Fergus & Fergus
[2023] FedCFamC2F 1353
•20 October 2023
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Fergus & Fergus [2023] FedCFamC2F 1353
File number(s): NCC 837 of 2021 Judgment of: JUDGE BETTS Date of judgment: 20 October 2023 Catchwords: FAMILY LAW – Property settlement proceedings – nine and half year relationship, married for seven – where the parties had no children – where the parties rented accommodation throughout the relationship – where the parties mostly kept their income and assets separate – where the husband was loaned money by the wife during the relationship – where after separation the husband’s valuable items were “stolen” – where the wife asserts that the husband fraudulently hid the valuable items or that the storage arrangements were so negligent that it warrants a wastage argument – where the husband seeks no property division but wife does – where the court considers that the husband orchestrated or knew the circumstances that lead to the disappearance of the valuable items – where the court considers that the just and equitable outcome is for the husband to pay back the wife the money she loaned him during the relationship – just and equitable outcome. Legislation: Evidence Act 1995 (Cth)
Family Law Act 1975 (Cth) Pt VIII
Federal Circuit Court Rules 2001
Cases cited: Anaya & Anaya [2019] FCCA 1048
Bassett [2021] NSWSC 207
Baumgartner & Baumgartner (1987) 164 CLR 137
Bosanac v Commissioner for Taxation & Anor [2022] HCA 34
Briginshaw & Briginshaw (1930) 60 CLR 336
Cosola & Moretto [2023] FedCFamC1A 61
Koprivnjak [2023] NSWCA 2
Kowaliw & Kowaliw (1981) FLC 91-092
Meagher, Gummow & Lehane’s Equity Doctrines & Remedies, 5th edition (2015)
Moretto & Cosola (No.2) [2022] FedCFamC1F 924
Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 110 ALR 449
Stanford & Stanford (2012) 247 CLR 108
Division: Division 2 Family Law Number of paragraphs: 243 Date of last submission/s: 28 June 2023 Date of hearing: 26, 27 and 28 June 2023 Place: Newcastle Counsel for the Applicant: Mr Bithrey Solicitors for the Applicant: Turnbull Hill Lawyers Counsel for the Respondent: Mr Weightman Solicitors for the Respondent: Lucy Urach & Associates ORDERS
NCC 837 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: MS FERGUS
Applicant
AND: MR FERGUS
Respondent
ORDER MADE BY:
JUDGE BETTS
DATE OF ORDER:
20 OCTOBER 2023
THE COURT ORDERS THAT:
1.Within thirty (30) days, the Husband is to pay to a bank account nominated in writing by the Wife or her solicitors, an amount of money in AUD which comprises the sum of:
(a)$1,700.00; and
(b)The amount of money in AUD which is equal to $25,000 USD at the date of payment. In the event that the Husband converts USD to AUD in order to make this payment, there is to be no deduction for any associated fees, charges or costs in respect of that conversion.
2.Each party is to otherwise retain all assets, financial resources and liabilities in that party’s name, possession or control as at the date of this order.
3.The Registrar of this Court is requested to provide a copy of these reasons to the Commissioner of Police NSW.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under a pseudonym has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
JUDGE BETTS
OVERVIEW
These are property settlement proceedings arising out of the breakdown of the marriage between Ms Fergus (‘the Wife’) and Mr Fergus (‘the Husband’).
The parties commenced cohabitation in in 2010, when the Wife was aged 31 and the Husband was aged 27. They married in 2012 and finally separated on 17 July 2020. In total, the parties were together for around 9 ½ years.
The parties chose not to have any children. Throughout the relationship they lived in rented accommodation and essentially kept their income and assets separate.
There are various disputes, particularly in relation to the Balance Sheet. Most significantly, the Husband had some valuable items at separation which are now ‘gone’. He says they were stolen by a person or persons unknown, that he is a victim of crime and that the valuable items should therefore be disregarded. The Wife contends that the Husband and/or others have fraudulently hidden the valuable items, or in the alternative that the Husband’s storage arrangements for the valuable items were so careless / reckless / negligent that their theft should be characterised as waste. In either case the Wife wants the value of the valuable items included in the Balance Sheet. There is also a vigorous debate concerning the true beneficial ownership of some land in the Husband’s name. He says that he holds most of the equity on trust for his father, a claim only advanced by him post-separation. The Wife rejects it; like the alleged theft of the valuable items she says the trust is a mere artifice designed to defeat her property entitlements.
But more fundamentally, the Husband contends that a property division would not be ‘just and equitable’ in this case and that each party should retain what they currently own. The Wife disagrees; she actively seeks a division including offering the Husband some of her own much greater superannuation balance by way of a splitting order.
For the reasons which follow, I largely accept the Husband’s ‘just and equitable’ argument. But in this case, justice and equity do not require that the Wife’s case be dismissed in its entirety as such a result would unjustly enrich the Husband. Rather, justice and equity require the Husband to restore to the Wife a modest cash amount consisting of:
·$20,000 USD that the Wife loaned to the Husband at his request in 2013 or 2014 for the specific purpose of enabling him to purchase an investment property in the United States; and
·$1,700 AUD that the Wife paid to the Husband shortly prior to separation being her share of the return flight costs for his sister’s overseas wedding which was later cancelled.
THE FINAL HEARING
This matter proceeded to final hearing on 27 and 28 June 2023. Mr Bithrey of counsel appeared for the Wife and Mr Weightman of counsel appeared for the Husband.
The parties relied upon the following documents:
Wife:
(a)Case Outline Document filed 23/06/23;
(b)Amended Initiating Application filed 29/05/23;
(c)Wife’s Affidavit and Financial Statement both filed 29/05/23;
(d)Affidavit of the single expert business valuer, Mr B, filed 23/06/23 (with leave).
Husband:
(a)Case Outline Document filed 25/06/23 (which contained the Husband’s proposed minute of order);
(b)Husband’s Affidavit and Amended Financial Statement both filed 29/05/23;
(c)Affidavit of the Husband’s father Mr C filed 17/10/22;
(d)Affidavit of the Husband’s partner Ms D filed 02/11/22.
At the hearing the parties also tendered numerous exhibits which will be referred to as relevant.
I had the benefit of seeing and hearing the parties and their witnesses give evidence. With all due respect to him, the Husband came across as an unsophisticated man with some evident literacy issues; in the witness box he confirmed that his affidavit had been read to him by Ms D. In the witness box he freely admitted that:
I can’t remember what I did last week.
In contrast, I was broadly impressed by the evidence of the Wife who was generally a more reliable witness than the Husband to the extent that their recollections differed.
THE LAW
These proceedings are governed by the provisions of Part VIII of the Family Law Act 1975 (Cth) (“the Act”).
The court may make declarations as to the parties’ interests in property: s 78. The court may make orders altering the parties’ interests in property: s 79(1). Such orders may be of wide scope: s 80.
However, the court must not make an order unless it is satisfied that, in all the circumstances, it is ‘just and equitable’ to make the order: s 79(2).
In considering what order (if any) should be made, the court is directed to consider the financial, non-financial, homemaking and parenting contributions made by the parties: s 79(4)(a), (b) & (c). The court is also required to consider various other matters including the future needs of the parties: s 79(4)(d), (e), (f) & (g); these also take up the matters referred to in s 75(2).
The interplay between the ‘just and equitable’ requirement in s 79(2), and the matters falling for consideration in s 79(4), were discussed by the High Court in Stanford & Stanford (2012) 247 CLR 108. To quote from the plurality judgment of French CJ, Hayne, Kiefel & Bell JJ:
35.…The requirements of the two sub-sections are not to be conflated. In every case in which a property settlement order under s 79 is sought, it is necessary to satisfy the court that, in all the circumstances, it is just and equitable to make the order.
36.The expression “just and equitable” is a qualitative description of a conclusion reached after examination of a range of potentially competing considerations. It does not admit of exhaustive definition. It is not possible to chart its metes and bounds. And while the power given by s 79 is not “to be exercised in accordance with fixed rules, nevertheless, three fundamental propositions must not be obscured.
