GEORGIADES & GEORGIADES
[2015] FamCAFC 115
•19 June 2015
FAMILY COURT OF AUSTRALIA
| GEORGIADES & GEORGIADES | [2015] FamCAFC 115 |
| FAMILY LAW – APPEAL – PROPERTY SETTLEMENT – Where the husband appealed against final property settlement orders – The trial judge did not err in finding that the husband had the beneficial ownership of a share in a family company, which he claimed to hold on trust for his parents – The trial judge did not err in adding back funds withdrawn from the husband’s personal accounts, which he claimed belonged to his parents’ business – The trial judge did not err in his treatment of the parties’ rent-free accommodation in a home owned by the husband’s parents – Appeal dismissed. |
| Family Law Act 1975 (Cth) – s 75(2) Family Law Rules 2004 (Cth) – r 6.02(1) |
| APPELLANT: | Mr Georgiades |
| RESPONDENT: | Ms Georgiades |
| FILE NUMBER: | MLC | 11134 | of | 2011 |
| APPEAL NUMBER: | SOA | 69 | of | 2014 |
| DATE DELIVERED: | 19 June 2015 |
| PLACE DELIVERED: | Perth |
| PLACE HEARD: | Melbourne |
| JUDGMENT OF: | Thackray, Ryan & Kent JJ |
| HEARING DATE: | 3 March 2015 |
| LOWER COURT JURISDICTION: | Family Court of Australia |
| LOWER COURT JUDGMENT DATE: | 8 September 2014 |
| LOWER COURT MNC: | [2014] FamCA 856 |
REPRESENTATION
| COUNSEL FOR THE APPELLANT: | Dr Ingleby with Mr Hutchings |
| SOLICITOR FOR THE APPELLANT: | FLA Partners |
| COUNSEL FOR THE RESPONDENT: | Ms Smallwood |
| SOLICITOR FOR THE RESPONDENT: | MCK Legal |
Orders
The appeal be dismissed.
The husband pay the wife’s costs of and incidental to the appeal as agreed, and in default of agreement, as assessed.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Georgiades & Georgiades has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT MELBOURNE |
Appeal Number: SOA 69 of 2014
File Number: MLC 11134 of 2011
| Mr Georgiades |
Appellant
And
| Ms Georgiades |
Respondent
REASONS FOR JUDGMENT
Introduction
Mr Georgiades (“the husband”) has appealed against orders made by Berman J on 8 September 2014. Ms Georgiades (“the wife”) opposes the appeal.
The husband’s parents were parties in the proceedings below, but did not participate in the appeal, having succeeded at trial in defending the wife’s claim that she and the husband held an interest in a property they owned.
The appeal
The husband has three primary complaints:
·the trial judge’s rejection of his argument that he held his share in a family company on trust for his parents (Ground 1);
·the decision to “add back” funds he disbursed from his accounts in the three years prior to the parties’ separation (Ground 2); and
·the trial judge’s treatment of contributions (Grounds 4 and 5).
Save for arguing that his failure to give full disclosure was not as egregious as the trial judge found, the husband does not challenge the damning credit findings the trial judge made about him and most of his witnesses.
Ground 1 – Beneficial ownership of a share in G Pty Ltd
Ground 1 asserts that the trial judge “erred in his treatment of and the value of the husband’s interest in [G] Pty Ltd”. The error was said to be identified in the following seven “particulars”, albeit counsel for the husband only addressed subparagraph (g) in his oral argument.
a.The learned trial Judge’s finding that the “balance of [purchase] monies were provided through [KK Pty Ltd] via a loan facility of $520,000 with the Commonwealth Bank of Australia” (Judgment at Para 305) is inconsistent with his Honour’s finding that the land owned by the company … should be treated as being unencumbered and included in his Honour’s calculations at its full value.
b.While his Honour was entitled to find as between the husband and wife that any loan to the Second and Third Respondents would not be repaid, he was not entitled to make a similar finding in relation to the other shareholders in the company.
c.The other shareholders in the company were not parties to these proceedings, and by virtue of
i.the declaration of the value of the husband’s interest by the learned trial Judge;
ii.The order made requiring the sale of the husband’s shareholding in the event of default [Order (2)(c)]
the other shareholders were disadvantaged without having an opportunity to be heard.
d.By disregarding the position and rights of the other shareholders the learned trial Judge erred in finding the value to be placed on the husband’s interest in the Company and thereby overvalued the husband’s assets.
e.The learned trial Judge erred in valuing the minority interest of the husband (as found) without applying a suitable discount for that minority interest or explaining why no such discount should be applied.
f.By reason of the errors referred to herein, the orders were unjust and accordingly not appropriate.
g.The learned trial judge did not make findings in relation to the contention of the husband ( … and which contention was supported by the second and third respondents) that the husband’s share in the Company was held on trust for his parents.
G Pty Ltd was incorporated in 1999, at the instigation of the husband’s parents, for the purpose of purchasing some rural land. The husband’s parents were involved in litigation at the time, and the four shares in the new company were issued to their four children. The husband claimed that his share was held on trust for his parents.
It was accepted that a company controlled by the parents provided the deposit for the purchase of the rural land, and that the balance of the purchase price was advanced by the same company via a bank loan. The loan was secured by a mortgage over the rural land, and by guarantees given by the husband and his two brothers.
The first ASIC returns stated that the shares in G Pty Ltd were not held beneficially. From 2002, the returns showed that the shares were beneficially held by the husband and his siblings, but the husband’s father said this was a mistake that the new accountant corrected when he took over the books.
In rejecting the husband’s contentions about the shares, and about an alleged debt relating to the purchase of the rural land, at [309] to [316] the trial judge:
·considered it was “important” that the parents had wanted to “alienate” the rural land, given that they did not want to be directors or shareholders of G Pty Ltd while they were involved in litigation;
·accepted that the parents had borrowed the money to acquire the rural land, but found that a loan agreement between them and G Pty Ltd was “a device designed to minimise the available property of the parties”; and
·found that the evidence of the husband and his father was “inherently unreliable” and that “there was a clear plan to ensure that the husband’s financial interests were arranged following separation … to minimise the property that was available for the Court’s consideration”.
