Dewell and Harris & Anor
[2016] FamCA 938
•4 November 2016
FAMILY COURT OF AUSTRALIA
| DEWELL & HARRIS AND ANOR | [2016] FamCA 938 |
| FAMILY LAW – PROPERTY - Application by the wife for property settlement –Where the husband engaged in calculated non-disclosure – Where the husband found to be an unreliable witness – Where the wife will receive 52.5 per cent of the net assets – Where the parties’ superannuation entitlements considered as assets given the age of the parties. FAMILY LAW – TRUSTS – Where the husband’s father was joined as the second respondent – Where the second respondent owns a Unit Trust – Where both the husband and his father were directors of the Trustee company prior to the commencement of the trial – Where the husband has engaged in extensive dealings with the Trust and his personal finances have become intermingled with those of the Trust – Where the Trust and the Trustee company are found to be financial resources of the husband. |
| Family Law Act 1975 (Cth) s 75(2), 79(2) Limitation Act 1969 (NSW) s 14(1) |
| Stephens v Stephens & Anor (2007) FLC 93-336 |
| APPLICANT: | Ms Dewell |
| RESPONDENT: | Mr Harris |
| 2ND RESPONDENT | Mr A Harris |
| FILE NUMBER: | SYC | 5809 | of | 2011 |
| DATE DELIVERED: | 4 November 2016 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Rees J |
| HEARING DATE: | 10, 11, 12, 13 and 14 October 2016 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Campton SC |
| SOLICITOR FOR THE APPLICANT: | Karras Partners Lawyers |
| COUNSEL FOR THE RESPONDENT: | Mr Dura |
| SOLICITOR FOR THE RESPONDENT: | Horton Rhodes Legal |
| COUNSEL FOR THE 2ND RESPONDENT: | Mr Schonell |
| SOLICITOR FOR THE 2ND RESPONDENT: | Milevski Family Lawyers |
Orders
IT IS ORDERED
That within fourteen days the husband shall vacate the property at B Street, Suburb C, and thereafter the wife shall be responsible for all rates, charges and taxes relating to the use and occupation of the property.
That within 90 days of the date of these Orders, the husband shall:
(a)Transfer to the wife all of his right, title and interest in the property at B Street, Suburb C (“the Suburb C property”) being the land in Folio Identifier …, free of encumbrance.
(b) Pay to the wife the sum of $2,132,078.
That pending compliance with Order (2), the husband shall be restrained from further encumbering or charging the Suburb C property.
That the husband’s superannuation interests with BT Investor SuperWrap Plan pursuant to membership number … (“the Plan”) shall be split to create a superannuation interest for the wife as follows:
(a)Pursuant to section 90MT(2) of the Family Law Act 1975 (Cth) (“the Act”) and Regulation 27 of the Family Law (Superannuation) Regulations (“the Regulations”) the Court determines that the amount in relation to the husband’s superannuation in the Plan is $2,672,825.
(b)Pursuant to Section 90MT(4) of the Act the Court allocates a base amount to the wife in respect of the husband’s superannuation interests in the Plan of $1,100,000.
(c)Pursuant to section 90MT(1)(a) of the Act whenever a splittable payment becomes payable in respect of the husband’s superannuation in the Plan the wife is entitled to be paid an amount calculated in accordance with the Regulations where the base amount is $1,100,000 and there is a corresponding reduction in the entitlement of the husband at the time of the splittable payment.
(d)That the operative time for payment under this Order is four business days after service of this Order.
(e)That the Trustee of the Plan shall do all acts and things and sign all documents required to calculate the entitlement and make payment to the wife pursuant to these Orders.
(f)That having been accorded procedural fairness in relation to the making of this Order, this Order binds the Trustee of the Plan.
That the second respondent is declared to be the owner of the painting by Artist PP.
That the wife retain the two Artist D artworks and that the husband retain all other artworks in addition to his tools and equipment located at the Suburb C property.
That other than as provided by these Orders, each party shall retain all property, both real and personal in his or her possession at the date hereof.
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 Dewell & Harris and Anor 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 5809 of 2011
| Ms Dewell |
Applicant
And
| Mr Harris |
Respondent
And
| Mr A Harris |
2nd Respondent
REASONS FOR JUDGMENT
Ms Dewell (“the wife”) and Mr Harris (“the husband”) commenced co-habitation in 1986 and married in 1991. Both were employed in different roles in the same industry.
They have two now adult children, aged 24 and 21 years.
They separated in July 2010 but they, and their two children, still reside under the same roof at the former matrimonial home in Suburb C (“Suburb C”).
The wife is aged 59 years and the husband is aged 60 years.
The husband’s father (“the second respondent”) is aged 99 years. The assets of the second respondent are a significant matter in the proceedings. The second respondent is the holder of all the units in the E Unit Trust (“EUT”) which was established in 1981. The trustee of the EUT is F Pty Ltd (“F Pty Ltd”). The second respondent has a substantial loan account with F Pty Ltd.
It is the wife’s case that the husband is the beneficial owner of the units in F Pty Ltd.
The second respondent and the husband assert that substantial sums are owed to the second respondent, and to F Pty Ltd, by the husband. The wife disputed that assertion.
The facts relating to the circumstances of the marriage and the acquisition of various properties are relatively uncontroversial. A number of properties were bought and sold and the parties and the second respondent engaged in share trading. I do not propose to set out all of the property transactions but rather to concentrate on those transactions which give rise to controversy.
The controversies relate to beneficial ownership, arising out of contribution of funds, the intermingling of funds and the husband’s involvement with various transactions whereby F Pty Ltd borrowed money from banks. It will be necessary in the course of these reasons to look at individual transactions.
At the commencement of the relationship, the wife owned a property in Brisbane subject to a mortgage. There is no evidence of the value of her equity. In the same year, she received a payment of $5,000 from her employer in relation to a discrimination claim.
At the commencement of the relationship, the husband owned a property at H Town which was encumbered by way of mortgage to the Commonwealth Bank in the sum of approximately $60,000. There is no evidence of the value of the husband’s equity in the H Town property. The husband also owned cash, shares and personal property but there is no evidence of value.
In 1990, the husband received an inheritance of $40,000.
In 1992 the husband commenced to use a firm known as Company I to trade in shares.
In 1993 the husband received an inheritance of $200,000.
On 31 August 1993, the husband was appointed secretary of F Pty Ltd.
In 1994, the husband purchased Suburb C in his own name for $880,000. The second respondent advanced $340,000 towards the purchase.
In March 1995, the wife sold her property in Queensland and received $107,383. She gave that money to the husband to invest.
On 8 February 1996, the husband was appointed a director of F Pty Ltd.
On 9 September 1999, one-third of the shares in F Pty Ltd were transferred to the husband.
In 2001, F Pty Ltd purchased J Street, Suburb K for $850,000.
In September 2001 the second respondent lent $1,000,000 to the husband to finance the rebuilding of Suburb C.
In 2002 the husband commenced buying and selling aircrafts and parts. The aircrafts were either refurbished and sold, or sold for parts.
Also in 2002 the husband purchased 2 J Street, Suburb K for $525,000.
On 2 August 2002 the husband provided a handwritten note to the ANZ Bank authorising the Bank to withdraw funds from “my accounts in F Pty Ltd” and forward a cheque “in my name”.
In 2003 F Pty Ltd purchased 3 J Street, Suburb K, for $1,260,000.
In 2005 F Pty Ltd purchased L Street, M Town for $820,000.
In 2006 the wife’s mother died and she inherited $22,345.
From at least 1 September 2006 (and perhaps earlier) the husband began to collect the rents payable to F Pty Ltd and to pay those rents into his own Westpac Bank account. The husband also paid for the expenses of F Pty Ltd in relation to those properties from his own account.
On 13 January 2009, F Pty Ltd sold Lot 1, N Town. As a result, a sum in excess of $378,000 was deposited into the husband’s Westpac Bank account. F Pty Ltd sold a second property, Lot 2, N Town on 6 July 2009 for $292,000 and the proceeds of Lot 2 were also paid into the husband’s Westpac Bank account.
In July 2010, the parties separated but remained living at Suburb C.
From November 2010, the husband commenced paying $60,000 per quarter from his own funds to pay interest payable by F Pty Ltd to the ANZ Bank pursuant to a loan facility taken out by F Pty Ltd.
In March 2011, the husband’s mother died and the husband inherited one third of her estate. The value of his inheritance was $1,441,490. This included a one sixth shareholding in O Pty Ltd.
On 11 April 2011, the husband resigned as a director of F Pty Ltd, leaving the second respondent a director.
On 4 May 2011, the husband negotiated the purchase of a rural property known as “Property P”. The property was in two lots. One lot was purchased and registered in the name of the husband. One lot was registered in the name of F Pty Ltd. The husband provided the whole of the money for the purchase of both lots.
On 21 September 2011 the wife filed her application for property settlement.