37.First, it is necessary to begin consideration of whether it is just and equitable to make a property settlement order by identifying, according to ordinary common law and equitable principles, the existing legal and equitable interests of the parties in the property. So much follows from the text of s 79(1)(a) itself, which refers to “altering the interests of the parties to the marriage in the property” (emphasis added). The question posed by s 79(2) is thus whether, having regard to those existing interests, the court is satisfied that it is just and equitable to make a property settlement order.
38.Second, although s 79 confers a broad power on a court exercising jurisdiction under the Act to make a property settlement order, it is not a power that is to be exercised according to an unguided judicial discretion…
39.Because the power to make a property settlement order is not to be exercised in an unprincipled fashion, whether it is “just and equitable” to make the order is not to be answered by assuming that the parties’ rights to or interests in marital property are or should be different from those that then exist. All the more is that so when it is recognised that s 79 of the Act must be applied keeping in mind that “[c]ommunity of ownership arising from marriage has no place in the common law”. Questions between husband and wife about the ownership of property that may be then, or may have been in the past, enjoyed in common are to be “decided according to the same scheme of legal titles and equitable principles as govern the rights of any two persons who are not spouses”. The question presented by s 79 is whether those rights and interests should be altered.
40.Third, whether making a property settlement order is “just and equitable” is not to be answered by beginning from the assumption that one or other party has the right to have the property of the parties divided between them or has the right to an interest in marital property which is fixed by reference to the various matters (including financial and other contributions) set out in s 79(4). The power to make a property settlement order must be exercised “in accordance with legal principles, including the principles which the Act itself lays down”. To conclude that making an order is “just and equitable” only because of and by reference to various matters in s 79(4), without a separate consideration of s 79(2), would be to conflate the statutory requirements and ignore the principles laid down by the Act.
In deciding the ‘just and equitable’ question, the court is not required to take into consideration the matters prescribed in s 79(4), although it is permissible to do so and in most cases it will be informative: Cosola & Moretto [2023] FedCFamC1A 61.
THE BALANCE SHEET
The parties tendered a joint Balance Sheet with various contentious items (exhibit 14). Using that exhibit as a template, I am satisfied on the evidence that the Balance Sheet is as set out below. I have asterisked the contentious items for which my reasoning will follow.
ASSETS
Item
Description
Value (W)
Value (H)
Value adopted
1
E Pty Ltd (H)
$80,000
$80,000
$80,000
2
F Street, Suburb G (H) ***
$490,000
$133,672
$490,000
3
NAB account #...01 (W)
$5,628
$5,628
$5,628
4
NAB account #...16 (W)
$7,340
$7,340
$7,340
5
NAB account #...61 (W)
$201,707
$201,707
$201,707
6
Motor Vehicle 1 (W)
$11,000
$11,000
$11,000
7
Motor Vehicle 2 (H)
$7,500
$7,500
$7,500
8
Motor Vehicle 3 (H)
$4,000
$4,000
$4,000
9
Motor Vehicle 4 (H)
$6,000
$6,000
$6,000
10
Motor Vehicle 5 (H)
$ Nil
$ Nil
$ Nil
Sub-total:
$813,175
ADD-BACKS
Item
Description
Value (W)
Value (H)
Value adopted
11
Valuable items (H) ***
$418,715
$ Nil
$418,715
12
Legal fees (H)
$6,000
$6,000
$6,000
Sub-total:
$424,715
LIABILITIES
Item
Description
Value (H)
Value (W)
Value adopted
13
NAB mortgage (H)
$121,410
$121,410
$121,410
14
NAB Visa #...58 (H)
$3,852
$3,852
$3,852
15
E Pty Ltd – loan from Mr C (H) ***
$70,000
$ Nil
$ Nil
16
Moneys owed to Ms H (H) ***
$21,860
$ Nil
$ Nil
Sub-total:
$125,262
SUPERANNUATION
Item
Description
Value (H)
Value (W)
Value adopted
17
Super Fund 1 (W)
$202,201
$202,201
$202,201
19
Super Fund 2 (H)
$55,990
$55,990
$55,990
Sub-total:
$258,191
I turn now to the contentious items.
Item 2 – F Street, Suburb G:
This is a block of land near City J, purchased by the Husband in 2001 for $35,000 and which remains registered in his sole name. Its current value is $490,000. Situated on the land is a partially constructed home consisting of a (now damaged) concrete slab and some retaining walls.
The Wife seeks to include the land in the Balance Sheet at its full value. The Husband objects. He asserts that his legal title to the land does not reflect his true beneficial interest – which he says is a mere 27.28% - and on that basis he contends that its true value is $133,672. [1]
By way of background, Mr C conducted a business in the City J region at that time and the Husband had worked for the business since leaving school at age 16.
Both the Husband and Mr C were closely involved in the purchase of this land and its subsequent partial development. That said, they give somewhat different versions of events.
The Husband deposes that:
12.Shortly prior to purchasing the [Suburb G] property, I had a conversation with my father, in words to the effect of:
My father: “[Mr Fergus], there is some land for sale at [Suburb G] which I was thinking we could buy together. I will pay the deposit and you can take out a loan and I will help you build a home. I will transfer the deposit into your account and you can purchase the property in your name. My suggestion is that you pay the mortgage and the rates. We will both contribute towards the cost of constructing a home. You can live in the property for twelve months because that will help us with capital gains tax. We can then sell the property and share the proceeds of sale in the proportions of the expense we have both paid to build the home and repay the mortgage.”
Me: “Thanks dad, that’s very good of you.”
Mr C deposes that:
4.In 2001 I became aware of a block of land for sale at [F Street, Suburb G] (‘the [Suburb G] property’). I thought it would be a good investment and encouraged [Mr Fergus] to purchase the block with my help. The agreement with [Mr Fergus] was as follows:
a. I lent him the deposit and buying costs.
b.I also went guarantor on the loan [Mr Fergus] took out with the NAB to fund the initial purchase.
c. I would then complete the build of the house on the property.
d.At completion, [Mr Fergus] would obtain a mortgage against the property and pay me back any money I had invested in the build.
e. When the property was sold, [Mr Fergus] and I would share equally in the profits.
I prefer Mr C’s version of events, which is also consistent with the near identical arrangement that Mr C and his sister entered into at around the same time in respect of the block next door.[2]
After the purchase of the land, Mr C and the Husband entered into a HIA Contract for the construction of the home. In or about 2002, Mr C started building work, culminating in the laying of the slab and erection of the retaining walls. The Husband was meant to help with the work but he didn’t, seemingly because he was suffering poor mental health.
In 2003 tragedy struck when Mr C’s brother, a key employee of Mr C’s business, lost a relative in an accident. The wider paternal family was devastated; the Husband’s brother was unable to work and Mr C’s own workload doubled. In the following months Mr C unsuccessfully tried to get the Husband to ‘step up’ and assist more with the business but the Husband’s mental health was not up to it.
The Husband had started behaving erratically and anti-socially and Mr C was worried that the Husband was going to hurt someone. In around 2004, the Husband was diagnosed with a mental health condition.
By this stage Mr C had found himself in a difficult situation. He had funded the deposit of $9,500 and estimates that he had spent another $80,000 being the costs of clearing the block, costs of the house design and drawings, Council and engineering approval costs, and the cost of building materials. Worried about his financial exposure, Mr C decided to ‘cut his losses’ and shut down all building work. For some time thereafter, he and his father did however continue to maintain the block including doing brush cutting, tree removal and the removal of rubbish dumped there by third parties.
The Husband deposes that he has had discussions with Mr C since 2004 in which Mr C said to him: “Well, if I build a house on the property, I own the majority of it” to which the Husband replied “yes I agree”. I do not accept that evidence, which I note is not corroborated by Mr C.
In 2005 the NSW Police involuntarily sectioned the Husband on two (2) occasions. This profoundly impacted the Husband’s perception of Police in a negative way; he did not trust them (which is relevant later when I consider the circumstances following the alleged theft of the valuable items). Around this time, Mr C had to terminate the Husband’s employment and over the following three (3) year period or thereabouts Mr C either himself made the Husband’s mortgage repayments, or loaned the Husband the money to make those repayments.
