HODGES & HODGES

[2010] FamCA 220

FAMILY COURT OF AUSTRALIA

HODGES & HODGES [2010] FamCA 220

FAMILY LAW – PROPERTY – assets and liabilities of the parties – disclosure – where the wife alleges the husband has failed to make full and frank disclosure and has made incomplete discovery – where the wife submits that the husband has undisclosed interests in entities and undisclosed assets – whether funds received by the wife prior to the hearing should be treated as a partial property settlement and added back to the pool – where there is dispute regarding the liabilities of the parties

FAMILY LAW – PROPERTY SETTLEMENT – alteration of property interests – contributions – where the wife seeks an “accounting of the negative contributions” of the husband in depleting the assets of the parties since separation – conduct of the husband – contributions assessed as equal – no adjustment on account of s 75(2) factors – net asset pool to be divided equally

Family Law Act 1975 (Cth) ss 75(2) & 79
Family Law Rules 2004 (Cth) Chapter 13

Kannis and Kannis [2002] FamCA 1150 (reported in edited form at (2003) FLC 93-135)
Morrison and Morrison (1995) FLC 92-573
Weir and Weir (1993) FLC 92-338
Oriolo and Oriolo (1985) FLC 91-653
Gould and Gould (2007) FLC 93-333
Chang v Su (2002) FLC 93-117
Antmann and Antmann (1980) FLC 90-908
Kowaliw and Kowaliw (1981) FLC 91-092
Browne and Green (1999) FLC 92-873
Ziano and Ziano [2007] FamCA 339
Waters and Jurek (1995) FLC 92-635
JEL and DDF (2001) FLC 93-075
Phillips and Phillips (2002) FLC 93-104

APPLICANT: Ms Hodges

RESPONDENT: Mr Hodges

FILE NUMBER: ADF 3134 of 2002

DATE DELIVERED: 12 March 2010

PLACE DELIVERED: Adelaide

PLACE HEARD: Adelaide

JUDGMENT OF: Strickland J

HEARING DATE:

11-13 September 2007

9-11 January 2008
29-31 January 2008

26-27 May 2008
26 September 2008

20 January 2010
24 February 2010
11 March 2010

REPRESENTATION

COUNSEL FOR THE APPLICANT: Ms Pyke QC

SOLICITOR FOR THE APPLICANT: Norman Waterhouse

COUNSEL FOR THE RESPONDENT: Mr Holland

SOLICITOR FOR THE RESPONDENT: Howe Martin & Associates

Orders

UPON NOTING

That it is agreed between the parties that if it is necessary to record, procedural fairness has been afforded to D Group Pty Ltd as Trustee of the Hodges Family Settlement and to ACN … Pty Ltd in respect of the funds held in HSBC account no. …71 and HSBC account no. …02 pursuant to s 90AE(3) of the Family Law Act 1975.

IT IS ORDERED

1. That the funds in the HSBC accounts nos. …71 and …02 be withdrawn forthwith by the parties and disbursed as follows:

   1.1If not already paid, the sum of NINE THOUSAND THREE HUNDRED AND EIGHTY EIGHT DOLLARS [$9388.00] to the Australian Taxation Office in payment of the PAYG Income Tax Installment Second Quarter 2010 due on 1 March 2010;

   1.2The sum of FORTY FIVE THOUSAND ONE HUNDRED AND TWENTY SIX DOLLARS [$45,126.00] to the Australian Taxation Office in payment of the tax payable by parties on or about 31 March 2010 as Trustees of the funds held in the said HSBC account no. …071;

   1.3From the total amount then available of ONE MILLION SEVEN HUNDRED AND THREE THOUSAND SIX HUNDRED AND FORTY TWO DOLLARS [$1,703,642.00] comprising ONE MILLION FOUR HUNDRED AND NINETY SIX THOUSAND FOUR HUNDRED AND FIFTY TWO DOLLARS [$1,496,452.00] in the said HSBC account no. …71 and TWO HUNDRED AND SEVEN THOUSAND ONE HUNDRED AND NINETY DOLLARS [$207,190.00] in the said HSBC account no. …02, the sum of FIFE HUNDRED AND SEVENTY THOUSAND EIGHT HUNDRED AND NINETY ONE DOLLARS [$570,891.00] to the wife and the sum of ONE MILLION SEVENTY EIGHT THOUSAND TWO HUNDRED AND THIRTY SEVEN DOLLARS [$1,078,237.00] to the husband.

2. That the wife retain as her sole property absolutely free of any claim, right, interest, demand, or entitlement of the husband the following:

   2.1Her interest in the house property situated at O Street in the State of Victoria;

   2.2Her interest in the home unit property situated at M Street in the said State;

   2.3All funds received by her to date;

   2.4Her investments and savings;

   2.5Her jewellery;

   2.6Her furniture and effects.

3. That the husband retain as his sole property absolutely free of any claim, right, interest, demand, or entitlement of the wife the following:

   3.1His furniture and effects;

   3.2His jewellery;

   3.3All funds received by him to date;

   3.4His investments and savings.

4. That forthwith upon receipt of his share of the monies in the said HSBC accounts the husband:

   4.1Pay to the wife the sum of SEVEN THOUSAND SEVEN HUNDRED AND SEVENTY EIGHT DOLLARS AND TWENTY FIVE CENTS [$7778.25] in satisfaction of the requirement that he reimburse the said HSBC account no. …71 with the amount paid to X Hodges in payment of his indebtedness to her;

   4.2Pay to Revenue SA the sum of TWENTY NINE THOUSAND SIX HUNDRED AND FORTY DOLLARS [$29,640.00] being the amount of Payroll Tax due by GS Pty Ltd and DB Pty Ltd.

5. That the husband do indemnify the wife and keep her indemnified against any liability to the children Z Hodges and X Hodges.

6. That the husband, GS Pty Ltd and DB Pty Ltd do jointly and severally indemnify the wife and keep her indemnified against any liability for Payroll Tax to Revenue SA.

7. That forthwith upon receipt of her share of the monies in the said HSBC accounts the wife pay to her sister MD the sum of TWENTY ONE THOUSAND FIVE HUNDRED AND EIGHTY TWO DOLLARS [$21,582.00] being the debt due by the wife to her, and the wife do indemnify the husband and keep him indemnified against any liability in relation to the said debt.

8. That the husband do pay and discharge any debt or loan due and owing to:

   8.1The Estate of H Hodges;

   8.2LK;

   8.3J Hodges;

   8.4T & Y;

   and do indemnify the wife and keep her indemnified against any liability for any such debt or loan.

9. That the husband do pay the amount of ONE HUNDRED AND SIXTY THOUSAND EIGHT HUNDRED AND THIRTY FOUR DOLLARS [$160,834.00] to S Firm in relation to any accounts for fees rendered by that firm to the husband and/or any entity in the Hodges Group of Companies and the husband do indemnify the wife and keep her indemnified against any liability for any such amount.

10. That the wife do pay the amount of TWO THOUSAND TWO HUNDRED AND TWENTY FOUR DOLLARS AND TWENTY CENTS [$2224.20] to S Firm in satisfaction of Invoice no. …:997 dated 18 June 2003 and the wife do indemnify the husband and keep him indemnified against any liability for this invoice.

11. That the husband do forthwith pay the sum of FIFTEEN THOUSAND FIVE HUNDRED AND FIFTY SIX DOLLARS AND FIFTY CENTS [$15,556.50] to Z Hodges in satisfaction of the husband’s indebtedness to him, and the husband do indemnify the wife and keep her indemnified against any liability of the husband to Z Hodges.

12. That in the event that the payment of the same is sought to be enforced and in fact becomes payable the husband do pay:

    12.1The sum of FORTY THOUSAND DOLLARS [$40,000.00] to U Nominees Pty Ltd and accrued interest (if any) in satisfaction of the alleged loans made by that company to N Pty Ltd (now ACN … Pty Ltd); and

    12.2The sum of SIXTY SEVEN THOUSAND SEVEN HUNDRED AND FORTY DOLLARS [$67,740.00] to Q Inc and accrued interest (if any) in satisfaction of the alleged loan made by that company to N Pty Ltd (now ACN … Pty Ltd); and

    and the husband do indemnify the wife and keep her indemnified against any liability for the said alleged loans and any accrued interest.

13. That in the event that the debt allegedly due and owing by K Company Pty Ltd to F Inc is sought to be enforced and in fact becomes payable the husband do pay and discharge the same including any accrued interest, penalties and costs, and the husband and K Company Pty Ltd do jointly and severally indemnify the wife and keep her indemnified against any liability for the said alleged debt and any accrued interest, penalties and costs.

