Jepson & Jepson (No 8)

Case [2025] FedCFamC1F 146

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA

(DIVISION 1)

Jepson & Jepson (No 8) [2025] FedCFamC1F 146

File number: SYC 2100 of 2016
Judgment of: MCCLELLAND DCJ
Date of judgment: 7 March 2025
Catchwords:

FAMILY LAW – PROPERTY – Application for an adjustment under s 79 of the Family Law Act 1975 (Cth) – Where the husband was the primary income earner and the wife was the primary caregiver for the parties’ children – Issues of credit – Non-disclosure – Where the wife failed to provide items of jewellery for valuation – Where the wife has returned to the workforce but the husband has remained unemployed – Where the wife’s inheritance and superannuation must be treated as a post-separation asset – Financial orders made for payment of monies to the husband and for the wife to retain her property.

FAMILY LAW – ADDBACKS – Exception not the rule –Whether legal fees of criminal proceedings should be added back – Where the wife contends that the husband should have declared bankruptcy – Where the husband was in his right to defend criminal proceedings – Where the legal expenses were reasonably incurred – Where the husband’s expenditure on legal fees was neither wasteful, reckless or wonton – Where an addback is sought due to the asserted “loss of businesses” – Where the wife’s allegations that the husband engaged in dishonest and illegal conduct does not satisfy the burden of proof – Where the husband contends that the wife’s reckless conduct led to a significant reduction in the sale price of the former matrimonial home – Where the husband asserts that the wife provided information to a journalist knowing it would create adverse media publicity and diminish the sale price of the property – Where any reduction could not be accurately quantified – Finding some items be added back with the balance to be considered under s 75(2)(o) of the Family Law Act 1975 (Cth).

FAMILY LAW – RESTITUTION – Associated jurisdiction of the Court – Where the wife sold two motor vehicles belonging to the second respondent at the time of the sale – Where the Court does not accept the wife’s account of the sale price – Where there is a lacuna in the evidence regarding the advertisement of the motor vehicles for sale – Consideration of Armory v Delamirie (1722) 1 Strange 505 [93 ER 664] – Facilitation principle – Wife to pay the second respondent $130,000 as compensation.
Legislation:

Bankruptcy Act 1966 (Cth) s 77

Corporations Act 2001 (Cth) s 206F

Evidence Act 1995 (Cth) ss 60, 69, 136, 140

Family Law Act 1975 (Cth) ss 75(2), 79, 106A

Federal Circuit and Family Court of Australia Act 2021 (Cth) ss 29, 43

Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) pt 7.1, r 8.04

Kopsen, Hugh PK and Robyn Carroll, “The Importance of Full and Frank Disclosure in Family Law Financial Proceedings and the Many Consequences of Non-Disclosure” (2017) 45 Federal Law Review

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AGLC
Jepson & Jepson (No 8) [2025] FedCFamC1F 146
Case
[2025] FedCFamC1F 146
Decision Date

CaseChat Overview and Summary

The case of Jepson & Jepson (No 8) before the Federal Circuit and Family Court of Australia involved a complex dispute between the husband and wife regarding the division of their assets and liabilities. The central issue was the appropriate division of assets, with the wife contesting the husband’s claims of fraudulent and illegal activities. Another significant point of contention was the handling of legal fees and the valuation of assets, including the sale of motor vehicles.

The court had to decide whether certain financial items should be added back to the husband’s assets or if the wife’s allegations were substantiated enough to warrant such adjustments. Additionally, the court examined the wife’s claim that the husband should have declared bankruptcy and whether the legal expenses incurred by the husband were reasonable. The wife also argued that the husband’s conduct led to a reduction in the sale price of their former matrimonial home, which the husband denied. The court had to balance these claims and decide on the final financial orders.

The court found that the wife’s credibility was compromised due to her false testimony regarding the sale of motor vehicles. Despite the wife’s allegations of fraud and illegal activities by the husband, the court did not find sufficient evidence to support these claims. Regarding the legal fees, the court ruled that some items should be added back, but others would be considered under section 75(2)(o) of the Family Law Act 1975 (Cth). The court also determined that the wife sold motor vehicles belonging to the husband’s mother and ordered her to pay compensation.

The final orders mandated the payment of certain sums to the husband from the wife, compensation to the husband’s mother, and the assignment of life insurance policies to the husband. The court discharged all previous orders and clarified that the parties retained their rights to other properties in their possession or name. The court emphasised the importance of executing all necessary documents to give effect to these orders and appointed a Judicial Registrar to facilitate this if necessary.

Orders

Orders of the court

SYC 2100 of 2016

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)

BETWEEN:

MR JEPSON

Applicant

AND:

MS JEPSON

First Respondent

MS B JEPSON

Second Respondent

ORDER MADE BY:

MCCLELLAND DCJ

DATE OF ORDER:

7 MARCH 2025

THE COURT ORDERS THAT:

1. All previous orders are hereby discharged.

2. Within 28 days of the date of these orders, the parties are to take all steps necessary to direct JJ Lawyers to pay to Mr Jepson (“the applicant”) the balance of the net sale proceeds of the property situated at L Street, Suburb P in the amount of $1,214,541.

