Irving and Irving
[2011] FMCAfam 632
•29 June 2011
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| IRVING & IRVING | [2011] FMCAfam 632 |
| FAMILY LAW – Alteration of property interests under s 79 – add backs to the pool of assets – non-disclosure – assessment of credit, contribution and future needs. |
| Family Law Act 1975, ss.75, 79 |
| Black & Kellner (1992) FLC 92-287 Browne and Green (1999) FLC 92-873 DJM and JLM (1998) FLC 92-816 Hickey & Hickey & Attorney-General of the Commonwealth of Australia (Intervener) (2003) FLC 93-143 Giunti & Giunti (1986) FLC 91-759 Kowaliw and Kowaliw (1981) FLC 91-092 Mezzacappa & Mezzacappa (1987) 11 Fam LR 957; (1987) FLC 91-853 AJO v GRO (2005) FLC 93-218 Townsend and Townsend (1995) FLC 92-569 Weir (1993) FLC 92-338 |
| Applicant: | MS IRVING |
| Respondent: | MR IRVING |
| File Number: | WOC 322 of 2009 |
| Judgment of: | Altobelli FM |
| Hearing date: | 22 June 2011 |
| Date of Last Submission: | 22 June 2011 |
| Delivered at: | Sydney |
| Delivered on: | 29 June 2011 |
REPRESENTATION
| Counsel for the Applicant: | Mr Millar |
| Solicitors for the Applicant: | Rita Thakur & Associates |
| Solicitor Advocate for the Respondent: | Mr Lagopodis |
ORDERS
That within 90 days of the date of this order but otherwise contemporaneously to the extent as possible:
(a)the Wife pay to the Husband $95,354; and
(b)the Wife refinance into her sole name all debts secured over the property situated at and known as Property C being the whole of the land contained in certificate of time folio identifier [omitted] (the property); and
(c)the Husband transfer to the Wife all of his interest in the property; and
(d)thereafter the Wife shall indemnify the Husband against any liability relating to the property; and
(e)the Husband shall vacate the property.
That within 14 days of the date of this order the Husband and the Wife shall sign all documents and do all things necessary to:
(a)cause the moneys held in the Wife’s solicitors trust account to be paid to the Wife or as she directs; and
(b)cause the moneys held in the CBA trust account for [Y] to be paid to the Wife or as she directs.
The Husband is to indemnify the Wife and keep her indemnified in relation to any debt owed by either or both of them to the Australian Taxation Office, or to any relative, friend or family member of the Husband.
That as between the Husband and Wife, an subject to the above orders, the Husband and Wife shall each respectively retain all interest in and entitlement to:
(a)all personal property now in his/her respective possession of control; and
(b)all shares, debentures, units in the unit trusts, bank, building society or credit union accounts standing in his/her sole name respectively; and
(c)all interests in the life insurance policies and superannuation funds standing in his/her sole name respectively.
That in the event that either party refuses or neglects to execute any deed, document or instrument necessary to give effect to this Order, the Registrar of the Court be appointed pursuant to Section 106A of the Family Law Act 1975 to execute such deed, document or instrument in the name of the said party and do all acts and thins necessary to give validity and operation to the deed, document or instrument upon the Registrar being provided with verification of such refusal or failure by way of affidavit.
Liberty to restore this matter before FM Altobelli on 7 days notice as regards:
(a)the interpretation, implementation or enforcement of these orders; or
(b)the making of orders for sale of the property should the Wife not be able to pay to the Husband the sum required pursuant to these orders in accordance with the true provisions stipulated on these Orders.
IT IS NOTED that publication of this judgment under the pseudonym Irving & Irving is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
WOC 322 of 2009
| MS IRVING |
Applicant
And
| MR IRVING |
Respondent
REASONS FOR JUDGMENT
Introduction
This is an application for alteration of property interests under section 79 of the Family Law Act, commonly known as an application for property settlement. The 34 year old wife is the applicant. The respondent is her 46 year old husband. He is a [omitted] by trade. The parties married in 1995 in Turkey, arrived in Australia in 1995, and have two children, [X] who is 16 and lives with his father and [Y], who is 13, who lives with her mother. The parties separated in March 2008.
Background
The husband, who was born in Turkey, immigrated to Australia in March 1985, working in various jobs but principally as a [omitted]. In 1991, he travelled to Turkey, and then, in 1994, met and subsequently married the wife. The husband and the wife initially moved to Germany for six months, and lived with one of the husband’s brothers. In March 1995, they arrived in Australia and, initially, lived with another brother of the husband.
In 1995, the husband, in partnership with his brother, opened a [business] called [D] in [location omitted]. The following year the partnership dissolved, with the husband selling his share of the partnership to his nephews, and then establishing a new business known as [B] in [location omitted].
The husband contends that, in about 2000, he commenced to invest in the stock market, and that it was not until late 2009 when trading ceased.
In 2001, the husband and the wife purchased their first home at [F]. The next year, 2002, the husband bought shares in a company ([K] Pty Ltd) which owned a building, in return for which he obtained the right to occupy a [business] at Property D. In the meanwhile, while settlement of the purchase of the shares in the company was going through, he established a [business] in [omitted].
In September 2004, the parties purchased a home at Property C having sold the [F] property.
In 2008, the husband closed his business that had been operating at [omitted] and relocated to Property D.
The husband and wife separated in March 2008. It seems common ground that, without consulting the wife, the husband sold his share portfolio, sustaining a loss on initial investments, and then sold the shares in [K] Pty Ltd.
