Dang & Zhi
[2022] FedCFamC2F 143
•15 February 2022
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Dang & Zhi [2022] FedCFamC2F 143
File number(s): DNC 650 of 2020 Judgment of: JUDGE YOUNG Date of judgment: 15 February 2022 Catchwords: FAMILY LAW - de facto property – dispute about a massage parlour - where the parties have failed to make full and frank disclosure – accuracy of the balance sheet is doubtful Legislation: Family Law Act 1975 (Cth) s90SF
Sex Industry Act 2019 (NT)
Division: Division 2 Family Law Number of paragraphs: 30 Date of hearing: 9 – 11 February 2022 Place: Darwin Counsel for the Applicant: Ms Cheong of Hunt & Hunt Solicitor for the Respondent: Ms Gray of Gray’s Legal Counsel for the Respondent: Ms Smith
Table of Corrections 2 March 2022 At paragraph [30] the adjustment that the “DF wife pays DF husband pay $70,000” has been amended to show “$75,000” as is consistent with the Orders of 15 February 2022. The subsequent totals have been amended to reflect this change. ORDERS
DNC 650 of 2020 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: MR DANG
Applicant
AND: MS ZHI
Respondent
ORDER MADE BY:
JUDGE YOUNG
DATE OF ORDER:
15 FEBRUARY 2022
UPON NOTING the undertaking of the Applicant that he will not remove, damage or otherwise interfere with any items owned by the business or located within the business premises of B Massage Centre, C Street, Darwin, including, but not limited to, the ATM machine located within the business premises.
THE COURT ORDERS THAT:
1.That the Respondent is to retain for her sole use and benefit the B Massage Centre (“the business”) and the parties do all things and sign all documents necessary to transfer the business into the sole name of the Respondent, including, if necessary, ensuring the business is recorded under the ABN of the Respondent.
2.That the Respondent indemnify the Applicant in respect of the tax liability associated with the business.
3.That the Respondent indemnify the Applicant in respect of the lease over the premises occupied by the business being C Street, Darwin, NT currently held in the parties’ joint names.
4.The Applicant be restrained by injunction from entering the premises occupied by the business being C Street, Darwin, NT save that a time or times within the next 14 days as agreed with the Respondent the Applicant may enter the premises to remove his personal effects.
5.That within 72 hours the Applicant return to the Respondent any items used in the business he may have removed from the business premises located at C Street, Darwin, NT.
6.That the parties do all things and sign all documents necessary to remove the property situated at D Street, Darwin, NT (the “D Street Property”) from sale on the private market.
7.That the Respondent retain the D Street Property for her sole use and benefit and in her sole name to the exclusion of the Applicant.
8.The Respondent indemnify the Applicant in respect of the mortgage on the D Street Property with NAB account number …91 in her sole name.
9.That within 42 days of the date of these Orders, the Respondent pay to the Applicant the sum of $25,000.
10.That within a further 6 months of the date of the initial payment at Order 9 above, the Respondent pay to the Applicant the sum of $50,000.
11.That the parties each indemnify the other party in respect of any debt or liability in their respective names including, but not limited to, any personal or business loans, credit card debt or personal tax liability.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under a pseudonym Dang & Zhi has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
Amended pursuant to r 10.14(b) of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) on 2 March 2022Judge Young
Background
This that is an application pursuant to section 90SF of the Family Law Act1975 (Cth) for alteration of property interests between former de facto partners. There is some suggestion by the de facto husband (whom I shall call the “husband”) that the parties were married in Country E in 2018 but there is no evidence that was a valid marriage ceremony and, in any event, the de facto wife (whom I shall call the “wife”) provided evidence of her divorce from another man in 2018.
The husband is 64 years old and the wife is 51 years old. They met in Darwin in 2011 at the Location F. At that time the husband operated a massage parlour in C Street, Darwin called B Massage Parlour which, he said, he began in 2009.
The parties began living together in 2011 and appear to have operated the massage parlour together from that point.
The wife claimed that she purchased the massage parlour from the husband at around that time for $6,000 and that the husband was thereafter employed in the business as a cleaner. There are no sale documents or any independent evidence to support the wife's claim. However, the wife has a business name certificate showing the registration of a business name B Massage in her name in 2012 which is not inconsistent with her claim.
