Gallieni and Gallieni and Ors
[2011] FamCA 791
•5 October 2011
FAMILY COURT OF AUSTRALIA
GALLIENI & GALLIENI AND ORS [2011] FamCA 791
FAMILY LAW – PROPERTY – Superannuation – add-backs – contributions – constructive or resulting trust – winding up of company – difficulty quantifying asset pool – accrued jurisdiction
Family Law Act 1975 (Cth) s 92, 92(3),
Corporations Act 2001 (Cth) ss 79(3), 232, 233, 233(1)(a), 472 and 1337C(1)
Re Coomber v Coomber [1911] 1CH 723
Warby v Warby (2002) FLC 93-091
ASIC v Edensor Nominees Pty Ltd (2001) 204 CLR 559
Bergman v Bergman (2009) FLC 93-395
Puddy v Grossvard and Anor (2010) FLC 93-432
Re Dalkeith Investments Pty Ltd (1984) 9 ALCR 247
Wallington v Kokotovich Constructions Pty Ltd (1993) 11 ACSR 759
Dalby v Bodily [2004] All (D) ER 43
Re Westbourne Gallenes Ltd [1973] AC 360
Re Tivoli Freeholds Ltd [1972] VR 445
Re Posgate and Denby(Agencies) Ltd (1986) 2BCC 99,352
Martin v Australian Squash Club Pty Ltd (1996) 14 ACLC 452
Hickey and Hickey and A-G for the Commonwealth of Australia (Intervener) (2003) FLC 93-143
Aleksovski v Aleksovski (1996) FLC 92-705
AB v ZB (2003) FLC 93-140
In the marriage of Jordan, RK and Jordan, R (1997) FLC 92-736
APPLICANT: Mr Gallieni
RESPONDENT: Ms Gallieni
FIRST & SECOND INTERVENERS: Mr D and Ms D THIRD & FOURTH INTERVENERS Mr H and Ms H
FILE NUMBER: MLC 7541 of 2008
DATE DELIVERED: 5 October 2011
PLACE DELIVERED: Cairns
PLACE HEARD: Melbourne
JUDGMENT OF: Benjamin J
HEARING DATE: 28 February, 1, 2, 3, 7, 8, 11, 16 & 17 March & 5 May 2011, 5 & 13 October 2011 REPRESENTATION
COUNSEL FOR THE APPLICANT: Mr Kenworthy up to part way through 11 March 2011 after which the applicant represented himself
SOLICITOR FOR THE APPLICANT: Kenworthy Lawyers up to part way through 11 March 2011 from which time the applicant was self represented but had the assistance of Mr Kenworthy
COUNSEL FOR THE RESPONDENT: Mr O'Shannessy
SOLICITOR FOR THE RESPONDENT: Slater & Gordon
COUNSEL FOR THE FIRST AND
SECOND INTERVENERS:Ms Smallwood
SOLICITOR FOR THE FIRST AND SECOND INTERVENERS: Mallesons Stephen Jacques COUNSEL FOR THE THIRD AND FOURTH INTERVENERS In person Orders
1.K Pty Ltd (“the Company”) be wound up pursuant to s 233(1)(a) of the Corporations Act 2001 (Cth) (“Corporations Act”), or alternatively, pursuant to s 461(1) of the Corporations Act.
2.Mr L, of Company F is appointed liquidator of the Company, subject to these orders and the conditions of appointment (set out in the liquidator’s consent dated 16 March 2011).
3.Mr D and Ms D (the First and Second Interveners), are not required to publish a notice in accordance with Rule 5.6 of the Federal Court (Corporations) Rules 2000 (Cth).
4.The purported issue of:-
· 20 shares in the Company to the husband,
· two shares in the Company to the wife, and
· four shares in the Company to Mr H and Ms H,
effected on or about 18 March 1997 are declared void and are set aside. Consequently the liquidator shall do all acts, sign all documents such that the Register kept by the Company is corrected and such share issues are removed pursuant to s 175 of the Corporations Act.
5.The appointment of Mr H and Ms H (the Third and Fourth Interveners) as directors of the Company on or about 18 March 1997 is declared void and is consequently set aside. Consequently the liquidator shall do all acts, sign all documents such that register kept by the Company is corrected pursuant to s 175 of the Corporations Act.
6.It is declared that the shareholding of the Company is as follows:-
(a)the husband holds two of the six issued shares in the Company;
(b)the wife holds two of the six issued shares in the Company
(c)Mr D (the First Intervener) holds one of the six issued shares in the Company; and
(d)Ms D (the Second Intervener) holds one of the six issued shares in the Company.
Consequently the liquidator shall do all acts, sign all documents such that the Register kept by the Company is corrected and such shareholding is shown on the said Register.
7.The parties and liquidator do all things necessary to have the mortgage, registered in favour of St George Bank (being the mortgage securing advances to the Company) over the property at O Street, Suburb T, discharged. The parties do all things necessary to have the mortgage, registered in favour of St George Bank (being the mortgage securing advances to the Company) over the property at S Street, Suburb E be discharged.
8.Subject to these orders (including order 10), the parties to these proceedings, in their personal capacities or as a director of any corporate entity, are restrained from submitting any proof of debt in the winding up of the Company.
9.It is declared that the Company owes Mr and Ms H, (the Third and Fourth Interveners), a sum of $28,000 (together with interest unpaid, if any, since June 2010) in respect of the loan entered into between the Company and the Third and Fourth Interveners on or about 26 March 1997.
10.In respect of such of the payments referred to below:-
Such payments as were made on or before 30 June 2008, the husband and wife pay to the Company (or have set off against any proposed distribution of income and/or capital to them) such sums; and
Such payments as were made after 30 June 2008, the husband pay to the Company (or have set off against any proposed distribution of income and/or capital to him) such sums;
These being monies of the Company improperly had and received by the husband, or entities controlled by the husband including:-
(a)$114,111.80 in respect of the husband’s legal costs of this proceeding;
(b)$208,276.34 in respect of Citibank loan repayments made by C Pty Ltd from 30 June 1991 to 30 June 2008 (excluding interest on that loan from 1991 to 31 March 1997);
(c)$57,501.30 in respect of the tax liability of C Pty Ltd paid by the Company on 26/08/09; and
(d)$63,834.20 in respect of other payments made to bank accounts controlled by the husband.
Such other money as is determined by the liquidator in accordance with these orders (subject to the overriding supervision of the Court).
Such payments to be made by the husband or the husband and wife (as the case may be) within three (3) months from the date of this order. If such payment/s are not made then the liquidator shall deduct any such amount/s (together with interest calculated as and from three (3) months from the date of this order and at a rate in accordance with the Rules of this Court) from the amount to be otherwise distributed to the husband and/or the wife. The return of such money and any and interest shall be assets and/or income of the Company.
11.If necessary, the liquidator is directed to undertake an investigation into, and take an account of, monies (other than the monies specifically referred to at orders 9 and 10 above) received by the husband or related entities of the husband from the Company, and to report to the shareholders in relation to his findings in that regard prior to any distribution being made to members of the Company.
12.The liquidator shall bring to the accounts of the Company money taken from it by the husband (and/or his related entities) so as to rectify the books and records of the Company having regard to these orders and the findings of fact contained in the reasons for the orders.
13.The liquidator shall inform the Australian Securities and Investments Commission (ASIC) within twenty eight (28) days of the date of this order of the amendment to the Company Register as to shareholders and directors made pursuant to these orders.
14.The liquidator has leave to apply to the Court for directions pursuant to s 79(3) of the Corporations Act.
15.As to the costs of the liquidator:-
(a)one-third of the costs of the liquidation will be paid out of the assets of the company,
(b)two-thirds of the costs of liquidation are to be set off against the amount otherwise payable on liquidation to the husband and the wife (in equal shares).
(c)if there is insufficient capital due to the husband and wife on liquidation, such shortfall shall be paid out of the capital due to Mr D and Ms D (the First and Second Interveners). They are in turn are indemnified, as to half each by the husband and the wife.
(d)if the capital due to the husband is insufficient to meet the whole or part of his share of the two-thirds cost of liquidation then the shortfall shall be paid out of the capital to be otherwise paid to the wife, who in turn is indemnified by the husband in respect of such sum.
(e)the liquidator shall be entitled to draw against the assets and income of the company to pay his fees as and when they fall due.
16.At or about the time of completion of the liquidation, the liquidator shall:-
(a)determine and inform the shareholders of the Company as to the amount payable to each of them in accordance with these orders for liquidation of the company.
(b)pay to Mr D and Ms D (the First and Second Interveners) their respective entitlements.
(c)in respect of the husband and the wife, pay from each of their respective entitlements one half of the wife’s tax liability of $36,202 and one half of the Citibank liability of about $69,000 (secured over Mr and Ms H’s home).
(d)calculate the amount due to each of the husband and wife having regard to:-
i)the net entitlement of each of the husband and wife on the liquidation of the Company;
ii)a division of non superannuation matrimonial property of the husband and wife as to 65 per cent to the wife and 35 per cent to the husband;
iii)the wife retaining S Street, Suburb E at a value of $750,000 (less the amount due to the St George Bank – being the housing loan of about $114,475) and her motor vehicle at a value of $500.
iv)the husband retaining his motor vehicle with a value of $8,000, his household contents of $1,500 and the legal fees he paid for his parents of $50,089;
(e)after giving at least twenty eight (28) days notice pay to the husband and wife their respective entitlements, subject to any further deductions that many arise in any costs determinations in these proceedings.
17.The husband and wife shall otherwise retain the property in his or her possession or control.
18.IT IS DECLARED that the asset of the $50,089 being legal fees paid by the husband on behalf of Mr and Ms H, (the Third and Fourth Interveners) is an asset of the husband.
19.The husband and wife shall indemnify Mr and Ms H (the Third and Fourth Interveners) in respect of the amounts outstanding to Citibank secured by a mortgage over the home of Mr and Ms H. Such indemnity shall expire when that loan is paid out by the liquidator in accordance with these orders.