His Honour completed his discussion of the issue in the following paragraphs:
317.The very fact that on the husband’s own case the purported loan agreement contains no requirement for any interim payment and that no payment has been made since 1999 would entitle the Court to assume that there is no real likelihood of the loan ever being called in…
318.I am not entitled to affect the substantive rights of third parties and I do not intend to do so. Given the unsatisfactory evidence given by the husband and his father, I am not satisfied that the evidence of the husband and his father, the purported loan agreement or indeed, the financial statements of [G] Pty Ltd oblige the Court to find that there is any loan outstanding and if there is, that the obligation for repayment is so certain that I should bring it to account. See Biltoft & Biltoft (1995) FLC 92-614.
319.The suggestion that the husband should be bound by a joint and several guarantee to the Commonwealth Bank in respect of an interest in [G] Pty Ltd that he says he holds for his parents is difficult to reconcile.
320.In all the circumstances, I reject the position put by the husband and I propose to attribute a value to the husband’s shareholding and interest in [G] Pty Ltd of $266,000. To the extent that demonstrably the property was purchased with funds supplied and arranged by the husband’s parents, that will be brought to account as a matter of contribution, noting however that there is no certainty as to the financial arrangements between the husband and his parents, and what benefit they have received from the company over the years.
We received, as further evidence in the appeal, the husband’s affidavit sworn in support of his application for a stay in October 2014. Counsel for the wife relied on the following statements in the affidavit as establishing that the husband now accepts he is the beneficial owner of the G Pty Ltd share:
4.Apart from my one-quarter shareholding and interest in [G] Pty Ltd, my only assets comprise…
5.With reference to my shares in [G] Pty Ltd, which is a private proprietary company held in ownership by myself and my three siblings as shareholders, I have been informed by my said lawyer and verily believe that it would be unlawful … for such shares to be offered for sale by public auction, as directed by His Honour … I have been advised by my said lawyer that the only practical means my shareholding in the company can be sold and realised, would be to offer them for private sale to one or more of my said siblings (alternatively to my parents…
Counsel for the husband submitted that no inference could be drawn from the affidavit because a party applying for a stay is bound by the judge’s findings. No authority was cited for this proposition, and we doubt its validity. On a fair reading of the affidavit, it is tolerably clear that the husband’s evidence was given in light of his Honour’s findings as to ownership, and is not an admission that the wife had been right all along. In any event, it is uncontroverted that the husband holds his share in G Pty Ltd in his name, and it is therefore open to him to dispose of it, given that his parents have not challenged the finding concerning ownership. We therefore do not regard the affidavit as a bar to the husband pursuing Ground 1.
However, as the trial judge recorded, the husband had earlier acknowledged in the first instance proceedings that he was the beneficial owner of the share. The trial judge referred to this in the following paragraphs of his reasons:
109.Whilst the husband acknowledges that he holds a 25 per cent shareholding in [G] Pty Ltd, and notwithstanding their disclosure in earlier affidavit material and his financial statement, it is his position that at all times he holds the shares on trust for his parents.
…
130.At page 311 of the transcript, the husband is shown his first financial statement filed 23 January 2012 which discloses a reference to [G] Pty Ltd with a value of $175,000. The husband was not able to explain the inclusion of his interest in [G] Pty Ltd as part of the property owned by him.
131.His best explanation was that his father’s accountant had helped with the figures and the preparation of the document but he is uncertain. The document was clearly prepared by the husband’s lawyer and presumably on his instructions.
…
133.The husband effectively conceded that the information contained in the financial statement and by reasonable implication the documents that follow have a significant level of unreliability about them. The husband was cavalier in his response and I am satisfied that he was unconcerned in respect of his obligation to make full and frank disclosure.
The husband again acknowledged ownership in his affidavit of 17 May 2012:
12.The only property that I say should be included in the asset pool is [J Street, Suburb Y] and my quarter share in property at [P Street, Suburb C]. There is also my share in the company [G] Pty Ltd and the boat, motorbike, superannuation and chattels. I note that there is significant debt attached to the asset pool which also needs to be considered.
On appeal, counsel for the husband heroically argued that the affidavit of 17 May 2012 showed that the husband’s case “consistently was that he didn’t really own [the share]” (appeal transcript, 3 March 2015, p 56). We reject this proposition, as did the trial judge, as appears from this extract:
149.The husband was referred to paragraph 34 of his affidavit sworn 26 September 2013 where the following is recorded:-
In previous [sic] affidavit and financial statement filed in these proceedings I had stated that I had a 25 per cent shareholding in [G] Pty Ltd. When I disclosed those shares in my previous affidavit and financial statement, I believed I was required to do so because they were in my name. I understand that at all times my siblings and I held our shares on trust for my parents.
150.The clear implication is that notwithstanding the statement to the contrary, the husband at all times understood that he held the [G] Pty Ltd shares on trust.
151.The husband was asked when he gained that understanding and he admitted that it was only during the course of the proceedings that somebody told him that he wasn’t really the owner of the [G] Pty Ltd shares. Clearly, it is not the case that the husband had an understanding from the very beginning but rather, is purportedly accepting what someone else has told him is [sic] the circumstances of the proceeding.
Relevant to Ground 1, the following additional observations were made by the trial judge when discussing the evidence of the husband’s father:
170.In evidence, it was put to the witness [the husband’s father] that the intention of the formation of [G] Pty Ltd was to protect the farm from creditors arising out of pending litigation. [The husband’s father] agreed that was the initial concern. He also agreed that the monies borrowed by [him] and his wife from the Commonwealth Bank in order to purchase the farm required that his three sons were guarantors.
171.It was put to him that the original loan to [G] Pty Ltd now exceeds $1.5 million and accordingly the loan could not be considered “genuine”. The witness was not able to properly answer the question but rather, deferred to that decision having been made by his former accountant … now deceased.
