Gee and Luxford & Anor

Case •

[2017] FamCA 222

•

11 April 2017

FAMILY COURT OF AUSTRALIA

GEE & LUXFORD AND ANOR [2017] FamCA 222

FAMILY LAW – PROPERTY – Where the husband and his brother, the second respondent, engaged in various property and financial ventures – Where money is found to be owing to the husband by the second respondent – Where those funds are considered assets of the husband for the purposes of his property settlement with the wife – Where the wife made contributions assessed at 60 per cent – Where the wife is entitled to a further adjustment under s 75(2) of the Family Law Act 1975 (Cth) – Where the husband has wasted funds by gambling throughout the marriage – Where the wife is to receive 65 per cent of the net assets – Where no order is made for the second respondent to repay the husband the amounts owed to him.

FAMILY LAW – PROPERTY – Application to set aside a transfer by the husband of his interest in a property to the second respondent under s 106B of the Family Law Act 1975 (Cth) – Where it is not established that the husband or the second respondent intended to defeat an order of this court by making the transfer – Where the wife’s application is dismissed.

Evidence Act 1995 (Cth) ss 63, 67
Family Law Act 1975 (Cth) ss 75(2), 79(2), 106B, 106B(1).
Australia and New Zealand Banking Group Ltd v Harper (1988) FLC 91-938
Pflugradt and Pflugradt (1981) FLC 91-052
Kowaliw and Kowaliw (1981) FLC 91-092
APPLICANT: Ms Gee
RESPONDENT: Mr Luxford
2nd RESPONDENT: Mr F Luxford
FILE NUMBER: SYC 6710 of 2012
DATE DELIVERED: 11 April 2017
PLACE DELIVERED: Sydney
PLACE HEARD: Sydney
JUDGMENT OF: Rees J
HEARING DATE: 27, 28 and 29 March 2017

REPRESENTATION

COUNSEL FOR THE APPLICANT: Ms Beck
SOLICITOR FOR THE APPLICANT: James and Associates
COUNSEL FOR THE RESPONDENT: Ms Pender
COUNSEL FOR THE 2ND RESPONDENT: Mr Friedlander
SOLICITOR FOR THE 2ND RESPONDENT: Christie Law & Associates

Orders

IT IS ORDERED

  1. That the wife be solely entitled to the proceeds of sale of the property at J Street, Suburb K and that each of the husband and the wife do all acts and things required to effect the payment of those funds to the wife.

  2. That from the proceeds of sale of the property at B Street, Suburb C, currently held in a controlled monies account, the wife be paid $157,209 and the balance be paid to the second respondent or as he may direct.

  3. That subject to these orders, all parties shall be solely entitled to any asset in his or her possession. 

Note: The form of the order is subject to the entry of the order in the Court’s records.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Gee & Luxford has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYC 6710 of 2012

Ms Gee

Applicant

And

Mr Luxford

Respondent

And

Mr F Luxford

2nd Respondent

REASONS FOR JUDGMENT

  1. Ms Gee (“the wife”) and Mr Luxford (“the husband”) commenced to live together in mid-2004. At the time of cohabitation, the wife’s two children of a previous relationship, Mr L and Ms M who were then aged nine and 11 years respectively, lived with the husband and the wife.

  2. A child, N, now aged ten years, was born to the husband and the wife in 2006.

  3. The husband and the wife married in 2007. They separated in November 2011. The wife moved out of the home in July 2012.

  4. N lives with the wife and spends time with his father and the paternal family.

  5. Consent Orders were entered into between the parties in relation to the care of N on 30 January 2013. The applications before the Court relate only to property.

  6. The husband’s brother, Mr F Luxford (“the second respondent”), who entered into a number of financial ventures with the husband before, during and after the marriage, is the second respondent in these proceedings.

  7. In order to understand the issues to be determined, it is convenient to set out the financial history of the parties and their respective families.

  8. From the outset, it was the wife’s case that, whatever financial transactions had occurred between the husband, the second respondent and their parents, she was not told about any borrowings involving the husband’s parents.

HISTORY

  1. In 1999 the husband and the second respondent set up a business known as O Pty Ltd. They assert that they used $300,000 which they borrowed on a line of credit from the National Australia Bank (“NAB”) against the security of their parents’ unencumbered home at Suburb P (“Suburb P”). The wife disputes that assertion. That line of credit was an issue throughout the proceedings and will be referred to throughout this judgment as “the line of credit”.

  2. In 2001 O Pty Ltd was sold. The husband and the second respondent assert that the line of credit was re-financed with St George Bank (“St George”) so that they had funds to invest in real estate. The wife disputes the assertion of refinance with St George.

  3. In May 2001, the wife purchased a property at J Street, Suburb K (“J Street”) for $259,000. She borrowed $125,000 by way of mortgage.

  4. On 27 November 2003 the husband and the second respondent incorporated Q Pty Ltd (“QPL”). The purpose of QPL was to operate a business in Suburb R known as “S”. S commenced operations in March 2004.

  5. The parties commenced co-habitation in mid-2004. J Street was tenanted and the wife received rent.

  6. By 20 June 2005, the wife had reduced the mortgage over J Street to $67,639.

  7. On 24 June 2005, three separate amounts were borrowed from the NAB, using the security of the wife’s property at J Street. The loans of $150,000, $61,000 and $93,000 increased the encumbrance on J Street by $304,000. Thereafter the husband paid the mortgage payments on J Street and the wife continued to receive the rent.

  8. The wife asserts that the husband had the sole use of those funds and has not accounted for them. The husband disputes that assertion.

  9. The wife asserts that the husband used a substantial portion of the funds raised from J Street to gamble. The husband denies that assertion.

  10. In November 2005, the husband and the second respondent purchased D Street, Suburb E (“Suburb E”) for $780,000. The husband and the second respondent assert that the purchase was funded by a mortgage from Bankwest of $700,000, secured over Suburb E and also over Suburb P, together with funds from the line of credit. The wife disputes that assertion.

  11. In June 2006 the husband purchased 1 T Street, Suburb U (“1 T Street”) for $578,000. The husband asserted that he used funds from the line of credit to pay the deposit and funded the balance from a mortgage to the NAB. The wife disputes that assertion.

  12. In August 2006, the J Street mortgage was again increased with a further advance. The wife deposed that the loan brought the total indebtedness over J Street to $340,000.

  13. N was born in 2006. The wife stayed at home with N for eight months before she resumed work. When the wife worked, N was cared for by both sets of grandparents.

  14. In 2007, the husband and the wife married.

  15. In July 2008 the wife borrowed $17,635 from the Commonwealth Bank of Australia. She deposed that the money was used to pay for some of the renovations to 1 T Street.

  16. In July 2009 the husband and the second respondent purchased a second property together at 2 T Street, Suburb U (“2 T Street”) for $700,000. The husband asserts that the deposit was drawn from the line of credit and the balance of the purchase price was entirely funded by mortgage to the NAB of $646,000. After some time, the wife’s parents occupied 2 T Street, paying rent. The rent they paid was subsidised by the wife who contributed money from the rent she received from J Street.

