FAMILY COURT OF AUSTRALIA
| KARBINES & KARBINES AND ORS (NO 2) | [2008] FamCA 1115 |
| FAMILY LAW – PROPERTY – determination of existence, ownership or value or assets and liabilities – where three companies liquidated – whether husband has beneficial ownership of a business – where husband’s evidence was inconsistent and unsatisfactory – where husband failed to call any witnesses FAMILY LAW – EVIDENCE – DISCLOSURE – proof of alleged debts FAMILY LAW – PROPERTY – CONTRIBUTIONS – where husband’s mother contributed to purchase price of a property – significant contribution by wife through an inheritance – contributions assessed 70%/30% in wife’s favour – no adjustment appropriate on account of s 75(2) factors |
| Family Law Act 1975 (Cth) ss 75(2), 79 |
| Chang and Su (2002) FLC 93-117 |
| APPLICANT: | Ms Karbines |
| RESPONDENT: | Mr Karbines |
| 1st INTERVENER: | C Pty Ltd (In Liquidation) |
| 2nd INTERVENER: | Mr and Mrs Willa |
| 3rd INTERVENER: | B Pty Ltd (In Liquidation) |
| 4th INTERVENER: | Westpac Banking Corporation |
| FILE NUMBER: | MLF | 2479 | of | 2005 |
| DATE DELIVERED: | 19 December 2008 |
| PLACE DELIVERED: | Adelaide |
| PLACE HEARD: | Mount Gambier |
| JUDGMENT OF: | Dawe J |
| HEARING DATE: | 30 April 2007, 1-4 May 2007, 26-29 May 2008 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Jordan |
| SOLICITOR FOR THE APPLICANT: | Maddens Lawyers |
| COUNSEL FOR THE RESPONDENT: | N/A |
| SOLICITOR FOR THE RESPONDENT: | Self-Represented |
| COUNSEL FOR THE 1ST INTERVENER: | Mr Barnett |
| SOLICITOR FOR THE 1ST INTERVENER: | Norman Waterhouse |
| COUNSEL FOR THE 2ND INTERVENER: | Mr Bersee |
| SOLICITOR FOR THE 2ND INTERVENER: | Herman Bersee |
| COUNSEL FOR THE 3RD INTERVENER: | Mr Rudaks |
| SOLICITOR FOR THE 3RD INTERVENER: | O’Loughlins Lawyers |
| COUNSEL FOR THE 4TH INTERVENER: | N/A |
| SOLICITOR FOR THE 4TH INTERVENER: | Fisher Jeffries |
Orders
That within 28 days from this date the husband and wife as sole shareholders of L Pty Ltd do all things necessary to ensure the sale of the real property at Y Street, G at a price and in a manner to be agreed between the husband and the wife and in default of agreement as ordered by this Honourable Court.
That upon the sale of Y Street the proceeds of sale are to be distributed as follows:
(a)in payment of the agreed costs of sale;
(b)in payment of all monies owing to Westpac Banking Corporation (“Westpac”) to discharge all mortgages, debts, loans or other amounts due or guaranteed by the husband and wife and in particular but not limited to all sums necessary to discharge any and all mortgages secured over Y Street and A Street, G (“A Street”) and all monies owing to Westpac by K Pty Ltd, C Pty Ltd (In Liquidation) and L Pty Ltd to fully release and discharge the wife and the said properties at Y Street and A Street (“the properties”) from all liabilities.
(c)in payment of the balance (if any) to L Pty Ltd.
That notwithstanding paragraphs 1 and 2 of these orders if within 28 days from this date the husband provides to the wife’s solicitors written confirmation and proof of the discharge of the Westpac mortgages over Y Street and A Street and the full release of the wife from any and all claims, monies due, guarantees or indemnities to Westpac and upon written confirmation by the wife’s solicitors of the full discharge the order for the sale of Y Street is to be discharged and the Y Street property is to remain the property of L Pty Ltd.
That within 7 days of the discharge of the Westpac mortgage over the A Street property (whether by action of the husband or sale of Y Street) the husband do transfer to the wife all his estate and interest whatsoever in A Street, G, which property is hereafter declared to be the sole property of the wife free from any claim by the husband.
That upon noting that previous orders of this Court provide for the payment of monies due to the 1st Intervener, C Pty Ltd (In Liquidation) and the option of the liquidator to sell the property at …, Queensland (“the Queensland property”) it is further ordered that if the Queensland property has by this date not been made the subject of contract for sale then it is further ordered that the Queensland property be sold at a price and manner to be agreed between the parties being the husband, wife and 1st Intervener, C Pty Ltd (In Liquidation) provided that the proceeds of sale are to be paid:
(a) firstly, in discharge of any mortgage secured over the Queensland property;
(b)secondly, in payment of monies due to the 1st Intervener pursuant to the order of this Court (including any interest accrued in accordance with the Family Law Act and Rules);
(c)thereafter, any remaining proceeds to stand initially to the credit of the husband in a Trust Account of the solicitors acting for the wife pending any further order of the Court in relation to costs.
That the net proceeds of sale of M Street, G, being the share of proceeds due to the husband and wife be paid as follows:
(a)by payment due to the 2nd Intervener, Mr Willa, of the sum due pursuant to orders of this Court (including any interest calculated in accordance with the Family Law Act and Rules);
(b)by payment of the sum of $8,169 to the wife;
(c)the balance (if any) to stand initially to the credit of the husband in a Trust Account of the solicitors acting for the wife pending any further order of the Court in relation to costs.
That the net proceeds of sale of the property at G Street, G, due to the husband and wife pursuant to the orders of this Court be paid initially to the credit of the husband in a Trust Account of the solicitors acting for the wife pending any further order of the Court in relation to costs.
That any application for an order for adjustment of costs, indemnity for costs or claim for costs of the husband, wife or any intervener in these proceedings be made within 28 days from this date.
That the husband do indemnify the wife and keep the wife forever indemnified with respect to:
(a) all debts and liabilities of the husband;
(b)all or any claim, debt, monies due or payable or alleged to be due and payable by the wife to J Karbines; M Karbines; K Karbines; P Karbines; the Karbines Family Trust; K Pty Ltd; L Pty Ltd; TA Pty Ltd; C (UK) Pty Ltd; TL Pty Ltd (In Liquidation); CD Pty Ltd; DT Pty Ltd; B Pty Ltd (In Liquidation) and C Pty Ltd (In Liquidation) SAVE AND EXCEPT any claim by the liquidator against the wife as director of C Pty Ltd for permitting the company to trade whilst insolvent which relates to any claim arising from trading prior to the 14 January 2005 (the date of separation of the husband and wife).
That upon compliance by the husband with the above-mentioned orders the wife do resign from any office held by her in any of the aforementioned companies or trusts and in particular but not limited to K Pty Ltd; L Pty Ltd; TA Pty Ltd; CPty Ltd (In Liquidation) and do transfer to the husband and/or his nominee any shareholding in any of the said companies or entities and any credit loan account in the said companies or entities which shall thereafter be the sole property of the husband and free from any claim by the wife SAVE AND EXCEPT in accordance with these within orders.
That the wife do retain as her sole property free from any claim by the husband the following:
(a) the wife’s Honda Legend motor vehicle;
(b)the motor vehicle in the possession of the parties’ daughter;
(c)any entitlement to the proceeds of sale of the motor vehicle formerly in the possession of the parties’ son;
(d)all of the wife’s superannuation entitlement or interest;
(e)the net proceeds of sale of D Street, G;
(f)the wife be entitled to claim as her sole property free from any claim by the husband all monies due to the parties by BF Pty Ltd;
(g)all items of furniture and household effects, chattels and other personal property in the possession of the wife.
