obligation to ensure that property is made available if the surviving parent needs the income from the property for the purposes of their maintenance;
89.5.It is likely that the wife would be unable to sell the J property without the consent of her mother and brother whilst her mother is alive; and
89.6.The wife has not established that she has no immediate beneficial interest arising from her 5/14th legal share in the property. This is a finding that can be even more confidentially made if applied to circumstances after October 2019.
Conclusion in relation to the value of item 3
The parties agree that the wife’s legal interest in item 3 is in the sum of AUD $2,262,319. Counsel for the wife argues that the wife does not have any beneficial interest in that property, and consequently, her real interest should be valued at nil. As indicated, I do not accept that proposition.
I do acknowledge, however, that the evidence indicates that the wife has a moral and cultural obligation to ensure that her mother is properly cared for and for that purpose, if it is necessary, the income from her share of the J property needs to be available to the extent that it is necessary to maintain her mother.
At its highest, that means that the wife’s mother may have the right for her life to have all of the income from the J property. I do not have a full picture of the wife’s mother’s financial circumstances. The wife’s mother has her own independent accommodation in South Korea which is subject to a Jeonse. She gave oral evidence that she was not receiving any income apart from the rental income generated from the J property, which is approximately AUD $244,783 per annum ($20,398 per month; see [38] of her 6 December 2017 affidavit). She says at [40] that after levies and tax she has approximately AUD $90,000 per annum for general living expenses. However, when cross examined by counsel for the husband, the wife’s mother agreed that she had been able to save about one third of the income after paying taxes and living expenses (that is, an amount of about AUD $30,000 per annum). The death taxes are approximately AUD $55,000 per annum. From October 2019, when the death taxes are no longer payable, the surplus income increases to AUD $85,000 per annum. I, therefore, do not accept an assertion that the entirety of the income generated by this very valuable property will be required by the wife’s mother for her ordinary living expenses.
Whilst I could have adopted the approach of treating the value of the wife’s interest in the J property as not being known on the basis that some discount (of which there is no actuary evidence) should be applied to the face value of the wife’s interest in the property, it is more convenient if I simply adopt the value of the wife’s legal interest in the property for the purposes of the balance sheet and take into account, when considering s 79(4)(d) – (g) considerations, the fact that the wife does not have the capital in this property immediately available to her, that in the short term she will not have available to her the full income stream flowing from her interest in the property and that, in the medium to long term, some of that income may need to be retained by her mother for her living expenses.
Item 13
Item 13 is part of the funds held by the wife’s mother from the rental income from the J property which counsel for the husband claims is the property of the wife. It is asserted that $69,239 is held upon the wife’s behalf. This value was reached by taking the 300,000,000 Korean Won (AUD $355,871) that the wife’s mother said she had in savings and adding the $90,000 the wife had received from her mother which was from the rental income. Of the overall savings of $445,871 ($355,871 + $90,000), counsel for the husband submits that the wife is entitled to a 5/14th share, namely $159,239. Counsel for the husband argues that as the wife has already received $90,000 from this source, the amount owing by the wife’s mother to the wife is $69,239 ($159,239 - $90,000).
It is not in dispute that currently the wife’s mother holds these funds in an account in her own name. Whilst these funds might be available to the wife to call upon, I prefer to treat that entitlement as a s 79(4)(d)-(g) consideration in circumstances where the monies are being managed by the wife’s mother and inheritance tax on the J property is still outstanding. It is, therefore, not appropriate to place the amount of $69,239 as an asset on the balance sheet against the wife, particularly when her notional share of the inheritance tax of $40,494 ($57,480 + $55,905 x 5/14; see [76] above) is taken into account. For the purposes of the pool one balance sheet, I assess item 13 as nil.
Item 21
The husband seeks that item 21, the wife’s paid legal fees of $167,469, be placed on the balance sheet. However, that figure is a combination of the wife’s paid legal costs ($97,566) and an estimate of her future costs ($69,903 of which $19,885 is held in trust (see the wife’s notification of costs at Exhibit 4)).
Whilst I am unable to reconcile some of the amounts set out in Exhibit 4, that document states that the source of the funds from which legal fees and disbursements have been paid and are to be paid are the wife’s mother and the wife’s brother. The wife has received $60,000 from her mother and $72,000 from her brother post separation, the source of which were also used as legal expenses.
The husband argues that to the extent the monies have come from the wife’s mother, they are a payment by the wife’s mother of rental monies owing to the wife from the J property. I am unable to conclude that is so, although, I note the payment of the money by the wife’s mother reinforces the general findings I have made about the ownership of the J property. The wife has not included any debt to her mother or brother for monies expended on legal fees on the balance sheet and, accordingly, I do not intend to add the wife’s paid legal fees to the balance sheet.
Accordingly, I assess item 21 as nil.