Throughout the course of the marriage, the husband contends and the wife disputes, at least in part, that he borrowed substantial funds from various relatives overseas. After the settlement of the sale of the shares in [K] Pty Ltd, as well as the sale of the share portfolio, the husband used most of these moneys to repay the balance then owing on these overseas loans. Some of the money was used for other purposes. One of the major issues in this case relates to the genuineness of these loans, the appropriateness of the husband repaying them, and the impact on the pool of assets available for distribution between the parties.
Currently the major asset available to the parties is the jointly‑owned property at Property C. Even though they are separated, they continue to occupy this home. The husband is primarily responsible for the care of his son, and the wife primarily responsible for the care of her daughter. The husband pays some child support. It appears that the wife’s relationship with her son has broken down.
The husband’s case is that the parties received the benefit of overseas loans totalling $330,856 during the marriage, and, specifically, between March 2001 and June 2007. These overseas borrowings were sourced from Germany, Sweden and Turkey. It is the husband’s case that all of these overseas loans, together with interest where applicable, were repaid by February 2010.
The husband seeks an order for sale of the property at Property C and that after payment of the mortgage and other related selling expenses, and payment of the parties’ joint debts, the balance be divided equally between the husband and the wife. There is an issue between the parties as to what debts ought to be paid out of the sale proceeds of the property.
At the commencement of the case, the husband asserted that he made a greater financial contribution at the commencement of cohabitation and throughout the course of marriage. He asserts that the section 75(2) considerations are equal. Both parties have issues in relation to the valuation of various personal items.
The wife’s case involves a substantial number of add‑backs to the property pool to include, for example, the value of the husband’s business, moneys withdrawn from a mortgage, the inclusion of the sale proceeds of the [K] shares and share portfolio, as well as some other share transaction, but the exclusion of any reference to debts owed overseas. The wife contends that the husband has failed in his duty of disclosure to the court. She asserts that he has a capacity to earn income that is greater than hers. She seeks an order that he transfer to her his interest in the property at Property C, but that she will refinance into her sole name the mortgage secured over the property. She also seeks a number of ancillary orders the effect of which would be to give her most, if not all, of the known remaining asset pool.
At the hearing the husband was represented by his solicitor, Mr Lagopodis. His evidence consisted of his affidavit and financial statements. The wife was represented by her counsel, Mr Millar. Her evidence consisted of her affidavits and financial statement. Both the husband and the wife were extensively cross‑examined.
A number of issues arose for determination in the case. There are some major issues about the credit of the parties. I will need to determine what items are either included, or excluded as the case may be, from the asset pool. Contribution will then need to be assessed, and so too s.75(2) factors considered. Lastly, I will need to consider what is a just and equitable order to make under the circumstances of this case.
Applicable Law
The preferred approach to the determination of an application under s.79 of the Family Law Act 1975 is set out in a passage found in the Full Court’s decision in Hickey & Hickey & Attorney-General of the Commonwealth of Australia (Intervener) (2003) FLC 93-143 at 39.
The Full Court states that there are four inter-related steps:
a)Identify and value the property, liabilities and financial resources of the parties; and
b)Identify and assess the contributions of the parties and express them as a percentage of the net value of the property; and
c)Identify and assess the other facts relevant under s.79(4)(d)-(g) including s.75(2) and determine the adjustment (if any) to be made to the contribution entitlements at step two; and
d)Consider the effect of the above and resolve what order is just and equitable in all the circumstances.
Accordingly, I must not only identify the contributions of each party, but also assess the weight to be attributed to these contributions having regard to many factors including what has occurred afterwards.
In relation to add-backs, the applicable law can be found in decisions such as the Full Court's decision in AJO v GRO (2005) FLC 93-218.
30. To date, three clear categories of cases have emerged where the Court has determined that it is appropriate to notionally add back to the pool of assets, that is, assets that no longer exist. They are:
(a) Where the parties have expended money on legal fees. In DJM and JLM (1998) FLC 92-816 the Full Court said at 85,262:
“11.6 For reasons set out in Farnell, s 117 provides that each party to proceedings under the Family Law Act shall bear their own costs unless the Court otherwise orders. Failing to add back monies expended by parties on costs frequently has the effect of defeating the policy of s 117 by permitting the pool of available assets for distribution between the parties to be diminished by any monies that either of the parties have managed to spend on their costs up to the date of trial. We are of the view that the normal approach ought be to add costs already paid back into the pool. Whilst there may be cases where that approach is inappropriate, the reasons why it is not taken ought normally be spelt out.”
(b) Where there has been a premature distribution of matrimonial assets. In Townsend and Townsend (1995) FLC 92-569 Nicholson CJ as he then was with whom Fogarty and Jordan JJ agreed, said at 81,654:
“In my view, what occurred in this case, as I said during the course of argument was, in fact, a premature distribution of a proportion of the matrimonial assets. What the husband did was to distribute to himself an asset in which the wife had a legitimate interest. In such circumstances I consider that it would be unjust in the extreme to simply treat such conduct by the husband as a matter to which regard should be had under section 75(2). It seems to me that the husband has had the benefit of that money. Had he retained, for example, the taxi licence instead of selling it, that would have been brought into account as an item of property which would have been dealt with in the same way as the remaining items of property in this case. Accordingly, I am of the view that the correct way in which to deal with the husband’s receipt of those moneys is to bring them into the pool of assets on a notional basis and make a distribution accordingly.”