In 2007 the Husband moved away to Queensland for a time; Mr C closed down his business and moved to Country K where he had a four (4) year ‘break’ after all that had happened.
In 2008, one of the owners of a neighbouring block made a verbal offer to the Husband to purchase the block for $270,000. The Husband rejected the offer; there is no evidence as to whether or not he discussed it with Mr C beforehand. Certainly had he taken the offer, Mr C could have been promptly repaid and indeed both the Husband and Mr C would have made a tidy profit.
By the time the Husband and the Wife commenced cohabitation in 2010, the Suburb G mortgage had a nominal balance. By 2011 the Husband had paid it off entirely and Mr C was back living and working as a tradesman in the City J region.
In his Affidavit, the Husband deposed that:
25.It has always been agreed between my father and I that, despite the fact that I am the legal owner of the property, my father holds a greater beneficial interest in the [Suburb G] property given he has made a greater contribution than me…
However, I accept the Wife’s evidence that at no stage during the relationship did the Husband ever tell her anything to this effect. Nor for that matter did Mr C ever mention anything about it to the Wife.
On the contrary, during the relationship the Husband acted in a manner which was consistent with having full beneficial ownership of the block.
I accept the Wife’s evidence that during the relationship:
·the Husband told the Wife that she should try to get a job at City J so that the parties could move there, build a house on the block, and live with the Husband’s grandparents. He also told the Wife that after the build they could go travelling, store their belongings downstairs and rent out the top floor of the home; [3]
·the parties discussed and exchanged building design ideas for the block. This included kitchen designs, outdoor area designs, and design ideas which they wanted to incorporate from their various rental homes; [4]
·on occasions the parties talked about selling the block and instead buying another block and building on it.
To some extent this is corroborated by what the Husband deposed to in his own Affidavit:
21.Early in our relationship, on or around 2010, [Ms Fergus] and I did discuss using [Ms Fergus’] savings to build the house on the [Suburb G] property for us to live in. However, by 2014 this had not eventuated. [Mr Fergus] made the decision not to use her savings toward building a house on the [Suburb G] property.
Taken to that specific paragraph in the witness box, the Husband said that it was incorrect and attempted to retract it. I reject his oral evidence that it was incorrect.
I also accept the Wife’s evidence that on almost every occasion when the parties were in City J, they visited the block. I reject the Husband’s evidence that he does not recall the Wife ever attending the property.
It is common ground that at no time during the relationship did the parties actually commence any building work on the property, and that the Husband met all of the property outgoings (such as Rates) without contribution by the Wife. Nor did the parties list the block for sale. When the marriage finally broke down, the block essentially remained in the same partially-constructed state that it had always been in.
I accept the Wife’s evidence that:
77.On 18 July 2020, (the day after our separation), [Mr Fergus] said to me words to the effect of “How much do you want? You’re going to take [Suburb G] aren’t you.”
78.I replied in words to the effect of “I hadn’t given our finances much thought when you’ve just ended our 10-year relationship.”
This was an opportune moment for the Husband to tell the Wife that in fact Mr C held most of the beneficial interest in the land. The Husband did not do so, because he did not believe it to be true. Rather, he simply tried to bully the Wife when they spoke again the next day:
79.On 19 of July 2020, [Mr Fergus] said to me words to the effect of: “You’ll get nothing, I’m going to take money from you” and then said “you know what happens to people that steal from me.”
80.In or about July 2020, [Mr Fergus] said to me “I’m going to draw out this process for as long as it takes for your Mum and Dad to die and then I’m going to take half of everything you get from that as well.”
Only later, in the course of these proceedings, did the Husband go on to assert his father’s beneficial interest in the block.
What of Mr C’s evidence?
Having had the benefit of seeing and hearing Mr C, it was apparent that he very much felt that the Husband had let him down financially in relation to the block. He said that at the time he shut down building work on the block, he regarded the Husband’s financial circumstances as a “basket case”. Mr C deposed that the block had adversely impacted him financially – so much so that he had himself delayed purchasing his own home until 2015.
Mr C said that over the ensuing years the topic of the block had simply been “too painful to dredge up” with the Husband – except for telling the Husband he cannot under any circumstances sell the block without Mr C’s permission. I accept that Mr C did say this to the Husband, but only after separation.
Between stopping building work in 2004, and the parties separating in 2020, it is apparent that Mr C, rather than asserting any debt or equitable claim in respect of the block, instead acted in a way that was more consistent with ‘writing off’ his losses.
Since the building work stopped, the land has just sat there for the better part of twenty (20) years. I accept Mr C’s evidence that a corner of the slab has since broken off; that the slab termite certification is no longer valid; that that the original certifying engineer engaged by him has since died; and that if the block is ever going to be built on it will be necessary to rip out the slab and start again. There is no evidence that the Husband or Mr C have made any such plans.
During the marriage, Mr C never spoke to the Wife about money owed to him, or about any equitable interest he claims to have in the block.
Neither the Husband or Mr C took any steps to sell the block to recoup Mr C’s money. The Husband did not accept the neighbour’s $270,000 offer for it.
In 2013 the Husband and Mr C entered into a joint venture whereby they purchased (in Mr C’s name) an investment property in the United States. Upon its sale in 2019, they made a substantial profit. As the owner of the property, Mr C received and therefore had control over the sale proceeds - yet he paid the Husband his share of the profits without any deduction or set-off in respect of the moneys spent on the block. This was despite Mr C deposing in his Affidavit that he would already have taken legal action in respect of the block if it had been anyone other than his own son involved.
Since separation, the Husband has acted as though he had full beneficial ownership of the block. He drew down on the NAB mortgage to pay his legal fees. He did not tell Mr C he had done so, nor did he seek his permission even though Mr C’s alleged beneficial interest could potentially be impacted by this further encumbrance.
I turn then to the trusts that the Husband asserts.
Mr Weightman contended that Mr C either had the benefit of a resulting trust or a common intention constructive trust. To quote from the Husband’s Case Outline:
13.…[O]n the evidence of the husband’s father, the respective interests are 41% to the husband (being a half-share of the balance of the value after the husband’s father’s first $89,500 is repaid; $490,000 less $89,500 = $400,500 / 2 = $200,250), and 59% to his father (the first $89,500, and then a half-share of the balance being $200,250 = $289,750), being $200,250 on the present value to the husband and $289,750 to his father. [5]
Resulting trusts are an ancient equitable remedy. Where B advances money to A to purchase a property, this gives rise to an equitable presumption that A holds his/her legal title on a resulting trust for B. But in certain relationships, the presumption does not arise. Examples are where a parent advances money to their child, or a husband advances money to their wife. In such relationships the countervailing presumption of advancement applies, ie. equity presumes that the recipient of the money was intended to acquire the full beneficial title. [6]
A presumption provides a starting point only. Either presumption (resulting trust or advancement) can be rebutted by evidence that the party who provided the purchase money had a contrary actual intention. The party who has to overcome the presumption carries the onus of proof.
A ‘common intention constructive trust’ arises where A holds legal title to property but where B can establish that A and B had the common intention that B would have an interest in that property. For instance, such trust can arise where there is a joint endeavour which fails in circumstances where it was not intended that A should receive the benefit of B’s contributions to that endeavour: see Baumgartner & Baumgartner (1987) 164 CLR 137.
It is not necessary to show a ‘common intention’ to confer upon B a specific share of the property. It is sufficient that the intention was for A to have a beneficial interest or some form of proprietary interest: see Koprivnjak [2023] NSWCA 2, citing Bassett [2021] NSWSC 207. Common intention constructive trusts may also arise after the property has been acquired where the evidence establishes that the relevant common intention was formed at a later time.
I am satisfied that at the time of the advance, Mr C did not intend to gift the moneys to the Husband. Rather, it was essentially a ‘joint venture’ arrangement involving the future development and sale of the land, with consequent reimbursement to Mr C of his out-of-pocket expenses and an equal sharing of the leftover profits. In my view a trust did arise in the percentages pleaded in the Husband’s Case Outline, perhaps best characterised as a hybrid of resulting and constructive trust.