Pool two
The settled table for pool two is set out below. Where values are not agreed they appear in bold as determined by me. The reasons for each determination are set out under item numbers following the table.
| Assets | ||||||
| Item no. | Title | Description | H value | W value | Agreed/ Determined | Value |
| 1 | J | D Street, Suburb C, NSW | $1,250,000 | $1,250,000 | Agreed | $1,250,000 |
| 2 | H | S Apartment, City G, South Korea | $1,186,206 | $1,186,206 | Agreed | $1,186,206 |
| 4 | H | CBA Bank Account (#...02) | $837 | n/k | Determined | $837 |
| 5 | H | ANZ Bank Account (#...01) | $26 | n/k | Determined | $26 |
| 6 | H | L Bank Account (#...78) | $34 | n/k | Determined | $34 |
| 7 | H | L Bank Account (#...07) | $0 | n/k | Determined | $0 |
| 8 | W | Westpac Bank Account (#..27) | $1,465 | $1,465 | Agreed | $1,465 |
| 9 | W | CBA Bank Account (#...42) | $214 | $214 | Agreed | $214 |
| 10 | W | M Bank Account (#...01) | $214 | $214 | Agreed | $214 |
| 11 | H | K Bank Account (#...13) | $51,057 | $51,057 | Agreed | $51,057 |
| 12 | W | Bond | $2,120 | $2,120 | Agreed | $2,120 |
| 14 | H | Japanese car | $17,000 | $17,000 | Agreed | $17,000 |
| 15 | H | European car | $8,000 | $8,000 | Agreed | $8,000 |
| 16 | J | Furniture & personal effects | $6,000 | $6,000 | Agreed | $6,000 |
| 17 | H | K Bank proceeds - Jeonse income | $0 | $209,915 | Determined | $54,915 |
| 18 | H | L Bank | $0 | $18,203 | Determined | $0 |
| 19 | H | Joint line of credit | $0 | $59,947 | Determined | $31,373 |
| 20 | H | Paid legal fees | $155,000 | Determined | $155,000 | |
| 22 | H | E Super | $105,023 | $105,023 | Agreed | $105,023 |
| 23 | W | F Super | $9,189 | $9,189 | Agreed | $9,189 |
| Total assets | $2,878,673 | |||||
| Liabilities | ||||||
| Item no. | Title | Description | H value | W value | Agreed/ Determined | Value |
| 24 | J | Home mortgage | $179,963 | $179,963 | Agreed | $179,963 |
| 25 | H | Total Bond repayable to South Korea tenants | $889,654 | N/K | Determined | $889,654 |
| 26 | W | Personal loan from mother | $0 | $60,000 | Determined | $0 |
| Total liabilities | $1,069,617 | |||||
| Total net assets | $1,809,056 | |||||
Items 4, 5, 6 and 7
Whilst the wife indicated that she did not know what was in the husband’s bank accounts there were no suggestions that his assertions in Exhibit 13 should not be accepted. The amounts are of no great consequence and I will place them on the table.
Items 2, 11, 17 and 25
The agreed value of the husband’s interest in the S Apartment (Item 2) is in the sum of $1,186,206. The sum of $51,057 in the K Bank Account (Item 11) are monies derived from the S apartment.
Item 17 is a disputed amount of $209,915 that the wife wants added back against the husband for money she asserts he has used from the Jeonse income of the S apartment.
Since separation, the husband has increased his Jeonse twice and he has received amounts of 70,000,000 Won in August 2014 and 150,000,000 Won in August 2016. From the total of 220,000,000 Won that the husband has received from the Jeonse income since separation, the husband has remaining 43,041,320 Won (AUD $51,057 at Item 11). The balance of 176,958,680 Won expended by the husband equates to AUD $209,915. The husband states that this amount was used primarily for legal fees as well as child support payments and living expenses whilst he was unemployed. The amount of $155,000 for paid legal fees has been accounted for at item 20 of the table. It is appropriate to mark item 17 as $54,915 ($209,915 - $155,000).
Item 25 is the Jeonse which is owing on the husband’s S apartment in the sum of 750,000,000 Won or AUD $889,654 and which is potentially repayable at the end of the current lease, namely September 2018.
Counsel for the wife submitted that this debt should not be included as a debt of the husband on the balance sheet and argued it was only a “contingent liability”. Counsel for the wife referred to Ms B’s evidence that the existing Jeonse debt would not be repayable until a new tenant was found and submitted it should be treated in the same way as a contingent Capital Gains Tax liability applying the principles in Rosati & Rosati (1998) FLC 92-804.
Counsel for the husband argued that it is clear from Ms B’s evidence that the Jeonse provided by the current tenant would be repayable as it is a commercial relationship between tenant and landlord and the landlord’s obligations are clear. The Jeonse will also have to be repaid in circumstances where the property is sold. Further, Ms B, at Part 4 of her December affidavit, opines that the Jeonse “has the exact character of a loan”.