(c) In the circumstances outlined by Baker J in Kowaliw and Kowaliw (1981) FLC 91-092 at 76,644:
“As a statement of general principle, I am firmly of the view that financial losses incurred by parties or either of them in the course of a marriage whether such losses result from a joint or several liability, should be shared by them (although not necessarily equally) except in the following circumstances:
(a) where one of the parties has embarked upon a course of conduct designed to reduce or minimise the effective value or worth of matrimonial assets, or
(b) where one of the parties has acted recklessly, negligently or wantonly with matrimonial assets, the overall effect of which has reduced or minimised their value.
Conduct of the kind referred to in para. (a) and (b) above having economic consequences is clearly in my view relevant under sec.75(2)(o) to applications for settlement of property instituted under the provisions of sec.79.”
31. As the Full Court said in Browne and Green (1999) FLC 92-873 at 86,360:
“44. We agree with her Honour that the principles stated by Baker J in Kowaliw certainly do not constitute any form of fixed code. They are no more than guidelines for use in the exercise of the discretionary jurisdiction conferred by s 79 of the Family Law Act 1975. Nevertheless, they have over the considerable period of time since they were enunciated, become a well accepted guideline in this jurisdiction – a guideline the use of which assists in the achievement of the important goal of consistency within the jurisdiction.”
A significant issue in this matter was the alleged non-disclosure of the husband. Attempting to deal with non-disclosure often puts the other spouse to considerable difficulty with regards to investigating their financial affairs. The Full Court in Weir (1993) FLC 92-338 at 79,593–4 made the following statement regarding the duty to disclose and the Court’s powers where non-disclosure has been found:
This Court has pointed out in a line of cases leading up to the recent decision of the Full Court in Black & Kellner (1992) FLC 92-287, that it is the duty of a party involved in property proceedings in this jurisdiction to make a full disclosure of their financial affairs. See also Giunti & Giunti (1986) FLC 91-759, and Mezzacappa & Mezzacappa (1987) 11 Fam LR 957; (1987) FLC 91-853. It is clear enough from his Honour's findings in the present case that the husband had not done so and had in fact pocketed the proceeds of a substantial number of cash sales. It is obvious that in most cases of this nature it is difficult enough for the other party to establish that fact let alone establish the quantum of what has been taken.
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 appreciate that this is something of a broad brush approach, but, as we have said, where there is clear evidence of non-disclosure as there was here, the Court should not be unduly cautious about making findings in favour of the other party. It has been said by one commentator (O'Ryan and Broadfoot, 5th National Family Law Conference Handbook, p 249) the failure to disclose undermines the whole process of adjudication of proceedings for a settlement of property in that the court is unable to identify the property of the parties, to properly assess contribution, or to properly assess s 75(2) factors.
Credit Issues
This is a case where the wife asserts that the husband is guilty of non‑disclosure, and should not be believed in financial matters, except where there is corroborative documentary evidence.
The difficulty with the wife’s case is that she faces her own credit issues, not just in terms of her own affirmative evidence, but also as regards her denials of knowledge as to certain facts.
Both the husband and the wife were unconvincing in various aspects of their evidence. Both were, at times, unresponsive and evasive in cross‑examination.
I am satisfied that the wife has not disclosed the quantity and the value of jewellery in her possession. The evidence she gave in cross‑examination was plainly inconsistent with her evidence‑in‑chief. The wife’s evidence, in attempting to give a value to jewellery she asserts the husband gave to third parties, was disingenuous to the extent that she asserted an expertise to value jewellery, when she clearly did not have that expertise. I do not accept her assertion that she used a Victims Compensation Tribunal payment of $14,250 for joint purposes, as she asserts in her affidavit. In cross‑examination she conceded that, at least in part, the payment was used to fund a holiday for herself, the children and her sister in the post‑separation period.
I find unconvincing the wife’s assertions in relation to a $50,000 cash deposit, allegedly held in the safe at the [business]. She asserted that this money was accumulated as a result of what she described as “child endowment” payments, cash gifts to the children, and money she was able to save herself. I do not doubt that the husband and the wife had access to substantial cash throughout the marriage (for example, refer exhibit H4, the 2007 takings book). But I find it inherently improbable that such a large stash of cash would be kept separate and apart by the wife, having regard to the financial history of the marriage which she herself gives. It is inconsistent with the wife’s own presentation of the case that she did not control matrimonial finances.
Moreover, and perhaps most significantly, I find that the wife has consciously minimised disclosing to the court her actual knowledge of loans made from overseas, during the marriage, as well as the repayments made. Whilst I accept the wife’s knowledge of financial affairs during the marriage was less than that of the husband, the documents written by the wife herself, and to which I will make reference in my reasons below, demonstrate that she knew far more about this topic than she disclosed in her affidavits. For all of the above reasons, I have concerns about the wife’s evidence.
However, the husband also has significant credit issues confronting his evidence. As I will find, however, and unlike the credit issues confronting the wife, the husband’s issues lead to concerns about the extent to which he has disclosed to the court his true income and asset position. Like the wife, I found the husband’s evidence to be sometimes unconvincing and evasive, particularly in cross‑examination. He was plainly caught out for not disclosing the true extent of his shareholdings, and his convenient control of shares in his son’s name. He conceded that he submitted incorrect tax returns, which necessitated the filing of amended returns and the incurring of additional tax, as well as penalties.