But given the passage of time, and intervening events over the years, the Wife contends that Mr C’s equitable claim is defeated by laches. Laches is, as Mr Weightman submitted, an equitable defence arising where a claimant has so delayed the institution or prosecution of an equitable claim that:
·the defendant has altered his or her position in reasonable reliance on the claimant’s acceptance of the status quo; or
·the claimant has otherwise permitted a situation to arise which it would be unjust to disturb. [7]
Mr Weightman submitted that there was no need for Mr C to take any step/s to enforce his equitable interest up to this point, as the land is still there and registered in the Husband’s name. He submitted that unless and until the Husband seeks to sell the land (or perhaps build on it), there is nothing Mr C needs to do in order to protect his equitable interest.
One wonders just how long Mr C can keep waiting? While he did consult a solicitor about lodging a caveat he ultimately decided just to “see what happens” given that the block is not yet on the market for sale. Despite knowing that the Wife seeks a property settlement, and that the block be included as part of the Balance Sheet, Mr C still sits on the sidelines. He could have chosen to intervene but clearly decided not to.
In my view, laches is a good defence to this claim. I consider that Mr C effectively abandoned his equitable interest a long time ago and I am satisfied that it is only being asserted now because of the Wife has brought this application for a property settlement.
I therefore include the full value of the block in the Balance Sheet for the purposes of these proceedings. But given that Mr C is not a party, and my ultimate finding that it would not be just and equitable in any event for the Wife to receive any share of the block (or any concomitant cash adjustment in respect of the block, I do not intend (nor does the Husband ask me) to make any formal declarations about the beneficial ownership of the block as between the Husband and Mr C.
Item 11 – the valuable items:
The Husband’s case is that the valuable items were stolen by unknown criminal/s. The Wife’s primary case is a circumstantial one; namely that the theft is no more than an artifice on the Husband’s part to defeat her property claim. In the alternative, if the valuable items were in fact stolen, she runs a ‘waste’ argument.
Given the nature of the case, it is necessary to descend into the surrounding circumstances in some detail, including events relating to the litigation itself.
Relevant relationship history:
The Husband was secretive about money during the marriage; he also dealt in cash income. I will refer to these matters in more detail later.
In or around 2017 the Husband had purchased two (2) large security safes, each with a volume of about one cubic metre. The Husband then drove these to Mr C’s home at City J. The Husband said in the witness box that they were gun safes. The Wife’s evidence is that she asked the Husband why his father needed two (2) safes and he responded “The other one is for me.” The Husband denied it, asserting that both safes belonged to his father. I prefer the Wife’s evidence.
Purchase of the valuable item:
The Husband purchased the valuable items in 2020, just weeks prior to the relationship finally breaking down. He used $418,715 of the company’s money to do so. He did not consult the Wife about it beforehand, suspecting she would be unhappy about it. After all, for years she had been unsuccessfully pressing him to buy a home with her and thus escape the ‘rental trap’. He told the Wife about it over dinner at a hotel, which seems to have precipitated the final separation.
The Husband travelled to Sydney to collect the valuable items at or around the date of separation. According to the vendor of the valuable item, L Company, each item was:
serialised and comes with an assay certificate, guaranteeing weight, purity and origin. [8]
Each of the valuable items was, in practical terms, smaller than a modern iPhone. I accept the Husband’s evidence that each block was contained in its own cloth bag, and that each bag contained an L Company business card.
Storage arrangements for the valuable item:
The Wife herself never saw the valuable item. A few days after the parties separated, they had a conversation in which the Husband informed her her that he was going to City J the next weekend. I accept the Wife’s Affidavit evidence that during the conversation:
53. I asked [Mr Fergus]“to take the valuable items up to the safe at your dad’s?”
54. [Mr Fergus] did not reply but simply smiled. Knowing [Mr Fergus] so well, I interpreted his smile as a ‘yes’.
The Wife contends that on the weekend in question, the Husband would have placed the valuable items in one of two large safes contained at Mr C’s City J property. Of course she is surmising that he did so; she did not physically accompany him on the trip.
The Husband admitted taking the valuable items to City J that weekend and that the two large safes were still at his father’s City J property. But he denied putting the valuable items in either of the safes. Asked whether he trusted his father with the valuable item, the Husband demurred, saying that the valuable items were left in his car when he visited his father and that:
I always wanted the valuable items with me.
I pause here to observe that in the witness box the Husband otherwise freely admitted that he trusted Mr C implicitly, such trust being evidenced by their joint investment in the United States property in the period from 2013 – 2019 which was entirely managed by Mr C. (I also note that for years the Husband stored his Motor Vehicle 2 at Mr C’s City J property.)
As he had always done, the Husband continued visiting his father at City J periodically thereafter. On his evidence the valuable items came with him in his car wherever he went (including when he visited City J), and when he was at home he stored it in his drawers.
Leadup to these property settlement proceedings:
Later in 2020 the Wife decided to institute property settlement negotiations with the Husband. His response was to stonewall her. He did not respond to her solicitor’s letters to him of 12 November 2020 and 3 December 2020 seeking financial disclosure.
I accept the Wife’s Affidavit evidence that:
84.[In] December 2020, [Mr Fergus] sent me a text message from his mobile number … as follows: “There is a big investigation over a [tradesman] that [had an accident] at [Suburb M] in 2016 and his insurance company is chasing me for it, it’s in the millions and if they win it they will bankrupt me, I’ve done everything to keep you out of it and protect you from it but now you have gone to the lawyers I’m pretty sure they will now come after you too.”
In the witness box the Husband accepted that he sent this message and that “the lawyers” he was referring to were the Wife’s family lawyers. The text was sent to dissuade her from pursuing a property settlement. It was no more than an attempt to threaten or intimidate her, like his earlier comments to her on 18 July 2020. [9] The 2016 claim he referred to was no more than a ‘red herring’.
Conduct of these proceedings:
Having been stonewalled and threatened, the Wife then instituted these proceedings on 18 March 2021. I reject the Husband’s Affidavit evidence that:
81.From separation until March 2021, I did not hear anything from [Mr Fergus]. I was unable to phone her or send messages and believe she had blocked me. I was served with a bundle of documents in around March 2021 which indicated [Mr Fergus] was pursuing a property settlement.
The Husband then made the litigation process more difficult than it needed to be.
On the first return date (10 May 2021), he appeared on his own behalf. He had not filed anything and was directed to file and serve his response material by 28 May 2021. The proceedings were otherwise adjourned to 10 June 2021.
By 10 June 2021, the Husband had a solicitor (Mr N) but he had still failed to file and serve any response material. The timeframe for him to do so was therefore extended to 1 July 2021 and the proceedings were adjourned to 15 July 2021.
This time around, the Husband complied with the filing directions. In his response material he included the value of the valuable items as an asset of E Pty Ltd. But the Husband was still in default of his financial disclosure obligations set out in rule 24.03 of the Federal Circuit Court Rules 2001 (which were then applicable). In the circumstances the Wife made an oral application for a disclosure order – successfully - and the Husband was ordered to pay her costs fixed in the sum of $305. The proceedings were otherwise adjourned to 19 August 2021.
On 19 August 2021, Mr N withdrew as the Husband’s solicitor. The parties otherwise entered into consent orders for O Company to undertake a valuation of E Pty Ltd. The orders noted that the parties agreed to participate in private mediation after the business valuation was completed.
The Husband subsequently delayed counter-signing the letter of instruction for some weeks, only returning the counter-signed letter on 27 September 2021 after the Wife threatened enforcement proceedings. O Company’s quoted fee was later revised upwards from $1,735 + GST to $3,500 + GST. The Husband refused to pay the extra so the Wife did.
In the meantime, in 2021 the Wife’s father died. The Husband’s approach to the case took on a sudden urgency. On 6 October 2021 he wrote to her solicitors refusing to attend mediation until the Wife had filed an updated Financial Statement disclosing her anticipated inheritance. The Wife’s solicitor responded by letter on 7 October, sending the Husband a copy of the Will which disclosed that the Wife was not a beneficiary. The Husband responded the same day, reiterating his demand that the Wife provide an updated Financial Statement on account of the inheritance and refusing to set a mediation date until she did. On 8 October the Wife’s solicitor again confirmed that the Wife was not a beneficiary of the estate, that no updated Financial Statement was necessary and that if needs be the Wife would seek to re-list the proceedings to implement the mediation and in that event would again seek costs against him.