I don’t accept that this is a situation analogist to a latent liability for Capital Gains Tax. When considering latent Capital Gains Tax where no immediate sale is proposed, it is usually unknown as to what the taxation liability will be because it will be dependent, inter alia, upon the owners’ individual tax position in the year the owner disposes of the property. In this case, the Jeonse is simply rolled over. The rollover of a Jeonse is very similar to the property being refinanced and, accordingly, I accept it has the same nature as a loan. This is a real debt owed to the current tenant, the amount of which is known, and it needs to be placed on the balance sheet.
Item 18
The wife initially asserted that the husband had used his L bank account and $18,203 should be added back on the balance sheet. That assertion was not pressed by counsel for the wife in final submissions and it was conceded that that amount should be marked as nil on the balance sheet.
Item 19
This item centres around an argument in respect of Exhibits 17 and 21. Exhibit 17 is an aide memoire provided by the wife, and marked by the husband, detailing the overall expenditures made on the joint line of credit secured over the Suburb C property mortgage. Exhibit 21 is the husband’s aide memoire detailing the amendments he made to the wife’s calculations in Exhibit 17.
The wife asserts that as at the time of separation the mortgage was $120,016 and since then the husband has made no interest repayments on the joint line of credit and has had the sole benefit of the joint line of credit which has resulted in an increase of $59,947. She seeks the husband be wholly responsible for this increase.
In Exhibit 21 the husband calculates that from the mortgage increases, $31,373 were his own personal expenses and $29,705 were joint expenses (this adds to $61,078 and I am unable to reconcile this amount with the figure of $59,947 asserted by the wife). Included in the husband’s personal expenses is the payment of the mortgage on an interest only basis. This is offset by the benefit to the husband of occupation of the Suburb C property. Included in the joint expenses which are listed by the husband are the wife’s living costs ($2,523), school and tuition costs for the children ($2,956), family health insurance ($6,594.80), Hornsby Council levies ($6,677.77; which the husband has listed as a joint expense even those he has sole use of the Suburb C property. The wife, however, did not make a complaint about that), property valuations and mediation fees ($7,675), and the loan fees ($1,560). The husband has also listed a number of amounts that he says are joint because they were incurred prior to separation, such as the costs of his surgery and the interest fees.
Counsel for the wife submitted that in circumstances where the husband was paying limited child support and the wife was paying the majority of the children’s costs it would be unfair to list the school fees and the wife’s living costs as a joint expense. I do not accept that the children’s school fees and the wife’s living costs totalling an amount of $5,479 should be treated as solely the husband’s expense. The post separation contributions of the children shall be considered below. Given the husband’s concession that $31,373 were his own personal expenses I place that amount against the husband on the balance sheet.
Item 20
The source of the husband’s paid legal fees (Item 20) is the income he has generated from increasing the Jeonse on the S apartment. Counsel for the husband argued, that in the event that the wife’s paid legal fees are not added back, the husband’s should not be also.
I have set out above the reasons for not adding back the wife’s paid legal fees. The history of the husband’s acquisition of his interest in the S apartment is discussed below and is significantly different to the history of the acquisition of the wife’s interest in the J property.
Given the source of the legal fees and the history of the S apartment, it is appropriate to add back the husband’s paid legal fees. Accordingly, item 20 will be $155,000.
Item 26
In June 2013, the wife’s mother provided $60,000 to the wife to assist her at the time the parties separated. The wife says this was a loan which she intends to repay.
In oral evidence, the wife’s mother stated that whilst the wife had promised to pay her back, since she doesn’t have much savings and doesn’t look like she’s in a position to pay, she has told her daughter not to worry. The wife’s mother was not asked if her attitude to this advance would change in the event the wife received a lump sum cash payment as a result of a property settlement order.
There is the question, which I do not need to resolve, as to whether this payment was really part of a payment by the wife’s mother of the wife’s entitlement to rent from the J property. Whether it was payment of rent or a loan I find it is unlikely that the wife’s mother will call upon the wife to repay the monies. Accordingly, I will not place a debt to the wife’s mother in the amount of $60,000 on the balance sheet.
WHETHER AN ORDER ALTERING INTERESTS SHOULD BE MADE
The parties have separated and their partnership has ended. After the separation, there was no longer a continuing commitment to the mutual use of assets and a shared responsibility for liabilities. The tables for pools one and two, set out above, demonstrate how the assets and liabilities are currently held by each party.
The Suburb C property is the only asset held in the joint names of the parties. Both parties are seeking a different property settlement order.
I find that in all the circumstances, it is just and equitable to make an order altering property (including adjusting liabilities).
WHAT ORDER SHOULD BE MADE?
The wife submitted the court should find the husband has made no contribution to pool one.
In respect of pool two, counsel for the wife submitted that the court should find that:
124.1.The contributions of the parties are equal; and
124.2.When taking into account s 79(4)(d)-(g) considerations, an adjustment should be made in favour of the wife between five and seven per cent if the Jeonse was not included on the balance sheet as a liability. If the Jeonse was included as a liability in pool two, counsel for the wife argued that an adjustment in favour of the wife between 15 and 20 per cent should be made in circumstances where it was asserted the Jeonse represented a large proportion of the overall net assets and where the liability was unlikely to be repaid in the foreseeable future.