3. Within 28 days of the date of these orders, Ms Jepson (“the first respondent”) is to pay the further amount of $456,609 to the applicant.

4. Within 28 days of the date of these orders, the first respondent is to pay the amount of $130,000 to Ms B Jepson.

5. Within 7 days of the date of these orders, the first respondent is to do all acts and things necessary to assign to the applicant any and all life insurance policies, total and permanent disability insurance policies, or any other policy that the first respondent has in her name which covers the applicant.

6. Except as otherwise set out in these orders, the parties have the sole right, title and interest in any other property which is at the date hereof in their possession, title or name and they shall be solely liable for and indemnify the other against any and all liabilities that stand in their name, title or possession.

7. Each party must do all acts and things, give all consent and execute all documents and writings necessary to give effect to the orders herein.

8. In the event that either party refuses or neglects to execute any deed or instrument, a Judicial Registrar or such other empowered person of the Federal Circuit and Family Court of Australia or such other Court with jurisdiction, be appointed pursuant to section 106A of the Family Law Act 1975 (Cth), to execute such deed or instrument in the name of such party and to do all acts and things necessary to give validity to the operation to the deed or instrument.

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

Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).

Part XIVB of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish an account of proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.

Background

Background to the litigation

I have determined that the parties’ assets are to be divided equally and that the wife will retain 100 per cent of a second pool, comprising of her post-separation inheritance and superannuation. In facilitating this division, the husband will be awarded the proceeds of sale from the former matrimonial home and an additional lump sum payment from the wife, and, in turn, the wife will retain her property. BACKGROUND In 1962, the husband was born. He is currently 62 years of age. In 1963, the wife was born. She is currently 61 years of age. The second respondent, the husband’s mother, was born in 1937. She is currently 87 years of age. Prior to the commencement of the parties’ relationship, the husband was a professional, and the wife was employed in real estate. The husband began developing an interest in collecting valuable items as a means of long-term investment. The parties commenced cohabitation in 1997 at LL Street, Suburb MM. At this time, the husband owned a number of business interests including an interest in NN Pty Ltd, OO Pty Ltd and interests in valuable items. The husband also had an interest in three companies and three properties, being: PP Street, Suburb QQ; RR Street, Suburb SS; and TT Street in Suburb UU. The wife owned Motor Vehicle 5 and had an interest in a property located at VV Street, Suburb WW, which was purchased in 1994. The parties married in 1998 and had two children, Mr XX, born in 1999, and Ms YY, born in 2001. During the course of the marriage, the husband was a businessman and the primary income earner. The wife was a homemaker although she did some paid work assisting with administrative matters arising from the properties. According to the husband, the parties separated in 2011. On the evidence of the wife, the parties separated in November 2015 and divorced in 2018. However, the wife accepts that in early 2012, she knew that “the marriage was over” (Wife’s affidavit filed 9 October 2023, paragraph 108). The husband has since re-partnered with Ms ZZ. The husband and Ms ZZ commenced a relationship in 2015. The wife has not re-partnered. In 1999, the husband entered into a loan agreement with his mother, the second respondent. It is contended that this was to enable the husband and wife to invest in various businesses and real estate opportunities. In 1999, AB Company was incorporated. The wife says that she was appointed director and secretary in 2000. In 2008, an ASIC form was signed changing the name of the company to K Pty Ltd. The wife contends that the signature on the ASIC form is not hers (Wife’s affidavit filed 9 October 2023, paragraph 283). It is accepted that K Pty Ltd is a shelf company with assets of $1. The parties have agreed to remove K Pty Ltd as a party to the proceedings. The second respondent claims that between mid-2011 and late 2012, she provided loans to K Pty Ltd totalling $928,000. She accepts that recovery of those monies is statute barred but both the husband and the second respondent contend the monies advanced by the second respondent are a significant contribution by the husband.