That subject to compliance with the above mentioned orders the husband do retain as his sole property free from any claim by the wife:
(a)any interest of the wife in the Karbines Family Trust, K Pty Ltd, L Pty Ltd, TA Pty Ltd, together with any assets remaining upon discharge of the liquidation of B Pty Ltd and C Pty Ltd;
(b)husband’s superannuation interest or entitlement;
(c)any motor vehicles or motor cycles or motor cycle parts in the possession of the husband;
(d)all items of furniture, household effects, chattels and other personal property in the possession of the husband.
The question of costs and the payment of orders for costs is reserved to a date to be fixed.
Liberty to apply for consequential orders.
IT IS NOTED that publication of this judgment under the pseudonym Karbines and Karbines and Ors is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)
| FAMILY COURT OF AUSTRALIA AT ADELAIDE |
FILE NUMBER: MLF 2479 of 2005
| MS KARBINES |
Applicant
And
| MR KARBINES |
Respondent
REASONS FOR JUDGMENT
Introduction
In August 2005 the wife, Ms Karbines, commenced property settlement proceedings in the Family Court. The husband, Mr Karbines, was the respondent.
Subsequently some of the companies in which the husband and wife hold an interest were placed into liquidation by order of the Supreme Court of South Australia.
Two liquidators filed Notices of Intervention.
The liquidator of C Pty Ltd sought specific orders. After hearing evidence and submissions specific orders were made in favour of the intervener C Pty Ltd (In Liquidation) on the 2 May 2008. Further orders for costs were made on the 6 June 2008.
A former employee Mr Willa and his wife Mrs Willa also intervened seeking specific orders.
After hearing evidence and submissions in relation to that intervention orders were made in relation to the intervener Mr Willa’s claim on the 17 July 2008.
B Pty Ltd (In Liquidation) and Westpac Banking Corporation intervened but did not seek specific orders.
The present judgment relates to the property settlement proceedings between the husband and the wife.
Proceedings and Hearings
The initial property settlement proceedings between the husband and wife were commenced by the wife in August 2005. The husband filed his response in October 2005. Since then there have been numerous interim and procedural hearings before the Court. Various orders have been made by way of injunctions and directions for the preparation of the final hearing.
From time to time the husband was represented by solicitors, but was unrepresented at the time of the hearing of oral evidence and final submissions.
The final hearing of the matter did not take place in Mount Gambier in December 2006 because the matter was not reached in the list. Further directions for the preparation of the matter for trial were made.
At a preliminary hearing on the 26 April 2007 the husband was given leave to give his evidence and that of his witnesses orally.
The hearing commenced before me in Mount Gambier on the 30 April 2007 when the husband was present. He was unrepresented. His mother was also present. At the commencement of the hearing the husband also indicated that he was going to call his sister K Karbines, his brother P Karbines, his employee, Ms RD and other witnesses, Mr BD, Mr DA and Mr F, the single expert to give evidence.
The wife was represented by Mr Jordan of counsel.
At the hearing before me, and after discussion with the husband and counsel for the wife, the husband was permitted to rely upon the following affidavits as part of his evidence in chief:
(a)Affidavit filed on the 4 October 2005 (document 11)
(b)Affidavit filed on the 6 February 2006 (document 20)
(c)Affidavit filed on the 31 May 2006 (document 34)
(d)Affidavit filed on the 4 September 2006 (document 51)
(e)Affidavit filed on the 12 December 2006 (document 63)
Those affidavits were received subject to the deletions from those affidavits material which was clearly inadmissible and numerous parts of which were classified as “argument” rather than “evidence”.
The wife relied upon the amended application filed on the 13 April 2007 and her affidavits filed on:
(a) 23 June 2006 (document 43)
(b) 21 July 2006 (document 48)
(c) 27 December 2006 (document 64)
and documents:
(d) Financial Statement filed on the 13 April 2007 (document 81)
(e)Superannuation particulars filed on 24 April 2007 (document 91)
These documents were also subject to some deletions ordered due to inadmissibility.
The first two days of the trial were occupied with preliminary matters concerning the admissibility of evidence, clarifying the factual issues which were in dispute between the parties and discussing the procedures to be followed and witnesses called.
On the 2 May 2007 the wife sought certain orders relating inter alia to real property owned by the Family Trust, Mr and Mrs Willa, the husband’s brother’s Family Trust and L Pty Ltd.
The husband also sought orders directing the wife to give approval for refinance of loans secured over some real estate.
I heard submissions from the husband, counsel for the wife, Mr and Mrs Willa and the liquidators. I also heard submissions from the husband’s mother.
The reasons for the orders made are set out in the judgment delivered on the 4 May 2007.
After hearing submissions in the claim made by the liquidator of C Pty Ltd the orders of 2 May 2008 provided:
“1.It is declared that the husband and wife hold the property at […], Queensland, being Lot […] on Registered Plan […] in the County of […] and Parish of […], Title Reference […] (“the [Queensland] property”) on constructive trust for the first intervener [C] Pty Ltd (In Liquidation) ACN […] to the extent of the sum of SIXTY FIVE THOUSAND THREE HUNDRED AND ONE DOLLARS [$65,301.00].
2.That if the said sum of SIXTY FIVE THOUSAND THREE HUNDRED AND ONE DOLLARS [$65,301.00] has not been paid to the first intervener [C] Pty Ltd (In Liquidation) by the 30th June 2008 the liquidator shall be entitled to sell the [Queensland] property by public auction or private treaty.
3. The proceeds of sale are to be paid as follows:
3.1in payment of the reasonable costs of and incidental to the sale;
3.2in payment of the mortgage to the Commonwealth Bank of Australia;
3.3in payment of the sum of SIXTY FIVE THOUSAND THREE HUNDRED AND ONE DOLLARS [$65,301.00] due to the first intervener [C] Pty Ltd (In Liquidation);
3.4the balance of proceeds of sale to be held in trust by the liquidator in an interest bearing account pending further order of this Honourable Court.
4.The question of the costs being sought by the first intervener and the wife is adjourned to 10.00 am on 26 May 2008 before the Honourable Justice Dawe sitting in Mt Gambier.
5.Leave is given for counsel for the first intervener to appear by telephone link.
6.Any material to be filed in support of the application for costs is to be filed and served by the 19 May 2008 at 4.00 pm.
AND IT IS NOTED The matter is adjourned for the conclusion if possible of the trial of the proceedings between the husband and wife and between the husband and wife and Mr and Mrs [Willa] and the question of costs of the first intervener and the wife of the proceedings concerning the Queensland property to be heard in Mt Gambier in the week commencing 26 May 2008 and the parties are DIRECTED to ensure that all witnesses are available to give evidence in relation to those proceedings concerning the matters arising between Mr and Mrs [Willa] and the parties and between the husband and wife by way of property settlement.
AND IT IS FURTHER NOTED The first intervener will file an updated report of the Liquidator by annexing it to an affidavit by 4.00 pm on the 19 May 2008.”
The evidence of the wife and her witness, Mr Willa, was heard on Wednesday 2 May 2007. On Thursday 3 May and Friday 4 May 2007 the husband gave oral evidence.
He was cross-examined by Mr Jordan, counsel for the wife.
At this time the evidence concerning Mr and Mrs Willa’s claim was heard. Mr Willa gave evidence again concerning his claim. The husband was also cross-examined about this issue.
The trial was adjourned part-heard to the 20 August 2007.