As discussed, counsel for the husband submitted that the court should:
125.1.Take a three pool approach (where pool one has all of the husband’s South Korean assets, pool two has all of the wife’s South Korean assets and pool three has everything else);
125.2.Find that both the husband and the wife each get 100 per cent of their respective South Korean property;
125.3.Determine that the contributions to the third pool were made as to 75 per cent to the husband and 25 per cent to the wife; and
125.4.Make a s 79(4)(d)-(g) adjustment between zero to five per cent in the wife’s favour.
Given that I have adopted a two pool approach, I will deal with the contributions to each pool and then, having considered what each party would receive as a result of that analysis, deal with s 79(4)(d)-(g) considerations on an overall basis.
CONTRIBUTIONS
Contributions to Pool one (Items 3, 13 and 21)
It is not a matter of controversy that the husband made no direct or indirect contribution to the acquisition or conservation of the assets in pool one and that the wife has made a 100 per cent contribution to those assets.
Contributions to Pool two
Initial Contributions
Prior to the parties’ marriage, the husband had received an apartment in City G, South Korea (“the N apartment”) as a gift from his father on 8 May 1998. The N apartment was subsequently redeveloped (after the marriage) and is now the S apartment.
Financial and Non-Financial Contributions
As indicated, the history of the parties’ contributions by way of personal exertion during the cohabitation is unremarkable and should be treated as equal.
The husband was unemployed from the date of the marriage on 6 February 1999 until December 2003 whilst he undertook various studies both in Australia and Country H. During that period the paternal parents assisted the parties with living expenses until the husband commenced work at P Firm in December 2003. The husband worked in various roles for the majority of the time from December 2003 until the present, except for the period from February 2013 to October 2014 when he was unemployed.
There is no issue that the wife made the major contributions in the role of homemaker and parent during the parties’ cohabitation.
The wife, at a case management event on 16 August 2017, conceded that the husband’s parents had gifted $253,000 as follows:
13.1 $100,000 between 1999 and 2005 applied towards living costs;
13.2 $55,000 in 2005 applied towards the purchase of the Suburb C property and the wife’s car; and
13.3 $98,000 in 2008 applied towards Suburb C mortgage repayments.
History of the acquisition of the S Apartment
In November 1999, the husband received a redevelopment proposal for the N apartment complex. On 24 December 2003, the husband entered into a contract with developers to purchase an apartment in the rebuilt block and the N apartment block was demolished and the S apartment block was built. The purchase price for the new apartment was 219,800,000 Won or approximately $270,000 (At the exchange rate at that time). The husband claimed the purchase was financed by the husband’s parents paying 120,000,000 Won and the husband borrowing 100,000,000 Won. Whilst there is no documentation that the husband’s parents had helped finance the apartment, there is also no evidence that the parties had otherwise put money into the balance. I accept that the husband’s parents put 120,000,000 Won into the apartment’s redevelopment. The S apartment was completed in 2005.
As an owner of the N apartment, the husband had the option of either selling his apartment to the developer or buying an apartment after the development was complete. Counsel for the wife submitted that there is no documentation that the apartment was purchased other than at market value and whilst there is no precise evidence, that inference is not a logical one to draw. If the husband could have got consideration for selling the unit, it only stands to reason his option to buy one of the new units must have been at less than market value for that unit.
Between August 2005 and March 2013 the total interest payments of the husband’s 100,000,000 Won loan of 41,306,464 Won was paid by the husband’s parents. In March 2013, the husband paid off the loan with 80,000,000 from two Jeonse deposit increases and 20,000,000 gifted from his parents.
History of the Jeonse and the acquisition of the Suburb C property
Upon completion of the S apartment, the husband entered into the first Jeonse with his mother on 6 November 2005 for an amount of 450,000,000 Won or approximately AUD $530,000 (At the exchange rate at that time). The first Jeonse was invested in the Suburb C property which was purchased on 10 July 2006 for $615,500. There is some dispute between the parties as to whether the amount paid was $510,000 or $530,000 and whether the total amount received from the first Jeonse was contributed to the Suburb C property. Nothing turns on that difference. The shortfall in the purchase price was funded by a Commonwealth Bank of Australia mortgage secured over the Suburb C property.
Counsel for the wife submitted that if the court was going to put the current Jeonse on the balance sheet as a debt against the husband it was not appropriate to characterise the monies that went into the Suburb C property from the first Jeonse on the S apartment as a contribution on behalf of the husband.
I accept counsel for the wife’s characterisation of the Jeonse and find that the $510,000 or $530,000 that was used to help finance the Suburb C property was in the nature of a borrowing which had to be paid back. Subsequently, as a result of receiving new Jeonses and paying out old ones, this original borrowing is currently reflected as part of the debt at item 25 of the balance sheet ($889,654).
