Deveraux and Deveraux

[2009] FamCA 1363

FAMILY COURT OF AUSTRALIA

DEVERAUX & DEVERAUX [2009] FamCA 1363

FAMILY LAW – PROPERTY – Settlement in relation to marriage

APPLICANT:  Mr Deveraux

RESPONDENT:  Ms Deveraux

FILE NUMBER: SYF 2302 of 2006

DATE DELIVERED: 24 December 2009

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Stevenson J

HEARING DATE: 7,8,9 & 10 September 2009

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Lethbridge SC with Mr Watkins

SOLICITOR FOR THE APPLICANT: Blanchfield Nicholls Partners

COUNSEL FOR THE RESPONDENT: Mr Spicer

SOLICITOR FOR THE RESPONDENT: Beilby Poulden Costello

Orders

1. That the parties do all things and execute all documents required to effect the distribution of the funds held on their behalf by D Hayward & Co., solicitors, as to 78.8% to the husband and the balance to the wife.

2. That each of the parties is declared to be solely entitled to all assets and superannuation presently in his and her respective possession or control.

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

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYF 2303 of 2006

MR DEVERAUX

Applicant

And

MS DEVERAUX

Respondent

REASONS FOR JUDGMENT

the proceedings

1. These are proceedings for settlement of property between the applicant husband, Mr Deveraux, and the respondent wife, Mrs Deveraux.  One feature of the litigation was the wife’s involvement in a number of corporate structures, some of which are located outside of Australia.  A significant aspect of the proceedings was that the husband alleged that the wife failed to make a full and frank disclosure of her financial position.

Background

1. Mr and Mrs Deveraux, who are now both 49, began to live together in 1984.  They married in 1986 and first separated in September 1999 or 2000.  They reconciled in February 2001, according to the husband, or January 2002 on the wife’s version of events.  They then cohabited again until their final separation in May 2005.  The wife lived and worked in the United States for substantial periods during the second phase of the relationship.

2. Around the time of the marriage the parties acquired their first home in Victoria.  They obtained a mortgage loan and contributed savings to the purchase money.

3. About 1988 the wife was gifted an interest in two companies known as S Products Pty Limited and S Import-Export Pty Limited, which are operated by her family.  Currently, the other shareholders are her mother and two brothers.  These companies are based in Australia and import products from Europe.

4. The wife also holds interests in corporate structures based in Macedonia.  The extent and nature of these interests remained unclear at the end of the proceedings.

5. The wife was employed within the S family companies until 2000, when she started her own business.  These companies and the Macedonian based corporate structures were not valued by the single expert, Mr G.

6. Following the marriage the husband was employed as a financial controller for approximately 12 months.  Between March 1987 and 1995 he was employed in an executive capacity with T Company, which continued until 1995.

7. In about 1988 the parties sold their home in Victoria and returned to Sydney.  They then purchased a house at B from the husband’s parents for $200,000.  They contributed the net proceeds of sale of their Victorian property and borrowed the balance of the purchase money.

8. The parties’ first child, C, was born in 1988.  Their second daughter, A, was born in 1990.

9. In September 1991 the parties purchased an investment property in L for $143,000.  The wife’s father made a gift of $40,000 and they borrowed the balance of the purchase money.  This property was sold in 1994.  According to the husband, the net proceeds of sale were invested on behalf of the parties by the wife’s father.

10. In 1992 or 1993 the parties sold their home at B and purchased a property at Y.  The husband said that the purchase price was $500,000 and the wife said that it was $535,000.  My impression was that the husband’s recollection of the parties’ joint financial history was more accurate than that of the wife.  He appeared to have a greater knowledge of the details and sequence of their real estate transactions, including borrowings.  Where there is a conflict in relation to any of these details, I accept the evidence of the husband.

11. The parties borrowed $340,000 to purchase the Y property.  The balance of the money came from the net proceeds of sale of their home in B.  The wife alleged that a gift of $40,000 from her parents formed part of the purchase money.  The husband said he did not know of any such gift and the wife adduced no corroborating evidence of such an advance.

12. Between 1995 and 1998 the husband was employed in various positions.  He then incorporated a company known as N Company Pty Limited and established an importation business.  He was responsible for the day to day administration of this business.

13. In September or October 1999 the parties separated and remained apart until March 2001 or January 2002, according to the husband and the wife respectively.  Although separated, they purchased jointly a property at D in October 1999.

14. The purchase price of this property was $1,230,000, according to the husband.  The parties sold the Y property in July 1999 for $775,000 and applied the net proceeds to the purchase of the D property.  They obtained a mortgage loan of about $600,000.  According to the husband, they also contributed the funds invested by the wife’s father from the proceeds of sale of the L investment property.  They also injected savings of approximately $10,000 into this purchase.

15. The wife alleged that, during this period of separation, she gave $50,000 to the husband so that he could discharge his credit card debt.  The husband said that he had “no clear recollection” of the wife doing so.  She adduced no evidence of any such advance to support this allegation.

16. During 2000 the wife stopped working in the business operated by her family and incorporated a company known as M Company Pty Limited.  She is the sole director and shareholder of this company, which imports and distributes products in Australia.

17. In 2000 the husband closed the business which he operated via N Pty Limited.  The 30 June 2000 balance sheet showed that this company had a bank overdraft of approximately $141,000 and trade creditors of about $93,000.  The husband said that the company’s final debts amounted to $152,000, which was converted into an equity loan with the Commonwealth Bank.

18. On 16 August 2000 the wife incorporated an entity known as CL Inc. in the United States of America.  Originally she was the sole director and shareholder of this company, which operates a business of manufacture and distribution of products in the United States.

19. On 26 June 2003 the wife incorporated a company known as CL International Pty Limited, of which she was the sole director and shareholder.  The single expert, Mr G, described this company as a service entity for M Pty Limited.