20.With regard to Mortgage Number … secured over property S Street, Suburb E (Certificate of Title Volume … Folio …), Mr and Ms H (Third and Fourth Interveners) shall within seven (7) days of the date of this order do all acts and sign all documents to provide discharge of that mortgage; and if they fail to provide the discharge of the said mortgage a Registrar of this Court shall execute such discharge of mortgage pursuant to s106A of the Family Law Act.
21.Within sixty (60) days of the date of this order:-
(a)the husband will do all acts and sign all documents to transfer his interest in property at S Street, Suburb E to the wife.
(b)at the time of transfer, the wife will do all acts and sign all documents necessary to either discharge or release the husband in respect of the mortgage to the St George Bank secured against the subject property and the wife shall indemnity the husband in respect of the housing loan mortgage (but not the mortgage being the collateral security in respect of the Company) and other liabilities against the said property including council rates, water rates and land taxes, but excluding the alleged liability to Mr and Ms H (the Third and Fourth Interveners).
22.The husband, wife, Mr D and Ms D (the First and Second Interveners) have liberty to apply in terms of the liquidation of the Company and the implementation of these orders. Such leave shall continue for the period of the liquidation, two (2) years from the date of this order or such other period as is determined by this Court.
23.The respective applications for costs between the parties are listed for hearing at 10.00am on 2 April 2012 (or such other date as is directed by the court and the parties are given leave to apply in respect of the allocation of this date upon the giving of seven (7) days notice to the court and to the other parties) and the Court makes the following directions in that regard:-
(a)that two (2) working days prior to that day each party who wishes to make submissions on costs file and serve a written outline of those submissions, including on what basis the costs are being sought whether pursuant to the accrued jurisdiction; party/party; practitioner client; indemnity together with the precise order that such party or parties seek in terms of costs;
(b)any further evidence the parties seek to rely upon in respect of the costs application is to be filed and served at least fourteen (14) days prior to the hearing of the costs applications.
(c)Leave be given for the husband to attend the hearing by telephone from Western Australia provided he notifies the other parties and the Court at least seven (7) days in advance.
SUPERANNUATION ORDERS MADE BY AGREEMENT
24.These superannuation orders are binding on the Trustee of the MLC Masterkey Superannuation Fund (“the Trustee”), it being noted that the Trustee has been afforded procedural fairness in relation to the making of these orders.
25.These superannuation orders relate to the interest of the husband Mr … Gallieni also known as or previously known as … (“Mr Gallieni”) in relation to his account number …07 in the MLC Masterkey Superannuation Fund.
26.The flagging order made by the Court on 21 May 2009 in relation to the interest of Mr Gallieni is lifted as and from the operative date.
27.The base amount to be allocated to the wife, Ms Gallieni, out of the interest of Mr Gallieni in the MLC Masterkey Superannuation Fund (“the Fund”) is $78,082.
28.Pursuant to s 90MT(1)(a) of the Family Law Act 1975 (Cth) whenever the Trustee of the Fund makes a splittable payment from the interest held by Mr Gallieni in the Fund the Trustee shall pay to Ms Gallieni an amount which is calculated in accordance with Part 6 of the Family Law (Superannuation) Regulations 2001 (Cth) using the base amount in paragraph 28 hereof and that there be a corresponding reduction in the entitlement that Mr Gallieni would have had but for these orders.
29.These superannuation orders have effect from the operative date.
30.The operative date for the purpose of these superannuation orders is twenty one (21) days after the date of these orders.
31.The wife shall cause a sealed copy of these orders to be served, by ordinary prepaid post upon the Trustees of the fund, within fourteen (14) days.
32.These proceeding are removed from the list of matters requiring determination.
NOTATION and DIRECTION
33.The methodology contained in the spreadsheets in Exhibit B in these proceedings (including assumptions [2] and [3] set out therein) accurately reflect these orders and the liquidator is DIRECTED to apply that methodology in winding up the company and in making distributions to the parties.
34.All subpoenaed documents be returned to the persons or institutions from which they emanated and all exhibits are returned to the person or persons who tendered the same, such return to occur twenty eight (28) days after the determination of any costs application or within twenty eight (28) days after
2 April 2012 whichever is the later.35.All outstanding applications (except as to costs) are dismissed and removed from the list of cases requiring determination.
36.The application by the husband and the third and fourth interveners for leave to make an oral application for stay is dismissed, noting that this does not constitute a dismissal of a stay application.
37.A transcript of the proceedings on 13 October 2011 be taken out and placed on the court file.
IT IS CERTIFIED
38.Pursuant to Rule 19.50 of the Family Law Rules 2004 (Cth) it was reasonable to engage counsel to attend.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Gallieni & Gallieni and Ors has been approved by the Chief Justice pursuant to s 121(9)(g) of the Act.
FAMILY COURT OF AUSTRALIA AT HOBART FILE NUMBER: MLC 7541 of 2008
Mr Gallieni Applicant
And
Ms Gallieni Respondent
And
Mr D and Ms D
First and Second IntervenersAnd
Mr H and Ms H
Third and Fourth IntervenersREASONS FOR JUDGMENT
introduction
1.These are property proceedings between Mr Gallieni and Ms Gallieni over a relatively modest asset pool. The proceedings are complex because they involve the intermingling of property with other members of the parties’ families and accrued jurisdictional issues. In these proceedings the evidence was that the legal costs have, and will continue to extinguish a significant proportion of the parties’ wealth.
2.It is of value in these reasons to introduce the parties to these proceedings, they are:-
·Mr Gallieni (“the husband”), a university educated professional, who describes himself as an entrepreneur.
·Ms Gallieni (“the wife”), the long term wife of the husband. She was the primary carer of their three children and describes herself as having been dominated by the husband throughout most of the marriage. She says she was either deceived or kept in the dark about financial issues.
·Mr and Ms D. Ms D is the wife’s sister and she and her husband describe themselves as naïve investors who relied upon the assertions and representations of the husband. They assert that they have been the victims of fraud and other improper business practices employed by the husband. They likewise say they relied upon the husband in terms of a major property investment. They are the first and second interveners.
·Mr and Ms H. They are the husband’s parents. Ms H claims that she relies almost wholly on that which Mr H says and otherwise has limited knowledge of the surrounding facts, that assertion was not seriously challenged by any of the other parties, including her husband. On the other hand, Mr H asserts that he is ‘his own man’. Mr H claims a significant interest in the assets of the parties and says that he was well informed about the financial dealing insofar as they related to him, the wife and the interests of Mr and Ms D. The case for the wife and Mr and Ms D was that Mr and Ms H have been used and are being used by the husband to meet his own ends. That assertion is strenuously denied by the husband and by Mr and Ms H. They are the third and fourth interveners in these proceedings.
3.The complexity that engulfs these proceedings has defied the wit and wisdom of the parties (and those who advised them) in finding their own solutions. This complexity includes the nature of a property investment made in 1991 by some or all of the relevant parties.
BACKGROUND
4.The husband and wife married in January 1987 and separated in mid 2008. There are three children of their marriage, twins G and N now aged about 24 and R now aged 18.
5.The husband is a professional person.
6.The wife has trained and worked in the beauty industry and as a receptionist. As at October 2010 she was working as a receptionist and had an income of about $33,000 per year.
7.The wife and husband each owned property at the time they married, the value of husband’s property at that time was greater than that of the wife. The extent of that difference is in issue.
8.The evidence of the husband was that he had net assets valued at about $255,000 and the wife had net assets of about $10,000. The wife disputes the values and equity asserted by the husband at the time of the marriage. No objective evidence was provided by the husband in terms of the real estate values he promoted. Having regard to my concerns about his evidence I am not convinced that the difference was as stark as he claims.
9.However, the financial circumstances of the parties in the first few years after marriage diminished. By 1989 they had jointly acquired some real property and by 1990 the evidence of both the husband and the wife was that their overall net wealth was negligible.
10.From mid 1989 the finances of the husband and wife were in a parlous state. According to the husband, this was a time of high interest rates and flat or declining property values. The parties had apparently defaulted on a purchase of real estate and owed considerable money to a bank on non income earning assets. Their family trust had acquired vacant land at Lot AA in J in 1988 for $263,000 and they were unable to commercially sell that land. They later used this property as part consideration for the acquisition of the factory at Lot BB in J by K Pty Ltd.
11.The husband and wife, together with their twin children, commenced living with and at the home of the husband’s parents, Mr and Ms H. The family remained living at that home for about two and a half years. Mr and Ms H provided accommodation for that period and assisted in the care of the children over that period and beyond.
12.In 1991 the husband and wife acquired an interest in a factory unit by way of their two-thirds shareholding in K Pty Ltd. The funding of that investment to purchase the factory was in part provided by:-
·Mr and Ms D by way of money loans, a substantial mortgage over their home and personal guarantees;
·the husband and wife who contributed capital for their shares by way of directing their family trust to transfer an adjacent vacant property it owned as part consideration. In this regard Mr and Ms H and the husband borrowed money from Citibank to reduce an existing loan over the land. The Citibank loan was secured by personal covenants of the husband and his parents and by a mortgage over the home of Mr and Ms H. That loan was secured by personal guarantees given to Mr and Ms H by the husband and wife and later further security by way of mortgages over the husband and wife’s S Street home. The nature of that arrangement is an issue; and
·Further money was secured by mortgages over the K Pty Ltd factory and personal covenants of the husband, wife and Mr and Ms D.
13.The factory owned by K Pty Ltd now has a value of about $2,000,000. The rights and entitlements of the husband and wife, Mr and Ms D and Mr and Ms H in relation to K Pty Ltd are a major issue of dispute in these proceedings. That determination was fundamental to enable the Court to ascertain the pool of assets of the husband and wife. The precise extent of the pool of assets will not be known until such time as K Pty Ltd has been wound up.
14.During the course of the marriage the husband and wife acquired their own home and directly and indirectly contributed to the creation of a superannuation fund.
15.When the husband and wife separated in May 2008 they had money in the bank of about $200,000 which, after deducting credit cards debts left them with net cash savings of about $160,000. Since separation this money has been spent by the husband and there is a question of an allowance in the context of contributions in respect of that sum.