Post Separation Contributions
As indicated, the wife received a payment of $60,000 from her mother and $72,000 from her brother post-separation, but as discussed, these monies were applied to legal fees and living expenses and have not been accounted for on the balance sheet. I do not count them as contributions made by the wife.
The husband has $51,057 in a South Korean bank account which represents the remains of additional Jeonse payments received after separation.
The wife bore the primary burden of the role of homemaker and parent after the time of separation. The younger child is currently estranged from her father. The husband was paying limited child support and the wife was paying most of the children’s expenses.
The husband had been unemployed from the date of separation until October 2014, when he commenced work as a manager at the Z church. The husband currently earns $1,327 gross weekly income.
The wife has worked since separation as a part time preschool assistant earning approximately $598 per week.
Since separation, the husband has had the benefit of sole occupation of the Suburb C property. The wife and children have lived in rental accommodation.
The husband’s financial statement says that he has been paying $200 per week in mortgage repayments. As discussed above, these have been interest only payments from the line of credit.
Conclusion on Contributions to Pool two
I am unable to accept the wife’s contention that there should be a finding that the contributions of the parties to pool two should be equal.
Significant sources of the assets in pool two include the initial contribution of the N Complex apartment, the Jeonse capital from the S apartment and capital provided by the husband’s parents. Taking the myriad of all other contributions into account, I conclude that the husband should receive 70 per cent of pool two based on contributions. The husband’s 70 per cent is equivalent to the sum of $1,266,339 and the wife’s 30 per cent is equivalent to the sum of $542,717.
Overall contributions to both pools
Where the combination of both pools are considered, the wife receives $2,805,036 (2,262,319 + 542,717; 68.9 per cent) and the husband receives $1,266,339 (31.1 per cent) of the overall assets as I have treated them for the purpose of the balance sheets.
SECTION 79(4)(d) - (g) MATTERS
The wife asks for an adjustment to her of between 15 to 20 per cent.
The husband asks for an adjustment to the wife between zero to five per cent.
When considering the prospective factors, the conclusions reached for pools one and two need to be taken into account. The overall net assets in both pools are in the sum of $4,071,375. As indicated above, based on contributions, the wife would receive $2,805,036 (68.9 per cent) of the combined assets in both pools and the husband would receive $1,266,339 (31.1 per cent).
Having said that, as indicated earlier, I am mindful that the figure ascribed to the wife of $2,262,319, being the value of her legal interest in the J property, needs to be balanced against the possible practical/moral/cultural requirements for the wife to not have the benefit of the capital of the property during her mother’s life and to not have the full benefit, on a regular ongoing basis, of precisely 5/14th of the income stream of the J property. Nonetheless, even taking that into account, I find that the wife has greater assets than the husband after a division based on contributions.
As earlier indicated, I find on balance that the wife is likely to be entitled to $69,239 of the $355,871 the wife’s mother holds in savings, subject to the payment of inheritance tax as earlier discussed. The wife can expect a greater regular payment from the rent on the J property after the final tax instalment is paid in October 2019.
Independently of the wife’s entitlement to an income stream from her legal interest in the J property, there is an additional question as to what, if any, financial resource the wife’s mother is to the wife. The mother’s parents (before the death of her father) gifted the wife $60,000 at the time of the separation of the parties. As already mentioned, since the father has passed away the wife has received amounts from her mother totalling $90,000 ($60,000 lump sum and $30,000 in various amounts when the wife travelled to Korea and the wife’s mother came to Australia). It is important not to double count this consideration but if I am incorrect about the wife’s right to an income from the J property then, alternatively, I can take into account the history of financial support that the wife’s mother has otherwise provided the wife. As indicated, I do not have the complete details of the wife’s mother’s financial circumstances but she has the surplus funds that are referred to in the discussion about item 13 in pool one.
As already indicated, I have not placed on the pool two balance sheet any debt that the wife may owe to her mother because I found that it is unlikely to be called upon, notwithstanding that, the wife will receive a capital sum as a result of these proceedings.
The wife is 43 years old and the husband is 48 years old. Both parties are in good health.
As mentioned above, the husband is employed as a general manager on a gross weekly wage of $1,327 and the wife is employed as a casual preschool assistant and estimates that her average weekly wage is $598.
The wife asserts that the husband pays child support in the total sum of $138 per week. The husband’s evidence is that the assessment is $141 per week but he pays additional monies for tuitions and medicals and estimates his payment to the wife by way of child support averages $216 per week. The difference in these figures was not the subject of any testing at the hearing. The wife has the main care for the two children aged 13 and 16. As indicated, the younger child is estranged from her father and it is probable that she will not have anything to do with him from this time until at least her 18th birthday. The substantial burden of the costs of caring for the children in the future will fall upon the wife.
