Juliet and Juliet & Anor
[2013] FamCA 497
FAMILY COURT OF AUSTRALIA
| JULIET & JULIET AND ANOR | [2013] FamCA 497 |
| FAMILY LAW – PROPERTY – Where the parties were married for over 20 years – Where more than 12 years have passed from the date of final separation to the commencement of the final trial – Where over the lengthy period of separation each party has essentially pursued their own individual interests, including financial interests, independently of the other – Where both parties have used capital or income sourced to property which existed at the time of separation – Where the Wife instituted property proceedings in 2002 – Where the Wife contends an informal property settlement was reached by the parties in early 2004 – Where the proceedings were adjourned in early 2005 and almost five years elapsed before the Husband reactivated them in late 2009 – Whether it is implicit that, at least in the period of five years when the proceedings lay dormant, each party would retain their existing and future legal and equitable interests to the exclusion of the other – Whether the just and equitable requirement is fulfilled FAMILY LAW – PROPERTY – Where the Husband estimates he has been involved in financial dealings with more than 45 separate legal entities including companies and trusts, partnerships and joint ventures, since separation – Where much of the evidence at trial was devoted to attempting to unravel the numerous post-separation transactions undertaken by the Husband – Where there were strident criticisms made of the Husband’s alleged lack of disclosure – Where the Husband was found to be an evasive and unconvincing witness on many issues – Where the Husband has had periods of earning very substantial income and had successful business transactions post-separation – Where the Husband had significant capital available to him from assets existing at the time of the parties’ separation – Where the Husband lost or expended all capital and income sourced to property existing at the time of the parties’ separation and his remaining very minor assets were overwhelmingly subsumed in value by the total amount of debts accumulated post-separation – Where the Husband’s current financial position is due to his financial dealings post-separation independently of and without reference to the Wife – Where the Wife has had a modest earning capacity – Where the Wife was responsible for the care of the parties’ daughter who was 15 years of age at the time of separation for two years thereafter – Where the Wife’s loss of capital was a consequence of the realities of the economic situation – Where the Husband acknowledged that any alteration of the Wife’s existing interests in property in his favour would be subsumed by his existing debts and creditors – Where it is not appropriate within the meaning of section 79(1) of the Family Law Act 1975 to make any orders which would alter the Wife’s presently existing legal or equitable interests in favour of the Husband | |||
| Family Law Act 1975 (Cth) | |||
| Ascot Investments Pty Ltd v Harper (1981) 148 CLR 337 | |||
| APPLICANT: | Ms Juliet | ||
| FIRST RESPONDENT: | Mr Juliet |
| SECOND RESPONDENT: | Y Pty Ltd |
| FILE NUMBER: | BRF | 6571 | of | 2002 |
| DATE DELIVERED: | 1 July 2013 |
| PLACE DELIVERED: | Brisbane |
| PLACE HEARD: | Brisbane |
| JUDGMENT OF: | Kent J |
| HEARING DATE: | 16, 17, 18, 19 and 20 July 2012 and further written submissions on 27 and 29 November 2012 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Alexander |
| SOLICITOR FOR THE APPLICANT: | Michael Sing Lawyers Pty Ltd |
| FOR THE FIRST RESPONDENT: | In person |
| FOR THE SECOND RESPONDENT: | Mr Juliet as Director |
Orders
IT IS ORDERED THAT
The Applicant shall retain, to the exclusion of the Respondents, all of her right, title and interest in the following real property:
(a)No. … R Street, Suburb M in the state of New South Wales more particularly described as Lot … of Section … Deposited Plan … at Suburb M in the Local Government Area of … and County of … as contained in Folio …, (“the M property”) subject to mortgage with ING Bank (Australia) Limited.
The Applicant shall retain, to the exclusion of the First Respondent, all of her right, title and interest in the H Trust of which the Applicant is principal and trustee, including the following real property:
(a)No. …, E Street, Suburb P more particularly described as Lot … on Survey Plan … in the County of … and Parish of … as contained in Title Reference … (“the P property”), subject to mortgage with Permanent Custodians Limited.
The Applicant shall retain, to the exclusion of the First Respondent, all of her right, title and interest in I Pty Ltd, including the following real property:
(a)Lot … G Street, Locality G, in the state of New South Wales more particularly described as Lot … in the Deposited Plan … at Locality G Local Government area of … in the Parish of … and County of … (“the G Property”).
The Applicant shall retain, to the exclusion of the First Respondent, all right title and interest in the H Trust of which the Applicant is principal and trustee, including any claim to any unpaid present entitlements and/or loan account which the First Respondent relinquishes to the Applicant, and the Applicant shall indemnify and keep the First Respondent indemnified with respect to any taxation liability that may arise from any such unpaid present entitlement and/or loan account.
The Applicant be entitled to the exclusion of the First Respondent to any claim to the apartment situated at …, City J, France (as beneficially held).
The First Respondent retain to the exclusion of the Applicant his interest in the land at State K in the United States of America.
Except as otherwise expressly provided otherwise in these Orders, the Applicant be declared the sole and beneficial owner of all items of personal and real property in her possession or of which she is the registered proprietor as at the date of these Orders, including but not limited to all or any money standing to the credit of the Applicant in any bank or building society, shareholdings, motor vehicles and any present or future expectation under a trust or estate.
Except as otherwise expressly provided otherwise in these Orders, the First Respondent be declared the sole and beneficial owner of all items of personal and real property in his possession or of which he is the registered proprietor as at the date of these Orders, including but not limited to all or any money standing to the credit of the First Respondent in any bank or building society, shareholdings, motor vehicles and any present or future expectation under a trust or estate.
The Applicant and the First Respondent shall be solely entitled to the exclusion of the other all property in the possession of such party as at this date including any jewellery, furniture and furnishings.
The Applicant and First Respondent forego any claims they may have to any superannuation or insurance benefit to or owned by the other. The party in whose name such policy of superannuation or insurance stands shall be deemed to be the owner and beneficiary of such policy to the exclusion of the other.
Other than is specifically provided for in these Orders, the Applicant and First Respondent are solely entitled to the exclusion of the other to all other property and chattels of every nature and kind in possession of each of the parties as at the date of the making of these Orders.
The First Respondent and Second Respondent Company indemnify and keep indemnified the Applicant against all or any manner of actions, suits, causes of action, arbitrations, debts, dues, costs, interest and demands both at law and in equity which the First Respondent and Second Respondent Company now has or may have at any time or times after the date of these Orders against the Applicant or which may arise in respect of any act or thing done or omitted to be done by the First Respondent, Second Respondent and/or Applicant up to and including the date of making of these Orders howsoever occurring and whether by reason of the Applicant being a shareholder of the Second Respondent Company and/or any loan account and/or receipt of monies at any time from the Second Respondent Company or otherwise.
The Applicant and First Respondent each be solely liable for and indemnify the other against any liability encumbering any item of property to which that party is entitled pursuant to these Orders.
The First Respondent indemnify and keep indemnified the Applicant in respect of all liability which the First Respondent may have to any credit cards and the First Respondent shall remain solely liable for all credit card debts in his name, whether jointly, severally howsoever occurring.
Each party do all acts and things required, including but not limited to the signing or execution of all necessary documents to give effect to the provisions of these Orders within seven (7) days of being requested in writing to do so.
If either party refuses or neglects to sign or execute and return a document within seven (7) days of a written request to do so then the Registrar of the Brisbane Registry of the Family Court of Australia is appointed pursuant to section 106A of the Family Law Act 1975 (Cth) to sign or execute such document on behalf of that party upon lodgement of such document and the filing of an affidavit of the requesting party or a solicitor on behalf of the requesting party as to the said neglect or refusal.
The costs of and incidental to such request and production of documents to the Registrar pursuant to Order (16) of these Orders shall be borne by the defaulting party without further order of that Honourable Court and may be taxed or fixed by the Registrar or Deputy Registrar and thereafter shall be recoverable from the defaulting party by the other party as a debt.
All previous Orders granting injunctive relief made in these property proceedings be discharged.
All applications be otherwise dismissed and removed from the pending cases list.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Juliet & Juliet and Anor 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 |
FILE NUMBER: BRF6571 of 2002
| Ms Juliet |
Applicant
And
| Mr Juliet |
First Respondent
And
Y Pty Ltd
Second Respondent
REASONS FOR JUDGMENT
More than 12 years passed from the date of the parties’ final separation on 15 March 2001 and the commencement of the final trial of these property proceedings pursuant to Part VIII of the Family Law Act 1975 (Cth) (“the Act”) in July 2012, which concluded with final written submissions in November 2012.
As will be discussed, over that lengthy period of separation each party has essentially pursued their own individual interests, including their own financial interests, largely independently of the other, and each have so done starting out with or utilising capital or income sourced to property which existed as at their separation in 2001. That has been interwoven with, in the case of each party, their financial activities over more than a decade of financial and economic cycles including the global financial crisis which can be recognised as reaching its height in 2008.[1] In the case of the Husband in particular, such financial activities over that period can fairly be described as numerous and complex in their overall effect.
[1] A matter of common knowledge within the meaning of s 144 of the Evidence Act 1995 (Cth).
Whilst the parties’ respective positions are detailed further below, as at trial the Wife’s existing legal and equitable interests in property (partly the residue of, or which can be sourced to, property in existence at separation in 2001) amounted to the relatively modest net total of $297,410 in non-superannuation assets plus a modest amount of superannuation interests totalling about $10,000.
As for the Husband, as at trial he had apparently lost or expended all capital and income sourced to property existing at the time of the parties’ separation and his remaining very minor assets were overwhelmingly subsumed in value by the total amount of debts accumulated by the Husband post-separation, a net deficit of approximately ($475,000). The total amount of the Husband’s deficit exceeds the net value of the Wife’s assets by a considerable margin. Not only were the Husband’s debts under discussion accumulated by him post-separation in 2001 but, as will be discussed, were incurred on and from the latter part of 2007, more than six years after the parties’ final separation.
The Husband acknowledged that, at best for him, any alteration of the Wife’s existing interests in property in his favour would be subsumed by his existing debts and creditors, without them being extinguished unless each of his many creditors was prepared to forego full repayment. The Husband expressed the hope or ambition to the effect that if he obtained, by the outcome of these proceedings, sufficient of the Wife’s property added to his meagre assets to offer his creditors “60 cents in the dollar” he might thereby be able to “do a deal” with his creditors and avoid his personal bankruptcy. He recognised that on such a “best case” outcome for him, that he would be left only with his motor vehicle unencumbered and no other assets.