20. In September 2003 the husband acquired an interest in a company known as P Pty Limited.  He operates a financial consultancy business through this company. 

21. The husband is the father of a child, O, who was born in November 2003.  The husband regularly spends time with O.  He has no formal arrangement for payment of child support with O’s mother.

22. During 2004 and 2005 the wife spent substantial periods in the United States, in pursuit of her business interests.  In 2005 the parties’ daughters began to attend a boarding school in Sydney.

23. In mid-2004 the parties sold the D property and purchased a home at H.  The sale price of the D property was $1,600,000, which yielded a net sum of approximately $761,000.  The balance of the purchase money for the H property came from loans from the Westpac Bank.

24. In 2004 the husband resumed a relationship with Ms F, who moved into the H property in November 2005.  He first became involved with Ms F in 2003.  Following the parties’ separation in May 2005, the wife lived and worked substantially in the United States.

25. On 16 May 2005 the wife incorporated a company known as CL Limited in the United Kingdom.  She was the sole director and shareholder of this company, which was intended to be a vehicle for distribution of products in the United Kingdom.

26. In February 2006 orders were made by consent, which provided that A live in the United States with the wife for one year.  A returned to Sydney early in 2007 and returned to her previous boarding school.  In March 2007 C went to the United States and lived with the wife.

27. In December 2006 the parties sold the H property for $2,042,000.  The net proceeds amounted to $639,577, which is held in trust pending resolution of these proceedings.

28. In April 2007 the wife entered into an agreement with various entities associated with a well known entrepreneur and/or his wife.  The full extent and details of these arrangements remained somewhat unclear at the conclusion of the trial. 

29. The basic elements of this transaction seemed to be that entities associated with the entrepreneur and/or his wife injected $2 million into Mrs Deveraux’s United States and United Kingdom operations.  She transferred the whole of her shareholding in CL Inc., CL Limited and another company, MA Inc., to an entity known as Z Investments Limited.  She now holds a 25% interest in Z Investments Limited, which is a company incorporated in the British Virgin Islands.

30. After their relationship broke down, Ms F commenced litigation against the husband in the District Court of New South Wales.  In 2007 they settled these proceedings, on the basis that she receive a payment of $32,500. The husband borrowed $8,000 from his mother, an additional $8,000 from Ms P and $16,250 from a litigation lending company in order to make this payment. 

31. In April 2008 the parties’ daughter C was accepted into an American college.  She currently lives in the United States and A shares a home with the wife in Sydney. A attends the University of New South Wales, where she is undertaking a Bachelor degree.

32. The wife’s business operations in the United Kingdom closed down in 2008.  The company CL Inc. has since sold its products to an unrelated distributor in the United Kingdom.

33. In July 2009 the wife married Mr N, who is a citizen of the United Kingdom.  There was no evidence as to the financial circumstances of their cohabitation.

Approach To These Proceedings

1. According to guidelines established through a series of leading decisions, the Court is required to determine the following matters on the evidence:

   ·firstly, the assets, liabilities and financial resources of the parties to the marriage are to be determined

   ·secondly, all relevant contributions of each of the parties, within the meaning of paragraphs (a) to (c) of section 79(4) must be identified and weighed against each other

   ·thirdly, the matters in paragraphs (d) to (g) of section 79(4), particularly paragraph (e) which takes up by reference the provisions of section 75(2) must be considered and a determination made as to what, if any, alteration should be made to the entitlements of the parties earlier assessed on account of contribution

   ·finally, an order under section 79 must not be made unless the Court is satisfied that, in all the circumstances, it is just and equitable to make the order.

The Evidence and Witnesses

1. Only the husband gave evidence in his case.  Generally I found him to be a forthright witness, who was prepared to make appropriate concessions.  As noted, I am of the view that his recollection of the parties’ joint financial history is more accurate than that of the wife.

2. The witnesses in the case for the wife were herself and a friend, Ms J.  I agree with the submission on behalf of the husband that the wife was “unresponsive, unhelpful” as a witness.  It seemed probable to me that she deliberately affected an air of vagueness while giving evidence, in an attempt to mask flaws in her case.  I now set out a number of features of her evidence which led me to this conclusion.

3. On several occasions the wife was forced to admit in cross-examination that certain aspects of her evidence were “incorrect” or “wrong”.  On one occasion, she conceded that the contents of a Financial Statement which she swore on 21 September 2006 were “false”.  In that Statement she deposed that her average weekly income was “0”.  She was then shown her 2007 United States individual income tax return, which recorded “wages, salaries, tips, et cetera” of $92,812.  She was also shown an Australian income tax return for the year ended 30 June 2006, which disclosed a taxable income of $138,660.  It was suggested to her that the assertion in her Financial Statement must therefore be “false”, a proposition to which she acceded.

4. The wife was asked about her interest in the two Australian-based S companies.  She said “I don’t believe I knew in January 2007 that I had an interest in two [S] corporations based in Australia”.  It is impossible to reconcile this evidence with the letter of instruction to Mr G, dated 5 December 2006 and written by her solicitor (annexure A to the affidavit of the wife sworn on 23 June 2009).  Mr G was instructed to value, inter alia:

   “The wife’s interest in the following entities:

   (j)        [S Products] Pty Limited

   (k)         [S Import-Export] Pty Limited”

   The only explanation which the wife offered for this inconsistency was:  “I may have made a mistake in when I found out…..”

5. On 14 September 2007 Mr G emailed the wife’s solicitor, in reference to

   “extracts from your client’s affidavit:  The statement that ‘in 2006 [MA] Inc. was started which is the American-based company, however this company has never traded.  The company has not purchased or sold anything’ does not appear to be correct.  Te financial statements provided for [MA] Inc. for the year ended 30 September 2006 disclose sales and purchases for the period and assets and liabilities being held.”