The Husband relented, only to then object to the cost of the mediation; he advised the Wife’s solicitor that he would be seeking a (cheaper) court-appointed Conciliation Conference instead. He complained that the Wife’s solicitors had under-quoted the O Company fee even though the fee was increased without reference to the Wife and she paid the extra. He baselessly accused the Wife’s solicitor of having told him that the mediator would come at no cost to him. Put shortly, the Husband was continuing to take a needlessly difficult and obstructive approach.
In early November 2021, O Company submitted their company valuation report in draft form to the parties. The report valued the company’s fixed assets as just $66,795 with a market value of $55,000. It also excluded the value of some Director’s Loans to the Husband totalling $418,715.
On 10 November 2021 the Wife’s solicitors queried O Company as to:
·why the fixed assets of the company were worth so little when on 1 July 2021 the Husband had disclosed in his Financial Statement that the company owned the valuable items; and
·why the Director’s Loans were not included in the assets of the company. [10]
These queries seem to have taken the valuer by surprise, his response email of 11 November 2021 stating that:
3.I did not know the company held Valuable items. Was I made aware of this previously? I note there is no Valuable items listed on the Company’s Balance Sheet as at 27 September 2021?? I confirm if the company does own Valuable items and it is not listed on the Balance Sheet it could change the valuation amount.
4.Directors loans. The only reason they are excluded is to simplify the calculations. It has a nil effect on the over [sic - overall] financial settlement. For example, I could have included the loans as assets of the company (thereby increasing the company valuation), however you would then need to include the amounts as liabilities of the husband within his asset pool. Therefore the overall effect would not change…
5.It appears to me that the Directors loans and the valuable items are separate issues. So if the company does own the Valuable item, that wouldn’t necessarily change the calculations with/without Directors loans.
On 11 November 2021, the Husband ‘clarified’ his position when he emailed O Company to advise that:
The company sold the valuable item. I haven’t got the money to pay it back.
Read in a vacuum, the Husband’s email is almost meaningless. What he was actually trying to convey was that:
The company sold the valuable items to me. I haven’t got the money to pay the company back”.
(my emphasis)
Put shortly, the Husband’s position was that the valuable items now belonged to him and that he did not have the money to repay the associated Director’s Loan which the accountants had raised in the company’s FY 2021 Financial Statements.
Asked about this in the witness box, the Husband explained that “my accountant was transferring the valuable items into my personal name”. No such transfer document was produced at the hearing; potential taxation issues obviously arise. My strong sense is that the Husband was simply treating the company money as though it was his own, oblivious of the taxation and regulatory consequences and leaving it to his accountants to ‘clean up’ and ensure appropriate compliance.
When the matter came back before the Court on 22 November 2021, the Husband asked for a Conciliation Conference. He was unsuccessful – just as the Wife’s solicitor had warned. The parties agreed to mediation by a local solicitor. The Wife’s costs were reserved.
The mediation took place on Wednesday 2 February 2022. It was unsuccessful.
The valuable items go missing:
The very weekend following the mediation, the valuable items went missing.
That weekend, the Husband travelled away to Region P with a friend, one Mr Q. The Husband intended to, and did, stop over to visit his father at City J on the way. But in what seems to have been a ‘first’, this time the Husband decided not to take the valuable items with him in his car. Had he done so, he could have placed them in one of the two safes at the City J property. Instead, the Husband’s evidence is that he left the valuable items at home in a drawer. If he is being truthful, it was far and away the most relaxed security arrangement for the valuable items that he had ever implemented.
The Husband’s partner, Ms D, was the first to arrive at the scene after the alleged theft.
By way of background, Ms D is a professional for R Company. She and the Husband have been in a relationship since on or around 2021 and she had regularly stayed at the Husband’s home. She had her own house key which the Husband kept hidden outside.
According to Ms D’s affidavit:
3.[In early] 2022, at around 7pm I attended upon [Ms Fergus’] property at [S Street, Suburb T] as [Mr Fergus] had been away for the weekend. We had agreed to meet at his place when he got home for a late dinner as we had not seen each other due to him being away.
4.I arrived at the [Suburb T] property and parked my car in the driveway. As I walked towards the property, I noticed the screen and sliding door were open. I thought this was strange given that [Mr Fergus] was away, and I was not expecting anyone to be at the property. I began to feel apprehensive. As I looked through the open door, I could see that the place had essentially been ransacked. I became quite frightened. I called [Mr Fergus] on his mobile phone. I can recall having the following conversation, or words to the effect of:
Me: I think you have been broken into.
[Mr Fergus]: Why?
Me: The door is wide open and there is stuff everywhere. I am too scared to go inside.
[Mr Fergus]: Just call the Police.
The Husband agrees that this was the content of their conversation. [11]
As instructed by the Husband, Ms D then called the Police. This took around half an hour in the course of which she was given a Police event number, told that Police would be there shortly and not to touch anything in the meantime.
Ms D then entered the home and took some photographs [12] which she texted to the Husband. He said that he could see from the photographs that the home had been broken into.
Ms D again called the Husband to tell him what Police had told her, including that she had been instructed not to touch anything until Police arrived. According to Ms D:
7.[Mr Fergus] asked about specific items such as the TV being still in his property. I confirmed the TV was still in the home. [Ms Fergus] then said to me words to the effect of “Can you go inside and check the [drawer]”. He then said words to the effect of “There should be bags in the [drawer] containing some valuable item”. I went into the house to have a look however. There was a side table that was on it’s front. Given I was told not to touch anything, I said to [Mr Fergus] words to the effect of “I can’t see inside the draws”. [sic]
Ms D observed that the screen door lock had been bent off and couldn’t be locked.
Ms D then called the Police again, quoting the Police event number. According to her affidavit:
8.…I said to the person who answered my call “[Mr Fergus] is not at the house yet. He is concerned about some valuable items he kept in the [drawer]. I can’t check as the table is on it’s front and I was told not to touch anything”. The Police Assistance Line person said to me words to the effect of “You can touch surfaces that don’t hold fingerprints like fabric.” I remained in contact with [Mr Fergus] until he arrived at the [Suburb T] property at about 9:30pm with his friend [Mr Q] who he had attended the weekend away with…
The Husband deposed that upon his return to the property he saw that the screen door was off its hinges, the door handle on the garage was snapped off, the corner kitchen cupboard door was broken off, and the drawer which had held the valuable items was broken.
The ‘broken’ drawer which had held the valuable items was sitting somewhat curiously – still upright but leaning forward on its front. Ms D described the drawer as being “on its front” and when shown her own photograph of it she said it would be more accurate to describe the drawer as having been “pulled forward”. The top drawer is open and visible but the bottom drawer (which the Husband says held the valuable item) is obscured because of the way the drawer is leaning forward; the bottom drawer seems to be touching the ground.
The bottom drawer could not be seen into without actively tilting the drawer back up into a more vertical position and looking into the drawer. The valuable items was the Husband’s self-described “life savings”; it was uninsured; either it was still there or it wasn’t. Just how desperate was the Husband to know if the valuable items was – or was not – still there?
According to Ms D’s Affidavit:
8.[Mr Fergus] and [Mr Q] looked around the home. [Mr Fergus] was trying to see into the [drawers] but was unable to do so without moving the side table.
Given the Husband’s admitted lack of trust in the Police, he showed seemingly immense stoicism in not just tilting the drawer upwards and looking in it. He could potentially have done so in a way as to minimise any risk of rubbing off any fingerprints. (For example, perhaps he could have gently tilted the drawer upwards from underneath in order to gain access to the drawer? Why would the thief have left prints on the underside? Once tilted upwards the Husband could potentially have then used a knife to lever the bottom drawer open.)
I note that the other person who was present, Mr Q, was not called by the Husband to give evidence.