The Husband did not adduce any direct evidence from any single one of his many creditors. Thus there was no evidence at trial from any of the Husband’s creditors as would lend support to the notion that the Husband can actually achieve his stated hope or ambition.
Thus it can be seen that, in practical effect, the Husband’s central contention in these proceedings is that the Court ought be satisfied that, in all the circumstances, it is just and equitable within the meaning of s 79(2) of the Act to order the sale of all of the Wife’s property (other than her modest superannuation of $10,000) and to distribute effectively all of the net proceeds so obtained to the Husband so that he might negotiate some resolution with his creditors involving the forfeiture to those creditors of all that he obtains. It also follows that the Husband’s contention is that it would be “appropriate” within the meaning of s 79(1) to make such orders. The corollary is that the Wife would be left with no assets apart from her modest ($10,000) in superannuation.
Following the conclusion of evidence at trial the Court invited the parties to file further written submissions in light of the decision of the High Court in Stanford v Stanford.[2] Those submissions were filed by each party in November 2012.
[2] Stanford & Stanford (2012) FLC 93-518.
It was ultimately contended on behalf of the Wife in the final written submissions filed on her behalf by reference to Stanford, that the Court could not be satisfied that it would be just and equitable to make any order altering her property interests in favour of the Husband. For his part, the Husband maintained his position as stated.
The “Just and Equitable” requirement
In Stanford the High Court considered s 79 of the Act including the provision in s 79(2) that a court shall not make a property settlement order unless satisfied that it is “just and equitable” to do so.
Commencing at paragraph 35 of the joint judgment of French CJ, Hayne, Kiefel and Bell JJ that plurality stated:
[35] It will be recalled that s 79(2) provides that “[t]he 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) prescribes matters that must be taken into account in considering what order (if any) should be made under the section. The requirements of the two subsections are not to be conflated. In every case in which a property settlement order under s 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. And while the power given by s 79 is not “to be exercised in accordance with fixed rules”, nevertheless, three fundamental propositions must not be obscured.
[37]First, it is necessary to begin consideration of whether it is just and equitable to make a property settlement order by identifying, according to ordinary common law and equitable principles, the existing legal and equitable interests of the parties in the property. So much follows from the text of s 79(1)(a) itself, which refers to “altering the interests of the parties to the marriage in the property” (emphasis added). The question posed by s 79(2) is thus whether, having regard to those existing interests, the court is satisfied that it is just and equitable to make a property settlement order.
[38] Second, although s 79 confers a broad power on a court exercising jurisdiction under the Act to make a property settlement order, it is not a power that is to be exercised according to an unguided judicial discretion. In Wirth v Wirth per Dixon CJ observed that a power to make such order with respect to property and costs “as [the judge] thinks fit”, in any question between husband and wife as to the title to or possession of property, is a power which “rests upon the law and not upon judicial discretion”. And as four members of this court observed about proceedings for maintenance and property settlement orders in R v Watson; Ex parte Armstrong:
“The judge called upon to decide proceedings of that kind is not entitled to do what has been described as “palm tree justice”. No doubt he is given a wide discretion, but he must exercise it in accordance with legal principles, including the principles which the Act itself lays down.”
[39]Because the power to make a property settlement order is not to be exercised in an unprincipled fashion, whether it is “just and equitable” to make the order is not to be answered by assuming that the parties’ rights to or interests in marital property are or should be different from those that then exist. All the more is that so when it is recognised that s 79 of the Act must be applied keeping in mind that “[c]ommunity of ownership arising from marriage has no place in the common law”. Questions between husband and wife about the ownership of property that may be then, or may have been in the past, enjoyed in common are to be “decided according to the same scheme of legal titles and equitable principles as govern the rights of any two persons who are not spouse”. The question presented by s 79 is whether those rights and interests should be altered.
[40]Third, whether making a property settlement order is “just and equitable” is not to be answered by beginning from the assumption that one or other party has the right to have the property of the parties divided between them or has the right to an interest in marital property which is fixed by reference to the various matters (including financial and other contributions) set out in s 79(4). The power to make a property settlement order must be exercised “in accordance with legal principles, including the principles which the Act itself lays down”. To conclude that making an order is “just and equitable” only because of and by reference to various matters in s 79(4), without a separate consideration of s 79(2), would be to conflate the statutory requirements and ignore the principles laid down by the Act.
[41]…The fundamental propositions that have been identified require that a court have a principled reason for interfering with the existing legal and equitable interests of the parties to the marriage and whatever may have been their stated or unstated assumptions and agreements about property interests during the continuance of the marriage.
…
[46] As has already been emphasised, nothing in these reasons should be understood as attempting to chart the metes and bounds of what is “just and equitable”. Nor is anything that is said in these reasons intended to deny the importance of considering any countervailing factors which may bear upon what, in all the circumstances of the particular case, is just and equitable. In particular, as the Full Court pointed out in its first judgment in this matter, the magistrate erred in not taking account of the consequences that would follow for the husband if a property settlement order were to be made in the terms which were sought on behalf of the wife. The husband would be required to sell the matrimonial home, in which he was still living, despite the needs of his wife then being met by the provision of full-time care, a further provision of money against future contingencies and the possibility, if needed, of making a maintenance order.
(footnotes and parts omitted)
Whilst this case, unlike Stanford itself, does not involve an involuntary separation of parties to a marriage, because of a number of unusual features, mainly arising out of the sheer length of the parties’ separation and what each party has done over that lengthy period, several considerations relevant to the conclusion of whether or not it is now just and equitable to make a property settlement order arise.
First, is the Wife’s contention that in 2004 the parties reached an informal agreement and thereafter each acted upon that agreement. The Husband denies entering into any informal agreement.
Second, is the alternative but associated contention permeating the Wife’s case to the effect that whether or not it can be said that a concluded agreement in specific terms was reached in 2004, the parties thereafter conducted themselves independently of each other in terms of their respective property interests over such a period and to such an extent as to end any stated or unstated assumptions about their existing legal and equitable interests whilst the marriage subsisted.
On either or both of these contentions the Wife ultimately contends that it would not be just and equitable to alter her current legal or equitable interests in property as these are the end product of the parties having adopted such a course.
Third, is whether the consideration of what each party has done, and how and with what effect, with their respective property interests over the lengthy period of separation is relevant to the conclusion of whether it is now just and equitable to effect an alteration of interests by the making of a property settlement order.
Existing legal and equitable interests
The Wife
For the purpose of these proceedings single experts were appointed to undertake valuations of the real property held by the Wife or by the entities she controls. The following values for such property are taken from that expert evidence which can be accepted:
Assets
E Street, Suburb P (held via H Trust controlled by the Wife)
$345,000.00
R Street, Suburb M
$325,000.00
G Street, Locality G
(held via Wife’s company)$180,000.00
BMW motor vehicle
$20,000.00
Gross Assets
$870,000.00
Liabilities
Mortgage debt E Street, Suburb P
$215,090.00
Mortgage debt R Street, Suburb M
$256,000.00
Wife’s credit card debts
$101,500.00
Total Liabilities
$572,590.00
Net Non-superannuation Assets
$297,410.00
Superannuation Interest (Asguard)
$10,041.00
Whilst the Suburb P real property referred to above is owned by the Wife in her capacity as trustee of the H Trust the evidence establishes that this discretionary trust is controlled by the Wife and the Wife has effectively treated the trust property as her own. In these circumstances I am satisfied that it is consistent with authority to treat the trust property as property of the Wife for the purpose of these proceedings.[3]
[3] Ascot Investments Pty Ltd v Harper (1981) 148 CLR 337; Harris and Harris (1991) FLC 92-254; Goodwin and Goodwin Alpe (1991) FLC 92-192; Davidson and Davidson (1991) FLC 92-197.
Further, by reference to the High Court decision in Kennon & Spry (2008) FLC 93-388, the property of this trust can be treated as the property of the Wife in circumstances where the Wife is the principal and trustee of H Trust and has the absolute discretion to apply and control the trust funds.[4]
[4] See also Glenn v Federal Commissioner of Land Tax (1915) 20 CLR 490 per Griffith CJ at 497 cited in CPT Custodian Pty Ltd v Commissioner of State Revenue (2005) 224 CLR 98 at 112/113 per Gleeson CJ, McHugh, Gummow, Callinan and Heydon JJ.
I am satisfied that the corporate entity which legally owns the Locality
G real property referred to above is wholly owned and controlled by the Wife and that it is legitimate to treat that asset as the asset of the Wife on the basis that the company is in effect merely the “alter ego” of the Wife.[5]
[5] Foda and Foda (1997) FLC 92-753.
I accept the Wife’s evidence that she does not have in her possession any jet ski. I also accept the Wife’s evidence that whilst each party has personal jewellery items these have not been valued for the purpose of the proceedings as historically it was agreed that the parties retain their personal effects including jewellery. The Husband did not take issue with that at trial but asserted that many years ago but post-separation the Wife had stolen from him substantial other jewellery he asserted to be worth something like $170,000; plus gold coins as well as the Husband’s coin and stamp collections; by illegally gaining access to his then apartment and storage shed. I accept the Wife’s evidence that she has not engaged in the conduct asserted by the Husband and that she does not have and has never had possession of the items referred to, whatever their actual value might be. I find it more probable than not, that if they have been removed from the Husband’s possession they have been removed by persons other than the Wife. I do not attribute to the Wife’s possession any of such items nor do I intend to attribute them to the possession of the Husband.
The Husband
The parties agreed the following value for the Husband’s State K, USA property and otherwise I find his position to be as follows:
Assets
Property in State K, United States of America
$23,000.00
Lexus Motor Vehicle
$20,000.00
Gross Assets
$43,000.00
Liabilities
Bank Overdraft (L Pty Ltd)
$16,000.00
Credit card and other debts (Exhibit 14)
$467,066.81
Esanda debt re: motor vehicle (Exhibit 14)
$35,692.52
Total Liabilities
$518,759.33
Net Non-superannuation Assets
($475,759.33)
Superannuation
Nominal
Exhibit 14 in the proceedings is the schedule of unsecured debts provided by the Husband. Absent the ability to crosscheck Exhibit 14 with source documents it may be that there is some overlap between the total of credit card and other debts outlined above and the overdraft debt stated above. Moreover, it is unclear to me whether Exhibit 14 incorporates a contingent liability of the Husband in respect of a personal guarantee he gave the Bank of Queensland referable to the Suburb C land discussed further below, being the shortfall on the mortgage debt recovered by the Bank of Queensland from that sale.