Evidence

Evidence Before The Court

In his trial affidavit, the husband stated that the criminal charges that have been brought against him were subject to a “No Bill application” as the police could not “make out the offences as charged” (paragraph 143). During cross-examination, however, the husband admitted that this had already been rejected (Transcript 1 July 2024, p.43 lines 39–40). Treatment of the parties’ evidence in the context of credibility concerns As a result of my concerns regarding the credibility of both the husband and wife, I have not accepted their evidence in respect to matters of controversy unless it is verified by independent and admissible documentary evidence. Where evidence of that nature is not available, I have determined that the party making the allegation has failed to establish the existence of that fact to the evidentiary standard set out in s 140 of the Evidence Act 1995 (Cth) (“Evidence Act”).Is it just and equitable to make a property adjustment? Counsel for the wife contended that in the circumstances of this case, it would not be just and equitable to make any property adjustment order and rather, the Court should make a declaration that monies held in respect to the proceeds of sale of the Suburb P property should be paid to the wife (Transcript 18 July 2024, p.93 lines 28–32). That submission was made on the basis of three essential contentions. Firstly, it was contended that the Court would have regard to the husband’s mismanagement of the corporate entities that he initially contributed to the parties’ property which includes – according to the wife – both fraudulent and illegal activity. Secondly, that the wife’s property where she currently resides, being EE Street, Suburb FF, has been acquired as a result of a settlement that the wife made with Y Company wherein she was paid in total the sum of $2,180,000. Thirdly, additional monies that the wife has available to her were gained from her post-separation income, superannuation that she received in respect to her post-separation employment, and the receipt of an inheritance post-relationship. It is convenient at this point to set out why, on the basis of evidence that she has presented, the wife has not satisfied me on the balance of probabilities and to the extent required by s 140(2) of the Evidence Act, that the husband has engaged in fraudulent and illegal activities. The wife sets out the relevant allegations she makes regarding the husband’s misconduct in a document entitled “wife’s asserted facts” (Exhibit T). Firstly, counsel for the wife refers to the husband’s affidavit in contending that the husband’s business interests were valued between $36 to $60 million before 2013 (Transcript 18 July 2024, p.77 lines 44–47, referring to husband’s affidavit filed 6 October 2023, paragraphs 42–44). It is to be noted, however, that the husband contended that the businesses were owned jointly with his mother. The wife contends that the husband engaged in fraudulent activities, including writing fraudulent cheques in 2013. She contended that the husband admitted to “cheque kiting”.

Decision

Reasons for decision

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

It is to be appreciated that the exercise of the broad discretion given to the Court pursuant to s 79 of the Act “‘inevitably involves value judgments and matters of impression’, and accordingly it cannot be treated as ‘a mathematical exercise’”.[13]CONSIDERATION[13] Petruski & Balewa (2013) 49 Fam LR 116 at [49], citing Lovine & Connor (2012) FLC 93-515 at [40]–[41].Factual findings The husband and wife have each helpfully provided to the Court a summary of factual findings that they contend are relevant to the determination of the controversies in these proceedings. I have considered each of those contentions of fact and will refer to them to the extent that a factual finding is necessary and has impacted my decision as to the orders I have made in these proceedings.The wife’s credibility The mother was a poor witness. Her answers were frequently non-responsive and self-serving. Most significantly, however, I am satisfied she gave deliberately false evidence to the Court in respect to the sale of two motor vehicles that had been constructed by the husband from parts taken from motor vehicles previously owned by his father and also from motor vehicles and parts acquired by the husband. Because of the impact that the wife’s false testimony has had on my assessment of her credibility, it is convenient to deal with that issue at this point of my reasons. The evidence of the second respondent in respect to her acquisition of the motor vehicles is set out at paragraphs 78–87 of her affidavit, as follows:[…] [the husband’s father] collected [motor vehicles] and when I met him in or about 1956, he had a [motor vehicle]. He restored several other [motor vehicles] during our marriage. It was from this that [Mr Jepson] developed his interest in [motor vehicles] and over the years he purchased around 8 [vehicles].[Mr Jepson’s] interest in [motor vehicles] was very much influenced by [his father]. I cannot remember the exact date, but I remember that [Mr Jepson] told me sometime after [his father] passed away, “I purchased two [motor vehicles], they are in pretty bad nick, but I think with the parts from Dad’s old [vehicles], I can restore them a bit”. This made me happy that my husband’s passion had passed to my son.[Mr Jepson] then purchased old [parts] and difficult to obtain […] parts: he used […] engines and many parts from [his father’s] collection to restore these two [motor vehicles] along with the assistance of [Mr AS]. As [Mr Jepson] used a lot of the parts from [his father’s] old [motor vehicles], we considered that the [vehicles] were a family asset, and [Mr Jepson] and I had a 50% share in them.When the [motor vehicles] were restored, [Mr Jepson] did not register them to be roadworthy as they were more sentimental and collectibles than anything.In […] 2013, [Mr Jepson] wanted to sell me his share of the [motor vehicles]. We agreed to sell the [vehicles] at $100,000 each as we believed this to be the value of them at the time. I did not pay him any money but instead, [Mr Jepson] told me, “the [motor vehicles] will be security for the money I owe you.” … [Paragraphs 83–85 omitted]I do not believe that [Ms Jepson] sold the [motor vehicles]. This is because the [vehicles] are not so much vehicles as they are collectibles; their value is informed by the proper registration and historical documentation. The [motor vehicles] are in my name and are now noted by [AT Group] as stolen worldwide; I deny that any purchaser who knows anything about the [motor vehicles] would want to purchase them.After we discovered that the [motor vehicles] were stolen, [Mr Jepson] told me “I told [Mr AS] about the [motor vehicles]. He was shocked at how low they sold for”. [Mr AS] is a world-renowned expert on [this brand of motor vehicle] and he knew my [vehicles] very well because he previously helped [Mr Jepson] with their restoration as deposed above.