I find plainly unconvincing his assertions that his back, shoulder and knee problems would have any impact on his future capacity to work as a [omitted] in future. His attempt to dispose of matrimonial funds by putting moneys in his children’s name was a dishonest, if not transparent attempt to put moneys out of reach of the wife. It is also quite likely that the husband manufactured the demands for repayment of the overseas loans, once it became clear to him that the marriage was breaking down.
Notwithstanding all of this, on what turns out to be the single most important issue in this case, I do accept the husband’s evidence about the overseas loans and the repayments made. In a finely balanced case, where there are significant concerns about credit on both sides, it is the fact that these transactions are corroborated by independent documents evidencing these transactions, as well as supported by documents that the wife, herself, created. I will find that, on balance, the husband’s evidence in this regard is to be accepted.
That is not to say that the court has, at the conclusion of this case, available to it all of the information relevant to the circumstances of these loans, and, particularly, the purpose to which they were put. At the end of the day this is not the prime focus, because I find that even the wife concedes that moneys were borrowed and loans were repaid. It should be noted, however, that even though I accept the husband’s evidence about the overseas loans, I retain lingering doubts about his evidence of financial matters generally.
Asset Pool Issues
Despite a direction to the effect, the parties did not submit a list of assets and liabilities indicating disputed matters. For present purposes, I will use the list prepared by the wife’s solicitor as a working draft. Both lists of assets are reproduced in the schedule to these reasons.
Assets
Item 1 is the property at Property C, and its agreed value is $500,000.
Item 2 is the money held in trust by the wife’s solicitors pursuant to an interim order I have made. There is no dispute that the amount held is $40,000. The husband does not include in his list of assets, presumably because he maintains it is money belonging to the children, being funds the father gifted to them. The source of this “gift” to the children by the father is, in my opinion, clearly property of the husband and the wife. It was not for him to make a unilateral decision to gift this money to anyone, including the children. This is a premature distribution of matrimonial assets and should be included in the pool.
Items 3 and 4 are uncontentious and will be included in the pool as assets of the wife.
Item 5 is the husband’s motor vehicle with an agreed value of $15,000.
Item 6 is the wife’s Holden Cruze motor vehicle. The wife says it has value of $17,500; the husband says he does not know. This is a vehicle that was purchased after separation using a loan from the wife’s sister. The wife proposes that the liability be included on the joint balance sheet. I am not prepared to include either this asset, or the liability in the balance sheet as it is not just and equitable to the husband. This is a post-separation asset. Some of the evidence leads me to doubt whether it was necessary for the wife to purchase a new car, thereby incurring a liability of over $27,000. In the circumstances, neither the value of the car, nor its corresponding liability, will appear on the balance sheet.
Item 7 is the husband’s Westpac bank account, as noted in his financial statement sworn 16 February 2011, and thus will be included.
Item 8 is entitled Husband’s Business. The wife says it has a value of $250,000, but the husband says it has a value of $2000. The wife’s claim is fanciful and without evidence. There is no evidence of any attempt to obtain valuations either of the husband’s current or past business. It is pure speculation on her part that was both unhelpful and inflammatory. The best one can do in these circumstances is accept the $2000 as an admission against the husband’s interest. Notwithstanding this, the court retains lingering doubts about whether this figure is a realistic assessment of the value to the husband of his business. As has already been noted, the wife was entitled to be concerned about the husband’s failure to disclose in relation to other aspects of this matter, and the doubts about the real value of the husband’s business is a s.75(2) factor I will take into account.
Item 9 is the wife’s jewellery. She values it at $2000, but the husband says it is $18,500. No one called independent expert evidence in this regard. Both parties are so involved in this litigation that their own opinions as to value (whether expert or not) are unreliable. The nadir of the wife’s evidence was her unconvincing claim to have expertise to value jewellery that the husband supposedly disposed of, whilst being unable to value the jewellery she herself possessed. In the absence of expert opinion, the best the court can do is to accept the wife’s value as an admission against interest, but the court retains significant reservations in relation to this.
Items 10 and 11 represent the husband’s superannuation, and is uncontroversial.
Item 12 is an add-back against the husband of moneys that he withdrew from the St George mortgage. In cross-examination, the husband conceded that at about the time of separation, he withdrew $20,000 from the joint St George loan account and deposited the funds shortly afterwards into his own loan facility. This is another premature distribution of assets, and the $20,000 should be added back.
The wife proposes an add-back against the husband of $323,586, which, presumably, represents the balance of the sale proceeds of the property of Property D ([K]) and the share portfolio. This is a significant issue in this case, and needs to be considered in the context of the husband’s case relating to overseas loans. As this issue needs to be dealt with extensively, I will deal with it in a separate segment of my reasons.
The wife proposes an add-back against the husband of money received from the sale of shares through [E]. This occurred post-separation. Again, the husband’s own evidence in this regard demonstrates it was a premature distribution of assets, and accordingly, $24,850 should be added back.
The wife proposes an add-back against the husband of the sale proceeds of the husband’s Toyota Corolla motor vehicle. The husband conceded that an add-back of $2000 should apply in this regard.
Again, the wife proposes an add-back against the husband of shares currently held with [E]. The husband, in cross-examination, reluctantly and belatedly accepted that he was in fact holding shares to the value of $6000 in trust for his son [X]. I do not accept his evidence that he holds the shares on trust for [X], who, he asserts, is the beneficial owner. The only way that [X] could have purchased shares is if his father provided money. This was a convenient structure for the husband. I accept that $6000 should be added back.