The Husband also made reference in his evidence to an historical amount outstanding for legal fees to his former solicitors Evans & Company in the order of $20,000, which I have not included in the above schedule as it is not clear on the evidence that the debt is in that amount or that it will be pursued. The Husband also referred in evidence to having other miscellaneous debts which he estimated to be in amounts of about $20,000 but absent some corroborative evidence I do not include such an amount.
It can be assumed by reference to the Husband’s evidence that he is personally liable for the above debts either because they were incurred by him in his own name or he is bound by personal covenants to repay them either by a personal guarantee, including in his capacity as director of L Pty Ltd.
In the end I have relied upon Exhibit 14 save only in respect of the addition of the bank overdraft referred to by the Husband but even if that is inaccurate it makes no real material difference to the outcome of the case for reasons outlined below.
Notice to Husband’s creditors
In the course of the trial I raised with the Husband the question of any notice he had given to his creditors of these proceedings.
Exhibits 20, 21, 22, 23, 24, 25 and 26 were tendered in evidence by the Husband in support of his oral evidence and submissions to the effect that not only had he informed each of his creditors but he had continually kept them updated as to the progress of the proceedings in circumstances where one or more of them were pressing for repayment.
For example, exhibit 22 reflects the Husband having involved the Financial Ombudsman Service in his then dispute with St George Bank concerning his St George vertigo mastercard. That is with respect to a debt of $9,208.12 as at 8 March 2012. That particular debt does not appear as part of exhibit 14 although it is less than clear whether the debt has been repaid or resolved or whether it remains owing.
The Husband was adamant in evidence and in his oral submissions that he had fully informed all of his unsecured creditors of the fact of these proceedings and in the end I am satisfied that that is so.
None of the Husband’s unsecured creditors sought to become a party to these proceedings pursuant to s 79(10) of the Act.
In this respect it is to be noted that there is no property jointly held by the Husband and the Wife. That is, neither party has been in a position to pledge property of the other or to identify property of the other as being an asset of that party for the purposes of obtaining credit. It follows that the unsecured creditors of the Husband who have apparently advanced funds to him have done so based upon his own personal asset position or that of one or more of his entities from time to time and in that respect, to the extent that the Wife seeks to retain what she has they could not be described as a party affected by the making of orders within the meaning of s 79(10). That is, none of the Husband’s creditors can be described as “any other persons whose interests would be affected by the making of the order” within the meaning of s 79(10) in these circumstances.
Other items
By reference to the Wife’s affidavit filed 11 July 2012 she referred to a property in City J, France beneficially held on behalf of the Husband. There was no valuation evidence with respect to this property and indeed significant uncertainty as to the method of ownership or the way in which it is actually said to be legally or beneficially owned. It was the Husband’s position at trial that the property is not in the legal ownership of either party and if the Wife could establish ownership of the property she was welcome to it, it being his position that the cost of so doing would be onerous and effectively not achievable. In these circumstances I do not credit against either party any interest in the subject property as I am not satisfied that either party has any existing legal or equitable interest in this property of any value.
The Wife also sought to include in the schedule of property owned by the Husband a Type N boat. The Husband acknowledged in his evidence that in late 2004, somewhere around September, October or November 2004, he entered into a transaction to acquire in combination both the boat referred to and a motor vehicle. Whilst the Husband’s evidence on this topic was somewhat variable and inconsistent, it seems that what the Husband did was to acquire the motor vehicle for $110,000 and the boat for a cost of $185,000, in a combined transaction for a total cost of $295,000. The Husband explained in evidence (contrary to other versions to the effect that this was part of some manic behaviour on his part) that these acquisitions were astute at the time by reference to the cost paid for the items and the fact that he could and did use the motor vehicle to conduct inspections of real estate with potential buyers and likewise he could and did use the boat to inspect canal properties with potential buyers. In other words, the Husband explained in evidence that these purchases were astute both in terms of the cost or value, and in terms of the utility of the items acquired with respect to his business activities.
In the end it would appear that, as the Husband put it, “…the bottom fell out of the market for boats” and he asserted that ultimately he could not maintain either the boat nor has he retained the motor vehicle. In essence, it was the Husband’s evidence that the boat was ultimately repossessed in satisfaction of an outstanding amount the Husband still owed on the purchase and it was ultimately auctioned for an overall loss. Likewise, the Husband acknowledged that he no longer retained the subject motor vehicle. Clearly, the Husband lost money but it was not possible on his evidence to be satisfied as to how much of the overall $295,000 he lost. The Husband contended that it was in November 2010 that his vendor-financed loan for the boat went into default and when the vendor repossessed it in 2011 there was $95,000 still owing. The Husband’s evidence was that he surrendered the boat in satisfaction of the $95,000 debt then owing. Why the Husband kept such an asset acquired late 2004 until the dates referred to, consistent with his emphatic protests about lack of capital is irreconcilable. That aside, it seems that the Husband lost about $200,000 overall in this transaction.
For present purposes I have not notionally added back against the Husband as was sought by the Wife any amounts referable for outlays incurred in respect of the proceedings as regards valuation fees or the like.
I also note in passing that I have not included as against the Wife the amount of $41,000 she inherited from the death of her late father some years after the parties’ final separation. I am satisfied that whilst the Wife acknowledges receiving such an inheritance post-separation it is absorbed within the existing property interests already referred to. There is no basis for notionally adding back that sum or treating it as existing property of the Wife.[6]
[6] Bonnici & Bonnici (1992) FLC 92-272.
I will deal separately below with H Trust and the historical loan accounts to each party reflected in the accounts of H Trust, the discretionary trust controlled by the Wife. For present purposes I do not include for either party any asset in this respect.
Marriage history
The Wife is 58 years of age having been born in 1954. The Husband is 62 years of age having been born in 1950.
The parties commenced a relationship in about 1976, married in January 1980 and finally separated on 15 March 2001.
There is one child of the marriage, O born in November 1985 who was thus 15 years of age when the parties finally separated on 15 March 2001 and who is now an adult aged 27 years.
The Husband acknowledges in his evidence that throughout the marriage the Wife was the primary homemaker and parent. It is also not in issue that from the date of the parties’ separation and for the following two years O lived with the Wife. The Husband acknowledged in evidence that the Wife was primarily responsible for O’s financial support for the two years following separation.
From about the time of their marriage, the parties worked together in a number of significant property development projects working together in a company titled Q Pty Ltd.
Notwithstanding their combined efforts and initial business success, in 1986 the parties struck sufficient financial difficulties as to lead to their company being placed into receivership and ultimately liquidation and both the Husband and the Wife entered into schemes of arrangements with creditors under Part X of the Bankruptcy Act 1966 (Cth).
Through their combined efforts, the parties financially recovered from their insolvency in 1986. They worked together as managers in a number of complexes and continued to work in commercial property development often in joint ventures or partnerships with others. They became active in the education industry during the late 1980s and following and built a number of education centres including in the Gold Coast area.
In about 1993 a parcel of land was purchased at Suburb C in partnership with Mr B and his wife involving Y Pty Ltd. The history of that transaction will be discussed separately below. Y Pty Ltd was joined as Second Respondent in these proceedings because of this holding but as will be discussed the land was sold before trial and no net benefit or profit was ultimately derived. The Husband purported as director of the company to appear for the company at trial although it was not clear whether he had the authority of Ms B, the other director and shareholder to so do. In the event, the Second Respondent had no active part to play.
On 4 August 1997 the parties established the family discretionary trust entitled “H Trust” with the Wife as principal. Funds borrowed upon other assets of the parties or either of them in the amount of $420,000 were advanced in the name of the Husband to H Trust. Business associates of the parties, namely, Mr S and Ms T, were the original trustees of H Trust but the Wife as principal had the power of appointment and she exercised that power (on 9 April 2002) to become the trustee herself and that has remained the position ever since.
As at the time of the parties’ separation in March 2001, H Trust was the owner of 50 per cent of the units in the X Trust with the other 50 per cent being owned by the U Trust, an entity associated with the business associates referred to above. The X Trust owned the freehold property at AA Street, Suburb BB and leased that property to other third parties who operated an education business at that property.
Also as at the time of separation CC Pty Ltd as trustee of the DD Trust held the leasehold of property at Locality EE on the Gold Coast and operated there the business known as Business FF. H Trust held 50 per cent of the units in the DD Trust with the other 50 per cent being held by the U Trust. Each month CC Pty Ltd made payments to H Trust in respect of H Trust’s 50 per cent share of its after expenses income from the business.
It is not in issue that both parties worked with Mr S and Ms T in increasing and expanding Business FF however I accept the Wife’s evidence that she was primarily responsible for operating and building up Business FF whilst the Husband continued to deal in property and other business interests.
I accept the Wife’s evidence that by the time of the parties’ final separation in March 2001 and over the following 12 months Business FF was generating an income in the order of $3,250 per week and essentially via H Trust each of the parties were receiving $500 per week from this source.
Also by the time of separation the parties had acquired a half interest in the real property and business known as Business GG and as at separation were reliant upon one Mr HH to operate that centre in partnership with the parties.
By the time of the parties’ final separation in March 2001 they had established a significant portfolio of negatively geared real properties. That is, apart from the education centres and properties referred to and apart from the Suburb C land the parties either via mainly the Husband or in companies or trusts which he controlled, including the JJ, held some ten real properties which were negatively geared and from which rental income was derived. The details of these properties are set out in schedule “A” to the Wife’s affidavit filed 5 May 2012.
It is apparent on the evidence that, no doubt informed by the experience of their then company’s liquidation in about 1986 and their associated Part X bankruptcy arrangements earlier referred to, and the effects of those matters presumably for some years thereafter, the parties subsequently employed a diverse range of legal structures and legal entities for the purpose of investment and asset holding and business operation. It is also evident that in the period leading up to separation in March 2001 the Wife applied herself assiduously to developing Business FF whilst the Husband went about other real estate transactions and investments and overall controlled the parties’ finances. As a result, apart from Business FF the Wife had little knowledge of the parties’ finances or financial arrangements.