14. That in the event that the debt allegedly due and owing by GS Pty Ltd to MV is sought to be enforced and in fact becomes payable, the husband do pay and discharge the same including any accrued interest, penalties and costs and the husband do indemnify the wife and keep her indemnified against any liability for the said alleged debt and any accrued interest, penalties and costs.

15. That upon the same becoming due and payable the wife do pay any Capital Gains Tax assessed against her as a result of the sale of the said property situated at M Street, and the wife do indemnify the husband and keep him indemnified against any liability for any such Capital Gains Tax.

16. That the wife make all payments required pursuant to the mortgage secured over the title to the said property situated at M Street and pay all rates and taxes, insurance premiums, and any other assessments, fees or charges payable by her in relation to the said property, and the wife do indemnify the husband and keep him indemnified against all such payment.

17. That in the event that there is any further tax or late lodgement penalties or general charges due and payable to the Australian Taxation Office in respect of interest income earned by the parties as Trustees in relation to either of the said HSBC accounts the parties do each pay one half of any such tax, penalties or charges forthwith upon the same becoming payable, and they do each indemnify the other of them against payment of one half of such amounts as are payable.

18. That the husband and D Group Pty Ltd do indemnify the wife and keep her indemnified with respect to any and all monies due and owing to them collectively by ACN … Pty Ltd arising out of the sale of the manufacturing business operated by N Pty Ltd on 31 May 2006.

19. That all applications and responses be dismissed and removed from the active pending cases list.

IT IS NOTED that publication of this judgment under the pseudonym Hodges & Hodges is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)

FAMILY COURT OF AUSTRALIA AT ADELAIDE

FILE NUMBER: ADF 3134 of 2002

MS HODGES

Applicant

And

MR HODGES

Respondent

REASONS FOR JUDGMENT

Introduction

1. I have before me competing applications for property settlement.

2. The applicant wife filed her Further Amended Application for Final Orders on 3 August 2007 however she is now seeking the orders set out in the document titled “Final Orders Sought by the Wife as at 24 February 2010”, tendered by counsel for the wife on that day as follows:

   “[D] Group Pty Ltd as Trustee of The [Hodges] Family Settlement

   1.Noting that:

1.1    In respect of funds held in HSBC Account No […]71 in the joint names of the parties (as trustees for and on behalf of [D] Group Pty Ltd as trustee of the [Hodges] Family Settlement), the parties have earned and will continue to earn interest income up to the date upon which the said account is closed; and

1.2    The parties have agreed in their capacities as Trustees to debit from the said account all tax, and late lodgement penalties and general charges if any due and owing to the Australian Taxation Office in respect of the interest income earned by them as trustees up to and including the date of closure of the said account; and 

1.3 Procedural fairness has been afforded to [D] Group Pty Ltd as Trustee of the [Hodges] Family Settlement pursuant to Section 90AE(3) of the Family Law Act;

the balance of funds remaining in the said account as at the date of its closure be paid to the wife.

Proceeds of Sale of [N] Pty Ltd (now known as ACN […] Pty Ltd) 

2.Noting that:

2.1    In respect of funds held in HSBC Account No Account No […]02 ordered to be invested in the joint names of the parties (as Trustees for and on behalf of A. C. N. […] Pty Ltd) pursuant to paragraph 2 of the Order of this Honourable Court on 31 May 2006 but in fact invested in the name of ACN […] Pty Ltd, the said company has earned and will continue to earn interest income up to the date upon which the said account is closed; and

2.2    The parties have agreed in their capacities as Trustees to debit from the said account all tax, late lodgement penalties and general charges due and owing to the Australian Taxation Office in respect of the interest income earned by them as Trustees up to and including the date of closure of the said account; and 

2.3 Procedural fairness has been afforded to A C N […] Pty Ltd pursuant to Section 90AE(3) of the Family Law Act;

the balance of funds remaining in the said account as at the date of its closure be paid to the wife.

3.That the husband and [D] Group Pty Ltd as the former collective owners of an 80% interest in the manufacturing business operated by [N] Pty Ltd (ACN […]) do indemnify the wife and keep her forever indemnified with respect to any and all monies due and owing to them collectively by ACN […] Pty Ltd arising out of the  sale of the said business on 31 May 2006.

Alleged Matrimonial Debts

Revenue SA Payroll Tax 

4.That in respect of the Payroll Tax debt of $29,640 alleged by the husband to be owed by [GS] Pty Ltd and [DB] Pty Ltd to Revenue SA:

4.1    the husband do personally pay such debt; and

4.2    hereafter the husband, [GS] Pty Ltd and [DB] Pty Ltd do jointly and severally indemnify the wife and keep her forever indemnified in relation to such liability.

Estate [H Hodges]

5.That in respect of numerous loans from the Estate of [H Hodges] totalling $97,500 alleged to have been taken out by the husband between 18 October 2001 and 9 April 2002 and on lent by the husband to various entities within the [Hodges] Group of Companies:

5.1    the husband and/or the said [Hodges] Group entities do repay such loans; and

5.2    hereafter the husband and the said [Hodges] Group entities do jointly and severally indemnify the wife and keep her forever indemnified in relation to such liability.

Loan [LK]

6.That in respect of numerous loans from [LK] totalling $60,000 alleged to have been taken out by the husband between 18 October 2001 and 29 November 2001 and on lent by the husband to various entities within the [Hodges] Group of Companies:

6.1    the husband do repay such loans; and

6.2    hereafter the husband and the said [Hodges] Group entities do jointly and severally indemnify the wife and keep her forever indemnified in relation to such liability.

Special Loan [J Hodges] 

7.That in respect of a loan from [J Hodges] in the sum of $20,000 not evidenced in writing and alleged to have been taken out by the husband on a date unknown to the wife and on lent by the husband to various entities within the [Hodges] Group of Companies:

7.1    the husband do repay such loan; and

7.2    hereafter the husband and the said [Hodges] Group entities do jointly and severally indemnify the wife and keep her forever indemnified in relation to such liability. 

Special Loan [T & Y]  

8.That in respect of a loan from [T & Y] in the sum of $25,000 not evidenced in writing and alleged to have been taken out by the husband on a date unknown to the wife and on lent by the husband to various entities within the [Hodges] Group of Companies:

8.1    the husband do repay such loan; and

8.2    hereafter the husband and the said [Hodges] Group entities do jointly and severally indemnify the wife and keep her forever indemnified in relation to such liability. 

[Q] Inc

9.That in respect of a loan not evidenced in writing and alleged by the husband to have been taken out by [N] Pty Ltd (now known as ACN […] Pty Ltd) from [Q] Inc (USA) in the sum of $67,740 on a date unknown to the wife:

9.1    the husband do repay such loan; or 

9.2    in the  alternative, and expressly subject to the Orders sought in paragraph  2 hereof, ACN […] Pty Ltd do repay such loan; and

9.3    hereafter the husband and ACN […] Pty Ltd do jointly and severally indemnify the wife and keep her forever indemnified in relation to such liability.  

[S Firm] Accountants  

10.That in relation to professional accounting fees in the total sum of $163,058.60 alleged by the husband to be due and payable as at 23 April 2007 to [S Firm] Accountants by the wife or the husband or various entities in the [Hodges] Group of Companies:

10.1  in respect of [S Firm] Invoice No […]:997 dated 18 June 2003 in the sum of $2,224.20 directed to the wife (“the said invoice”):

10.1.1   upon the making of final orders for property settlement herein, the wife do meet payment of only $200 in respect of the said invoice; and

10.1.2   the husband and the said [Hodges] Group entities do pay the balance of the said invoice, namely $2,024.20; and 

10.1.3   hereafter the wife do indemnify the husband and keep him forever indemnified in relation to the sum of $200 only of the invoiced amount for which she admits she is personally liable; and

10.1.4   hereafter the husband and the said [Hodges] Group entities do jointly and severally indemnify the wife and keep her forever indemnified in respect of the balance of the said invoice.  

10.2in respect of the balance of professional accounting fees alleged by the husband to be due and owing by the husband and/or various entities comprising the [Hodges] Group of Companies to [S Firm] Accountants as at 23 April 2007:

10.2.1   the husband and the said [Hodges] Group entities do pay the said balance; and

10.2.2   hereafter the husband and the said [Hodges] Group entities do jointly and severally indemnify the wife and keep her forever indemnified in relation to such liability.

