K and M

[2008] FCWA 59

[2008] FCWA 59

JURISDICTION	:	FAMILY COURT OF WESTERN AUSTRALIA
:	FAMILY LAW ACT 1975
LOCATION	:	PERTH
CITATION	:	K and M [2008] FCWA 59
CORAM	:	PENNY J
HEARD	:	14, 15, 16, 19, 20, 21, 22, 23 FEBRUARY 2007
and 16, 17 & 18 MAY 2007
DELIVERED	:	21 MAY 2008
FILE NO/S	:	PT 796 of 2005
BETWEEN	:	K
Applicant
AND
M AC PTY LTD K PTY LTD 1st to 3rd Respondents
AND
CRS PTY LTD GM PTY LTD BRN PTY LTD
CM LM 4th to 8th Respondents
Catchwords:

Property settlement - wife alleges husband's father's companies a sham and that husband true owner of father's companies - husband and father deny sham - evidence of company transaction - accept that one company, [CRS] Pty Ltd, alter ego of husband and should be included in asset pool – [GM] not satisfied that is a sham

Spousal maintenance - add backs for legal fees

Proceedings adjourned for valuation of [CRS]

[2008] FCWA 59

Legislation:

Family Law act 1975 - s 72, s 75

Category: Not Reportable

Representation:

Counsel:

Applicant	:	Mr P Dowding SC
1st to 3rd Respondents	:	Mr J Hedges
4th to 8th Respondents	:	Mr F Castiglione QC

Solicitors:

Applicant	:	Leach Legal
1st to 3rd Respondents	:	Clement & Co
4th to 8th Respondents	:	Talbot Olivier Lawyers

Cases referred to in judgment:

Ascot Investments Pty Ltd v Harper & Harper (1981) FLC 91-000
Chorn v Hopkins (2004) FLC 93-204
Gould & Gould; Swire Investments Ltd (1993) FLC 92-434
In Mitchell and Mitchell (1995) FLC 92-601
Sharrment Pty Ltd v Official Trustee in Bankruptcy (1988) 18 FCR 449
Wilson v Wilson; Figtree Gardens Caravan Park Pty Ltd (1993) 114 FLR 439

[2008] FCWA 59

1 The husband and wife met in 1993. At that time the husband was a farmer,

leasing a farm in the [district]. The wife was a [technician] living in Perth. Between the time they met and their marriage in 1998 the wife spent time on the farm and assisted the husband when she could and the husband spent time in Perth. In 1996 the husband purchased the farming property known as [W]. The wife moved to the farm after the marriage in 1998 and she gave up her employment. Shortly after that time the partnership of [L K & P G M] was established to run the farming operation. The couple ran that business successfully until 2001 when they suffered a drought year.

2 In that year the husband went to [the goldfields] and bought a blast hole drilling

rig with a view to diversifying the partnership business. He obtained contracts around the area in which they were farming and then subsequently in the [goldfields and regional areas]. The drilling business was not initially successful, but the partnership purchased additional drills and second hand parts and obtained a number of contracts. It first traded under the partnership name, but later traded under the company name of [AC] Pty Ltd (“AC”). The husband was sole director and shareholder of that company. By 2003 the husband was spending most of his time in the [regional] area attending to the running of [AC] and the wife was attending to the farming duties.

3 In April 2004 the parties entered into an agreement to purchase another farm, [L]

for $700,000. The deposit of $160,000 was provided by the wife’s parents. The parties separated in September 2004 and did not complete the purchase of [L]. They have not been reimbursed the deposit.

4 After separation the parties both took legal advice and attempted to negotiate a

settlement, but this did not occur. The wife commenced proceedings in this court in February 2005. The next month the husband's father established a company known as [GM] Pty Ltd (“[GM]”). This company purchased a drill rig and leased it to [AC] to be used by them for a new contract they had obtained.

5 Around this time the husband decided that he would not do anything which

would increase the value of [AC] as he did not wish to enrich the wife. The husband's father, in June 2005, set up another company, [CRS] Pty Ltd (“[CRS]”). This company took over some of [AC]’s contracts and the husband subsequently was employed by [CRS] and actively looked for contracts for that company. Not surprisingly, the income of [AC] dropped significantly. The wife alleges that [GM] and [CRS], while legally owned by the husband’s father, are really owned by the husband. She says that the husband's father is the husband’s alter ego and the corporate structures set up by the husband's father are a sham.

6 The hearing of this trial took 11 days. Most of the time was spent on the issue of

the ownership of [GM] and [CRS]. It is the wife’s case that if I was to find that both [CRS] and [GM] were the alter ego of the husband, I should adjourn the trial and direct the appointment of a single expert for the purpose of a valuation of the shares in those companies. Before I consider the evidence in relation to the ownership of [GM] and [CRS] it is necessary for me to determine other issues in relation to the asset pool, in particular whether the wife’s legal fees should be added back to the asset pool, whether the payments received by her by way of spousal maintenance should be characterised as that or as partial property settlement and whether the legal fees paid by the husband of $405,620 should be added back to the asset pool.

[2008] FCWA 59

Spousal maintenance or add-back

7 The husband seeks to add-back as an asset of the wife a portion of the spousal

maintenance received by the wife since the parties separated. He argues that she had no need for spousal maintenance for at least some of the time it has been paid. The wife argues that the amounts should be treated as spousal maintenance.

8 Between the end of January 2005 and the middle of April 2005 the parties

agreed that the husband would pay the wife $1,600 per fortnight. This amount was then increased, by consent, on 27 May 2005 to $1,400 per week. The increase was made by a court order on the basis that the payments were to be characterised by the trial judge in the final property settlement between the parties. The husband seeks to have added back to the asset pool all the amounts received by the wife after May 2005.

9 S 72 of the Family Law act 1975 states:

“A party to a marriage is liable to maintain the other party, to the extent that the first-mentioned party is reasonably able to do so, if, and only if, that other party is unable to support herself or himself adequately whether:

(a) by reason of having the care and control of a child of the marriage who
has not attained the age of 18 years;

(b) by reason of age or physical or mental incapacity for appropriate
gainful employment; or

(c) for any other adequate reason,

having regard to any relevant matter referred to in subsection 75(2).”

10 The parties did not have any children. In determining whether the payments

received by the wife are to be characterised as spousal maintenance it is necessary to consider whether the wife was able to adequately support herself, either by reason of age or physical or mental incapacity for appropriate gainful employment or for any other adequate reason.

11 The husband in his written closing submissions considers there to be three issues

for determination – what level of support was adequate; what period of time was reasonable for the wife to be unemployed; and whether the wife was entitled to spousal maintenance once she resumed employment.