I accept the Wife’s evidence that upon separation in March 2001 she commenced renting a two-bedroom apartment for herself and the parties’ then 15 year old daughter O at a cost of $270 per week in rent. Upon separation the Wife continued working fulltime at Business FF but I accept the Wife’s evidence that the income of that centre or at least the parties’ share of it via H Trust was controlled by the Husband as part of his overall control of the parties’ finances, and the Wife was initially receiving a weekly allowance of approximately $500 per week from which she paid rent and essentially maintained O, other than in respect of school fees and medical insurance which were expenses otherwise met out of the parties’ finances.
I accept the Wife’s evidence that the Husband ceased paying her allowance as at 6 February 2002 upon which the Wife applied for a Newstart Allowance from Centrelink.
I accept the Wife’s evidence that by March 2002 she had no alternative but to surrender her rental accommodation as she could then no longer afford rent moving into alternative rental accommodation at a reduced rate with a friend. I accept that the Wife underwent re-training with Centrelink and after about eight months found employment with a property developer earning $24,000 gross per annum. The Wife commenced these proceedings by filing an Initiating Application on 11 November 2002.
Post-separation transactions – H Trust
As already noted, as at separation in March 2001, the Husband was in control of the parties’ finances including H Trust. That control included H Trust’s continuing receipts of monthly income from CC Pty Ltd in respect of Business FF.
At trial, the Wife agitated an issue to the effect that in the approximately 12 month period immediately following the parties’ separation in March 2001 the Husband had to his own use and benefit $90,500 of money H Trust held or also received from CC Pty Ltd in respect of Business FF. The Wife sought that such total amount be considered as a benefit the Husband solely received post-separation in any comparison of the parties’ respective positions.
Whilst the Husband did not dispute the amount being received it was his central contention that it was used to service loans, and in effect, that he derived no greater benefit than did the Wife. The Husband referred to H Trust funds being used for private school expenses for the parties’ daughter O and health insurance and other medical benefits likewise being paid from that source.
The Wife, having appointed herself as Trustee of H Trust in April 2002 thereafter assumed some control of H Trust’s finances and indeed the Husband contends that for a period of ten weeks the Wife solely received what he estimates to be $3,250 per week H Trust was paid from Business FF. (This amounts to $32,500 and not $52,700, the amount in the Husband’s trial affidavit schedule)
The Wife denies receiving that or any similar amount and in the absence of some retrospective audit the Court cannot be comfortably satisfied as to either party receiving overall a greater benefit than the other from this source.
That aspect aside, it is not in issue that on or about 26 June 2002 the X Trust settled the sale of the property at AA Street, Suburb BB and net proceeds payable to the Wife in her capacity as Trustee of H Trust amounted to approximately $248,000. This amount was initially held in the Wife’s solicitor’s trust account. Obviously, capital gains taxation and perhaps other taxation issues for H Trust crystallised in the 2002 financial year in respect of that sale.
Only some three months later, in September 2002 CC Pty Ltd as trustee of the DD Trust sold the leasehold and Business FF to KK Ltd, a publicly listed company. The Wife in her capacity as trustee of H Trust received 401,650 fully paid shares in KK Ltd at par value of $1 per share plus $150,000 in cash in exchange for H Trust’s interest.
It seems that the Wife’s motor vehicle at the time may have been in the actual ownership of CC Pty Ltd and that the $150,000 cash component may have been adjusted to pay for the motor vehicle to the extent of about $41,000. In any event, however the transaction was constructed, it seems that $41,000 of the $150,000 cash component received in September 2002 was used to enable the Wife to retain that motor vehicle. The balance of the $150,000 cash component (about $100,000 in net terms) was retained by the purchaser for about 12 months as security for the vendor’s obligations under the sale agreement. That $100,000 was released in October 2003 to the Wife’s then solicitor’s trust account.
It bears recording at this point that there is ample evidence from both parties to support the proposition that between the parties’ separation in March 2001 and the time of the above transactions in July and September 2002 respectively, a substantial impediment to the parties reaching any concluded resolution of their financial affairs or a negotiated settlement of them was the complexity of their financial structures and their financial position overall, including any taxation issues. The transactions referred to added further layers of complexity.
On 25 February 2004 the Wife had the Husband sign an authority to permit the Wife to sell the KK Ltd shares. Whilst the Wife, as Trustee of H Trust had power to deal with property in that capacity, as has been noted the Wife had instituted these proceedings in November 2002 and thereafter the parties respective legal advisors and indeed the Court had been involved in regulating the parties’ affairs. I accept the Wife’s evidence that at the time she sought the authority she was concerned about the potential for the market in KK Ltd shares to decline.
At the time the 25 February 2004 authority was signed by the Husband he was undertaking hospital treatment for an acute episode of his bi-polar condition and associated stress, anxiety and depression. Nevertheless, I accept the Wife’s evidence that the Husband’s signature was witnessed by his treating medical practitioner. I also accept the Wife’s evidence, including that at paragraph 22 of her affidavit filed 11 July 2012, to the effect that there was no suggestion at the time that the Husband did not understand what the authority was for or that he lacked capacity at the time. I also accept the Wife’s evidence that a subsequent authority signed on 12 July 2004 permitting the $248,000 (approximately) of sale funds from the X Trust property sale referred to be released to H Trust was signed by the Husband at the LL Building in Suburb BB and not whilst the Husband was in hospital as he has asserted.
I accept the Husband’s evidence that when he initially signed the authorities referred to he intended that any proceeds be held upon trust for the parties pending resolution of these property proceedings.
I accept the Wife’s evidence that over a period of approximately 3.5 years from 26 February 2004 to 14 August 2007 the Wife as trustee of H Trust gradually sold the KK Ltd shares whilst scrutinising the market over that period and making sales when she considered it prudent to so do.
It is the Wife’s case that in 2004 an informal property settlement agreement was reached between the parties whereby the Husband was to retain all other real properties including the Suburb C land interest but the Wife was to retain H Trust and thus the $248,000 in proceeds from the X Trust; and the KK Ltd shares referred to plus the benefit of the residue of the $150,000 cash component paid in that transaction. Part of the Wife’s case is that such an agreement was made and concluded but significant taxation issues had to be addressed because of the sheer number of entities the parties had utilised in their business dealings and the complexity of them. Part of the Wife’s case in this respect is that involvement of expert accountants and lawyers at that point was only to resolve taxation issues and extricate the parties from their interwoven and complicated financial structures and entities.
In support of her case in this respect the Wife refers to the history of these proceedings. As already noted it was the Wife who had initiated property proceedings in November 2002 at a time when she says she had no other option, commercially, than to commence them. However, the Wife contends that when in 2004 an informal property division agreement was reached by the parties, soon thereafter these proceedings were removed from the pending cases list.
It is a striking feature of this case, lending support to the Wife’s contention, that after the Wife instituted proceedings in November 2002 there was animated legal activity by the parties’ then respective legal representatives over the period from then until early 2005. Likewise, in that period the Court entertained a number of applications and made over time a series of Orders and directions. However, in early 2005 the proceedings were adjourned to a date to be fixed and were removed from the pending cases list. Thereafter, almost five years elapsed between early 2005 when the proceedings went into abeyance and the Husband re-activating them by the filing of an application in November 2009.
Self-evidently, despite the fact that in the November 2002 to early 2005 period the Wife had sought the Court’s intervention, inter alia, in respect of the Husband’s dealings with property including the obtaining of an Order on 12 August 2003 requiring the Husband either by himself or in his capacity of director of any company giving the Wife 24 hours notice of any proposed sale of real property, the Wife did not receive notice after early 2005 and did not seek to restrain the Husband’s real estate sales and activities or to scrutinise them thereafter in the period of hiatus referred to.
For his part, the Husband claimed, disingenuously I find, that because the Order of 12 August 2003 referred to was directed to him personally or in his capacity as a director, he was not obliged to give notice of any such dealings in his capacity as a trustee of any trust he controlled.
That disingenuous claim aside, the Husband continued his business activities without reference to the Wife and did not seek any intervention by the Court in the approximate five year period referred to despite knowing that the Wife as sole controller of H Trust had the power to, and was, dealing with the KK Ltd shares and the proceeds of sale of those shares as well as the proceeds of the X Trust property referred to.
It would seem more likely than not that the explanation for the Husband’s acquiescence in this respect is that he saw his own financial future at the time in the following:
· the existing real property interests acquired during the marriage which he owned and controlled;
· the Suburb C land development via his 50 per cent shareholding in Y Pty Ltd discussed further below;
· the pursuit of his income earning capacity in his property industry business as also discussed below;
· the fact that, as will also be discussed, he was generating substantial commission income in his work in the property industry business.
As will be further discussed, just in respect of the period from late 2004 to mid-2005, a period of about eight months or so, the Husband gave evidence that he earned commissions of about $320,000. As to the Suburb C land, there is evidence from the Husband to the effect that he held the expectation that the land would be worth in excess of $10 million in the not too distant future.
The Husband steadfastly maintained in these trial proceedings that there was no concluded agreement reached between the parties in 2004 or otherwise. He acknowledges giving authority to the Wife to commence selling the shares but says this was in the context of the proceeds being retained in trust until any final agreement could be reached. Likewise, he refutes the suggestion that the authority for the Wife to receive the $248,000 in proceeds referred to was part of any concluded settlement. His case is that it was agreed these proceeds be divided equally between the parties pending the parties reaching a final or concluded agreement overall. The missing element is the Husband’s lack of explanation for the period these proceedings were in abeyance after he knew that this had not occurred and the Wife was actively using these funds and he was likewise acting independently.