According to Ms D:
9.At roughly 12am, the Police still had not attended [Ms Fergus’] home. I said to [Mr Fergus] words to the effect of “We should go to sleep at my house” [Ms Fergus] was not willing to leave his property at this time. I phoned the Police Assistance Line again and was informed it was unlikely the Police would be attending that night as it was not a priority.
At this juncture the Husband could have simply ‘relented’ and just tried to look in the drawer himself. After all, the Police he did not trust were not now going to come that night anyway. Surely a peek in the bottom drawer was tempting. Instead, the Husband was seemingly able to sleep in bed just a foot or so away.
In the witness box the Husband was challenged about his apparent failure to check the bottom drawer. He responded by asserting that the valuable items were “the first thing I looked for when I got home”.Yet his Affidavit was entirely silent about his search; the only Affidavit evidence that he did search is found in paragraph 8 of Ms D’s Affidavit quoted above at [115].
Ms D deposes that:
10.[In early] 2022, the following morning, a Police Officer from [Region U] Station phoned me to ask about the Valuable items. I said to her words to the effect of “I am not aware if it has been taken because we were told not to touch anything”. The Police Officer said to me words to the effect of “Can you please phone me as soon as you know.”
11.In the afternoon I was at [Ms Fergus’] home when the forensics police officer attended. I saw them take fingerprints from all over the home.
12.Following the forensics worker leaving [Ms Fergus’] home, he was able to move things around. This is when [Mr Fergus] looked into the [drawers] and realised the valuable items had been taken.
I accept this evidence and am satisfied that was the first time that the Husband physically checked the drawers.
Unhelpfully, the Husband did not have any photographs of the valuable items, nor did he have their serial numbers. Like the valuable items themselves, the bags they were in and all other paraphernalia (including certificates, business cards and serial numbers) were all gone.
It is a truism that criminal conduct can be unpredictable. That said, there are various curious features about this break-in. Given the evident damage at the home, whoever broke in was clearly not worried about making noise. Breaking off a corner kitchen cupboard door also seems rather gratuitous (and noisy) for any would-be thief presumably seeking to avoid detection.
The damage and disarray look rather contrived. Logically, the drawer which held the valuable items would have been one of the first places a burglar would go looking for valuables. Yet given that the whole of the interior of the home looks like it was ransacked, the drawer seems to have been one of the last places the burglar looked. Either that or, having found the valuable items early on, the burglar then decided to effectively ransack the rest of the home anyway, with all of the associated noise and increased risk of detection.
The Husband was asked whether he had inquired of his neighbours in relation to the burglary. He said he had; a neighbour had mentioned their dog barking at one point though there were no details provided. Apparently concerns were expressed to the Husband that there had been “lots of break-ins” in the area.
In early 2022, Ms D, and not the Husband, phoned Police to follow up. By then the Husband had identified that in addition to the missing valuable item, he had also lost an iPad, two watches, some old mobile phones, some knives, some keys and an empty backpack.
Two (2) Police officers again attended the home later that day; they had a discussion with the Husband on the back verandah.
Subsequent events:
In the aftermath of the alleged burglary, the Husband did not live like a man who had just lost his life savings. On 9 February 2022, he made two (2) x $1,000 withdrawals at a licensed hotel; on 14 February he withdrew $1,000 at a licensed hotel; on 21 February he made three (3) x $1,000 withdrawals at licensed hotels, two (2) x $1,000 withdrawals at a licensed hotel on 24 February and so his bank records go on. By 2 June 2022 – less than four (4) months after the alleged burglary - he had withdrawn another $53,000 in cash at licensed hotels, including withdrawals made in March 2021 when he was at City J. [13]
True, the Husband had a longstanding history of ‘playing the pokies’ but there is no evidence that he in any way slowed down or limited such spending in the aftermath of losing his life savings.
In May 2022 the Husband stopped disclosing to the Wife either his or E Pty Ltd’s bank statements, nor did he provide the Wife with BAS statements or superannuation statements. To circumvent his lack of disclosure in relation to E Pty Ltd, the Wife later ended up issuing a subpoena to the business accountants. The filing fees and conduct money came to $1,307 which the Wife paid.
The company accountants seem to have been somewhat flummoxed about how to appropriately account for the valuable items and the associated taxation implications.
On 29 June 2022, accountant Ms V created the following file note: [14]
Acct set up non-secured loan over valuable items purchase [2020] $418,715 direct fm Bus 25 yrs if mortgage taken out
Repayments will place this client in unnecessary hardship
Marriage breakdown
Business slowed due to mental health break
Valuable items were stolen
Was purchased in name of director NOT company.
Should invoice be changed?
28 days for private ruling
Apply through TAP per lady on phone (#...)
ATO Receipt # …
In late 2022, the Husband travelled overseas for his sister’s wedding, later posting onto Facebook photographs from Country W, City X, City Y, City Z, Country AA and Country BB. The Husband deposed that he told his sister he could no longer afford to go, that she then insisted that she would pay and that when Mr C learned about it he then funded the Husband’s travel instead.
The Husband deposed that he gave his father the registration papers for the Husband’s Motor Vehicle 1 as collateral for this advance. But he retracted this in the witness box, admitting that he had given the registration papers to his father as collateral a month earlier in mid-2022 when his father loaned him $70,000 to bail out the company financially.
The Husband’s follow-up efforts with Police have been rather blasé. He called them a few times in 2022 and says they told him they had nothing new to tell him, and to wait for them to call him. The last time the Husband called Police was around late 2022.
The Husband changed company accountants at some stage; Mr CC became the new accountant. He seems to have written some sort of ‘ethical letter’ to Ms V, which prompted her to respond with the following email in late 2022:
Hi [Mr CC],
Attached is our response to your ethical letter regarding [E Pty Ltd] and [Mr Fergus].
…
I have not included a workpaper for division 7a or director’s loans as this amount was paid back in 2022 and there was no further action required. This can be seen in the Quickbooks file.
There is a fixed asset amount for valuable item which originally was recorded against a loan account but I believe it was purchased by the company. The valuable item has since been stolen and needs to be written off as a loss.
…
Contrary to what is asserted in this letter, there is no credible suggestion that the Husband ever repaid the Director’s Loan in respect of the valuable item. The assertion that he did so is plainly wrong, and it comes from someone who should have known the true facts and who was clearly responding to specific ethical queries. Did Ms V simply get it wrong, or did such repayment appear as some sort of paper entry in the Quickbooks file? It is impossible to know.
After this email from Ms V, Mr CC rang the Husband. He specifically recorded their conversation in the following File Note: [15]
As there is no paperwork provided we cannot establish that the ownership of this asset is that of the Company ([E Pty Ltd] ), therefore we cannot claim a tax deduction for the write off despite the previous accountant ([Ms V]), noting so, email below for file note.
[Mr Fergus] has advised that this “valuable item” asset has gone missing and that it was not insured.
Treatment is to remove this as an asset to the Company as we cannot establish ownership, and that asset is held with [Mr Fergus] on a personal nature, noting Division 7A tax implications advised to [Mr Fergus] and that interest will be required in the next 12 months with minimum repayments also to be met.
Curiously, O Company received two (2) different sets of Financial Statements for E Pty Ltd prepared for FY 2022. On 15 May 2023 they emailed the parties about this, advising that both sets of statements appeared to have been prepared by the same accountants and that neither was marked as a ‘draft’. O Company sought clarification as to which ones were correct, as the discrepancy between them “could result in a material difference to the valuation”. [16]
This was quickly clarified by an email sent from Ms D’s email address direct to O Company attaching an updated FY 2022 Financial Statement. The Wife’s solicitors were not copied into the communication, a most unsatisfactory state of affairs given the requirements of the rules of Court and the unfortunate past history of the litigation. In any event, O Company forwarded a copy to the Wife’s solicitors.
Fraud?