12 The wife’s ability to adequately support herself, and her corresponding needs,

have varied considerably since separation. There were periods when she was unemployed, employed, living in rented accommodation and living in rent-free accommodation. These matters need to be taken into account when determining the wife’s ability to adequately support herself at a particular time.

13 In determining an adequate amount of maintenance I must take into account the

matters set out in s 75(2). In Mitchell and Mitchell (1995) FLC 92-601 the Full Court
said at 81,995:

[2008] FCWA 59

“Thus, the question whether the applicant can support herself “adequately” is not to be determined by reference to any fixed or absolute standard but having regard to the matters referred to in s. 75(2) and more specifically the paragraphs of that sub-section identified above.

Nor is that question to be determined upon a “subsistence” level, as earlier cases under State maintenance legislation suggested…

….

It is also necessary in determining this issue to have regard to the standard of living of the parties and the financial circumstances of the other person: s. 75(2)(b) and (g). The days are long gone when it is necessary for an applicant for maintenance to use up all of her assets and capital in order to satisfy the requirement that she is unable to support herself “adequately”. Where the line is to be drawn will depend upon the circumstances of individual cases.”

14 At the time of separation the wife says that she had not been employed for some

eight years, the husband argues it was 6½ years. When the parties separated the wife left the former matrimonial home and was consequently required to re-establish herself. Her immediate expenses included renting a furnished flat in Perth at $500 per week and agistment fees for her horses. The wife met these expenses through funds in the parties’ partnership account and the use of her own personal credit card. In January 2005 the partnership overdraft account was closed, and subsequently the husband commenced making payments of $800 per week to the wife. The wife says she received these payments from 4 February 2005 until 19 April 2005, after which she relied on her credit card.

15 The wife’s expenses were reduced between January 2005 and August 2005. During this period she was able to secure rent-free accommodation at a property [out of Perth]. She gave evidence during cross-examination that she was not actively paying agistment fees during her time at [the outer Perth property]. The wife at that time claimed that her weekly expenses amounted to $1,983. Included in those expenses was a telephone expense of $250 per week. The wife claimed she was spending this sum on telephone expenses because of her obligations to the partnership and [AC]. At this time she was not living on the farm and the husband was running [AC]. She further claimed expenses for insurance, motor vehicle registration and motor vehicle hire purchase payments which exceeded $500. These expenses were being met by the partnership [L K & P G M]. The husband claims the wife’s real expenses around this time were $623. In my view, her reasonable living expenses around that time, when she was not paying rent, were about $800 per week.

16 In early June 2005, when the wife was still living [out of Perth], she began

receiving $1,400 per week from the husband. At this time she was paying no rent and
no agistment fees.

17 After leaving [the outer Perth property] the wife rented an unfurnished property

in Perth at $400 per week. She continued paying agistment fees and was required to purchase furniture for her rental property. It was around this time, on 1 August 2005,

[2008] FCWA 59

that the wife began working part-time as a [technician] three days per week. Once the wife obtained employment she was able to pay back the debt she incurred as a result of having to purchase furniture and set up accommodation. The wife gave evidence during cross-examination that once the $1,400 payments were in place there was an intention to repay the loan from her parents but priority was given to furnishing her rental property and repaying her credit card debt, which totalled approximately $30,000. The wife has included the value of her furniture at $10,000 for the purpose of these proceedings. It appears that the majority of the wife’s credit card debt was accumulated in a two month period after separation where she did not receive any money from the husband and was unemployed. By March 2006 the wife’s credit card debt was reduced to $700. According to the wife, once she met her debts and any other general expenses, if she could, she would make repayments to her parents. In her February 2007 financial statement the wife said she was providing $1,400 per week to her parents. Her credit card debt had risen to $2,173.

18 The important question is did the wife have the ability to obtain employment to

adequately support herself? The only reasons provided by the wife as to why she did not obtain employment until August 2005 was that it took her “some time” to find employment and that she was traumatised by the separation causing her to suffer depression. There was no medical evidence to support this. There was no reason provided as to why she could not obtain full-time employment. She was not responsible for caring for children or any other person, besides herself, and there was no evidence that she needed any further training despite her absence from employment for around eight years. Once the wife began working she received a reasonable income. She said in cross-examination that she averaged approximately $800 per week. In her financial statement filed on 1 February 2007 her weekly income after tax was approximately $960 per week. If she had worked full-time, I have no doubt she would have been able to support herself adequately.

19 I acknowledge that immediately after the parties separated the wife did require

financial assistance from the husband in the form of spousal maintenance. She had not been employed for a number of years, she was required to seek alternate accommodation, pay for agistment of her horses and purchase furniture. In my opinion, after the wife obtained employment, which was approximately a year after the parties separated, she was in a position to adequately support herself. The fact that she chose to work part-time was her choice. It appears that the spousal maintenance payments made by the husband after this time were used to reduce her debt to her parents and pay some legal fees.

20 I am of the opinion that the payments received by the wife after she obtained

employment on 1 August 2005 should be add-backed to the asset pool as funds received by her by way of partial property settlement. Some of her legal expenses were paid from these funds and should not be added back to the asset pool.

Husband’s legal fees

21 The husband has paid the sum of $405,620 in legal fees, including accounting,

valuation, solicitor and barrister fees. The husband submitted that some of these fees had been paid from his post-separation employment and should not be added back to

[2008] FCWA 59

the asset pool. The bulk of the fees had been drawn from [AC] and debited against the husband's loan account. The husband, in his closing submissions, stated that if the legal fees paid by him were to be added back to the asset pool then the tax payable by him as a result of the increase in his loan account in [AC] should be taken into account.

22 Later in this judgment I will go into the husband's conduct in relation to the

running of [AC] after separation in some detail. In my opinion, the income he derived from [AC] during the course of 2005 appears to be excessive. Most of his time from around May 2005 onwards was spent working for [CRS]. While there are circumstances in which legal fees paid from post-separation earnings would not be added back to the asset pool, see Chorn v Hopkins (2004) FLC 93-204, in my view, this is not one of those situations and the amounts paid for legal fees out of his post- separation earnings should be added back.

23 In relation to the fees drawn down from [AC] by way of his loan account, in my

opinion, these should also be added back into the asset pool. I do not intend to take into account the tax paid by the husband on those drawings. The tax payable is estimated, in the submissions of the husband, as over $97,000. If the husband had borrowed the money from the bank his interest payment would have been significantly less. It was the husband’s choice to draw down on the assets of [AC] to pay his legal fees. In my view, it is up to him to meet the taxation payable on those fees. The entire sum of the husband's legal fees of $405,620 should be added back to the asset pool.