6. When asked about this inconsistency, the wife said:

   “I interpreted trading as buying and selling throughout the USA” and

   “I really don’t know” and

   “All I know is that we bought equipment through [MA] Inc. – that is why it was set up.”

   Ultimately, the wife conceded:

   “Yes, this information must be plainly wrong.”

7. These examples are not an exhaustive list of occasions when the wife conceded that information provided on her behalf was incorrect.  There were also a number of instances when she admitted, effectively, that she could have been more forthcoming with information requested by the husband’s solicitor and/or Mr G.

8. The wife swore Financial Statements on 29 September 2006 and 2 February 2007.  As noted, she deposed in the September 2006 Statement that her income was “0”.  In the February 2007 document she swore that her average weekly income was $2,165.  Her only explanation for this significant change in her financial position, in a period of less than five months, was “I believed I was taking money as loans rather than salary”.  Even if she genuinely held such a belief, it does not explain why her various entities could pay her nothing in September 2006 and $2,165 in February 2007.

9. There was a substantial issue as to the adequacy of the information provided by the wife and her accountants to the single expert, Mr G.  The wife was taken to email correspondence between Mr G and the solicitors for each of the parties.  In an email dated 19 November 2007 Mr G stated:

   “I have reviewed the letter and attachments from Mr [K] and have two primary concerns, being the reliability of the financial information provided and that adjustments to the Australian based entities would need to be reflected in the US based entity.”

   Mr K is the wife’s accountant in Australia.

10. In an email dated 30 January 2007, to both parties’ solicitors, Mr G requested financial statements for an entity known as the “[DL] Trust”.  He noted that Mr K had told him that “no such trust exists”.  The wife maintained that she never told Mr K that the DL Trust existed.  She said:  “I never did anything with it and I thought it had just disappeared somehow”.

11. In emails dated 31 January 2007 and 1 February 2007, between the solicitors and Mr G, the latter referred to a transfer of ownership of M USA to CL International Pty Limited.  In cross-examination the wife suggested that she did not know about this transfer of ownership.  She said:  “I don’t know what really happened here”.  She conceded that “it would have been very easy” for her to obtain this information.

12. In an email dated 12 April 2007 to both lawyers Mr G wrote:  “…..there are some loan accounts which do not appear to reconcile between the entities and the description of some of the balance sheet accounts do not provide sufficient understanding of the nature of the account…..”  In cross-examination the wife conceded that this email would have been brought to her attention.  She said:  “The loan accounts did not reconcile because I had no accountant in the US and Australia for a while due to a downward spiral in business.”  She added:  “Yes I know the books were wrong”. 

13. In a letter dated 3 July 2007 to Mr G, which was copied to the wife’s solicitor, the lawyer for the husband noted a discrepancy in the net assets of CL International Pty Limited.  Mr G was provided with balance sheets for this company for the 2004, 2005 and 2006 years, under cover of a letter dated 16 March 2007.  These documents included the net assets of the company at $67,283.  The 2006 tax return and financial report, however, listed the net assets of the company at $(281,812).  The wife could offer no explanation for this significant discrepancy. 

14. In an email dated 30 July 2007, to the solicitors for both parties, Mr G said:  “Some of the information requested was not provided and many other responses were not sufficient”.  With regard to the role of the wife within the various entities and her work hours Mr G commented:  “The responses provided do not appear to be plausible”.  In cross-examination the wife denied that she was unconcerned about the correctness of information being provided by her solicitor.

15. In an email dated 19 November 2007 to both solicitors Mr G expressed a number of concerns about the sufficiency and adequacy of information provided to him by the wife’s accountant, Mr K.  When taken to this email in cross-examination, the wife agreed that “there were areas of considerable unreliability about information being provided”. 

16. In a letter dated 12 December 2007 to the husband’s solicitor, the lawyer for the wife stated inter alia: 

    “At this time our client or her accountant does not have the financial information in relation to the 2007 financial year and they do not expect the information to be available until the close of the next financial year, which is when the information is available to both our client and her accountant.”

    When asked about this proposition, the wife said: 

    “I can’t answer whether it was completely wrong in December 2007 to say that the 2007 financial information was unavailable.  I assume there would have been something.  I don’t know what the problem was……”

17. In the same letter the solicitor for the wife wrote: 

    “In respect of the [AK] transaction that your client raises, this was an injection of financial assistance from friends of our client.  Our client did not receive any of the funds, as they were applied to payment of creditors.  This debt can be called upon at any time.”

18. This letter purported to be a response to a request from the husband’s solicitor, contained in a letter dated 28 November 2007,for this information:

    “In respect of that [AK] transaction, it is not clear to us whether the information provided to date, such as it is, is in US dollars or Australian dollars.  In any event we would be pleased if you would provide to us all the relevant documents and information relating to this transaction including but not limited to the following:

    (a)      the purpose of the injection of over $2 million by [AK]

    (b)      the terms on which it was made including:

    (i)       equity entitlements

    (ii)      voting rights

    (iii)     rights to dividends and the dollar value or percentage value of anticipated dividends to [AK] in the next 3 years

    (iv)     the percentage shareholding [AK] will have in [CL] Inc.  Will it have the option to acquire further equity?

    (c)the full names and addresses of the directors and shareholders of [AK]

    (d)      the terms of the loan and a copy of the loan agreement.”

1. In cross-examination the wife said: 

   “The information in relation to the [AK] loan requested may or may not have been available to me.  Yes I knew the purpose of the $2 million loan.  They transferred funds otherwise the company would have gone into liquidation.  They did not tie up anything legally for some time because they were not sure the company would survive.” 

   She also said:

   “I knew the money was being paid in whole or in part for shares in my US company.  I believe they can acquire further shares.  I believe that any debt can be converted to stock but I am not sure” and

   “I don’t really understand it.  I was just happy to have my head above water.  I don’t know whether part of the $2 million was to acquire shares in [CL] Inc.  I don’t know whether they converted it at that stage.”