As a result of subsequent interlocutory proceedings the part-heard trial, which had been listed to commence on the 20 August 2007 was postponed. The matter was listed for directions.
The orders made on 18 December 2007 provided, inter alia, that:
“1.…
2.The husband do deliver up to the wife by her solicitors withdrawal of Caveat No […] in registrable form within fourteen [14] days from today.
3.In default of compliances by the husband with paragraph 2 hereof and upon proof of the same by affidavit, a Registrar of the Court is authorised to execute withdrawal of Caveat No […] in lieu of the husband.
4.The wife is given leave to effect the sale of the property situated at [D Street, G] being the whole of the land comprised and described in Certificate of Title Register Book Volume […] Folio […] (“the [D Street] property”).
5.The proceeds of sale of the [D Street] property after payment of the costs of sale and adjustments in accordance with the requirements of sale be held in Maddens Lawyers on behalf of the parties pending further order of this Court.”
The trial resumed in Mount Gambier on the 26 May 2008. Again the husband was unrepresented. The husband resumed giving his evidence in chief. The trial continued on the 27, 28 and 29 May 2008. The wife was interposed during this hearing to give evidence of her updated financial circumstances.
In spite of warnings in open Court about the inferences which might be drawn if the husband did not call any of the witnesses he had indicated when the case commenced, the husband did not call any witnesses.
Following the conclusion of the evidence on Thursday 29 May 2008 orders were made for written submissions to be provided by the wife’s counsel by the 16 June 2008 and by the husband by the 30 June 2008.
On the 29 May 2008 further directions were made. Orders were also made concerning the sale of real estate which were:
“1.…
2.…
3.…
4.…
5.…
6.The properties at [M Street, G] and [G Street, G] in the State of South Australia be sold by auction. The real estate agent to be appointed to carry out the auction is [MA Real Estate] of [G]. Upon sale of the premises if the net amount received upon sale (after the costs of sale and auction) is less than the amount of the valuations of those properties carried out by Mr [EH] then the husband will pay to the wife and Mr and Mrs [Willa] their share of the difference in the shortfall.
7.The reserve price of these properties be the amount of the valuations of these properties by Mr [EH].
8.It is directed that the net proceeds of sale otherwise payable to the husband and wife of [M Street] and [G Street] in the State of South Australia be deposited in an interest bearing account by the wife’s solicitors in trust pending further order of the Court.
9.…
10.…”
The parties were directed to provide C Pty Ltd (In Liquidation), B Pty Ltd (In Liquidation) and the Westpac Banking Corporation with copies of the written submissions.
Westpac Banking Corporation (the 4th Intervener in the proceedings) provided submissions on the 2 July 2008 which in summary submitted that if the Court ordered the sale of either the A Street property or the Y Street property, the bank sought orders that would have the effect of “releasing sufficient funds to pay Westpac in satisfaction of all debts owed” by K Pty Ltd, C Pty Ltd or L Australia Pty Ltd (being loans which the husband and wife guaranteed).
On the 1 August 2008 the husband applied for an extension of time within which to appeal the orders in the proceedings by C Pty Ltd (In Liquidation).
On the 3 September 2008, Strickland J dismissed the husband’s application and awarded costs against the husband to the wife and to the 1st Intervener (C Pty Ltd (In Liquidation).
On the 13 August 2008 the husband filed an Appeal against the orders of the 17 July 2008 being the order made in the claim by Mr and Mrs Willa.
On the 16 October 2008 the Court was notified by the Regional Appeals Registrar that the appeal against the orders of the 17 July 2008 was deemed abandoned due to non-compliance by the husband.
Orders in Relation to Interveners
On the 2 May 2008 on the application by the 1st Intervener, C Pty Ltd (In Liquidation) the following orders were made:
(1)It is declared that the husband and wife hold the property at […], Queensland, being Lot […] on Registered Plan […] in the County of […] and Parish of […], Title Reference […] (“the [Queensland] property”) on constructive trust for the intervener [C] Pty Ltd (In Liquidation) ACN […] to the extent of the sum of SIXTY FIVE THOUSAND THREE HUNDRED AND ONE DOLLARS [$65,301.00].
(2)That if the said sum of SIXTY FIVE THOUSAND THREE HUNDRED AND ONE DOLLARS [$65,301.00] has not been paid to the intervener [C] Pty Ltd (In Liquidation) by the 30th June 2008 the liquidator shall be entitled to sell the [Queensland] property by public auction or private treaty.
On the 6 June 2008 the following orders were made:
(1)The husband and wife jointly and severally pay the intervener [C] Pty Ltd (In Liquidation) the costs of and incidental to the application of the intervener prior to the 17 March 2008 on a party/party basis such costs to be as agreed or in default of agreement as taxed.
(2)The husband pay the intervener [C] Pty Ltd (In Liquidation) the costs of and incidental to the application of the intervener from the 17 March 2008 including the application for costs such costs to be on a party/party basis as agreed or in default of agreement as taxed.
(3)Further consideration of any claim by the wife to be indemnified by the husband or reimbursed by the husband for the costs to be paid to the liquidator is adjourned to be determined with the final orders for property settlement between the husband and wife.
On the 17 July 2008 in relation to the matter of Willa the following orders were made:
(1)Within twenty eight [28] days from today the husband pay to Mr [Willa] the sum of TWENTY THREE THOUSAND FOUR HUNDRED AND FORTY SIX DOLLARS [$23,446.00].
(2) And it is noted:
(i)that before any monies from the proceeds of sale of [M Street] and [G Street], [G], in the State of South Australia are paid to the husband, the Court will require the husband to provide proof of compliance by him with this order for payment;
(ii)if payment has not been made the Court will consider ordering such payment directly from any share otherwise payable to the husband.
(3)Further consideration of the question of costs is adjourned to a date to be fixed upon application by the solicitor for the Intervener.
As previously indicated the husband’s attempts to appeal the orders made in favour of the interveners have failed.
On the 13 November 2008 the following orders were made on the application of the liquidator of C Pty Ltd (In Liquidation):
“1.In the event that the husband refuses or neglects to sign within four [4] business days of receiving a written request to do so any documents or do any act necessary to affect the terms of the order made by the Honourable Justice Dawe on the 2 May 2008 whereby the liquidator of the first Intervener is entitled to sell the property at […], in the State of Queensland, a Registrar of this Court is hereby appointed pursuant to section 106A of the Family Law Act to execute such documents on behalf of the husband and the husband is to pay all reasonable solicitor costs incurred by the first intervener in relation thereto PROVIDED THAT the first intervener files an affidavit in these proceeding setting out the default of the husband.
2.The husband pay the first intervener’s costs of and in relation to the application filed on the 29 October 2008 and the hearing today fixed in the sum of ONE THOUSAND DOLLARS [$1,000.00].”
Main Issues
A substantial number of issues to be determined relate to the existence, ownership or value of the assets and liabilities of the parties.
The wife did not accept the husband’s value of the group of companies set up and operated by the parties prior to separation. In particular, the wife took issue with the husband’s assertion that the value of the group of companies which operated the businesses was represented by the liabilities of the group as asserted by the husband.
The issue of the liabilities to be brought into account is further complicated by the liquidation of three of the companies and the outstanding question of the undetermined proof of debts in those liquidations.
The liquidators indicated that they may later seek to recover in another Court sums from the husband and wife as directors of the companies being claims based upon allegations of trading whilst insolvent.