In 2012 the husband purchased 1, 2 and 3 Q Street Suburb R for a total of $907,500.
In late 2012 the husband purchased a rural property known as “Property S” for $1,657,756 including stamp duty. Parts of Property S were then sold off to adjoining land holders.
On 22 July 2013, the husband made arrangements for the rental income due to F Pty Ltd to be paid into the accounts of F Pty Ltd.
On 16 February 2014, the second respondent executed a Power of Attorney in favour of the husband.
In April 2014, the husband effected the sale of the portion of “Property P” which was registered in his name for $1,850,000. Simultaneously, the husband caused the lot belonging to F Pty Ltd to be sold for $1,500,000 and those funds were paid into the accounts of F Pty Ltd.
In 2014 F Pty Ltd purchased 1 T Street, Suburb K for $550,000 and 2 T Street, Suburb K for $924,000.
Also in 2014, the husband purchased 3 T Street, Suburb K for $1,500,000.
In 2015, the second respondent ceased preparing the tax returns and financial statements for F Pty Ltd and for the husband. Mr U became the accountant for F Pty Ltd and the husband.
On 3 February 2016, the second respondent resigned as a director of F Pty Ltd and Mr V was appointed sole director.
In July 2016, the husband purchased 4 T Street, Suburb W (“Suburb W”) for $3,600,000.
ISSUES
In summary the issues are:
1.The husband’s credit;
2.The nature/characterisation of the $340,000 advanced by the husband’s father in 1994. The husband contends it was a gift to assist in the acquisition of the Suburb C home. The wife contends that it was a payment for work undertaken by the husband to assist his father;
3. The value of EUT and F Pty Ltd;
4. The beneficial ownership of the issued units in the EUT;
5. If the husband is not the beneficial owner of the units in EUT, is the EUT a financial resource of the husband?
6. The second respondent’s loan account;
7. The characterisation of the $1,000,000 advanced by the Second Respondent to the husband in September 2001;
8. The younger child’s HELP fees;
9. The impact, if any, of the husband’s health on his current and future income earning capacity, including by way of employment;
10. The contribution contended by the husband by way of use of his parents’ Company I accounts;
11. The contribution contended by the husband by way of the second respondent permitting the husband to use the assets of the EUT to secure personal borrowings;
12. The wife’s health, and its impact upon her future income earning capacity;
13. Alleged non-disclosure by the husband; and
14. Occupation of Suburb C.
THE HUSBAND’S CREDIT
On 22 July 2011, the husband made a Statutory Declaration, pursuant to the provisions of the Oaths Act 1900 (NSW), in which he declared, on his oath, that he was a joint owner with the second respondent of the units in the EUT. That document is more fully considered later in these reasons in the context of the husband’s dealings with financial institutions on behalf of the EUT.
It was the husband’s case that the contents of the Statutory Declaration were false and that he made the declaration to obtain a benefit by way of financial assistance from the bank.
On his own case, and on his own evidence, the husband is a person who is prepared to make a false oath to obtain a financial benefit.
The husband had also signed a document to the same effect in 2010, although not a Statutory Declaration, to which reference is made in the context of non-disclosure.
I find the husband not to be a credible witness.
THE NATURE OF THE $340,000 ADVANCE BY THE HUSBAND’S FATHER IN 1994
In his trial affidavit, the husband deposed that, since 2001, he had assisted the second respondent in the operation of the affairs of the EUT including locating property for development, organising finance, giving instructions for sales and purchases and dealing with managing agents in relation to tenants. In cross-examination, he said that he did feasibility studies for developments. He does not suggest that he was paid for that assistance.
In his trial affidavit, the husband deposed that, at the time he was negotiating to purchase Suburb C, he had a conversation with the second respondent to the following effect:
[Second respondent]: “You have worked hard on the farms and their subdivisions, so I want to give you some money towards the purchase the house (sic) to help you out. If I give you $340,000 towards it, would you be able to come up with the rest?”
The second respondent deposed to the conversation in identical terms.
Both the husband and the second respondent deposed that, from mid-1985, the husband and his father engaged in a joint venture of buying, developing and selling properties. The husband deposed that he looked for properties, negotiated the purchases and did feasibility studies. In addition, the husband was engaged in the active management of rural property owned by the second respondent and did that work without hired workers.
The husband was not paid for the work he did in those capacities between about 1985 and the time Suburb C was purchased in 1994.
He deposed that he received an equal share of any profit which was made on the property developments.
The wife contends that the sum of $340,000 represented a payment to the husband in compensation for work done. There is no evidence to support that contention.
I accept that the advance of $340,000 from the second respondent should be treated as a contribution.
THE VALUE OF THE EUT AND F PTY LTD
It is not in dispute that the financial statements of the EUT were produced by the accountants for the EUT based solely on the instructions given to them by the second respondent until the 2014 tax year and thereafter the husband gave the instructions. Mr U, the accountant who prepared the Financial Statements since about 1999, gave evidence that he did not query or verify the instructions but simply reproduced them.
A single expert, Ms X, was engaged to value the EUT units. She produced a report dated 30 September 2016 in which she set out her “unconcluded estimate” of the value of the units, based on net asset backing.
Ms X assessed the gross value of the EUT units to be $4,493,402 based on valuations of the underlying real estate. She deducted from the gross value the liabilities of the EUT which included, inter alia:
Accrued expenses [second respondent] $248,160
Unpaid trust distributions [second respondent] $243,288
The item described as “accrued expenses” was interest attributed to the second respondent’s loan account in the 2013 tax year. Mr U in cross-examination said that the husband had directed him to include that figure in the accounts. The interest had never been paid.
The “unpaid distributions” were notional distributions of the profit made by the EUT in 2015 to the second respondent. That money has not been distributed to the second respondent or credited to his loan account.
I am not satisfied that those two asserted liabilities have any foundation in fact, but I am not required to determine that issue. Having regard to the terms of the Will of the second respondent in which he forgives all debts owed to him by the EUT, I consider it unlikely that the alleged debts would ever be called in by the second respondent and therefore I propose to ignore them for the purpose of these proceedings.
The largest liability of the EUT is the loan account of the second respondent, shown in the 2015 balance sheet as $3,196,262. How that figure was calculated is a mystery. In the financial year ended 30 June 2014, the loan account was recorded as having increased from $3,065,269 in 2013 to $4,499,412 in 2014. There is no explanation for the increase. In cross-examination the second respondent could not explain it. He was clear that he had not advanced $1,434,143 to the EUT. I do not accept that this figure accurately represents the loan account owed.
In the financial year ended 30 June 2015, the loan account had decreased to $3,196,262. There was no suggestion that the second respondent had received $1,303,150 or any money at all. I do not accept that the Financial Statements of EUT accurately reflect the amount of the loan account.
No loan account ledgers have ever been produced, although they have been called for. The loan account balances have been recorded by the accountants in the Financial Statements simply on the basis of instructions, firstly from the second respondent and then from the husband. They have no probative value.
In any event, as has been explained, the second respondent, in his Will and by his Statutory Declaration made on 16 March 2016, has forgiven those debts. There is no evidence from the second respondent that he intends to call up the loan, whatever its accurate balance might be.
It was agreed that, if those three items are disregarded, then Ms X’s “unconcluded estimate” of valuation would become $5,116,170.
That estimate is, however, as Ms X stated, not accurate.
Ms X at Appendix G of her report, set out the matters which caused her concern. Those were the receipt by the husband of rents payable to the EUT, the payment by the husband of expenses of the EUT, the fact that no provision has been made in the Financial Statements of the EUT for GST, and the issues surrounding the purchase of Property P by the EUT and the advance of the purchase money by the husband. None of these matters was reflected in the Financial Statements.
Ms X was made aware of the Property P transaction by the wife. When asked in cross-examination by senior counsel for the wife why he did not instruct Ms X about the Property P transactions, the husband said words to the effect “It slipped my mind”.
Ms X was not aware of all of the discrepancies.
Mr U, in cross-examination, said that the first time he had become aware of the Property P transactions was when he was advised of them by the husband in 2015. Thus the capital gain on the sale of the EUT’s portion of Property P was not returned in the 2014 Financial Statements but was included in the 2015 Financial Statements.
Mr U was not aware that the husband had advanced $1,250,000 for the purchase of Property P until July or August 2016 and thus that advance is not recorded at all in the Financial Statements.
The income or loss from the rural operations of Property P has not been included in the Financial Statements.
Mr U was not aware of the transfer of a parcel of shares from the husband to the EUT for no consideration.
Mr U was unable to say what property was acquired for $1,390,000 in the 2014 tax year.
Mr U was not aware of the sale by the EUT of the two parcels of land at N Town and the retention by the husband of the proceeds of the sale.
Mr U was not aware that the husband had received the rents due to the EUT, until July 2016. He was not aware, when cross-examined, that the husband had also paid expenses payable by the EUT.