Are [CRS] Pty Ltd and [GM] Pty Ltd the alter ego of the husband?

The husband and the father’s position

24 [GM] Pty Ltd was formed by the husband’s father, [NM]. He was the sole

director and shareholder of the company. The company was set up by him in the following circumstances. He was told by the husband that [AC] had the opportunity to obtain a contract for a drill and blast contract in the [mining area] at [a mine] called [N]. The husband told him that [AC] was unable to obtain finance for a rig need for the project and suggested that the father obtain finance to purchase a drill rig that would enable [AC] to be awarded the contract. The husband advised him that if he purchased the drill rig he would guarantee its ongoing hire to [AC]. Consequently, [GM] purchased the drilling rig on terms. [GM] had to make 5 monthly payments of $30,000 and a balloon payment of $540,000. The balloon payment was financed by an equipment loan to the National Australia Bank. The father’s personal assets were pledged as security for that loan.

25 In around May 2005 the husband decided that he would not take on any new

work for [AC]. He did this because he believed that the wife was deliberately prolonging the proceedings and he did not want to work hard and increase the value of [AC] merely to enrich the wife. As a result of this decision he says he told his father he could not guarantee that [AC] would lease the drill rig from [GM] in the future. The father, who was the office manager for [AC], said that he was approached by [Mr G], who was then employed by [AC]. They decided they would set up a [new business] and [CRS] was formed on 29 June 2005. The father was the sole

[2008] FCWA 59

director and secretary of [CRS] however his shares were subsequently transferred to [GM]. The formation costs associated with both companies were paid by himself and his wife. The only signatories to the bank accounts of [CRS] and [GM] are the father and another son, [KM].

26 After the creation of [CRS] the husband and [Mr G] commenced working for

[CRS] as consultants. The husband signed a consultancy agreement with [CRS] on 22 February 2006, but worked for [CRS] prior to this date. It is acknowledged by the husband and his father that the husband and [Mr G] have greatly assisted the father in obtaining contracts for [CRS]. The husband has not attempted to obtain any new contracts for [AC]. Some of [AC]’s equipment has been leased to [CRS].

27 The husband and the father’s case is that the formation of [CRS] and [GM] were

not a sham. The husband admits that he intentionally stopped building value in [AC] because of these proceedings. His position was that he would maintain [AC] as an asset but he did not want to share any increase in profits with the wife. In his affidavit filed on 23 March 2006 the husband says that his intention was to manage [AC] until such time as it was either sold or alternatively the outcome of the trial, after which point he intended to work for [CRS] as a subcontract consultant on an as needs basis. In fact, he was working for [CRS] at the time he swore this affidavit.

28 In relation to the formation of [GM], the father says the commercial risk he took

on by purchasing the rig was an extension of the generosity previously extended to his son and the wife. The father says that not only did he and his wife stand to generate an income from the rig, it also allowed [AC] to generate profit which increased the marital pool. While the formation of [GM] may have had that affect, the setting up of [CRS] had the opposite effect on profits.

29 In relation to the formation of [CRS], the father said during cross-examination:

“What he said in broad terms, your Honour – and I honestly can’t repeat word for word what was said, but the essence of what [K] said to me – and it was within those words that the genesis of [CRS] emerged – was that he was being frustrated in a lot of his business endeavours by the constrictions that had been imposed upon him by these proceedings. He was having great difficulty in trying to come to a reasonable settlement resolution with his ex-wife and because of that, he was no longer prepared to keep working his butt off, if I may use that description, to increase the value of his business and therefore the value of the matrimonial pool simply to enrich [the ex-wife].

….. He didn’t say, your Honour, that he was going to stop working. One thing he did emphasis to me very clearly, that he felt his prime responsibility was to maintain the matrimonial asset, not expand it.

…..He was going to work for me and if in the consequences of that, I happen to benefit, so be it. I was taking a huge commercial risk in taking the step that I did to form [CRS].”

[2008] FCWA 59

The wife’s position

30 The wife argues that [CRS] and [GM], whether as trustee of the [M] Family

Trust or otherwise, are the alter ego of the husband and the husband’s position that these companies are independent of him, and are in reality his father’s companies, is a sham. Highlighted throughout the wife’s argument is her claim that the third parties have failed to comply with their obligations of full and frank disclosure, which led to difficulties in her ability to put forward a precise case.

31 She argues that the husband has created and promoted work for [CRS] and

[GM], under the guise that these companies are the father’s when, in reality, the companies are his and he stands to gain the full benefit once these proceedings are finalised.

32 The wife refers to the following exchange which occurred between the husband and her counsel during cross-examination:

“And at the very time you are now saying that you were giving up

effectively all the activities of [AC] except the [name] contract? No, I wasn’t giving up all of the activities of [AC]. I had made a conscious decision that I wasn’t going to take on any new work in terms of [AC] actually completing the contracts but that did not preclude the rebuilding of existing [AC] equipment so that it could out and get a return.

Now indeed, is it right that you had made a conscious decision in about the middle of 2005 that you did not wish to build up [AC] as an asset because you would have to share it with you wife in these proceedings? Certainly that was part of my reason for what ultimately happened to AC].

…..

And you decide that rather than enrich your wife you would put all new business out through [CRS]? No.

And in fact you did put all new business through [CRS], did you not?
Any that came my way, yes.”

33 The wife suggests that the husband did not maintain the matrimonial asset pool

because he handed the goodwill of [AC], which was the husband’s ability to get business, to [CRS] without any consideration. He gave away major contracts belonging to [AC] to [CRS] and he had drawn down considerable sums from [AC] against his own loan account in that company.

34 The wife questions the timing of the formation of [GM] in comparison to the

institution of these proceedings. [GM] was formed some 14 days after the wife commenced her property settlement proceedings and 16 days prior to [AC]’s refusal of finance for two second hand drill rigs.

35 The wife suggests that the father was simply a front for these companies and

they were in reality controlled and operated by the husband and [Mr G]. The wife’s

[2008] FCWA 59

argument is not structured on one particular contract or event rather she says that the finding that [CRS] and [GM] are the alter egos of the husband “becomes unavoidable as a result of a series of circumstances, of a series of deliberate actions, of a series of contract and a series of transactions.” The wife deals with each of these circumstances, actions, contracts and transactions in her submissions and I intend to address them shortly.

The evidence

36 Both the husband and the father gave evidence in relation to [CRS], [GM] and

[AC] over a number of days. The evidence mainly concentrated on transactions and events which were central to the wife’s claim that [GM] and [CRS] are shams and the alter ego of the husband. The father gave evidence on behalf of the fourth, fifth, sixth and seventh respondents.