  17. In January 2011, the husband and the second respondent purchased a property together at B Street, Suburb C (“Suburb C”) for $929,000. The husband asserts that the purchase was financed by a mortgage from the NAB which was also secured over Suburb P. The wife disputes that assertion.

  18. In March 2011, a credit card was obtained in the name of the wife from the Bank of Queensland (“the BOQ card”). The wife asserts that she did not apply for the card and the husband was its sole user. He denies that assertion.

  19. In November 2011 the husband and the wife separated but remained living at 1 T Street.

  20. On 9 November 2012, the wife filed an application for property settlement.

  21. On 30 November 2012, the husband and the second respondent as borrowers, and their parents as lenders, signed a “Deed of Acknowledgement, Loan and Indemnity” (“the 2012 Deed”) wherein the husband and the second respondent acknowledged responsibility for all money secured by the line of credit over Suburb P, the balance recited in the 2012 Deed to be $839,639.47. The wife disputes the validity of the 2012 Deed. In cross-examination, counsel for the wife put to the husband, that the 2012 Deed was a concoction for the purpose of these proceedings.

  22. In December 2012, the husband and the second respondent assert they borrowed $50,000 from an entity described as “V Centre”. The wife disputes that assertion.

  23. J Street was sold for $445,000 in December 2012. The net proceeds of $102,821 were paid into a controlled monies account.

  24. 1 T Street was sold on 15 February 2013 for $785,000. The husband did not receive anything from the proceeds. The wife asserts that the husband should have received approximately $200,000.

  25. 2 T Street was sold in April 2013 for $886,000. The husband received nothing from the proceeds of sale. The wife asserts that the husband should have received something although the amount is not stated.

  26. The wife deposed that on 31 May 2013 she paid out the remaining amount on the BOQ card of $10,225.16 from monies held by her solicitors. In June 2013, the balance of the wife’s personal loan from the Commonwealth Bank of Australia of $10,229.25 was paid from her solicitors’ trust account, which held the proceeds of sale of the Suburb K property.

  27. In March 2014, the husband executed a Deed (“the 2014 Deed”) wherein he agreed to pay $326,799.80, being “his half share of the Loan Funds as at 21 February 2014”, as directed by his parents. The husband’s parents and the second respondent accepted that payment as full satisfaction of the husband’s liabilities under the 2012 Deed.

  28. On 31 March 2014, the husband transferred his interest in Suburb C to the second respondent for a stated consideration of $625,000. The wife asserts that the husband did not receive full payment for his interest. Suburb C was sold on 30 August 2016 for $1,540,000.

  29. On 30 April 2014, the husband transferred his interest in Suburb E to the second respondent for a stated consideration of $522,500. The wife asserts that the husband did not receive the whole of the funds to which he was entitled. Additionally, the wife seeks to set aside the transfer of Suburb E.

  30. Various amounts were transferred by internet transfer from the S account in 2015. The wife alleges that the amounts were transferred to the husband.

  31. On 30 June 2016, S ceased trading. There is a dispute about the quantum of the liabilities claimed by the husband to be owed by S to creditors and whether the husband is, in fact, liable to any or all of those creditors.

  32. On 29 July 2016, I ordered that the balance of the proceeds of sale of Suburb C, after payment out of the mortgage, legal costs, agents’ commission, rate adjustments and land tax, should be held in a controlled monies account pending the determination of these proceedings (“the Suburb C controlled monies”). The balance held is approximately $254,000.

ISSUES

  1. The following issues of fact arise from the narrative of the transactions set out above:

    ·    When was the line of credit account secured over Suburb P established?

    ·    For what purpose or purposes was the line of credit used?

    ·    How were the monies borrowed against J Street in 2005 and 2006 used?

    ·    Did the husband lose money gambling and, if he did, how should those losses be treated?

    ·    How was the purchase of Suburb E financed?

    ·    How was the purchase of 1 T Street financed?

    ·    How was the purchase of 2 T Street financed?

    ·    How was the purchase of Suburb C financed?

    ·    Who obtained the benefit of the BOQ credit card?

    ·    Was the 2012 Deed a sham? If not, did the husband and the second respondent owe their parents $839,639.47?

    ·    Did the husband and the second respondent borrow $50,000 from V Centre?

    ·    What money should the husband have received from the sale of 1 T Street?

    ·    What money should the husband have received from the sale of 2 T Street?

    ·    What money should have been received by the husband for his interest in Suburb C?

    ·    Should the transfer of the husband’s interest in Suburb E to the second respondent be set aside?

    ·    What money should have been received by the husband for his interest in Suburb E?

    ·    Did the husband receive $30,000 from S in 2015?

    ·    Is the husband liable for any of the debts of S?

    ·    What is the value of Suburb E?

THE TRIAL

  1. The wife relied upon an affidavit sworn by her on 19 September 2016 and her Financial Statement.

  2. By way of Orders made on 26 September 2016, the wife was given leave to obtain a valuation of Suburb E at her own expense. The valuer was cross-examined.

  3. The husband relied on an affidavit sworn by him and affidavits sworn by each of his parents in 2014. The husband’s father died before the commencement of the trial. The husband’s mother did not attend for cross‑examination because of ill health.

  4. No objection was made to the admission into evidence of the affidavit of the husband’s father pursuant to s 63 of the Evidence Act 1995 (Cth) (“Evidence Act”).

  5. Objection was made to the Court receiving the affidavit of the husband’s mother.

  6. Section 63 of the Evidence Act provides:

EVIDENCE ACT 1995 - SECT 63

Exception: civil proceedings if maker not available

(1)  This section applies in a civil proceeding if a person who made a previous representation is not available to give evidence about an asserted fact.

(2)  The hearsay rule does not apply to:

(a)  evidence of the representation that is given by a person who saw, heard or otherwise perceived the representation being made; or

(b)  a document so far as it contains the representation, or another representation to which it is reasonably necessary to refer in order to understand the representation.

Note 1: Section 67 imposes notice requirements relating to this subsection.

Note 2:       Clause 4 of Part 2 of the Dictionary is about the availability of persons.

  1. Notice was given on the first day of the trial that the husband’s mother would not be available. A medical certificate from her doctor was tendered stating that the husband’s mother had a major coronary by-pass operation two months ago and fractured her right arm seven weeks ago. The doctor stated “Due to emotional lability I advise her not to undertake any strenuous act which could mentally upset her. She was due to attend court today.”

  2. I accept that being cross-examined would be an activity which could upset her.

  3. The affidavit of the husband’s mother has been available to the wife since April 2014. Although no issue was taken in relation to notice, the filing of the affidavit constitutes reasonable notice of the intention to adduce the evidence for the purpose of s 67 of the Evidence Act.

  4. I accept that she is a person unable to give evidence for the purpose of s 63 of the Evidence Act and her affidavit should be read.

  5. Where the evidence of either of the husband’s parents is challenged in the wife’s case, it must be given appropriate weight having regard to the fact that they are not available for cross-examination.

  6. There was, however, no real challenge except to the existence of the agreement to make a loan facility (the line of credit) available to the husband and the second respondent and, ultimately, that issue fell to be determined on the basis of contemporary documents.