16.This hearing was conducted over a lengthy period of time and involved a significant number of issues of fact. I am alive to the comments made by Fletcher and Moulton LJ in Re Coomber v Coomber [1911] 1CH 723 at 729 where they said of cases involving alleged fiduciary relationship that there is “no class of case in which one more carefully to bear in mind the facts of the case”. In reflecting on the fact finding in this case I have borne in mind that observation and I have endeavoured to be very careful about making such findings.
17.I have not endeavoured to repeat or list the large volume of evidence, although I have had regard to it in making the various findings. In these reasons any statement of fact is to be treated as a finding of fact, unless the contrary is clear form the context.
THE ISSUES
18.The issues include:-
(a)Determining the respective shareholding of the husband, wife and Mr and Ms D and Mr and Ms H in K Pty Ltd, including whether the four shares recorded in the name of Mr and Ms H are held as security for an advance made by Mr and Ms H for $28,000 in or about 18 March 1997, or whether (as asserted by the husband and Mr and Ms H) they own a beneficial interest in those shares.
(b)Whether there was an agreement put in place that in consideration of offering their otherwise unencumbered home, as security for the initial loan to purchase the property owned by K Pty Ltd, there was a collateral contract that Mr and Ms H would receive one-half of the husband and wife’s interest in that company and whether it was by way of a transfer of shares or by distribution on winding up (it was the husband’s evidence that it was to be by distribution on winding up).
(c)There was an issue as to whether Mr and Ms H’s four shares, if validly issued, were held beneficially by them.
(d)In terms of the events around 1997, whether a board/shareholders meeting occurred and if so the impact of that on the shareholdings. The husband’s case was that Mr and Ms D were about $73,000 behind in the contributions they were required to make and if they wished to retain 25 per cent equity in K Pty Ltd (that being down from a one-third equity) they needed to contribute a further sum of $53,000. The case on behalf of Mr and Ms D was that KPty Ltd has been, for all intents and purposes, self funding and they are entitled to a one-third share and that for various reasons under the Corporations Act 2001 (Cth) (“the Corporations Act”) it is appropriate to wind up K Pty Ltd.
(e)The husband claims that he is entitled to remuneration under two separate agreements. In one he says that he is entitled to 5 per cent of the income for managing the business and in the other agreement he says he is entitled to 10 per cent of the capital as an entrepreneurial bonus.
claims by mr and ms h
19.Mr and Ms H claim an interest in K Pty Ltd and various other money claims.
20.As at the beginning of March 1997, K Pty Ltd had an issued shareholding of six. One share was held by each of Mr and Ms D and two shares were held by each of the husband and the wife.
21.In March 1997, two shares were purportedly issued to each of Mr and Ms H. They now claim a beneficial interest in those shares and the husband supports that contention. Further shares were purportedly issued to the husband and wife. Mr and Ms Hs claim that of the then total 22 shares held by the husband at that time, 11 were held either on a constructive or resulting trust for them. They seek a transfer of those 11 shares to them or the beneficial interest in the assets behind those shares. This is intended to be from the present expressed shareholding of:-
The husband –original shares 2
The husband – shares allocated 20
The wife –original shares 2
The wife – shares allocated 2
Mr H’s shares held 2
Ms H’s shares held 2
Mr and Ms D – original shares held 2
Total shares allegedly issued 32
22.The shareholding would then be:-
The husband –original shares 2
The husband – shares allocated (less 10) 10
The wife –original shares 2
The wife – shares allocated (less 1) 1
Mr and Ms H new shares 11
Mr H’s shares held 2
Ms H’s shares held 2
Mr and Ms D – original shares held 2
Total shares allegedly issued 32
23.The case for Mr and Ms H was that they had the beneficial interest in their four shares and a further entitlement in equity to 11 of the shares issued in March 1997 to the husband and wife giving Mr and Ms H a collective shareholding of 15 out of the 32 shares issued.
24.The wife and Mr and Ms D assert that they were not aware that those shares had been issued and as such allocation of those shares is void. The wife and Mr and Ms D assert that there is no such trust arrangement as alleged by the husband and his parents, Mr and Ms H, and that the four shares were not legitimately issued to Mr and Ms H, and if they were legitimately issued no beneficial interest passed as the shares were security for the loan of $28,000 advanced by Mr and Ms H to K Pty Ltd at that time. There is no issue that K Pty Ltd owes Mr and Ms H $28,000.
25.Mr and Ms H sought an order that the Citibank loan, which is secured over their home to the sum of approximately $69,000, be discharged at the expense of the husband and wife. This aspect of their claim is not contentious. The Citibank loan was taken out in about 1991 to provide funds to the husband and/or the wife to reduce or discharge the mortgage over another property owned by them. This enabled the husband and wife to contribute capital to K Pty Ltd by way of a partial property exchange. It is not contentious that out of the husband and wife’s equity from the wind-up of K Pty Ltd, the Citibank loan should be paid and the husband and wife should indemnify Mr and Ms H in respect of that Citibank loan. Mr and Ms D have no concerns about this aspect of the orders. Accordingly, that order will be made.
26.In 1993, the husband and wife acquired their home at S Street, Suburb E. In 1995 the husband and wife executed a second mortgage over S Street, such mortgage was in favour of Mr and Ms H who allege a loan of $187,000. It is not in issue that no money was paid to the husband and wife by Mr and Ms H. The mortgage was further security for the Citibank loan. In 1995 the first ‘security’ mortgage was discharged and a new ‘security’ mortgage was put in place in the sum of $100,000. Once again, no money was actually paid by Mr and Ms H to the husband and wife. However, Mr and Ms H seek an order that the husband and wife repay them the mortgage plus compound interest. Having read the exhibits and heard the evidence, I am satisfied that these mortgages were simply executed as security for the Citibank loan and once that loan is repaid Mr and Ms H will be required to discharge the mortgage over the former matrimonial home. There is no debt to repay but for the repayment to Citibank in respect if its loan.
27.In the early 1990’s the husband, wife and their then children resided at the home of Mr and Ms H for approximately two and a half years. In addition Mr and Ms H claim they cared for the husband and wife’s children from time to time. Mr and Ms H claim an amount of $86,800 for rent and child minding services provided by them, plus accrued interest, calculated using the published monthly Reserve Bank accepted ninety day bill rates.
28.Mr and Ms H seek an order for costs. In that regard Mr and Ms H had legal advisors assist them prior to the hearing but were unrepresented during the course of the hearing. As costs will be a contentious issue for all parties, including the interveners, I do not intend to determine the question of costs until after these reasons are delivered and orders made.
claims by mr and ms d
29.Mr and Ms D are the wife’s sister and brother-in-law. They claim a significant interest in K Pty Ltd. They were given leave to intervene pursuant to s 92 of the Family Law Act 1975 (Cth) and as such are parties to these proceedings.
30.Mr and Ms D submit that the Court has jurisdiction to make the orders they seek pursuant to s 1337C(1) of the Corporations Act, which provides that the Family Court has jurisdiction in civil matters arising under the Corporations legislation.
31.I am satisfied that this Court has jurisdiction to make the orders sought pursuant to the accrued jurisdiction of the Family Court. The question of the Family Court’s jurisdiction was considered in Warby v Warby (2002) FLC 93-091, where the Court held:-
79.… the Family Court of Australia is not restricted to the determination of a family law claim or proceeding; it may exercise accrued jurisdiction to determine the non-federal aspects of a justiciable controversy of which the family law claim or cause of actions arose forms a part. The factual circumstances of the case will determine whether the jurisdiction arises and whether it is appropriate to exercise the jurisdiction…
…
90.… the relevant indicia, criteria, factors and considerations [to be taken into account in determining whether the Family Court will exercise its accrued jurisdiction] are as follows:
1. what the parties have done;
2. the relationships between or among them;
3. the laws which attach rights or liabilities to their conduct and relationships;
4. whether the claims are part of a single justiciable controversy and in determining that question whether the claims are “attached” and not “severable” or “disparate”; and
5. whether the claims are non-severable from a matrimonial cause and arise out of a common sub-stratum of facts.
91. We consider that a court's assessment of these matters will allow it to determine whether it should exercise its accrued jurisdiction. As the authorities indicate, a rigid filter is difficult to define without close inspection of the particular facts and we would not wish to create an exhaustive definition which must be applied beyond the circumstances posited in this case.
92. So far as the present agreed factual situation is concerned, we are satisfied that the accrued jurisdiction is attracted and prima facie it is appropriate for the Family Court of Australia to exercise such jurisdiction.
93.In the present case there is a single property that is central to the parties’ controversy. The Family Court cannot determine and settle the property of the parties without determining the relative beneficial interests of the parties to the marriage and the wife’s father, and that the Family Court of Australia could then determine the family law dispute between the parties to the marriage. It is enough to say that even taking the narrow view of accrued jurisdiction represented by Wilson J’s judgment in Philip Morris, in this case “the federal question could not be resolved without the determination of the non-federal question”. The Family Court of Australia must ascertain as a first step the property pool of the parties available for distribution.
32.I note that the above considerations are derived from the High Court in ASIC v Edensor Nominees Pty Ltd (2001) 204 CLR 559. It was made clear in Bergman & Bergman (2009) FLC 93-395 (Bryant CJ, Finn, Warnick JJ) at 83,311, paragraphs 91 and 92 of Warby (supra) is not an complete statement of the law in relation to accrued jurisdiction, in that:-
We observe here that it must now be accepted that once it is determined that accrued jurisdiction is available in a particular matter there is, at least as a general rule, no discretion not to exercise such jurisdiction (ASIC v Edensor Nominees Pty Ltd (2001) 204 CLR 559; Houghton & Ors v Arms (2006) 225 CLR 553).[1]
[1] Bergman & Bergman (2009) FLC 93-395 (Bryant CJ, Finn, Warnick JJ) at 83,311.