172.When pressed, his position was that as long as he was alive he would expect payment, but if he dies then he does not know what would happen.
173.The witness was asked whether the loan agreement in respect of [G] Pty Ltd was really intended to be no more than a device to potentially reduce the pool of property available to the wife in terms of these proceedings. In short, that the loan agreement was a sham. [The husband’s father] had little answer to the proposition that the terms of the current loan agreement would see him at the age of 94 years before it was repaid and in circumstances where there were no interim or other payments required. When interest is added, the amount outstanding would far exceed the value of the underlying property. The simple answer from the witness was that it was a matter to put to his accountant.
174.The witness was demonstrably unhelpful and his attitude was such that he was clearly resentful of the process in which he found himself as a party and struggled to understand why he should be required to answer any questions about his financial affairs.
Counsel for the husband argued on appeal that (apart from correctly recording the source of the purchase money for the rural land) the trial judge failed to consider the evidence and the submissions made on behalf of the husband’s parents that the assets of G Pty Ltd were “derived” from the husband’s parents; that the four children had not made any financial contribution to G Pty Ltd; and that the husband’s father controlled the company.
Counsel for the husband also submitted that the trial judge did not deal with the husband’s contention about the beneficial ownership of the shares, and argued that his Honour’s conclusion at [320] was referable only to the loan arrangement and not to the ownership of the shares.
Counsel further argued that the trial judge failed to deal with the standing of the ASIC returns, and submitted that his Honour’s finding concerning the unreliability of the evidence of the husband and his father was directed only to the loan and not to the beneficial ownership of the shares.
We find no merit in any of these propositions. The trial judge dealt more than adequately with the evidence and the submissions at [109], [130] to [133], [170] to [174] and [302] to [320]. His Honour’s firm rejection of the evidence of the husband and his father was, in our view, directed not only to the issue relating to the loan, but also to the ownership of the shares. The ultimate finding at [320] also clearly relates to the contention concerning ownership of the shares, as well as disposing of the proposition regarding the alleged debt.
These conclusions are sufficient to deal with the matters raised in the oral argument; however, we will also deal with three arguments contained in the written submissions, as they were not formally abandoned.
Counsel for the husband submitted that his Honour’s remark at [319] concerning the husband having guaranteed the loan for the rural land was “not sufficient to constitute a finding in relation to the contention as to beneficial ownership of the share”. We agree that, considered alone, the fact the husband had given the guarantee could not provide a sufficient basis for concluding that he must have an interest in the company. However, it is evident that the husband’s guarantee was only one part of the reasoning by which the trial judge reached his conclusion.
Counsel for the husband also submitted that it was not open to the trial judge “to make findings against [G] Pty Ltd or its other shareholder [sic] when it was not a party to the proceedings … and should have been” (citing, in support, r 6.02(1) of the Family Law Rules 2004 (Cth)). The submission has no merit, since the orders and findings did not affect the rights of any person who was not a party (as his Honour noted at [318]).
Counsel for the husband submitted, in the alternative, that the trial judge erred in not making any discount for the fact that the husband has only a minority interest. This argument lacks merit, since the only reference to the issue was when his Honour queried, in opening submissions, whether there was any contention that the husband’s share was worth less than one quarter of the total value. In response to his Honour’s enquiry, counsel for the wife said (transcript, 19 March 2014, p 5):
Well, your Honour, you raise it as an issue; I understand that. However that is not something that the husband has ever put before the court ... Or raised as an issue.
The matter was left there. The husband did not adduce evidence about the appropriate method for valuing his shareholding. In the absence of further evidence or submissions, his Honour would have erred if he had purported to apply a discount.
In concluding that Ground 1 lacks merit, we have not taken into account the failure of the husband’s parents to participate in the appeal, as we were invited to do. We accept that their failure to contest a finding that was adverse to their interests did not preclude the husband from doing so, since the finding was also adverse to his interests.
Ground 2 – Add back of $217,800
Ground 2 concerns the decision to add back into the pool an aggregate amount of $217,800, which was received into the husband’s personal bank account and disbursed in the three years prior to the parties’ separation.
The following particulars were provided in support of the overarching complaint that the trial judge erred in his treatment of this issue:
a.The transactions which were the subject of these findings took place between 20 November 2007 and 2 August 2010. The parties separated on 22 November 2010.
b.The learned trial Judge did not, as he was obliged to do, examine carefully what happened to the money which his Honour found had been in the husband’s bank account.
c.The learned trial Judge failed to deal with or consider the un-contradicted evidence that the money was paid out to the husband’s parents for purchase of real estate in their name. Such evidence is consistent with the evidence that the money came from the husband’s parents’ business and it was returned at their direction.
d.The “robust approach” which is permitted following findings of non-disclosure or adverse credit findings does not extend to creating property where there is none.
e.The learned trial Judge failed to scrutinise the evidence in relation to the “addback” more carefully and in so doing fell into error.
f.The learned trial Judge failed to apply the principle the [sic] “addbacks ought to be the exception rather than the rule” and he failed to explain what evidence created the exception in the present case.
The background facts, and the issue itself, were correctly identified very early in his Honour’s reasons. We have emphasised one part of the quotation below, as it will assume importance in our rejection of this ground:
5.The aggregate of cash withdrawals in the sum of $217,800 is the cumulative count of significant cash deposits paid into the husband’s personal account between 20 November 2007 and 2 August 2010. Those monies were withdrawn by the husband by six irregular but substantial withdrawals. The contention of the husband is that the monies belonged to the family business and that for various reasons they were “parked” in his account but ultimately withdrawn at the direction of his father with no benefit gained or enjoyed by the husband. The wife seeks that the total aggregate sum be treated as an “add back”, and therefore property of the husband and consequently included in the asset pool.
The husband claimed that the cash deposits were takings belonging to KK Pty Ltd; a company controlled by his parents, which employed him and his sister. However, his Honour made these findings about the deposits:
144.… At first the husband was not able to proffer any explanation as to the source of those monies, but ultimately his evidence was that on occasion and at the end of a working day if there were cash monies left on the premises, he would collect them and deposit them in his bank account.
