Judge and Judge (No. 2)

[2014] FamCA 723

FAMILY COURT OF AUSTRALIA

JUDGE & JUDGE (NO. 2) [2014] FamCA 723

FAMILY LAW - PROPERTY – Final Orders – undefended hearing – where husband defending criminal and civil proceedings in other jurisdictions – where husband failed to participate in proceedings – husband has not disclosed his financial circumstances – adverse inference drawn against the husband.

FAMILY LAW – PROPERTY – Final Orders – just and equitable – where husband’s actions have resulted in significant diminution of the assets available for distribution – where wife has made overwhelming contributions – consideration of s75(2) factors – where just and equitable for wife to receive 65 per cent of available assets.

Family Law Act 1975 (Cth) s 79(2), 79(4), 75(2)

Bevan & Bevan [2014] FamCAFC 19
Clauson & Clauson (1995) FLC 92-595
Judge & Judge [2014] FamCA 528
Livesey v Jenkins (1985) 1All ER 106
Orielo & Orielo (1985) FLC 91-653
Stanford v Stanford (2012) 247 CLR 108
Waters & Jurek (1995) FLC 92-635
Weir & Weir (1993) FLC 92-338

APPLICANT: Ms Judge

RESPONDENT: Mr Judge

FILE NUMBER: ADC 2814 of 2013

DATE DELIVERED: 3 September 2014

PLACE DELIVERED: Adelaide

PLACE HEARD: Adelaide

JUDGMENT OF: Berman J

HEARING DATE: 1 September 2014

REPRESENTATION

COUNSEL FOR THE APPLICANT: Ms Pyke QC

SOLICITOR FOR THE APPLICANT: Barnes Brinsley Shaw Lawyers

COUNSEL FOR THE RESPONDENT: No appearance by Litigant

SOLICITOR FOR THE RESPONDENT:

Orders

1. In full and final settlement of any claim that either party may have against the other for settlement of property:-

   (a)That subject to the discharge of the freezing order made in the Supreme Court of South Australia in Action No. … of 2013 made on … 2013, the husband do transfer to the wife all his right, title and interest both at law and in equity in the property situate at C Street, Suburb D in the State of South Australia being the whole of the land described by and comprised in Certificate of Title Register Book Volume … Folio … (hereinafter referred to as “the former matrimonial home”);

   (b)That contemporaneously with the transfer as referred to in paragraph 1 hereof the wife do discharge the St George Bank Mortgage (mortgage number …) secured against the former matrimonial home and do indemnify the husband in relation thereto;

   (c)That from the date of the said transfer of the former matrimonial home the wife do pay all outgoings in relation thereto and indemnify the husband in relation to such payments;

   (d)That within 14 days the wife do all things necessary and sign all such documents that may be required to enable the husband to receive 100 per centum of the proceeds from the joint equity trust (BT Growth Fund) Account PROVIDED THAT the husband do pay any taxation liability incurred in respect of this investment, including any of the wife and do indemnify the wife in respect thereof;

   (e)That as to G Pty Ltd (ACN Number …) and H Pty Ltd, formerly J Pty Ltd (ABN …) (“the companies”):-

   (i)The wife do forthwith transfer all her shares and entitlements in the companies to the husband and/or his nominee(s);

   (ii)The husband do indemnify the wife in relation to any or all liabilities either past, present or future including without limiting the generality of the forgoing any past, present or future income tax liability, capital gains tax liability or other taxation liabilities or penalty costs of the wife and/or the husband arising out of the companies or the wife’s position in the companies;

   (iii)The wife do hereafter relinquish any further claim against the husband in relation to the companies or against the companies in relation to the assets of the companies or any monetary entitlement the wife may have in the companies including without limiting the generality of the forgoing any loan account of the husband or the wife in the companies or as to wages or dividends or otherwise either past, present or future and any such monetary entitlement of the wife shall vest in the husband.