33.The complex facts and the complex interaction of the family arrangements in the circumstances of this case, which I refer to in these reasons, are such that there is clearly a common sub-stratum of facts and it is not feasible for them to be determined separately, they all ought to be determined in one proceeding, and I have done so. They are part of a single justiciable controversy. In this regard, the comments of Coleman J in the Full Court decision of Puddy & Grossvard and Anor (2010) FLC 93-432:
63. To the extent that, at least inferentially, the trial judge relied upon the Court's accrued jurisdiction as the basis upon which the liquidator's claim could be entertained, nothing to which this Court has been referred persuades me that so doing was erroneous. As earlier noted, the “first step” in determining the property settlement proceedings before her required the trial judge to determine the property of the parties to the marriage. So doing involved identifying and quantifying the parties’ assets and liabilities. It could not be successfully asserted that the liquidator's claim lacked the requisite justiciable connection with the proceedings before the trial judge. Indeed, so far as the determination of the property of the parties was concerned, that was the most significant issue, and was not severable or disparate from the property settlement proceedings between the husband and wife.
34.Having had regard to the evidence and the submissions on the law I am satisfied, as I said, that I have accrued jurisdiction. The question is whether in all the factual circumstances Mr and Ms D have an actionable claim. Mr and Ms D raised a significant number of issues in their affidavits, their pleadings and submissions.
35.The first of those was the issue of 22 shares to the husband and four shares to Mr and Ms H in March 1997. Mr and Ms D seek to have that share issue declared void and set aside pursuant to s 175 of the Corporations Act.
36.In March 1997, Mr and Ms H were appointed directors of K Pty Ltd. Mr and Ms D seek a declaration that their appointment be declared void and set aside.
37.The consequence of the Court making those declarations would mean that of the six shares in K Pty Ltd, the husband and wife would each hold two shares, and Mr and Ms D would each hold one share.
38.Mr and Ms D seek a number of other declarations, namely :-
·They are owed $6,000 in respect of a loan made to K Pty Ltd in around 1991.
·K Pty Ltd owes Mr and Ms H $28,000 in respect of the loan entered into in March 1997 (this aspect is not contentious).
·The husband repay to K Pty Ltd money which Mr and Ms D submit the husband has and improperly (either directly or indirectly) had and received from K Pty Ltd, including:-
(i)$114,111.80 in respect of husband’s legal costs;
(ii)$208,276.34 in respect of the Citibank loan repayments made by C Pty Ltd from June 1991 to June 2008,[2]
(iii)$57,501.30 in respect of a tax liability of C Pty Ltd paid by funds August 2009; and
(iv)$63,834.20 in respect of other payments made to bank accounts controlled by the husband.
[2] As the findings are that most of the repayments on the Challenge Bank loan to Mr and Ms D were paid by K Pty Ltd (from 1991 to 1997) it follows that the interest repayments on the Citibank loans ought to be regarded as a legitimate expense of K Pty Ltd from 1991 to 31 March 1997. From that time on it was the responsibility of the husband, wife or their alter egos.
39.Mr and Ms D also claim that K Pty Ltd is entitled to a distribution of $407,057 from the H Family Trust and that C Pty Ltd as trustee ought to be ordered to make that distribution.
40.Consequently Mr and Ms D seek an order that Mr L, of Company F, be appointed pursuant to s 472 of the Corporations Act as liquidator of K Pty Ltd subject to the condition of appointment as agreed and as set out in the liquidator’s consent.
41.They seek further orders that:-
·the liquidator is directed to undertake and investigate and take into account monies (other than monies referred to earlier in these reasons) received by the husband, or related entities of the husband, from K Pty Ltd and report back to the Court in relation to findings in this regard prior to any distribution made to the husband or the wife in the capacity as members.
·The parties to these proceedings be restrained from submitting any proof of debt in the winding up of K Pty Ltd other than those specifically referred to in the orders that they propose.
·Mr and Ms D seek a number of mechanical orders.
the wife’s claim
42.The wife’s case in respect of K Pty Ltd is similar to that of Mr and Ms D. The only difference from the wife’s point of view is the treatment of some of the claims by Mr and Ms D that the trustee of the Family Trust pays back $407,057 to K Pty Ltd.
43.Counsel for the wife submitted that once the pool of assets has been identified, the wife’s contribution ought to be assessed at 55 per cent on the basis that the contributions of the husband and wife up to separation were equal, but since that time her contributions have been greater than his, as a consequence of the husband’s exclusive use of funds and other expenses, including not paying a tax debt incurred prior to separation. The wife submits that as a consequence of the differential in earning capacity, there ought to be a 15 per cent adjustment pursuant to s 75(2). The overall effect of the orders sought by the wife is that she would receive 70 per cent and the husband would receive thirty per cent of the matrimonial property pool.
the husband’s claim
44.The husband was represented at the commencement of the hearing and prior to the hearing, however, during the course of the proceedings he terminated the retainer of his then solicitor.
45.The solicitor for the husband initially submitted that Mr and Ms H had an interest in K Pty Ltd to the extent of about 47 per cent, being the four shares that they allegedly acquired in 1997 and the 11 shares to which he said they were entitled pursuant to the 1997 agreement. He submitted that Mr and Ms H’s shareholdings had been reduced to two out of 32 shares by virtue of their failure to take up an option to acquire a further eight shares in March 1997. He submitted that although Mr and Ms D had paid $45,000, they needed to pay an alleged debt of $73,000 and additional capital of $57,000. The husband’s solicitor submitted that if that had occurred they would have been allocated a further eight shares giving them a 25 per cent equity in K Pty Ltd. He submitted that the $28,000 provided by Mr and Ms H in March 1997 was not a loan but equity. This was inconsistent with the later evidence of the husband, at least at some levels.
46.The husband claimed that he entered into a number of agreements with K Pty Ltd, the wife, Mr and Ms D and Mr and Ms H.
47.The first of those agreements was that on the winding up of K Pty Ltd the husband would be paid a “ten percent greater share of the net value of [K Pty Ltd] because of his entrepreneurial effort or skill”.
48.The second agreement, according to the husband, was that he is entitled to a fee of five per cent of the gross annual rent of the factory each year for “services rendered” as the administrator of K Pty Ltd, pursuant to an agreement made on 27 July 1990 between himself, the wife and Mr and Ms D. The husband has, from time to time, taken these funds. The wife and Mr and Ms D deny that such an agreement existed. The husband sought orders that K Pty Ltd pay these fees to him. Or a declaration that he is entitled to them.
49.The husband joins with his parents in terms of the equity in the four shares allegedly allocated to them in March 1997 and that he and the wife hold 11 of their shares in some form of trust for Mr and Ms H.
50.The husband seeks the following orders:-[3]
[3] Minute of Proposed Orders sought by the husband filed the 28 April 2011.
1.That the shareholdings held by all parties in [K Pty Ltd] remain the same as they are currently shown on the ASIC register, save that the [husband] transfer 11 of the 22 shares held by him to [Mr and Ms H], and save that 2 of the shares held by the [husband] be transferred to the [wife].
2.That the subsequent total shareholding of 6 shares owned by the [wife] are purchased by the [husband], each at a price equal to 1/32nd of the net worth of [K Pty Ltd] as calculated by its balance sheet as at 5/5/2011, less an amount calculated as being due under Capital Gains Tax laws by an independent auditor.
3.That all parties are prevented from further litigation with respect to [K Pty Ltd] shares.
4.That the [K Pty Ltd] shares of all parties other than the [wife] are retained until such time as a willing buyer and willing seller agree on the sale of any shares in accordance with the [K Pty Ltd] Memorandum and Articles of Association.
5.That [K Pty Ltd] is required to distribute all future profits in proportion to the ASIC registered shareholdings (after all share transfers have been finalised) on an annual basis.
6.That [K Pty Ltd] is required to pay fees for property management and administration services rendered by the [husband] as per the [husband's] claim of 5% of gross annual rent (plus GST) since it began renting the property until 5/5/2011 as stated in the [husband’s] Affidavit dated 23/11/2010 (or by other settlement terms agreed with the [K Pty Ltd] shareholders).
7.That [K Pty Ltd] is required to pay 10% of the total net value of [K Pty Ltd] (as Calculated from the balance sheet as at 5/5/2011 by the independent auditor) to the [husband] for entrepreneurial effort as per the [husband's] claim stated in the [husband’s] Affidavit dated 23/11/2010 (or by other settlement terms agreed with the [K Pty Ltd] shareholders).
8.That an independent audit is conducted of the bank statements of all parties (including relevant companies) to ascertain the accurate loan account and inter-party debt situation prior to the final assessment of the asset pool of the [husband] and [wife], with the cost of such audit to be borne equally by the [husband] and [wife].
9.That an updated property valuation is provided by an independent valuation expert agreed upon by the parties for the properties at [S Street, Suburb E] and [Property at J], prior to the final assessment of the asset pool of the [husband] and [wife], with the cost of such audit to be borne equally by the [husband] and [wife].
10.That after completion of the independent audit, [K Pty Ltd] is required to repay the balance of outstanding loans plus compounded interest calculated at the applicable Reserve Bank of Australia published 90-day Bank Bill Rates to the [husband] and [C] Pty. Ltd.
11.That [K Pty Ltd] is required to settle outstanding loan accounts and debts with all creditors and debtors, and that account is taken of the rental arrears, penalty interest and legal recovery costs owed to [K Pty Ltd] by [A] Pty. Ltd. who are now in voluntary administration[4].
[4] Having regard to the orders I propose, that being appointing a liquidator – he can consider the claim against [A Pty Ltd].
12.That [Mr and Ms H] are paid their claim for outstanding rent and child-minding fees as stated in the [husband’s] Affidavit dated 23/11/2010 from the asset pool of the [husband] and [wife] (unless an alternative agreed settlement is reached).
13.That the house at [S Street] is sold by public auction and the 1st and 2nd Mortgages[5] are discharged after agreed settlement of the Mortgagees' claims (unless the [husband] and [wife] reach agreement on an alterative arrangement in conjunction with the Mortgagees), and that the remaining net proceeds be distributed equally to the [husband] and [wife].
[5] The first and second mortgages are mortgages […]1M and […9L] both to St George Bank – one being a housing loan mortgage and the other being collateral security for the loans made by that bank to [K Pty Ltd] in 1997. See wife’s Tender Book, Volume at 1 page 146.
14.That the combined superannuation of the [husband] and [wife] be shared equally.