Another significant issue to be determined is the involvement of the husband, if any, in the company DT Pty Ltd. The husband claims to have no interest in the assets or business operated by this company. The wife maintains that the purported ownership of the interests in this company by Mr T is a sham. The wife did not accept that the husband had ceased to trade in the normal course of business, but asserted that he had continued to trade under the guise of DT Pty Ltd.
The parties were also in substantial dispute as to the assessment of contributions and future needs.
The husband alleged that the wife’s actions following the separation of the parties damaged the value of the businesses conducted by the C Group.
There were minor matters in dispute concern the ownership of personal property such as the karaoke machine and various motor vehicles.
The husband asserted that the wife no longer resides in the former matrimonial home. He sought to move back into that house. The wife said she resided there and wished to continue to do so.
Background and Chronology
The husband was born in April 1957 and is now aged 51. The wife was born in June 1961 and is now aged 47.
The husband and wife were married on the 9 April 1983 in G. They did not live together prior to marriage.
The husband says at the time of the marriage he owned two blocks of land which were later sold to purchase the first matrimonial home at H Street, G. (“H Street property”).
The wife’s evidence was that $20,000 was provided by way of deposit for the purchase of the property and the rest was borrowed on mortgage.
There are two children of the marriage, a son, who was born in March 1986 and is now aged 22 and a daughter who was born in July 1988 and is now aged 20.
In November 1987, C Pty Ltd was incorporated. Initially, the husband, the wife and the husband’s brother P Karbines were appointed directors. The husband and wife were equal shareholders. The company became the Trustee for the Karbine Family Trust which was set up in December 1987.
In 1992 the husband became a director of L Pty Ltd.
In March 1993 the husband and wife sold the H Street property and purchased the matrimonial home at A Street, G. This property is mortgaged to the Westpac Banking Corporation.
In May 1994 the husband and wife purchased the adjoining property at 2A Street, G.
The property at A Street, G was purchased with the proceeds of sale of the H Street property and mortgage assistance. Subsequently, A Street, G, was the subject of mortgages registered in favour of Westpac Banking Corporation. The evidence of the wife suggested that the mortgages were rolled into one, including the business liabilities for C Pty Ltd.
In 1995 the warehouse at S, Victoria (known as the S warehouse) was purchased by C Pty Ltd as Trustee for the Karbine Family Trust (as to one third). The remaining shares were held by the husband’s brother P (through his Family Trust) as to one third and Mr Willa as to the remaining third.
In September 1995 the husband’s brother P ceased to be a director of C Pty Ltd.
In 1996 the husband’s mother was appointed a director of C Pty Ltd.
In 1996 the husband and wife joined with Mr Willa and his wife Mrs Willa to purchase land at M Street, G and construct three units upon the land. Mr and Mrs Willa have managed the rental of the units and the finances concerning this property since.
In 1996 the husband also became a director of companies TL Pty Ltd, C (UK) Pty Ltd and TA Pty Ltd.
During the period the husband and wife resided together various other companies were established in which the husband and wife were shareholders. These companies included, C (UK) Pty Ltd; K Pty Ltd and CD Pty Ltd.
In 1997 or 1999 the husband and wife purchased a 50 per cent interest in G Street, G. Mr and Mrs Willa bought the other half.
The husband’s mother J Karbines travelled to the United Kingdom where for a time she was employed by C (UK) Pty Ltd. Later the husband’s brother, P Karbines, participated in the business.
In 2002 the husband and wife purchased the property at Queensland (“Queensland property”). Some of the money to purchase this property was provided by the husband’s mother. There was considerable dispute about her possible equitable interest in the Queensland property.
In December 2003 the husband and wife paid $45,000 to the DM Investment Trust in relation to the BT Motel. The husband asserts that the husband and wife have an equitable interest in the BT Motel. The wife maintains that the further steps necessary to obtain the appropriate shareholding were not taken up and as a result the husband and wife are merely owed $45,000. This is one of the issues in dispute at the trial.
In February 2004 PC Partnership Ltd obtained a judgment against C Pty Ltd in the Oxford County Court in the United Kingdom for a debt of $30,779. Subsequently, this judgment was registered in the Adelaide Magistrates Court. The husband alleged before this Family Court of Australia that this amount was owing by C (UK) Pty Ltd and not C Pty Ltd. (This was the debt that subsequently led to the liquidation of C Pty Ltd).
In August 2004 the wife’s aunt died. The wife inherited from her the property at D Street, G and $96,000 in cash.
The wife subsequently lent $10,000 from her inheritance to C Pty Ltd.
In November 2004 the husband ceased to be a director and secretary of C (UK) Pty Ltd.
The husband and wife separated on the 14 January 2005. The husband left the former matrimonial home at A Street, G. The wife maintains that she has resided in this property since. The husband disputes this and has from time to time made applications to Court to reside in the property at A Street, G.
For a short time after the separation the wife continued in her role in the business of C Pty Ltd and the associated companies in the group. Her active involvement with the group ceased in February 2005.
The wife maintains that this was at the request of the husband.
On the 25 February 2005 the husband set up a company B Pty Ltd with himself as sole director and shareholder.
In April 2005 the husband, acting as appointor of the Family Trust, removed C Pty Ltd as Trustee and appointed B Pty Ltd as sole Trustee.
Following the separation the husband has alleged that monies have been borrowed by, or become payable by, various entities, such as K Pty Ltd and C Pty Ltd. These included disputed debts to TZ Pty Ltd, DJ Pty Ltd, the husband’s father, the husband’s mother and a former employee, Ms BU.
After the wife ceased her day to day involvement in the business of the group the husband commenced trading under the business name “[C] Australia” a name which was registered in September 2005.
In 2006, Mr TZ, a business associate of the husband, sued the wife in the Mount Gambier Local Court for the return of a karaoke machine. The proceedings were later dismissed.
Also in 2006 the husband’s father, M Karbines, sued the wife in the Mount Gambier Local Court for funds allegedly lent by the husband’s father. The proceedings were dismissed.
The husband’s mother, J Karbines, also sued the wife in the Mount Gambier Local Court (without prior notice) for the return of a writing desk. The wife agreed to return the desk.
Throughout 2006 there were interim proceedings in the Family Court. Orders were made with a view to preparing the matter for final hearing.
In March 2006 the single expert, Mr F, valued the C group of companies. Exhibit 2 was before the Court by consent as the report prepared by Mr F on the clear understanding that the wife did not accept the basis upon which those conclusions were reached and therefore did not accept the conclusions of the report.
The husband indicated at the commencement of the trial that he was calling Mr F to give evidence. He did not do so.
In May 2006 the husband transferred the business name, C Australia to Mr T, a business associate from Taiwan.
In November 2006 the husband’s accountant, Mr MS of Victoria incorporated and became the sole shareholder of a company DT Pty Ltd. Later in January 2007 the husband was appointed a director of DT Pty Ltd and the business name, C Australia was transferred to the company DT Pty Ltd. In April 2007 the shares in DT Pty Ltd were transferred to Mr T a business associate of the husband.
On the 6 December 2006 the Federal Court of Australia made an order for the winding up of B Pty Ltd. Mr MR was appointed liquidator. At that time the company was acting as Trustee of the SH & AM Karbines Family Trust.
In February 2007 Westpac Banking Corporation issued a “Notice of Default” in respect of the mortgages secured over the property at A Street, G, and have subsequently issued notices to the wife to give up possession of the property.
Westpac Banking Corporation has postponed taking further action pending the outcome of these Family Court proceedings.
In February 2007 the Supreme Court of South Australia placed C Pty Ltd in liquidation and appointed Mr R from S & Co as the liquidator. The liquidation arose out of the debt due to PC Partnership in the United Kingdom.