Mr U could not say how the EUT paid the interest on its commercial bill facilities.
Mr U was not told that the husband had paid $260,000 to the EUT from the sale of livestock in 2014 until August 2016. That transaction is not recorded in the Financial Statements.
Mr U was not aware that the EUT had paid $1.1 million to the husband for the purchase of Suburb W.
Mr U was not aware of the husband purportedly paying a sum of money, perhaps $154,000, or perhaps $23,000, to the EUT in repayment of an asserted debt by the husband to the EUT.
On 28 September 2015, the wife’s solicitor wrote to the husband’s solicitor, setting out, inter alia, what were described as anomalies in the accounts of the EUT. The letter detailed discrepancies between the declared acquisition costs of real property owned by EUT and the stated value of the property in the Financial Statements. The letter, which continued over four pages, raised numerous discrepancies between the accounts and the available supporting documents. In cross-examination, the husband agreed that he had never caused his solicitors to respond to the letter.
The published accounts of the EUT are little more than a rough guide to its value.
I can do no more than find that the value of EUT is not less than $5,116,170.
Ms X valued the shares in F Pty Ltd at $138,524. There was no challenge to that valuation.
THE BENEFICIAL OWNERSHIP OF THE ISSUED UNITS IN THE E UNIT TRUST (EUT)
The husband, in cross-examination, was asked if he had always been truthful in his representations to banks. He said that he had not been truthful in relation to F Pty Ltd. The husband gave evidence that he signed a document in 2010 in support of a loan application to the ANZ Bank. The application was made to the Suburb Y branch of the ANZ Bank in Queensland. The document was a declaration that the husband owned units in EUT. It was, he said, something that the bank got him to sign. The document was in aid of an application for finance by F Pty Ltd. Reference will be made again to this document in the context of the discussion about the husband’s non-disclosure.
On 22 July 2011, the husband made a Statutory Declaration, pursuant to the provisions of the Oaths Act 1900 (NSW), which purported to be a joint declaration with the second respondent. The second respondent did not sign the document. The Statutory Declaration stated:
We, [the second respondent] and [the husband] … do solemnly and sincerely declare as follows:
1.We are the beneficiaries of an undisclosed trust in which [F Pty Ltd] is the Bare Trustee.
2.We acknowledge that the Trustee purchased a property situated at [3 J Street, Suburb K, J Street, Suburb K and L Street, M Town] on our behalf.
3.We acknowledge that the Trustee has executed a Mortgage in favour of [ANZ] to secure financial accommodation in the name of [F Pty Ltd].
4.We acknowledge and consent to the Trustee pledging the property at [3 J Street, Suburb K, J Street, Suburb K and L Street, M Town] in support of the financial accommodation detailed in item 3.
The husband conceded that in 2011, he was the only person dealing with the ANZ Bank. The second respondent was not involved in the negotiations with the ANZ Bank.
By July 2011, the husband had resigned as a director of F Pty Ltd. The Statutory Declaration was required by the bank to support a new loan facility for $1,090,000 for F Pty Ltd.
The husband signed the document accepting the loan facility.
The husband was unable to give any explanation for his continuing to negotiate and sign documents on behalf of F Pty Ltd when he was not a director.
The wife relied upon this declaration, and to the husband’s use of the EUT as if it were his own, (which is canvassed later in these reasons) to assert that the husband, in fact, is the beneficial owner of the units in the EUT.
The wife relied on, inter alia, the cases of Ascot Investments v Harper (1981) 148 CLR 334, In the Marriage ofStein (1986) FLC 91-779, and In the Marriage of Ashton (1986) FLC 91-777. These cases stand for the proposition that the property or income of a trust can be regarded as an asset of a party in circumstances where the trust is the “alter ego” or “device” of that party.
The circumstances of this case do not fall within that recognised category of cases.
The second respondent created the EUT in 1981 and has been the legal unit holder of all 6 units of the EUT since 1999. Throughout the course of the trial the second respondent consistently maintained his position in relation to his ownership of the EUT. The second respondent has also made significant contributions to the assets of the EUT since its inception.
Nonetheless, it is clear that the husband has exercised control over the EUT. The husband conceded, and it is clear on the evidence, that he has engaged in various dealings on behalf of the EUT, has directed agents on behalf of the EUT, and has had the benefit of the use of assets owned by the EUT as security for his own personal borrowings. The circumstances of these dealings are set out in detail later in these reasons. The husband has continued to exercise this control over the EUT despite having resigned as a director of F Pty Ltd in 2011.
The husband concedes that there has been an intermingling of his funds with the funds of the EUT.
In Stephens v Stephens & Anor (2007) FLC 93-336, Finn J states at 81,768 that:
I accept that no earlier authority in this court has gone so far as to hold that control alone without some lawful right to benefit from the assets of the trust, is sufficient to permit the assets of the trust to be treated as property of the party who has that control.
The second respondent, albeit he is 99 years of age, continues to maintain his legal and beneficial interest in the EUT.
The husband has never been a unit holder of the EUT.
I am not satisfied that, whilst the second respondent remains the owner of the EUT, the husband has some “lawful right to benefit from the assets of the trust”.
Despite the control exhibited by the husband in respect of the dealings of the EUT, I am not satisfied that the EUT is an alter ego or device used by the husband for his sole benefit.
I find that the second respondent is the legal and beneficial owner of the units in the EUT.
IF THE HUSBAND IS NOT THE BENEFICIAL OWNER OF THE UNITS IN THE EUT, IS THE EUT A FINANCIAL RESOURCE OF THE HUSBAND?
The extent to which the husband has treated the EUT and its assets as his own has emerged in the course of the trial.
In cross-examination, the husband said that he had discussions with the second respondent about his receiving the benefit of the EUT units on the death of the second respondent. He said he did not remember when those discussions took place.
On 15 November 2012, the second respondent made a Will in which he left his interest in the EUT and his shares in F Pty Ltd to the husband.
The Will of the second respondent was produced to the Court in answer to a subpoena. There was an objection to inspection but the Will was eventually inspected. A further subpoena was issued to two law firms to produce documents relating to the second respondent’s Will.
What emerged from the documents produced on subpoena was that, on 12 October 2011 the second respondent made a statutory declaration to the following effect:
1.I hereby state my intention to amend my existing Will to provide that all shares held by me in [F Pty Ltd] and in [another company] shall on my death pass to my son [the husband] absolutely.
2.DELETED
3.I further state my intention to amend my existing Will to provide that all debts owing to me at the date of my death by any of my three children be forgiven absolutely.
4.It is presently not my intention not to amend my existing will other than as set forth in this my statutory declaration.
In cross-examination the second respondent said that he had signed the Statutory Declaration and its contents were true.
The Will of the second respondent, executed 15 November 2012, contained a specific bequest of all of the shares held by the second respondent in F Pty Ltd and all units held by him in the EUT to the husband.
On 14 April 2014, the second respondent signed a codicil in which he revoked the specific bequest to the husband and bequeathed his interest in F Pty Ltd and the EUT to the husband’s two children.
The instructions for the preparation of the codicil were given to the solicitor by the husband, not by the second respondent. The codicil had the effect of by-passing the husband and bequeathing the EUT units and the F Pty Ltd shares to the husband’s two children.
The codicil was witnessed by the husband’s then partner. The husband was present when the codicil was executed.
On 17 January 2016, the husband consulted Z Lawyers. The note of the consultation is:
Your (sic) going through a divorce in New South Wales. Court ordered that a copy of [the second respondent’s] Will be produced to her [solicitors]. He and you want to cut yourself out of his Will immediately. You both agree.
On 16 March 2016 the second respondent attended at the offices of AA Lawyers for the purpose of executing a second codicil. In the course of conversation, the second respondent told the solicitor, referring to the first codicil of 14 April 2014 “I recall signing this. It was an attempt to stop her … [the wife] from getting her claws into my assets. I don’t think it’s been very effective”.
On 16 March 2016 the second respondent executed another codicil in which he revoked the first codicil dated 14 April 2014. He also included the following clause:
I forgive and discharge [F Pty Ltd] and the trustee of the [EUT] from the payment of all sums whether for principle or interest which at the date of my death may be owing by them to me whether secured or unsecured.
The effect of the codicil was to reinstate this specific bequest to the husband of the interest of the second respondent in F Pty Ltd and the EUT. The consequence of the forgiveness of the debts owed to the second respondent by F Pty Ltd and the EUT is that the amount of the second respondent’s loan account, whatever that may be, will not become part of the rest and residue of his estate, but will remain as an asset of the EUT and be passed on to the husband on the death of the second respondent.
Also on 16 March 2016, the second respondent made a statutory declaration in which he stated
1.I have made this Statutory Declaration (and have instructed that it be left with my will) on the basis that it is to be provided in the strictest confidence to my executor(s) and my trustee(s) (“my trustees”) appointed in my will and that it is not be revealed to any other person(s) unless my trustees see fit.