When was the line of credit account secured over Suburb P established?

  1. The husband deposed that a line of credit with NAB was first obtained to finance a business run by him and the second respondent in 1999. The line of credit was secured over Mr and Mrs Luxford Sn’s home. Arrangements were made for the husband and the second respondent to make the payments on this loan.

  2. The second respondent deposed to the same facts.

  3. The husband’s mother deposed that, when the husband wanted to set up O Pty Ltd, “We let [the husband] use our Home as security for a mortgage and [the husband] borrowed the money with [the second respondent].”

  4. The husband’s father deposed to the same facts. 

  5. On behalf of the wife, counsel submitted that there was no evidence that a line of credit account secured over Suburb P existed before 12 December 2012 when a bank account with a number ending in …05 (“the …05 account”) was established.

  6. Thus, it was submitted that there was no evidence that any funds had been borrowed using the security of Suburb P until after separation.

  7. The husband’s parents are in receipt of Centrelink pensions. I infer that they have satisfied the Centrelink assets test. No explanation was offered by counsel for the wife to explain what the husband’s parents might have done with the funds from the line of credit if they had retained and used those funds. No questions were put to the husband or the second respondent in relation to investments made by their parents which might account for the funds drawn from the line of credit.

  8. There are a number of documents relating to the existence of the line of credit before 12 December 2012.

  9. An historical search of the title of the Suburb P property shows that a mortgage was registered over the property on 5 May 1999. That evidence is consistent with the evidence of the respondents that the transaction commenced in 1999.

  10. Annexure “C” to the affidavit of the husband’s mother is an unsigned document entitled “Guarantee and Indemnity” to St George on a form dated July 2003. The document refers to a mortgage to be given by the husband’s parents over Suburb P, and a personal guarantee by the husband’s father as “Guarantee and Indemnity from [the husband’s father] in favour of St George Limited in respect of the obligations of [the husband] and [I infer, the second respondent].”

  11. Annexure “B” to the affidavit of the husband’s mother is an offer of a loan facility by St George to QPL in an amount of $780,000, dated 24 August 2005, the security to include a guarantee and indemnity from the husband’s parents and a first registered mortgage over Suburb P. The purpose of the loan is said to be the purchase of Suburb E.

  12. On 10 July 2008, the husband, the second respondent and their parents executed a mortgage in favour of the NAB over the Suburb P property. That mortgage was registered. The title search is in evidence.

  13. On 30 November 2012, a mortgage to the NAB was executed by the husband’s parents, the husband and the second respondent over Suburb P. (The mortgage was also noted as being secured over the Suburb C and Suburb E properties).

  14. Tendered as Exhibit 15 were four letters from AA Loans (which is agreed to be the NAB) addressed to the husband’s mother, the husband’s father, the husband and the second respondent dated 7 December 2012, confirming that a new credit facility (the …05 account) had been put in place from that date with a total amount of $840,000. The letter confirms that two previous facilities with account numbers ending …18 and …26, with total balances of $840,000, had been paid out.

  15. On 7 December 2012 an account was opened with the NAB in the names of the husband, the second respondent and their parents with an opening balance of $840,000.

  16. On 30 December 2012 the 2012 Deed was executed. The 2012 Deed recites the following transactions:

    ·    That in February 1999 the husband and the second respondent asked their parents to assist them in obtaining a line of credit from the NAB;

    ·    That the parents would make the loan application to the NAB;

    ·    That the husband and the second respondent would be responsible for the loan repayments and would indemnify the parents;

    ·    That in 2002 the parents refinanced the loan and the husband and the second respondent used the proceeds to establish S;

    ·    That in 2008 the line of credit was again refinanced with the St George Bank;

    ·    That in 2012 the line of credit was again refinanced with the NAB;

    ·    That the husband and the second respondent charged their properties at 2 T Street, Suburb C and Suburb E as security for the debt owed on the line of credit.

  1. Caveats were lodged over 2 T Street, Suburb C and Suburb E by the husband’s parents.

  2. No application has been made to set aside the 2012 Deed.

  3. A further Deed was executed in March 2014, releasing the husband from any liability under the 2012 Deed on payment of $326,799.80 being one half of the amount outstanding in the …05 account as at 21 February 2014. The 2014 Deed appears to have been executed in contemplation of the transfers by the husband to the second respondent of his interests in Suburb E and Suburb C and the assumption by the second respondent of the ongoing liability for the line of credit.

  4. No application was made to set aside the 2014 Deed.

  5. I accept the evidence of the husband, the second respondent and their parents that the line of credit was established in 1999 and refinanced in 2002, 2008 and 2012.

For what purpose or purposes was the line of credit used?

  1. In order to answer this question it is necessary to trace the funds used for the sale and purchases of the various pieces of real property bought by the husband and the second respondent.

  2. It is not possible to trace the funds with any certainty. The husband and the second respondent were the only parties with access to all of the relevant bank statements and supporting documents. There was no real attempt to place a complete record before the Court. If, in the course of the tracing exercise, some injustice is done to them, then their own lack of disclosure is to blame.

How were the monies borrowed against J Street in 2005 and 2006 used?

  1. The wife deposed that she was not aware of the manner in which the money raised by extending the mortgage over J Street was used. She deposed that the husband requested that she facilitate the transactions and she did so and that thereafter he handled those funds. There was no real challenge to that evidence and I accept it.

  2. By August 2006, a total of $300,159 had been drawn down against J Street.

  3. The husband said that the funds were used for day to day living expenses.

  4. As is explained later in these reasons, I am satisfied that the funds from J Street were not used for the purchase of Suburb E, the purchase of 1 T Street, the purchase of 2 T Street, or the purchase of Suburb C.

  5. I am unable to say how the money was used. It should be taken into account as a contribution on the part of the wife.

Did the husband lose money gambling and, if so, how should those losses be treated?

  1. The wife gave evidence that the husband gambled at the Casino every Tuesday night and lost. The husband denied that allegation. In cross-examination he said that he lost, at most, a few hundred dollars. The husband denied that he had a gambling problem or that he had been a member of Gamblers Anonymous.

  2. The statements for the husband’s bank account in 2009 and 2010 were tendered in evidence. Those statements showed withdrawals at the Casino of up to $3,000 at a time, and often multiple withdrawals over the course of an evening.

  3. The husband was referred by his general practitioner to a psychiatrist, Dr W, in 2012. In April 2012, Dr W reported to the husband’s general practitioner:

    During this week, he went to the casino to gamble after his late shift at work … He went to Chinatown or Star Casino for a meal then proceeded to play blackjack. He said that he had “a great understanding of the game” and “enjoyed it” calling it “[My] time”. Depending on his mood he would gamble for half an hour to three hours and would spend between $3000 and $5000.

  4. Dr W recorded “[The husband] allowed that he has lost up to $100,000 in the past from his gambling.”

  5. Dr W speculated that the husband was a pathological gambler but stated that he would require more information before he could make a diagnosis.