   (f)That as to G Trust and Judge Trust (“the trusts”):-

   (i)The wife do forthwith renounce, relinquish and transfer her entitlement in the trusts to the husband and/or his nominee(s);

   (ii)The husband do indemnify the wife in relation to any or all liabilities either past, present or future including without limiting the generality of the forgoing any past, present or future income tax liability of the wife or other taxation liabilities of the wife or penalty costs of the wife and/or the husband arising out of the wife’s interest in the trusts or any distributions to her;

   (iii)The wife do hereafter relinquish any claim against the husband in relation to the trusts or against the trusts in relation to the assets of the trusts or any monetary entitlement the wife may have in the trusts including without limiting the generality of the forgoing any beneficiary loan account and any other past, present or future monetary entitlements of the wife shall hereinafter vest in the husband;

   (iv)That the husband do forthwith do all things necessary and sign all such documents as may be necessary to amend the trust deeds to remove the wife as a beneficiary or class of beneficiary of the trusts, at his sole cost;

   (v)That the husband be restrained and an injunction be granted restraining the husband from distributing any income from the trusts to the wife, without the wife’s prior written consent.

   (g)       That as to the self-managed superannuation fund:-

   (i)The wife do forthwith resign from any position she holds in the Fund;

   (ii)The husband do hereafter indemnify the wife in relation to any or all liabilities either past, present or future including without limiting the generality of the foregoing any past, present or future income tax liability and capital gains tax liabilities of the wife and or the husband arising out of the Fund or the wife’s membership (if any) of the Fund;

   (h)The husband do otherwise retain for his sole use and benefit absolutely free from any claim or demand of the wife all of the following:-

   (i)Items of furniture and effect in his possession;

   (ii)The savings, monies and investments, including shares in his sole name;

   (iii)His superannuation entitlement, if any;

   (iv)His interest in the following entities, including any assets and liabilities in the names of any of the entities listed in Orders (1) (h) (v) to (viii) herein;

   (v)G Pty Ltd;

   (vi)Judge Trust;

   (vii)G Trust; and

   (viii)H Pty Ltd;

   (ix)The motor vehicle in his possession;

   (x)The property situate at I Street, Suburb K in the State of South Australia;

   (xi)100 per cent of the BT Growth Fund proceeds;

   (xii)100 per cent of the proceeds of his Commsec shares;

   (xiii)All other items of real and personal property in his possession or control.

   (i)The wife do otherwise retain for her sole use and benefit absolutely free from any claim or demand of the husband all of the following:-

   (i)Items of furniture and effect in her possession;

   (ii)The savings, monies and investments, including shares in her sole name;

   (iii)Her Toyota motor vehicle in her possession;

   (iv)Her superannuation entitlement with HESTA and Super SA;

   (v)The sale proceeds from the sale of the A Limited shares;

   (vi)The motor vehicle in her possession;

   (vii)All other items of real or personal property in her possession or control.

   (j)That the husband and wife do otherwise pay and discharge all debts and liabilities in their sole name to the exoneration of the other and do indemnify the other in relation thereto.

2. Liberty to apply as to consequential orders.

3. That all matters be removed from the Pending List of Cases.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Judge & Judge (No. 2) has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT ADELAIDE

FILE NUMBER: ADC 2814 of 2013

Ms Judge

Applicant

And

Mr Judge

Respondent

REASONS FOR JUDGMENT

INTRODUCTION  

1. The wife seeks that her Amended Initiating Application filed on 21 February 2014 seeking orders by way of property settlement, proceed on an undefended basis.

2. The said application was first listed before me on 15 July 2014.  On that occasion, after hearing submissions of senior counsel for the wife and noting the matters contained in affidavit material relied upon by the wife including an affidavit of the husband filed 11 July 2014, I declined to conclude the proceedings without providing a further opportunity for any affected third parties, but in particular B Pty Ltd being the plaintiff in Supreme Court of South Australia proceedings action number … of 2013 to be heard.

3. I do not propose to repeat the matters set out in my reason for judgment delivered 18 July 2014 reported as Judge & Judge [2014] FamCA 528, but the short summary is that the husband was then and currently remains subject to a “freezing order” made by Vanstone J in 2013 which restrains the husband from disposing of, dealing with or diminishing the value of his assets in Australia.

4. The freezing order would clearly affect the interest that the husband holds as a joint registered proprietor of property situate at C Street, Suburb D being the whole of the land described and comprised in Certificate of Title Register Book Volume … Folio … (“the former matrimonial home”).