[N] Contract and the consequential formation of [GM]

37 The [N] contract was a drill and blast contract awarded to [AC] for [a company]

mine site in the [region]. The husband’s evidence was that to operate the contract [AC] required two GD-5000 type drill rigs and at that time [AC] had only one GD- 5000 drill rig. As mentioned previously, the husband approached his father to obtain finance to purchase the drill rig from [TR] as he did not think [AC] could raise the finance. He told his father if he purchased the drill rig [AC] would guarantee its ongoing hire for $30,000 plus GST per month.

38 The husband says he attempted to gain finance for the drill but was rejected. He

gave evidence that he received a quote for two second-hand drill rigs from [TR] on 28 January 2005. The husband accepted the quote on 18 February 2005 and consequently took steps to obtain finance from Pacific Finance for an amount of $700,000. The husband, through his broker at Pacific Finance, submitted an application to Bank of Queensland for finance on 18 March 2005. The application was rejected on the same day.

39 On 26 April 2005 the father, on behalf of [GM], agreed to purchase a new drill rig for $720,000 plus GST from [TR].

40 The wife does not accept that [AC] would not have been able to obtain finance for the drilling rig. In around October 2004 [AC] obtained finance for a new GD-5000 rig worth approximately $700,000. As recently as February 2005 [AC] had obtained finance for a new vehicle. The application by the husband was for two second hand rigs. He did not ever seek finance for a rig similar to that purchased by the father. The manner in which the husband sought to obtain finance, in that he disclosed he was going through a divorce and that there would be “rocky times ahead”, the wife says was worded to seek a rejection, not an acceptance of finance. It is not surprising, she says, that they rejected the application within an hour.

41 Further, the wife says [AC]’s asset position improved between 2004 and 2005.
The net assets of [AC] as at 30 June 2005 were $1m. The purchase of the rig by
[GM], at least for the first six months, was underwritten by [AC] in that it undertook to

[2008] FCWA 59

hire the rig for six months at a sum equal to the repayment of the finance company. The father did not have to refinance the balance of the purchase price until six months after he took possession. At that time the balance owing had reduced to $540,000 and, as the father stated, he anticipated the repayments on the rig at that time would be much less than the $30,000 that he was paying initially.

42 The manner in which the husband described to [Mr W] of [TR] the

establishment of [GM] and how it “fits into the picture” confirms the wife’s opinion
that the setting up of [GM] was a sham.

43 In his email dated 6 May 2005 the husband stated:

“[GM] is solely owned and controlled by my father, [Mr M], who incidentally is the [AC] office manager. [Mr M] has a history of facilitating some of my business ventures.

[GM] will purchase the rig and hire it to [AC]. There will be a stamped 12 month (minimum) hire agreement and [GM] will have a floating charge over the assets of [AC] as security and a director’s guarantee from me.

[GM] will then be able to give [TR] a director’s guarantee that will be effectively backed by [AC] and me personally. [AC] currently has given no other securities (save for two chattel mortgages and director’s guarantee that relate specifically to two GD 5000’s already owned) and therefore [GM] would be the first ranking secured creditor.

Obviously the problem with [GM] is that it is brand new and has no trading history whatsoever. The agreement between [AC] and [GM] outlined above effectively makes [GM] a proxy of [AC], at least for the life of the contract with [TR].

I am hoping that all of the related contracts can be in place by late next week. It would be helpful if you could fax or email a copy of your generic GD 5000 operational hire agreement to [Mr M]…”

44 The husband attempted to explain what he meant by this email. He said the

purpose of the email was to give [TR] comfort in his father’s ability to purchase the
drilling rig and make the payments. In cross-examination he stated as follows:

“The simplest way I can put it is that in the absence of [AC]’s ability to finance this new drill rig itself, I would have written any kind of an email to [Mr W] to get this drill rig.”

45 The father gave evidence that he was aware of the email, but did not agree to its

contents. No security as set out in the email was given by [AC] to [TR] and no floating charge was given by [AC] to [GM]. Given the allegations made by the wife in relation to the father’s companies being the alter ego of the husband, extensive disclosure was sought by the wife in relation to documents surrounding the setting up of [GM], the obtaining by [GM] of equipment and the contracts obtained by both [GM] and [CRS]. The email from the husband to [TR] was not disclosed by the

[2008] FCWA 59

husband or the father in their disclosure documents and was obtained only by way of
subpoena of the [TR] file.

46 Taking into account the evidence surrounding the setting up of [GM], I am

satisfied it was set up by the father as a means by which the husband could ensure that [AC] had access to equipment which [AC] did not own. This step was taken in furtherance of the husband's desire not to increase the value of [AC], nor to increase its profits so as to enrich the wife.

47 The father and the husband argued that there was no detriment to [AC] by this

course of action and I agree that this was the case. [AC] was renting the equipment from [GM] at what appears to be a commercial rate and using the rig to complete a contract which it had obtained and from which it was making a profit.

Formation of [CRS]

48 The father’s evidence was that after [AC] had commenced the job at [N], [Mr G]

became concerned because the husband was distracted by property settlement issues. He approached the father and suggested that the father take over the further work which could become available to [AC]. The father said he then approached the husband in relation to this issue. The husband told him that he decided to restrict the activities of [AC] to the existing subcontract with [another company] at [that location]. The husband told him that in his view the wife was deliberately prolonging the settlement of the proceedings, and that by delaying the proceedings the wife was expecting [AC] to increase in value and, therefore, the asset pool would be increased and that he had had enough of working hard to enrich the wife. According to the father, the husband apologised for letting down the father, but he could no longer guarantee the hire of the rig purchased by the father through [GM]. According to the father, he and [Mr G] then discussed setting up a business and upon telling the husband this was to occur, the husband said that he was “happy for us”.

49 [CRS] was registered on 29 June 2005. The shareholding was held by [GM]. In

paragraph 76 of his affidavit sworn on 26 May 2006 the father states that the
formation of [GM], [BRN] Pty Ltd and [CRS] was without reference to the husband.

50 The father says that after the company had been set up he had discussions with

the husband who advised that he was willing to assist in the role of technical
consultant and would assist in the development of new business for [CRS].

51 From the time of formation of [CRS] both the husband and the husband's father

continued to receive an income from [AC]. The husband's father continued, until January 2006, to charge [AC] for using office space [in his home]. This is despite both the husband and the father both actively looking for work for [CRS] rather than for [AC]. [AC] was also responsible for ensuring that [CRS] obtained contracts which had previously been obtained by [AC].