2. This evidence sits most uncomfortably with the fact that an officer of a company known as G Investments Ltd wrote to the wife on 8 June 2006, setting out “Heads of Terms” in respect of this transaction (exhibit 13).  The agreement was executed by all parties on 20 April 2007 (exhibit 12).

3. In cross-examination the wife said that she travelled to London to “talk to the people who provided the $2 million on several occasions”.   She said that G Investments Ltd transferred some of the $2 million and “other funds came in from different areas”.  She conceded that she had records in the United States which would identify each person or entity who transferred these funds.

4. The wife said further, in cross-examination:

   “I had assumed that [the AK transaction] had not gone through yet, that nothing had been registered in the US.”

   She also suggested:

   “It is possible that I was so embarrassed that I did not want to admit that I only owned 25% of [CL] Inc.”

   She admitted that she signed the agreement (exhibit 12) on 20 April 2007 and that she received the last contract payment in 2007.  She conceded that she understood that “one effect was to confirm the sale of 75% of my 100% of [CL] Inc. to a corporation in the British Virgin Islands and that I took a 25% interest in [Z Investments] Limited.”

5. On 4 February 2008 orders were made which obliged the wife to produce specified documents by 28 February 2008.  Mr G prepared a list of missing documents, which included:

   “All documents and information relating to the sale of an interest in [CL] Inc. and/or [MA] Inc. to [AK] Investments Ltd, [G] Investments Ltd or any related entity or subsidiary thereof, including but not limited to:

   9.1      the names and addresses of the purchasers and in the event of that purchase being a company, details of the shareholders of that company;

   9.2      any share transfer documents;

   9.3      any allotment of share documents;

   9.4      bank statements showing disbursement of sale proceeds.”

6. Mr G’s list of missing documents also included:

   “10.1 the loan agreement or any other document showing the terms of the loan (there is a document referred to in the share sale agreement referred to as heads of terms dated 8 June 2006).

   10.2    the amount of the loan in Australian and US dollars

   10.3    the date of payment of the loan funds

   10.4    bank statements or other documents showing the disbursement of the loan funds.”

7. Mr G’s list of unprovided documents also included fundamental information such as 2007 financial statements and tax returns for the various corporate structures.  When asked why the documents on Mr G’s list were not produced, the wife said:  “I can’t explain why this documentation was not provided by 28 February 2008.  It is not true that I was deliberately withholding documents.”

8. In a letter dated 22 April 2008 the wife’s solicitors wrote to Mr G, inter alia:  “In relation to the reconciliation of the US accounts, we are unable to provide any assistance as to why the accounts do not reconcile.  We are unable to inform of what the US companies do with the funds or their accounts once they receive them.”  In cross-examination the wife conceded that “information about what the US corporations did with their funds and accounts was available to me”.  She said that she could not comment whether this response was “pitifully inadequate”, “because I don’t know how long it takes to get this information”.

9. In a letter dated 3 July 2008 to both parties’ solicitors, Mr G reiterated a request for access to MYOB data files for CL International Pty Limited and M Pty Limited.  He had made this request on at least two previous occasions.  He sought access to the MYOB files for CL International Pty Limited because:

   “this company had significant sales in recent years (over $4,000,000 in the year ended 2005) and I have not been provided with any reasonable response as to what this company has done in the past.”

10. Mr G’s letter stated that he sought access to the MYOB files for M Pty Limited “in order to further consider the explanation I was provided during the attendance at the business premises in regards to the recording of purchases from overseas”.  In his letter Mr G expressed concern that “stock in transit has not been recognised as an asset in the financial statements”. 

11. Mr G’s request for access to these MYOB files had been refused by the wife’s solicitor in a letter dated 5 June 2008, which stated:  “We are instructed that this information contains personal and confidential information in relation to our client and it will not be made available”.  In his letter of 3 July 2008 Mr G clearly explained that refusal of access to the MYOB files would be likely to cause an increase in his fees and undermine the accuracy of his valuation report.  He offered, in the plainest terms, to enter into a confidentiality agreement with respect to any records of the wife’s personal finances.  He noted that he would expect any personal information to be recorded in a separate file and stressed that he sought access only to data files for the companies.  Nonetheless, Mr G was denied access to these files.  The wife’s only explanation was that her accountant advised her to decline to produce this information.

12. These specific matters and the wife’s demeanour while giving evidence left me unimpressed with her as a witness.  It was my impression that she was unconcerned about her duty of disclosure before and during the trial.  It seemed to me that she adopted an air of vagueness when pressed on matters for which she could provide no explanation.

13. Ms H swore two affidavits and gave brief oral evidence.  She deposed that she loaned approximately $147,632 to the wife in 2006 and has since received repayment of about $50,000.  She then advanced a further sum of $44,755 on 18 February 2008.  Ms J’s unchallenged evidence thus was that the wife currently owes to her a sum of $132,387.  The figure of $142,387, included in the balance sheet submitted on behalf of the wife, seemed to overlook Ms J’s evidence that she received a repayment of $10,000 on 12 August 2009. 

14. Otherwise Ms J’s evidence was to the effect that the wife currently has use of certain pieces of furniture and household effects which belong to her.  The husband did not raise any issue about the ownership of these items. 

15. I had the assistance of a report and oral evidence from a single expert, Mr G.  As noted, there was a substantial issue as to the adequacy of the information provided to Mr G by or on behalf of the wife. 

The Alleged Non-Disclosure by the wife

1. In Weir & Weir (1992-1993) 16 FamLR 154 the Full Court said:

   “This court has pointed out in a line of cases leading up to the recent decision of the Full Court In The Marriage of Black and Kellner (1992) 15 FamLR 343; [1992] FLC 92-287, that it is the duty of a party involved in property proceedings in this jurisdiction to make a full disclosure of their financial affairs. See also In The Marriage of Giunti (1986) 11 FamLR 160; [1986] FLC 91-759, and In the Marriage of Mezzacappa (1987) 11 FamLR 957. It is clear enough from his Honour’s findings in the present case that the husband had not done so and had in fact pocketed the proceeds of the substantial number of cash sales. It is obvious that in most cases of this nature it is difficult for the other party to establish that fact let alone establish the quantum of what has been taken.