A finding of fraud is a serious matter. It requires that the Court be satisfied to the highest civil standard of proof embodied in s 140(2) of the Evidence Act 1995 (Cth). This standard of proof effectively adopts the Briginshaw standard, so named from the celebrated judgment of Dixon J in Briginshaw & Briginshaw (1930) 60 CLR 336 at 361-362:
The truth is that, when the law requires the proof of any fact, the tribunal must feel an actual persuasion of its occurrence or existence before it can be found. It cannot be found as a result of a mere mechanical comparison of probabilities independently of any belief in its reality. No doubt an opinion that a state of facts exists may be held according to identified gradations of certainty; and this has led to attempts to define exactly the certainty required by law for various purposes…
Except upon criminal issues to be proved by the prosecution, it is enough that the affirmative of an allegation is made out to the reasonable satisfaction of the tribunal. But reasonable satisfaction is not a state of mind that is attained or established independently of the nature and consequence of the fact or facts to be proved. The seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding are considerations which must affect the answer to the question whether the issue has been proved to the reasonable satisfaction of the tribunal. In such matters “reasonable satisfaction” should not be produced by inexact proofs, indefinite testimony, or indirect inferences.
At various times during the relationship, the Wife pressed the Husband to buy (or build) a home with her so that they could escape the ‘rent trap’. The Suburb G block was part of those discussions as referred to earlier. But in the end the Husband simply would not or could not commit. In the meantime the Wife kept on saving and the Husband kept on spending and saving as he saw fit.
As noted earlier, in 2013 the Husband and his father went into a joint venture in respect of an investment property in the USA. They agreed to share the profits on sale commensurate with their respective contributions towards the property.
The Husband invited the Wife to join in the venture but she said no; she would have preferred that they build or purchase their own home instead. However, at the Husband’s specific request she did advance him the sum of $20,000 USD so that the Husband could open an American bank account in connection with the purchase, thereby apparently saving himself additional bank charges and fees. The Husband admits that these moneys were loaned to him and not gifted; they were not joint moneys from either parties’ perspective and the Wife was not otherwise any part of the joint venture.
To facilitate the purchase, in 2013 the Husband paid $350,000 USD ($385,277 AUD) to his father. Mr C purchased the property in his sole name. In 2014 the Husband transferred his father another $45,865 USD ($50,000 AUD) to complete the purchase. The Husband’s moneys for the joint venture came from E Pty Ltd, some personal savings and a redraw of around $80,000 on the Suburb G mortgage.
Up to 2016 the Husband was working in the order of sixty (60) – eighty (80) hours per week. The on-site physical work that he did was often quite taxing. It eventually caught up with him; in 2016 he had an injury which required surgery. He had further surgery again in 2018 when his condition deteriorated.
Following each round of surgery the Husband was unable to drive for some weeks; in the initial post-operative period he managed E Pty Ltd from his hospital bed.
Although the Husband was able to return to full-time work with E Pty Ltd, the progressive nature of his condition meant that he did less and less of the hard physical work on site.
As noted earlier, in 2019 the Husband’s father sold the United States investment property for a profit. The Husband deposed that in early 2020 his father repaid him the total amount of $464,773 USD, a profit of $48,910 USD on the original amount he had invested. Converted back to AUD, the total amount was $773,038. [20]
The Husband used that money to repay what he owed to E Pty Ltd. He did not however repay the Wife’s $20,000 USD which was simply left sitting in the Husband’s United States bank account.
The parties had operated entirely separate bank accounts up until the last nine (9) months of the relationship. At that point they opened their first ever joint account which was used to pay for groceries, dinners and holidays. Even then, they contributed to the account on an equal, dollar-for-dollar basis. That is, they treated it not so much as a joint account but as an account held in common in equal shares.
Towards the end of the relationship the Husband began to pay a cleaner to vacuum and mop the floors on a fortnightly basis.
Shortly before separation, the Wife transferred $1,700 to the Husband to cover the cost of her return flights to Country AA for his sister’s wedding. He then paid for both flights on his credit card. The flights were later cancelled due to Covid lockdowns; the Husband retained the money.
As noted earlier, the Husband bought the valuable items at or about the time of separation.
Post-separation contributions:
At separation, the Wife had accumulated $218,512 in her bank accounts. Her superannuation balance was $145,052.
The Husband had $1,800 in the bank; E Pty Ltd; the Suburb G property (with a mortgage balance of only $180); $53,000 in superannuation and various motor vehicles. He also had the valuable items, and an associated director’s loan from the company.
Based on the Husband’s representations to the Wife in early 2020 about having “fifty grand” stored in the home (as discussed in [183] & [184] herein), the Wife contended that at separation that amount would still have been there. In terms of the cash that she herself saw, the Wife photographed the inside of the Husband’s cash box in mid-2020: exhibit 1. It depicts four (4) clips of $50 notes, perhaps running into a few thousand dollars and certainly nothing like $50,000.
The Husband denies having cash in the home apart from that contained in the cash box.
The Husband’s evidence can hardly be relied upon given my other findings. The Wife’s estimate is based on the Husband’s admitted figure earlier from that same year which is ultimately the best evidence the court has. It is likely that some of that cash, or perhaps all of it, remains safely stashed away either in the home or somewhere else.
Upon separation, the parties divided their joint account equally – each received about $2,000. They divided their furniture according to what each had purchased. I accept the Husband’s evidence that at the Wife’s request he vacated the home for the weekend to allow her to take back her personal belongings.
The Wife kept the Motor Vehicle 1 which she had always driven during the relationship and which both parties had always treated as being hers. E Pty Ltd was the registered owner but this was always understood by both parties to be for tax minimisation purposes only. Accordingly, in late 2020 the Husband had E Pty Ltd transfer the Motor Vehicle 1 to the Wife. At the same time, she transferred from her name into his name a motor vehicle registered in her name that was in his possession and had been treated as his. Both transfers were by consent.
I reject the Husband’s evidence that the Wife received the Motor Vehicle 1 in lieu of the $20,000 USD she had previously loaned him. The Husband simply did not want to repay the Wife’s $20,000 USD and the transfer of the Motor Vehicle 1 gave him a pretext.
The Husband said that he had since spent the Wife’s $20,000 USD but I am unable to make any finding in that respect.
Post-separation the Husband has substantially drawn down on the NAB mortgage. At one stage its balance was around $140,000 but he has since paid it down to the figure of $121,410 contained in the Balance Sheet.
Since separation, E Pty Ltd has also gone consistently backwards in its financial performance – at least on paper. Shortly prior to separation, the company recorded total revenue of $502,241 in FY 2019 and $477,373 in FY 2020. In FY 2020 it had a number of casual employees on its payroll. [21] By FY 2021 its gross income had dropped to $351,548 and the number of casual employees had reduced. [22] By FY 2022 its gross income was only $219,946 and, by the time of the updated business valuation of 31 December 2022, its financial performance had continued to decline markedly. The interim revenue in the six (6) months to 31 December was just $51,658 or $102,474 on an annualised basis. Moreover, there was just one (1) company employee apart from the Husband. [23]
Given the company’s financial performance, the single expert valued it on a net assets basis as reflected in the Balance Sheet.
The Husband no doubt has some medical problems as recorded earlier, but I consider that the prime reason for the astonishing decline in recorded company revenue is the Husband’s fervent desire to avoid paying the Wife anything in these proceedings. Put shortly, he has chosen to let the company ‘run down’. And to the extent he still deals in cash, neither the Wife or the court will ever be told the true position.
Each party has otherwise continue to work and each has re-partnered.
OTHER MATTERS ARISING PURSUANT TO SECTION 79 INCLUDING FUTURE FACTORS
The Wife was born in 1979 and is presently 44 years old. She works on a full-time basis as an educator in the greater City DD Region. She earns $130,094 per annum. In weekly terms she earns $2,502 and her expenses are $1,781. She lives in rental accommodation with her partner, a professional, who earns approximately $184,000 per annum.
Though the Wife does not own a home, she has a measure of financial security as evidenced by the substantial savings she accumulated during the relationship and her ongoing income.
The Husband was born in 1983 and is presently 40 years old. He continues to work as a tradesman and director of E Pty Ltd. In FY 2021 his taxable income was $130,002 including dividends of $96,200 and in FY 2022 his taxable income was $122,666 including dividends of $92,000.[24] This income was paid to him by way of company dividends. His declared income in the current financial year is likely to be much lower given that he only works three (3) hours per week at present and has just one (1) employee who he hires out. I emphasise declared income: there will in all likelihood be an undeclared cash income as well.