[F]Inc

11.That in respect of two alleged loans from [F] Inc totalling $1,360,126.85 inclusive of accrued interest as at 24 January 2007 alleged to have been taken out by [K] Company Pty Ltd in 1996 and 1998 and on lent by the husband to various entities within the [Hodges] Group of Companies:

11.1  the husband do repay such loans; and

11.2  hereafter the husband, [K] Company Pty Ltd and the said [Hodges] Group entities do jointly and severally indemnify the wife and keep her forever indemnified in relation to such liability.

[MV]

12.That in respect of royalties allegedly due and owing by [GS] Pty Ltd to [MV] pursuant to an agreement not evidenced in writing for the alleged use in Australia of the intellectual property of [SP] Inc (USA) on dates unknown to the wife:

12.1  the husband and/or [GS] Pty Ltd do pay such liability; and

12.2  hereafter the husband and [GS] Pty Ltd do jointly and severally indemnify the wife and keep her forever indemnified in relation to such liability. 

[U] Nominees Pty Ltd – [R Hodges]

13.That in respect of two alleged loans from [U] Nominees Pty Ltd each in the sum of $20,000 alleged to have been taken out by [N] Pty Ltd (now ACN […] Pty Ltd) on 3 February 2000 and 24 July 2002:

13.1  the husband do repay such loans and accrued interest (if any); or 

13.2  in the alternative, and expressly subject to the Orders sought in paragraph 2  hereof, ACN […] Pty Ltd do repay such loans and accrued interest (if any); and

13.3  hereafter the husband and ACN […] Pty Ltd do jointly and severally indemnify the wife and keep her forever indemnified in relation to such liability.  

Real Estate

14.That the wife do retain the following without any further claim by the husband:

14.1  Her 50% interest in the house property situated at [O Street] in the state of Victoria (“the [O Street] property”); and

14.2  Her 25% interest in the home unit property situated at [M Street] in the state of Victoria (“the [M Street] property”).

15.That the wife do indemnify the husband and keep him forever indemnified in relation to the mortgage loan in her sole name in favour of the Commonwealth Bank registered against the title to the [M Street] property.

Sundry Assets

16.That the wife do retain the following without any further claim by the husband:

16.1  All funds already received by her to date;

16.2  Her savings, if any.

16.3Her jewellery.

16.4All items of furniture and effects, including art work, in her possession.

[X] and [Z] [Hodges]

17.That in respect of the sum of $31,113 due and owing by the husband to the children of the marriage [X Hodges] and [Z Hodges] (being the net proceeds of sale of shares originally purchased by the husband with monies bequeathed to the children by their late grandmother and held on trust by the husband for the benefit of the children until the said shares were sold by the husband without the children’s knowledge or consent):

17.1  In respect of [Z Hodges], the husband do pay [Z] the sum of $15,556.50 plus interest at such rate and for such period as is determined by this Honourable Court.

17.2Upon noting that in respect of [X Hodges]:

17.2.1   the husband has since 25 February 2009 progressively paid [X] the sum of $15,556.50 (“the said sum”) in part payment of his indebtedness to her (such sum being debited from HSBC Account No […]71 opened in the joint names of the parties as trustees for and on behalf of [D] Group Pty Ltd as trustee of the [Hodges] Family Settlement); and

17.2.2   the wife has duly executed all such documents as were necessary to enable the husband to withdraw the said sum from the said HSBC account on certain terms and conditions, namely:

17.2.2.1  that upon final orders being made in these proceedings the said sum of $15,556.50 would be refunded by the husband into the said HSBC Account; and

17.2.2.2  the said sum, together with the remaining balance in the said account, would then be divided between the parties by Order of this Honourable Court by way of final property settlement orders;

the husband:

(i)     do pay [X] interest on the said sum of $15,556.50 at such rate and for such period as is determined by this Honourable Court; and

(ii)do repay into HSBC Account No […]71 the sum of $15,556.50

18.That the husband do indemnify the wife and keep her forever indemnified in relation to his said liability to the children.  

Costs

19.That the husband do pay the wife’s costs.

Other Orders

20.Such further or other orders as this Honourable Court deems fit.”

1. The basis of the wife seeking orders against various entities is that the husband is the alter ego of these entities and that is not disputed by the husband.

2. The husband filed his Further Amended Response on 8 August 2007 seeking orders as follows:

   “1.That in full settlement of any claim that either party may have for settlement of property or alteration of interests in property:

   1.1That the assets of the parties be divided equally between them after payment of the following amounts:-

   1.1.1Revenue SA Payroll Tax  $29,330.00

   1.1.2Estate [H Hodges]  $97,500.00

   1.1.3Loan [LK]  $65,000.00

   1.1.4Special loan [J Hodges]  $20,000.00

   1.1.5Special loan [T & Y]  $25,000.00

   1.1.6[Q] Inc  $184,713.00

   1.1.7[S Firm]  $119,336.00

   1.1.8[F] Inc

   1.1.8.11996 Note  $510,241.31

   1.1.8.21998 Loan Agreement      $849,885.54

   1.1.9[MV] (Royalties)  $157,372.15

   1.1.10[ G Lawyers]  $14,503.80

   1.1.11[W Nominees]  $1,881.00

   1.1.12    [I] Nominees Pty Ltd  $40,000.00

   1.1.13    Australian Taxation Office             $148,000.00

   1.1.14    Loan – [LK] (Children)  $31,000.00

   2.  That the wife do pay the husband’s costs incidental to these proceedings.

   3.  Such further or other orders as this Honourable Court deems fit.”

3. During final addresses the husband’s position changed in relation to the liabilities to be paid out first given that some had been paid out by then and the figures had changed with others. This changed again as set out in an amended statement of assets and liabilities annexed to a letter dated 27 July 2009 (Exhibit W94) and this was updated at the hearing on 24 February 2010 and in a statement provided to the Court on 3 March 2010. The liabilities that he now says should be paid out are as follows:

   Wife’s debt to sister  $21,582

   Wife’s share of the mortgage liability in respect of the

   M Street property  $9,943

   Estate H Hodges   $97,500

   Loan LK  $65,000

   Loan J Hodges  $20,000

   Loan T & Y  $25,000

   Revenue SA  $29,640

   Q Inc  $67,740

   F Inc (judgment)  $1,334,750

   MV  $86,927

   U Nominees Pty Ltd  $40,000

   Australian Taxation Office  $54,514

   S Firm  $163,058

   Z and X Hodges  $31,113

   CGT on the sale of the property at M Street  $16,275

4. Given the orders sought by the husband as to the payment of liabilities to a number of third parties and the dispute between the parties about that, during the course of the proceedings it was canvassed with counsel whether the third parties should be joined as parties to the proceedings. It was agreed that there was no need for that but the opportunity should be given to those persons and entities to intervene if so advised. Accordingly, on 16 May 2007 I made an order that the husband serve his Amended Response and the Further Amended Application of the wife on the third parties. That was duly attended to and I refer to the affidavit of the husband’s solicitor filed on 31 May 2007.

5. On 14 June 2007 a notice of intervention was filed by the three adult children of the husband’s first marriage, but that related to an issue other than the payment of any liabilities, and was ultimately disposed of by orders made on 8 August 2007. Separate to that a number of the third parties did file notices of intervention on 14 June 2007, namely, the Estate of H Hodges, T and Y, J Hodges, LK, S Firm, W Nominees Pty Ltd and G Lawyers. The first four were allegedly owed money by the husband and last three were allegedly owed money by N Pty Ltd. On 18 June 2007 I made an order that within 14 days each of the third parties who had filed notices of intervention file and serve an application setting out the orders sought by each of them together with an affidavit in support of that application. On 29 June 2007 the three alleged creditors of N Pty Ltd took up that opportunity and filed a joint application and a supporting affidavit. However, the four alleged creditors of the husband did not take up this opportunity and no application was filed.

6. In relation to the application filed by S Firm, W Nominees Pty Ltd and G Lawyers, an order was made with the consent of the wife and those third parties on 7 August 2007 that the amounts due to those third parties be paid by the husband and the wife from the funds invested in HSBC account no. …02 standing to the credit of the husband and the wife as trustees for ACN … Pty Ltd.

Factual background

1. The husband was born in 1942 and is currently aged 68 years. 

2. The wife was born in Europe in 1947 and is currently aged 62 years.

3. The wife migrated to Australia in 1962.

4. In 1963 the husband became a director and shareholder of BM Pty Ltd. BM Pty Ltd owned a business at BM which the husband was responsible for running on a day to day basis.