52 It is the wife’s case that the setting up of [CRS] was to provide a vehicle by

which the husband could continue to obtain contracts and take advantage of the boom conditions in the mining industry without having to enrich the wife by obtaining those contracts through [AC]. She says the husband and the father’s conduct and the

[2008] FCWA 59

manner in which they obtained the contracts for [CRS] thereafter will establish that
this was the case.

53 The husband was cross-examined about what appeared to be a conflict of

interest in receiving a very significant income from [AC] while he was actively
working to obtain contracts for [CRS]. He stated during the trial:

“Your Honour, it is not fair to say that any one person either in [AC] or in [CRS] is responsible for gaining a contract. I mean, certainly you hear rumour and innuendo and people within each of those organisations have their own network of contracts and it is something that is built up over time.

……

Okay. In terms of the [CRS] jobs I had something to so with pretty much all of them, I think, with the exception of the [ANRW] contract. It’s probably easier for me to remember the ones that I didn’t have anything to do with. Most of them I have had some kind of input into and certainly have been aware of or have made telephone conversations in relation to.”

54 The husband confirmed that over 2005 and up to February 2006 he was paid

$144,000 by [AC] and a further $83,000, not taxable in his hands, by way of travel allowance from [AC]. From the commencement of the incorporation of [CRS] in June 2005, until the trial in February 2007, the husband had only been paid about $60,000 from [CRS]. As will be seen from this judgment, the husband received a significant income from [AC] when all he did was to wind it down and transfer most of its sources of income to [CRS].

55 The father was cross-examined about the income paid to the husband's wife.

She has been employed by [GM] in an administrative capacity. She received a salary when she was working of approximately $100,000 per annum. She was paid this sum in the latter stages of her pregnancy when she could not work. She was also paid this sum when she has been on maternity leave caring for a child. I shall refer to the circumstances of the payments to the husband and to his wife later in this judgment.

56 The wife says the husband's involvement in the following contracts on behalf of [CRS] confirms he is the true owner of [CRS] and [GM].

[BSN]

57

[AC] was subcontracted by [a company] to perform drilling and blasting work for [BSN, a subsidiary of [LO]. The contract was operated in [the goldfields]. Subsequent to entering the contract, [that company] went into administration and consequently [AC] was contracted by [BSN] to continue the contract. It appears that in about May 2005 the husband made the decision to discontinue [AC]’s involvement in the contract. He said during cross-examination that he saw no future for [AC] in the area:

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“Well, [a company] had recently gone belly up owing [AC] somewhere in the vicinity of $80,000. The nature of the contract meant very small volumes and associated low profitability. The fact that it wasn’t a contract, it was simply the issuing of an order number. So we had no security of tenure and no longevity there. It really, I thought at the time, was a prudent decision for [AC] to step away from it and focus its resources in the [area] at the time.”

58 The wife rejects the husband’s argument that he gave up the contract because he

wanted to concentrate on the [regional area]. She particularly points out that the husband did not mention his intention to concentrate on the [regional area] in his first or second trial affidavits. The husband admitted during cross-examination that from July 2005, excluding the [N] contract, [AC] had not acquired any new contracts in the [regional area]. The following proposition was put to the husband during his cross examination.

“Well, there’s poor old [AC], you drawing this very substantial salary

and this very substantial travelling allowance and this very substantial mechanism for receiving money without paying tax and director’s fees and paying over a quarter of a million dollars out of your legal fees. What happened to the development of the new business for which you gave up the [BSN] contract? I didn’t actually refer to developing any new business. I said I wanted to refocus my attention on the [regional area].

….As I understand it, it was an oral agreement established by [Mr G] with
the [LO] people and the rates were invoiced at the same rates.

So the agreement had never been written down, to your knowledge, in any shape or form, in email or letter or contract or anything? Not the – there was no agreement between [CRS] and [LO]. They provided us with a monthly order.

Was there one between ADD and [LO]? No

So really all that happened was there was a different heading on the invoice? [CRS] did the work in July and invoiced it.

When you say “[CRS] did the work” presumably [CRS] began to pay the workers, did they? In that instance, no. We hired…...

[CRS] didn’t pay the workers. And [CRS] paid for the equipment, did

it, in July? Yes.

How did it pay for the equipment? On invoice from [AC] to [CRS].

So if [AC] invoiced [CRS] and [CRS] invoiced [LO], the only difference [LO] saw in this activity was that the invoice had a different heading on it? I gather that, but they knew that they were – that [CRS] was performing the work for them.”

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59 [Mr G] did not agree with the husband’s assessment as to the profitability of the

contract. He stated that he felt the [BSN] job had potential for growth. The husband agreed that [CRS] could approach [BSN] and take over the contract from [AC]. The following month [CRS] took over the contract. Virtually nothing changed as far as the project was concerned. The effect of this was to terminate an income stream for [AC] and provide one to [CRS].

[MM] drill and blast contract

60 This contract involved drill and blast operations on a [harbour] at [a port] run by

[MM]. The father’s position is that [CRS] sought this contract through [Mr G] and the husband prior to [CRS]’s incorporation in June 2005. The father said during cross- examination, having decided on setting up an entity in which to obtain drilling contracts, he, [Mr G] and the husband would begin looking for business opportunities for the new entity.

61 According to the father, [CRS] successfully tendered for the [MM]’s contract

and commenced work there in July 2005. The father relies on a contract dated 16 May 2005 between [MM] and [CRS], accompanied by a covering letter dated 8 June 2005 which is addressed to [CRS] from [MM]’s enclosing the contract.

62 The father said in his affidavit sworn 24 May 2006 at paragraph 86:

“[CRS] obtained, through its own efforts, a contract with [MM] in respect of drilling and blasting work [on a harbour], near [the regional centre]. [AC] had not previously worked for [MM] on this contract.”

63 The wife says this is not the case and the contract was originally awarded to

[AC]. Subpoenaed material obtained by the wife from [MM]’s, she says, establishes this. Amongst the subpoenaed documents is another version of the [MM]’s contract, which is also dated 16 May 2005 but refers to [AC] as the subcontractor in the annexures to the agreement. However, the subcontract agreement cover page refers to [CRS] as the subcontractor and is executed by [Mr G] on behalf of [CRS]. Also amongst the material is another version of the cover letter dated 8 June 2005, referred to above, which is addressed to [AC], not [CRS]. The father claims he does not know why this happened. He says he was not aware that the contract was ever awarded to [AC].

64 In an email dated 6 July 2005 from the husband to [Mr CL] (who is believed to be an employee of [MM]’s, the husband stated:

“I also neglected to mention in my early email the restructure that we are currently undertaking. The new trading name will be [C R S] Pty. Ltd. [CAN – 123456 ABN – 1233456 PO Box 1234, Suburb WA 1234]

I am hoping that the [current contracts] can be drawn up in the new name. All the people, equipment etc. will remain the same name. There is never a good time to do these things, but we have out-grown the [AC] name.