No steps were taken by the husband to set aside the registration of the judgment or the liquidation, although in the proceedings before the Family Court the husband maintained that the debt was not a debt owed by C Pty Ltd, but a debt owed by C (UK) Pty Ltd.
The solicitors acting for the liquidator of C Pty Ltd indicated to the Court that there was a possibility that the liquidator would seek to recover from the husband and wife a substantial sum based on a claim that the husband and wife were directors of the company which had traded whilst it was insolvent. The liquidator did not seek those orders in these proceedings. The liquidators provided the Court with the provisional assessment of debts. Apart from the claim for monies in relation to the Queensland property (and associated costs) the liquidators did not seek specific orders. The liquidators maintained an interest in the proceedings.
Orders Sought
The parties have sought various orders by way of application, amended application and orders set out at the commencement of trial. Various factors have intervened, in particular orders for the sale of some of the properties concerned.
At the conclusion of the trial the wife sought the following orders:
“1.That the husband do transfer to the wife all his estate and interest in the former matrimonial home at [A Street, G] free from all encumbrances.
2.That the property at [Y Street, G] be sold and from the proceeds of sale the amount secured by mortgage to Westpac Banking Corporation ($320,560 or thereabouts) be discharged and the balance stand to the credit of the husband.
3That the property at [Queensland] be sold and from the proceeds of sale
(a)the sum secured by mortgage to Commonwealth Bank of Australia be paid
(b)the sum of $65,301 be paid to the liquidator of [C] Pty Ltd
(c)the sum due to the said liquidator pursuant to his costs order made on 6/6/08 be paid
and the balance stand to the credit of the husband.
4.That the net proceeds of the sale of [M street, G] due to the husband and the wife be paid to the trust account of Maddens Lawyers on behalf of the wife and for her sole use and benefit absolutely and the husband do account to the wife for fifty percent of any shortfall between the net proceeds of sale and the valuation of [Mr EH].
5.That the net proceeds of the sale [G Street, G] due to the husband and the wife do stand to the credit of the husband.
6.That the wife do have as her sole property the following:
(a)the loan to [BF] Pty Ltd;
(b)the wife’s Honda Legend motor vehicle;
(c)the motor vehicle in the possession of [the parties’ daughter];
(d)any entitlement to the proceeds of sale of the motor vehicle formerly in the possession of [the parties’ son];
(e)the wife’s superannuation entitlement;
(f)all items of furniture, household effects, chattels and other personality in the possession of the wife;
(g)the net proceeds of the sale of [D Street, G].
7.The wife do resign from any office held by her in [K] Pty Ltd, [L] Pty Ltd and [TA] Pty Ltd and do transfer to the husband and/or his nominee her shareholding therein.
8.That the sums standing to the credit of the husband hereinbefore referred to be paid to the trust account of Maddens lawyers on behalf of the husband to abide:
(a)any amount due by the wife as a consequence of any judgment against her arising from the insolvent trading or otherwise in the liquidation of [C] Pty Ltd, [B] Pty Ltd and [TA] Pty Ltd;
(b)any amount due by the husband in respect of the claim of the 2nd Intervener in these proceedings including costs;
(c)the payment of any order for costs previously made against the wife in these proceedings;
(d)any claim for costs of the 2nd, 3rd and 4th Interveners; and
(e)the determination of the wife’s application against the husband for her costs of and incidental to these proceedings as may be ordered by the Court.
9.That the husband do have as his sole property the following:
(a)any interest of the wife in SH & AM [Karbines] Family Trust, [K] Pty Ltd, [L] Pty Ltd and [TA] Pty Ltd;
(b)50% of the net proceeds of sale of [G Street, G] subject to paragraph 8 above;
(c)the proceeds of sale of [the Queensland property] subject to paragraph 8 above;
(d)the husband’s superannuation;
(e)the husband’s motor vehicles;
(f)all items of furniture, household effects, chattels and other personalty in the possession of the husband.
10.That the husband do indemnify the wife and keep her forever indemnified with respect to:
(a)all debts and liabilities of the husband
(b)all or any claim in debt against the wife by [J Karbines], [M Karbines], [K Karbines] or [P Karbines];
(c)any debit loan account of the wife in and all debts and liabilities of the entities referred to in paragraph (9) above;
(d)the husband’s legal costs.
In his final submissions the husband sought the following orders:
1.That the husband receives a 75% split, plus the entire business liabilities of $1,058,966.51 and that the wife receives 25% of the assets, unencumbered by business debts.
2.That should the above split be awarded, the husband writes to all owners of the substantiated debt and advises that the wife is no longer liable for those debts.
3.That should the above split be awarded, the savings on any substantiated business debts that remain unpaid be shared equally with the wife.
4.That the wife to transfer to the husband all her estate and interest in the former matrimonial home at [A Street, G] free from all encumbrances. …
5.That the wife retain the inheritance ($98,000 plus the [D Street] property $241,781) and all the net proceeds of the sale of [D Street, G] …
6.That the property at [Y Street, G] and the balance owing be transferred to the husband.
7.That the wife’s estate and interest in the property at [Queensland] be transferred to the husband for sale as and when required of or by himself, and from the proceeds of sale
(a)the sum secured by mortgage to Commonwealth Bank of Australia be paid
(b)the sum of $65,301 be paid to the liquidator of [C] Pty Ltd
(c)and the balance stand to the credit of the husband on terms he arranges with the Liquidator and the Bank.
8.That the property at [M Street, G] be sold by Auction and that the net proceeds of the sale of due to the husband and the wife be equally divided directly into their own bank accounts.
9.That the property at [G Street, G] be sold by Auction and that the net proceeds of the sale be due to the husband directly into his own bank account.
10.That the wife retain ownership of the [BF Pty Ltd] assets ([BT] motel and house). …
11.That the wife do repay directly to [TZ] of Japan by Telegraphic Transfer or equivalent to gain as her sole property the following:
(a)a sum of $25,000 being the wholesale value of the money owed for the wife’s Honda Legend motor vehicle;
(b)a sum of $10,000 being the wholesale value of the money owed for the motor vehicle in the possession of [the parties’ daughter];
(c)a sum of $8,000 being the wholesale value of the money owed for the motor vehicle formerly in the possession of [the parties’ son].
12.That the wife do have as her sole property the wife’s superannuation entitlement.
13.That all items of furniture, household effects, chattels and other personalty in the possession of the wife, subject to agreement on site between the husband and the wife as to the splitting of these items, and the right of the husband to question any items that may have been knowingly removed
14.That no sums standing to the credit of the husband hereinbefore referred to be paid to the trust account of Maddens Lawyers on behalf of the husband:
(a)…
(b)…
15.That the husband do have as his sole property the following:
(a)any interest of the wife in SH & AM [Karbines] Family trust, [K] Pty Ltd, [L] Pty Ltd and [TA] Pty Ltd;
(b)the husband’s superannuation;
(c)all items of furniture, household effects chattels and other currently remaining in the [A Street] house, particularly the billiards and dining tables.
16.The husband will not indemnify the wife against actions by the following:
(a)all debts and liabilities of the husband;
(b)all or any claim in debt against the wife by [J Karbines], [M Karbines], [K Karbines] or [P Karbines];
(c)any debit loan account of the wife in and all debts and liabilities of the entities referred to in paragraph 9 (a) above;
(d)the husband’s legal costs
because the husband has no say over their actions, and their lendings were to [C] Pty Ltd. …
Evidence
The wife gave oral evidence which was consistent with her affidavit evidence in chief. When cross-examined by the husband she was not significantly challenged. At times she was unable to remember whether specific payments had come from the parties’ personal funds or from the group of companies’ funds.