   It seems to us that once it has been established that there has been deliberate non-disclosure, which follows from his Honour’s findings in this case, then the court should not be unduly cautious about making findings in favour of the innocent party.  To do otherwise might be thought to provide a charter for fraud in proceedings of this nature.”

2. As indicated, I had difficulty in accepting the wife as a witness of candour and frankness.  I reject the suggestion that her evidence must be viewed as that of a person “who is not a financial expert”.  In my opinion it beggars belief that a person who has control of entities with an annual turnover of millions of dollars could have so little knowledge of the details of their operations.

3. My impression was that the wife did not deliberately and calculatingly fail to disclose relevant financial information.  Rather, it appeared to me that she was unconcerned about whether she fulfilled her obligation to make full and frank disclosure.  She was largely content to allow her accountant, Mr K, to deal with Mr G’s requests for documents and information.  The fact remains, however, that responsibility rested with her alone to ensure that she fulfilled her disclosure obligations.

4. I am not satisfied that the wife did all that she could to inform the husband and the court of the truth of her financial position and that of the corporate structures in which she has an interest.  I propose to take this circumstance into account, in favour of the husband, pursuant to section 75(2)(o).

The Assets, Liabilities and Financial Resources

The Assets

1. The parties agreed that they have non-superannuation assets valued as follows:

1.	Sale proceeds of H property	$639,577
2.	BMW motor vehicle (H)	$80,000
3.	Commonwealth Bank account (H)	$600
4.	Commonwealth Bank account (W)	$1,300
5.	ING savings account (W)	$2,000
6.	Furniture and contents (H)	$28,000
7.	Furniture and contents (W)	$10,000
8.	Personal items (H)	$14,000
9.	15% interest in P & D Consultancy (H)	$49,424
10.	Interest in Z Investments Limited (W)	$113,755
11.	Jewellery (W)	$3,000

1. There was an issue as to the valuation of the company known as CL International Pty Limited.  On an asset-backing basis, Mr G valued this entity at $(780,000).  The wife accepted this figure.

2. In a document handed up during submissions, it was suggested on behalf of the husband that this value should be adjusted to reflect the fact that the wife has given personal guarantees amounting to $280,000 for the liabilities of this company.  This evidence is extracted from her Financial Statement sworn on 2 June 2009.  It was said that this figure should be deducted from the total of the Westpac Bank loan of $382,191 and “cash at bank” or overdraft facility of $142,879, which is $525,070.  That figure less $280,000 is $245,070.  The submission thus was that Mr G’s value of $(777,439) should be reduced by $245,070, which yields a net figure rounded off to $(532,000).

3. On behalf of the husband it was then submitted that there should be a further adjustment to reflect the fact that an alleged debt to EA of $85,808 was said by the wife to have been written off.  I understood her to say in her oral evidence that this entity has recently made demands for payment.  Mr G said that he has recently received an audit certificate relating to this debt.

4. It is readily apparent from Mr G’s report that he did not factor the personal guarantees into his valuation.  I am persuaded that it is appropriate to reduce the liabilities of CL International by $280,000.  I am not satisfied that the debt to EA should also be deducted from the company’s liabilities, having regard to the evidence of Mr G.  I thus find that the company CL International Pty Limited has a value of $(532,000).

5. There was also a dispute as to the value of the company M Pty Limited.  On an asset-backing basis, Mr G valued this company at $495,488 which he rounded off to $500,000.  The wife accepted that figure.

6. On behalf of the husband this valuation was disputed on the basis that Mr G took into account a liability to Ms J of $185,191.  It was suggested that this amount should be added to the net asset value, thus the correct figure is $680,679 or a rounded-off $681,000.

7. I have referred already to the evidence of Ms J, whereby she effectively updated the position in regard to the current balance of her advances to the wife.   The debt will be included as a personal liability of the wife, thus the value of M Pty Limited should be increased as submitted on behalf of the husband.  I thus find that the company M Pty Limited has a value of $681,000.

8. On behalf of the husband it was submitted that a bonus of $120,000 due to the wife from M Pty Limited should be included as an asset.  Mr G reported:  “I also note that there is a liability in the company for $120,000 bonus payable to the wife.  The amount of this bonus less any tax payable should also be included as an asset of the wife.”

9. There was no challenge to this opinion of Mr G.  There was no evidence as to tax which the wife will have to pay when she receives this money.  The best I can do is thus to include the sum of $120,000 as an asset in the balance sheet.

10. A figure of $37,000 was included in the balance sheets submitted on behalf of each of the parties on account of the wife’s interest in the companies S Products Pty Limited and S Import/Export Pty Limited.  There was no valuation of these interests by Mr G.  It seems that the wife has made an admission against interest, which was accepted by the husband.  I thus find that the value of the wife’s interest in these two companies is valued at $37,000, which will be included in the list of assets.

11. There was an issue as to whether the wife owns vacant land in Bali.  The husband maintained that she purchased such a property for 489,720 rupiah in 2002.  He relied on a document purporting to be a receipt for payment of this amount, signed by one Mr GY, dated 5 October 2002 (exhibit 15).  He also relied on a map in which the land in question was shaded in green colouring (exhibit 9). 