145.The obvious question was put to the husband namely, if the monies belonged to the employer company [KK Pty Ltd] and given that it also banked with the Commonwealth Bank and at the same branch as the husband, why not put the money into the company account. When that was put to the husband, his evidence was as follows: [His Honour then recited an exchange in cross-examination in which it was put to the husband that he was lying in saying he did not bank the money in KK Pty Ltd’s account because he didn’t know the account number.]
146.The husband conceded that by way of withdrawals of amounts not related to the deposits into the account, the following large monies were withdrawn:-
20 November 2007 $30,000
29 December 2007 $35,400
21 June 2008 $49,000
2 September 2008 $19,000
2 June 2009 $54,400
27 August 2010 $30,000
TOTAL $217,800
147.There was no satisfactory explanation by the husband as to why the amounts remained in his account for relatively long periods of time. It would not have been difficult for the husband to ask the officer [sic] manager for the account details of [KK Pty Ltd]. There was no sensible explanation to justify paying the income of [KK Pty Ltd] into any other account.
148.The evidence of the husband on this topic was demonstrably unsatisfactory. His answers made no sense and even making substantial allowances for what might be considered lax financial controls, I was not satisfied that the husband was attempting to assist the Court.
The trial judge also made adverse findings about the credibility of the husband’s father concerning this issue. His Honour described him at [180] and [181] as being “demonstrably uncooperative and resistant to answer questions” and his evidence as being coloured by his “barely disguised hatred” of the wife.
When dealing with the evidence of the husband’s sister, who was responsible for the daily administration of the business, his Honour observed:
230.Given the focus of these proceedings and in particular the status of monies received by the husband between 2007 and 2010, it is difficult to understand the paucity of effort that members of the [husband’s] family have expended on attempting to comply with the provision of demonstrably critical documents.
His Honour’s ultimate findings are set out below:
325.Between 20 November 2007 and 2 August 2010 the husband banked significant amounts of cash totalling $217,800 into his personal accounts. The husband withdrew equivalent amounts as detailed elsewhere in these reasons.
326.The explanation of the husband was both nonsensical and incredible. It was suggested by him that the money represented the daily takings of [KK Pty Ltd] from time to time and rather than leave the cash in the factory premises overnight, the husband took the money with him and banked the cash into his personal account. It was conceded by him that it could have been banked into the [KK Pty Ltd] account given that both [KK Pty Ltd] and the husband used the same bank and branch. [The husband’s sister] says that she disapproved of the practice and made it known that it should stop. According to her, her request was denied both by her father and presumably the husband.
327.The wife sought discovery from the husband and his parents of various documents which would assist in establishing whether the assertion of the husband namely, that the monies banked by him could be linked to the takings of [KK Pty Ltd] could be established.
328.The response from the solicitors of the husband’s parents that the relevant category of documents had either been lost or destroyed was clearly unhelpful. It became problematic when the evidence of [the husband’s sister] established that there were other collateral documents that would have provided assistance as to the extent of cash received by [KK Pty Ltd] during the relevant period.
329.The position of the husband was that he certainly neither had any documents which would assist in the enquiry nor did he have access to them. The response of his parents was that whatever documents may have existed they were now lost or destroyed.
330.I consider that the husband and his father have not been prepared to assist the wife by making full and frank disclosure. The deposits into the husband’s account during the relevant period are clearly identified and it would not have been a difficulty to provide the takings for the relevant periods which would clearly have established the true position.
Having discussed authorities concerning non-disclosure, the trial judge then considered how he should treat the withdrawals in circumstances where “the husband puts forward no credible alternate explanation to the proposition of the wife that the husband was entitled to that money” (at [332]):
335.Whilst the cases where it would be appropriate to “add property back” to the interests of each of the parties will be relatively few, I do not consider that there is no place for such a consideration.
336.The present case has about it the significant distinction of the husband being uncooperative and recalcitrant in respect of his obligation to make full and frank disclosure. He does not have the luxury of attempting to deflect his obligation to provide appropriate discovery onto others…
337.Accordingly, this is not a situation where the husband has provided a satisfactory explanation as to how the money has been utilised. All that is known is that it entered the husband’s account in circumstances which defy logical explanation and without pattern or temporal connection to the date of deposit or the amounts so deposited significant cash sums are withdrawn.
338.There is no evidence as to the destination of the funds and I consider it open to the Court to find that in the absence of full and frank disclosure, those monies may still be available to the husband as opposed to the proposition that they have been dissipated, spent or in some way returned to [KK Pty Ltd] or the husband’s father.
Counsel for the husband focused his attack on the findings at [337] and [338], namely that “this is not a situation where the husband has provided a satisfactory explanation as to how the money has been utilised” and that “[t]here is no evidence as to the destination of the funds”.
This attack was mounted notwithstanding it was conceded that the husband led no evidence-in-chief concerning how the money had been utilised. The first evidence concerning the expenditure of the funds was volunteered by the husband in reply to questions from the bench during cross-examination (transcript, 21 March 2014, p 376; emphasis added):
HIS HONOUR: Can I assume, Mr [Georgiades], that any significant deposits into your accounts are likely to have come from your father?‑‑‑That’s correct.
Is that fair?‑‑‑Yes.
You tell me if it’s not?‑‑‑Yes.
Yes. All right?‑‑‑I would believe – yes. That kind of money I’ve never had personally.
No?‑‑‑It was my father’s.
And I appreciate that you‑ ‑ ‑?‑‑‑And if I’m correct ‑ ‑ ‑
All right?‑‑‑ ‑ ‑ ‑we’ve proven the – where these amounts of big money has gone through the bank cheques that were made out to – when he purchased his properties or whatever it was.
No. No. That’s all right. I’m only asking the first question, just so that we don’t need to traverse this each and every time we refer to a large sum of money that appears as a deposit into your account?‑‑‑Yes. Come – yes. Yes.