Liabilities
Item 1 is the St George mortgage debt. The husband asserts it’s $164,000; the wife, $161,000. The husband files a much more detailed financial statement than that of the wife, so accordingly, I accept his figure of $164,000.
Item 2 is the wife’s car loan from [Mr/Ms A]. For the reasons that I have indicated above, in the context of item 6 of the assets, I propose to exclude both item 6 of the assets and item 2 of the liabilities.
There is an income tax liability which arose out of the filing of amended tax returns, which was necessitated by the husband filing incomplete tax returns. The wife agrees that the liability that should be included in the balance sheet in this regard is $61,075. The husband says $68,000. The evidence indicates that the liability is a joint one, except to the extent that the filing of misleading and incomplete tax returns was a matter attributable to the husband. The wife asserts, therefore, that the lower figure should be on the balance sheet and that she should not be responsible for penalties and interest. I find that the husband made the major decisions in the marriage, of a financial nature. I do not accept his assertions that the wife was a partner with him in this regard. I doubt if he consulted her. It was more likely than not that he may have told her of his decisions. If there was non-disclosure to the Australian Taxation Office for the relevant tax year, this was primarily attributable to the husband, but the wife clearly benefited. In these circumstances, the wife should not, however, have to bear a share in the penalties and interest, and accordingly I accept her figure in this regard.
The husband asserts that there are overseas loans of $250,826. As this is one of the major issues in this case, I prefer to deal with it at length in a separate part of my reasons below.
The husband claims miscellaneous personal liabilities for arrears of rent, trade creditors and legal fees. The only evidence of this was the husband’s own word. There is no corroborative documentation. These are the sorts of liabilities that one would expect there to be some independent corroborative documentary evidence. None was advanced. Apart from excluding all legal fees for both the husband and the wife from the balance sheet (though being conscious of them as a s.75(2) consideration) I do not accept the husband’s evidence about these tax debts. He has not established that these are actual debts in existence, let alone debts that should be shared in any way by the wife. Accordingly, I am not prepared to include them in the balance sheet.
The Overseas Loans
The husband’s case was that during the course of the marriage, the husband and the wife received from overseas loans totalling $333,856 which were repaid in full, together with interest where applicable, in a final instalment of $250,826 in February 2010. The husband’s evidence about these transactions consists of his own evidence, letters of demand from overseas lenders, and documents evidencing transfers of money to and from Australia from German and Swedish bank accounts. Moreover, and quite importantly, the husband also relies on two documents which, I accept the evidence indicates, were in fact prepared by the wife. I will discuss each of these documents.
The first document is the annexure A to the husband’s affidavit of
16 February 2011. It is a handwritten document containing a list of moneys received, mainly in Euro, converted to Australian dollars, referenced to a date, and then added up. The document looks like it was prepared at one time, even though the entries start from 6 June 2002 and conclude 15 June 2007. The document was clearly prepared after 15 June 2007, at which time, according to the document, $226,065.95 had been borrowed, $52,450.09 had been repaid, and $173,607.86 was outstanding. Based on the wife’s own evidence, I accept that this document is a quite convincing piece of evidence of the wife’s own knowledge of the existence of these loans at the time. Her evidence in cross-examination was that, initially, it “could be” that the husband told her to write these figures down and then, just a minute later, that she had a clear recollection of the husband telling her to write figures down. The wife was clearly seeking to distance herself from the veracity of the information contained in the document, regardless of the fact that she was the one who wrote it. I found the wife’s answers in cross-examination, on this topic, to be sometimes unresponsive and evasive. From the perspective of the wife’s case, this was a significant document which, ultimately, they simply could not explain away.
The second document is annexure B to the husband’s affidavit of 16 February 2011, a document that became known as the “My Rules” document. The context of this document is that it is an attempt to set out the basis of a possible reconciliation between the husband and the wife. The evidence indicates that there are two versions of this document, both prepared by the wife. The husband asserts that the annexure B to his affidavit was the one given to him by the wife. The wife asserts that the version of the “My Rules” document, being the annexure D to her affidavit of 28 May 2010 was in fact the version she gave to the husband. In the wife’s version of the document, there is reference to a paying $50,000 back. In the husband’s version, it says “sell your shares to pay your brother back”. On the husband’s case, his copy of the “my rules” document constitutes another admission by the wife that moneys were owed as at the relevant date. On the wife’s version of the “My Rules” document, the reference to “pay back the $50,000” is a reference to the $50,000 cash in the safe that the wife alleges the husband took. I have already expressed doubts about the wife’s evidence in this regard. Whether or not, as the wife asserts, one version was a draft of the final document, the fact is that both were clearly her documents, and the husband’s version again contains an admission against the wife’s interests of money owed, and is consistent with the husband’s case that the wife was aware of the debts. Again, from the perspective of the wife’s case, this was a critical document which needed to be somehow explained in order to avoid the inference that, contrary to the wife’s assertions, she was well aware of the existence of debts owed to overseas relatives. The wife’s case simply fails to provide an alternative explanation on this document.