12. The husband alleged that the parties discussed the purchase of this land during a visit to Ms J in 2002.  In his affidavit he said: 

    “The circumstances leading to the purchase of this land were that in September 2002 [the wife], the children and I went to Bali for a holiday.  [The wife] has a friend, [Ms J], who lived in Bali at that time.  Together with another Australian living in Bali, [the wife] made enquiries about acquiring 3 acres of beach front land at […].  We all visited the land and I remember walking around it and roughly measuring out boundaries.  It was a sloping block from the road down to a creek.  It had been cleared and there was construction taking place on a neighbouring block.  I do not know the address and I have not been able to find out more about the land despite endeavours to do so.  At the time [the wife] said to me words to the effect: ‘This could be developed as a holiday home for the family.  But I will put it in my mother’s name and she will provide the money’”. 

13. There was no evidence as to the circumstances in which the purported receipt was created or that the wife ever actually paid any money to Mr GY.  There was no equivalent of an Indonesian document of title.  The husband’s own evidence was that, at best, the wife expressed an intention that her mother would provide all of the purchase money and become the registered proprietor of the property.  I do not accept that the onus shifted to the wife to prove that she did not own land in Bali, once she was made aware of the husband’s suspicion.  In those circumstances I find that the wife is not the owner of land in Bali.

14. On behalf of the husband it was submitted that an amount of $47,000 should be added back to the list of assets.  It was suggested that this amount was applied from the proceeds of sale of the H property to discharge a debt of the wife’s company. 

15. In his affidavit the husband asserted that the sum of approximately $50,000 was paid from the sale proceeds, to discharge a secured loan of M Pty Limited.  In a balance sheet submitted on his behalf, it was contended that $47,000 should be added back to the list of assets as “payout of loan to wife’s company [CL] International Pty Limited – [CL] Inc. on sale at home”. 

16. There was no documentary evidence, such as a settlement statement, to establish that such a payment occurred.  I do not suggest that I disbelieve the husband but, in my view, the evidence as to this transaction was insufficient to justify the suggested add-back.

17. On behalf of the wife it was submitted that there should be add backs for amounts of $50,000 and $30,000 which were applied to discharge credit card debts of the husband.  She alleged that she provided $50,000 to the husband to discharge credit card debts during the first separation.  As noted, he said that he had “no clear recollection that she did so” and there was no independent evidence to support this assertion.  In any event, the parties subsequently reconciled and again intermingled their finances for some years.  In these circumstances I will not add back an amount of $50,000 to the list of assets.

18. The wife also alleged that the husband refinanced the H property after their final separation, without her knowledge, while she was living in the United States.  She claimed that he borrowed $30,000 to meet credit card debts.  The husband disputed that he did so and, again, there was no independent evidence of any such transaction.  In these circumstances I will not add back a sum of $30,000 as an asset.

19. There was a suggestion that amounts should be added back to the list of assets on account of paid legal costs.  It did not appear to me that either party asserted such an add back with any particular enthusiasm.

20. The evidence was scant as to the source of funds used by each of the parties to meet paid legal costs.  The husband said that he has paid $30,000 to $40,000 to his lawyers from “his own resources”. 

21. It seems likely to me that any legal costs which have been paid by the parties to date have come from income generated after the separation.  The husband has met some of his legal costs from a litigation loan taken out, in part, to settle the proceedings with Ms F.  In these circumstances I will not add back any amount on account of paid legal costs.

Superannuation Assets

1. The parties agreed that they have superannuation funds with these values:

1.	AMP (H)	$29,008
2.	BT Business Super (W)	$56,986

1. I thus find the parties’ assets to be as follows:

1.	Proceeds of sale of H property	$639,577
2.	BMW motor vehicle (H)	$80,000
3.	Commonwealth Bank account (H)	$600
4.	Commonwealth Bank account (W)	$1,300
5.	ING savings account (W)	$2,000
6.	Furniture and Contents (H)	$28,000
7.	Furniture and Contents (W)	$10,000
8.	Personal Items (H)	$14,000
9.	15% interest in P & D Consultancy (H)	$49,424
10.	Interest in Z Investments Limited (W)	$113,755
11.	Jewellery (W)	$3,000
12.	CL International Pty Limited (W)	($532,000)
13.	M Pty Limited (W)	$681,000
14.	Bonus due from M Pty Limited (W)	$120,000
15.	Interest in S family companies (W)	$37,000
16.	AMP superannuation (H)	$29,008
17.	BT Business Super (W)	$56,986
$1,333,650

The Liabilities

1. On behalf of the husband it was submitted that only the following liabilities should be taken into account:

1.	Bonus Finance debt in relation to BMW motor vehicle (H)	$77,000
2.	Debt to Ms J (W)	$132,387
3.	Loan account with M Pty Limited (W)	$286,613

It was conceded that borrowings from his mother and Ms P, post-separation income tax, credit card bills and unpaid legal fees for this litigation and the District Court proceedings should not be taken in account.

1. I was not clear whether it was submitted on behalf of the husband that a debt of $43,750 to Impact Funding Ltd, on account of paid legal costs, should be included as a liability.  As I have not included paid legal fees in the list of assets, I will disregard this debt.  The Bonus Finance liability should be included, as the BMW motor vehicle appears in the list of assets.

2. Mr G valued the company M Pty Limited on the assumption that the wife’s loan account “is receivable in full”.  In his opinion, the amount of $286,613 “should be disclosed as a liability of the wife”.  I will thus include this amount as a liability of the wife in the balance sheet. 

3. On behalf of the wife it was submitted that the following liabilities should be included in the balance sheet:

1.	Personal guarantees of wife to AK Investments Limited and W Investments Pty Limited	$1,380,000
2.	Credit cards (W)	$9,130
3.	2007 income tax (W)	$7,842
4.	Mr K accounting fees (W)	$34,736
5.	S & B accountancy fees (W)	$US18,566

1. Mr G reported that the wife’s personal guarantees would become her liability only in the event that CL Inc. is unable to repay certain amounts.  That situation has not arisen, thus the wife has no current liability of $1,380,000.  I will not include this amount in the balance sheet.