Are you satisfied that I could record those moneys are more likely than not to have come from you father?‑‑‑It come – I’m pretty sure.
All right?‑‑‑It has come from my father, not me.
Okay. Thank you.
Counsel for the wife then resumed her cross-examination, in which the entire focus was on receipt of funds into the account, rather than their disbursement. In particular, counsel was seeking to establish that the funds represented reward to the husband for his work in the business. However, in the course of questioning, counsel for the wife said to the husband (transcript, 21 March 2014, p 377):
…And so if I can just read a letter, which we received, dated 22 October. And in fairness, your Honour, I will give – this is a bundle of documents which I’m confident that if the husband was represented, would have been produced by somebody. And it is a letter to my solicitor and a number of copies underneath it, your Honour.
The letter to which counsel had alluded was dated 22 October 2013 and was annexed to the wife’s affidavit of 12 February 2014. It had been sent after the wife filed her Case Outline on 14 October 2013, in which she foreshadowed an argument that the funds disbursed from the account should be added back.
Although counsel’s questions were directed toward the payment of funds into the account, the letter itself also dealt with their disbursement, as appears from this extract (emphasis added):
We are instructed that the amounts deposited were deposited by our client on behalf of [KK Pty Ltd]. The amounts were cash receipts with respect to the sale of produce by [KK Pty Ltd]. We are instructed that our client and his siblings deposited such monies into their personal account/s on behalf of the business so that cash was not left on the business premises (noting the business was not insured for loss of cash through theft). We are instructed that the withdrawals (six (6) in total), were then with respect to properties, acquired by either [KK Pty Ltd], the [husband’s parents], or another company wholly owned by the [husband’s parents]. Our client was caretaker for those funds only, and at no time the beneficial owner of the funds.
Any ambiguity arising from the infelicity of expression in the highlighted portion of the extract would have been resolved by reference to documents attached to the letter, which were described in the letter as “evidencing the application of those monies (i.e. the withdrawals)”. Copies of these documents were not annexed to the wife’s affidavit, and thus were not in evidence when the husband was cross-examined about the letter. When given the opportunity, counsel for the wife declined to tender the documents, whereupon this exchange ensued between senior counsel for the husband’s parents and counsel for the wife (transcript, 21 March 2014, p 383):
MR GLICK [QC]: Your Honour, my friend says she’s not going to tender them. She read out part of a letter – I was going to make that call – attached to the letter were explanations of where the money went. She says, “I’m only going to read the first one because I'm not going to tender the rest.”
…
MS SMALLWOOD: I didn't tender the letter.
MR GLICK: You read it.
HIS HONOUR: I think the witness needs to have a look at it first and then we will tender it.
MS SMALLWOOD: Have a look at those documents, and I think that's what you keep referring to when you're talking about having proved things. That's what you mean, isn't it? That’s what you gave your solicitor?‑‑‑[THE HUSBAND] Yes, yes.
[MS SMALLWOOD] Yes?‑‑‑[THE HUSBAND] That's what we – yes.
After counsel for the wife appeared to be moving to another topic, the following exchange occurred (transcript, 21 March 2014, p 384):
HIS HONOUR: Have we finished with that other document, Ms Smallwood? Have we finished with the – he has identified it, he agrees that that’s the documents that he was referring to.
MS SMALLWOOD: Yes.
HIS HONOUR: Then I will ‑ ‑ ‑
MS SMALLWOOD: Well, I don’t want to tender it because I don’t want to tender it as to its truth, but the witness may wish to in due course.
HIS HONOUR: Well, the witness – I will mark it as an exhibit.
MR GLICK: We will tender it, your Honour.
MS SMALLWOOD: Yes. I'm happy for it to be tendered ‑ ‑ ‑
HIS HONOUR: Doesn’t matter. I will ‑ ‑ ‑
MS SMALLWOOD: ‑ ‑ ‑ for identification by him when it's his turn or whatever.
HIS HONOUR: Well, it will be in – no, we're just going to tender as an exhibit now.
MS SMALLWOOD: As long as there's no suggestion that I did.
After a further exchange, the letter was received as “Exhibit 11”, along with copies of all the documents attached to it, which the husband said “proved” how the funds from his account were disbursed.
The trial was then put off for a week. On the resumption, the following exchange occurred about the bundle of documents (transcript, 27 March 2014, p 396):
MR GLICK: Your Honour, before the witness is further cross-examined, may I just clarify your Honour’s understanding of the status of the document, being a bundle of documents provided by the husband’s former solicitors which reconciled the withdrawals and give a reason for it. Does your Honour recall the discussion about those documents? There was discussion as to whether they were tendered or tendered for identification.
HIS HONOUR: Yes, they were ‑ ‑ ‑
MR GLICK: That’s the exhibit ‑ ‑ ‑
MS SMALLWOOD: I specifically didn’t tender them, your Honour.
HIS HONOUR: No.
MS SMALLWOOD: But the situation is this ‑ ‑ ‑
HIS HONOUR: They’re not tendered.
MS SMALLWOOD: They’re not.
MR GLICK: Not tendered yet.
MS SMALLWOOD: But, your Honour, in the normal course of events, the husband would be represented. And because they are alluded to in – because the letter enclosing them and reference to them is made in my client’s own affidavit, in the normal course of events, had the husband been represented, I would strongly think that he would have tendered those in examination in-chief by way of answer.
HIS HONOUR: Right.
MS SMALLWOOD: Given the circumstances, I have no objection to the husband putting them into evidence. Naturally, I don’t want to tender them ‑ ‑ ‑
HIS HONOUR: No, that’s all right.
MS SMALLWOOD: ‑ ‑ ‑ because I don’t accept their veracity, but I have no objection, for the flow of the matter, for the husband to do so.
HIS HONOUR: Thank you.