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Please advise of any additional information that you require to make this transition as smooth and as transparent as possible.”

65 The father agreed with the wife’s counsel during cross-examination that, on the

face of it, the email dated 6 July 2005 indicated the contract was sought by [AC] originally and later the contract was drawn up in the name of [CRS]. However, the father stated that [AC] never entered into a contract with [MM]’s and it was only [CRS] who entered into the contract.

66 Following the award of the contract [MM]’s sent to [CRS] a subcontract

evaluation questionnaire. The questionnaire was completed and signed by the father. In relation to a request on the form to provide a brief description of relevant experience in the relation to this enquiry, the father has stated “various civil and mining projects completed under the banner of [AC] Pty Ltd.”

67 The wife says the evidence establishes that the [MM]’s contract was actually

awarded to [AC] some time around 27 April 2005. She states this contract is the contract referred to by the husband, in an unrelated email from the husband to [L], which refers to obtaining another contract in the [regional area] the following Wednesday, being 27 April 2005.

68 I am satisfied on the evidence that the husband originally sought and got the

[MM]’s contract for [AC] and then asked [MM]’s to put the contract in the “new trading name of [CRS]”. I am also satisfied that the father, as office manager for [AC at this time, was well aware of this fact.

69 The [MM]’s contract was not only a lucrative one for [CRS], but led to the

acquisition of the [quarry and stockpile for CRS]. It was through [CRS]’s work with [MM]’s at [the site] and they became aware of that [MM]’s required additional rock and consequently [CRS] acquired the [quarry stockpile].

Mount Regal quarry and stockpile

70 The husband and [Mr G] were aware of a disused quarry near

[the regional centre] which had a large stockpile of rock. [MM]’s needed rock for their [project]. The husband and [Mr G] negotiated a sublease of the quarry on behalf of [CRS]. The purchase price of the stockpile was $1,005,330.86. The father says that the finance for the purchase was obtained by [CRS] and [GM] with a guarantee and indemnity by [GM] and a personal guarantee and indemnity from him. The husband gave evidence that he, through [AC], had no prospect of raising the finance for the purchase of the amour rock. The wife argues that [CRS] was in no better position than [AC] to obtain finance, having only been trading for six months.

[Another contract]

71 The father in his affidavit of May 2006 made no mention of the [contract] or the

fact that [CRS] had taken over [AC]’s obligations under the contract or that it was being paid for that contract. The father in his affidavit sworn 3 January 2007 stated that the husband, on behalf of [AC], subcontracted the [other] contract to [CRS] on a

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month by month basis. This occurred in February 2006. ADD was to receive 5% of the gross monthly invoice as consideration for handing over the subcontract. The husband said he did this to reduce all of the overheads of [AC] to a bare minimum, so he would not have to meet such expenses as insurance premiums. The father’s case appears to be that there was no detriment to [AC] as a result of this, as they continued to receive 5% of the gross monthly invoices. [Mr N]’s evidence was that the margins on contracts obtained by [AC] were normally around 30% on the contract price. While the outgoings may have been reduced, it was a serious reduction in the income to [AC]. In the husband’s affidavit he states that in August 2006 the father informed him that [CRS] would cease operating at [contract location] supposedly due to the fact that the company was losing money on the contract. The husband stated that upon hearing this he advised [another company] that [AC] was unable to meet its contractual obligations after September 30, and requested to be released from the contract. This subsequently occurred and [the other company] approached [CRS] to take over the works. A new rate was negotiated and [CRS] took over the subcontract.

[Mr MH] emails

72 There are two emails from the father’s insurance broker, [Mr MH] which were

put into evidence by the wife. The emails were both to insurance companies, one being QBE Commercial and the other to GIO. The QBE email was sent on 16 February 2006 and discusses [AC]’s insurance policy. It stated that there has been confirmation from the client to renew [AC]’s insurance for six months as the intention was to roll [AC]’s assets into [GM]’s policy. The father disputed the contents of the email during cross-examination, in particular he said there was no such plan as referred to in the email. The wife’s counsel went on to suggest to the father that the email depicted the events relating to the [CRS]’s takeover of the [current] contract from [AC]. The father agreed that that is what eventually evolved; however, it was not a plan.

73 The GIO email dated 5 November 2006 relates to the insurance policy for [CRS]

and [GM]. The email states that the [CRS]’s policy had taken over from [AC]’s policy due to client restructuring and all [AC] employees transferring over to [CRS]. It also describes [GM] as simply the “administration” component for [CRS]. Although the father agreed during cross-examination that it was basically correct to say [GM] was the administrative component of [CRS], he denied that portion of the email relating to the takeover of [AC]’s policy by [CRS] was the reality of the situation nor did it reflect anything he told [Mr MH]. The father argues that [Mr MH] made the link between [AC] and [CRS] and [GM]’s insurance policy in order to obtain the benefit of [AC]’s positive claim history, presumably for a reduced premium. This position relates to the inclusion in the email of comments made by [Mr MH] that due to the takeover of the policy “…..there is in fact a claims history going back to 2003 available for consideration and my understanding is that the claims history on that policy is good.”

74 The emails were not put to the husband and [Mr MH] did not give evidence.

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[Perth] Premises and [Regional] Premises

75 There are two premises which were originally occupied by [AC] which are now occupied by [CRS], the [Perth] premises and the [regional] workshop.

76 [CRS] currently operates from a premise in [Perth]. Initially the premises were

occupied by [AC] in August 2005 for the purposes of repairing some antiquated equipment. Despite an acceptance of an offer to lease the [Perth] premises from [AHG] Pty Ltd there was no actual lease in place at the time [AC] took occupation of the premises. After [AC] moved equipment to the premises the husband says it was then not commercially viable to continue to repair that equipment in their current condition and the equipment now remains at the premises. Subsequently, in May 2006 [CRS] entered into a lease agreement for the [Perth] premises.

77 In relation to the workshop in [regional], these premises were originally leased

by [AC] from CALM; however, there was no written lease in place. The husband says that he no longer required the [regional] premises as [AC] was only operating the [current] contract and that contract was mainly operating from its mine site. Subsequently the husband suggested that the father take over the premises. [CRS] took occupation of the premises some time around September 2005. The husband says he was not involved in the negotiations between the father and CALM.

78 The husband admitted during cross-examination that after [CRS] erected their

signs at the [regional] office there was no further information distributed to the public that ADD was still in business. It appears that his justification for this is that after [CRS] took over the [regional] premises he had given up looking for work for [AC]. The father refutes the suggestion that the removal of [AC]’s business sign has any significance as [AC]’s business did not rely on passing trade.