  6. Also tendered in the wife’s case was a letter from a psychologist, Dr X, who reported to the husband’s general practitioner on 13 March 2012. Dr X reported:

    [The husband] also describes a number of personality and psychosocial factors which may also have predisposed his gambling problems and difficulties managing emotions … I have suggested to [the husband] he makes another appointment to come and see you to discuss this. Please let me know if you have other thoughts about this. My plan is to continue to work with [the husband] to help him manage mood more effectively and support him to rejoin GA to address his gambling issues.

  7. I accept the evidence of the wife that the husband lost money gambling. It is not possible to determine how much he lost or where the money came from.

  8. The bank statements to which I have referred show numerous deposits made by internet banking immediately prior to the withdrawals. They also show cash deposits.

  9. The case which has come to define the scope of “waste” in the family law context and which is viewed as establishing legal “guidelines” for this Court is the frequently cited case of Kowaliw and Kowaliw (1981) FLC 91-092 (“Kowaliw”).

  10. In Kowaliw, Baker J made the following comments on the topic of “waste” at 76,644:

    As a statement of general principle, I am firmly of the view that financial losses incurred by parties or either of them in the course of a marriage whether such losses result from a joint or several liability, should be shared by them (although not necessarily equally) except in the following circumstances:

    (a) where one of the parties has embarked upon a course of conduct designed to reduce or minimise the effective value or worth of matrimonial assets, or

    (b) where one of the parties has acted recklessly, negligently or wantonly with matrimonial assets, the overall effect of which has reduced or minimised their value.

    Conduct of the kind referred to in para. (a) and (b) above having economic consequences is clearly in my view relevant under sec. 75(2)(o) to applications for settlement of property instituted under the provisions of sec. 79.

  11. At 76,644 of Kowaliw Baker J reiterated his earlier comments by stating:

    If a party has acted in a manner to which I have referred earlier… then such conduct in my view and the economic consequences that flow therefrom are clearly matters to which the Court may have regard pursuant to the provisions of sec. 75(2)(o).

  12. The husband’s gambling losses will be considered in the context of section 75(2) of the Act, adjustment.

How was the purchase of Suburb E financed?

  1. In November 2005 the husband and the second respondent purchased Suburb E for $780,000.

  2. The husband and second respondent deposed that they used funds from the second line of credit to pay for the 10 per cent deposit for Suburb E. They acquired a loan for 80 per cent of the purchase price, and the balance of the price plus stamp duty was drawn from the line of credit. The husband deposed that the loan from St George was for an amount of $624,000. He deposed that a total of $200,000 was drawn from the line of credit.

  3. Neither the husband nor the second respondent has provided any documentation in relation to the borrowings for the purchase of Suburb E.

  4. Annexure “B” to the affidavit of the husband’s mother is an offer of a loan facility by St George to QPL in an amount of $780,000, dated 24 August 2005, the security to include a first registered mortgage over Suburb E and, inter alia, a guarantee and indemnity from the husband’s parents and a first registered mortgage over Suburb P.

  5. Annexed to the husband’s affidavit is a settlement letter from the solicitors who acted on the purchase which states, inter alia, “We confirm that the amount of money left over from your total borrowings and the amount due on settlement has been retained in your nominated account by your bank.”

  6. It is likely that the whole of the purchase price for Suburb E was borrowed. Having regard to the way in which the various borrowings of the husband and the second respondent were arranged, it is possible that the money was advanced in two separate mortgages.

  7. When the husband transferred his interest in Suburb E to the second respondent in 2014, there was a mortgage over Suburb E with a balance owing of $529,868.86. That is consistent with the husband’s evidence of an original borrowing of $624,000 having been repaid over the past nine years.

  8. Neither the husband nor the second respondent were challenged in relation to their evidence as to the use of the line of credit for the purchase of Suburb E.

  9. I accept that some or all of the purchase money for Suburb E came from funds guaranteed by the husband’s parents.

How was the purchase of 1 T Street financed?

  1. On or about 6 March 2006, the husband exchanged contracts to purchase the property situated at 1 T Street, Suburb U for $570,000. The husband deposed that the total cost including legal fees and stamp duty was $592,425.75.

  2. The husband deposed that he paid for the deposit and the balance of the purchase money using the NAB line of credit secured over his parents’ home, and there was a mortgage to St George for $510,376. The husband deposed he also borrowed $40,000 from his sister to pay for renovations to the property but that money was repaid.

  3. A settlement letter is annexed to the husband’s affidavit. The letter confirms that a net amount of $510,376 would be available from St George on settlement. The difference between the total costs of the purchase and the mortgage was $82,050.

  4. There was no challenge to the husband’s evidence that the line of credit was used to fund the balance of the purchase money.

How was the purchase of 2 T Street financed?

  1. In July 2009 the husband and the second respondent purchased the property situated at 2 T Street, Suburb U for $700,000. The husband deposed that the deposit of $35,000 was obtained from the NAB line of credit. The husband deposed that the balance of funds of $646,000 were also obtained from the NAB line of credit.

  2. The solicitor’s settlement letter was annexed to the husband’s affidavit. The letter discloses that there were two separate mortgages raised for the purchase. Both facilities were with the NAB.

  3. The second respondent re-financed a mortgage on a property owned by him at Suburb Y for $358,017.50. A further sum of $646,000 was also advanced by NAB. Thus a total of $1,004,017.50 was raised. The amount required to refinance the mortgage on Suburb Y was $386,504.46 or almost $28,500 more than was raised to re-finance the mortgage. Thus, the second respondent benefited by the receipt of $28,500 raised jointly with the husband against the purchase of 2 T Street being paid against his personal mortgage debt.

  4. I accept that the whole of the purchase money for 2 T Street was borrowed but the second respondent should account to the husband for half of the sum applied to re-finance his mortgage over Suburb Y or $14,250.

How was the purchase of Suburb C financed?

  1. Suburb C was purchased in January 2011 by the husband and second respondent for $929,000.

  2. The husband deposed that $225,000 was paid using the line of credit.

  3. The settlement letter is annexed to the husband’s affidavit. A loan was obtained from NAB for $743,200. The husband deposed that the NAB required further security for the mortgage. Consequently, the Suburb P property, and the properties at 1 and 2 T Street, were used as security for the mortgage.

  4. The total amount due on settlement (after payment of the five per cent deposit and including outgoings) was $883,098.93. The balance required to settle, including the payment of stamp duty and legal fees, was $181,114.78.

  5. The husband estimates that they drew approximately $225,000 from the line of credit to purchase Suburb C. If the deposit and the balance of the purchase money was drawn from the line of credit, the amount would have been $227,564.78. That position appears to have been conceded by the wife at paragraph 68 of her trial affidavit.

  6. There is no evidence of any other source of funds which could have been used to fund the balance of the purchase price and I am satisfied that the money came from the line of credit.

Who obtained the benefit of the BOQ credit card?

  1. The wife deposed that she was not aware that the card had been obtained and that she had never used it.

  2. The husband denied that he was the sole user of the card.

  3. The BOQ provided to the wife a copy of their records of the application for the card which is annexed to her affidavit. The application was processed on 21 March 2011. The documents include a copy of a facsimile forwarded from S to BOQ on 21 March 2011. Although the husband denied that the handwriting on the documents was his, the writing bears no resemblance at all to the wife’s handwriting. It is likely that the facsimile emanated from the husband.