I am not satisfied that the parties did in fact reach a concluded or comprehensive agreement in or about February or later in 2004 as to final property division, whether informal or otherwise. The conditions of that purported agreement referred to by the Wife as to the need to resolve complicated taxation and structure issues as an element renders it vague and uncertain as to what any alleged agreement could be, given the fundamental effect of those components. Moreover, the preponderance of evidence including a raft of communications between the parties, including discussions about offers or a potential means of resolving the matter, tend against any conclusion to the effect that any concluded agreement overall was reached in 2004. Moreover it would seem on the evidence that it was after the time of any alleged agreement in early or mid-2004 that the Wife was negotiating her possible retention of the LL Building home unit referred to below. It seems that negotiation ended when the Wife learned the Husband had drawn down further advances on the mortgage, but the point here is that such negotiation appears contrary to a concluded agreement having been reached in early 2004.
However, I have no doubt that the Wife legitimately held hopes that an agreement along the lines for which she contends would in fact ultimately be reached. Indeed it seems that from early 2005 each of the parties acquiesced in respect of their extant positions. As will be discussed, each acted thereafter largely independently of the other. As will be seen, there is significant evidentiary support for the Wife’s proposition to the effect that only when the Husband’s fortunes fell with the loss of his capital and the realisation subsequent to the global financial crisis that Suburb C and his other activities were thereby affected did the Husband reactive these proceedings.
As to his post-separation property dealings the Husband gave evidence both in his affidavit and oral evidence when cross-examined to the effect that with, he says, the benefit of legal advice from his then lawyer Mr Coco, the Husband thought he could use his credit cards to fund trading in properties and other business dealings as this would not involve the use of “matrimonial funds”. It would seem an obvious inference that the Husband thought he could, and sought to, quarantine future benefits he might receive from his business activities by this means. Quite why credit card funding, as opposed to more conventional and cheaper means of funding was identified in this context, is not clear. As will be discussed, the Husband did access assets existing at marriage in his business and financial pursuits.
Absent a conclusion in favour of the Wife to the effect that any concluded agreement was reached, it nevertheless was the case that the Wife via H Trust as its principal and trustee controlled thereafter the funds referred to and went about buying and selling properties with the use of funds generated from sales of the shares undertaken over a period of about three and a half years; whilst the Husband continued dealing in properties and other business interests as will be further referred to.
Exhibits 6 and 7, being correspondence from H Trust’s accountants in 2005 confirm that in the 2003 and 2004 financial years, H Trust had net capital gains to distribute, after deducting current year losses in each of those years, of $56,273 and $81,101 respectively from sales of the KK Ltd shares. For accounting and taxation purposes profits were distributed equally to the Husband the Wife and the maximum non-taxable amount in each year was distributed to their daughter O.
It is not in issue that on 8 June 2004 the Wife as trustee of H Trust purchased the property at E Street, Suburb P using $285,028.79 of H Trust funds from the sales of the KK Ltd shares for the purchase.
It is also not in issue that on 9 August 2004 the Locality G Property was acquired by the Wife’s company I Pty Ltd using funds likewise from H Trust in an amount of $200,000.
Further, in April 2005 the Wife borrowed mortgage funds from ING Direct in the amount of $256,000 to purchase the property at R Street, Suburb M referred to above.
In May 2005 using a combination of mortgage funds and funds from H Trust in an amount of approximately $285,000 the Wife purchased a 50 per cent interest in a property at MM Street, Town NN in partnership with one Mr OO. The Wife and Mr OO applied funds to renovate the property and whilst it is unclear as to the total amount expended on that renovation it is clear that substantial funds were used.
In the event in 2008, obviously in the context of the effects of the global financial crisis, the MM Street property was sold. A loss for the Wife was crystallised in an amount of approximately $233,000 given the amount expended on renovations and the reduced sale price that could be achieved for the property.
It should be noted in this context that the Wife was heavily reliant on capital given her limited capacity for external employment. The evidence, which I accept, as to the Wife’s taxable income over some of the relevant years is as follows:
Year ended 2004 – $30,019 2005 – $65,194 2006 – $1358 2007 – $5728 2008 – $2723 2009 – ($2821) 2010 – $31,294 2011 – $41,998
Obviously at least some of the taxable income above relates to not only employment but receipts from the financial structures and the distributions from H Trust referred to.
In passing whilst in the period leading up to trial the Wife had been employed in a sales role I accept her evidence to the effect that the stress of these proceedings caused her to have ceased that employment as at trial.
It is, as will be seen below, the central thrust of the Husband’s case in these proceedings that the use by the Wife of H Trust funds that justifies the orders he seeks. However, before turning to the central thrust of the Husband’s case it is necessary to note some matters concerning the evidence at trial and issues arising as to credit.
Evidence and issues of credit
Following the restoration of these proceedings to the pending cases list by early 2010 as earlier referred to a series of orders were made.
Of particular significance for present purposes is the order made by consent on 14 January 2010 in the following terms:
1.Mr [PP] of [D] Accountants, [Suburb BB], be appointed as a single expert and provided with the following instructions by the Husband and Wife:
a.to prepare a report in writing addressed to the Court and the parties dealing with the following matters:
i.identification of the matrimonial property had and received by each spouse since separation;
ii.preparation of financial statements for each entity between separation and the present date, unless those financial statements have already been prepared, whereupon instructions shall be to review the financial statements and offer information as to their accuracy and as to the benefits received by one or other parties from the entity;
iii.the value of each entity;
iv.details of any relevant taxation, winding up or disposal costs involved in concluding the operations of any entity with which the parties are involved; and
v.any other information which the parties agree should be made available to them for the purposes of the property settlement proceedings or the negotiated settlement of the same.
A further order (paragraph 5) then made by consent made provision for $30,000 in funding to be provided to the single expert so appointed for the purpose of that report which funding was provided.
On the Husband’s estimate more than 45, or perhaps more than 50, separate legal entities including companies and trusts or partnerships or joint ventures have been involved in financial dealings, mainly involving the Husband and mainly involving post-separation transactions over the long period since separation occurred. Something like 40 or more separate transactions of the Husband of buying and selling real estate or other financial transactions were explored in the evidence and in cross-examination of the Husband.
The Orders in January 2010 referred to reflected the recognition by the parties that expert accounting evidence was needed if anything approaching a complete financial analysis of the historical complex of the many financial dealings undertaken over the lengthy period since separation, particularly by the Husband was to be concluded.
In his affidavit evidence the Husband emphasises that as at separation the Wife had little knowledge or understanding of the complex dealings historically. The way in which the parties conducted themselves independently of the other in the post-separation period furthers that gap in knowledge.
Even in the context of a forensic accounting report then being undertaken by the single expert the Husband notes in his affidavit evidence:
A comment agreed to by [Mr QQ] at the [D Accountants] [Suburb BB] office was that there would probably never be any real end to their expert report due to the number (of) entities and joint ventures and time spans.
In the end, despite funding of tens of thousands of dollars to D Accountants and each party having expended something like $250,000 or more on legal fees and outlays including accounting expenses, no expert accounting report was ever completed by D Accountants and no expert accounting evidence was adduced in evidence at trial.
Much of the evidence for trial and the trial itself was devoted to attempting to unravel the numerous post-separation transactions of the Husband undertaken over the period of more than a decade that has elapsed. Within that, strident criticisms were made of the Husband for his alleged lack of disclosure which he persistently answered in cross-examination by referring to boxes of documents he historically provided to the expert accountants D Accountants over many years in circumstances where, as already noted, no report was ever completed.
Some further insight into the difficulty, indeed impossibility, of such a forensic task, particularly without any expert accounting input, is provided in the following discussion.
On his evidence the Husband utilised the sheer number of separate legal entities he operated to ensure that profits made in one or other transaction or entity were offset against losses in others to ensure that no end of financial year taxable profit crystallised in any entity and no taxable income in his own name existed in sufficient amount for the Husband to pay tax.
As but one example, in cross-examination the Husband gave evidence that from the end of 2004 until about mid-2005 he received $320,000 in commissions from property industry business yet he had no taxable income at end of financial year. As an example of both the diversity of the Husband’s transactions and this practice of spreading of income amongst entities, the Husband gave evidence that one of the entities he operated (RR Pty Ltd) was initially a company set up to establish a personal services business. The Husband’s evidence was to the effect that losses of $49,000 crystallised in the entity because of the failure of that operation. However, the Husband diverted property industry business commissions he earned to that entity as an offset to eliminate net profit or taxable income in his name to that extent.
A striking example of what may be described as the Husband’s “creativity” when it comes to matters of taxation is that on his own evidence an entity controlled by his defacto partner Ms SS rendered invoices for the photocopying and like expenses (which obviously has been very extensive) of the documents used by the Husband for the purpose of these proceedings. In that way, as I understood the Husband’s evidence and so find, the Husband in conjunction with his partner created a tax deduction referrable to the photocopying expense of the documents for these proceedings. How that could be a legitimate taxation deduction escapes me.
In his evidence the Husband described himself as involved in the property industry and financial industry. On the evidence he traded himself (or via trusts or “alter ego” private company entities of his) in many real estate transactions including with partners or joint venturers and including transactions involving his own defacto partner Ms SS, a real estate agent operating her own agency. An indication of the breadth of the Husband’s activity was his evidence about purchasing something like 300 items of clothing advertised on Ebay for the purpose of re-sale, which he ultimately on-sold to his partner Ms SS.
Undoubtedly, apart from periods of earning very substantial income post-separation as referred to, the Husband had successful business transactions including land transactions. He acknowledged making a profit of $105,000 on a land transaction at Suburb TT as just one example. Much of the Wife’s focus and in schedules prepared by her legal representatives was as a consequence of the attempt to analyse and unravel the Husband’s conduct and was designed to show that the Husband had significant income and capital available to him over the long period post-separation.
However, despite all of those efforts, I do not consider that the Wife ultimately succeeded where expert accountants had previously failed in the sense of actually unravelling, in any complete sense, the Husband’s myriad post-separation financial dealings, nor in the circumstances could it be expected that the Wife would so succeed.
Before turning to the Husband’s case it is necessary to record the finding and reasons for finding that fundamental doubt attends the Husband’s credit as a witness.
Due allowance must be made for the feature that the Husband has, I accept, historically been diagnosed with bi-polar disorder and in 2002 and 2004 required treatment for mental health issues. Due allowance must also be made for the feature that the Husband represented himself in these proceedings with the retainer of his lawyers who previously acted for him ceasing some significant time prior to trial.
However, one feature of a self-represented litigant, despite all the disadvantages of that, is that the Court is provided with the opportunity to observe the litigant not only in giving evidence but in conducting their own case.