5. Additionally, in the reasons for judgment of Nicholson J there is a tangential reference to the claim of the plaintiff extending beyond the property and assets of the husband and potentially affecting the legal interest of the wife in the said former matrimonial home.

6. I rely upon my reasons as delivered and note my comment at paragraph 21 of the judgement:-

   Accordingly, it could be said that the pool of assets available for distribution between the parties is modest.  Subject to further consideration, the effect of the orders sought by the wife would result in an outcome comfortably within the ambit of my discretion.

7. I declined to conclude the proceedings on the last occasion in preference for the proceedings to be further adjourned to enable B Pty Ltd to be served with a copy of orders made on 15 July 2014 and reasons for judgment delivered 18 July 2014.

8. The matter comes back before me noting that there has been full compliance with orders made and that there is no attendance by B Pty Ltd or any representative.

9. At the commencement of the proceedings, senior counsel tendered a bundle of correspondence which confirms that the plaintiffs in the Supreme Court proceedings is now represented by different solicitors namely, Hunt and Hunt Lawyers, that a copy of the order and the reasons were forwarded to the plaintiff’s solicitors and that by correspondence dated 20 August 2014 receipt of the order and reasons was acknowledged and importantly, a confirmation that “our client has instructed us to remain uninvolved in the Family Court proceedings”.

10. In all the circumstances, I am satisfied that procedural fairness has been afforded the plaintiffs and they do not wish to be heard in respect of the wife’s application which seeks orders that would impact upon the husband’s interest in the former matrimonial home.

11. I do not consider that there is any impediment to the wife’s application being heard and determined.

ORDERS SOUGHT

1. The wife continues to seek orders as set out in her Amended Initiating Application filed 21 February 2014 with the only amendment being the transfer of the husband’s interest to the wife in the former matrimonial home is subject to the discharge of the freezing order made in the Supreme Court proceedings.  In all other respects the orders sought in the Case Outline document filed 1 September 2014 mirror the orders sought in the said Amended Initiating Application.

CHRONOLOGY

… .61            Date of birth of husband

… .66            Date of birth of wife

… .88            Date of marriage

1988Parties purchase former matrimonial home at C Street, Suburb D.

… .92Date of birth of L

… .94Date of birth of M

1995Wife returns to work following maternity leave

1998Husband commences employment with B Pty Ltd in a financial role

… .2000Date of birth of O

Dec 2000Wife returns to work following maternity leave

2004Husband acquires an interest in a shack situate at C Street, Suburb D

2007Husband and wife refinance the mortgage secured over the former matrimonial home

2007-

CurrentWife puts in place a salary sacrifice arrangement which causes significant reduction in the outstanding mortgage.

May 2013Husband’s involvement with B Pty Ltd is brought to an end

3.6.13Date of separation of parties

June 2013B Pty Ltd commences proceedings in the Supreme Court of South Australia.  The husband is a defendant in the proceedings.

June 2013Mortgagees of a property owned by the parties and situate at N Street, Suburb P cause the said property to be sold for $180,000.

BACKGROUND

1. The wife is 48 years of age and holds the qualification of a healthcare worker.  She is currently employed at Q Hospital.  The husband is 52 years of age.  Historically he has been involved in the finance industry and prior to the termination of his employment, he had a financial role with B Pty Ltd.

2. The husband is currently the subject of criminal and civil proceedings arising out of his employment.  His current employment status is not certain but he apparently works as a driver.

3. The parties separated in June 2013.  Two of the three children are adults.  The children continue to reside with the wife.

4. In 1988 the parties purchased the property at C Street, Suburb D for about $100,000.  A mortgage was taken out over the property in order to fund the purchase.  A property at N Street, Suburb P was sold to effect the purchase of the Suburb D property but was later repurchased by the parties in 1994. It was the wife’s belief that the property was registered in the joint names of the parties. 

5. In June 2013, the husband asserted that the Suburb P property formed the corpus of Judge Trust of which the husband and wife were trustees.  The wife knows nothing of this trust and it was only as a result of these proceedings and various searches undertaken by the wife that she discovered that the husband had been dealing with property without her permission, consent or knowledge.  In particular a mortgage was registered over the property in or about 2012.  The mortgage had not been repaid and the mortgagee took proceedings in the Supreme Court of South Australia to foreclose and sell the Suburb P property.