5. The husband married Ms P in 1967. There were three children of that relationship.  The husband and Ms P were divorced in 1982.

6. In 1971 Hodges Nominees Pty Ltd was incorporated by the husband’s father.

7. In 1972 the husband established the E Foundation through the General Trust Company in Europe with a view to it being an investment vehicle for funds from Australia.

8. The parties met in Europe in 1972.

9. In 1973 K Company Pty Ltd was incorporated, with the husband as director and shareholder. The company purchased land in the upper south east of South Australia.

10. In March 1974 the husband set up the company FP Limited.

11. In 1977 the husband established the Hodges Family Settlement. The trustee was P Nominees Pty Ltd.

12. The parties commenced cohabitation in 1979. They resided in a rental property in South Australia.

13. After commencing cohabitation the wife commenced studies at Flinders University and was supported by the husband.

14. The wife states that between 1979 and 1982 the parties travelled several times to the United States of America. The parties met the American solicitor Mr BH over this period. 

15. In 1979 the husband requested that Mr BH set up a company such that it would obtain favourable taxation outcomes on any United States investments. This company was set up and was called DP Incorporated and was a subsidiary of FP Limited.

16. While the parties were in the United States they purchased land and house properties in the name of DPIncorporated. The husband states that the initial capital of DP Incorporated was provided by FP Limited and that a loan facility was established with Standard Chartered Bank in Zurich. The husband states that the land was sold to a French group prior to development.

17. The husband states that I Corporation and N Investments Inc were established in the United States by Mr BH on behalf of the husband. The husband’s case was that I Corporation was not used and was abandoned in 1986, and that N Investments Inc was used in 1998 to purchase and hold shares in SP Inc. The husband states that these entities fell under the E Foundation umbrella and that he was not directly involved in any of these transactions.

18. In September 1980 F Inc was incorporated in the United States of America. The husband says that he has no interest or involvement in this company.

19. On 22 October 1980 F Inc purchased the husband’s brother’s share in K Company Pty Ltd for $350,000.

20. In 1982 the Hodges Family Settlement purchased the former matrimonial home for $325,000 or $350,000. The purchase price was provided by loans from BM Pty Ltd and FAP Pty Ltd together with some vendor finance.

21. Also in 1982 the parties purchased interests in properties in Victoria. The parties purchased a 50% share of a property at O Street in Melbourne, the other 50% being held by the wife’s sister and brother in law. The parties’ interest was registered in the name of the wife. The parties also purchased a 25% share in a property in M Street Victoria which share was also registered in the name of the wife.

22. The parties were married in 1982.

23. At the time of the marriage, the husband was managing director of BM Pty Ltd and was responsible for the day to day running of the business. The husband was also employed as Works Manager for an export company.  The husband was a director of FP Limited (which owned two home units on the Gold Coast) and FAP Pty Ltd. The husband states that at the date of marriage the Hodges Family Settlement owned 10% of the shares of BM Pty Ltd, 50% of the shares in K Company Pty Ltd, 100% of the shares in FP Limited, and 25% of the shares in FAP Pty Ltd.

24. At the time of the marriage, the wife was not employed and held no assets apart from a Honda motor vehicle.

25. The parties’ child Z HODGES was born in 1985 and is currently aged 24 years.

26. In 1985 the husband established the Hodges Trust with D Group Pty Ltd as trustee.

27. The parties’ child X HODGES was born in 1986 and is currently aged 23 years.

28. In 1987 the husband sold his interest in BM Pty Ltd and FAP Pty Ltd and received approximately $2.5 million. The husband ceased working and the parties lived in Surfers Paradise for three months and then in Europe for three months in 1988.

29. Following the sale of the BM business, the husband commenced a contract with the purchaser of BM Pty Ltd and worked as a consultant for approximately 12 months.

30. On 29 January 1988 the husband and the wife signed a Memorandum of Wishes in relation to the E Foundation.

31. The husband states that on 25 February 1988 he transferred control of the E Foundation to his daughter Ms T.

32. From about 1988 to 1990 extensive renovations were undertaken at the former matrimonial home, at a total cost of approximately $800,000.

33. The wife states that in the late 1980s K Company Pty Ltd purchased more land in upper south east South Australia.

34. The wife became a director of K Company Pty Ltd in 1989.

35. In 1990 the husband acquired the company Hodges Nominees Pty Ltd from his father.

36. In 1990 the wife became a director of D Group Pty Ltd.

37. Also in 1990 R Constructions Pty Ltd was incorporated.

38. In 1992 the husband set up a company named AS Pty Ltd in order to purchase the intellectual property from N Manufacturing Pty Ltd as it had gone into liquidation. AS Pty Ltd later changed its name to N Pty Ltd.

39. In 1992 the wife was appointed a director of Hodges Nominees Pty Ltd which changed its name later that year to DK Development Pty Ltd. On the husband’s case this company ceased trading in 1992.

40. In August 1994 Q Inc was incorporated in the United States by the wife’s brother, Mr D. The company was set up to act as an agent for the sale of N products in the United States.

41. On 21 February 1996 F Inc allegedly lent $150,000 to K Company Pty Ltd.

42. In 1997 K Company Pty Ltd sold one of the three properties it held in the upper south east of South Australia. 

43. In December 1997 GS Pty Ltd was incorporated with the husband and Mr FJ as directors. The shareholders were effectively the Hodges Trust and the FJ Trust.

44. Throughout 1997 the wife states that she was involved in caring for the husband’s sister who was terminally ill with cancer.

45. In 1998 FP Limited changed its name to DB Pty Ltd, and was set up as a company for the purpose of importing products into Australia. The wife was appointed a director.

46. In 1998 the parties ceased making the mortgage payments on the M Street property.

47. On 18 March 1998 F Inc allegedly lent $150,000 to K Company Pty Ltd and on 12 June 1998 a further $285,000 was allegedly lent.

48. In October 1998 K Company Pty Ltd sold the remaining properties it held at upper south east South Australia for approximately $1.92 million including plant and equipment and stock. The proceeds of the sale of these properties were paid into the accounts of DB Pty Ltd ($130,000), GS Pty Ltd ($120,000), AS Pty Ltd ($882,083), D Group Pty Ltd ($180,000), K Company Pty Ltd ($160,000) and again D Group Pty Ltd ($300,000) in late 1998 and early 1999.

49. In 1998 the husband purchased shares in a United States company described in the documents as SP Inc but it seems actually called … Inc (see Exhibit W73). The husband states that this was done by DP Incorporated loaning funds to N Investments Inc and having that company purchase the shares.

50. In 1999 the husband set up GS Unit Trust with GS Pty Ltd as trustee. The Hodges Trust held 90% of the units in the trust.

51. In January 2000 Mr FJ was appointed co-director of AS Pty Ltd. 

52. In or about July 2000 AS Pty Ltd changed its name to N Pty Ltd.

53. In 2001 SP Inc went into liquidation and the husband states that his investment was lost.

54. On 24 May 2002 the husband sold shares held on trust by his sister for his children for $31,113.21. The husband says that the inheritance of the children of the marriage of $25,000 from the husband’s parents was used to purchase these shares.

55. The parties separated under the one roof on 24 June 2002.

56. The wife filed her Application for Final Orders seeking orders for property settlement on 5 April 2002.

57. In July 2002 the husband called a meeting in order to remove the wife as a director of D Group Pty Ltd, DK Development Pty Ltd, K Company Pty Ltd and DB Pty Ltd. 

58. On 22 July 2002, consent orders were made by JR Forbes providing for an injunction restraining the wife from being removed as a director of the entities listed above at paragraph 65. The injunction also restrained the parties from dealing with any interest in the entities other than in the ordinary course of business. The order also provided for paintings owned by D Group Pty Ltd and/or DB Pty Ltd to be sold and the proceeds divided $20,000 to each party’s solicitor with the balance to be held in a joint bank account.  Orders were made for the sale of the former matrimonial home.

59. The parties physically separated in November 2002. The husband moved out of the former matrimonial home.

60. A further order was made by consent on 5 December 2002 providing that the wife be permitted to withdraw $800.00 per week for personal expenses from the investment account into which the monies from the sale of the paintings were paid, and for the withdrawal of monies to pay outgoings in relation to the former matrimonial home. Further injunctions were also made, restraining the carrying on of the businesses of GS Pty Ltd, N Pty Ltd and D Group Pty Ltd save and except in the ordinary course of business.