Conclusion in relation to s 79(4)(d)-(g) adjustment
Taking all the above considerations into account, and particularly having regard to the real nature of the wife’s interest in the J property which is subject to the restrictions earlier discussed and the wife’s future responsibilities of the costs of the children, I find that a five per cent adjustment should be made in the wife’s favour for s 79(4)(d) – (g) considerations calculated upon the combined value of both pools.
JUST AND EQUITABLE
The parties agreed to a splitting order which would have the effect of dividing superannuation interests so that each party would have an equal amount. The husband’s superannuation interest is $105,023 (Item 22) and the wife’s superannuation interest is $9,189 (Item 23). A splitting order should be made that provides a base amount of the wife in the sum of $47,917 (105,023 + 9,189 = 114,212/2 = 57,106. 57,106 - 9,189= 47,917).
Based on my findings in relation to contributions and s 79(4)(d)-(g) matters, the wife is to receive 73.9 per cent of the overall assets and the husband is to receive 26.1 per cent.
It is convenient to go back to the combined table which incorporates both pools one and two to set out a distribution which would achieve that result.
| Husband gets 26.1 per cent | |||
| Assets | |||
| Item No. | Description | Percentage | Value |
| 1 | D Street, Suburb C | 100 | $1,250,000 |
| 2 | S Apartment, City G, South Korea | 100 | $1,186,206 |
| 4 | CBA Bank | 100 | $837 |
| 5 | ANZ Bank | 100 | $26 |
| 6 | L Bank (…78) | 100 | $34 |
| 7 | L Bank (…407) | 100 | $0 |
| 11 | K Bank | 100 | $51,057 |
| 15 | European car | 100 | $8,000 |
| 16 | Furniture and effects | 50 | $3,000 |
| 17 | K Bank proceeds - Jeonse income | 100 | $54,915 |
| 18 | L Bank | 100 | $0 |
| 19 | Joint line of credit | 100 | $31,373 |
| 20 | Paid legal fees | 100 | $155,000 |
| 22 | E Super | $57,106 | |
| Liabilities | |||
| Item No. | Description | Percentage | Value |
| 24 | Home mortgage | 100 | $179,963 |
| 25 | Total bond repayable to South Korea tenants | 100 | $889,654 |
| Husband pays Wife | $665,166 | ||
| Net Assets | $1,062,771 | ||
| Wife gets 73.9 per cent | |||
| Assets | |||
| Item No. | Description | Percentage | Value |
| 3 | J Property, City G, South Korea | 100 | $2,262,319 |
| 8 | Westpac Bank | 100 | $1,465 |
| 9 | CBA Bank | 100 | $214 |
| 10 | M Bank | 100 | $214 |
| 12 | Bond | 100 | $2,120 |
| 13 | Funds held by wife's mother | 100 | $0 |
| 14 | Japanese car | 100 | $17,000 |
| 17 | Furniture and effects | 50 | $3,000 |
| 21 | Paid legal fees | 100 | $0 |
| 22 | E Super | $47,917 | |
| 23 | F Super | 100 | $9,189 |
| Liabilities | |||
| Item No. | Description | Percentage | Value |
| 26 | Personal loan from mother | 100 | $0 |
| Wife receives | $665,166 | ||
| Net Assets | $3,008,604 | ||
Standing back, I consider that the distribution of assets and liabilities contained in the above table is appropriate and just and equitable.
ORDERS
Both parties sought that the husband make the payment to the wife within 42 days, and in default, the Suburb C property be sold.
Neither party sought any order in respect of the jointly owned furniture which is to be divided evenly by agreement or failing agreement, by a pick a pile method.
If there is a default sale, the wife has proposed she receive a sum certain with interest from the date of the orders. It is not appropriate to make an order for the payment of a sum certain with interest where there is a default sale. The principal amount payable to the wife from a default sale shall be 665,166/1,250,000 of the gross sale price which shall rise or fall depending upon whether the gross sale price of the Suburb C property is more or less than $1,250,000. The wife shall receive 73.9 per cent of any rise but bear the liability of the 73.9 per cent of any fall.
If there is to be a sale, the husband should be responsible for any arrears in respect of the regular repayments of the mortgage and the Viridian Line of Credit.
I certify that the preceding one hundred and sixty-seven (167) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Watts delivered on 11 October 2018.
Associate:
Date: 11 October 2018
SCHEDULE 1 (orders sought by the wife)
That on or before the date which is 42 days from the date of these orders (“the due date”) the Husband pay to the Wife the sum of $1,368,498.00 (“the payment”).
That simultaneously with the making of the payment by the Husband to the Wife:
a.the Husband pay all such moneys and do such other things necessary to cause the Commonwealth Bank Viridian Line of Credit account number …14 and the mortgage securing the Commonwealth Bank Viridian Line of Credit against the property at [D Street, Suburb C] being the land described in Folio Identifier …/…75 (“the [Suburb C] Property”) to be discharged; and
b.the Wife sign all documents and do such other things reasonably required (at the cost of the Husband) to transfer her interest in the [Suburb C] Property to the Husband.