Other matters

79 On 24 October 2005 [Mr G] sent an email to [Ms B] of [a company]. In that

email he told her that they had restructured the company and were running under a new company name, [CRS]. [Mr G] says that he did this because [AC] was on the tender’s list for [the regional area] and he wanted [CRS] to be included in that list. He said he did not want to alarm [the company] as to the problems [AC] was having, so he advised them that [AC] was restructuring so that they would change the name on the tender’s list to [CRS]. The only problem that [AC] was having at this time was that its contracts were being taken from that company and given to [CRS]. I do not accept this explanation given by [Mr G].

80 In April 2006 the husband swore a Statement of Financial Circumstances.

Part E requires the deponent to fill in details in relation to any income earners in the household, their relationship to the deponent and their average weekly income. The husband left that section blank. In cross-examination the husband confirmed that at the time he swore this document [his partner], was six months pregnant, that they were living together and she had an income. In fact, her income was a salary of $108,000 per year. The wife was employed by [GM]. He was asked what services she was providing [GM] in April 2006. His response was:

[2008] FCWA 59

“Not a hell of a lot, I wouldn’t have expected. She certainly was responsible for some minor clerical work fetching and carrying and the likes.”

He was asked again about the hours she was working at that time by Mr Dowding SC:

“So what portion of a full week was she working at that point of time?

--- I would suggest – from my recollection – precious little.”

81 The husband further advised that when he is in [regional] he lived in a house

provided by [GM]. His phone and [his partner]’s phone were both provided by [CRS].

82 The father was cross-examined about the husband’s remuneration for the work

completed by him for [CRS]. The father stated that from 31 March 2006 until 30 June 2006 the husband had rendered accounts working on a contract basis of $37,550. He had been paid $28,550. From 1 July 2006 until 31 May 2007 the husband had submitted invoices to the value of $24,870. Not surprisingly, it was put to the father that a payment of $30,000 per annum to the husband for his senior management role in the company indicated that the whole arrangement put into place by the formation of [GM] and [CRS] was a sham. The father denied it.

83 In particular, Mr Dowding SC put to the father that by paying the husband's wife

over $100,000 a year for not doing much also indicated that the setting up of [CRS] and [GM] was a sham. The father denied it. When asked by me why he would pay the husband’s wife, who at that time was doing very little, a lot of money and pay the husband very little, he stated that he employed the husband's wife before they were married and he agreed to pay her salary commensurate with what she received in her previous employment. When she was pregnant and was to have a child he undertook to pay her her salary. He agreed that he had continued to pay the salary after the child was born.

84 In re-examination the father stated that he had paid the sum of over $100,000 to

the husband's wife to “ensure that the overall incomes of my son and his wife were maintained at their previous level”. He described this as caring for his family and extending “some form of generosity towards them”.

85 It is true that the father and his wife have assisted the husband previously when

he was married to the applicant wife. It appears, however, that the assistance was always in the form of a loan which was subsequently repaid. In this instance the father is providing a very generous sum, far in excess of that earned by either himself or the husband, to the husband's wife. I am not satisfied with the explanation given by the father in relation to this is true.

The law
86	The High Court in Ascot Investments Pty Ltd v Harper & Harper (1981) FLC 91-000, held that the Family Law act 1975 does not apply to third parties so as to alter their rights. Consequently, the assets of the husband and wife are to be dealt with as

[2008] FCWA 59

they are found. The exception to this is where a company is found to be a sham.
Gibbs J said at 76,061:

“It can safely be assumed that the Parliament intended that the powers of the Family Court should be wide enough to prevent either of the parties to a marriage from evading his or her obligations to the other party, but it does not follow that the Parliament intended that the legitimate interests of third parties should be subordinated to the interests of a party to a marriage, or that the Family Court should be able to make orders that would operate to the detriment of third parties. There is nothing in the words of the sections that suggests that the Family Court is intended to have power to defeat or prejudice the rights, or nullify the powers, of third parties, or to require them to perform duties which they were not previously liable to perform. It is one thing to order a party to a marriage to do whatever is within his power to comply with an order of the court, even if what he does may have some effect on the position of third parties, but it is quite another to order third parties to do what they are not legally bound to do. If the sections had been intended to prejudice the interests of third parties in this way, it would have been necessary to consider their constitutional validity.

The position is, I think, different if the alleged rights, powers or privileges of the third party are only a sham and have been brought into being, in appearance rather than reality, as a device to assist one party to evade his or her obligations under the act. Sham transactions may always be disregarded. Similarly, if a company is completely controlled by one party to a marriage, so that in reality an order against the company is an order against the party, the fact that in form the order appears to affect the rights of the company may not necessarily invalidate it.

Except in the case of shams, and companies that are mere puppets of a party to the marriage, the Family Court must take the property of a party to the marriage as it finds it. The Family Court cannot ignore the interests of third parties in the property, nor the existence of conditions or covenants that limit the rights of the party who owns it.” [emphasis added]

87 The difference between a sham and a puppet was considered by Fogarty J in

Gould & Gould; Swire Investments Ltd (1993) FLC 92-434, Fogarty J. His Honour said at 80,433:

“….the description of an entity as the “alter ego” or “puppet” of a person really denotes something different. Correctly described, it not an assertion that it is a “counterfeit, a façade or a false front”. Rather, it describes an actual situation although as a matter of law or practicality the actions of the other entity may be capable of and may in fact be controlled by the party in question. For example, a party may establish a trust over which he or she exercises control. That trust may in turn own or control property. It may be correct to describe that trust as the alter ego or even perhaps the puppet of that party, but it would not be correct to describe its existence or its ownership or control of property as a sham. Transactions entered into

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by it under which it deals with its property by, for example, a transfer of property to a third party would not be a sham transaction. It is likely to be a genuine transaction although the evidence may demonstrate that the transaction was carried out “by direction or in the interest of” the party.”