In this case the Husband showed a ready and sometimes remarkable grasp for detail both in the course of his lengthy cross-examination of the Wife and in his own lengthy cross-examination. At the outset of the trial objection taken by the Counsel for the Wife was upheld to the Husband advancing as evidence letters or certificates from medical practitioners concerning his health rather than having those witnesses available to be cross-examined on any centrally disputed issue. At that time the Husband was aware that he had leave to subpoena any medical witness but ultimately no medical witness was called by him in his case. The issue mainly was the Husband’s delay in complying with directions to file trial material leading to the trial that was earlier set down to proceed in early 2012 having to be adjourned to July 2012, at significant cost to the Wife, because the Husband was unable, he asserted for medical reasons, to file his affidavit material.
Another issue relating to the Husband’s health is that the Husband included in his voluminous annexures a short letter from one Dr UU, a general medical practitioner, recording an opinion to the effect that the Husband’s purchases of four blocks of land and the car and boat earlier referred to in about 2004 was the product of mania as a consequence of his bi-polar disorder. However, as already referred to, when giving evidence on this in cross-examination the Husband was at some pains to justify the merits of these purchases as astute. I considered him capable of giving cogent explanations for the merits of these purchases both as to the prices he paid and the utility of the property acquired. Dr UU, in expressing what he does in the 2005 letter, seems to rely on little more than history provided then by the Husband after the event. In any case, that opinion falls away in the face of the actual evidence of the Husband at trial about these purchases. In the end, the Husband did not call any other expert witness or any other expert evidence as to his health historically or as it related to his delay in filing material for trial leading to it being adjourned on an earlier occasion.
Despite these allowances as referred to, I found the Husband to be evasive and unconvincing as a witness on many issues.
For the purpose of the trial the Wife sought and obtained leave to issue a subpoena to the Bank of Queensland in respect of the Husband and Y Pty Ltd.
The subpoenaed documents were produced by the Bank of Queensland to the Court under cover of a letter on behalf of the Bank signed by a person identified as “Financial Crimes Officer” within the Bank’s department described in the letter as “Financial Crimes Unit”. The documents produced became Exhibit 16 in the proceedings.
Within Exhibit 16 is a loan application made to the Bank in July/August 2007 by or on behalf of Y Pty Ltd for a loan facility of $1.2 million to be secured on the Suburb C land owned by the company.
The Husband objected, within the meaning of s 128 of the Evidence Act 1995 (Cth) to giving evidence in cross-examination on the topic of that refinancing application on the grounds identified in the section. He was granted a certificate under that section in respect of his evidence on the topic.
Whilst this topic and Exhibit 16 is revisited as a separate topic below, and some of that discussion is relevant to the assessment of the Husband’s credit, the overall effect of the Husband’s evidence concerning this refinancing application is that it casts fundamental doubts about the credit of the Husband as a witness. The Husband admitted in the course of his cross-examination on this topic that he was prepared to mislead (essentially to tell lies) if it advanced his financial interests to so do.
The Husband’s cross-examination took place over two days. This particular topic was explored with the Husband in cross-examination on both occasions.
At the very outset of his evidence on this topic it seemed to me that the Husband prevaricated about whether or not he had lodged or made the application for refinancing. He made references to his accountant as if to distance himself from the content of the application, or to place responsibility upon his accountant for its contents, perhaps knowing what was to come.
As to whether the Husband lodged the application Exhibit 16 records:
This application has been lodged by a Mr [Juliet], an approved referrer for this office. Mr [Juliet] owns 48.78% of the issued shares of the company. His accountant ([Mr VV]) holds 1.22% of the shares in a “management” capacity on behalf of Mr [Juliet], ie [Mr VV] (as an experienced accountant) represents the interests of Mr [Juliet] in all company dealings. Mr [VV] is also a director of the company in place of Mr [Juliet]…
Plainly the Husband did lodge the application for refinancing and its relevant contents or recorded details were supplied by him to the Bank of Queensland. That is, I find that to the extent Exhibit 16 records matters of fact including the asset position for the Husband in support of the application I find that it was the Husband who supplied that information.
Exhibit 16 contains:
Both guarantors have separate income sources to service their personal debt and living expenses, separate to the applicant entities’ trading i.e. Mr [Juliet] as a PAYG employee of [XX] Pty Ltd (see payslip p/e 21/06/07 showing gross earnings YTD of $275,652) additional rents and interest income…
It follows that the Husband provided to the bank a “payslip” indicating that for the almost full year period ending 21 June 2007 he had gross earnings as a PAYG employee of $275,652, apart from rental and interest income. That must have been a fraudulent document because the Husband has never operated as a PAYG employee.
When first cross-examined about this the Husband essentially scoffed at the suggestion that he would have actually been earning the amount claimed by way of income.
In contrast, on the second day when he was cross-examined on the topic the Husband thought the income claimed to be earned might be accurate or supportable. That may be right, but he certainly did not derive his income as a PAYG employee. As has already been noted, the Husband’s practices were designed to eliminate the prospect of tax being paid. The “payslip” must have been a fraudulently created document.
On the list of assets provided for the Husband recorded within Exhibit 16 is an item of “cash–NAB $200,000”. When first cross-examined about that the Husband dismissed the proposition that he would be holding $200,000 in a term deposit or otherwise with the National Australia Bank. On the second day when cross-examined about this topic the Husband completely altered his answer to suggest he may well have had such funds.
Notably the only credit card liability apparently disclosed by the Husband to the Bank of Queensland on the asset statement within Exhibit 16 is “Visa $28,000”.
Despite his efforts on the second instalment of his cross-examination to change his earlier answers to suggest that somehow this recorded statement of his asset position was accurate, the Husband acknowledged that as at the time of the application his credit card debts exceeded $300,000. He suggested to the effect that he only identified the visa credit card debt as that was all he was asked about. His evidence was arrant nonsense but designed to deliberately mislead.
I find that the Husband was readily prepared to, and did, deliberately mislead the Bank of Queensland to secure $1.2 million in a funding facility to Y Pty Ltd. He falsely pretended as to his income and asset position for his own financial benefit and he essentially admitted doing so, at least in part of his cross-examination.
I find that the Husband further deliberately obfuscated and prevaricated and sought to mislead on much of his evidence concerning his defacto partner Ms SS. The evidence included the Husband selling to his defacto partner on 30 April 2005 the property known as YY Street, Suburb ZZ for $595,000. Exhibit 16 contains records showing both the Husband and Ms Juliet securing a joint line of credit on the security of the property in 2008. It is obvious they have close financial connections but the Husband in evidence sought to minimise this aspect.
Whilst the Husband prevaricated and obfuscated in his oral evidence when cross-examined about this sale of his property to his defacto partner, the Husband eventually admitted to conniving with Ms SS in artificially inflating the price appearing on the contract of sale so that Ms SS could obtain sufficient finance from the Bank of Queensland for the purchase. In short, the Husband and Ms SS connived in falsely pretending to the Bank of Queensland that the price on the contract was the true or legitimate price, when it clearly was not, so that the Bank of Queensland would advance loan funds on the understanding that the price was legitimate. The Husband and Ms SS lived together in that property subsequent to the transfer. Ms SS also took advantage, for the mutual advantage of both the Husband and Ms SS, of the first home owner’s grant in respect of this purchase.
The Husband also admitted to advancing $54,000 to Ms SS at around the same time (2005) to establish Ms SS’s real estate business. The Husband asserted that interest was charged on the loan and that it was repaid with such interest over a three year period from commissions Ms SS earned in the real estate business so established. However, it is clear that from then a substantial financial interrelationship existed in the financial affairs of the Husband and Ms SS.
The Husband completed a number of taxation returns in 2010 for several earlier financial years. On none of them did he disclose the fact that he had a defacto partner, Ms SS in each of those years. Cross-examined about that the Husband initially obfuscated as to whether or not Ms SS was or was not his defacto partner. She clearly was and the Husband then reverted to suggesting this was simply an omission in the returns.
I find that the Husband was being purposefully misleading given the extent of his financial dealings with Ms SS; the fact that she operates a real estate agency which the Husband assisted her to establish and that there are claims as and between Ms SS and the Husband for deductible taxation expenses which would simply not be tenable in the face of their defacto relationship and the fact that they were living together. One simple example is the charging of rent referred to by the Husband in evidence.
Cross-examined about some of the numerous land transactions he has undertaken the Husband acknowledged deliberately inflating purchase prices on occasions so that purchasers would be able to secure financing to complete the purchase. Whilst the Husband suggested this was some common practice, and that it was part of that common practice to include in special conditions on contracts a “discount clause” as he referred to it, on at least one particular transaction where this had occurred, the contract was in evidence and no such special condition appeared.
I find that the Husband, given that the relevant transaction involved the purchase of land from himself, was quite prepared to connive with a purchaser to mislead a financier into funding the purchase by artificially inflating the price and not disclosing that to the financier.
Other concerning features of the Husband’s approach to taxation issues will be included in discussion which follows below but suffice to note here I was left with the clear impression that the Husband was quite prepared to obfuscate and mislead in giving his evidence whenever he thought that would suit his purpose.
Also relevant to the Husband’s credit is his apparent approach to disclosure throughout the course of proceedings. The Husband’s Case Outline for the trial includes this:
The Husband was ordered by the Family Court to report only to the Expert Court Appointed Accountants [D Accountants], NOT the wife and I did so.
I do not accept the disingenuous claim by the Husband that he thought providing documents as requested by D Accountants fulfilled his obligations of disclosure to the Wife.
In his evidence when cross-examined the Husband expressed indignation at the tone of the initial correspondence he received from the Wife’s solicitors. He conveyed the clear impression that he then adopted approach of minimising or obfuscating in relation to his obligations as to disclosure.
The most striking example of this is the Husband’s approach to answering specific questions delivered by the Wife. In the first place, the Wife had to obtain an Order when the Husband failed to provide his answers and she received such an Order together with an Order for costs in her favour. The Husband gave an unbelievable account at trial that the answers were in fact prepared and available prior to the application being made.
That aside, it is clear from the questions the Wife directed to the Husband that what she sought in relation to specific transactions was the details of profit made with respect to such individual transactions. The answers provided by the Husband, relying upon his end of financial year position of no net profit having been made were disingenuous.