2.On this day I have executed a codicil to my will dated the 15th day of November 2012.
3.By the codicil executed on this day, I revoked a previous codicil dated the 14th day of April 2014 and inserted a new clause into my will so as to forgive [F Pty Ltd] and the trustee of the [EUT] all debts owing by them to me at the date of my death.
4.The effect of the revocation of the codicil dated the 14th day of April 2014 is to reinstate the original provisions of my will dated the 15th day of November 2012.
The second respondent is 99 years old. The husband will be the legal and beneficial owner of both the units in the EUT and the shares in F Pty Ltd on his death.
That is not, however, the only evidence that supports the contention that the property of the EUT is a financial resource of the husband.
I will not detail all of the evidence which are relevant but will examine the most significant transactions.
Direction to Mr BB
On 2 August 2002, the husband handwrote and signed a document addressed to Mr BB, his stock broker, in the following terms:
Would you please withdraw all funds in my account … accounts of [F Pty Ltd] and send a cheque in my name to [Suburb C].
In cross-examination, the husband agreed that he had received a cheque for the amounts held in the name of F Pty Ltd and in his name.
F Pty Ltd rents
Between 2006 and 2013, the rent for the properties owned by F Pty Ltd was paid into the husband’s Westpac Bank account and the expenses in relation to those properties were paid from that account.
The amounts were significant. The husband deposed that he had received in excess of $1,900,000.
The wife deposed that in 2014 she overheard a conversation where the husband said “The properties are mine but you pay rents to my father, then he gives the money to me”. She further deposed, in relation to that conversation:
This was consistent with comments to me by [the husband] during the marriage including in words to the effect of “I am buying in F Pty Ltd for tax purposes.”
The husband denied making the first comment but agreed that he did tell the wife that he was buying in F Pty Ltd for tax purposes. F Pty Ltd had substantial accumulated tax losses.
Having regard to the finding I have made in relation to the husband’s credit, and to the husband’s extensive dealings with the assets of the EUT as I have detailed, I accept the wife’s evidence. The conversations to which she deposed are consistent with the husband’s dealings with the assets and income of F Pty Ltd.
Finlease application for finance
On 1 August 2007, the husband signed an application for finance. Included in his statement of assets was real estate in Queensland with a value of $7,000,000 and a mortgage liability of $2,000,000 over that real estate. The husband did not own real estate in Queensland to that value but EUT did.
The ANZ Bank advance to F Pty Ltd in November 2007
On 13 November 2007, the ANZ offered F Pty Ltd a loan facility of $1,606,000. The husband provided a personal guarantee of up to $2,775,000 secured over property owned by him personally. The repayments on the facility were $60,000 per quarter. Those payments were made by the husband from his own money, not by the EUT.
Sale of F Pty Ltd’s N Town properties
In 2009, F Pty Ltd sold two properties in N Town, described as Lot 1 and Lot 2. The proceeds of both sales were paid into the husband’s Westpac account.
The property at N Town known as Lot 1 which belonged to F Pty Ltd was sold on 13 January 2009. The solicitors acting on the sale wrote to the husband on 15 January 2009 confirming that an amount of $318,019.58 had been deposited into the husband’s Westpac account. The deposit brought the balance of the account to $394,003.31. On 22 January 2009 an amount of $300,000 was withdrawn by cheque. The husband was unable to say with any precision where those funds had gone but “thought” they may have been paid to the ANZ Bank against the liabilities of F Pty Ltd. The husband provided no evidence to support that contention.
The proceeds of the sale of Lot 2 were also paid into the husband’s Westpac account. In cross-examination he said that those funds had been withdrawn and paid to the ANZ to reduce F Pty Ltd’s liabilities. He recanted that evidence when shown the bank statements for his Westpac account which did not support his contention.
The husband denied that he had ever asserted that the N Town properties belong to him and not F Pty Ltd. Tendered in the wife’s case was a letter from the husband’s solicitors to the wife’s solicitors dated 3 March 2016 which stated, inter alia:
In relation to the [N Town] property, our client purchased that property as four parcels for about $700,000.00. The first three parcels were sold some time ago, however the last parcel was subdivided with the homestead being sold first for around $300,000.00. The lot which was recently sold was the balance of that fourth parcel after sale of the homestead.
In the same letter, in relation to Property P, the husband’s solicitors wrote:
We are instructed the purchase price of $1.2 million was for lot 31 alone. We are waiting on instructions from our client as to the source of funds the Trust used to purchase lot 32.
Property P had been bought in 2011 and sold in 2014. That information was known to the husband.
ANZ Bank advance to F Pty Ltd 22 June 2011
On 22 June 2011, the husband negotiated the provision of a facility to F Pty Ltd from the ANZ of $1,109,383. The husband conducted the negotiations and signed the acceptance of the loan facility. He provided security over his own property at 3 T Street, Suburb K and a personal guarantee. The husband had resigned as a director of F Pty Ltd in April 2011.
Statutory Declaration as to beneficial ownership
On 22 July 2011, the husband made the Statutory Declaration, to which more extensive reference has been made earlier in these reasons, to the effect that he and the second respondent were the beneficiaries of the EUT.
Property P
The property, Property P, was purchased in 2011 after the husband had resigned as a director of F Pty Ltd. Despite his not being a director, the husband caused one lot of Property P to be acquired in the name of F Pty Ltd using funds in the sum of $1,251,818.50 provided by the husband. By virtue of his provision of the purchase money, absent any agreement to the contrary, the husband was the beneficial owner of the property.
The adjoining lot was purchased in the name of the husband for $1,288,000.
Property P was never included in the accounts of the EUT as property of F Pty Ltd. No loan was recorded in the financial accounts of Property P in relation to that transaction. There was no documentary record of the advance at all. The husband simply gave $1,251,818.50 to F Pty Ltd. He did not require the payment of any interest on the amount.
Despite the fact that the husband was not a director of F Pty Ltd at the time of the purchase, the husband executed the contract and other relevant documents on behalf of F Pty Ltd.
There was no evidence that this transaction was ever discussed with the second respondent. In cross-examination, the second respondent said that he believed that Property P was the private property of the husband.
In cross-examination, the husband said that he borrowed the whole of the money for the purchase of both lots from a line of credit secured against Suburb C. Thus, interest was payable on the money. The husband paid that interest from 2011 until July 2016 when F Pty Ltd paid the husband $1,100,000. That sum was then not repaid to the line of credit but used for the purchase of Suburb W. Presumably, the husband continues to pay interest on the advance.
When Property P was sold in 2014, EUT received $1,500,000. This money was money to which the husband, as beneficial owner of the property, was entitled.
It was not until after the husband had sworn his trial affidavit in July 2016 that he required the accounts of F Pty Ltd to be amended to include the debt to him. However, the amount is to be recorded as the amount advanced for the purchase, not the amount for which the property was sold.
The second respondent prepared a handwritten document which set out the income and expenses of F Pty Ltd for the purpose of the preparation of the tax return and the financial statements for the tax year ended 30 June 2012. In cross-examination, the second respondent, when asked why the acquisition of Property P and the loan by the husband to F Pty Ltd of $1.25 million was not included in the handwritten document which he had prepared, said that he had not been aware of those transactions. The second respondent said in cross-examination that it was his understanding that the husband had purchased Property P as a “private purchase”.
Money from sale of livestock
In 2014 the husband sold livestock owned by him for $260,000 and that money was paid to F Pty Ltd. There is no entry in the accounts of F Pty Ltd or the EUT that reflects that payment.
Transfer of shares from the husband to F Pty Ltd
Between February 2012 and April 2014 the husband transferred to F Pty Ltd shares held in his own portfolio with a value in excess of $265,000 for no consideration.
The Suburb W purchase
The husband’s trial affidavit was sworn on 22 July 2016. A week before, the husband purchased a property in Queensland known as “Suburb W” for $3,600,000. No mention is made of that transaction in his trial affidavit. In evidence in chief, the husband said that he had raised $2,500,000 from the ANZ Bank and that the balance of the purchase price had been paid by the EUT in repayment of his loan relating to the purchase of Property P.
The husband gave instructions for the Property P loan to be repaid to him by F Pty Ltd. He was not a director.
The husband also caused the EUT to borrow funds from the ANZ to finance the repayment to him. When asked in cross-examination on what basis and with what authority he negotiated with the ANZ for the loan to the EUT, the husband said “the bank allows me to do it”. Presumably, the bank relies on the Statutory Declaration made on 22 July 2011.
At the time of the Suburb W purchase, the husband also negotiated an arrangement whereby F Pty Ltd guaranteed the repayment of a loan by a third party from the National Australia Bank. This was done despite the fact that the husband is not a director of F Pty Ltd or a unit holder. There was no evidence that the arrangement had any commercial value to F Pty Ltd. It appeared to be an arrangement that allowed the third party to borrow money at a favourable rate.