  4. The loan application gives the applicant’s marital status as single and states that she earned a gross monthly salary of $9,753. A note dated 21 March 2011 states that the husband confirmed that the applicant earned $2,092 per week. A further note on the same date states “employer [mr luxford] rg no pw, adv that docs sent … adv to call him on his mob# … if other dets still needed.”

  5. The BOQ file contains a Pay Advice from “QPL T/A S” for the wife dated 18 March 2011 for a gross weekly amount of $2,092.10.

  6. At no time did the wife receive a salary from S in that sum.

  7. The substantial purchases on the BOQ card were made at S in sums of $1,200, $1,000 and $1,800.

  8. The husband gave no explanation for the wife making purchases from S in such amounts. A more likely explanation is that the husband used the card to fund the operations of S.

  9. I accept the evidence of the wife that she did not receive any benefit from the BOQ card and that the husband obtained and used the card.

Was the 2012 Deed a sham? If not, did the husband and the second respondent owe their parents $839,639.47?

  1. It follows from my determinations in relation to the line of credit and the use of the line of credit that the 2012 Deed was not a sham but represented the agreement actually reached between the husband, the second respondent and their parents.

  2. The husband and the second respondent were jointly liable to repay any loans secured over Suburb P.

Did the husband and the second respondent borrow $50,000 from V Centre?

  1. Annexed to the affidavit of the husband is a caveat lodged by Z Legal on behalf of three named people claiming an interest arising from an unregistered mortgage over 1 T Street executed on 13 December 2012. The caveat has been stamped and registered.

  2. It was the husband’s evidence that Z Legal acted for the lenders and that he and the second respondent borrowed $50,000 in December 2012 to provide funds for S.

  3. On the sale of 1 T Street, $50,962.50 was paid to Z Legal.

  4. I accept that payment was a repayment of the loan of $50,000.

  5. However, the liability was a joint liability of the husband and the second respondent and the husband repaid the whole amount. The second respondent is indebted to the husband for $25,481 (in round terms) in relation to this transaction.

What money should the husband have received from the sale of 1 T Street?

  1. 1 T Street was owned solely by the husband.

  2. On 17 December 2012 the husband swore a Financial Statement in which he deposed that the balance outstanding on the mortgage over 1 T Street was $456,000. He agreed in cross-examination that was an accurate statement.

  3. 1 T Street was sold for $785,000 with settlement occurring on 15 February 2013. The vendor’s direction to pay is annexed to the husband’s affidavit.

  4. The total amount due on settlement was $706,695. Presumably a deposit of ten per cent had been paid. There is no evidence of how the balance of the deposit after payment of commission was paid but I assume it was received by the husband.

  5. Cheques were drawn as follows:

    AA Loans  $653,223.07

    Z Legal  $  50,962.50

    Sundries   $    2,508.54 

  6. The difference between the amount owed on the mortgage and the amount paid on settlement to AA Loans is explained by a letter from AA Loans dated 15 February 2013 acknowledging payment of one loan of $455,030 (which I assume is the mortgage referred to by the husband) and a reduction in another loan facility in account number ending …03 of $205,651. Surplus funds of $1,600 were paid into an account number ending …73.

  7. Thus $205,651 was paid from the proceeds solely owned by the husband to reduce a joint liability of the husband and the second respondent to the line of credit.

  8. I accept that $82,050 had been drawn from the line of credit to purchase the property. The repayment of that sum to the line of credit from the proceeds of sale was appropriate. However, the payment of the balance of $123,601 benefited the husband and the second respondent and the second respondent must account for half of that sum, that is, in round terms, $61,801.

What money should the husband have received from the sale of 2 T Street?

  1. 2 T Street was sold for $886,000, settlement taking place on 29 April 2013.

  2. The total amount due on settlement was $883,829.57. The purchaser had paid a deposit of $2,215.

  3. Cheques were drawn as follows:

    AA Loans (NAB)  $652,969

    National Australia Bank  $180,000

    Second respondent  $34,847.32

    Land tax, legal fees, etc.  $16,013.25

  4. The husband received nothing.

  5. The sum of $646,000 had been borrowed to finance the purchase.

  6. In relation to the payment of $180,000 to NAB, the husband deposed “We agreed to pay $180,000 from the proceeds of sale to the loan secured against my parents (sic) home.” This was a payment from a jointly owned asset to reduce a joint liability of the husband and the second respondent.

  7. There is no explanation for the payment of $34,847.32 to the second respondent other than that the solicitors note that the payment is made in accordance with the husband’s direction. That money should have been paid to the husband.

  8. The wife commenced these proceedings on 9 November 2012. It was not put to the husband that he directed the payment to his brother to remove the money from the matrimonial pool but that was the effect of the payment.

  9. The second respondent owes the husband $34,847.

What should the husband have received for his interest in Suburb C?

  1. The husband’s interest in Suburb C was transferred to the second respondent on 31 March 2014. The valuation of the Suburb C property was $1,250,000. The consideration for the transfer was $625,000.

  2. It is to be remembered that in March 2014 the 2014 Deed had been executed, fixing the husband’s liability in relation to the line of credit at $326,799.80. 

  3. Annexed to the affidavit of the second respondent is a calculation, apparently prepared by the solicitor for the second respondent which explains the concession. It is set out below:

    The Suburb C property was valued at  $1,250,000

    Less deductions

    [Sundries]  $140.00

    [Sundries]  $583.00

    NAB mortgage  $743,199.53

    BB Lawyers  $5,000

    Bank cheque fees  $80.00

    Total deductions  $500,997.47

    Balance  $494,494.47

    Half share of balance payable to brother  $250,498.74

    Less brother’s share owing to bank   $248,698.20

    Balance owing to brother  $    1,800.54

  4. It is not possible to understand this calculation. The total of the deductions should be $749,002.53 not $500,997.47. How the balance was reached is unclear.   

  5. The total amount borrowed for the purchase of Suburb C in 2011 was $970,765. Of that amount, $227,564.78 had come from the line of credit. The balance of $743,200 came from a mortgage to the NAB.

  6. By the Deed which was executed in March 2014, and, I infer, shortly after 21 February 2014 as that is the date on which the loan balances are taken, the husband was released from further liability in relation to the line of credit provided he paid $326,799.80. 

  7. That sum was paid from the money due to the husband from Suburb E.

  8. I accept that the husband had a liability for half of the NAB mortgage secured over Suburb C (originally $743,200), but it has not been established that he had any liability to repay a further $248,698.20.

  9. Doing the best I can on the available material, I calculate that the husband should have received payment for Suburb C as follows:

    Suburb C valued at  $1,250,000

    Less deductions

    Mortgage  $743,200

    BB Lawyers  $    5,000

    [Sundries]  $      803

    Total deductions  $749,003

    Net  $500,997

    Husband’s half share  $250,489.50

  10. The husband should have received $250,499 (in round terms) from the transfer of Suburb C.

  1. However, he paid $248,698.20 towards the line of credit leaving him with a liability, according to the 2014 Deed, of $78,101.60 towards the line of credit.