6. Importantly, the wife alleges that she did not sign the mortgage document notwithstanding that there is a signature which purports to be hers. She makes the clear allegation that the husband forged her signature and that of the witnesses.  She further alleges that he admitted to her that he had done this.

7. In January 2014, the Suburb P property was sold for $180,000.  There were no net proceeds of sale and in fact at settlement there was shortfall of $2,911.

8. The distressing summary of the husband’s dealings with the Suburb P property is that the assets of the parties were diminished by $140,000 directly related to the husband’s fraudulent conduct.

9. During the currency of the marriage the wife was employed as a healthcare worker.  She structured her employment to take into account maternity leave following the birth of each of the three children.

10. It is clear that not only did the wife contribute significantly from her employment, but she was also the principal homemaker and was sufficiently frugal in terms of her financial management that salary sacrificing her income reduced the mortgage over the former matrimonial home from $368,000 in 2007 to the date of separation by $73,008.  The wife continues to salary sacrifice.

11. Whilst it is conceded that the husband was generally employed as a sub-contractor with B Pty Ltd from 1998 until his services were terminated in May 2013, there is scant information provided by the husband as to his income, expenditure and perhaps more importantly, his financial dealings.

12. In 1998 the parties purchased the former matrimonial home situate at C Street, Suburb D for approximately $100,000.  The property was funded by applying the proceeds of the sale of the Suburb P property which was later re-purchased by the parties.  The current mortgage in respect of the former matrimonial home is $362,767.

13. The husband operated various entities during the course of the marriage but in particular the G Trust and its trustee G Pty Ltd and the Judge Trust.

14. The husband did not involve the wife in the affairs of these entities and refrained from providing her with any information.  Indeed, other than the somewhat disastrous consequences in terms of the effect on the diminution of assets of the parties by the husband’s financial activities, the activities of the husband during the course of the marriage remain largely unknown to the wife.

15. Following separation, the wife continued her employment as a healthcare worker.  She now holds three jobs in order to provide appropriate financial assistance to the children who continue to reside with her.

16. The husband works as a driver.  Whilst the husband has maintained a relationship with O, it is the wife who has undertaken the principal homemaker role.

17. O is currently in year 8 at School R.  In order that O have stability in his life, the wife has successfully negotiated with School R for tuition fee relief but ultimately, the wife has shouldered all of the financial obligation with respect of the children generally but in particular O without assistance from the husband.

18. Whilst it is self-evident that the husband faces an uncertain future, the consequence for these proceedings is that he has acted in a manner contrary to the interests of the parties.  It would appear he has embarked upon a fraudulent course of conduct which has significantly wasted property and has left the wife in the invidious position of having to deal with the distress and trauma of the children and herself following the husband’s arrest and the disclosure of the extent of the husband’s adverse conduct and financial consequences.

DISCOVERY AND DISCLOSURE

1. The husband has not participated in the proceedings.  It is difficult for the wife to gain a complete understanding of the husband’s activities and how his business dealings have impacted adversely on the finances of the family.

2. In Weir & Weir (1993) FLC 92-338, the Full Court said at page 79,593:-

   Once it has been established that there has been a deliberate non-disclosure…the Court shall not be unduly cautious about making findings in favour of the innocent party…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.

3. In Orielo & Orielo (1985) FLC 91-653 (a decision of Emery, Fogarty and Murray JJ) the Full Court held at 80,256:-

   We consider that there is a clear obligation on a party to proceedings in this Court to make a full and frank disclosure of all the relevant financial circumstances.

4. As was said by Lord Brandon before the House of Lords in Livesey v Jenkins (1985) 1 All ER 106 at page 114:-

   I stated earlier, that unless the Court is provided with correct, complete and update information on the matter to which, under Section 25 (1), is required to have regard, it cannot lawfully or properly exercise discretion in the manner ordained by that subsection.  It follows necessarily from this that each party concerned in claims for financial division and property adjustment (or other forms of ancillary relief not material in the present case) owes a duty to the Court to make full and frank disclosure of all material facts to the other party and to the Court.  This principle of full and frank disclosure in proceedings of this kind has long been recognised and enforced as a matter of practice.  The legal basis of that principle, and a jurisdiction for it are to be found in the statutory provisions to which I have referred.