I am satisfied that the husband has, since at least 2002, treated the EUT as if it were his own. He has done so, initially, with the actual or tacit agreement of the second respondent. Since about 2011, commencing with the purchase of Property P, there is no evidence that the second respondent has been aware of any of the transactions that the husband conducted with, or on behalf of, the EUT.
The husband will, on the death of his father, inherit the EUT units. In the meantime, he treats them, for all purposes, as his own.
I am satisfied that the EUT is a financial resource of the husband.
THE SECOND RESPONDENT’S LOAN ACCOUNT
This has been considered in the context of the valuation of the EUT. The loan account will be disregarded as a liability of the EUT.
THE CHARACTERISATION OF THE $1,000,000 ADVANCED BY THE SECOND RESPONDENT TO THE HUSBAND IN SEPTEMBER 2001
It is not in dispute that, in mid-2001, the sum of $1,000,000 was advanced by the second respondent to the husband to fund proposed renovations to Suburb C.
The husband, in his trial affidavit, deposed:
In about mid 2001, I was speaking with my father about my plans to knock down the house at the [Suburb C] Property and build a new home for my family. I was concerned about the costs of the project. My father and I had a conversation to the following effect:
My father:I would like to help you out with the knockdown and rebuild. I will give you a loan of $1,000,000 if that will help.
Me:That would be great Dad, but I wouldn’t be able to repay that kind of money for some time.
My father: You can keep it interest free until I need it.
The second respondent in his trial affidavit deposed:
29. …I said to [the husband] words to the following effect:
“…I can lend you $1,000,000 interest-free if you want to proceed with the demolition and construction of your new house.”
30. [The husband] then said to me words to the effect:
“Thanks, that would be great, I wouldn’t be able to complete the house without it. I will repay the money to you as soon as you require it.”
31. I then said to [the husband] words to the following effect:
“Yes, you must repay me when I require you to do that. If by some chance or event you lose possession of the house I will call in the loan and require that sum of $1,000,000 be repaid to me. There will be no interest on the loan and no other charges. Apart from reflecting my gratitude for all that you have done for me over the years I want you to have the benefit of this interest free loan in the hope that it will help, as I say, completion of the education of my grandchildren and enable you to give them a good education leading to their fulfilling lives in the future they choose to have (sic).”
32.I do not expect the loan of $1,000,000 to be repaid to me as I do not presently require the money. If in the future I require funds I will call on the loan however at this time I do not require the repayment of the loan.
Section 14(1) of the Limitation Act 1969 (NSW) provides, relevantly, that:
An action on any of the following causes of action is not maintainable if brought after the expiration of a limitation period of six years running from the date on which the cause of action first accrues to the plaintiff or to a person through whom the plaintiff claims:
(a)a cause of action founded on contract (including quasi contract) not being a cause of action founded on a deed.
There is a settled line of authority in relation to the operation of limitation periods on advances payable on demand. In Young v Queensland Trustees Ltd (1956) 99 CLR 560, the High Court (Dixon CJ, McTiernan and Taylor JJ) said “A loan of money payable on request creates an immediate debt”.
Fullager J in Ogilvie v Adams [1981] VR 1041, considering a similar provision in the Victorian legislation, said:
There is a long-settled rule of construction that, where there is a present debt between the parties to a contract to repay money, and the only terms as to repayment of the debt are to be spelled out of a promise to repay on demand, or out of a statement that the money is to be repaid or repayable on demand (or on request), an instantaneous cause of action, upon the very creation of the contract, arises in the lender.
… it is settled law that a loan (for example) which is simply described as being repayable on demand or on request or at call creates a cause of action in the lender enabling him to recover the money instantaneously upon the loan being made, and without any demand being made at all.
The loan from the second respondent to the husband is statute barred. The advance will be treated as a contribution on behalf of the husband.
The circumstances of the advance, without documentation, of $1,000,000, are relevant in the context of the proposition that the assets of the second respondent are a financial resource of the husband.
HELP FEES
The husband deposed that he intends to pay the HELP fees of the parties’ younger child as they had already paid the fees for the older child. These fees will be included as a liability.
CONTENDED CAPITAL GAINS TAX (CGT) PAYABLE BY HUSBAND
There was no evidence before the Court of the quantum of CGT payable by the husband.
Counsel for the husband submitted that, in order to satisfy any order that he pay money to the wife, he will be required to sell property. The husband in cross-examination said that he does not propose to borrow funds but will transfer in specie or sell property to pay the wife.
Counsel for the husband contended that the potential for a CGT liability to arise should be “taken into account”.
The wife’s application was for the transfer of nominated properties to her. If that occurs, the husband will not incur any CGT liability.
THE IMPACT, IF ANY, OF THE HUSBAND’S HEALTH ON HIS CURRENT AND FUTURE INCOME EARNING CAPACITY
The husband is 60 years old. He has some health problems but he deposed that he intended to remain in his employment until he reaches 65 years of age. After he ceases that employment, the husband will have the capacity to earn income from his investment and trading activities as he has during the marriage. His evidence was not challenged.
THE WIFE’S HEALTH, AND ITS IMPACT UPON HER FUTURE INCOME EARNING CAPACITY
The wife works part time for long shifts. She deposed to health problems but did not depose that she would not keep working. Her evidence was not challenged.
THE CONTRIBUTION CONTENDED BY THE HUSBAND BY WAY OF USE OF HIS PARENTS’ COMPANY I ACCOUNTS
In his trial affidavit, the husband asserted that he had used the Company I accounts of each of his parents for share trading from about 1994 to 2010 in the case of his mother, and 2012 in the case of his father. He deposed “In 1994, my parents allowed me to use their borrowing capacity in their Company I accounts to purchase shares.”
Although the husband deposed that he had obtained a large sum of money from his mother’s leveraged equity account, which had not been repaid to her, he resiled from his assertion that that sum remained as a debt to his mother’s estate or was somehow required to be repaid. No such debt was included as an asset in the husband’s mother’s estate nor was it included as a debt in the husband’s earlier Financial Statements. The husband did not suggest that he considered himself liable to account to his fellow beneficiaries for their share of the funds.
On behalf of the wife, it was contended that the alleged debt to the husband’s mother’s estate was no more than a device to minimise the assets of the parties available for distribution. I accept that submission.
In relation to the dealings with his father’s Company I account, the husband similarly asserted throughout the hearing that he owed a large sum of money to his father but resiled from that assertion after the evidence had concluded. The purported debt was not asserted on behalf of the husband in the final Balance Sheet tendered at the commencement of submissions.
The husband’s assertions in relation to benefits gained from the use of his parents’ Company I accounts were the subject of challenge. Senior counsel for the wife submitted that the Court would not accept that the second respondent, who is an accountant, prepared quarterly reconciliations of credit statements to be reimbursed for expenses paid by him on behalf of the husband, but would not seek any accounting for almost $1.5 million dollars asserted by the husband to have been removed by the husband from the second respondent’s Company I account.
The moneys asserted to have been derived from the Company I account were not disclosed in his Financial Statements sworn in December 2012 or April 2013.
The husband did not assert that any demand had been made for repayment by the second respondent.
The second respondent swore an affidavit on 20 September 2016. He did not assert that there was a debt owed to him by the husband arising from the use of his Company I account.
On behalf of the wife it was submitted that the allegation was a recent invention intended to reduce the pool of assets available for distribution.
Having regard to the findings I have already made in relation to the husband’s willingness to lie under oath for financial gain, I am unable to accept, on the balance of probabilities, that the husband derived a benefit from the Company I accounts of his parents other than as he asserted in his trial affidavit as set out above, that they “allowed” him to use their “borrowing capacity”. That assertion is so general that I can give no weight to the asserted contribution.
THE CONTRIBUTION CONTENDED BY THE HUSBAND BY WAY OF THE SECOND RESPONDENT PERMITTING THE HUSBAND TO USE THE ASSETS OF THE EUT TO SECURE PERSONAL BORROWINGS
I have already found that the EUT is a financial resource of the husband. To give weight to the contribution derived from his dealings with the financial resource would be to double count its significance.
DISCREPANCIES IN THE FINANCIAL STATEMENTS SWORN BY THE HUSBAND
In his Financial Statement sworn at the commencement of the proceedings on 2 December 2011, the husband disclosed that he was self-employed by F Pty Ltd. In that Financial Statement, the liabilities disclosed by the husband did not include any liability to the second respondent in relation to the Company I account or any liability to his mother’s estate in relation to his mother’s Company I account. The husband did not depose that he owed any money to F Pty Ltd.
Amongst his assets the husband disclosed a loan to Mr CC in the amount of $109,115. He deposed that he was the sole owner of the property “Property P”. The husband deposed that his interest in F Pty Ltd, being one half, was valued at $2,000,000. He did not disclose the monies which had been advanced to F Pty Ltd for the purchase of the share of “Property P” owned by F Pty Ltd.