Should the transfer of the husband’s interest in Suburb E to the second respondent be set aside?

  1. One of the orders sought by the wife is that the transfer of the husband’s interest in Suburb E to the second respondent be set aside so that the husband’s interest in Suburb E is property of the husband and the wife for the purposes of these proceedings.

  2. The second respondent opposes that application. The second respondent submits that he is a bona fide purchaser for value. He relies on the fact that a valuation was obtained at the time of the transaction, and that in accordance with the agreement, he assumed responsibility.

  3. By way of Transfer dated 30 April 2014, the husband transferred his interest in Suburb E to the second respondent. A valuation of the property was obtained, attributing a value to Suburb E of $1,045,000 as at 6 March 2014. The Transfer document in favour of the second respondent recorded consideration of half of the valuation amount, $522,500. Stamp duty was paid on that sum.

  4. The wife did not challenge the valuation and brought no contrary evidence of value.

  5. The relevant portions of s 106B of the Family Law Act 1975 (Cth) (“the Act”) are as follows:

    106B  Transactions to defeat claims

    (1)  In proceedings under this Act, the court may set aside or restrain the making of an instrument or disposition by or on behalf of, or by direction or in the interest of, a party, which is made or proposed to be made to defeat an existing or anticipated order in those proceedings or which, irrespective of intention, is likely to defeat any such order.

    …

    (2)  The court may order that any money or real or personal property dealt with by any instrument or disposition referred to in subsection (1), (1A) or (1B) may be taken in execution or charged with the payment of such sums for costs or maintenance as the court directs, or that the proceeds of a sale must be paid into court to abide its order.

    (3)  The court must have regard to the interests of, and shall make any order proper for the protection of, a bona fide purchaser or other person interested.

    (4)  A party or a person acting in collusion with a party may be ordered to pay the costs of any other party or of a bona fide purchaser or other person interested of and incidental to any such instrument or disposition and the setting aside or restraining of the instrument or disposition.

    …

    (4A)  In addition to the powers the court has under this section, the court may also do any or all of the things listed in subsection 80(1) or 90SS(1).

    …

  6. A transfer of property is an “instrument or disposition” for the purposes of s 106B(1) of the Act.

  7. An order cannot be made pursuant to s 106B(1), of the Act, setting aside a transaction or disposition unless the transaction or disposition “is made or proposed to be made to defeat an existing or anticipated order in those proceedings or which, irrespective of intention, is likely to defeat any such order.”

  8. The onus is on the wife to establish that the transfer of Suburb E was likely to defeat an anticipated order of the Court (See Australia and New Zealand Banking Group Ltd v Harper (1988) FLC 91-938 (“ANZ v Harper”) at 76,781). Whether an order was “anticipated” by the husband is an objective test characterised by whether it could be “expected or foreseen as being likely or reasonably probable” in all the circumstances of the case (In the Marriage of Pflugradt and Pflugradt (1981) FLC 91-052 at 76,429).

  9. At the time of the transfer in 2014, the property proceedings between the husband and the wife was underway and a final hearing was looming. It certainly could have been expected or foreseen that an order of the Court would come from the finalisation of the parties’ dispute.

  10. It must also be established that the husband’s conduct was either intended to defeat the anticipated order, or is likely to defeat the anticipated order irrespective of intention. In cross-examination by counsel for the wife, it was put to the husband that by transferring his interest in the properties to his brother he intended to remove assets from the matrimonial pool and direct assets to his parents. The husband said that was incorrect. He disagreed that the transactions were designed to thwart any orders made by this Court. In the absence of any objective evidence of the husband’s intention, it cannot be said that he intended to defeat the anticipated orders.

  11. The husband deposed that the reason for the transfer was that he was unable to contribute his half share of the outgoings on Suburb E and, in those circumstances, he had no alternative but to sell his share to the second respondent.

  12. That evidence was not challenged. There was no evidence that the husband had funds with which to pay his share of the outgoings.

  13. Whether the transfers were likely to defeat the orders is a matter which the wife needs to be established.

  14. Had the husband and the second respondent decided to sell Suburb E because the husband could not meet his share of the outgoings, and had they sold to an arms’ length purchaser, that transaction was not likely to defeat the wife’s claim because the husband’s share of the sale price would form part of the matrimonial pool.

  15. That the transferee was the husband’s brother does not, of itself, establish that the transferee is not a bona fide purchaser for value whose rights must be considered.

  16. I accept that the transfer was for value.

  17. The second respondent, in consideration of the transfer, has assumed responsibility for the mortgage which includes both a half share of the line of credit which existed at the time of the transfer and the mortgage raised from the Bendigo and Adelaide Bank to finance the purchase. He has also paid all of the periodic outgoings on Suburb E.

  18. It is not possible to put the second respondent back in the position he would have been in if the transfer had not been effected and the husband had continued to pay his share of the outgoings.

  19. I am not satisfied that the wife has established that the transfer of Suburb E to the second respondent had the effect of defeating her claim or was likely to do so.

  20. The wife’s application, pursuant to s 106B of the Act, will be dismissed.

What should the husband have received for his interest in Suburb E?

  1. I accept that Suburb E was valued at $1,045,000 at the time of the transfer to the second respondent. The agreed price for the husband’s half share was therefore $522,500. The transfer was effected on 30 April 2014.

  2. As part of the agreement, the second respondent assumed responsibility for the line of credit, subject to the payment by the husband to the line of credit of $326,799.80 pursuant to the 2014 Deed. The amount of $326,799.80 was one half of the amount owing on the line of credit as at the date of the 2014 Deed.

  3. The net amount paid to the husband from the transfer of Suburb E, should, prima facie, have been $195,700.

  4. In fact, the husband received nothing. The second respondent conceded in his affidavit that the husband should have received $94,120 and acknowledged that he owed that sum to the husband.

  5. Annexed to the affidavit of the second respondent is a calculation, apparently prepared by the solicitor for the second respondent which explains the concession. It is set out below:

    The Suburb E property was valued at  $1,045,000.00

    Less deductions

    Commonwealth Bank mortgage  $529,868.86

    [Legal fees]         $956.67

    [Sundries]  $120.00

    [Legal fees]  $880.00

    Ms CC   $18,600.00

    Bank cheque fees  $80.00

    Total deductions  $550,505.53

    Balance  $494,494.47

    Half share owing to brother   $247,247.24

    Less amount to our client   $80,519.81

    Less brother’s share of amount owing to bank                   $73,101.60

    Balance owing to brother   $94,120.00

  6. Ms CC is the husband’s partner. She provided $18,600 to S in March and April 2014. Bank statements annexed to the affidavit of the second respondent show those sums being banked into the S account. That amount was jointly owed by the husband and the second respondent. If they agreed for it to be repaid, as apparently they did, then it was appropriate that it be paid from the gross amount.

  7. The payment of $80,519.81 to the second respondent is more controversial. The husband deposed “I believe that my brother received more than I did by about $80,000 from the transfer of [Suburb E] but this was because he had made more payments than I had.”