Throughout his cross-examination the Husband claimed to have provided relevant documents to D Accountants. He may well have done so but that did not relieve him of the obligations for not only discovery of documents but provision of information to the Wife such as required by the specific questions she directed to him.
Fundamentally, the ramifications of the Husband’s admission in cross-examination about Exhibit 16 that he will be untruthful if he sees advantage for himself in so doing are obvious as regards these proceedings.
In contrast to the Husband I found the Wife to be a creditable witness. There were obvious gaps in her knowledge of historical financial affairs and gaps produced by the sheer length of time over which transactions occurred following separation as long ago as 2001. I am satisfied that the Wife was frank and forthright in her evidence and that she was a reliable witness.
The Husband’s evidence was that whilst rates of interest on credit cards varied it was reasonable to assume an average rate of 20 per cent interest per annum over the period. That only has to be stated for the lack of prudential merit in that course of conduct to be identified.
In terms of comparisons, it is clear that the Wife lost capital, in particular in relation to the MM Street acquisition, renovation and on-sale; in an amount of $233,000 being crystallised as a loss.
However, the evidence is replete with many examples of the Husband losing significant capital in ventures or transactions entirely of his own choosing. In his evidence the Husband did not seek to suggest that the Wife’s loss of capital on the MM Street property was wanton, reckless or negligent. He seemed to accept, as was reasonable, the realities of the economic situation given the global financial crisis and the general economic downturn as a consequence with reference to that particular loss.
However, significant doubt must attend the Husband’s conduct. First is his use of credit card funding. As was put to him by Counsel for the Wife it might be understandable that he incurred losses in attempted endeavours from time to time but it is not so understandable that he would do so year after year when it would be obvious that such a method of financing, rather than using the capital he had available to him from time to time, created its own difficulties.
I have earlier referred to the approximate $200,000 the Husband lost on the combined boat and motor vehicle purchase. He retains nothing now to show for that purchase although it is unclear precisely what the overall loss was.
The Husband acknowledged the loss of significant funds in his proposed purchase of Business AE. The Husband outlaid $140,000 for the purchase; a further $33,000 to remedy trust account deficiencies; and a further $15,000 which the Husband says was incurred to undertake “due diligence” although there is no corroborative evidence of that. A further $12,000 was outlaid for three months rental and a further $6,000 was outlaid in legal fees, giving a total of $206,000 essentially lost on this transaction. The Husband asserted he had conducted “due diligence” in respect of the purchase but there is no evidence to corroborate that. That aside, that substantial loss had nothing to do with the Wife. It followed soon after the $40,000 the Husband lost on the Collection House shares.
As earlier referred to, the acceptance by the Husband of $200,000 for the parties’ interest in Business GG including repayment for loans of a similar amount, again done without reference to the Wife, on the face of it was prima facie reckless in the sense of not truly testing the market for the interest or even testing what could be achieved from Mr HH, the purchaser. As the Husband put it he simply accepted Mr HH’s first offer of $200,000 in exchange for these interests.
The Husband gave evidence of expending $30,000 on a failed venture in which the Husband as trustee for the AV Trust trading as Business AW sought to set up an education industry business. Again, there was no reference to the Wife about this transaction.
Cross-examined about AX Pty Ltd, the Husband referred to losing $15,000 in a dealing involving the attempted acquisition of some management rights.
He gave evidence of losing $30,000 in a venture involving AY Pty Ltd involving the purchase of an entertainment business in Town AZ. By his own account the Husband lost $39,000 via RR Pty Ltd set up to establish the personal services business earlier referred to.
By his own account he lost over $100,000 in a vendor financing transaction he undertook in respect of one Ms BA in circumstances where he did not register his second mortgage for the vendor finance provided and the purchaser ultimately defaulted.
Testament to the Husband’s loss-making capacity is his evidence that he holds accumulated taxation losses of more than $1 million in his trust.
Leaving aside whether the Husband’s losses are attributed to reckless, wanton or negligent conduct on his part, the essential point is that the Husband’s proposition that his current deficit position is the product of him having no capital as existed from the time of the parties’ separation is not made out. The Husband’s current position has everything to do with his financial dealings post-separation independently of the Wife and notwithstanding that he has had very significant capital available to him from assets existing as at the time of the parties’ separation in 2001.
Is the “just and equitable” requirement fulfilled?
From the foregoing examination a number of considerations operate in favour of the conclusion that the Court ought not be satisfied that in all the circumstances it is just and equitable to now make a property settlement order.
Primarily, such considerations revolve around the lengthy post-separation period operating in conjunction with the extent of each party having acted independently of the other and both using capital sourced to assets or capital existing as at separation but also combined with income earned and, in the case of the Wife, her post-separation inheritance. Of particular relevance is the seemingly implicit understanding by both, at least in the period of about five years when these proceedings lay dormant, that each would retain their then existing and future legal and equitable property interests.
However, in the end I am satisfied on balance that the just and equitable requirement is fulfilled having regard to the following considerations:
(a)the parties were married for 21 years and their final separation was voluntary. It could not be concluded that as at separation the fact of separation did not bring an end to relevant assumptions previously existing about common use of property or like factors as referred to in paragraph 42 of the majority judgment in Stanford;
(b)these proceedings were instituted by the Wife in November 2002 and things done then and after were done in contemplation of these proceedings;
(c)when the proceedings were reactivated by the Husband in late 2009 a series of Orders were made thereafter and the proceedings progressed on the understanding by both the Husband and the Wife of property settlement orders ultimately being made. No issue was taken on any of the many occasions when Orders were made on and from November 2009 as to the just and equitable requirement;
(d)after the proceedings were reactivated in late 2009 both parties conducted themselves with these proceedings in the background and in contemplation of property settlement orders being made;
(e)on 14 January 2010 the parties consented to Orders that included Orders for each of them to receive $100,000 from funds then held in trust accounts by their then respective solicitors. Whilst under the terms of those consent Orders each party reserved the right to argue at trial as to the “classification” of such sums, and thus the juridical source of power for such an Order, it was not then contended by either party that the s 79 power was excluded;
(f)s 81 of the Act and the historical beneficiary loan accounts of H Trust, discussed further below.
Section 81 of the Act provides that in proceedings under Part VIII the Court shall, as far as practicable, make such orders as will finally determine the financial relationships between the parties to the marriage and avoid further proceedings between them.
I have earlier set out the history in terms of the creation of H Trust. As already noted, when H Trust was established in 1997 funds of $420,000 borrowed by the Husband were advanced in the name of the Husband to H Trust thereby creating a loan account in the Husband’s name.
Whilst the Husband refers in his affidavit to $90,000 of the loan funds obtained to make the advance to H Trust being repaid the evidence overall, absent accounting evidence, does not permit any tracing or complete history as to beneficiary loan accounts or whether the Husband’s initial loan was reduced or to what extent.
Exhibits 8 and 9 in the proceedings are the financial reports for H Trust for the years ended 30 June 2003 and 2004.
The 2004 balance sheet for H Trust shows beneficiary loan accounts totalling about $700,000 with the Husband’s loan account standing at $315,519. His loan account was at about $240,000 in the 2003 financial year on these records but the evidence overall does not allow any conclusion as to how much of that sum was referable to the Husband’s original loan or the residue of that loan.
Exhibits 6 and 7 as earlier referred to disclose net capital gains from sales of the KK Ltd shares having been distributed to beneficiaries including the Husband.
It is not in issue that the Husband did not actually receive amounts distributed to him in the accounting of H Trust in the 2004 financial year although I accept the Wife’s evidence that no distributions were credited to the Husband at any time after the conclusion of the 2004 financial year.
The Husband raised a complaint at trial that because of these historical facts that from 2004 his loan account stood in the amount referred to the Department of Social Security treats him as having such an asset.
Obviously enough H Trust ceased trading operations in terms of Business FF in the 2003 financial year.
As has already been discussed, for the purpose of establishing the parties’ existing and legal interests outlined above the Wife has been treated as having the benefit of the real property H Trust owns as it is a trust she controls and the Wife can distribute the funds of the trust to herself.
In these circumstances it operates in favour of s 79 property orders being made to secure certainty for each party in terms of eliminating for the Husband what is an illusory or notional asset in terms of his loan account and affecting the reality for the Wife of her retention of H Trust.
Section 79(4)
In addition to the matters already traversed I take into account the Wife’s acknowledgment that her existing credit card debt arises from the need to fund her litigation expenses in respect of these proceedings.
I also take into account that despite the terms of the Order made on 14 January 2010 the Wife drew down on the mortgage loan secured over the property at E Street, Suburb P. The Wife addresses this in her affidavit in reply filed on 11 July 2012 and on this aspect in particular at paragraph 76.
These matters referred to might in a usual case of this type result in the Court in accordance with guidelines established by Full Court authority notionally adding back property that no longer exists, or disregarding liabilities, for the purpose of assessing the parties’ contributions-based entitlements.[8]
[8] See Chorn & Hopkins (2004) FLC 93-204; Omacini v Omacini (2005) FLC 93-218; Townsend & Townsend (1995) FLC 92-569; Kowaliw v Kowaliw (1981) FLC 91-092 and Polonius and York [2010] FamCAFC 228.
However, the Husband acknowledges in his affidavit material having expended more than $250,000 in legal fees over the course of these proceedings. Given his currently existing legal and equitable interests amounting to such a substantial deficit, an obvious unfairness would be produced to notionally reduce his liabilities by such an amount but still leaving him in an overall significant deficit whilst excluding the Wife’s actual credit card liability to artificially increase her assets. Moreover, for all the reasons already traversed the circumstances of this case do not meet conventional guidelines.
In Stanford’s case the High Court emphasised that s 79 of the Act must be applied keeping in mind that “community of ownership arising from marriage has no place in the common law”.[9]
[9] Paragraph 39 of Stanford citing Hepworth v Hepworth (1963) 110 CLR 309 at 317 per Windeyer J.
There is no presumption of equality.[10] Moreover, whilst losses incurred during marriage are usually to be shared they are not necessarily to be shared equally and the circumstances in which losses were incurred will dictate responsibility for them.[11] I find that the Husband’s present deficit position is the product of gross mismanagement by him of the income and capital he had available to him over the lengthy post-separation period. I reiterate the findings made above as to the Husband’s losses and the feature that the Wife had nothing to do with them being incurred.