In the event the Husband fails to comply with his obligations pursuant to orders 1 and 2 the parties shall, on the request of the Wife, forthwith join in doing all things recommended by the Real Estate agent appointed by the parties pursuant to subparagraph 3a to list for sale and sell the [Suburb C] Property together with all improvements, fixtures and fittings on and to the [Suburb C] Property in accordance with the following arrangements, unless otherwise agreed in writing between the parties:
a.The [Suburb C] Property shall be listed for sale by public auction within 30 days of the due date referred to in order 1 with a real estate agent as agreed between the parties but in default of agreement within 14 days of the due date, with a real estate agent nominated by the President for the time being of the Real Estate Institute of New South Wales (“in this order referred to as “the Real Estate Institute of New South Wales”) on the request of either party (“the real estate agent”);
b.The parties shall do all such acts and things and sign all such documents as necessary to procure a sale by way of public auction of the [Suburb C] Property upon the following terms:-
i.The auctioneer shall be as agreed between the parties and, if there is no agreement, as nominated by the real estate agent;
ii.The auction shall take place within 30 days of the [Suburb C] Property being listed with the real estate agent; and
iii.The reserve price shall be as agreed by the parties, and if no agreement, either of them is at liberty to approach the Real Estate Institute of New South Wales to request that an appropriate officer nominate a real estate valuer and the parties shall request such valuer to determine the reserve price for the purposes of auction and the parties shall be bound by the decision of the nominated valuer.
c.In the event the [Suburb C] Property is not sold at any auction held pursuant to these orders or by private negotiation within fourteen (14) days after the said auction then the parties shall do all acts and things and sign all necessary documents to procure a further auction to take place within a further 35 days of that date with a reserve price which is 5 per cent lower than the reserve price for the previous auction and otherwise upon the same terms and conditions as applied to the first auction.
d.In the event the bidding at any auction which takes place pursuant to these orders does not reach the reserve price the parties shall negotiate with the highest bidders or any other interested party and use their best endeavours to effect the sale of the [Suburb C] Property at a price which is not more than five percent (5 per cent) below the reserve price or at such other price as the parties may agree in writing.
e.The parties shall co-operate in every way with the nominated real estate agent, including (without limiting the generality of the foregoing):-
i.Making all keys available to the Real Estate Agent and allowing inspection of the [Suburb R] Property at all reasonable times requested by the Real Estate Agent;
ii.Doing or saying nothing to hinder or prevent a sale from being effected;
iii.The Husband shall ensure that the [Suburb C] Property, including the grounds, are in a neat, clean and well maintained condition at the time of inspection by the Real Estate Agent and any prospective purchasers; and
iv.Signing all documents reasonably requested to be signed by the Real Estate Agent in relation to the listing for sale of the [Suburb C] Property.
f.The contract for sale of land for the sale of the [Suburb C] Property shall contain such reasonable terms and conditions as may be agreed between the parties, or in default of agreement, as advised by the solicitor or conveyancer acting on the sale.
g.The Husband shall pay all costs required to be paid for the purposes of this order 3 and, in relation to any such costs paid to the Real Estate Institute of New South Wales for the purposes of nominating a real estate agent or valuer, to the real estate agent for advertising expenses, to the auctioneer for auction fees, to any valuer appointed under this order for valuation fees and to any solicitor or conveyancer engaged to act for the parties on the sale, the Husband shall be entitled to be reimbursed such amounts from the sale proceeds of the [Suburb C] Property as a cost of sale.
h.Upon completion of the sale of the [Suburb C] Property the proceeds of the sale shall be applied in the following order and priority:-
i.In payment of the amount required to discharge the Commonwealth Bank Viridian Line of Credit and the mortgage over the [Suburb C] Property
ii.In payment of all real agent’s commission and auction expenses (if any);
iii.In payment of all legal or conveyancing costs and expenses on sale;
iv.Reimbursement to the Husband of any amounts paid by him as referred to in subparagraph 3g;
v.In payment to the Wife of the amount of the payment which remains unpaid together with interest at the rate prescribed by the Family Law Rules calculated from the date of these orders to the date of completion of the sale; and
vi.In payment of the balance to the Husband.
4.That pending the transfer or sale of the [Suburb C] property pursuant to these orders:-
a.the Husband shall pay as they fall due all rates, taxes, building and legal liability insurance premiums to keep the [Suburb C] property insured in the joint names of the parties to its full insurable value, and other outgoings in relation to the [Suburb C] Property;
b.the Husband shall pay as they fall due any amounts which require payment in respect of the Commonwealth Bank Viridian Line of Credit;
c.the Husband shall maintain the [Suburb C] property in a clean, tidy and well maintained state and condition; and
d.neither party shall withdraw funds against the Commonwealth Bank Viridian Line of Credit without the prior written consent of the other party.