During cross-examination she conceded that the husband put in $20,000 for the purchase of H Street, the first matrimonial home and that the rest came from a Westpac Bank loan.
The husband was unrepresented. His cross-examination of the wife was brief. The husband did not put to the wife in cross-examination any questions which would assist him in maintaining his submission that “the companies are in their current state of disrepute simply because the wife failed directly in her duties as director, failed to consider any action designed to avoid bankruptcy and directly took action to hinder the activities of the companies”. (Part of the husband’s final submissions, paragraph 14 (a) page 6). Nor did the cross-examination of the husband cover the topic in paragraph 15 of his final submissions “It is submitted that the wife actively damaged the business, organised or actively supported a theft from the Company offices and deliberately set out to extend this trial to the utmost extent possible”.
Documents were produced by the husband from time to time. There are a large number of Exhibits before the Court.
The husband was extensively cross-examined by experienced counsel.
The husband’s evidence was inconsistent. At times he was unable to provide any sensible answer to direct questions. In particular, his evidence concerning the debts that he owed to various persons was inconsistent and unreliable.
It was only during cross-examination towards the end of the trial that the husband admitted to earning substantially more than he had disclosed at the commencement of the trial.
His evidence concerning the control and ownership of the company DT Pty Ltd was not convincing. The husband’s evidence concerning the ownership of the business operated by DT Pty Ltd was unsatisfactory. He produced a letter on C Pty Ltd letterhead which purported to set out the agreement with Mr T. This document (Annexure SK6 to the husband’s affidavit filed August 2007 (document 116) was a letter dated 12 July 2006 which was only signed by the husband.
The husband also produced another letter dated 12 July 2006 on C Pty Ltd letterhead signed only by the husband addressed to “[Mr O], Manager […], [Y Street], [G]”. The husband asserts that this letter proves he handed over certain assets of C Pty Ltd to Mr O (see Annexure SK5 to husband’s affidavit filed 9 August 2007 (document 116)).
Evidence that the husband gave in relation to the TZ debt was inconsistent. At one stage the husband asserted that the amount of the debt due by C Pty Ltd was $392,000 or $392,800. See Exhibits 2 and 3.
Later however he asserted that the debt was only $45,000.
The evidence of the husband in relation to the business operated by DT Pty Ltd was contradicted by the evidence of Mr Willa.
The evidence of Mr Willa is to be preferred to the inconsistent evidence of the husband.
From time to time during the years since commencement of these proceedings the husband has been represented by solicitors and occasionally represented by counsel at interim hearings. The husband was aware well before the trial that the wife did not accept the husband’s assertions concerning the alleged assets and liabilities of the C group. At the commencement of the trial the husband said he would call several witnesses which would provide assistance to the Court in determining the assets and liabilities. In spite of being warned on numerous occasions that the Court would be asked by the wife to draw adverse inference if the witnesses were not called, the husband failed to call any witnesses.
Relevant Law
Section 79
Alteration of property interests
(1) In property settlement proceedings, the Court may make such order as it considers appropriate:
(a) in the case of proceedings with respect to the property of the parties to the marriage or either of them--altering the interests of the parties to the marriage in the property; or
(b) …
including:
(c) an order for a settlement of property in substitution for any interest in the property; and
(d) an order requiring:
(i) either or both of the parties to the marriage; or
(ii) ...
to make, for the benefit of either or both of the parties to the marriage or a child of the marriage, such settlement or transfer of property as the Court determines.
…
(2) The Court shall not make an order under this section unless it is satisfied that, in all the circumstances, it is just and equitable to make the order.
(4) In considering what order (if any) should be made under this section in property settlement proceedings, the Court shall take into account:
(a) the financial contribution made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them, or otherwise in relation to any of that last‑mentioned property, whether or not that last‑mentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them; and
(b) the contribution (other than a financial contribution) made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them, or otherwise in relation to any of that last‑mentioned property, whether or not that last‑mentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them; and
(c) the contribution made by a party to the marriage to the welfare of the family constituted by the parties to the marriage and any children of the marriage, including any contribution made in the capacity of homemaker or parent; and
(d) the effect of any proposed order upon the earning capacity of either party to the marriage; and
(e) the matters referred to in subsection 75(2) so far as they are relevant; and
(f) any other order made under this Act affecting a party to the marriage or a child of the marriage; and
(g) any child support under the Child Support (Assessment) Act 1989 that a party to the marriage has provided, is to provide, or might be liable to provide in the future, for a child of the marriage.
…
(10) The following are entitled to become a party to proceedings in which an application is made for an order under this section:
(a) a creditor of a party to the proceedings if the creditor may not be able to recover his or her debt if the order were made;
(b) any other person whose interests would be affected by the making of the order.
...
Section 75(2)
(2) The matters to be so taken into account are:
(a) the age and state of health of each of the parties;
(b) the income, property and financial resources of each of the parties and the physical and mental capacity of each of them for appropriate gainful employment;
(c) whether either party has the care or control of a child of the marriage who has not attained the age of 18 years;
(d) commitments of each of the parties that are necessary to enable the party to support:
(i) himself or herself; and
(ii) a child or another person that the party has a duty to maintain;
(e) the responsibilities of either party to support any other person;
(f) subject to subsection (3), the eligibility of either party for a pension, allowance or benefit under:
(i) any law of the Commonwealth, of a State or Territory or of another country; or
(ii) any superannuation fund or scheme, whether the fund or scheme was established, or operates, within or outside Australia;
and the rate of any such pension, allowance or benefit being paid to either party;
(g) where the parties have separated or divorced, a standard of living that in all the circumstances is reasonable;
(h) the extent to which the payment of maintenance to the party whose maintenance is under consideration would increase the earning capacity of that party by enabling that party to undertake a course of education or training or to establish himself or herself in a business or otherwise to obtain an adequate income;
(ha) the effect of any proposed order on the ability of a creditor of a party to recover the creditor's debt, so far as that effect is relevant; and
(j) the extent to which the party whose maintenance is under consideration has contributed to the income, earning capacity, property and financial resources of the other party;
(k) the duration of the marriage and the extent to which it has affected the earning capacity of the party whose maintenance is under consideration;
(l) the need to protect a party who wishes to continue that party's role as a parent;
(m) if either party is cohabiting with another person--the financial circumstances relating to the cohabitation;
(n) the terms of any order made or proposed to be made under section 79 in relation to:
(i) the property of the parties; or
(ii) vested bankruptcy property in relation to a bankrupt party;
(na) any child support under the Child Support (Assessment) Act 1989 that a party to the marriage has provided, is to provide, or might be liable to provide in the future, for a child of the marriage; and
(o) any fact or circumstance which, in the opinion of the Court, the justice of the case requires to be taken into account; and
(p) the terms of any financial agreement that is binding on the parties.
Disclosure of the husband’s financial position requires consideration. In Chang and Su (2002) FLC 93-117 the Full Court dealt with the requirement of full and frank disclosure saying:
“66.Her Honour had to do the best she could with very limited material. As she said in paragraph 119, it would be normal to proportion the parties' entitlements in the context of findings as to the identity and value of the property available for division. She went on to say, however, that because of the findings of non-disclosure by the husband, the only imperative that she could fall back upon was that the order be just and equitable, and she concluded it would be just and equitable for the wife to have the visible assets in Australia unencumbered, leaving the husband with all of the Taiwanese assets.