61. In March 2003 the wife ceased being a director of D Group Pty Ltd, DK Development Pty Ltd, K Company Pty Ltd and DB Pty Ltd.

62. The husband says that on 30 June 2003 he made a distribution from the Hodges Family Settlement to the children of his first marriage in the sum of $240,574, pursuant to a court order.

63. On 14 July 2003 the parties sold a number of paintings and they each received $16,920 from the proceeds of sale.

64. On 15 October 2003 an order was made by consent by way of partial property settlement.

65. On 7 November 2003 each party received $13,000.

66. In December 2003 the former matrimonial home was sold for $3.2 million with net proceeds of $1.67 million. As per the order of 15 October 2003, the parties each received $100,000 and the balance was paid into a joint bank account in the names of the parties on trust for the Hodges Family Settlement. 

67. On 15 March 2004 the parties sold various items of furniture, with each party receiving $5125.

68. On 2 December 2004 a valuation report was produced by Mr HP Accountant regarding the value of the husband’s interest in the Hodges Group of companies.

69. The wife alleges that in the period from 1996–2004 the husband made payments to three different women through overseas bank accounts amounting to a total of $165,364. The wife states that the husband had personal relationships with these women.

70. Orders were made on 31 May 2006 providing for the sale of the business and name of N Pty Ltd for $200,000. On that day the proceeds of sale of $200,000 were invested in the joint names of the parties as trustees for the company, now known as ACN … Pty Ltd.

71. In 2006 the wife moved to reside in Melbourne. The wife resides with her sister in rent free accommodation.

72. On 23 January 2007 F Inc issued proceedings against K Company Pty Ltd in the United States for the payment of amounts loaned by F Inc to K Company Pty Ltd.

73. In June 2007 a default judgment was entered for F Inc against K Company Pty Ltd for $600,000 plus interest of $420,671.04 and outstanding costs, a total of $1,073,325.29. Interest continues to accrue on this amount at US$116.64 per day.

74. On 29 June 2007 the three children from the husband’s first marriage, Ms T, J Hodges and Ms O filed an application seeking an order that the husband and the wife remit to D Group Pty Ltd as trustee of the Hodges Family Settlement the balance of the proceeds of sale of the former matrimonial home on the basis that they were entitled to those proceeds as the default income beneficiaries of the Hodges Family Settlement.

75. The hearing of this application commenced on 6 August 2007, but on 7 August 2007 the applicants sought to withdraw their application. On 8 August 2007 an order was made dismissing the application and an order for costs was made in favour of the wife against the applicants.

The current circumstances of the parties

The wife

1. The wife continues to live with her sister in the property at M Street in Victoria in which she has a 25% interest.

2. At the time of the hearing the adult child X was also living there with the wife.

3. The wife is not employed and she receives government benefits. She also receives rent from the property at O Street in Victoria. She also has the use of a Mercedes Benz motor vehicle.

The husband

1. The husband has been living in a property owned by his daughter Ms T and her husband. The rent is $100 per week but that is not being paid and a debt is accruing. The husband cannot stay there over Christmas periods because it is otherwise let out, but at those times he stays with his brother.

2. The husband is not employed and he receives the age pension. He commenced to receive this pension in late 2006.

3. The husband does do some work for his daughter’s business UY Business. He does not receive payment for the work but his expenses are paid. The business also pays his motor vehicle expenses including lease payments. That motor vehicle is a Holden Astra which was previously leased by GS Pty Ltd, but the lease was taken over by UY Pty Ltd in the 2006/2007 financial year.

The issues in dispute

The assets and liabilities of the parties

1. The primary dispute here is in relation to the allegations made by the wife that the husband has failed to disclose all of his assets. She claims that he either has assets or he has the control of assets through various entities both in Australia and overseas which would far exceed the value of the assets disclosed. The wife says that she is not able to identify these assets or where they are situated because of the husband’s failure to provide full and frank disclosure in these proceedings, and particularly in relation to the disposition of substantial assets and his financial dealings generally. She says that the husband is the person who has all of the relevant information but he has failed to disclose that.

2. The husband denies these allegations and says that he has fully disclosed the assets that he has, and he has provided all the information that he is able to in relation to historical transactions and his current financial circumstances.

3. The parties are indispute as to how some of the funds received by the wife prior to the commencement of the hearing should be treated. Pursuant to an order made on 5 December 2002 the wife received an amount of $9702.50 over a period of time. The husband says that this should be taken into account as a partial property settlement but the wife says it should be treated as spousal maintenance. Further, in June 2004 and July 2006 the wife received respectively amounts of $3000 and $12,100 by way of rent from the O Street property in Victoria. The husband says that these amounts should also be treated as partial property settlements and the wife says otherwise. The wife says that she used this money to meet her ongoing living expenses in the absence of any spousal maintenance from the husband.

4. Apart from this issue the parties are in dispute as to the various liabilities that the husband says must be paid before the parties can access the proceeds of sale of the former matrimonial home and of the company N Pty Ltd. The wife denies that many of the liabilities are legitimate debts, she denies that they are all “debts of the marriage”, and she says that she should not be responsible for the payment of any of them.

5. The wife alleges that the business and name of the company N Pty Ltd was sold by the husband for an under-value. The husband denies this, and at this point I indicate that I accept the husband’s and Mr S’s evidence about this. The husband had no choice but to accept the proposal of Mr FJ. If he did not then it was almost certain that the husband would receive nothing for his interest in the business.

6. On 30 June 2003 there was an allocation by the Hodges settlement of $240,570 to the three children of the husband’s first marriage. The wife was concerned about this and Ms T said she had no knowledge of it, but it was explained by Mr S, the husband’s and the group’s accountant in his oral evidence. It was a book entry to take account of the removal from the accounts of a property which was provided to the husband’s first wife by way of property settlement. I accept this evidence and as far as I am concerned there is no issue that should be the subject of any dispute here.

The contributions of the parties

1. It seems that the parties are ad idem that their respective contributions should be assessed as being equal. However, the wife says that the husband has “substantially depleted” the assets of the parties since the separation and seeks an “accounting of the negative contributions of the husband in that regard”. It is not clear though what outcome the wife seeks on this basis. In other words, if the wife’s primary submission is accepted, namely that the husband has assets and/or the control of assets that he has failed to disclose that far exceed in value the remaining assets, and therefore the wife should have all these remaining assets, then the submission about negative contributions should not alter that outcome. However, if the submission is aimed at what should happen if this Court does not find that the husband has assets and/or the control of other substantial assets then that is another matter. For example, the husband’s case is that after the payment of various liabilities the balance of the existing assets of the parties should be divided equally, but the wife’s case is that “(t)he husband has since separation had access to and failed to account properly to the wife for draw downs, loan account movement, borrowings and inter-entity borrowings by and in the various entities in the [Hodges] Group and in respect of the husband personally,” and that this should be taken into account. The difficulty is that the wife has not sought an alternative order to cater for this, and thus I am left somewhat in the dark. Further, the wife submits that between 1996 and 2004 the husband has arranged for payments totalling approximately $165,000 to be made to the bank accounts of three women overseas, but she does not then ask the Court for example to notionally add these monies back to the asset pool; she simply seeks that these payments be taken into account.

Section 75(2) factors

1. The dispute here is that the wife says that she has no ability to obtain gainful employment, but the husband does have the capacity to earn income. Thus, the wife says there should be an adjustment in her favour. The husband denies that he has the ability to earn income but again, this submission need only be addressed if the Court is not satisfied that the husband has and/or has the control of substantial undisclosed assets.

The principles applicable to the matters before the Court

1. The provisions of s 79 of the Family Law Act 1975 define the court's power and obligations in determining applications for property settlement.  The court has a discretion to make orders altering the interests of parties in property, provided the court is satisfied that such orders are appropriate, just and equitable.

2. The court is obliged by the provisions of s 79(4) of the Act to take into account the following matters:

   99.1The financial and non-financial contributions made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them (sub-paragraph (a) and (b));

   99.2The contribution made by a party to the marriage to the welfare of the family, including any contribution made in the capacity of homemaker or parent (sub-paragraph (c));

   99.3The effect of any proposed order upon the earning capacity of either party to the marriage (sub-paragraph (d));

   99.4The matters referred to in s 75(2) so far as they are relevant (sub-paragraph (e));

   99.5Any other order made under the Act affecting a party to a marriage or a child of the marriage (sub-paragraph (f));

   99.6Any child support payable (sub-paragraph (g)).