[10] Mallet v Mallet (1984) 156 CLR 605.
[11] Browne v Green (1999) FLC 92-873.
In this context it bears repeating that not only did the Husband have capital available to him but he also derived substantial income from time to time in his work in the property industry business. Whilst the period from the end of 2004 to mid-2005 has been referred to reference has already been made to the Husband’s claimed income for the purpose of the refinancing application in July/August 2007. The manner in which the Husband conducted his affairs, byzantine in nature, together with the fundamental doubts that attend the Husband’s credit preclude the Court from being comfortably satisfied about the Husband’s income over the whole post-separation period.
That the Husband constantly used credit card debt funding at rates he acknowledged at an average of 20 per cent makes it patently clear that rather than prudentially managing the capital and income at his disposal the Husband continually took his chances on speculative ventures at high interest rates. These had nothing to do with the Wife and it cannot be said that she participated in these to any extent.
In contrast to the Husband, the Wife has not had any substantial earning capacity in the post-separation period. For the first two years of that period she was primarily responsible for the care and support of the parties’ daughter who was 15 years of age when the parties separated in March 2001.
As already noted, the Wife’s “employment” essentially came to an end with her departure from Business FF where she had assiduously worked in building up the profitability of that business in the preceding years. Not long after separation the Wife became reliant on social security until she secured some employment at $28,000 gross per annum.
As expressed in her affidavit in reply filed 11 July 2012 and also in her oral evidence, the Wife had to rely upon the capital she received for her livelihood over the 12 years post-separation. This is not a case such as Spiteri v Spiteri[12] or Zalewski v Zalewski[13] where in the period between the parties’ separation and the hearing of their property settlement proceedings substantial new assets have been built up by the endeavours of one or other party. In this case, the Wife has within the constraints of economic cycles, including the global financial crisis, conserved such property as was available to her and upon which she has essentially relied for her financial support for a decade or more. It is certainly true that the Wife also sustained a loss, particularly by reference to the MM Street property referred to, but even the Husband acknowledged that the Wife ought not be held accountable for that in terms of it being a wanton or reckless or negligent loss. That loss crystallised in the context of the global financial crisis.
[12] (2005) FLC 93-214.
[13] (2005) FLC 93-241.
The losses of the Husband already referred to are in another dimension when account is taken of the substantial earning capacity he has had from time to time to supplement the capital he has also had. The Husband has incurred very substantial losses overall and as already referred to his net deficit position is greater than the net asset position overall of the parties.
This was a long marriage. At its end in 2001 the parties’ cumulative efforts had resulted in substantial property, or at least substantially greater property than now exists, having been accumulated. Viewed in retrospect it might have been concluded as at the time of the parties’ separation that their contribution-based entitlements under s 79 were equal even if it could be said that an adjustment for s75(2) factors in favour of the Wife given her caring responsibilities and inferior earning capacity were taken into account.
However, 12 years later by the time of this trial the situation is very different. Notwithstanding the capital available to him and his income earning capacity in the meantime the Husband arrives at the point of having very substantial deficits. In contrast, notwithstanding her modest income earning capacity and notwithstanding the economic cycles referred to what now exists in terms of assets held by the Wife exists because of her careful management of them within the constraints already referred to.
In my judgment, whether the factors identified in s 79(4)(a) to (d) are considered by reference to the global position of the parties collectively or on an asset-by-asset approach it cannot be legitimately concluded that the Husband’s proportional contribution-based entitlement results in any allocation of the Wife’s present legal and equitable interests in property in his favour.
In my view consideration of the parties’ contribution-based entitlements does not result in any disturbance of the parties’ respective presently existing positions.
S 75(2) factors
As already noted the Wife is currently 58 years of age and will soon turn 59 years. I accept her evidence that the stress of these proceedings has taken a toll upon the Wife in terms of her health. I accept that for this reason she ceased her previous employment in a sales role shortly before trial in which capacity she had worked for about the previous two and a half years.
Taken from her Financial Statement filed 5 May 2012 the Wife had been earning a gross income of $31,200.00 in that employment. Otherwise she was reliant upon rental income from the property she holds but the mortgage liabilities with respect to that property subsumed the rental income such that her expenses exceeded her income even when she was working.
As at trial the Wife had commenced cohabitation with Mr CD which cohabitation commenced in March 2012. Mr CD is 59 years of age and according to the Wife’s Financial Statement earns gross weekly income of $1,750.00.
The Wife resides in rental accommodation and it can be assumed that she receives some benefit from the mutual sharing of expenses with Mr CD. It may also be assumed that when these proceedings are at an end, the Wife is likely to be able to return to some employment exercising her capacity to earn, it seems, about $30,000 gross per annum.
The Husband is 62 years of age and will soon turn 63. As at trial according to his Financial Statement filed 25 May 2012 the Husband was reliant upon social security in the form of “Centrelink illness and sickness benefits” for his income of $309.00 per week.
In addition to his bi-polar condition already discussed, which seemingly is controlled by medication, I accept that the Husband suffers from a back condition from a motor vehicle accident many years ago which also results in leg-length discrepancy and may ultimately require the Husband to undergo surgery at some indeterminate future time.
In evidence, the Husband contended that if he can avoid personal bankruptcy by resolving his debt situation he will retain his property industry license and exercise his capacity to undertake such employment. On the alternative that he becomes bankrupt, it was the Husband’s evidence that he would be employed by others in the same role.
One fundamental difficulty in assessing the Husband’s claims as to his present income and financial resources or those in future for the Husband relates to his de facto relationship with Ms SS.
In his Financial Statement filed 25 May 2012, under the heading “Relationship to You” the Husband describes Ms SS as his “carrer” presumably meaning “carer”.
There can be no doubt that Ms SS is in fact the Husband’s de facto partner and has been such now for many years.
I have already referred to the failure of the Husband, to disclose his defacto status with Ms SS in taxation returns prepared in 2010 for several earlier years, and indeed he actively avoided disclosure of the fact that he has a de facto partner and that it is Ms SS.
In combination with the Husband’s dealings in taxation matters already referred to and the fact that he was not a credible witness, I find that the Husband has not been frank and forthright as regards the extent of his financial dealings with Ms SS or the financial interrelationship between the two of them.
Even as to Ms SS’s income the Husband prevaricated between at one point suggesting she earned weekly income in the order of $1,000.00 as compared to the $400.00 identified in his financial statement.
On his evidence, the Husband has contributed to Ms SS establishing herself as a real estate agent and indeed the Husband acknowledged assisting her historically financially to do so.
Initially cross-examined about why Ms SS would be incurring expenses for land tax in the context of questions then being directed towards the extent of Ms SS’s land ownership, the Husband gave some evidence about rental income as an explanation which was difficult to follow. When this topic was later revisited with the Husband he acknowledged that Ms SS had incurred liability for land tax because of the then extent of her land holdings. (Exhibit 15)
Obviously in association with these findings, it is difficult to satisfactorily conclude as to the Husband’s necessary commitments for his own support. I accept the Wife’s evidence about that as contained in her Financial Statement.
Neither party has the responsibility of supporting any other person. Each of the parties’ respective de facto partners clearly has capacity for their own support.
As already noted it seems that the Husband is eligible for social security benefits albeit that if the historical loan account in H Trust is removed as an issue his capacity for that eligibility may be enhanced.
In terms of a reasonable standard of living “in all the circumstances” I am satisfied that the Wife can maintain a reasonable standard of living in her present circumstances albeit that whilst she is unemployed, and even when she is, there would seem to be a deficit of her expenses concerning her existing property and debts which exceeds her income. For the Husband whether or not he avoids bankruptcy I am satisfied that he can in future exercise an earning capacity, despite his health problems and age, and in his likely continued association with Ms SS and his standard of living can be described as reasonable in all the circumstances.
If the Wife retains her presently existing legal and equitable interests in property including retention of the H Trust assets to the exclusion of the Husband, involving as that does removing the notional asset of the Husband’s beneficiary loan account, I do not consider that such an order has any effect upon the ability of the Husband’s creditors to recover debts at least to any “relevant extent” within the meaning of the subsection.
As already discussed, all of the debts seem to be unsecured and were advanced to the Husband on that basis. There is no evidence that he relied upon his loan account as an asset for the purpose of obtaining any debts. Indeed, it is unknown as to how the Husband achieved such borrowing but if the Bank of Queensland refinancing is any guide, that open question is troubling.
The duration of the parties’ marriage affects the Wife’s earning capacity in so far as she devoted herself to Business FF and relied on that engagement for her income which came to an end with the marriage. She has thereafter had to secure alternative forms of employment over the 12 years since separation occurred at modest levels of income. For his part, the Husband retains his earning capacity in the property industry albeit within the constraints already referred to.
Reference has already been made to the financial circumstances relating to the parties’ respective cohabitations. As noted, I have fundamental reservations about the Husband’s full and frank disclosure as to the financial circumstances relating to his cohabitation.
I have regard to subsection (n) in framing the terms of the orders I have proposed to make by reference to the considerations already expressed.
In terms of subsection (o) being any fact or circumstance which, in the opinion of the court, the justice of the case requires to be taken into account; I am conscious that orders which see the Wife retaining what she has without any alteration in favour of the Husband would see her retaining significant capital as compared to the Husband’s position.
However, even now the Husband retains a significantly greater earning capacity than does the Wife albeit that the parties are now of the ages they are.
Moreover, in the unusual circumstances of this case, to make any adjustment in favour of the Husband because of the superior capital the Wife holds as compared to the Husband’s deficit position involves, in my view, an artificial approach or some kind of engineering, social or otherwise, to make an adjustment on an ill-defined or unprincipled basis.
Balancing all of the section 75(2) matters, in the curious and unusual circumstances of this case, results in the conclusion that it would not be “appropriate” within the meaning of s 79(1) to make any orders which would alter the Wife’s presently existing legal or equitable interests in favour of the Husband.
For these reasons, I make the Orders set out at the commencement.
I certify that the preceding three hundred and eight (308) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Kent delivered on 1 July 2013.
Associate:
Date: 1 July 2013
Key Legal Topics
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Family Law
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Property Law
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Remedies
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Procedural Fairness
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Statutory Construction
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Res Judicata
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