1. Accordingly, I am able to draw an adverse inference against the husband arising from the deliberate disregard by the husband of these Court proceedings.

2. The husband did not participate in the proceedings, nor is it clear that he has made full and frank disclosure or that the wife has a clear understanding of exactly how the husband has dealt with the property of the parties.

3. It is clear however that the husband’s actions have been to the substantial detriment of the wife.

LEGAL PRINCIPLES TO BE APPLIED

1. Before I am able to consider any alteration or adjustment to the interests of the parties to their separate property, I must be satisfied by regard to Section 75 (2) of the Family Law Act 1975 (Cth) (“the Act”) that it would be just and equitable to embark upon such an exercise.

2. In Stanford v Stanford (2012) 247 CLR 108 the majority held:-

   [35]It will be recalled that Section 79 (2) provides that “the Court shall not make an order under this Section unless it is satisfied that, in all the circumstances it is just and equitable to make the order.

   Section 79 (4) describes matters that must be taken into account in considering what order (if any) should be made under the Section.  The requirement of the two sub-sections are not to be conflated.  In every case in which a property settlement order under Section 79 is sought, it is necessary to satisfy the Court, that in all the circumstances, it is just and equitable to make the order.

   [36]The expression “just and equitable” is a qualitative description of a conclusion reached after examination of a range of potentially competing considerations.  It does not admit of exhaustive definition.  It is not possible to chart its metes and bounds.

3. Importantly, the Court found:-

   Whether it is just and equitable to make the order is not to be answered by assuming the parties rights to all interest in marital property are or should be different from those that then exist.

4. In Bevan & Bevan [2014] FamCAFC 19 the majority of the Full Court said (in relation to the previously quoted paragraph in Stanford):-

   [70]In our experience the circumstances as described in the paragraph above encapsulates the vast majority of cases.  Hence the reminder in Stanford of the pivotal role of Section 79 (2) is unlikely to have any impact in most cases although it will serve as a reminder to trial judges that the precondition to making any order is a finding that it is just and equitable to do so.

5. Accordingly, three steps to be considered:-

   (1)The Court needs to consider the existing property interests of the parties and to identify those interests;

   (2)The direction must be exercised in accordance with legal principles and not in respect of any assumption that the parties interests should be different from those as determined by common law equity; and

   (3)Section 79 (2) cannot be conflated by reference only to matters of contribution in Section 79 (4).

LEGAL AND EQUITABLE INTERESTS OF THE PARTIES

1. The period of marriage is 25 years. There are three children of the relationship.

2. The parties had a mutual commitment towards each other and against a long marriage and the circumstances as presented to the Court it would be unconscionable to suggest that the parties did not uphold a significant and substantial and equitable interest in the property of the other.

3. I am satisfied that having regard to Section 79 (2) of the Act, it is just and equitable to embark upon a consideration of whether to adjust their respective property interests.

1. From the affidavit evidence of the wife the parties hold the following assets and liabilities:-

Assets
C Street, Suburb D (joint)	550,000
Furniture and effects (wife)	5,000
Toyota motor vehicle (wife)	13,300
S Credit Union (wife)	3,448
ING Direct bank account (wife)	7,426
Furniture and effects (husband)	1,000
BT Investment Fund paid to husband (husband)	28,065
I Street, Suburb K (husband)	220,000
T Street, Suburb U (asset of G Trust) (husband)	405,000
V Street, Town W (asset of G Trust (husband)	210,000
TOTAL	$1,443,239
Liabilities
Bank SA mortgages secured over C Street, Suburb D	362,767
Mortgage with Permanent Custodians Limited over I Street, Suburb K	122,635
Mortgage with Westpac Bank over T Street, Suburb U	425,669
Mortgage with X Pty Ltd over V Street, Town W	120,000
TOTAL	$1,031,071
Superannuation
Hesta (Wife)	68,000
Super SA (Wife)	57,902
TOTAL	$125,910

1. Accordingly, the net property of the parties is in the sum of $412,168.

CONTRIBUTIONS

1. I find that the wife has made the overwhelming contribution.

2. She has been the principal homemaker and I am satisfied that she has at all times worked hard to generate a reliable income for the family.