3. Accordingly, in assessing the entitlement of each of the parties for property settlement, there is both a retrospective element relating to the contributions of each of the parties and a prospective element relating to matters referred to in s 75(2).

4. According to guidelines established through a series of leading decisions, the Court should determine the following matters on the evidence, that is:

   101.1Firstly, the Court must determine the assets, liabilities and financial resources of the parties to the marriage.

   101.2Secondly, the Court must consider all relevant contributions of each of the parties, and, where possible, the court should assign an entitlement of each of the parties arising as a result of those contributions.

   101.3Thirdly, the Court should then consider the prospective components of the claims of each of the parties arising as a result of the provisions of s 75(2). The Court should then identify what alteration, if any, should be made to the entitlement of each of the parties earlier assessed on account of contributions having regard to the relevant s 75(2) factors.

   101.4Fourthly, the Court takes a step back and considers whether the proposed orders are just and equitable. 

5. In relation to the issue of full and frank disclosure the law and the principles are well settled. The obligation that each party has is clearly set out in Chapter 13 of the Family Law Rules 2004. As for the consequences of failing to comply with this obligation I refer to the oft-quoted decision of the Full Court in Weir v Weir (1993) FLC92-338, at p79,593, where it was said:

   “It seems to us that once it has been established that there has been a deliberate non-disclosure, which follows from his Honour’s findings in this case, then the Court should not be unduly cautious about making findings in favour of the innocent party. To do otherwise might be thought to provide a charter for fraud in proceedings of this nature.

   …

   We should have thought that the Court’s jurisdiction to make an order going beyond the identified property arises once there is sufficient evidence to support a finding that the party has not made a full disclosure of his or her assets.”

6. I also refer to the Full Court decision in Chang v Su (2002) FLC93-117 where it was confirmed that in circumstances where there has not been full and frank disclosure of financial circumstances by a party, it is open to a court to find that an indeterminate undisclosed amount was held by one of the parties and to make property orders without reference to an overall pool.

The evidence

1. The wife was represented by Ms Pyke QC. The wife gave evidence and she was cross examined. She relied on her affidavit filed on 27 July 2007 and her financial statement filed on 26 July 2007.

2. The husband was represented by Mr Holland. The husband gave evidence and he was cross examined. He relied on his affidavit filed on 20 July 2007 and his financial statement filed on 26 July 2007.

3. The wife called a number of witnesses, namely Mr FJ, Mr S, Accountant, and Mr Tom Hawkes Solicitor. Mr FJ attended pursuant to a subpoena, as did Mr S. However, Mr S had also filed two affidavits on behalf of the husband, namely his affidavits filed on 7 October 2003 and 25 August 2004. In addition, Ms T, the husband’s daughter, and Mr Tony Fuller, his previous commercial solicitor made themselves available for cross examination by the wife’s senior counsel. That arose as a result of them being witnesses in the proceedings commenced by the husband’s three children from his first marriage and them agreeing to make themselves available for cross examination in these proceedings.

4. The parties appointed Mr HP, Accountant as a single expert to provide a valuation of the husband’s interest in the Hodges Group of Companies. He provided two reports annexed respectively to his affidavit filed on 3 December 2004 and his affidavit filed on 19 January 2005. Mr HP gave evidence and was cross examined on behalf of both parties.

5. Another single expert witness, Mr EN, was not required for cross examination but his updated report in relation to the issue of capital gains tax on the sale of the two properties in Victoria was tendered by consent and marked Exhibit W93.

6. At this point I need to comment on the affidavit of evidence in chief of the wife. It was replete with inadmissible material including hearsay, argument, submission, conclusions and opinion, and its inadequacies even extended to the annexures. For example, a number of items of correspondence were annexed but then for some inexplicable reason the contents of those letters were set out in the body of the affidavit itself. This affidavit should have been uplifted and returned to the wife, but I was not asked to do that by the husband’s counsel in the interests of progressing the hearing as expeditiously as possible.

7. In this case the credit of the husband was seriously under challenge. He was asked to recall transactions and details of transactions going back to the 1980s, and he was heavily criticised for not being able to always recall accurately and for there being inconsistencies in his evidence, but the wife was in reality in no better position with her memory. She clearly did not know the detail, and in certain respects not even the generality. Thus, I accept the submission of the husband’s counsel that as between the husband and the wife, as to historical detail stretching back to the 1980s, and as to the troubled times in the 1990s and in early 2000, it is a safer course to generally accept the husband’s evidence.

8. Looking more specifically at the wife’s evidence, I consider that she was prone to exaggeration and in particular in relation to the issue of the respective contributions of the parties. She deposed in her affidavit material to being the one to do it all, and she failed to acknowledge that the husband even assisted let alone did anything himself including for example in relation to the upkeep, maintenance and renovation of the former matrimonial home, and in caring for the children. She was also quite prepared to make the claim that the husband was the owner of or at least had an interest in various of the entities under discussion in this case when I consider that she in fact had no idea. At one point she even suggested that the husband had told her in discussions that Q Inc was “our company”, yet that did not appear in her affidavit of evidence in chief. She also insisted that the business of N Pty Ltd was sold for an undervalue but she conceded in cross examination that she had had nothing to do with the business since the separation and she knew nothing about what work it had.

9. With the husband, his credibility is very much tied up with the issue of alleged non-disclosure. Frankly, if the husband has failed to disclose to the extent that the wife alleges then it would be difficult to see how I would accept the veracity of his evidence on any topic.

10. I propose to leave the issue of alleged non-disclosure to later in these reasons, but for the moment I make the following comments about the husband’s evidence.

11. In general terms it must not be forgotten that the husband who was in the witness box for a considerable period of time was expected to recall transactions and details of transactions that occurred many years ago, and in respect of which there was usually sparse documentation available. A further difficulty in that regard was that it was always possible that what documentation there was could be taken out of context.

12. The wife’s approach was to make an allegation based on what documentation there was and then look to put the onus on the husband to explain what had happened often just from his memory alone. To repeat though, often the issue was some transaction or event which had occurred many years ago and there was usually incomplete and sparse documentation available.

13. At this point I indicate that I am satisfied that there is no other documentation available beyond what the husband has discovered and produced and what the wife has located. That is not to say that the husband made full disclosure of relevant documents, because I find that he did not, but at the end of the lengthy process that was embarked upon including pre-trial and culminating with cross examination I am satisfied that all documents that were relevant and available have been produced. As to the lack of complete documentation I accept the reason generally for that is a combination of the passage of time and the completion long ago of many of the transactions, and in relation to the records of money going overseas in the 1990s, the nature of that exercise, namely tax minimisation.

14. That also does not mean that I accept all of the husband’s evidence. For example, I am not satisfied that he was telling me the truth about the proceedings instituted by F Inc against K Company Pty Ltd. I do not consider that even if there is a debt that it is a debt the repayment of which was intended to be enforced, and I find the proceedings to do so are a sham.

15. I am also not satisfied that the husband was telling me the whole truth in relation to the alleged transfer of control of the E Foundation to his daughter Ms T.

16. I find that at times the husband was evasive in his answers, and even to the point of giving nonsensical responses. For example, in trying to explain why he received an email from his lawyer in the United States, Mr BH, in relation to Q Inc at a time when he says that he had no interest or involvement in that entity, he said that this happened all the time with entities that he was not involved in!

17. Again, in relation to certain monies that the husband arranged to be paid to three women overseas, his evidence was far from convincing. For example, on 23 November 2001 the husband drew a cheque for $5000 on the United States bank account of Q Inc payable to one of them, Ms IA, in the United States. He attempted to explain that this was money paid to this woman to explore the prospect of distributing products through direct selling organisations in the United States. This was difficult to accept and it also created another problem for the husband in that he was using the account of a company in which he professed to have no interest or involvement. He went on to say in cross examination that Q Inc paid for shipments of the products sent to Ms AQ in the United States, but he could not explain how it worked. He also could not explain why if this was so there was nothing about this in the spreadsheets detailing the expenditure of Q Inc. It is also relevant to note that the spreadsheets were not discovered by the husband but were retrieved by the wife from the hard drive of the husband’s computer. The spreadsheets recorded payments into overseas accounts of the three women although in correspondence from the husband’s solicitors to the wife’s solicitors (see Exhibit W79) it was denied that any of the payments were made by the husband. In cross examination the husband was obliged to concede otherwise when shown documents evidencing payments by him.

18. The extent to which the husband was prepared to go in limiting the assets available for distribution is exemplified by his orchestration of the claims by his three children from his first marriage to have the balance of the proceeds of sale of the former matrimonial home paid back to the Hodges Family Settlement.