  8. The second respondent deposed:

    …the [husband] had drawn in excess of $80,519.81 more than me from the [S] business in the previous 3 years in order to fund his legal fees in respect of these proceedings, living expenses and child support payments. The sum of $80,519.81 was all that was left over after payment of the necessary bills and outgoings.

  9. In cross-examination, the second respondent said that he had allowed the husband to take about $500 per week “give or take” from cash takings but that he had kept no records of the amounts.

  10. The evidence of the husband and the second respondent cannot stand together. The most likely explanation is that, as the second respondent deposed, the sum was simply what was left.

  11. I do not accept the evidence of either the husband or the second respondent that $80,519.81 was actually owed by the husband to the second respondent.

  12. Doing the best I can on the available material, I calculate that the husband should have received payment for Suburb E as follows:

    Agreed value  $1,045,000.00

    Less joint liabilities

    Mortgage   $529,868.86

    Payment to Ms CC       $18,600.00

    Sundries incl. fees and stamp duty                   $21,059.17

    Total   $569,528.03

    Net equity        $475,471.97

    Husband’s half share   $237,735.99

  13. I have allowed the stamp duty as a joint liability because, although the purchaser would usually be liable to pay stamp duty, the husband appears to have agreed to pay half. In the circumstances where the transfer is brought about because the husband cannot afford to pay his share of the outgoings, that is not an unreasonable agreement.

  14. From the husband’s half share, he had to pay the balance of the money required to be paid pursuant to the 2014 Deed of $78,101.60. However, the evidence shows that only $73,101.60 was paid into the parents’ NAB account. In his affidavit, the husband described that payment as “balance of my share of loan from bank”. He deposed that the funds went into the parents’ NAB account and this was evidenced by a statement annexed to the affidavit of Ms DD Luxford.

  15. The husband should have received $237,736 from Suburb E. The payment of $73,101.60 to his parents’ NAB account should be deducted, leaving a sum of $164,634 owed to the husband.

Did the husband receive $30,000 from S in 2015?

  1. The second respondent was cross-examined in relation to a bundle of bank statements that he produced in the course of cross-examination. The documents had not previously been made available and were not available when the husband was cross-examined. The bundle consisted of eight pages of bank statements from January 2015 to July 2015 for an account number ending in …21.

  2. The …21 account was one of the operating accounts of S. The second respondent said that only he and the husband had access to the …21 account.

  3. The statements show approximately weekly internet transfers to an account identified only by a letter which is the first letter of the husband’s name. The second respondent conceded that it was likely that the transfers were part of the husband’s weekly drawings. There are 20 internet transfers of sums of $300, $200 or $150 between January and July of 2015.

  4. In July 2015, there are three further transfers to the same account totalling $30,000. The second respondent could give no explanation for those transfers. It is likely that the sum of $30,000 was transferred by the husband from the S account to his own account.

Is the husband liable for any of the debts of S?

  1. The second respondent annexed to his affidavits a bundle of invoices which he said represented the amounts outstanding to creditors following the closure of S on 30 June 2016. He also annexed a MYOB printout showing total debts owed of $129,090.71.

  2. S was owned by QPL. There is no evidence that any personal guarantees were given by the husband and the second respondent for the debts of QPL. There is no evidence that the husband and the second respondent have any liability for those debts.

  3. The debts will be disregarded.

The value of Suburb E

  1. Having regard to the determination I have made in relation to s 106B, of the Act, it is not necessary to consider this issue.

THE BALANCE SHEET

  1. Directions were made on 26 September 2016 that a joint Balance Sheet be filed by 4.00 pm on 13 March 2017. Despite that direction, no Joint Balance Sheet was available until the commencement of submissions of the third and final day of the hearing.

  2. The Joint Balance Sheet which was tendered is reproduced below. Matters in contention will be dealt with using the item numbers in the document.

Ownership Description Applicant 1st R

2nd  R
ASSETS/ADD BACKS
1            H (½) D Street Suburb E 775,000 Nil Nil
2            H B Street Suburb C 253,400 Nil Nil
3            J Household contents No sig value  -
4            H (½) QPL Pty Ltd (ACN …) 237,500 Nil Nil
5            H Car 1 4,500 4,500 -
6            H Boat 18,000 18,000 -
7            H Motor Bike 5,000 5,000 -
8            H Commonwealth Bank (…88) 20 20 -
9            H Z Legal 50,962 Nil
10         J Cash (proceeds of the sale of 1 & 2 T Street Suburb U) 107,423 Nil
11         J Cash (net proceeds from sale of J St,Suburb K) 102,821 102,821 -
12         J Payment made by the H on transfer of properties 321,799 Nil
13         J Total debt owed by 2nd Respondent to the 1st Resp 95,920 95,920 95,920
14         W St George …39 E51,000 NK -
15         W St George …58 E 2,300 NK -
16         W Car 2 Nil NK -
17         W Jewelley [sic] No sig value NK -
18         W Payment to Mr F on transfer of Suburb E 80,519 Nil
19         W Sale of 1 T Street unexplained increase in loan 197,223 Nil
Total $2,303,387 $
LIABILITIES
20         H (½) [Suburb E] E369,119 Nil Nil
21         H BOQ Credit Card 10,225.16 10,225.16 -
22         Joint Commonwealth Bank – Personal Loan 10,229.25 10,229.25 -
23         H ANZ Bank MasterCard by Order 10,708 10,708 -
24         H Commonwealth Bank Credit Card by Order 34,927 34,927 -
25         H Legal costs to Applicants Solicitors 1,136 1,136 -
26         1st2nd QPL Pty Ltd (Overdraft) Nil 63,334 63,334
27         H 50 per cent of outstanding line of credit after the transfers Nil 166,971 -
28         H Legal fees Nil 35,000 -
29         H Half line of credit (current) Nil 369,500
30         H NAB Credit Card Nil 4,000 -
31         2nd Capital Gain Tax on the sale of the Suburb C
32         Capital Gains Tax on sale of 2 T Street
Total $436,844 $336,530
SUPERANNUATION
Member Name of Fund Type of Interest Applicant 1st Resp 2nd Res
33         H Zurich Accumulation 77,466 77,466
34         W North Personal Super Accumulation 67,104 67,104
Total $144,570 $144,570
Net Total

Add back

Liability
35       J Half of line Credit at 30.11.12 Nil 419,819
36        

Legal fees paid by Husband

Nil 60,000
$144,570
Net Total

Item 1 - Suburb E

  1. For the reasons already stated, Suburb E will be removed from the Joint Balance Sheet.

Item 2 - Suburb C

  1. Suburb C is not an asset of the husband and the wife. This item will be removed from the Joint Balance Sheet.

Item 3 – Household contents

  1. This item has no significant value and will be removed from the Joint Balance Sheet.

Item 4 - QPL

  1. The value attributed to QPL is the value the husband attributed to goodwill in his Financial Statement sworn in 2012 when QPL was trading as S. There is no evidence that QPL has any current value. The item will be removed from the Joint Balance Sheet.