67.The law to be applied and the approach that may be adopted in cases where, through the lack of a full and frank disclosure, the Court is unable to fully ascertain the extent of a party's wealth, is well settled (see Stein v Stein (1986) FLC 91-779; 11 Fam LR 353; Mezzacappa v Mezzacappa (1987) FLC 91-853; 11 Fam LR 957; Black and Kellner (1992) FLC 92-287; 15 Fam LR 343 and Weir v Weir (1993) FLC 92-338; 16 Fam LR 154).
68.In Black and Kellner (supra) the appellant had submitted that, absent findings as to the extent of his wealth, the order made by the trial Judge was plainly unjust. The key finding of the trial Judge was:
“...the failure on the part of the [husband] to disclose his financial position to the court and his attempts to conceal this matter from the court, which has left the court in the position of not knowing what the [husband’s] financial position is, except that he deliberately underestimated it."
69.Chief Justice Nicholson (with whom Ellis and Cohen JJ agreed), said in dismissing the appeal:
“As senior counsel for the wife pointed out, the first step in proceedings for a property settlement is for the court to ascertain the wealth of the parties and in this regard it is of interest to note the remarks of the Full Court in the case of Giunti and Giunti (1986) FLC 91-759, particularly at 75,555 where the court commented:
‘It is obviously desirable as a general principle that the court should first of all identify the pool of assets available and evaluate it. If each party complies with his or her obligation to make a full and substantive disclosure of their financial affairs- see Briese and Briese; (1986) FLC 91-713, affirmed by the Full Court in Oriolo v Oriolo (1985) FLC 91-653, there is no problem, although there may be disputes as to valuation.
However if, as here, one party fails to fulfil that obligation, is it open to that party then to rely on the absence of satisfactory evidence to prevent the making of an order against him or her which otherwise justice and equity would require? It would be simple, if that were the case, to evade the jurisdiction of this court, not by outright refusal which would attract sanctions but by obfuscation and evasion.’
The Full Court in Oriolo and Oriolo, supra, referred with approval to the remarks of Smithers J in Briese and Briese, and it is perhaps worth reiterating a portion of his Honour's statement at 75,181 where he said, after referring to the decision of the House of Lords in Livesey v Jenkins (1985) All ER 106:
‘... I believe that the conclusion of the House of Lords in the case of Livesey v Jenkins… is apposite, namely that in financial proceedings between spouses each party must make a full and frank disclosure of all material facts. In that case it was made clear that full and frank disclosure was required as a matter of principle in the light of the fact that it was the duty of the court, taking into account a number of designated criteria, to make a decision which basically involved the exercise of discretion. This is quite different from common law litigation between strangers, in which such a general duty does not exist, and obligations would only exist in so far as statute or court rules required.
In my view it is fundamental to the whole operation of the Family Law Act in financial cases that there is an obligation of the nature to which I have referred.’
Regard also may be had to the decisions of this court in Stein and Stein (1986) FLC 91-779 at 75,676 and Mezzacappa and Mezzacappa (1987) FLC 91-853.
In the present case a similar situation arose. The assets of the parties could not be ascertained in full because of obvious non-disclosures.
It is apparent that if his income was more substantial than he claimed, then this would be reflected in the value of his practice and in this regard it is perhaps of interest to note that the wife's former husband's practice of a similar nature, was capable of being sold for a figure in 1973 terms which would if reflected in 1991 terms, represent a very substantial asset indeed. Finally, another part of a judge's obligation in cases of this nature in considering s 75(2) factors is to consider the respective incomes of the parties. Again, through the behaviour of the husband, this was something which the learned trial judge could not do.
It follows from what I have said that I do not believe that his Honour's judgment can be attacked upon the basis relied upon by the husband.””
Assets and Liabilities
The former matrimonial home at A Street, G
The agreed value of this property is $840,000. There are two titles registered in the joint names of the husband and wife (A and 2A Street, G). The properties secure the loans payable to Westpac Banking Corporation. As at the 23 May 2008 Exhibit 40 indicates that this debt was $320,560.
Queensland Property
The value was agreed by the parties at $480,000. This property is registered in the joint names of the husband and wife. It secures a Commonwealth Bank of Australia housing loan. Exhibit 47 indicates the balance was $252,118.
The husband’s mother has occupied this property. She provided $50,000 towards the purchase of the property. The wife says this was a gift. The husband maintained that she provided the money and appears to assert that she has some type of equitable interest in this property.
The documents provided by the husband also suggest that his mother provided this money as part of a loan to C Pty Ltd.
The husband’s mother was present in Mount Gambier on the first day of the trial. She was also present on the 4 May 2007 when the wife sought orders, inter alia, about the Queensland property. She opposed the orders sought saying from the bar table that she occupied the property and had put down the deposit “as a nice gesture … … for the two of them”.
The husband’s mother did not give evidence.
G Street, G, Property
This property was valued at $85,000. The registered proprietors are the husband and wife and Mr and Mrs Willa. The property is freehold and unencumbered.
M Street, G, Property
The property at M Street, G, consists of three units valued at $500,000. The registered proprietors are the husband and wife and Mr and Mrs Willa. This property is mortgaged to the ANZ Bank with a balance of $98,981.
An order has been made for the sale of this property by this Court on the 29 May 2008 which provided:
“1.…
2.…
3.…
4.…
5.…
6.The properties at [M Street, G] and [G Street, G] in the State of South Australia be sold by auction. The real estate agent to be appointed to carry out the auction is [MA Real Estate] of [G]. Upon sale of the premises if the net amount received upon sale (after the costs of sale and auction) is less than the amount of the valuations of those properties carried out by Mr [EH] then the husband will pay to the wife and Mr and Mrs [Willa] their share of the difference in the shortfall.
7.The reserve price of these properties be the amount of the valuations of these properties by Mr [EH].
8.It is directed that the net proceeds of sale otherwise payable to the husband and wife of the [M Street, G] and [G Street, G] in the State of South Australia be deposited in an interest bearing account by the wife’s solicitors in trust pending further order of the Court.
9.…
10.…”
Y Street, G, Property
The agreed value of Y Street, G was $450,000. The registered proprietor is L Pty Ltd. This is a warehouse. It secures loans due to Westpac Banking Corporation. The husband and wife are the sole shareholders of the company L Pty Ltd. The husband and wife were directors from January 1992 until February 2006. The wife was replaced as a director by the husband’s mother in February 2006.
The husband has permitted the businesses of DT Pty Ltd and K Pty Ltd to use this property. The wife claims the husband should account for his failure to collect rent for the property.
S, Victoria Property
C Pty Ltd was the proprietor of one undivided third part of the property which was the S Warehouse. The other owners were Karbines Management Pty Ltd (now known as X Pty Ltd, a company controlled by the husband’s brother, P) and Mr Willa.
The warehouse was occupied by C Pty Ltd. It secured borrowings from Westpac Banking Corporation. The evidence of the husband is that DT Pty Ltd and the husband occupied the premises following the liquidation of C Pty Ltd.
The property was sold after Westpac Banking Corporation sought a mortgagee sale. The net proceeds have been apportioned equally between the three registered proprietors with the share of C Pty Ltd (In Liquidation) being paid to Westpac Banking Corporation in reduction of the amount owed to it. The debt due to Westpac Banking Corporation was in the region of $600,000. The sale of the S Warehouse reduced the Westpac Banking Corporation’s indebtedness to $320,560.