He deposed that he was liable for one half share in “Business Loans for [F Pty Ltd]” in the sum of $2,475,000.
The husband swore a second Financial Statement on 5 April 2013. Again he deposed that he was self-employed by F Pty Ltd. He deposed that he was the sole owner of Property P. He deposed that he owned 50 per cent of F Pty Ltd and valued that interest at $2,000,000.
The husband deposed to a liability in the amount of $37,275 to the second respondent “on account of [DD] Shares” and a liability described as “Rent held on behalf of [F Pty Ltd]” in the sum of $415,441.12. He did not claim that he owned any liabilities to his father in relation to the Company I dealings or to estate of his mother in relation to the Company I dealings.
The husband again deposed that he was liable for 50 per cent of the “Business Loans for [F Pty Ltd]” in the sum of $2,475,000..
He did not disclose the monies which had been advanced to F Pty Ltd for the purchase of the share of Property P owned by F Pty Ltd.
On 14 April 2014, the husband swore a further Financial Statement. He did not declare that he was self-employed by F Pty Ltd. In cross-examination he could not recall why that was so although he conceded he was still working for F Pty Ltd.
The husband deposed that he owned 100 per cent of Property P.
The husband deposed that he had an interest of 50 per cent in F Pty Ltd but valued the share at nil. In cross-examination the husband said that this was because he had become aware that F Pty Ltd was a bare trustee.
In relation to the liability for “Rent held on behalf of F Pty Ltd Pty Ltd”, the liability had been reduced to $154,661.12. In cross-examination the husband said that he had reduced that liability by paying $260,000 to F Pty Ltd from the sale of livestock.
The husband did not disclose, as an asset or otherwise, the amount of $1.25 million dollars that he had advanced to F Pty Ltd.
In his liabilities the husband continued to claim that he owed an amount of $37,275 to the second respondent on account of “DD Shares”. In cross-examination he said that he could not remember the circumstances in which that liability arose.
In his Financial Statement sworn for the trial on 10 June 2016, the husband deposed to the loan to F Pty Ltd of $1,200,000 for the purchase of Property P as an asset. In his trial affidavit he deposed that he had advanced the sum of $1,251,818.50. Why that loan was not included in his Financial Statement at its full value is not explained. He disclosed that EE Holdings owed him $150,000. He disclosed the exchange of contracts for the purchase of “Suburb W” for $3,600,000.
The husband deposed to a liability to the second respondent of $1,267,464 “for Company I” which had never before been asserted, a further liability to the second respondent of $37,275 in relation to DD Shares and a debt of $154,661.12 to F Pty Ltd.
THE HUSBAND’S NON-DISCLOSURE
The husband gave the usual undertaking as to disclosure which was filed on 14 September 2015. The husband in cross-examination said that he was well aware of his obligation to make full and frank disclosure.
Reference has been made earlier in these reasons to a document that the husband signed in 2010 which stated that he was a unit holder in EUT. In cross-examination, the husband was asked if he had a copy of the document. He said he did not. The husband said that he last saw the document about two years ago when he was shown it by “the bank”. He had seen the document after the commencement of these proceedings at the Suburb Y branch of the ANZ. The bank officer who showed him the document was Mr FF. The husband still has dealings with Mr FF at that branch.
The husband agreed that the existence of the document had never been disclosed in these proceedings. When he was asked why he had not disclosed the document, the husband said he had not done so because the document had already been produced on subpoena by the ANZ and the wife’s lawyers had it.
He was asked to telephone Mr FF during the lunch adjournment and ask that a copy of the document be forwarded to his solicitors.
When cross-examination resumed after the lunch adjournment, the husband was asked whether he had been able to obtain a copy of the document. He had not. Asked why, the husband said that he had been given the document by Mr FF two years ago but that he did not have it any more. The husband said that when he had possession of the document, he did not give a copy to his then solicitors. He destroyed the document.
The husband agreed that he had made a deliberate and calculated decision not to disclose the document for the purpose of these proceedings.
There could be no clearer example of non-disclosure.
That was not, however, the only non-disclosure.
Counsel for the husband, in his written submissions conceded that “the husband’s evidence in cross-examination revealed an “air [of] secretion of transactions and movements of funds”.
It is not necessary to recount each and every instance, but only to give examples.
On 14 October 2013 the court noted:
It is agreed that the husband will provide on the first of each month an updated list of disclosure documents which would include certificates [of] the shares, accounts issued, any evidence of property dealings, [livestock] dealings, updated bank statements and any other relevant document. Those documents are to be available for inspection upon request and after inspection the inspecting party is at liberty to ask questions about those documents.
In cross-examination, the husband agreed that he had never complied with that obligation.
The husband did not disclose, in his trial affidavit, his knowledge of the provisions of the second respondent’s Will and the fact that he would receive the second respondent’s interest in F Pty Ltd and the EUT on the death of the second respondent. Similarly, he did not disclose his dealings with the various lawyers in relation to the iterations of the second respondent’s testamentary dealings and their combined efforts to ensure that they were kept from the wife and from the Court. Those matters emerged in cross-examination by virtue of the material produced in answer to subpoenas issued by the wife.
The husband denied that he had ever been in partnership with Mr GG of HH Pty Ltd. On 14 September 2016, the solicitors for the husband wrote to the single expert, Ms X in relation to the asserted partnership in the following terms:
There is no partnership agreement. The Husband, in his personal capacity, and [Mr GG] via [II Pty Ltd] have been purchasing, leasing and parting [equipment] since 2002. The net gain is split 50/50 between the Husband and II Pty Ltd. The Husband’s 50% share is treated as part of his taxable income in his personal taxation returns.
Tendered in the wife’s case was a document under the letterhead of HH Pty Ltd dated 25 July 2014 signed by Mr GG. The document stated, inter alia, “My company, again, linked with [the husband] in 2002 when we entered into an [equipment] leasing partnership. The partnership continues to operate to this day.”
The husband conceded that he had relied upon that letter as being a true and accurate representation, and it had been tendered on his behalf in proceedings in relation to traffic offences.
The husband resigned as a director of F Pty Ltd in 2011 because, he said in cross-examination “I could see where this was going”. He conceded that he asked Mr U to prepare the relevant documents. His evidence that his first communication with Mr U occurred in June 2012 was false.
In cross-examination, for the first time, despite requests for this information by letter from the wife’s solicitors which were unanswered, the husband gave evidence about the source of the financing for the purchase of Suburb W.
It will be recalled that the husband gave evidence in chief to the effect that Suburb W had been partially financed using an advance of $2,500,000 from the ANZ bank. He had not disclosed that he had also arranged, on behalf of F Pty Ltd, for F Pty Ltd to borrow $1,100,000 to fund the remainder of the purchase of Suburb W. It was alleged by the husband that the $1,100,000 paid by F Pty Ltd operated in payment of the alleged loan.
It will be recalled that, at the time of these negotiations, the husband was not a director of F Pty Ltd. Counsel for the husband submitted that the husband was entitled to negotiate and conclude agreements on behalf of F Pty Ltd because he held the second respondent’s power of attorney. However, the second respondent was not a director of F Pty Ltd either. There is no evidence that the sole director of F Pty Ltd was at any time aware of these transactions.
At the time of the Suburb W purchase, the husband also negotiated a guarantee facility to the extent of $1,200,000 with the National Australia Bank (NAB) whereby F Pty Ltd guaranteed a facility for a third party associated with the sale of Suburb W.
In cross-examination the husband conceded that he had never disclosed this arrangement which had been finalised before he swore his trial affidavit. He agreed that the extent of his disclosure, in his trial affidavit, in relation to the Suburb W transactions was:
I purchased …[Suburb W] … for a purchase price of $3,600,000 in July 2016. Exhibited…is a copy of the settlement statement and purchase transfer for … [Suburb W]. I borrowed the sum of $2.5m from the ANZ towards the purchase costs.
The exhibited settlement statement was silent as to the source of the purchase money and made no mention of the guarantee facility or any involvement on the part of F Pty Ltd.
In cross-examination, for the first time, it emerged that in 2011 the husband paid to the Company JJ (“JJ”) the sum of $720,000.
When asked why that sum had been advanced, the husband said it was “vendor finance”. Pressed, he said he could not recall what the money was paid for. He then said the money was for an option to purchase Property S. It was suggested that if the husband had granted an option to JJ to purchase part of Property S then he would have received a payment, not made one. He then said he had provided the money to JJ to purchase part of JJ from the original vendors.
The husband’s evidence in relation to the purchase of Property S is set out in his trial affidavit. There is no mention of any money paid to JJ in his affidavit.