15.That the [wife’s] personal debt of $3,060.00 is repaid to [K Pty Ltd] from the wife’s share of the proceeds of the [S Street] sale.
16.That the [wife] pay to the [husband] an amount equal to half of the total outstanding Citibank loan registered under mortgage on the property at [I Street, Suburb P] from her share of the asset pool of the Applicant and Respondent.
17.That the [husband] discharge the mortgage on the property at [I Street, Suburb P].
18.That the [husband] and [wife] share equally the combined total of their legal costs and pay the costs from the asset pool of the [husband] and [wife].
19.That the [husband] pays to the [wife] an amount of $4,250 on account of the [husband] retaining the Ford [motor vehicle] and [the wife] her car.
20.That the [husband] and [wife] be solely entitled (to the exclusion of each other) to property in the possession of such party as at the date of these Orders (the furniture, personal possessions and like chattels in each of the other parties' residences).
21.That the remaining asset pool of the [husband] and [wife] is divided equally after all combined tax and other liabilities (including the Applicant's debt to Citibank) and legal costs are deducted. If the asset pool is insufficient to discharge all liabilities, the [husband] and [wife] are to share the remaining liabilities equally, and be individually responsible for settlement of their own liabilities.
22.That [Mr and Ms D] pay their own legal costs plus those of [Mr and Ms H].
23.That [Mr and Ms D] pay to [K Pty Ltd] their outstanding legal debt of $2,500 and interest payments remaining unpaid prior to the St. George Bank refinancing on 1/4/1997 (plus compounded interest calculated at the applicable Reserve Bank of Australia published 90-day Bank Bill Rates).
24.That the [wife] is prevented from lodging future spousal maintenance claims.
25.That the [wife] is ordered to return the [K Pty Ltd] minutes of meetings book and all other [K Pty Ltd] material she removed from the office of [K Pty Ltd] plus all personal notebook and diary entries belonging to the [husband].
26.That the [wife] resigns as director of [K Pty Ltd].
27.That the [wife] resigns as director of [C] Pty. Ltd. and transfers her 6 shares in that company to the [husband] for $l each.
28.That the [wife] does all things necessary to cease to be a member of the [CH] Family Trust.
29.That the existing restrictions on the [husband] from accessing the funds of [K Pty Ltd] be removed.
30.That any caveat on the [Property at J] be removed.
31.That all outstanding Orders in relation to this matter be rescinded.
32.That the costs of all past valuation reports, medication [sic] and conciliation costs and [W Accounting Firm] reports, which have been bourn [sic] unilaterally by the [husband] be born [sic] equally by the [husband] and [wife].
51.There are also a number of orders, sought by the husband, in respect of K Pty Ltd[6], which I have referred to earlier.
[6] Minute of Proposed Orders sought by the husband filed 28 April 2011.
52.At the commencement or during the hearing the husband submitted that the non superannuation property should be divided as to 60 per cent to him and 40 per cent to the wife. In the orders the husband submits that the wife take 4/32nds or about 12.5 per cent of the equity in K Pty Ltd and the parties share equally in the proceeds of sale of the S Street home, other assets and liabilities.
53.The husband sought an updated valuation of the land which is the primary asset of K Pty Ltd. I do not propose to adopt that course as part of the role of the liquidator will be to sell the property. There will be a sale of that property by the liquidator and that will determine its precise market value.
54.The husband also sought to have the former matrimonial home revalued. He submitted that this was because the agreed valuation from 2010 was somewhat old, and its value had increased. He did not call the real estate valuer nor did he adduce evidence of the alleged increase in value. At the start of the hearing the husband, through his then solicitor, asserted that the value of the former matrimonial home was $750,000. During his submissions the husband sought to file and rely upon a financial statement filed 28 April 2011, which material I allowed into evidence. In that statement the husband deposed that his fifty per cent interest in the former matrimonial home was valued at $375,000, thus he explicitly asserted its full value was $750,000. Having regard to that evidence and those agreements, concessions and evidence, I do not propose to order a revaluation of that property. I will treat its value as $750,000.
55.The husband sought an order that the former matrimonial home be sold by public auction and that the mortgage to his parents be discharged. There are a number of factors regarding this which I will deal with later, including the status of the mortgage of his parents. However, the home has been occupied by the wife and she seeks to retain it for the use of herself and at least one of the parties’ adult children. The husband clearly does not want the home. There is little reason to sell it and its value was not in issue until the end of the hearing and this was by way of submission. His desire for the sale seems to arise out of hope that the sale price may be greater than the valuation. It is possible the sale could achieve more or less. It is inevitable that there will be cost on the sale. Exercising the broad discretion that the Court has and having regard to all of the relevant matters discussed in these reasons, I will not order its sale.
56.The husband sought distribution of the combined superannuation between the parties equally. This accords with counsel for the wife’s approach in this regard.
57.The husband sought that the wife’s alleged personal debt of $3,060 be repaid to K Pty Ltd from her share of the sale of the property. The issue of that debt seems to me to be a matter for the liquidator, subject to my supervision as contained in the orders.
58.The husband also sought that the cost of all past valuation reports, mediation and conciliation costs and W Accounting Firm reports, which he says has been borne unilaterally him, be borne equally by he and the wife. This, together with the other costs applications, will be dealt with by me when the costs issues are argued after these reasons have been delivered.
the proceedings
59.The husband was represented by Mr Kenworthy for most of the first seven days of the hearing. Shortly after the luncheon break on Friday 11 March 2011, during his cross-examination of the wife, Mr Kenworthy announced his instructions had been terminated.
60.The evidence taking in the proceedings were suspended and enquiries were made of Mr Kenworthy as to whether this was a temporary or a permanent situation. Mr Kenworthy said his instructions had been terminated. He sought leave to withdraw.
61.I made enquires of the husband direct as to whether that was the case and he said it was. The husband said that he would undertake the completion of the cross-examination of the wife. I sought the views of counsel for Mr and Ms D and counsel for the wife in relation to whether I should give such leave.
62.To enable the parties and their representatives to consider their position I stood the matter down for a short period of time. Upon my return counsel for the wife, counsel for Mr and Ms D and Mr H raised no objection to the change and I gave leave for Mr Kenworthy to withdraw and allowed the husband to continue cross-examination.
63.Doing the best I could, I explained the process to the husband.
64.Mr and Ms H were not represented and needed interpreters. The Court provided interpreters for each of them. I explained to Mr and Ms H my role as judge and told them of the assistance I could provide in terms of informing them of the process. I ensured that they had pens and paper and told them if they had any questions that they ought to ask me them during the course of the hearing. That invitation was taken up on numerous occasions.
65.The final submissions in respect of this hearing were made on 5 May 2011. These reasons are being delivered about five months from that date.
66.The general approach, in Australian Courts of record, is that reserved judgments should be delivered with a period of three months. As such the parties to these proceedings are entitled to know why these reasons took the time they did.
67.These proceedings involved six parties all of whom were related in one form or another. There was a high degree of conflict between the parties and a broad range of issues, many of which were complex. The factual history ranged over a period of almost twenty five years, and there were serious factual contests from as long ago as 1990, 1991 and 1997.
68.The parties relied upon affidavits and voluminous documentation. The wife and Mr and Ms D relied upon five ring binders of documents and the husband, and to a lesser extent Mr and Ms H, relied upon seven ring binders of documents.[7].
[7] These binders were not originally tendered in evidence although many parts of them were individually tendered as evidence. Parts of the material in those ring binders were referred to and were not part of existing exhibits, were buried deep in affidavits or were referred to in an “MFI 1”. As such during the period that the reasons were reserved I asked my legal associate to contact the parties and ascertain their views to those ring binders being tendered as evidence. All parties agreed to this course. The wife’s 5 Volume Tender Books are Exhibit ‘W14’ and the husband’s 7 Volume Tender Books are Exhibit ‘H23’.
69.The hearing was constituted by ten days of evidence and submissions. Mr and Ms H acted for themselves as they were unrepresented during the hearing. In addition both sought and were provided with interpreters. The husband terminated the retainer of his solicitor advocate during the course of the hearing and acted for himself for the remainder of the hearing.
70.As the hearing progressed I made notes and commenced preparing an outline of the structure of these reasons, lists of facts agreed and in issue, preliminary thoughts and observations of witnesses. The parties provided case outlines, summaries of final submissions and detailed oral submissions.
71.In reading, researching, reflecting and writing these reasons, I spent about two days for each day of hearing. I have applied in excess of to 20 days to put these reasons into a form to be delivered. In keeping with the practice of many judicial officers, a proportion of these days were public holidays, leave days and weekends.
72.In addition, whilst this determination was important there remained a need to hear and determine other cases and as such this time needed to be spent in the context of a continuing judicial workload.
73.As such the completion of these reasons has been somewhat longer than I would initially have envisaged.
the evidence, discussion and conclusion
The husband
74.The husband gave evidence in accordance with his affidavits filed the 7 July 2009 and the 23 November 2010. That later affidavit had been the subject of significant strike outs in interlocutory proceedings. Only those parts of the affidavit which had not been struck out were read into evidence.
75.The evidence of the husband was unpersuasive. I have referred to many instances in these reason and others are contained in the transcripts of evidence. As such I do not intend to extract every single and unsatisfactory feature of the husband’s evidence which underlies the impression I have formed of him.
76.My overall impression is that whenever the husband perceived that a fair and direct answer to a question might not be in his interest he resorted to denial, non-recollection or evasion. Frequently, when the substance of the question was obvious, but the language was arguably ambiguous, the husband would adopt a literal approach so that his answer was unhelpful. When giving evidence, the husband would often answer a question by providing his own question and answering that, instead of answering the question which he had been asked. The husband’s answers would also often go outside the scope of the questions. For the reasons I have articulated elsewhere the husband had reason to be defensive.
77.The husband tried to assert that his wife understood commerce and business because she worked as an assistant to a book-keeper and had done processing and data entry. The reality was that the wife acquiesced to the husband’s business decisions and did what was asked of her because she trusted him and at times feared him. That trust continued until their separation in 2008. If the wife expressed a view which differed from the husband’s, she was subjected to at least verbal abuse and in early times, physical abuse.