3. The husband’s position is uncertain and made more so by his refusal to participate in the proceedings and to make full and frank disclosure of his financial circumstances both historically and at present.

4. Moreover, the husband has acted fraudulently and by his actions has caused a significant diminution in the property of the parties of at least $140,000 if not a significantly greater sum.

5. Following separation the three children remained in the care of the wife and she has supported them, but in particular O without any financial assistance from the husband.

6. I have also had regard to the behaviour of the husband and the extent to which it has placed significant impediment to the wife’s ability to discharge her role as homemaker and parent.

SECTION 79 (4) (d)

1. The wife remains employed.  There is an uncertain future facing the husband.  The settlement will no doubt alter the property held by the parties.

2. The settlement will have no impact on the wife’s earning capacity.  She will be able to maintain her employment and whilst she will be left with a substantial liability in respect of the former matrimonial home, the wife has a quiet confidence that she will be able to make financial ends meet.

3. The husband’s future is uncertain. I assume that his income is modest.  There exists the possibility that he may suffer a term of imprisonment.  The settlement will have no impact on the husband’s future circumstances.

SECTION 75 (2) FACTORS

1. The wife is currently employed.  I am confident that her employment is secure.  There is significant uncertainty as to the husband’s future circumstances, but that is largely if not entirely as a result of the husband’s adverse conduct.

2. The wife will have the ongoing care of O in circumstances where the husband is unlikely to provide any financial assistance.

3. The preponderance of relevant factors pursuant to Section 75 (2) clearly favour the wife.

CONCLUSION

1. The effect of the orders sought by the wife would see her retain the following property:-

C Street, Suburb D	550,000
Furniture and effects	5,000
Toyota motor vehicle	13,300
S Credit Union	3,448
ING Direct Bank	7,426
Total	579,174
Liabilities
Bank SA mortgage	362,767
Net Balance	$216,407

1. Without bringing to account the superannuation entitlement of the wife, this would represent an adjustment to the wife of 52.5 per cent of the total property of the parties.

2. This calculation ignores the wife’s retention of her superannuation entitlement.

3. Whilst the treatment of the wife’s superannuation entitlement is problematic, I am cognisant of her age and note that it will be some years before she is able to satisfy a condition of release.

4. I do not consider it would be proper to ignore the wife’s superannuation entitlement given that it is a significant sum.  I note my earlier remarks that the husband has not contributed significantly during the course of the relationship and without the financial management of the wife, the property of the parties including her superannuation entitlement would have been further diminished.

5. If the wife’s entitlement were to be treated as if it were an asset of the wife, the total of the property of the parties and her superannuation would be $538,078.  On the basis that the wife is to retain net property of $216,407 and taking into account her superannuation entitlement of $125,910 this would represent a notional adjustment in her favour of 65 per cent of the combination of property and superannuation.

6. In all the circumstance I consider that such an outcome is well within the generous ambit of my discretion.

7. I am reminded of the consideration of the Full Court in Clauson & Clauson (1995) FLC 92-595 as follows:-

   There is we think at times a tendency to assess Section 75 (2) factors in percentage terms without considering its real impact, and we think there is legitimacy in the view expressed in more recent times that the Court has tended to operate in this area within artificially delineated boundaries. That is, it appears almost to be inevitable that the Section 75 (2) factors will be assessed in the range between 10 per cent and 20 per cent. A number of cases will justify an assessment outside of those parameters and in any event it is the real impact in money terms which is ultimately the critical issue.

8. That approach was endorsed by Fogarty J in Waters & Jurek (1995) FLC 92-635 where his Honour found that:-

   In the majority of property cases little difficulty is encountered in the contribution step and increasingly in a general run of cases the conclusion is likely be one of equality or thereabouts. There is no doubt that the centre of gravity in the determination of property cases has, especially in more recent times, moved to the evaluation of the Section 75 (2) factors, and the significance of that has been heightened because of recent Full Court decisions which have emphasised those provisions and indicated that they should be given real rather than token weight.

9. I consider therefore the orders I propose to make are appropriate in all the circumstances.

10. I make orders appear at the commencement of these reasons.

I certify that the preceding seventy (70) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Berman delivered on 3 September 2014.

Associate: 

Date:  3 September 2014