The wife’s case, put to the husband in cross-examination, was that the moneys borrowed were not in fact needed to fund the acquisition of the parties’ assets, except, perhaps, the first matrimonial home, and even then there was a dispute about the extent of the external cash injection that was needed. The husband was quite robust in resisting what was put to him in cross-examination about the absence of need for these funds. For example, it was put to him, and I accept that the evidence clearly indicates, that at the times that he was receiving money by way of overseas loans, his business accounts were often in credit. Despite my reservations about the husband’s credit, expressed elsewhere in these reasons, I found the husband’s explanations to be sufficiently plausible. The fact is there is sufficient documentary evidence to indicate that moneys were in fact received from overseas. The husband explains, for example, that working capital was needed to establish businesses and to provide stock for the same. I find this to be a plausible explanation. The husband’s 2008 tax return, being a document tendered by the wife herself, indicates that at the beginning of the relevant tax year, the opening stock inventory had a value of $35,000, and there had been purchases of $104,269. If this represents stock levels during a year when, based on the husband’s unchallenged evidence he was intending to close the business, then it is by no means farfetched that moneys were needed for working capital which could not be sourced from the established institutional borrowings undertaken by the parties. It is also quite likely that some of the overseas moneys were used for share trading which, ultimately, may not have been as successful as the husband had hoped. One of the strongest points in the wife’s case against the existence of the overseas loans is the absence of any reference to them in the parties’ loan application to St George finance. This is a matter going to the husband’s credit, but does not establish that there were no overseas loans. Whilst this is only speculation, I suspect that if he had told
St George about the existence of the overseas loans, he would never have received a finance approval from them. On balance, the court accepts the husband’s explanation for these international loans as being sufficiently plausible, particularly in the absence of a cogent alternative explanation by the wife. The moneys received were probably used for working capital and share trading. Moreover, the wife probably knew about this in general terms, though not to the level of specificity of her husband. I do accept that she knew more about these overseas loans, and the repayments thereof, than she has presented to the court.
Sale of Property D and Share Portfolio
The wife asserts that there should be an add-back against the husband of the sale proceeds of [K], otherwise known as Property D, and of the share portfolio. She asserts that the add-back should be $323,586. There seems little doubt that the husband acted unilaterally in selling these assets and then applying the sale proceeds in repayment of the overseas loans referred to above. The court is not clear, however, how the wife established the sale proceeds at $323,586. The husband’s own evidence is that Property D was sold and that he received net $255,586 after payment of the sale expenses and the discharge of the relevant
St George mortgage. Moreover, he says that on the sale of the shares, and after paying out the balance of the ComSec share trade facility, he netted $128,000. The total is $383,586. Accordingly, if there is to be an add-back, it should be at the figure proposed by the husband as the net sale proceeds; ie $383,586.
Net Add-back – Difference Between Sale Proceeds and Overseas Loans Repaid
As indicated above, it is clear that the net sale proceeds at Property D and the share portfolio was $383,586. I also accept from the husband’s own evidence that he then repaid the final instalment on outstanding loans of $250,826. The husband’s own evidence is that out of the remaining money ($132,760) he purchased his car for $22,000. This is item 5 on the balance sheet, though the value reflected is, it is agreed, the current value. The husband also asserts that he created the bank accounts in the children’s names totalling $40,000. This is item 2 on the balance sheet. The amount unexplained, therefore, is $70,760. Paragraph 35 of the husband’s affidavit sworn 11 June 2010 contains an explanation of the use of part of the funds. He asserts that after repaying the various outstanding overseas loans, purchasing his motor vehicle, and creating the two $20,000 accounts in his children’s names, he then used part of the funds to pay outstanding school fees, to make a payment to [D] for work carried out on his behalf, and to pay arrears of rent. In the absence of corroborative evidence about these payments, I do not accept the husband’s explanation. For reasons I have already expressed above, there are real concerns about the husband’s credit in circumstances where transactions are not corroborated by documents. All three of the debts he allegedly paid should, in the normal course, be evidenced by some form of correspondence or documentation, but he has not presented the same. In any event, the amount that he had to account for was $70,760. He has failed to do so. The court is entitled, in the circumstances of this case, to infer that he still retains or controls these funds, and is otherwise entitled to notionally add it back. Accordingly, the net add-back for balance sheet purposes will be $70,760, to be treated as notional property of the husband.