That within 14 days the Husband do all acts and things and sign all documents required to transfer the [Japanese] car registered number […] to the Wife.
That:
a.the Court allocate, as required by s. 90MT(4) of the Family Law Act 1975, a base amount of $47,917 to [Ms Chih] (“the Wife”) out of the interest of [Mr Chan] (“the Husband”) in [E] Superannuation, member number …75 (“the Fund”).
b.Pursuant to paragraph 90MT(1)(a) of the Family Law Act 1975 whenever [E] Superannuation makes a splittable payment out of the interest of the Husband in the Fund, the Trustee shall:
i.Pay to the Wife the entitlement calculated in accordance with part 6 of the Family Law (Superannuation) Regulations 2001; and
ii.Make a corresponding reduction in the entitlement the Husband would have had in the Fund but for this order.
c.This Order has effect from the operative time.
d.The operative time for this Order is four (4) business days after the date of service of a sealed copy of the Orders on the Trustee of the Fund.
e.The Trustee of the Fund do all such acts and things and sign all documents as may be necessary so that, in accordance with the obligations set out under the Family Law Act 1975 and Family Law (Superannuation) Regulations 2001, the Trustee can calculate the entitlement of, and make payment to, the Wife in accordance with this Order.
That in the event that either party refuses or neglects to sign any document required to be signed to comply with this Order, a Registrar of the Family Court of Australia is hereby appointed to execute all Deeds and documents in the name of the Husband or Wife and do all acts and things necessary to give validity and operation to this Order pursuant to s106A Family Law Act.
SCHEDULE 2 (orders sought by the husband)
That within 42 days and contemporaneously:
1.1the wife transfer to the husband her right, title and interest in the property located at [D Street, Suburb C], New South Wales and more particularly described in folio identifier …/DP…75 ('the [Suburb C] property');
1.2the wife transfer to the husband all her right, title and interest in and to all insurance policies in respect to the [Suburb C] property;
1.3the husband secure the wife's unconditional release and discharge from all liability to or with respect to the Commonwealth Bank of Australia loan, and discharge of registered mortgage number AC…04, and assume liability for and indemnify the wife with respect to that loan;
1.4the husband and wife sign all documents necessary to withdraw the balance of funds (if any) from their joint line of credit attached to the mortgage secured over the [Suburb C] property and pay the proceeds to the husband or as directed by the husband, and then transfer the account into the husband's sole name;
1.5the husband pay or cause to be paid to the wife or as she may direct in writing the sum of $267,500; and
1.6the husband transfer to the wife all his right, title and interest in and to the [Japanese] motor vehicle, registration number [….]
That the husband’s superannuation be split in accordance with the following:
2.1That in accordance with paragraph 90MT(1)(a) Family Law Act 1975:
(a) the wife is entitled to be paid the base amount from each splittable payment out of the husband's interest in the [E] Super fund, namely $45,000; and
(b) the husband's entitlement, and the entitlement of such other person to whom a splittable payment may be made to payments out of the husband's interest in the [E] Super fund, is correspondingly reduced.
2.2That this order have effect from the operative time and the operative time is 4 working days from the date of service of sealed copies of these Orders upon the trustee.
That unless otherwise specified in these Orders:
3.1each party is solely entitled (to the exclusion of the other) to the legal and beneficial ownership of all items of property including money, motor vehicles, insurances, equities, superannuation entitlements and personal effects in the possession or control of each of them respectively as at the date of these Orders;
3.2each party be solely liable for and indemnify the other against any liability encumbering any item of property to which that party is entitled pursuant to these Orders.
That the parties sign or execute all documents or instruments and do all acts and things necessary to give effect to these Orders.
That if either party refuses or neglects to sign or execute and return a document within seven (7) days of a written request to do so then the Registrar of the Family Court of Australia at Sydney Registry is hereby appointed pursuant to Section 106A of the Family Law Act 1975 to sign or execute such document on behalf of that party upon lodgement of such document and the filing of an affidavit of a solicitor on behalf of the requesting party as to the said neglect or refusal.
That the wife pay the husband's costs of and incidental to these proceedings.
SCHEDULE 3 (documents relied upon by the parties)
The mother relied on the following documents:
1.1.Affidavit of [Ms Chih] filed 6 December 2017;
1.2.Financial Statement of [Ms Chih] filed 6 December 2017;
1.3.Affidavit of [Mr Chih] filed 6 December 2017;
1.4.Affidavit of [Ms O] filed 6 December 2017; and
1.5.Affidavit of [Ms B] filed 6 December 2017.
The father relied on the following documents:
2.1.Financial Questionnaire filed 27 July 2017;
2.2.Financial Statement filed 28 November 2017;
2.3.Affidavit of [Mr Chan] filed 28 November 2017;
2.4.Affidavit of [Mr Chan Snr] filed 28 November 2017; and
2.5.Orders made 16 August 2017.
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