2. If the husband’s post-separation income tax and credit card debts are to be disregarded, the same approach should be adopted in relation to similar liabilities of the wife.  I take the same view in relation to her post-separation debts to accountants in Australia and the United States.  There is no reason why any liability for these debts should be cast upon the husband.

3. I thus find the relevant liabilities to be as follows:

1.	Bonus Finance debt in relation to BMW motor vehicle (H)	$77,000
2.	Debt to Ms J (W)	$132,387
3.	Loan account with M Pty Limited (W)	286,613
$496,000

Financial Resources

1. It was not suggested that either party has any financial resource.

The Contributions of the Parties

1. On behalf of the husband it was submitted that there should be a finding of equality of contribution.  It was contended that the only relevant section 75(2) factor was the wife’s alleged non-disclosure.  It was suggested that the result should be that the husband receives the whole of the proceeds of sale of the H property.

2. On behalf of the wife it was contended that she should receive 60% of the net pool of property.  There was no submission as to the appropriate findings in relation to contribution or any adjustment pursuant to section 75(2).

3. At the commencement of cohabitation neither party had any significant assets.  The wife received a gift of her interest in the two S companies approximately four years into the relationship.  This matter has little significance in the overall assessment and balancing of the parties’ contributions.  The only available evidence suggested that these interests have a present value of only $37,000.  Neither party has been involved with the Australian-based S companies since 2000.

4. Throughout the relationship both parties were in paid employment.  It seems that they each worked hard and they were able to accrue assets.  They cohabitated for a total of approximately 19½ years between 1984 and 2005. 

5. On behalf of the wife an attempt was made to demonstrate that the husband failed to make the whole of his income available for the support and benefit of the family.  This endeavour focussed on his relationships with Ms F and the mother of his son, O, prior to the parties’ final separation in May 2005.  No specific allegations of financial detriment to the family unit, as a consequence of these relationships, were put to him.  I would note that the wife was out of Australia for substantial periods during 2004 and 2005. There was little reliable evidence as to how she dealt with the funds generated by her business activities before the final separation while she was overseas.  For these reasons, I am not satisfied that the husband’s extramarital relationships undermined his contributions.

6. On behalf of the wife it was submitted that it was significant that she alone paid the mortgage on the parties’ matrimonial home during their separation.  The bank statements tendered in evidence (exhibit 2) indicate that she was solely responsible for payment of the mortgage while the parties lived separately.  On the other hand, she occupied the property and the husband was required to find alternate accommodation. 

7. It was also emphasised, on behalf of the wife, that her family provided financial assistance to the parties during their marriage.  The husband had no hesitation in expressing his gratitude for the generosity of the S family.  The extent of this assistance could not be quantified.

8. On behalf of the wife it was submitted that her payment of certain credit card debts of the husband go to a contribution finding in her favour.  The evidence relied upon to support these payments were bank statements in respect of a joint account and a facility in the wife’s sole name (exhibits 4 & 5).  There was a handwritten notation (“credit cards”) in exhibit 5 which was not adopted by the wife in her evidence.  There was only an asterisk next to a funds transfer in the joint account.

9. In my view this evidence was insufficient to establish that the wife paid the husband’s credit card debts.  In any event, whatever credit card payments she may have made took place prior to the parties’ final separation.  They were living as a couple in 2004, although the wife spent substantial periods out of Australia.

10. It was further sought to justify a contribution finding in favour of the wife on the basis that the husband borrowed funds to discharge debts of N Pty Limited.  These borrowings were then converted into an equity loan secured on the parties’ former matrimonial home. 

11. This borrowing occurred in 2000, well before the final separation of the parties.  There was no submission that the husband engaged in conduct which could be categorised as “reckless, negligent or wanton” in accordance with the well known decision in Kowaliw and Kowaliw (1981) FLC 91-020. Rather, it seems to me that the husband’s establishment and operation of this business would fall within the description of “pursuit of matrimonial objectives” to which reference is made in that decision.  Consequently, these losses should not fall entirely at the feet of the husband. 

12. It was further submitted on behalf of the wife that she is entitled to a contribution finding in her favour because she “made a significantly greater contribution to the children”.  This submission could only relate to the time prior to their 18^th birthdays, being 2006 in the case of C and 2008 for A.

13. In a document which the wife created (pp173ff in exhibit 20) she recorded that she worked “extremely long hours 5:00 or 6:00am until 10:00pm six to seven days per week in 2000” when she established the business known as M Pty Limited.  She also wrote that her work hours were from 7:30am until 6:00pm in 2001 and 2002.  She also referred to her pattern of travel to the United States to pursue her business interests.

14. The children began to attend a boarding school in 2005.  A spent one year living in the United States with the wife and returned to boarding school in Sydney in 2007. 

15. I accept that the husband cared for the children while the wife was overseas in the course of her business activities.  The H home was close to their school.  I accept that he provided physical and emotional support for the children, as he alleged.  The reality of the children’s situation was that both of their parents played a role in their care, while they were not at boarding school.  The evidence does not enable me to find that the wife made a greater contribution to the care of the children than did the husband.

16. It is difficult to assess the wife’s contributions to her businesses in Australia and overseas.  It was certainly the case, as the husband conceded, that she operated these businesses without his input.  The available evidence suggests that the United States operation suffered a downturn, as the wife alleged, due to difficulties in securing the correct components for the manufacture of products.  It seems to me that no finding is open that the wife engaged in conduct of the kind referred to in the Kowaliw decision.

17. As counsel for the husband submitted, the parties “had a lengthy relationship, worked hard and took part in the care of their children”.  I was not persuaded that any matter urged on behalf of the wife shifted the position, in her favour, from equality of contribution.