Another exchange then ensued, in which it was clarified that the bundle had already been received in evidence as “Exhibit 11”. Cross-examination of the husband then resumed (transcript, 27 March 2014, p 432; emphasis added):
MS SMALLWOOD: Now – yes. Thank you. And with the other documents that are underneath that letter, if you can just have a look there and refresh your memory about what I’m ‑ ‑ ‑?‑‑‑On my statements?
‑ ‑ ‑ talking about. No. 11 – exhibit 11, which is a lying down, I think, now?‑‑‑Yes.
Okay. You’ve got a pile of documents under there that you produced. That’s what you want his Honour to take into account as an explanation of what you ‑ ‑ ‑?‑‑‑Where the money went.
Yes?‑‑‑That’s correct. Yes.
Correct?‑‑‑That’s the truth.
The trial proceeded, without the husband or his parents giving any evidence concerning the transactions said to be evidenced by the documents comprising “Exhibit 11”, but also without them being cross-examined concerning the provenance of those documents.
The husband was self-represented at trial and made no submissions relating to the findings that could be made on the strength of “Exhibit 11”. Senior counsel for the husband’s parents did make submissions, as appears from this extract from his closing address (transcript, 31 July 2014, p 907; emphasis added):
One of the assets said to be part of the wife’s assets pool, so described, is $217,800, being aggregate cash withdrawals. Now, your Honour heard the evidence that this money was placed into [the husband’s] bank account, held there, and disbursed as to every cent on behalf of the father for the father and mother to acquire properties. “We do maintain that it was always our money. It came from [KK Pty Ltd]. It wasn’t’ given to [the husband] as a gift. It wasn’t given to him as anything; he had simply held it and spent it on our behalf.” So there are two answers: one is an answer that the husband can give that Stanford learning today means it has already gone, it’s not part of the pool, taking into account you might reflect an adjustment, that’s his point, but my point is it was our money, it was spent as our money, it was acknowledged as our money, and it went our way…
Counsel for the wife also made closing submissions about “Exhibit 11”. As will be seen from this extract, she did not dispute that the documents showed that the monies were used to purchase properties which the husband and his parents alleged belong to KK Pty Ltd (transcript, 31 July 2014, p 950):
…the documents do nothing to establish where those deposits come from. All they do is show the passage of money, by way of bank cheques, to purchase properties by money – which you’re urged to accept by the other side – belong to [KK Pty Ltd] but money – a lot of it – which never goes through [KK Pty Ltd]’s bank account…
On appeal, counsel for the husband submitted that “Exhibit 11” clearly demonstrated that all six withdrawals from the husband’s account were matched with a contemporaneous payment toward the acquisition of real estate by the husband’s parents or by a company controlled by them (albeit in the case of one of the $30,000 withdrawals, the acquisition was in the name of an entity about which no evidence had been given). Counsel therefore submitted it was incorrect for the trial judge to find that there was “no evidence as to the destination of the funds”, and argued that his Honour had “omitted consideration of detailed, documented evidence” (appeal transcript, 3 March 2015, p 5).
In her submissions to us, counsel for the wife conceded the contemporaneity of the withdrawals with the expenditure of identical amounts on the acquisition of real estate. However, her argument was that the documents had simply been tendered in “a bald fashion”; that even the husband didn’t know what they meant; and that no other witness had explained what they meant. She argued that “the documents do not speak for themselves, in the sense that they’re not bank records … They need to have a dialogue addressed to them so that their meaning can be deciphered” (appeal transcript, 3 March 2015, p 35).
In fact, some of the documents were bank records. And while it would have been expected that the husband would give evidence about the transactions, counsel for the wife properly acknowledged at trial that this had presumably not happened because he was self-represented. Although the absence of representation did not relieve the husband of the obligation to prove his case, we consider that the documents, on their face, were proof of the application of the funds (absent any cross-examination establishing that they were an elaborate concoction). Furthermore, the husband effectively swore to their veracity when he confirmed they were the documents he wanted his Honour to take into account as explaining “where the money went”.
Counsel for the husband submitted on appeal that since there was evidence of where the money went, it was not open to the trial judge to make an adverse finding about the husband’s disclosure concerning the disbursement of the funds. It was also submitted, correctly, that it was not put to the husband that the funds drawn from the account still existed, or that he retained some interest in any property or assets acquired with the funds.
These complaints stand to be assessed in light of the fact that the wife always accepted that the funds were removed from the account; hence her request for the money to be added back. The primary thrust of the wife’s case was that the money belonged to the husband. Arguably, there was little point in her counsel putting to the husband that he still retained an interest in the funds in circumstances where he denied the money was his in the first place. The trial judge accepted the wife’s case, and his finding was well open on the evidence.
In our view, it having been proven that the money belonged to the husband, the onus fell on him to establish why he had disposed of such a large sum in circumstances where there was no suggestion it was needed for expenses, or used to acquire property that remained in the pool. The evidence about this was entirely in the hands of the husband and his parents.
While we accept “Exhibit 11” as showing that the funds were used to acquire property in the name of the husband’s parents or their entities, the fact remains that neither the husband nor his parents advanced any explanation as to why the husband divested himself of funds which belonged to him. We consider it is in this sense that the trial judge said at [338] (emphasis added):
There is no evidence as to the destination of the funds and I consider it open to the Court to find that in the absence of full and frank disclosure, those monies may still be available to the husband as opposed to the proposition that they have been dissipated, spent or in some way returned to [KK Pty Ltd] or the husband’s father.
The husband’s argument requires the adoption of a constrained interpretation of what the trial judge said at [338]. Constrained because the interpretation is sustainable only by adopting the artifice of reading those words in isolation and with complete disregard to all that was said by the trial judge which is contrary to it; and the findings of the trial judge that do not sit conformably with it.
We have already quoted [5] of the reasons. Not only did the trial judge there refer to “six irregular but substantial withdrawals”, but his Honour also specifically referred to the husband’s contention that the funds were
“ultimately withdrawn at the direction of his father with no benefit gained or enjoyed by the husband”. At [146] (also quoted above), the trial judge detailed the dates and amounts of each of the withdrawals. These statements combine to confound the proposition that the trial judge somehow overlooked or ignored Exhibit 11, and thus confound the interpretation urged by the husband.