88 In Wilson v Wilson; Figtree Gardens Caravan Park Pty Ltd (1993) 114 FLR 439, Moss J referred to the decision of Sharrment Pty Ltd v Official Trustee in Bankruptcy (1988) 18 FCR 449. He helpfully summarised the comments made about sham transactions in that matter as follows:

“From that case and the authorities therein collected, and so far as relevant to the circumstances of the present case, the following propositions emerge as requiring careful consideration before a transaction can be characterised as a "sham" (an expression itself infected with ambiguity and uncertainty (at 453)):—

(a) Before a transaction can be so characterised, it is necessary to find both a common intention among participants to the transaction and a disjunction between the appearance and reality of the transaction (at 452) — the question is: Did the parties who entered into the ostensible transaction mean it to be a facade, concealing their real transaction? (at 453) — Were the acts done or documents executed by the parties which are intended by them to give to third parties or to the Court the appearance of creating between the parties legal rights and obligations different from the actual legal rights and obligations (if any) which the parties intend to create? (at 454);

(b) It does not establish that a transaction is "a sham" simply to show that it involved a round robin of cheques, even when no party has funds to meet the cheques, or that the transaction contained artificial elements (at 454) or that it was done for an ulterior purpose (at 455);

(c) Where (as is the case here) the transactions were between parties who were not "at arm's length" the fact that there may be an absence of a commercial basis for the arrangement does not mean that the arrangements were not genuine (at 468);

(d) To draw an inference from the surrounding circumstances that a particular transaction is "a sham" is to reach a strong finding, and one which cannot be made if another inference is at least equally open (at 461).”

Conclusion

89 I do not accept that the husband was unable to get the loan for the rig needed for

[N] contract. By advising the lenders of the circumstances regarding the break down of his marriage, which had had almost no impact on the profitability of [AC], he was ensuring that the loan would not be obtained. In my opinion the formation of [GM] and the purchase of the rig in that company’s name occurred because the husband did not wish to purchase any more assets in the name of [AC] which could increase its

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value and enrich the wife. I am prepared to accept, at that time, it was the intention of the husband and his father that the rig would be purchased by the father and used by [AC] thereby providing the father with an investment over which he was taking the risk and providing [AC] with access to the machinery.

90 The formation of [CRS] in June 2005 was, in my view, for a different purpose.

[AC] had been the husband’s business since its commencement. When [Mr G] was employed, he brought to the business significant experience in the industry and many contacts. The father became the office manager in 2004. He had little to do with the action on sites. His duties were undertaken in the [home office].. It appears the [regional] office ran all the other aspects of the business. There is no evidence that either before or after the formation of [CRS] the father obtained any contracts himself for [CRS]. I do not accept the evidence of the father that he became concerned about whether there would be any further work for the drill [GM] had purchased and then had discussions with [Mr G] about the formation of a new business entity. In my opinion the most likely scenario was that the husband discussed with his father setting up a new business, under his fathers control, through which all new contracts would now be obtained. The father would stay in the same role as previously and [Mr G] and the husband would be responsible for accessing contracts for the new business. Nothing would change except the business name and, very importantly, [AC] would not be the recipient of income from the new sources of work. The actions of the father of taking over the premises of [AC] at [the regional centre] and [Perth] for [CRS] were all to further the profile of the new business. The manner in which the [CRS] obtained [AC]’s contracts after its incorporation, in my view support this proposition.

91 The first contract [CRS] obtained was the [BSN] contract. In May 2005 the

husband decided to discontinue [AC]’s involvement with that contract. His reason for doing this was that there was no future for [AC] in the area of [the goldfields] and he wanted to concentrate on the [regional area]. The husband did not get another contract in the [regional area], apart from the [N] contract, for [AC] after this time. [CRS] picked up this contract and completed the work under the same terms and conditions and with the same machinery and mostly the same personnel.

92 The circumstance in which the [MM]’s contract was obtained by [CRS] have

been set out previously. I accept that the initial [MM]’s contract was to be awarded to [AC] and that after advice from the husband about the “new trading name” the contract was awarded to [CRS]. I do not accept the father’s evidence that the contract was obtained by [CRS] “through its own efforts”. In my opinion the wording used by the husband to describe the changed circumstances was important. The husband wanted [MM]’s to know that [AC] had merely changed its name and that they would be dealing with the same people as they had dealt with at [AC]. This email was not sent by the father, the alleged owner of the business but by the husband, the person they had dealt with in the past.

93 The [other] contract is another example of [AC] handing over to [CRS] an

existing contract. In February 2006 ADD subcontracted [this] contract to [CRS] In August 2006 [CRS] terminated its contract with [AC] because, the father said, it was no longer commercially viable. [AC] then terminated their contract with [the company] who were running [the project] and [CRS] subsequently successfully tendered for a new contract for the project.

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94 The husband sought to draw most of his income from mid-2005 until 2006 through [AC], although it appears that most of the work he was doing was for [CRS]. He is described by the father as having a senior management role in that company. In that role he has only rendered accounts for his employment on average $30,000 per year. In my view, this is an attempt by the husband and his father to play down the role he has had in [CRS] after its formation. His failure in April 2006 to depose to the income earned by his wife was also an effort by him to attempt to hide the fact that his family unit was obtaining an income from [GM] through another person.

95 I am satisfied that the setting up of [CRS] was an attempt by the husband, the

father and [Mr G] to build up a business and obtain an income to which the wife would not be entitled. The husband’s intention was not to enrich the father, but himself. In my opinion, the only inference that can be drawn from the circumstances set out previously is that the husband was the true owner of it. The husband was involved in every aspect of [CRS]. From being “happy” about its incorporation he handed over [AC] contracts to it. He actively sought work for it to the detriment of [AC]. He sought to arrange the manner in which he was paid and in a manner that did not accurately reflect the work carried on by either himself or his wife. Both he and [Mr G] have used to others the term “restructure”. The transfer of the personnel contracts, business premises and the goodwill of [AC], in the form of the husband, amounts to a restructure of [AC].

96 However, I am not able to say the husband is the true owner of [GM]. I have

stated previously, in my view, [GM] was set up by the husband's father for the purpose of obtaining assets which could be used initially by [AC], and subsequently by [CRS], to earn an income for [CRS]. The father has provided all guarantees and indemnities required in relation to assets purchased by that business. He and his wife have loaned funds to the business.

97 I accept that what was said in the email sent by the husband to [TR]l on 6 May

2005 when he stated that [GM] was a “proxy of [AC], at least for the life of the contract with [TR]” was the truth and that after that time [GM] was no longer a proxy of [AC]. [AC] has given no securities for either the purchase of that drill or any other equipment purchased by [GM]. In these circumstances, in my view, there is on the evidence at least another inference open and that is that [GM] was, in fact, the father’s company in which he acquired assets which were subsequently leased to [AC] and then [CRS]. There is nowhere near the same level of involvement, on the evidence, by the husband in [GM] as there was in [CRS]. Although [GM] has been described as the administration entity for [CRS], it is a separate corporate entity with assets separate to [CRS]. In these circumstances, I am not prepared to find that the husband was the true owner of [GM].

I certify that the preceding [97] paragraphs are a true copy of the reasons for

judgment delivered by this Honourable Court

Associate