The Final Balance Sheet
Having regard to the matters I have referred to above, the final balance sheet in this case will be as follows:
| Balance Sheet | |||
| Number | Asset | Ownership | Value |
| 1 | Property C | Joint | $500,000.00 |
| 2 | Money held in trust by Wife's Solicitor | Joint | $40,000.00 |
| 3 | CBA Bank Account | W | $400.00 |
| 4 | CBA trust Account - [Y] | Joint | $3,400.00 |
| 5 | Toyota Corolla | H | $15,000.00 |
| 6 | Westpac Bank Account | H | $300.00 |
| 7 | Business | H | $2,000.00 |
| 8 | Jewellery | H | $2,000.00 |
| 9 | [M] Super | H | $13,251.00 |
| 10 | [R] Super | H | $2,465.00 |
| 11 | Add-Back, Money drawn against mortgage | H | $20,000.00 |
| 12 | Add-Back, Difference between sale proceeds of Property D, Share portfolio and Loan Repayments | H | $70,760.00 |
| 13 | Add-Back, Money received from sale of shares: [E] | H | $24,850.00 |
| 14 | Add-back, Sale proceeds Toyota Corolla | H | $2,000.00 |
| 15 | Add-Back, Shares current held: [E] | H | $6,000.00 |
| Total | $702,426.00 | ||
| Liabilities | |||
| 16 | St George Mortgage | Joint | $164,000.00 |
| 17 | Income Tax | Joint | $61,015.00 |
| Total | $225,015.00 | ||
| Net Assets | $477,411.00 | ||
| Superannuation Assets | $15,716.00 | ||
| Non-Superannuation Assets | $461,695.00 |
Contribution
By the time of final submissions, the husband asserts that at the end of the marriage, contribution should be assessed equally, having regard to the diverse contributions that each of them made. On behalf of the wife, however, it is asserted the contribution should be assessed as to 52.5 per cent in her favour to reflect two lump-sum contributions that she made by way of compensation payments. In her evidence, the wife refers to two such payments; one in the sum of $48,974, and the second one being a Victim’s Compensation Tribunal payment of $14,250. As I have indicated elsewhere in these reasons, I do not accept the wife’s submission that the VCT payment is a contribution on her part, as it seems to have come in so late in the marriage but, more particularly, the evidence is that she used it for her own purposes in the post-separation period. In relation to the other payment, however, there is substance in her submission that some adjustment needs to be made to reflect this. In the circumstances, only a five per cent differential is sought, and in these circumstances I consider it is just and equitable, therefore, to assess the wife’s contribution at 52.5 per cent
An Adjustment Under Section 75(2)?
The husband submits that any s.75(2) factors are equal, as between the parties. For example, each has the care of a child. Implicitly, any s.75(2) considerations favouring the wife are offset by what the husband asserts to be his inability to work based on various physical ailments that I have discussed elsewhere in these reasons. However, as I have indicated earlier, in the absence of any independent medical evidence I certainly do not accept the husband’s own evidence about his disabilities which, I note, do not seem to have affected him earning an income over the many years that he has suffered from them.
The wife’s case is that there should be a s.75(2) adjustment in her favour assessed at seven-and-a-half per cent. In the circumstances of this case, I agree that that is appropriate. Even though she is younger than the husband, the wife certainly does not have his skills. He is a [omitted]. She is, at best, a [occupation omitted]. His capacity to earn income is considerably greater than that of the wife’s, as is apparent from the amended tax returns filed by him. I acknowledge that the husband pays child support in relation to [Y], the child in the wife’s care, whereas the reverse is not so. This reflects the financial disparity between them. I acknowledge that the husband will have other debts that, he asserts, he will need to pay, even though they have not been allowed on the balance sheet. To a lesser extent, the same is also true of the wife. They will each have their own considerable legal fees to pay, and the husband has an outstanding court order for costs to be paid.
The most significant s.75(2) consideration working in favour of the wife, however, derives from the findings that I have made in relation to the husband’s nondisclosure. Whilst I have found in his favour in relation to probably the most important issue in this case, the overseas loans, and whilst I have made a number of add-backs against the husband and thus notionally increased the value of the asset pool, the fact is that at numerous points in these reasons I have expressed reservations about whether the husband has been faithful in discharging his obligation to disclose the true extent of his financial circumstances to the court. In these circumstances, the wife is entitled to an adjustment on account of the uncertainty, and on this basis, the seven-and-a-half per cent adjustment that she seeks is entirely appropriate. It must be recognised that the husband clearly has available to him resources that the wife does not. According to his own evidence, he was able to raise considerable sums of money from overseas for business, investment and personal purposes. The triggers for repayment was, undoubtedly, the separation of the parties. I doubt if he will have any significant problems in turning to these sources for finance again in the future.
Just and Equitable Order
I have found the net pool of assets to be $477,411. I have assessed the wife’s contribution at 52.5 per cent, and her s.75(2) adjustment at
7.5 per cent. Hence the wife’s entitlement is 60 per cent of the pool of assets. By her minute of order of 11 March, she seeks to retain the property at Property C. I will give her the opportunity to do so. The husband proposed the sale of the said property and division of its sale proceeds, but if he receives his entitlement in a timely fashion, it should not make a difference to him whether or not the property is sold.
If the wife retains the Property C property, refinances the mortgage, keeps the moneys held in trust by the solicitor, and the other property attributed to her in the list of assets, her entitlement would be $381,800 net. Accordingly, in order to retain the Property C property, she would have to pay to the husband $95,354. I am not sure how the wife intends to do this. Nonetheless, I will give her the opportunity. If she cannot pay the husband within 90 days of these orders, the property will be listed for sale.
If the husband retains all the property attributed to him in the list of assets, including the notional add-backs, and assumes responsibility for the taxation debt, the payment to him of $95,354, takes him to his
40 per cent entitlement.
| Expressed mathematically the outcome is as follows: | |||
| Net pool of assets | $477,411 | ||
| Sixty percent to wife | $286,446 | Forty percent to husband | $190,964 |
| Wife receives: | Husband receives: | ||
| Property C | 500,000 | Toyota Corolla | 15,000 |
| (Less: mortgage) | 164,000 | Westpac account | 300 |
| Monies held on trust | 40,000 | Business | 2,000 |
| CBA account | 400 | [M] Super | 13,251 |
| [Y]'s trust account | 3,400 | [R] Super | 2,465 |
| Jewellery | 2,000 | Add-back | 20,000 |
| Sub-total | $381,800 | Add-back | 70,760 |
| (Less: pay to husband) | 95,354 | Add-back | 24,850 |
| Total | $286,446 | Add-back | 2,000 |
| Add-back | 6,000 | ||
| (Less: tax debt) | 61,015 | ||
| Sub-total | $95,611 | ||
| Add: payment from wife | 95,354 | ||
| Total | $190,964 |
I think the result is as just and equitable as the circumstances permit. If the wife can raise the money to pay out the husband as well as refinance the mortgage, she retains the formal matrimonial home. If she can’t, then she will receive a sum of cash which will go some way towards re-accommodating the child with her, as well as herself. From the husband’s perspective, he should receive enough money to pay out some of the debts that have not included on the final balance sheet, but I have little doubt on the evidence before me that he has the capacity to re-establish himself. Accordingly, the orders I make will reflect the above.