78.Mr and Ms D also trusted the husband. They were unsophisticated investors and accepted that the husband would look after their interests. They had no understanding of corporate structures, the meaning of directors, the roles of shareholders or the roles of officers in a public company. The husband tried to assert that because Mr D worked as a supervisor in a food services industry he had financial and business skills. This was nonsense on the part of the husband. The reality of the situation is encapsulated in the evidence of Mr M (K Pty Ltd’s accountant), who observed Mr D’s surprise and shock upon Mr M confirming that Mr and Ms D’s shareholding in K Pty Ltd was about six per cent and not one-third.
79.At some point during cross-examination the husband endeavoured to say that his parents trusted him to act on their behalf (of that I am satisfied) and that Mr and Ms D trusted the wife and let her act on their behalf and in their interests. I do not accept that later suggestion insofar as it relates to Mr and Ms D’s reliance upon the wife’s so called business skills. Mr and Ms D, the wife and Mr and Ms H all trusted and relied upon the husband.
80.Throughout the relevant period it can be seen that the husband created a mammoth liability for K Pty Ltd in his favour by adding interest on the capital contribution that he and his wife made to K Pty Ltd. The husband was not entitled to do this.
81.After separation the husband used the parties’ savings for his own purposes, including legal costs and his living expenses to the exclusion of the wife. After separation in 2008 the husband paid his tax liability from family saving, but declined to pay a similar tax liability of the wife. The husband had available more than sufficient joint funds to meet this debt and when pressed offered an explanation that the wife had money hidden away. That assertion was made in the absence of evidence that the wife had such funds. The husband’s evidence in this regard was fanciful and disingenuous.
82.In August 2008 the wife was living in Melbourne with at least one of their children and was seeking financial support from the husband. The matrimonial house was let at that time and the lease was due to expire. The husband unilaterally gave the tenants a new lease, without reference to the wife, instead of making it available to her. This was a vindictive act on his part.
83.The husband has engaged high cost litigation, having spent up to and perhaps beyond $300,000 in legal fees. He funded part of these costs by use of the parties’ savings and also used funds from K Pty Ltd.
84.The husband parents, Mr and Ms H, participated in this litigation. The husband assisted his parents in the preparation of some of their documents and in payment of some, if not all, of their legal costs.
85.In about March 1997 the husband, who expressed a view at that time that the wife may no longer be trusted by him, created or caused to create documents to give his parents a substantial interest in K Pty Ltd. The consideration given to his parents, he says was substantial. What he essentially says is that his parents loaned K Pty Ltd $28,000 and that as a consequence (he says) that his wife and Mr and Ms D agreed:-
· To repay the loan of $28,000 and pay interest on that sum. This fact is not contentious, and accords with the written agreement dated 26 March 1997. There also is evidence that the interest has been paid over many years.
· He further claims that his parents would also be given a beneficial interest in four shares in K Pty Ltd (to be seen in context – double the shareholding of Mr and Ms D). This is despite business records from Centrelink showing that the husband and his parents asserted that the shares would be transferred back and implicitly that Mr and Ms H had no equity in the shares.
· That the husband would hold 11of his 22 shares and his wife hold one of her four shares in some form of undocumented trust or agreement, so that the benefit of those shares would at some time vest in his parents. Such a vesting and interest to be in a form as would make it unnecessary for the husband or his parents to inform Centrelink about such alleged rights.
· In contrast, that at the same time the husband’s brother Mr NH lent K Pty Ltd $29,000 on the basis that that loan would accrue interest and would be promptly repaid. The fact of the loan and its prompt repayment is not in issue. The difference in the asserted consideration between the loans is stark.
· That Mr and Ms D after paying $45,000, borrowing a further sum of about $100,000 and providing director’s guarantees would have their shareholding watered down from about 33 per cent to about 6 per cent.
· That the shareholding of the husband and wife would be significantly increased in terms of numbers of shares (albeit that their shareholding was effectively reduced from about 66 per cent to about 47 per cent) in circumstances where they gave director’s guarantees and paid little or no money.
86.The husband’s assertions of what and how this transaction came about and its circumstances, beggars belief. I do not accept his evidence about the circumstances in and about the share issue in 1997 nor do I accept the evidence of his parents in that regard. I deal with this further elsewhere in these reasons.
87.The husband was not frank with the Court on a number of occasions. One example of this behaviour can be seen in a series of affidavits which he filed in 2009 in relation to the wife occupying the former matrimonial home. The husband characterised his employment status as “retired” and asserted that he could not work because of the emotional and psychological issues arising from the marriage breakdown. The wife asserted in her affidavit in response that the husband was not retired and was likely earning income. In a subsequent affidavit the husband did not disclose his income and once again said that he was retired, despite the fact that he was working and earning a substantial income. During cross-examination, the husband explained that this lack of disclosure was an error made by his solicitor. I do not accept that explanation as it was clear that the husband took positive steps not to disclose his income. The husband referred to many aspects of the wife’s affidavit in paragraph form, but pointedly, did not respond to the paragraph in which the wife raised the question of his income.
88.Another example of the husband’s attitude towards these proceedings can be gleaned from his conduct when he was asked by the wife to provide her with financial information about the parties’ shareholdings. The wife’s solicitors sought particulars from the husband’s solicitors by letter dated 15 September 2008,[8] including information in relation to the allotment of shares in K Pty Ltd and other particulars. The husband’s solicitors responded by way of a question. That is reflective of the husband’s approach to giving oral evidence.
[8] Annexure I to affidavit of wife filed the 22 February 2011.
89.Counsel for the wife submitted that the husband was an entirely unreliable and wilfully dishonest witness and provided a number of examples of this from the husband’s evidence. Counsel for the wife submitted that the business records of K Pty Ltd could not be regarded as reliable evidence of anything including where records or evidence would (ordinarily) constitute an admission against interest.
90.As to that evidence counsel for the wife submitted on the question of the husband’s evidence:-[9]
[9] Wife’s Summary of Final Submissions filed the 29 April 2011.
6.The Court will find that the husband is an entirely unreliable witness and a wilfully dishonest witness. So unreliable and dishonest is the husband that even business records (the financial statements and loan accounts of [K Pty Ltd]) where reliant upon the husband cannot be regarded as reliable evidence of anything including where records or evidence would (ordinarily) constitute an admission against interest.
7.On his own account the husband is someone who will intentionally deceive another for a financial purpose. See his evidence when cross examined about annexure G to the wife’s affidavit (the email to [Mr Q] of St George Bank of 15 Nov 2005 also page 99.1 of the tender book).
8.When confronted with the reality that the email directly contradicted his account of dealing with the [Mr and Ms D] Interveners he told the Court, “I lied to the bank.
9.See also his answer in cross examination when presented with his diary entry contradicting his moment’s earlier sworn evidence and asked which was the lie, “I’ll go with the writing”.
10.Nor can the husband be trusted in smaller details, either contemporaneously or when recounting past events. For example despite the $28,000 loan agreement (TB 704 vol 2) of 28 March 1997 and the brothers $29,000 loan agreement (TB 400 vol 2) of 26 March 1997 i.e. real transactions that actually occurred, in a letter purporting to be written on 31 March 1997 (Annexure 76 to the husband’s affidavit & page 629 of the husband’s tender book) the husband when (falsely) advising his accountant of share changes omits reference to the $28,000 and $29,000 and instead has an incorrect “ [Mr & Ms H]- $60,000 for 1 year (principal and interest)”.
11.The husband’s statements to the Court in WA (see W3) on 7 Aug 2008 that, “I will have no income” and “It’s not about walking away from $350,000 a year job..”, were false. The husband did simply “walk away” but then under the cover of that evidence resumed employment in Feb 2009 (see W7 his resume of employment) but failed to disclose same to the wife (see the careful avoidance of disclosure of the fact that he was then working in his 12 May 2009 affidavit responding to the wife’s affidavit handed up in bundle).
12.The husband’s demeanour as a witness was the opposite of a frank and truthful witness. An intelligent, educated and articulate man, he chose, unless strongly and repeatedly pressed, not to answer the question asked but to obfuscate and state his case as it was at time of answering the question. On a topic of his choosing e.g. his current employment applications he refused to answer at all because that suited him at the time.
13.The husband’s position on anything at any particular time was always shifting and was multi positional and simultaneously held mutually inconsistent positions to such an extent that it was impossible to discern just what was his evidence or his case at any particular time save that if any document was consistent with the wife or [Mr and Ms D] Interveners case he disagreed with it. He made a false allegation of fabrication ([Ms D] notes D10), but then withdrew it.
14.The husband’s different (and each false) versions of key matters include the following:
(a)The vague position on 7 August 2008 [original emphasis] to the Court in WA:- Mr Kenworthy: “No, they don’t your Honour. I’m not sure of the actual interest, but it’s certainly not two thirds. [The husband’s] father is a you know substantial shareholder or owner [original emphasis] in the factory situation also.”
(b)When expressly asked on 15 sep 2008 (question 12 of annexure I to wife’s affidavit of 21 Feb 2011) for the first time about the shares he chose not to respond but to ask a question (question 8 of the 19 Sep letter annexure J to wife’s affidavit).
(c)When ordered to file an affidavit explaining the [K Pty Ltd] share position the husband swore in his affidavit of 7 July 2009 (relied upon at hearing) with the on trust version, that pursuant to a “verbal contract.. between my parents and the wife and I whereby the wife and I would each hold a share in our names on trust [original emphasis] for my parents…”, see paragraphs 18, 33, 34 (b) (i) but simultaneously contradicted by para 35 (only a promise when it comes to DSS).
(d)The trial affidavit (various) versions (and oral evidence) that;
·recant the “on trust” version as “not my parents words (nor mine)” at point 43 of page 81
·but adds the 5% claim, para 204 and
·the 10% claim, para 209
·and the its only tattslotto “if”, only a promise version, may get wealthy in 20 yrs paras 194, 195 and
·the oral agreement (contract) was made between “[Mr H, Ms H] and me”
·and para 173, “My two shares were promised to my parents under the above oral agreement”.
(e)The version contained in the particulars delivered during the hearing.