Item 9 – Z Legal

  1. Money borrowed by the husband from the clients of Z Legal was paid back in accordance with the obligations of the borrowers. I have noted earlier in these reasons that half of that amount (namely, $25,481) represents a debt owed by the husband to his brother as the Z Legal loan had been repaid from their joint funds. This is taken into account in my determination of what monies are owing to the husband by the second respondent.

  2. This item will be removed from the Joint Balance Sheet.

Item 10 – Money payable to the husband from the sale of 1 & 1 T Street.

  1. This amount will be calculated in accordance with the findings set out earlier in these reasons and will be subsumed into the assessment of the total amount payable to the husband by the second respondent.

Item 12 and 13 – money due to the husband from the transfers of Suburb E and Suburb C

  1. This amount will be calculated in accordance with the findings set out earlier in these reasons and will be subsumed into the assessment of the total funds payable to the husband by the second respondent.

Item 17 – The wife’s jewellery

  1. There is no evidence of the value of the jewellery. The item will be removed from the Joint Balance Sheet.

Item 18 – Payment received by the second respondent on transfer of Suburb E

  1. This item will be subsumed in the assessment of the funds payable to the husband by the second respondent consequent upon the transfers in Items 12 and 13.

Item 20 – Mortgage on Suburb E

  1. Suburb E is the property of the second respondent. The mortgage is his liability. This item will be removed from the Joint Balance Sheet.

Item 21 – The BOQ credit card

  1. This liability has already been paid from the proceeds of the sale of J Street. This item will be removed from the Joint Balance Sheet.

Item 22 – Joint personal loan

  1. There is no evidence that this loan is outstanding.

Item 23 - Mastercard

  1. This debt was paid out of the proceeds of the sale of J Street.

Item 24 – Commonwealth Bank Credit Card

  1. Neither the husband nor the wife deposed to this liability.

Item 26 – QPL overdraft

  1. There is no evidence that the husband has a personal liability for this debt.

Item 27 – 50 per cent of outstanding line of credit

  1. Pursuant to the 2014 Deed, the husband had no liability in relation to the line of credit after the payments which were made in the course of the transfers of his interest in Suburb E and Suburb C.

Item 28 – Husband’s legal fees

  1. Both the parties have incurred legal fees. The wife has been represented throughout the proceedings. Since there is no evidence of the wife’s outstanding legal fees, it is appropriate to leave both the husband’s legal fees and the wife’s legal fees out of the Joint Balance Sheet.

Item 29 – Half line of credit (current)

  1. Pursuant to the 2014 Deed, the husband had no liability in relation to the line of credit after the payments which were made in the course of the transfers of his interest in Suburb E and Suburb C.

Item 30 – NAB credit card

  1. There is no evidence that this debt is referable to spending during cohabitation. The wife should not be responsible for the husband’s post-separation spending.

Item 31 – Capital Gains Tax on sale of Suburb C

  1. The husband was not an owner of Suburb C at the time of the sale. He did not incur any liability for CGT on the sale.

Item 32 – Capital Gains Tax on sale of 2 T Street

  1. The husband’s tax return for the relevant year was tendered. The net capital gain was $22,903 and the husband’s income that year was $34,812. No attempt was made to provide a calculation of the applicable tax. The amount is minimal. Absent evidence of the actual amount, I do not propose to take it into account.

Controlled monies account – proceeds of sale of J Street

  1. This item does not appear on the Joint Balance Sheet. The only evidence of its value is found in the wife’s Financial Statement sworn 24 March 2017 where the value is deposed to be $81,200.

  2. I find the assets and liabilities of the parties to be:

    ASSETS

H

Car 1

$4,500

H

Boat

$18,000

H

Motor bike

$5,000

H

Commonwealth Bank

$20

H

Money owed to the husband by the second respondent pursuant to sales and transfers of properties. See paragraphs 132, 140, 149 and 195

$286,763

W

St George Bank

$533,300

W

Proceeds of sale of J Street

$81,200

TOTAL

$448,783

  1. The parties have no relevant liabilities for the purpose of these proceedings.

  2. The husband has superannuation of $77,466 and the wife has superannuation of $67,104. Neither seeks a splitting order.

CONTRIBUTION

  1. The wife owned J Street at the commencement of cohabitation, subject to a mortgage of less than $69,000. The mortgage was $67,639 in 2005. J Street had been purchased in 2001 for $259,000. It is reasonable to assume that her equity at cohabitation was approximate to $200,000.

  2. The husband had no net assets of value. He and the second respondent had recently incorporated QPL and started the S business using borrowed capital.

  3. Both the husband and the wife worked, subject to the wife taking maternity leave when N was born.

  4. The wife’s two children of her first marriage lived with the family. Their father did not pay child support although after some time and after litigation, he commenced to pay school fees. The two children were supported both financially and emotionally by the husband and the wife.

  5. The equity in the wife’s J Street property was utilised during the marriage by increasing the mortgage so as to make some $304,000 available for the use of the husband and the wife. Having regard to the asset pool, that contribution is significant.

  6. The rent on J Street was also available from 2004 until the wife’s parents moved into 2 T Street in May 2012 when that rent was used to subsidise their rent.

  7. The husband’s parents allowed the husband and the second respondent to use their property at Suburb P as security for the line of credit so as to allow them to operate S and to buy properties. However, as has been demonstrated earlier in these reasons, the use of the line of credit did not bring much financial gain to the husband.

  8. Both the husband’s parents and the wife’s parents have cared for N to allow the parties to continue to work.

  9. For six months when the wife travelled to Europe, the husband was N’s primary carer. Since physical separation in July 2012, the wife has been N’s primary carer and primarily responsible for his financial support.  

  10. Taking all of those matters into account, contributions should be assessed at 60 per cent in favour of the wife.

SECTION 75(2)

  1. Both the husband and the wife have re-partnered. Both their partners work and contribute to their respective support.

  2. Each has a capacity for employment.

  3. The wife has the responsibility to care for N, aged ten. The husband’s contribution to N’s support is modest.

  4. The husband’s gambling losses are significant having regard to the quantum available for distribution.

  5. I am conscious that the wife’s application is for an adjustment in her favour of 65 per cent of the net asset pool.

  6. That would require an adjustment of 5 per cent for s 75(2) factors, of the Act, which is very modest.

CONCLUSION

  1. The wife will receive 65 per cent of the asset pool or $291,709. She has assets (including the proceeds of J Street) of $134,500.

  2. She should be paid a further $157,209 from the funds held in the Suburb C account.

  3. I have concluded that the second respondent owes the husband $286,763. Of that sum, $157,209 will be paid to the wife leaving a balance owed of $129,554. Neither the husband nor the second respondent has sought any order for the payment of money from one to the other. Accordingly I will make no order. The balance of the Suburb C account, after the payment to the wife of $157,209, should be paid to the second respondent or as he directs.

I certify that the preceding two hundred and fifty (250) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Rees delivered on 11 April 2017.

Associate: 

Date:  11/04/2017

Key Legal Topics

Areas of Law

  • Family Law

  • Equity & Trusts

Legal Concepts

  • Remedies

  • Fiduciary Duty

  • Injunction

  • Res Judicata

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