Moreover, the matters of context in which the trial judge said what he did at [338] should be emphasised. That context included his Honour’s findings:
·at [156] to [158] that the husband was not a witness of truth, that his evidence was “entirely unreliable”, that he “was prepared to concoct his evidence if he thought it would assist in promoting the position adopted by his family”, and that in some of his answers he was “either deliberately lying or demonstrably reckless”;
·at [189] that an agreement in respect of a “boat loan” from the husband’s parents was entered into as a “sham document for the purpose of these proceedings”, and at [323] that the agreement was entered into by the husband and his parents as “a concoction”;
·at [191] that the husband’s father was an unsatisfactory and unreliable witness who was evasive and was in “no sense … attempting to assist the Court”;
·at [312] that as between the husband and his father “there was a clear plan to ensure that the husband’s financial interests were arranged following separation in such a way as to minimise the property that was available for the Court’s consideration”;
·at [316] that an agreement between G Pty Ltd and the husband’s parents in respect of a purported loan of $1,207,530 was “a device designed to minimise the available property of the parties”;
·at [302] to [320], rejecting the case urged by the husband and his parents that the husband is not beneficially entitled to his shareholding in G Pty Ltd; and
·at [332] that with respect to the aggregate sum of $217,800, “the husband puts forward no credible alternate explanation to the proposition of the wife that the husband was entitled to that money”, and at [351] that the husband’s acquisition of those funds was part of his “proper entitlement”.
Read in this context, [338] of the reasons was simply a finding that there was no reliable evidence to disprove the proposition that the husband remained entitled to the $217,800, irrespective of any interim dealings with those funds.
Acceptance of the fact that these funds were used to acquire real estate in the name of the husband’s parents and associated entities does not mean that his Honour erred in concluding “that in the absence of full and frank disclosure, those monies may still be available to the husband”. We do not read this as suggesting that the husband may have put the funds in another account or kept the money in cash, but rather as suggesting that the funds may be “available” to him because for example, the parents may covertly acknowledge they are indebted to him for the amount advanced, or accept that he has an unregistered interest in the real estate acquired using his money.
Furthermore, we do not consider that his Honour’s finding about the failure to give full disclosure was directed to the production of documents concerning the way in which the funds were disbursed from the account. The focus of the argument at trial, as we have emphasised, was on the receipt of the money into the husband’s account and the ownership of the funds. His Honour’s criticism about disclosure was related to the production of documents from the business which could have had a material bearing on establishing the veracity of the husband’s assertions about the true ownership of the funds. This can be seen most clearly at [327] to [330] of the reasons.
We also reject the complaint that his Honour “failed to apply the principle the [sic] ‘addbacks ought to be the exception rather than the rule’ and he failed to explain what evidence created the exception in the present case”. There can be no doubt that his Honour accepted there will be “relatively few” cases where funds should be added back, since he said so at [335]. His Honour then went on to explain why he considered the evidence in the present case (or the lack of evidence from the husband and his family) led him to conclude that this was one of those “relatively few” cases.
For these reasons, we find no merit in Ground 2.
Our rejection of the first two grounds of appeal renders it unnecessary for us to consider Ground 3, which asserted error on the part of the trial judge in requiring the husband “to make an adjustment in favour of the wife against property which no longer exists, which is overvalued or which is not his”.
Grounds 4 and 5 – Contributions and “double dipping”
Grounds 4 and 5 concern the assessment of contributions and s 75(2) factors. Their focus is the trial judge’s treatment of the parties’ rent-free occupation of a home in Suburb O, which is held in the names of the husband’s parents and which the wife said was worth $720,000. The wife unsuccessfully asserted at trial that the husband’s parents had gifted the property to her and the husband.
Before moving into the Suburb O home, the husband and wife lived in a property in Suburb Y, which the wife bought in 2001, just before the commencement of cohabitation, for $183,000 with a mortgage of about $160,000. The parties moved to the newly constructed Suburb O home in March 2006, and lived there until their separation in November 2010. The wife and children eventually moved back to the Suburb Y property, and the husband remained in the Suburb O home.
The Suburb Y property was let after the parties moved to Suburb O. By the time of separation, the balance owing on the Suburb Y property had been reduced to $66,000. The wife then redrew funds, predominantly to meet legal costs, and by the time of trial there was $111,000 owing on the mortgage.
Ground 4 asserts error on the part of the trial judge by:
i)Treating the husband’s continued residence in his parents’ property [at Suburb O] as a factor relevant to the assessment of contribution-based entitlements (RFJ para 358); and/or
ii)“Double-dipping” by taking into account the husband’s continued residence in [the Suburb O] property at 2 stages (RFJ paras 358 and 363).
Ground 5 asserts that the trial judge also erred by:
making a contribution-based entitlement of 57.5% in favour of the husband:
a)Without adequate reasons;
b)Which was manifestly unjust and excessive (in favour of the wife);
c)Omitting consideration of the contribution represented by the provision of rent-free accommodation [in the Suburb O property].
These complaints require consideration of [348] to [376] of the reasons.
At [348] to [354], his Honour dealt with the financial contributions made by the parties, including the contribution by the husband at the commencement of the relationship of his interest in G Pty Ltd and a property in P Street. His Honour also referred to the contribution by the wife of her interest in the Suburb Y property.
Having completed his brief discussion of the financial contributions during the marriage, his Honour said:
353.Post separation, the position is more complex. Orders were soon made putting in place appropriate arrangements for the care of the children. The husband continues to assert that his wage is modest and is not the subject of any supplement by ongoing benefit provided by his family. The wife returned to the [Suburb Y] premises and it became her place of residence. The husband with the alleged consent of his parents, continues to reside in the [Suburb O] property. He does so rent free and without mortgage payment. I am uncertain as to the extent of the utility charges that he is responsible for, but taking into account the history, it is more likely than not that the [Georgiades] family in some manner or other pays for the husband’s ongoing utility expenses. I assume the husband pays his other outgoings.