However, on 1 April 2016 both parties signed a lease for the massage parlour premises with a Mr G. The husband said that until that time Mr G had not required a lease. The fact that the husband is joint lessee of the premises from which the massage parlour operates is entirely inconsistent with the wife's claim that he was merely the cleaner. The lease was for an initial term of three years with a three-year option. There is no evidence that the lease has been extended or renewed past the option term and, if so, the lease will expire in 2022.
The wife also said in her evidence that the husband took cash from the premises at times during the relationship. She did not report making a complaint and I am satisfied that her conduct is consistent only with her recognition of the husband's joint interest in the massage parlour with her.
Credibility
Neither witness was reliable and I give little weight to their evidence unless it is independently corroborated.
In relation to the wife I reject as untrue her evidence that she purchased the business from the husband in 2011.
I will give an example of the husband's admitted dishonesty. In his 2014 income tax return he claimed to be married to a Ms H to whom, according to the return, he was married for the whole year. Ms H’s date of birth was in 1989, so in 2014 she was about 25. The husband was then about 57. It is not contested he was in a relationship with the wife at that time. In cross-examination he was asked about Ms H, without objection, and answered that it was a "fake marriage" in China but the young woman did not want to go through with it. He said it was the wife's idea. The husband was then warned against self-incrimination and thereafter declined to answer questions on the basis that his answers might incriminate him.
The suspicion arises that the purpose of the “fake marriage” was to traffic the woman to Australia for the purpose of prostitution.
The Property Pool
The pool is notional in this case in the sense that I am not satisfied that the parties have disclosed all of their assets. The parties were vying for control of the massage parlour but both have chosen to come to court without a valuation of the massage parlour and without evidence of its turnover or profit. The wife tendered her tax returns that, in 2018, showed a business income of about $191,000 and taxable income of $87,540. In 2019, she claimed a business income of $188,000 and taxable income of $86,356.
The husband's stated income in the financial year 2019 was $10,578 and in 2020 it was $19,520, including $5,068 in Jobseeker payments. In 2021 it was $24,403 including $11,888 in Jobseeker payments.
It is of note that for the last six months of the 2021 financial year the husband deposited $41,275 into his Commonwealth Bank Smart access account. The husband made no disclosure in relation to the source of this money and I suspect it is from an undeclared source of income.
During the same period the husband's bank account for the period 8 February 2021 to 30 June 2021, for example, showed deposits of a little more than $80,000 or an average of about $16,000 a month. The husband said in evidence that these were simply the withdrawals by customers from the ATM within the premises and that it was cash neutral because he had to keep the ATM supplied with cash. He said this was not business income.
However, the husband did say in cross-examination that the credits represented the amounts of money withdrawn by customers to pay for massage services in cash, which was evidently the preferred method of payment. I consider that this is probably a fair proxy for the income of the business, that is, in the region of $192,000 a year. It also approximates the wife's declared business income for the 2018 and 2019 years.
However, these amounts do not account for cash payments where there was no withdrawal of money from the ATM on the premises. Accordingly, whether this sum represents an approximation of the true gross income of the business, I do not know.
The parties, as noted, did not give evidence about the value of the business. Its only significant asset is a lease which appears due to expire in 2022. There is also a registered business name but no evidence of goodwill.
I am satisfied the massage parlour is an enterprise which generates significant cash but is not otherwise saleable.
There are two other items in the asset pool of significance. The wife purchased a residential unit in Melbourne during the relationship. It is not in dispute that the wife used funds generated by the massage parlour and borrowings to purchase the unit. The wife said there were significant personal borrowings in the region of $100,000 which she claimed were repaid from the net proceeds of sale of the business of $173,000. There is no objective evidence of that and I am not satisfied it is true.
In a notional sense I have included the sale proceeds in the balance sheet as an “add back” but I accept the wife's submission that, in view of the non-disclosure by the husband – really by both parties, it is unfair to simply add back this sum. I accept that submission. I have not arrived at the final result on the basis of the balance sheet which I accept is largely meaningless between these parties.