19. I consider that there is a similar situation with the royalties allegedly due to Mr MV. In other words I find that the husband was behind Mr MV making a demand. That is clear from an email sent by the husband to Mr MV on 4 March 2003 (see Exhibit W86) and from the demand itself (see Exhibit W87). In cross examination the husband said that he had had a telephone conversation with Mr MV before the email and Mr MV indicated he would be sending a demand. However, I do not believe that there was any such conversation.

20. During the course of the proceedings the wife served a request for answers to specific questions. The husband provided his answers and the wife’s senior counsel attempted to mount a case that the husband was not being truthful in his answers. However, I do not accept this. The impediment to making such a finding was that the questions allowed for differing interpretations and in answering it was open to the husband to adopt any interpretation that was open. A similar situation arose when looking at what the husband deposed to in his affidavit filed on 18 August 2004 and in relation to which Ms Pyke was critical. He said that he had “no involvement” with F Inc or with Q Inc, but it was a question of what he meant by “involvement”.

21. There were two key documents presented by the wife, neither of which the husband discovered. Firstly, a flowchart dated 4 August 1987 (Annexure “AAH7” to the wife’s affidavit filed on 27 July 2007). That identified a number of the entities, their share capital, and various loans. Secondly, there was a spreadsheet prepared by the husband initially in October 1987, and then added to in October 1990 and October 1998 (Document ‘A’ in Exhibit W3). This was a document not only not discovered by the husband but retrieved by the wife from the hard drive of the husband’s computer.

1. The total owing is as follows;

   Royalty  $40,000.00

   Novis (or your nomination)        $82,750.28

   Total  $122,750.28

   It would be appropriate for you to sent a letter of demand to [GS] requesting information as to when payment can be expected.

   You may wish to point out that you understand the reasons for the delay in payment but because of your assistance in funding the purchase of [equipment] in the past you were anxious to receive payment advice.

   Regards – […]”

   Then, by email curiously dated 3 March 2003 Mr MV sends a demand for payment in accordance with the “suggestion” made by the husband in his email (see Exhibit W87). There was of course no reference to the husband’s email in this email. This is sufficient in my view to reject this as a liability that needs to be taken into account, but I also note that there is no particularity of the claim provided, and Mr MV was not called as a witness. There are no invoices and no schedule, there is no indication of a timeframe, there is no indication of what the technical “breach” is, and there was no follow up to the demand. In addition, there was a different figure promoted by the husband. There is the amount of $122,750 in the notice but now the amount claimed is $86,927.

   The husband did tender what purported to be a “license agreement” made on 28 March 2001 between Mr MV as the licensor and GS Pty Ltd as the licensee. That provided for payments of a licence fee to be paid by the licensee every three months, and for a statement of revenue to be provided by the licensee at the same time. The agreement also provided for the licence to be revoked if there was default in payment. However, to repeat, there is no evidence as to the implementation or the enforcement of this agreement.

   In these circumstances I will be making an order that the husband pay or arrange to pay this alleged debt and indemnify the wife against the same. Again because GS Pty Ltd is the husband I do not consider it necessary to make these orders against the company. In any event I understand that that company no longer operates and it has no funds.

   202.109Finally in relation to liabilities, the husband initially sought to include an amount of $31,113 payable to Z and X, the children of the parties. However the wife’s position was that this should be the sole responsibility of the husband and should not be included in the liabilities for the purposes of determining the net asset pool available for distribution. The husband says that this was originally an amount of money from the estate of his parents held in trust for the children by his sister. At his request his sister allowed him to use the money to purchase a share portfolio held on trust for the children. However, when the husband became short of funds after the commencement of these proceedings his sister allowed him to sell the shares and use the funds for living expenses. Now, on those facts I did not consider that I needed to say too much about this. On the husband’s own evidence it should be his sole responsibility to repay this money and the amount should not be included in the liabilities of the parties for the purposes of fixing the net asset pool. However, things have changed and the current position is that the husband has now paid $15,556.50 to X from the funds held in HSBC account no. …71 with the agreement of the wife but on the basis that he will reimburse that amount upon final orders being made. Now, this does not affect my finding as to who should be responsible for payment of this debt, but I will need to make an order and provide an indemnity taking into account the changed circumstances. The simplest may be to make an order that the husband pay the appropriate amount direct to the wife.

   A further issue though is that the wife is now seeking an order that the husband pay interest on the sum of $15,556.50 still owing to Z and also interest on the same amount now paid out to X. The husband opposes this order. In submissions Ms Pyke indicated that the rate of interest sought is the default interest rate provided in the Family Law Rules. However, the difficulty for the wife is that there is no evidence before me as to this issue, and therefore there is no basis for the Court to make the orders sought.

Contributions

1. I now turn my attention to the respective contributions of the parties pursuant to s 79(4) of the Family Law Act 1975, and I refer to the issues that I identified on this topic in paragraph 95 above.

2. The husband’s position is relatively straight forward and it is that despite his greater initial contribution, after taking into account all subsequent contributions of the parties, and with the wife’s contributions being primarily by way of homemaker and parent, the respective contributions should be assessed as being equal overall.

3. The wife’s position is not as simple though given that I have found that the husband does not have undisclosed assets. In summary, the wife concedes that the husband had significant assets at the commencement of cohabitation, but she says that this contribution has been “eroded” over the 25 years of cohabitation and “subsumed into the various assets and enterprises of the parties” such that save and except in respect of two matters the respective contributions as at separation should be assessed as being equal. The wife relies heavily on her non-financial contributions to “the maintenance, upkeep and improvement” of the former matrimonial home and “particularly in respect of the substantial renovations undertaken… over a lengthy period of time”.

4. The two matters are the husband sending monies overseas to three women and the husband “divesting” himself of his interest in the E Foundation.

5. Post-separation the wife says there should be an accounting of the “negative contributions of the husband” in “substantially depleting the assets of the parties.” As I have noted previously though it is not clear what outcome the wife seeks on that basis, and in any event I note that the Full Court has discouraged the use of the term “negative contribution” (Antmann and Antmann (1980) FLC 90-908). However, that is not to say that conduct of a party having economic consequences cannot be taken into account. Although the authorities suggest that it should be taken into account under s 75(2)(o) of the Act, it is also apparent that it can be taken into account in considering the issue of contribution. For example, although in the oft-quoted decision of Baker J in Kowaliw and Kowaliw (1981) FLC 91-092 his Honour said that “(c)onduct… having economic consequences is clearly in my view relevant under s 75(2)(o)”, his Honour, in discussing the Full Court decision in Antmann (supra), said this:

   “It does seem to me, however, that if a party has either by deliberate act or by economic recklessness reduced the value of assets available for distribution then the economic consequences which flow therefrom including the resultant burden to the other party are directly relevant to a consideration of the respective contributions of the parties contemplated by s 79(4).”

   Indeed, subsequent cases have identified that there is no hard and fast rule about this (eg see Browne and Green (1999) FLC 92-873, and Ziano and Ziano (2007) FamCA 339, at paragraph 96).

   In this case, whether it can be considered “waste” or not, I propose to take relevant conduct of the husband into account when assessing the contributions of the parties, and I will elaborate on that shortly in these reasons.

6. The only real issues raised by the husband in relation to the contributions of the wife are as to the extent of her contributions to the upkeep, maintenance, improvement and renovation of the former matrimonial home, and what she says about the husband’s parenting role. The husband says that the wife has played down what he has done in these areas and exaggerated what she says that she has done. Indeed, the tenor of her evidence was that she did everything and the husband did virtually nothing. I do not accept the wife’s evidence in this regard, and I prefer the evidence of the husband.

7. Returning to the issues raised by the wife in relation to the husband, firstly there are the payments made to or on behalf of the three women, Ms NN, Ms AZ and Ms IA. They lived respectively in Thailand, Kazakhstan and the United States.

8. The majority of the payments were made before separation, commencing as early as 1996 in respect of Ms NN, but some payments were made afterwards and indeed as late as early 2004.