E Pty Ltd does pay various expenses for the Husband’s benefit, including a share of his home rental (home office), and various travel costs. It has been tax-effective income-earning vehicle for him over the years.
In the witness box the Husband said that he intended to wind up the company, but I regard that evidence as questionable. Asked when he himself stopped doing physical work, he admitted that “I have been on the tools a little bit lately”, saying he had worked forty (40) hours the week prior to the hearing as he “had no choice” and relied on painkillers to do so.
The Husband does suffer from chronic medical conditions. He deposes that since separating, he has been “mostly unable to physically work due to his injury.” A more accurate description would be that he is “to some extent unable to work but mostly unwilling to work due to these proceedings.”
The Husband has undergone medical imaging and a medical treatments in early 2023. This treatment seems to have given him some relief and improved function as, at the date of the final hearing some five (5) months later, the Husband had not needed further medical review.
In truth, the Husband’s income-earning capacity is shrouded in mystery largely because while I accept that he does have a genuine injury he also does have a genuine desire to defeat the Wife’s claim. Right up until the last couple of years, the Husband had a very good work history and ran a highly profitable business – including after undergoing two (2) rounds of surgery.
At the conclusion of these proceedings I suspect that either E Pty Ltd will experience a Lazarus-like resurgence, or a new entity will be established in its place.
Over the course of the relationship, the Wife’s career flourished. The Husband’s business flourished.
Neither party receives any means-tested benefits.
Both parties have a reasonable standard of living. While the Husband claims to be going backwards financially each week, his evidence cannot be relied upon in that respect.
The Husband does not seek a cash payment from the Wife to pay any alleged creditors of his (or the company); the Wife has no creditors.
In this case, while I have considered them, I do not propose to formally assess the parties’ respective s 79 entitlements given the extremely narrow ambit of the orders that I consider to be just and equitable.
THE JUST & EQUITABLE REQUIREMENT
This was not a young and naïve couple. When they married, they each had their own career path and their own income.
By choice, they consistently kept their finances almost entirely separate throughout. There simply was no common sharing of the assets. The Husband’s Suburb G block was always his; E Pty Ltd was always his. While Mr Bithrey contended that the parties were “a team” and that the nature of those assets did not lend themselves to sharing of title, the fact is that the parties could have – but never did – build on the Suburb G land. Nor did they ever buy a home or land together. In my view the Husband baulked at buying or building a home with the Wife; firstly by investing his money into the USA property and secondly by purchasing the valuable items at or about the time of separation. He was not acting like a man who was seeking joint financial commitment; the Wife knew it and this was likely a source of resentment in the relationship contributing to its breakdown.
Each party’s bank account/s were treated as being their own. Neither had any input into how the other invested - or spent - that money (as the case may be). I would also refer to the sheer amount of money the Husband spent at hotels and on poker machines without demur by the Wife. Frankly, if she did regard those moneys as ‘joint’ she had quite a bit to complain about.
I have already referred to the ‘joint’ account opened by the parties which was contributed to equally and then split equally; I have referred to their furniture division according to what each had purchased.
I respectfully adopt the submission made in the Husband’s Case Outline that:
22.Whatever may be said about the husband refusing to refund money to the wife for a cancelled flight shortly prior to separation (assuming that is what occurred – the husband does not recall receiving a refund), the fact that the wife “transferred [Mr Fergus] $1,700 to pay for my return flights to [Country AA]”, speaks volumes as to how these parties chose to live their financial lives.
The Husband’s Case Outline referred to recent case law and I respectfully adopt what it asserts therein:
37.The circumstances in this case are not dissimilar to the circumstances confronting Schonell J in Moretto & Cosola (No.2) [2022] FedCFamC1F 924, where in refusing to accept the wife’s application to make property settlement orders (an order was made concerning a motor vehicle which was found to be held by the wife on trust for the husband), His Honour held at [85] – [86]:
I am satisfied that the unstated assumptions underpinning the parties’ relationships were that during the relationship they were each free to deal with their assets as they chose to do so. They gave effect to that assumption during the relationship. The parties did not intermingle their financial affairs and did not conduct a joint personal bank account. They held and dealt with their real property, being their single biggest asset, free of consultation or consideration of what the other party may have thought was appropriate to do. The respondent had the benefit of occupation of the applicant’s home rent free whilst making her home available for use to her son. Her children lived in the applicant’s home for periods of time.
There is no presumption that following the breakdown of a relationship lasting 15 years that an order should be made adjusting the parties’ legal and equitable interests in the property. There must be a principled basis for doing so, arising out of how the parties conducted their relationship. I am not satisfied that one has been established. I am not satisfied that it is just and equitable to make an order.
38.The wife in Moretto appealed unsuccessfully (Cosola & Moretto [2023] FedCFamC1A 61).
39.To take on the words from Stanford, there is no “principled reason” for the Court to now interfere with how these parties chose to live their married life together, whether in respect of superannuation, or non-superannuation.
40.The “unstated” or “implicit assumptions” between these two parties was they would keep their finances separate – this is no more obvious than the fact that the wife has managed to accumulate savings, in her own name, in the amount of about $225,000.
But in contending that there be no order whatsoever, the Husband pushes his argument too far. Such a result would see him unjustly enriched to the extent of the $20,000 USD advanced to him by the Wife; and he would also be unjustly enriched by holding the $1,700 in flight costs. Both parties acted on the basis that these were the Wife’s money, not the Husband’s. They were not gifts, but were provided for specific purposes. The marriage having broken down, those moneys should have been returned to the Wife.
These specific sums of money are the only assets which this court has a principled reason to make orders about. In so finding, I am mindful of the contributions that each party made during the marriage, including the Wife’s homemaking contributions. I am also mindful that in the days after separation the Husband asked the Wife “what she wanted” but which he said without the benefit of legal advice. The valuable items are his, and always have been. It is ironic that his dishonesty in respect of the valuable items has ultimately been entirely to his own detriment. But in that respect a more ‘just’ outcome is unimaginable.
CONCLUSION & ORDERS
For these Reasons, I make the orders set out at the commencement herein.
As foreshadowed during closing submissions, I intend to provide a copy of these Reasons to the NSW Police so that they are aware of these findings.
I certify that the preceding two hundred and forty-three (243) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Betts. Associate:
Dated: 20 October 2023
[1] In his proposed orders, the Husband sought a declaration in slightly different terms, namely that he held a 25% beneficial interest, with his father holding the other 75%. The difference does not matter on my analysis of the case.
[2] Mr C’s sister bought the block, Mr C built a house on it, his sister paid for the build and when the block was later sold Mr C and his sister divided the profits equally.
[3] Wife’s Affidavit, paragraph 57
[4] Wife’s Affidavit, paragraphs 56 & 58
[5] This was of course the Husband’s alternative position. The Husband’s primary position – based on his own evidence – was that the Husband held a 27.28% beneficial interest and [Mr C] held the other 72.72%.
[6] See Bosanac v Commissioner for Taxation & Anor [2022] HCA 34
[7] Mr Weightman took this definition from Meagher, Gummow & Lehane’s Equity Doctrines & Remedies, 5th edition (2015).
[8] Exhibit 2
[9] See [44] of these Reasons
[10] Exhibit 5
[11] Husband’s Affidavit, paragraph 83
[12] Exhibit 3. These are annexure ‘C’ to the Husband’s Affidavit.
[13] Exhibit 4
[14] Exhibit 16
[15] Exhibit 16
[16] Wife’s Affidavit, paragraph 160
[17] Exhibit 6
[18] The Wife’s unqualified opinion puts it at $2,000
[19] Wife’s Affidavit, paragraph 26
[20] Exhibit 9
[21] Exhibit 10
[22] Ibid.
[23] Husband’s Affidavit, paragraph 37, which is consistent with what the Husband told the single expert
[24] Dividend figures are drawn from exhibit 12
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