The other property is a unit in Darwin in the wife's name. It appears to have minimal or no equity at the moment and the wife wishes to retain the property. There is an assertion by the husband that he contributed about $40,000 to the purchase price. The wife professed not to recall whether this was the case. I accept that it is probably the case but, in any event, any monies directed towards these acquisitions by the parties were generated by the massage parlour business. It appears that both parties have lost due to the decline in value of the property since it was purchased. I am not satisfied it would be just to order the wife to repay the husband any amount contributed by him.
In relation to liabilities, the wife has a tax debt of $69,052 that relates to the business. There may be some justice in requiring the husband to contribute to the payment of the debt but the parties, for reasons which are unclear, have structured their affairs in a way which is misleading as far as the distribution of the income of the business. I am reluctant to interfere because of significant non-disclosure and lack of frankness by both parties.
As noted, the parties made a deliberate choice not to give evidence of the value of the business. However, I accept it is not saleable on the open market. Further, I am not sure the business is even legal having regard to the provisions of the Sex Industry Act 2019 (NT) that requires premises with three or more sex workers to obtain a suitability certificate from the Northern Territory Commissioner of Consumer Affairs. There is no evidence about these matters or that the parties have obtained such a certificate.
The balance sheet appears as follows:
Description DF Husband DF Wife Total Assets 1 D Street, Darwin Est. $315,000 2 B Massage unknown unknown 3 Motor Vehicle 1 $26,000 4 Motor Vehicle 2 $13,000 Add backs? 5 Proceeds of sale of Melbourne property $173,000 Total assets $13,000 $514,000 $527,000 Liabilities 1 NAB mortgage for D Street $301,783 2 Personal income tax $8,133 3 Income tax debt re B Massage $69,052
Total $378,968 Net assets $13,000 $135,032 $148,032 Superannuation 1 DF Husband’s E$2,000 2 DF Wife E$2,000 Total Superannuation E$2,000 E$2,000 E$4,000 Total assets and superannuation $15,000 $137,032 $152,032
I suggested to the parties that one way to assess the value of the massage parlour business to each of them was to, in effect, hold an auction. The wife offered to pay the husband $75,000 for control of the massage parlour. The husband did not make any offer but said he would relinquish his interest for $120,000.
Contributions
I am satisfied the contributions of the parties during the relationship were equal. I acknowledge that the husband operated the massage parlour at the time the relationship began but I am not satisfied that there should be any adjustment in his favour because of that factor. I am satisfied the massage parlour is, as noted, not saleable and difficult to value. I am satisfied that its real value to the parties is its capacity to generate cash and I am satisfied that since 2011 both parties have contributed equally to the massage parlour and its generation of income.
There may be other contributions from other sources but there is no clear evidence of that, although I am far from satisfied that the husband, in particular, does not have other assets or interests.
Section 90SF(3) Factors
In my view these factors do not require any adjustment. The parties are 64 and 51 years of age. They are in apparent good health and able to support themselves. They have no children.
I propose to make orders largely as sought by the wife. The effect will be that the wife is to pay the husband $75,000 by two instalments and she is to obtain control of the massage parlour. The husband opposed the making of an injunction preventing him from entering the premises. He declined to offer an undertaking in similar terms. Where he is a joint lessee of the premises I am satisfied that an injunction is necessary to give effect to these orders and to enable the wife to assert possession as against the husband should that be necessary. However, the husband did offer an undertaking in relation to not removing any assets from the premises.
The effect of the orders is as follows:
Description DF Husband DF Wife Total Assets 1 D Street, Darwin Est. $315,000 2 B Massage Unknown unknown 3 Motor Vehicle 1 $26,000 4 Motor Vehicle 2 $13,000 Add backs 5 Proceeds of sale of Melbourne property $173,000
Total assets $13,000 $514,000 $527,000 Liabilities 1 NAB mortgage for D Street $301,783 2 Personal income tax $8,133 3 Income tax debt re B Massage $69,052
Total $378,968 Net assets $13,000 $135,032 $148,032 Superannuation 1 DF Husband’s E$2,000 2 DF Wife E$2,000 Total Superannuation E$2,000 E$2,000 E$4,000 Total assets and superannuation $15,000 $137,032 $152,032 Adjustment DF wife pays DF husband $ 70,000$75,000($75,000) $
85,000$90,000$62,032
I certify that the preceding thirty (30) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Young.
Associate:
Dated: 15 February 2022
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