9. The payments totalled approximately $165,000.

10. The husband did not discover any documents in relation to these payments and the wife only came across them when she accessed the hard drive on the husband’s computer. There was a spreadsheet recording payments to the bank accounts of these three women. At the time the wife’s solicitors queried this and in August 2006 the husband through his solicitors responded as follows:

    “The spreadsheet:

    This document does not record payments made by my client. However, the document wasn’t prepared by him. The document records payments made by an overseas buyer to third party suppliers for the delivery of [products] brokered by [DB Pty Ltd]. The document records the date, the amount paid, the cumulative total, the amount in baht and the baht cumulative total as well as other currencies. The purpose of the document was to enable my client to monitor that overseas suppliers were being paid for their deliveries.” (Exhibit W79)

11. However, during cross examination further documents were shown to the husband which clearly indicated that he had made at least some of the payments through Q Inc and that he had also made payments which were not included in the schedule. The husband then conceded that he had sent money to the three women but sought to maintain his claim that the purpose of the spreadsheets was to “monitor shipments”. However, he could not recall “the exact paper chain” and he could not say how these payments worked.

12. I do not believe the husband’s evidence in relation to this issue and I consider that he was making it up as he went along. In addition, in cross examination the husband was taken to his American Express statements which indicated payments by him for Ms IA including for airfares in the United States when she travelled with him.

13. There was also clear evidence that the husband had personal relationships with these women (see Annexures “AAH44”, “AAH47”, “AAH48” and “AAH52” to the affidavit filed by the wife on 27 July 2007).

14. In these circumstances I find that the husband did make substantial payments to these three women without the wife’s knowledge and that they should be taken into account in assessing the respective contributions of the parties. I note again though that the wife did not seek to notionally add back these amounts to the asset pool.

15. In relation to the other matter referred to by the wife, namely the husband allegedly divesting himself of his interest in the E Foundation, I do not accept that that has any relevance to the respective contributions of the parties, and I have dealt with the issue of the E Foundation and the question of undisclosed assets previously in these reasons.

16. Pausing at this point to make an assessment of the respective contributions of the parties as at separation, I consider that the husband’s contributions exceeded those of the wife. The primary basis for that is the substantial initial contributions that the husband made, coupled with his financial and non-financial contributions during cohabitation, and the fact that the wife’s financial and non-financial contributions during cohabitation were not as great. That assessment applies even allowing for the money paid by the husband to the three women overseas.

17. Turning then to the position post-separation, there is no question that there has to be an adjustment in the wife’s favour, given the fact that the husband alone has had the control of and access to the capital and income of the Hodges Group of Companies, and the fact that he did not provide the wife with any funds by way of spousal maintenance or child support after June 2003. Certainly the wife has received a share of the sale proceeds of various items of property including furniture, paintings and the former matrimonial home as well as having the use of rental income from the O Street property, but the husband, who has also had a share of those same sale proceeds, has had the added benefit of being able to draw monies from D Group Pty Ltd to fund his lifestyle. For example, as referred to earlier, he has spent hundreds of thousands of dollars on his credit cards on food, alcohol, entertainment and overseas trips and which has then been paid primarily by drawing on his loan account with the Hodges Trust of which D Group Pty Ltd is the trustee. He has also drawn substantial other money for his own purposes and debited the same to his loan account (for example see Exhibit H11).

18. To a certain extent I have taken this into account in refusing to include a number of liabilities in the asset pool that the husband and/or entities that he controls have incurred, and which could easily have been paid out of drawings if the husband had chosen to, but in my view there is still some leeway for that circumstance to be taken into account here. He has clearly behaved in a financially irresponsible way in drawing down significant funds to meet his lifestyle given the dire financial difficulties of the group of companies.

19. Indeed, it seems to me that that can be treated as offsetting the greater contributions of the husband as at separation such that overall the respective contributions of the party should be assessed as being equal.

Section 75(2) of the Family Law Act 1975

1. I now turn as s 79(4)(e) of the Act dictates to the individual matters to be taken into account pursuant to s 75(2). However, as I have identified above, the only issue that the parties have raised relates to the respective earning capacities of the parties.

2. The wife is now aged 62 years and she is not employed. Her case is that she is unable “realistically” to obtain gainful employment. The husband does not suggest otherwise.

3. The husband is now aged 68 years and he receives the age pension. He does “work” in his daughter’s business but it is limited and he receives no wage. Instead, his travel expenses and the lease payments on his motor vehicle are paid by that business. Outside of this the husband says he has no capacity to work and earn income. However, the wife challenges this and says that the fact that he does work in his daughter’s business and “his post-separation business dealings” indicate that he does have the capacity to earn, and therefore there should be an adjustment in the wife’s favour. She does not specify what adjustment though.

4. I propose to deal with this issue quite quickly. I do not consider that the husband has any greater capacity for gainful employment than the wife. What he does for his daughter does not indicate otherwise and I do not know to what the wife refers in mentioning the husband’s “post-separation business dealings”. On the evidence there has been none of recent times.

5. Accordingly, there is no basis for any adjustment in favour of either party on the basis of their respective earning capacities.

6. As to other matters, I need to address the issue of the respective assets and liabilities of the parties as a result of my findings in that regard. The relevant fact here is that if they are enforced the husband will be left to pay a number of liabilities which will reduce the net assets that will be available to him. There were of course some liabilities promoted by the husband that I have found to be not genuine debts/loans, and I am not including those in this category. Thus the debts which he may be required to pay are as follows:

   Estate H Hodges  $97,500.00

   Loan LK  $65,000.00

   Loan J Hodges  $20,000.00

   Loan T and Y  $25,000.00

   U Nominees Pty Ltd  $40,000.00

   S Firm Accountants   $160,834.40

   Z Hodges  $15,556.50

   Reimburse money paid to X Hodges    $15,556.50

   TOTAL  $439,447.40

   In addition, there are the following liabilities about which I found there to be a real question mark:

   Q Inc  $67,740.00

   Mr MV  $86,927.00

7. Given this, the question then is should the husband receive an adjustment as a result of the circumstance that he may have to pay some or even all of these liabilities? In my view the answer to that question is no. I do not intend to repeat what I have individually said about these liabilities, but the common denominator is that the husband has created this situation himself and the wife should not prejudiced as a result. The evidence as to most of these liabilities is scant, there is no consistent evidence as to the use made by the husband of much of the money received, I am not satisfied that many of these liabilities will be enforced, the wife has had no or little benefit from these loans, and the husband chose to draw money out of the group to meet his own needs rather than repay some or all of these debts.

Conclusion

1. The net assets of the parties should be divided equally between them.

Just and equitable

1. Pursuant to s 79(2) of the Act the Court cannot make an order unless the Court is satisfied that in all the circumstances it is “just and equitable” to make the order. To assess that I need to stand back and consider the practical effect of my proposed orders (Waters and Jurek (1995) FLC 92-635; JEL and DDF (2001) FLC 93-075; Phillips and Phillips (2002) FLC 93-184).

2. The net asset pool comprises a monetary equivalent of $2,795,746. Thus, the effect of my decision is that each party is entitled to net assets to the value of $1,397,873.

3. The wife has had and currently has the benefit of net assets totalling $826,982 calculated as follows:

   Assets

   Funds already received  $334,476

   The wife’s 50% interest in the property at

   O Street Victoria  $350,000

   The wife’s 25% interest in the property at

   M Street Victoria  $100,000

   Furniture in the wife’s possession  $65,106

   The wife’s jewellery    $25,200

   TOTAL  $874,782

   Liabilities

   The wife’s debt due to her sister  $21,582

   25% of the mortgage secured over the title

   to the property at M Street Victoria  $9,943

   GST on the sale of the property at M

   Street Victoria    $16,275

   TOTAL    $47,800

   NET  $826,982

4. The husband has had and currently has the benefit of net assets totalling $319,636 calculated as follows:

   Assets

   Funds already received  $329,994

   Furniture in the husband’s possession  $16,232

   The husband’s jewellery      $3,050

   TOTAL  $349,276

   Liabilities

   Revenue SA payroll tax    $29,640

   NET  $319,636

5. On the basis of the above calculations the wife is entitled to receive from the monies held in the bank accounts the sum of $570,891 and the husband the sum of $1,078,237 (after payment out of the total tax due and owing of $54,514).

6. In the end result then apart from also retaining her interest in the properties in Victoria, each of the parties will have a relatively substantial amount of money to meet their current and future needs. However, with the husband that will be dependent upon what happens in relation to the various liabilities that I have either found are not genuine or should be borne solely by the husband. I have already found that the fact of the husband possibly having to pay some of these liabilities does not warrant an adjustment in his favour, and I do not consider that that position should change in assessing the justice and equity of the order that I propose.

7. In my view there is nothing unjust or inequitable in the orders that I propose.

I certify that the preceding 236 paragraphs are a true copy of the reasons for judgment of the Honourable Justice Strickland delivered on 12 March 2010.

Associate