(f)The annual versions and explanations to DSS upon specific request to the husband;
·26.3.2001 (after 14 hours preparation) page 757 to 771 of W2 parents owed $28,000 and 2 shares as security (only).
·1.7.2003 page 743, “$28,000…shares will be taken up by other shareholders once the loan is paid out”;
·29.06.04 page 738, the same “$28,000….”
·30.06.2005 page 737, the same “$28,000….”
·10.7.2006 page 734, the same “$28,000….”
·2.08.2007 page 731, the same “$28,000….”
·6.08.2008 page 727, the same “$28,000….”
·15.03.2009, after the 7.8.2008 W.A. statement the same “$28,000….”;
·12.04.10 (incorrectly dated 2009), and while the 7 July 2009 affidavit was being relied upon to this Court, the same “$28,000….”
(g)The cross examination version that each of the shares as security and taken up by other shareholders DSS statements actually meant “purchased by the other shareholders for substantial and 1/3 of [K Pty Ltd] value” hence no lie to DSS.
91.Counsel for Mr and Ms D was equally disparaging of the husband’s evidence, she set out:-
11. The husband has throughout his affidavit material and throughout his viva voce evidence, been untruthful in relation to critical matters of disputed fact.
12.Examples are as follows;
·The Husband told the Court that he had paid all of his legal costs from his own funds, but was later forced to admit that he had paid some of his legal costs from Company funds.
·On his own admission, the Husband lied to St George bank in 2005 in order to obtain further funds.[10]
[10] At Annexure G of the wife’s affidavit filed on the 28 February 2011.
·The Husband admits that St George Bank was misled as to the directorship of the Company, on the first loan occasion inadvertently, and the second and third by deception, as agreed by all directors. All other directors deny that they agreed to this.
·The Husband stated that he had discussed the Company’s refinancing arrangements with St George Bank in October and December 1997 with his father. His father directly contradicted that assertion.
·The Husband stated that he had not told his father that the cause of the financial crisis of the Company in around 1997 was caused by [Mr and Ms D]. This evidence was directly contradicted by [Mr H].
·[Mr and Ms D] gave evidence that, at the relevant times, they did not have a cheque book. One of the $1,162.12 payments asserted by the Husband to have been made by them (on 27 September 1991) was subject of a dishonoured cheque notation (on 30 October 1991).[11]
[11] Exhibit H19, statement page number 5.
·The Husband admitted that he had wrongly administered and recorded company financial matters, both before and after the 1997 purported share issue.[12]
[12] Exhibit D8 [wife’s Tender Book, Volume 3 at pages 835 to 1118].
·The Husband asserted, throughout his affidavit material, that he and the Wife had personally, via [C Pty Ltd], borne the interest repayments on the money borrowed by the Third and Fourth Interveners pursuant to the Citibank loan, used to fund their initial capital contribution to the Company. But the evidence and affidavit of [Mr M][13] revealed that the Husband had wrongly recorded these interest payments by [C Pty Ltd] as loans advanced to the Company, and had in turn wrongly advanced monies from the Company to repay them.
[13] Exhibit H15.
·The Husband admitted to asking his mother to sign a letter of demand that she could not read.[14]
·On 31 March 1997, the Husband writes a letter to [Mr M] wrongly describing the refinancing.[15]
·On 26 March 1997, the Husband’s brother [Mr NH] loaned $29,000 to the Company[16] (this loan has been repaid by the Company). The evidence is that the Husband first calls his brother to arrange for a loan of $17,000 on 16 March 1997,[17] with a further $12,000 being discussed on 17 March 1997.[18] This contradicts the Husband’s written evidence, at paragraph 311 of the Husband’s trial affidavit, where the Husband deposes that on 18 March 1997 “[Mr and Ms H] advised that they were prepared to put in $57,000 ($28,000 from their own savings) as a loan earning 6% p.a. interest fixed for the term of the loan, plus another $29,000 they would procure from their son [Mr NH]…”. The St George loan renegotiated in October and December 1997, and [Mr and Ms H] did not participate in these negotiations.[19]
·The Husband lied to his employment agent as to the reason he had been recently unemployed.
·The Husband told the Court that a note produced by [Ms D][20] was a “complete fabrication.” The Husband later withdrew that allegation and apologised to [Ms D].
·The Husband falsely put to [Ms D] that her taxation returns contained facts which they did not.
·In order to contradict the [Ms D’s] evidence, the Husband asserted at page 73, point 33 of his trial affidavit, that the Factory had always been let, except for four months in late 2006. The Husband admitted during cross-examination that he was wrong in this regard.
481.The husband gave evidence that he used C Pty Ltd (and another company after separation) as a device for (what he implicitly asserted was) legitimate tax minimisation. He used that structure throughout the marriage except for a period of four months on one occasion and a year on another occasion.
482.As at 21 August 2008 (a number of months after separation) the wife owed $33,948.72 to the Australian Tax Office, being the tax, interest and penalties in respect of income earned in the financial years ending 30 June 2004 to 2006. It was apparently income earned as a result of the family trust. At that time the parties had sufficient money in their joint accounts to pay the whole of that tax liability, as there was approximately $160,000 in those accounts some months earlier. That money was in the husband’s control.
483.As I have said earlier, in relation to the wife’s tax liability, the husband adopted an extraordinary approach. In August 2008 the husband forwarded to the wife her income tax assessment and asked that she pay the tax. It is clear from the wife’s evidence and the husband’s evidence that the husband declined to pay the wife’s tax liability, notwithstanding that it was tax payable on income earned by him and used by both of them in the preceding years. The husband’s explanation for not paying the wife’s tax liability was that he believed that the wife had money “squirreled away”. However, there is no evidence which supports this contention. The evidence of the wife, which I accept, was that prior to separation she earned about $24 per hour, which was generally paid into their joint bank account. At this time the wife was caring for their children, particularly the youngest child, and had an income earning capacity of about $22 per hour. The husband’s income earning capacity was $125 per hour.
484.Since 21 August 2008, penalties and interest have increased the wife’s tax liability to $40,937.93.[166] This figure takes into account the tax refund due to her on 18 September 2009 of $3,453.11, in respect of her income for the financial year ending 30 June 2008, which was applied towards reducing the debt. The wife did not lodge her income tax return for the 2008/2009 financial year or the 2009/2010 financial year because all of the tax refunds arising from that would have been used to offset her outstanding tax debt. As a consequence the wife has lost her entitlement to the Family Tax Benefit.
[166] Exhibit W11.
485.Since this time, the wife has lodged her income tax returns for the 2006/2007, 2008/2009 and 2009/2010 financial years. In 2007 the wife’s income was $25,927 and she was entitled to a tax refund of $876. In 2009 the wife’s income was $20,972 and she was entitled to a tax refund of $2,141. In 2010 the wife’s income was $34,526 and she was entitled to an income tax refund of $2,144. These three tax refunds total approximately $5,161 and have been applied to reduce her tax liability. This money would have otherwise been available to her. With interest and penalties continuing to accrue, the wife’s current tax liability is $36,202.
486.The payments in reduction of her tax debt arising from the 2006/2007 and 2007/2008 tax returns were from money accumulated during the relationship. The payments in respect of the 2008/2009 and 2009/2010 financial years I will treat as post-separation contributions of the wife. Counsel for the wife does not require an add-back of these amounts but wants me to take them into account and I have done so.
487.I had considered requiring each of the parties to contribute equally to the primary tax bill and then require the husband to pay the whole of the penalties. However, exercising the broad discretion I have in relation to property proceedings I will not do so. I will simply order that debt be paid out of the joint assets of the parties. I have had regard to the way that debt was created in dealing with contributions and the other factors.
488.The husband claims a tax liability of $28,062, part of this may be in relation to KX Pty Ltd of $26,421. In any event the husband earned this income post separation and spent that income. I see no reason why this should be allowed against the asset pool. Similarly the husband had $200,000 in his control and I see no reason why the credit card debts, now asserted to be $115,262 should be allowed. The husband had the capacity to pay them and chose not to do so and spent his income and capital in other ways. I do not intend to impose these credit card debts or husband’s tax debts on the wife, in these circumstances.
489.The husband had a capacity to earn between $200,000 a year and $300,000 a year. I am satisfied that the husband simply abandoned his employment to, in his own words, “snooker” the wife. He applied the parties’ savings and incurred new credit card debts for his own benefit when he had the capacity to work, which he displayed when he worked in 2009.
490.The husband asserts in his April 2011 financial statement that he has an asset of $50,089 being legal fees paid on behalf of his parents. I intend to make an order that the husband retain this asset. Having regard to the conflict in these proceeding and the way this asset was created it would not be just to impose this asset or a part of it on the wife. The evidence during the hearing was that the husband paid legal costs of as little as $75,000 and perhaps $83,000 or more to assist Mr and Ms H and yet he claims a debt to him of $50,089. How the difference arose is not clear but that is a matter for the husband and his parents.
491.In terms of the net balance, that will change depending on the enquiries of the liquidator of K Pty Ltd. The precise figures are not known, although in general terms the amounts are relatively clear. The factory has a value of about two million dollars and is unencumbered.[167] There will the costs of the liquidation and the adjustments made as a result of this determination. Two-thirds of the value is $1,333,333. The husband asserts in his financial statement that 34.375 per cent of K Pty Ltd is $460,389, therefore two-thirds on his figures is about $950,000. The total pool for division between the parties is likely to be between $800,000 and $1,100,000. This is to be calculated by the liquidator.
[167] Mr RR was the single expert valuer of this property and valued it on 3 December 2010 at $1,930,000. His report was part of wife’s Tender Books, Volume 1at page 172.
492.In that regard the wife is to retain the home at S Street, subject to the housing loan, her car and personal possessions.
493.The husband is to retain his home contents; his Ford motor vehicle and the legal costs due from his parents. The wife’s tax bill is to be paid out of the parties’ interest in K Pty Ltd and the husband will be liable for his own tax bills, including those in his family trust, and the credit card debt.
contributions
494.In relation to the contributions of the parties, the husband submitted that they should be assessed as being equal. Counsel for the wife submitted that the contributions should be assessed 55 per cent in her favour, having regard to the wife’s greater post separation contributions.