The source from which the amount of $720,000 was taken and whether the amount of $720,000 was ever repaid to the husband are unknown. There is no reference to it in the husband’s affidavits and the only reference is an amount of $600,000 in the husband’s asset schedule in the Balance Sheet referred to as “Property S vendor finance owing”.
The court could have no confidence that the full extent of the husband’s assets and liabilities have been exposed.
OCCUPATION OF SUBURB C
It is agreed that the wife will retain Suburb C. She asks the Court to order that the husband vacate the property. The husband wishes to remain in Suburb C for a further 90 days or until he has transferred Suburb C to the wife, free of encumbrance.
The parties have lived separately under the one roof at Suburb C for over six years, including for the whole of the duration of the litigation.
No evidence was adduced by either party in relation to this issue and no submissions were directed to it.
The husband has ample resources to rehouse himself, if only on a temporary basis.
The wife should be entitled to the sole occupation of Suburb C.
The orders will provide that the husband vacate the property within seven days.
SECTION 79(2)
Both parties ask the Court to make a distribution of their assets between them. The majority of the assets of the marriage are legally owned by the husband. It would not be just and equitable for him to retain most of the assets.
THE BALANCE SHEET
In the course of the trial, the parties tendered an agreed balance sheet, setting out their conventions in relation to the value of assets. The balance sheet is reproduced below.
I will deal with the matters in dispute using the item number adopted in the balance sheet.
I have removed from the balance sheet all of the items with an agreed value of “Nil”.
| ASSETS | |||||||
| Ownership | Description | Wife/de facto partner's value | Husband/de facto partner's value | ||||
| 1 | H | B Street, Suburb C | 4,900,000 | 4,900,000 | |||
| 2 | H | 2 J Street, Suburb K, QLD | 1,300,000 | 1,300,000 | |||
| 3 | H | 3 T Street, Suburb K QLD | 1,600,000 | 1,600,000 | |||
| 4 | H | 1 Q Street, Suburb R | 580,000 | 580,000 | |||
| 5 | H | 2 Q Street, Suburb R | 560,000 | 560,000 | |||
| 6 | H | 3 Q Street, Suburb R | 65,000 | 65,000 | |||
| 7 | H | KK Street, Suburb LL | 1,150,000 | 1,150,000 | |||
| 8 | H | 4 T Street, Suburb W | 3,600,000 | 3,600,000 | |||
| 9 | H | O Pty Ltd | 357,917 | 357,917 | |||
| 10 | H | F Pty Ltd Pty Ltd | 138,524 | 0 | |||
| 11 | H | E Unit Trust (“EUT”) | 5,116,170 | 0 | |||
| 12 | H | Concrete Truck and Pump | 325,067 | 180,000 | |||
| 13 | H | Balance owing on sale of Motor vehicle 1 | 5,000 | 5,000 | |||
| 14 | H | Motor Scooter | 3,000 | 3,000 | |||
| 15 | W | Motor vehicle 2 | 20,000 | 20,000 | |||
| 16 | H | WBC a/c #829 | 49,015 | 49,015 | |||
| 17 | H | QCU a/c #952 | 27,965 | 27,965 | |||
| 18 | H | QCU a/c #757 | 3,547 | 3,547 | |||
| 19 | H | QCU a/c #856 | 70,425 | 70,425 | |||
| 20 | H | QCU a/c #972 | 167,857 | 29,708 | |||
| 21 | W | QCU a/c #450 | 9,386 | 9,386 | |||
| 22 | W | QCU a/c #609 | 553 | 553 | |||
| 23 | W | QCU a/c #568 | 563 | 563 | |||
| 24 | W | MM Share Portfolio a/c #962 | 222,134 | 222,134 | |||
| 25 | W | MM Share Portfolio a/c #002 | 12,116 | 12,116 | |||
| 26 | H | NN Shares (NYSX) | 1,045 | 1,045 | |||
| 27 | H | 478 x Qantas Airways Limited Shares | 1,577 | 1,577 | |||
| 28 | H | 138 x WBC Limited Shares | 4,120 | 4,120 | |||
| 29 | H | 94 x Energy Resources Australia Ltd Shares | 32 | 32 | |||
| 30 | H | Shares at Company I | 7,611,308 | 7,611,308 | |||
| 31 | H | OO Holdings a/c #471 | 306,885 | 306,885 | |||
| 32 | H | Bell Potter Options | 292,096 | 292,096 | |||
| 33 | H | Business 1 | 725,000 | 725,000 | |||
| 34 | H | Australian painter painting 1 | 18,000 | 18,000 | |||
| 35 | H | Australian painter painting 2 | 3,000 | 3,000 | |||
| 36 | H | Australian painter painting 3 | 7,500 | 7,500 | |||
| 37 | H | Australian painter painting 4” | 9,500 | 9,500 | |||
| 38 | H | Artist D Painting 1 | 2,900 | 2,900 | |||
| 39 | H | Artist D Painting 2 | 2,900 | 2,900 | |||
| 40 | J | Australian painter painting 5 | NK | NK | |||
| 41 | O | Artist UU Painting OO “ | NK | 0 | |||
| 42 | H | Loan to Mr CC | 126,250 | 0 | |||
| 43 | H | Loan to Ms PP | 100,000 | 100,000 | |||
| 44 | H | Property S vendor finance owing | 600,000 | 600,000 | |||
| 45 | H | US joint venture with Mr QQ | NK | NIL | |||
| 46 | W | Jewellery and Watches | 20,230 | 20,230 | |||
| 47 | H | Jewellery and Watches | 320 | 320 | |||
| Total | $30,116,902 | $24,452,742 | |||||
| ADDBACKS | |||||||
| Ownership | Description | Wife/de facto partner's value | Husband/de facto partner's value | ||||
| 48 | W | Interim Payment to Wife | 0 | 300,000 | |||
| Total | $ 0 | $300,000 | |||||
| LIABILITIES | |||||||
| Ownership | Description | Wife/de facto partner's value | Husband/de facto partner's value | ||||
| 49 | H | Mortgage - ANZ | 2,485,330 | 2,485,330 | |||
| 50 | H | ANZ Access Advantage a/c …647 | 1,799,237 | 1,799,237 | |||
| 51 | H | Suburb W Mortgage | 2,500,000 | 2,500,000 | |||
| 52 | H | Company I loan | 4,063,721 | 4,063,721 | |||
| 53 | W | Company I loan | 72,755 | 72,755 | |||
| 54 | W | H.E.L.P loan | 782 | 782 | |||
| 55 | H | H.E.L.P Loan | 0 | 24,000 | |||
| 56 | H | 2016 Tax Liability | 0 | 234,043 | |||
| Total | $10,921,825 | $11,179,868 | |||||
| SUPERANNUATION | ||||||||
| Member | Name of Fund | Type of Interest | Wife/de facto partner's value | Husband/de facto partner's value | ||||
| 57 | H | BT Wrap | Accum/growth | 2,672,825 | 2,672,825 | |||
| 58 | W | Superannuation | Part-invested | 479,210 | 479,210 | |||
| Total | $3,152,035 | $3,152,035 | ||||||
| FINANCIAL RESOURCES | |||||||
| Ownership | Description | Wife/de facto partner's value | Husband/de facto partner's value | ||||
| 59 | W | Beneficial Interest in Estate of the late Ms Dewell Snr | 2,170 | 2,170 | |||
| 60 | H | HH Pty Ltd – Beneficial Interest | NK | 0 | |||
| 61 | H | Overseas Bank Accounts | NK | 0 | |||
| 62 | H | RR Street, Suburb SS | NK | 0 | |||
| 63 | H | TT Street, ACT | NK | 0 | |||
| Total | $2,170 | $2,170 | |||||
| NETT TOTAL ASSETS (including Superannuation) | $22,349,282 | $16,727,079 |
Item 10 – F Pty Ltd
For the reasons expressed, this is not the asset of the husband and it will be removed from the list of assets. It will be included as a financial resource.
Item 11 - EUT
For the reasons expressed, this is not the asset of the husband and it will be removed from the asset list. It will be included as a financial resource.
Item 12 –Concrete truck and pump
The wife contends that the truck and pump should be included at purchase cost. The truck was bought in 2014 and the pump a little later. There is no current valuation. The only evidence is the husband’s admission against interest of a value of $180,000. That value will be adopted.
Item 20 – QUC a/c #972
The current bank statement shows the balance of the account as $29,708. There is no evidentiary basis for including the account at its June balance.
Item 41 – Artist UU painting
The wife conceded that this item will be returned to the second respondent. It will be removed from the balance sheet.
Item 42 – loan to Mr CC
The husband in cross-examination said that this was not a debt to him but a debt to HH Pty Ltd. Why he had included it in his Financial Statements as his asset was never explained. There is no evidence that the money is owed. The item will be removed from the balance sheet.
Item 45 – US joint venture with Mr QQ
There is no evidence of the value of this enterprise or that the husband and Mr QQ are currently engaged in trading. The item will be removed from the balance sheet.