After referring to authority concerning the significance of initial contributions, his Honour then turned to the non-financial contributions, but only to record at [355] that neither party had provided “significant evidence” concerning such contributions.
His Honour then briefly discussed contributions as parent and homemaker.
Finally, in two paragraphs which assume much importance in dealing with Grounds 4 and 5, his Honour weighed up the contributions (emphasis added):
358.On balance, there should be modest adjustment in favour of the husband to reflect his introduction into the relationship of his interests in [G] Pty Ltd and [P Street], which together now represent a significant proportion of the total property pool. That is however tempered by the advantage to the husband of his continued residence in the [Suburb O] property and the likelihood that the majority of his expenses both in respect of that property and otherwise are paid for by the [Georgiades] family business.
359. The wife has not had that advantage following separation.
His Honour then found at [360] that the contributions “should be recognised as 57.5/42.5 per cent in favour of the husband”.
His Honour next considered the s 75(2) factors. It is unnecessary to set out the full discussion, it being sufficient to record what was said relating to the Suburb O property:
362.… The difficulty that I have is that I do not accept that the husband has been full and frank in respect to the totality of his financial arrangements with his family and the [Georgiades] family business and it is likely in all the circumstances that he will continue to receive generous and substantial ongoing financial benefit. He continues to reside in the [Suburb O] property on terms that are most favourable to him. That will continue into the future. …
363.I do not consider that there is any likelihood that the husband will be asked to leave the [Suburb O] property and look for and fund his own accommodation.
364.The relationship between the husband and his family is particularly close and there is no suggestion that the extraordinary financial generosity of the husband’s parents towards him on the husband’s case, will not other than continue.
His Honour concluded that there should be an adjustment of 20 per cent in favour of the wife for the s 75(2) factors.
The initial complaint advanced under Ground 4 concerns his Honour’s obvious acceptance of the husband’s “continued” residence in a home owned by his parents as being a factor relevant to contributions.
The first thing to be said is that we consider his Honour was clearly directing his remarks only to the period following separation – i.e. November 2010 until the trial in 2014. This can be seen not only by reference to his Honour’s use of the word “continued”, but also by reference to [359] where the wife’s position post-separation was contrasted with that of the husband.
The second matter to be noted is that his Honour’s reference to the husband’s occupation of the parents’ home does not stand alone in this part of the reasons. Rather, it is allied with the finding concerning “the likelihood that the majority of [the husband’s] expenses both in respect of that property and otherwise are paid for by the [Georgiades] family business”.
Although we accept that his Honour’s remarks are somewhat cryptic, we understand him to be doing no more in this part of his reasons than drawing attention to the fact that the wife’s post-separation contributions were made in somewhat more difficult circumstances, as she did not enjoy similar benefits to those enjoyed by the husband. We do not see any basis for appellate interference, particularly in light of his Honour’s very strong findings about the failure of the husband to be “full and frank in respect to the totality of his financial arrangements with his family and the [Georgiades] family”.
The husband's second complaint under Ground 4 was that the trial judge engaged in “double-dipping” because, having taken into account the husband’s occupation of the Suburb O home while dealing with contributions, his Honour also took it into account in dealing with the s 75(2) factors.
There is no merit in this part of the argument. It is clear that in dealing with contributions, his Honour took into account the occupation of the Suburb O property up until the date of trial; but in dealing with the s 75(2) factors, his Honour took into account the likelihood that, in future, the husband would have the very substantial benefit of residing in that property rent-free.
The husband’s third complaint relates to the failure of the trial judge to take into account, as a contribution, the rent-free occupation of the Suburb O home during the marriage; and the fact that this allowed the parties to use the wife’s Suburb Y property as an investment asset, rather than as a residence.
Counsel for the wife argued there was no evidence that the parties had been able to acquire more assets as a result of having rent-free occupation of the Suburb O home. Furthermore, she submitted that the husband had not strongly agitated at trial for credit for the rent-free use of the property. We are not persuaded that there is merit in either of these propositions, since the provision of rent-free accommodation would seem to us to be a contribution worthy of consideration, and reference to the husband’s Case Outline indicates that he did seek credit for this factor.
Although we consider it would have been desirable for the trial judge to mention the advantage the parties enjoyed as a result of rent-free accommodation for a period in excess of four years, we do not consider this omission requires appellate intervention. Had his Honour turned his mind to this question, we consider he would inevitably also have taken into account other, highly material, countervailing factors.
In particular, although his Honour ultimately found that the funds for the construction of the home on the Suburb O property came from the husband’s parents, his Honour found that the husband project managed the entire building process. Indeed, his Honour recorded the husband’s own evidence that he had “worked tirelessly to build my parents’ property” (at [72]). There was no suggestion that the husband received any remuneration for this work, or that the wife received any remuneration for the more limited work she did during the construction process.
The parties’ rent-free accommodation also stands to be considered in light of the findings about the great uncertainty surrounding financial arrangements between the husband and his parents, including the husband’s assertion that he only received a very modest income for all his work in the family business (said to be only $33,000 per annum at the time of separation).
Grounds 4 and 5 lack merit.
The outcome and costs
There being no merit in any of the grounds, the appeal will be dismissed.
In the event that the appeal was dismissed, the wife sought an order for costs against the husband on a party-party basis. Counsel for the husband accepted that the only basis upon which he could oppose an order for costs was because of the husband’s financial circumstances.
We were informed that an order for costs was made following the trial, requiring the husband and the wife each to pay one half of the costs of the husband’s parents. A decision about costs, as between the husband and the wife, has been deferred pending the outcome of this appeal.
In our view, having been entirely unsuccessful, the husband should meet the wife’s costs of the appeal to be assessed, if not agreed, on a party-party basis.
I certify that the preceding ninety-three (93) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court (Thackray, Ryan & Kent JJ) delivered on 19 June 2015.
Associate:
Date: 19 June 2015