495.This was a long marriage which involved raising three children. The parties’ initial contributions were different, that of the husband being larger than that of the wife. However, in the first few years of the marriage the parties, through their then investment strategy, put themselves in the position where most of their assets were either lost or seriously compromised. I am satisfied that by 1989 they had virtually no assets of any significant value, as was the husband’s evidence.
496.The husband conceded the wife worked hard during the marriage and looked after the children. He was mildly critical of her that she worked part time instead of full time. I am satisfied that the wife contributed significantly throughout the marriage in terms of her part-time work and her role in parenting the parties’ three children, being the primary home maker and carer of the children. In the later years of the marriage the husband was away from home from time to time with his work.
497.I have had regard to the contribution made by the husband’s parents in providing accommodation for the parties and their children. I have also had regard to the husband’s parents facilitating the Citibank loan of initially $187,500 (through the Citibank loan) to enable the investment in K Pty Ltd.
498.I accept the submission made on behalf of counsel for the wife that the contribution and the care of the grandchildren should be given little or no weight. As Justice Kay said in the matter of Aleksovski v Aleksovski (1996) FLC 92-705:-
It seems to me that the extension of the Gosper principle to child-minding by grandparents is problematic. Whilst it is true that the catalyst for the provision of the services is the relationship between parent and child (that is, the grandparent and the parent), frequently the service is provided out of the natural love and affection between parent and grandchild and for the reciprocal benefits that flow back to the care giver in terms of personal satisfaction, relationships and “occupational therapy”.
Absent any direct evidence as to the commercial considerations surrounding the arrangement with the care giving grandparent, in my view, it is generally inappropriate to place any significant weight upon such a contribution.
499.I also note Mullane J’s comments about the proper treatment of child minding by third parties when assessing the parties’ contributions in the first instance judgment of AB v ZB (2003) FLC 93-140:-
274. The wife's parents assisted the parties by minding the children frequently when the wife was working in the office of Macquarie Groupware. But this has not been taken into account under subsec 79(4) as a contribution on behalf of the wife or both parties. The reason is that whereas paragraphs (a) and (b) of the subsection, which deal with contributions to property, specifically include contributions by a person on behalf of one of the parties to the marriage, paragraph (c), which is about contributions to the welfare of members of the family, does not.
500.I have given some weight to the child minding of Mr and Ms H and the parties’ residence in their home in and around 1990.
501.Up to the date of separation I am satisfied that the contributions were equal, having regard to all of those factors. The wife was the primary carer of the three children and this was sometimes in the absence of the husband. The husband was the driving force in the acquisition, maintenance and management of the factory and in its preservation in the mid 1990’s. He clearly worked hard, as did the wife.
502.I have made comments elsewhere about the parties’ post separation contributions, including the husband’s dissipation of the parties’ savings, his failure to pay the tax on the (his) income which had been distributed to the wife, his application of K Pty Ltd’s capital and his own earnings. The husband also walked away from a $300,000 per annum income with the intention of “snookering” the wife. He chose not to work and dissipated the family savings. The husband had the capacity to payout the then credit card debts in 2008 but has in fact allowed that liability to double to well over $100,000.
503.The husband engaged in adversarial litigation which led to this ten day trial, incurring significant legal costs to himself and to his parents. Tendered on behalf of the wife[168] was a statement which showed that the husband (ether directly or indirectly) had paid legal costs between June 2009 and November 2010 of $119,536.71. The evidence was that he paid to Mr Kenworthy, either directly or through his previous employer, a sum of $95,000. He also paid to Mr Kenworthy a sum of $10,000 for the purpose of this hearing.
[168] Exhibit W10.
504.The husband paid or contributed directly or indirectly to his parent’s costs of about $75,000 on his evidence, and $83,000 on his father’s initial evidence.
505.Counsel for the wife asserted that in contrast to the husband, the wife has ‘kept her shoulder to the wheel’ post separation. The wife obtained part-time employment in a receptionist role in October 2008 and currently works three days per week from 8.45am until 4.00pm, two days a week from 8.45am until 1.00pm and works on Saturdays for three and a half to four hours. She earns $22 per hour.
506.Further evidence was adduced in relation to the wife’s post separation tax refunds. These have been applied against the pre-separation tax bill. The amount presently outstanding on her tax is about $36,000.
507.This arose because the wife lodged amended tax returns in recent times and there were refunds due to her in the 2006/2007 tax year of $876.00, the 2008/2009 tax return of $2,141 and the 2009/2010 income tax returns of $2,144 making a total of about $5,162.
508.I treat the post separation tax refunds as post separation contributions.
509.Counsel for the wife does not require an add-back of these amounts but wants me to take them into account and I have done so.
510.The wife also had the overall burden of care of the parties’ daughter, R, in the difficult circumstances brought about by the husband. I accept the evidence of the wife and I am satisfied that the wife’s contributions since separation outweigh that of the husband.
511.Accordingly, in assessing the overall relative contribution, and exercising the broad discretion that I have in that regard, I determine that the relative contributions over the whole of this long relationship as being 55 per cent by the wife’s and 45 per cent by the husband.
OTHER FACTORS
512.The husband is currently aged about 57. The wife is aged about 51.
513.The husband claims some health issues, but has been able to work since separation, and I have significant concerns about his assertions of health being a factor in his ability to work. He has not relied upon any admissible medical evidence to support his assertion that he is unable to work because of his health.
514.The wife’s counsel raises no significant issues about her health.
515.I have made comment elsewhere in these reasons in terms of the husband’s capacity to earn income. The husband asserted he has never earned $300,000 a year and does not have the capacity to do so.
516.At the time the husband and wife separated the husband was employed under a contract with a company in Western Australia. He was paid an hourly rate of about $125. His income was valued at anywhere between $300,000 and $350,000. The husband conceded this in evidence before the Family Court of Western Australia.
517.The husband threatened the wife in relation to his continuation of employment. The wife was involved in proceedings in Western Australia in the middle part of 2008. In August 2008 the husband told his general medical practitioner that his wife was leaving and that he was not coping. The husband said that he was planning on leaving work and he did just that. The husband was prescribed medication which he did not take at that time. He said that he was leaving because he would be ‘unsafe at work’ yet he made no enquiries of his employer in relation to that medication.
518.The husband obtained employment in 2009 and earned about $200,000. He applied almost all of this income to himself and did not pay the tax. He seeks an allowance for the tax unpaid on that income; I have dealt with this elsewhere in these reasons.
519.The husband was earning a very good income at the time of separation, and earned during the course of a significant income when he worked for almost one year. I have had regard to these facts and to the letter written by Mr M, the husband’s accountant, to Business TT dated 10 March 2011,[169] in which he states that the husband’s earning capacity is between $250,000 and $280,000. Mr M also states that “we are aware of his current circumstances and have no reason to believe that this will affect his future income earning capacity.”[170] This letter was prepared in consultation with the husband and I am satisfied that the husband has a present earning capacity of $250,000 to $280,000 per annum.
[169] Exhibit H21.
[170] Ibid.
520.The wife has not been in paid employment and has devoted her life to the care and upbringing of the children and as such she is able to obtain employment but at a very modest rate. The wife has paid the child R’s school fees and the husband has paid minimal child support since separation. This is in circumstances where the husband had the capacity to pay child support but has not done so.
521.Having regard to all of the relevant factors and on balance I determine that there ought to be an adjustment of a further 10 per cent (overall difference of 20 per cent) primarily in respect of difference in the relative earning capacity of each of the parties. The husband is a highly qualified university graduate with a strong work and income history. The wife has a very modest earning capacity. On this basis and subject to the final consideration the property would be divided as to 65 per cent to the wife and 35 per cent to the husband.
just and equitable
522.As I have said earlier, it is not possible for the Court at this time to determine precisely how much money will be involved in relation to K Pty Ltd. It is, however, clear that there will be significant monies payable to the husband and the wife on the winding up of that company.
523.I propose to order that the wife’s outstanding tax liability and the amount outstanding to Citibank be paid out of the entitlements of the husband and wife prior to the division of the pool of assets.
524.The wife will retain the S Street home but will be responsible for discharging the existing home mortgage. The amount of the mortgage is set off against the value of the home so that in essence the parties are contributing to the payout of that mortgage in accordance with the division set out earlier. The wife sought the matrimonial home, which has been the family home for many years, apart from the relatively short period of time when the parties lived in Perth. The husband has contributed some monies to the mortgage but most of the mortgage payments since the wife took occupation of the home have been met by her. I am satisfied, as I said earlier, as to its value and I am also satisfied that this property should be transferred to the wife and its value treated as an asset in her hands.
525.Each of the parties will have a significant sum pursuant to the agreed division of the superannuation assets.
526.Having regard to the property pool, contributions and the other factors I am satisfied that a division of property as to 65 per cent to the wife and 35 per cent to the husband is in all the circumstances, just and equitable.
527.I intend to give all of the parties, a short time after publishing these reasons, leave to apply to the Court to make submissions in terms of the precise property orders. This is not intended to facilitate or allow any argument on substantive issues, but to enable any mechanical improvements to the orders.
COSTS OF THE PROCEEDINGS
528.Each of the parties sought costs orders and it is clear that costs will be a feature in the wind up of these proceedings.
529.It is likely that the costs as between the husband and perhaps the wife and Mr and Ms D are likely to follow the event having regard to the accrued jurisdiction I am exercising in that area. Whether such costs are to be made and how they are to be made and whether they are on an indemnity basis will be a matter for further submission by the parties at some time in the future.
530.There may be some costs issues by the first and second interveners and there may be costs issues as between the parties pursuant to s 117 of the Act.
531.As such I have allocated a day in the future to enable those costs arguments to be ventilated. I had considered dealing with costs at the same time as I dealt with the substantive issues, as costs are likely to be a significant issue. However, to do so may involve looking at offers and the like and considering the various factors under s 117 of the Act. That could not have been reasonably in advance of these reasons and consequent primary orders.
I certify that the preceding five hundred and thirty one (531) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Benjamin delivered on 5 October 2011.
Associate:
Date: 5 October 2011