Item 48 – The partial property settlement of $300,000
The wife’s evidence is that the whole amount was applied to legal costs. The husband has also paid legal costs from assets. Counsel for the husband conceded that there was no basis on which the wife’s costs paid could be added back if the husband’s were not. The item will be removed from the balance sheet.
Item 55 – HELP loan
For the reasons already expressed, this item will be included in the balance sheet.
Item 56 – Husband’s 2016 tax liability
The husband received the benefit of his income in 2016. He should pay the tax. This item will be removed from the balance sheet as a joint liability.
Item 60 – HH Pty Ltd
The husband’s interest in that enterprise is included as part of Item 33. The item will be removed from the balance sheet.
Items 61-63
There is no evidence that the husband has an interest in these entities or that allows any value to be ascribed to them. The items will be removed from the balance sheet.
I therefore find that the net assets and liabilities of the parties are as follows:
| ASSETS | ||
| H | B Street, Suburb C | 4,900,000 |
| H | 2 J Street, Suburb K, QLD | 1,300,000 |
| H | 3 T Street, Suburb K QLD | 1,600,000 |
| H | 1 Q Street, Suburb R | 580,000 |
| H | 2 Q Street, Suburb R | 560,000 |
| H | 3 Q Street, Suburb R | 65,000 |
| H | KK Street, Suburb LL | 1,150,000 |
| H | 4 T Street, Suburb W | 3,600,000 |
| H | O Pty Ltd | 357,917 |
| H | Concrete Truck and Pump | 180,000 |
| H | Balance owing on sale of Motor vehicle 1 | 5,000 |
| H | Motor scooter | 3,000 |
| W | Motor vehicle 2 | 20,000 |
| H | Bank accounts (WBC a/c #829 and QCU a/c #952, #757, #856, #972, #450, #609, #568) | 191,162 |
| W | MM Share Portfolios (a/c #962 and #002) | 234,250 |
| H | NN Shares (NYSX) | 1,045 |
| H | 478 x Qantas Airways Limited Shares | 1,577 |
| H | 138 x WBC Limited Shares | 4,120 |
| H | 94 x Energy Resources Australia Ltd Shares | 32 |
| H | Shares at Company I and OO | 7,611,308 |
| H | OO Holdings a/c #471 | 306,885 |
| H | Bell Potter Options | 292,096 |
| H | Business | 725,000 |
| H | Australian artist painting 1 | 18,000 |
| H | Australian artist painting 2 | 3,000 |
| H | Australian artist painting 3 | 7,500 |
| H | Australian artist painting 4 | 9,500 |
| H | Artist D painting 1 | 2,900 |
| H | Artist D painting 2 | 2,900 |
| J | Australian artist painting 5 | NK |
| H | Loan to Mr CC | 126,250 |
| H | Loan to Ms PP | 100,000 |
| H | Property S vendor finance owing | 600,000 |
| W | Jewellery and Watches | 20,230 |
| H | Jewellery and Watches | 320 |
| Total | $24,578,992 | |
| LIABILITIES | |||||
| H | Mortgage - ANZ | 2,485,330 | |||
| H | ANZ Access Advantage a/c …647 | 1,799,237 | |||
| H | Suburb W Mortgage | 2,500,000 | |||
| H | Company I loan | 4,063,721 | |||
| W | Company I loan | 72,755 | |||
| W | H.E.L.P loan | 782 | |||
| H | H.E.L.P Loan | 24,000 | |||
| Total | $ 10,945,825 | ||||
| Total net assets | $13,633,167 |
| SUPERANNUATION | ||||||
| H | BT Wrap | Accum/growth | 2,672,825 | |||
| W | Superannuation | Part-invested | 479,210 | |||
| Total | $3,152,035 | |||||
| Total net assets including superannuation | $16,785,202 | |||||
| FINANCIAL RESOURCES | ||
| W | Beneficial Interest in Estate of the late Ms Dewell Snr | 2,170 |
| H | F Pty Ltd | 138,524 |
| H | EUT | 5,116,170 |
| Total financial resources | $5,256,864 | |
CONTRIBUTIONS
Such disparity as exists in the initial contributions of the wife and the husband does not require adjustment.
The wife contributed a small compensation payment and a small inheritance.
She has been the primary home maker and carer for the children over a relationship of 24 years. Her home making and parenting roles continued after separation because they have remained living in Suburb C, as have their children. The younger child did not reach 18 years of age until 2013.
The husband also made parenting contributions and contributions to their home.
The husband’s financial contributions, in addition to the income he earned from personal exertion, have far exceeded those of the wife.
In 1990 the husband received an inheritance of $40,000.
In 1993 the husband received an inheritance of $200,000.
In 1994 the second respondent contributed $340,000 to the purchase of Suburb C.
In 2001, the second respondent contributed $1,000,000 to the re-building of Suburb C.
In 2011 the husband inherited from his late mother cash of $40,000, shares valued at $764,021.29 and one sixth shareholding in O Pty Ltd (“O”). For probate purposes, the interest in O was valued at $454,371.
In so far as it is asserted by the husband that his father made a substantial contribution to the acquisition of the assets of the EUT, that claim is difficult to assess having regard to the manner in which the case was run. There is no evidence which allows the contribution of the second respondent to be identified with any specificity, let alone quantified.
If the husband first became involved with the EUT in 2001, then the Financial Statements show that in the 2001 tax year EUT had an accumulated deficit of $728,101, presumably as a result of the management of the second respondent. It is not possible to say, on the evidence available, whether the profit from the joint ventures in property development, into which the husband and the second respondent entered, found their way into the second respondent’s loan account or were in some way divided between them. The husband deposed to work done by him in relation to F Pty Ltd from before 2001 which resulted in a benefit to F Pty Ltd.
The husband and the second respondent could have brought evidence to establish their respective contributions to the assets of the EUT. They did not do so.
Overall, I find that contributions should be assessed as 65 per cent to the husband and 35 per cent to the wife.
SECTION 75(2)
The wife is aged 59 years. She is employed part time. She has no qualifications for alternate employment. There is no evidence of her expected date of retirement.
She earns approximately $46,696 per annum from her employment and has an income from a share portfolio. In her Financial Statement sworn 20 May 2016, she deposed to shares to the value of $441,764 producing an income of $28,000 per annum. Some of the shares have been sold to fund legal costs and she now has shares worth net $161,495. She has superannuation of $477,700 to which she will become entitled when she retires or, on transition to retirement, when she is 60 years of age. She has no other significant assets.
The husband is aged 60 years and will continue to work until he is 65 years. His income from that employment in 2016 has been reduced because of time off work due to health problems. His usual salary is $344,252 per annum. In addition to his salary, the husband derives an income from trading in parts and equipment and from property development and investment in shares. The husband’s income from those enterprises is $376,813 per annum.
The husband’s income and earning capacity vastly exceeds that of the wife. Even after he retires from employment he will be able to continue to earn a significant income from investment.
The wife seeks a superannuation splitting order. Given their respective ages, I will treat the superannuation as an asset available for distribution and will not, therefore, have regard to the disparity in their superannuation as a s 75(2) factor. In submissions, the husband asked the Court to make a small superannuation splitting order but conceded that if a greater amount was to be allocated to the wife, then the amount should not exceed $1,100,000.
A significant s 75(2) factor is the financial resource available to the husband in the EUT. The EUT provides an asset base from which the husband can leverage the acquisition of property and has a proven borrowing capacity.
The husband will be legally and beneficially entitled to the EUT on the death of the second respondent who is now aged 99 years.
The access to the EUT will ensure that the husband is able to continue with his investment activities regardless of the requirement that he dispose of assets he currently holds in order to satisfy any orders made in these proceedings.
The wife’s very small interest in the estate of her late mother which is included as a financial resource does not warrant adjustment.
The disparity in income and the financial resource available to the husband demand a substantial adjustment in favour of the wife.
There will be an adjustment in her favour of 17.5 per cent.
CONCLUSION
The wife will receive 52.5 per cent of the net asset pool including superannuation, which amounts to a sum of $8,812,231. It is agreed that she will retain Suburb C, her superannuation and her personal possessions including her shares. The net value of those assets is $5,580,153. She should receive a superannuation split as conceded by the husband of $1,100,000. Thus the husband will be required to pay to the wife the balance of $2,132,078.
Before entering the proposed orders, my reasons will be given to the parties so that they have an opportunity to reach agreement about the time and the manner in which the amount due to the wife will be satisfied.
Absent agreement, orders will be made in the form which I have proposed.
I certify that the preceding two hundred and eighty-one (281) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Rees delivered on 4 November 2016.
Associate:
Date: 4/11/2016
Key Legal Topics
Areas of Law
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Family Law
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Equity & Trusts
Legal Concepts
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Constructive Trust
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Fiduciary Duty
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Procedural Fairness
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Remedies
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