I certify that the preceding sixty-six (66) paragraphs are a true copy of the reasons for judgment of Altobelli FM
Date: 29 June 2011
Schedule
Wife’s list of assets and liabilities
| ASSET | OWNERSHIP | WIFE SAYS | HUSBAND SAYS |
| 1. Property C | Joint | $500,000 | $500,000 |
| 2. Money held in trust by Rita Thakur and Associates Pty Ltd | Joint | $40,000.00 | Agreed. |
| 3. Wife’s CBA account | Wife | $400.00 | |
| 4. CBA Trust Account | Joint (for the child, [Y]) | $3,400.00 | $3,400.00 |
| 5.Toyota Corolla Motor Vehicle | Husband | $15,000.00 | $15,000.00 |
| 6. Holden Cruz Motor Vehicle | Wife | $17,500.00 | $17,500.00 |
| 7. Husband’s Westpac Bank Account | Husband | $300.00E | $300.00 |
| 8. Husband’s business | Husband | $250,000E | $2,000.00 |
| 9. Jewellery | Wife | $2,000.00 | $18,500.00 |
| 10.Husband’s [M] Superannuation | Husband | $13,251.00 | $13,251.00 |
| 11. Husband’s [R] Superannuation Fund | Husband | $2,465.00 | |
| 12. Addback against husband –money withdrawn from mortgage | Husband | $20,000.00 | Not agreed. |
| 13. Addback against husband –Sale of Property D and Share Portfolio | Husband | $314,820.00 | Not agreed. |
| TOTAL ASSETS | $1,176.671.00 | $572.416.00 | |
| LIABILITY | OWNERSHIP | WIFE SAYS | HUSBAND SAYS |
| 1. St George Mortgage | Joint | $161,000.00 | $161,000.00 |
| 2. Wife’s car loan from [Mr/Ms A] | Wife | $27,333.00 | $27,333.00 |
| 3. Legal Costs | Wife | $46,277.99 | |
| 4. Visa Card | Husband | Disputed. | $24.00 |
| 5. Income Tax liability | Husband | Disputed. | $100,000.00 |
| 6. Business Loan [B] | Husband | Disputed. | $21,364.00 |
| 7. Business Loan [K] Pty Ltd | Husband | Disputed. | $3,500.00 |
| 8. Loan from Mr H | Husband | Not Agreed | $4,000.00 |
| Loan from [X] | Husband | Not Agreed | $2,000.00 |
| [omitted] Accounting Liability | Husband | Not Agreed | $2,090.00 |
| [omitted] College Fees | Husband | Not Agreed | $2,560.00 |
| [K] rent in arrears | Husband | Not Agreed | $11,660.00 |
| Legal Costs – Hansons | Husband | Not Agreed | $18,658.00 |
| Legal Costs – Good Legal | Husband | Not Agreed | $6,000.00 |
| TOTAL LIABILITES | $234,610.99 | $360,189.00 | |
| NET ASSETS AT HEARING | $942,060.01 | $212,227.00 |
Husband’s list of assets and liabilities
| ASSET: | H. Value: | W. Value: | Agreed: |
| Wife: | |||
| Property C | 500,000 | 500,000 | Agreed |
Property D | 450,000 | 650,000 | NIL (Sold) Refer Note |
| Commonwealth Bank account Held in Trust for children | 3,400 | 3,400 | 3400 |
| Holden Cruze 2009 | N/K | 17,500 | 17,500 |
| Toyota Corolla 2010 | 15,000 | 15,000 | 15,000 |
| Superannuation: [M] [R] | 13,251 | 13,251 | 13,251 |
| Furniture/Personalty | 2,000 | 2,000 | 2,000 |
| Jewellery ( Wife) | 18,500 | 2,000 | Dispute as to Value |
| Husbands Business – [G] | 2,000 | N/K | 2,000 |
| Shares | 178,000 | N/K | Dispute (Sold) |
Wife’s Liabilities
| Wife car loan to Sister | NIL | 27,333 | 27,333 |
| Wife’s Legal Fees in Proceedings | N/K | 26,000 | 26,000 |
Joint Liabilities: | |||
| Mortgage debt to St George Bank over Property C | 164,000 | 164,000 | Agreed |
| Australian Tax Office | 68,000 | N/K | 68,000 |
| Overseas Loans | 250,826 | NIL | Refer Notes |
| Husband Liabilities: | |||
| [K]- Outstanding rent Arrears | 11,660 | N/K | 11,660 |
| Loan [B] – Trade Creditor | 21,264 | N/K | 21,264 |
| Hansons Lawyers- Legal fees | 18,658 | N/K | 18,658 |
| Rita Thakur Legal Fees | 4,950 | 4,950 | 4,950 |
| Good Legal Lawyers | 6,000 | N/K | 6,000 |
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