Section 75(2) Factors

1. On behalf of the husband, it was submitted that the only relevant consideration pursuant to section 75(2) is the wife’s non-disclosure.  It was said that this matter should be taken into account in his favour pursuant to section 7(2)(o).  It was submitted that “millions were spent in the United States and she has been reluctant if not entirely unwilling to provide relevant information”.  As indicated above, I am satisfied that the wife failed to make a full and frank disclosure and this matter will weigh in favour of the husband pursuant to section 75(2)(o).

2. It seemed to be suggested on behalf of the wife that her contingent  liability of $1.38 million, and the allegedly parlous state of her corporate interests, should be taken into account in her favour pursuant to section 75(2).  I am unpersuaded by these submissions.  She has no present liability for $1.38 million and may never incur such a debt.  I regard the evidence as to the current financial position of herself and her corporate entities to be insufficiently clear or reliable to be taken into account in her favour pursuant to section 75(2).

3. I have considered all factors set out in section 75(2).  I will now refer only to those considerations which appear to me to be relevant to the proceedings.

   section 75(2)(a):     the age and state of health of each of the parties;

   section 75(2)(b):     the income, property and financial resources of each of the parties and the physical and mental capacity of each of them for appropriate gainful employment;

4. Each of the parties is 49 years old and in good health.  It is obvious that they both have the capacity to engage in well-paid employment, as they have done in the past. 

5. The husband’s salary package provides him with benefits amounting to approximately $2,483 gross per week.  His Financial Statement indicated  that he is able to live comfortably within his means.

6. The financial position of the wife is not nearly so clear.  In her Financial Statement sworn on 2 June 2009 she disclosed gross weekly income of $2,188 from “[CL] Inc. – USA and [M] Pty Limited”.  There was no breakdown of the benefits which she receives from these two entities.  She said in cross-examination:  “I will pay $50,000 per year for [C] to attend [college] in New York.  Yes, I am well able to meet these fees from my income.”

7. I was left with considerable doubt that I have an accurate picture of the wife’s financial circumstances.  The weekly expenditure specified in her Financial Statement sworn on 2 June 2009 amounted to $5,392, which included $3,393 for “food, children allowance, schools fees, board and living expenses”.  There was no explanation as to how she meets a shortfall of about $3,200 per week of income over expenditure, now how she could accrue savings of around $2,400 in these circumstances. 

   section 75(2)(e):     the responsibilities of either party to support any other person;

8. The husband has the responsibility to provide financial support for his son O.  As noted, he said that there is no formal arrangement for payment of child support to his mother. This responsibility will continue for approximately 15 years.

   section 75(2)(m):    if either party is cohabiting with another person – the financial circumstances relating to the cohabitation;

9. The wife cohabits with her husband, Mr N.  There was no evidence whatsoever as to his financial position.  Obviously, it was the wife’s responsibility to adduce this evidence but she failed to do so.  She offered no explanation for this gap in her evidence.  It seemed to me that this failure is yet another illustration of the wife’s apparent unconcern as to her duty of disclosure.

   section 75(2)(o):     any fact or circumstance which, in the opinion of the court, the justice of the case requires to be taken into account;

10. As indicated I propose to take into account, in favour of the husband, the cavalier attitude displayed by the wife to her obligation of full and frank disclosure.  Ultimately, she elected to leave the husband and the court in a position of uncertainty in relation to the financial circumstances of herself, her corporate entities and her cohabitation with Mr N.

Conclusion

1. The husband sought orders to the effect that he receive the whole of the net proceeds of sale of the H property.  This result would require an adjustment of 41% in his favour pursuant to section 75(2), calculated as set out below.

2. The assets are valued at $1,333,650 and the liabilities total $496,000.  The net pool of property is thus valued at $837,650.  The husband has the following assets and superannuation:

1.	BMW motor vehicle	$80,000
2.	Commonwealth Bank account	$600
3.	Furniture and contents	$28,000
4.	Personal items	$14,000
5.	15% interest in P & D Consultancy	$49,424
6.	AMP Superannuation	$29,008
$201,032

He has a liability of $77,000 in relation to his motor vehicle, which means that he holds net assets and superannuation to the value of $124,033.

1. If the husband takes the whole of the proceeds of sale of the H property, he would hold net assets and superannuation to the value of $763,610.  That figure equals 91% of the net pool of property.

2. The wife has the following assets and superannuation:

1.	Commonwealth Bank account	$1,300
2.	ING savings account	$2,000
3.	Furniture and contents	$10,000
4.	Interest in Z Investments	$113,755
5.	Shareholding in M Pty Limited	$681,000
6.	Shareholding in CL International Pty Limited	$(532,000)
7.	Bonus due from M Pty Limited	$120,000
8.	Interest in S family companies	$37,000
9.	Jewellery	$3,000
10.	BT Business Super fund	$56,986
$493,041

She has liabilities totalling $419,000, which means that she holds net assets and superannuation valued at $74,041.  This figure amounts to 9% of the net pool.

1. I could not be satisfied that such an outcome is just and equitable, even having regard to the unsatisfactory state of the wife’s case.  This result would almost entirely ignore the contributions which the wife made during the parties’ cohabitation.

2. The uncertainty surrounding the financial position of the wife and her corporate entitles makes it difficult to craft an outcome which satisfies the “just and equitable” test in section 79.  Doing the best I can, I find that a division of the net pool of property of 75% to the husband and 25% to the wife is just and equitable in all of the circumstances raised by the evidence.

3. Ultimately, the issue then is the division of the net proceeds of sale of the H property, which amounted to $639,577 at the time of the trial.  The husband would need to receive $504,205 to achieve a division of 75% of the net pool in his favour.  The wife would receive the balance of $135,372.

4. Interest would have accrued on the net sale proceeds, so an order in terms of a percentage division would be appropriate.  This money should be divided as to 78.8% to the husband and the balance to the wife.  Otherwise, the parties will retain the assets, superannuation and liabilities which they currently hold.

I certify that the preceding one hundred and thirty nine (139) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Stevenson

Associate:     

Date:              24 December 2009