D Street, G, Property
The property was sold by the wife for $247,000 in January 2008. The net proceeds of $241,780 are held in the trust account of the wife’s solicitors. This property was inherited by the wife from her late aunt who died in August 2004. The parties are in dispute about the contribution the husband made to the improvements to this property.
BF Pty Ltd
It was agreed that $45,000 had been paid by the husband and wife to BF Pty Ltd. The husband claimed that this indicated that they had a 25 per cent shareholding in the company and its main asset the BT Motel. The wife said that $45,000 was the initial payment made but the subsequent balance required to obtain the shareholding was not paid.
The husband did not provide any evidence to support his assertion that the parties have a 25 per cent shareholding in the company, nor any evidence as to the value of any such shareholding.
The evidence indicates that the sum of $45,000 is owing to the parties by BF Pty Ltd.
The Businesses, Company and Trust Assets
Prior to the separation the husband and wife had an interest in, or controlled, the companies C Pty Ltd, K Pty Ltd, L Pty Ltd, TL Pty Ltd, TA Pty Ltd and CD Pty Ltd. C (UK) Pty Ltd was also a company in which the parties had an interest as well as the husband’s mother and brother from time to time.
B Pty Ltd was established by the husband following the separation. It became the Trustee of the SH & AM Karbines Family Trust. The husband has also made arrangements for businesses to operate under the business name C Australia and the business name K.
Following the separation of the parties and a few months before the liquidation of C Pty Ltd the company DT Pty Ltd was also established. It took over certain assets and parts of the business previously operated by C Pty Ltd.
The corporate structure, assets and liabilities of the businesses were not agreed.
C Pty Ltd (In Liquidation)
The company was incorporated in November 1987. The husband, wife and the husband’s brother, P Karbines were originally directors. P Karbines ceased to be a director in 1995. In November 1996 the husband’s mother, J Karbines, was appointed a director. At the time of the liquidation the husband, the wife and his mother were the directors.
The husband and wife each hold one of the two issued shares in the company. C Pty Ltd was the Trustee of the SH & AM Karbines Family Trust until the 22 May 2005 when at the instigation of the husband it was replaced as Trustee by B Pty Ltd.
In February 2007 the Supreme Court of South Australia made an order placing C Pty Ltd in liquidation and appointing Mr R of S & Co as liquidator.
The minutes of the creditors’ meeting held on the 16 April 2008 (being dated 22 April 2008) were before the Court.
The husband maintained that the debt due to the UK firm PC Partnership Ltd was a debt due by C (UK) Pty Ltd and not C Pty Ltd. The husband contended throughout the proceedings that the judgment against C Pty Ltd was an “improper judgment” and was capable of being set aside.
The husband acknowledged in his evidence that he had not defended the application for winding up. The husband implied in his evidence that the enquiries he had made of ASIC in relation to the setting aside of the winding up order had been favourably received. He provided no other evidence which would suggest that the liquidation was to be set aside. The liquidator’s costs to date are likely to be significant.
When the trial in the Family Court commenced in 2007 the liquidator’s position in relation to assets and liabilities and any claim against the husband and wife was not clear. It was necessary for the liquidator to carry out further investigations and give consideration to the available material before making any determination.
The liquidator’s claim against the husband and wife in relation to the Queensland property was heard and determined with orders made by the Court on the 2 May 2008 which provided that the husband and wife pay the sum of $65,301 to the liquidator and in default certain orders were made for the sale of the Queensland property.
On the 26 May 2008 a costs order was made.
The liquidator did not seek to bring any further claims against either the husband or the wife in the Family Court but indicated to the Court that consideration was being given to pursuing both the husband and wife for claims arising from insolvent trading of C Pty Ltd.
The liquidators were not able to confirm the creditors’ claims. Many of the claims made for debts due by the company are disputed by the wife.
By letter of the 31 January 2008 the liquidator gave notice of a claim of $228,339 against the husband and wife.
The wife submitted that if any claim was made for insolvent trading she would only admit as the total of relevant debts incurred the sum of $64,413.33.
The wife disputed the amount owing to Ms BU by C Pty Ltd or K Ltd.
The wife does not agree that the company in liquidation owes K Karbines (husband’s sister) $19,181.57, M Karbines (husband’s father) $14,000, K Pty Ltd $40,000, GY Pty Ltd $30,000, KR Pty Ltd (possibly mistaken for K Pty Ltd) $68.20.
The Chairman of the Creditor’s meeting in April 2008 rejected the claim for voting rights of NS Company (save as to the extent of $1) on the basis “that he had not received satisfactory evidence of its claim”. The Chairman also rejected the claim by K Pty Ltd on the basis that its loan was not to C Pty Ltd. The claims by M Karbines was rejected on the basis that the loan monies were paid to K Pty Ltd and not C Pty Ltd. The claim by K Karbines was rejected on the basis that no loan agreement was produced and there were no payments shown to be made to C Pty Ltd.
By letter dated the 12 July 2006 the husband purported to transfer some of the assets of C Pty Ltd to Mr T.
The letter reads:
“To [Mr T]
Director
[NS Company]
In lieu of part payment to [Mr T], director of [NS Company], I, [the husband], Director of [C] Pty Ltd, agree to hand over to the company called [C] the following:-
(1)All stock of [the company’s product] and parts thereof.
(2)All machinery for [production of a product] and [a service of the company] with stock.
(3)All existing customers.
(4)All stationary (sic) including the new server and the invoicing computers showing previous customers.
This agreement is made because [C] Pty Ltd is not able to carry on business due to a company dispute.
This agreement is made to enable the factory in China, [NS Company], who makes our product to sell the existing product in Australia and their stock in China. For these reasons I allow the name of [C] to remain on the boxes etc and for their continuance of trading.
Signed …[the husband]…………
Director for [C] Pty Ltd”
As the affidavit of the liquidator of B Pty Ltd discloses by that time C Pty Ltd was not the Trustee of the Family Trust. The husband had arranged for B Pty Ltd to become the Trustee.
The husband was unable to give satisfactory evidence about this transfer other than to say it was in forgiveness of a debt.
Mr T operates the business NS Company. Notwithstanding this alleged transaction in July 2006, the husband still maintained at the trial that NS Company (Mr T) was owed $127,500 (Australian account) and NS Company (UK account) $140,550. (See Exhibit 3).
NS Company claimed as a creditor in the liquidation of C Pty Ltd in the amount of $127,500. This claim has not yet been assessed by the liquidator.
At a meeting of creditors on the 16 April 2008 the husband purported to represent NS Company (amongst others). At that meeting the chairman rejected, for voting purposes, the claim by NS Company (except to $1) on the bases that satisfactory evidence of the claim had not been provided.
The Liquidators report (document 143) raises the possibility of the transfer of any assets to Mr T being set aside as voidable as an unfair preference.
The husband did not produce any documents signed by Mr T nor did he provide any sworn evidence of Mr T to support his claim.
The lack of reliable evidence in relation to many of the alleged debts (whether they be debts due by C Pty Ltd (In Liquidation), the parties, or other entities) creates a situation where the Court is unable to find, even on the balance of probabilities, that the debts are owed as asserted by the husband or those making claims against the company in liquidation.
A balance sheet for C Pty Ltd at 30 April 2005 disclosed stock in the inventory with a book value of $690,370.25.
The husband’s evidence was that the remaining stock held at the time of trial had a value of approximately $500. He had previously informed Mr MR (the liquidator of B Pty Ltd) that the realisable value of the stock was estimated at $10,000. The husband’s evidence was that some of the stock remained at the S factory property before its sale and that some of the stock had been taken back by the suppliers in exchange for a reduction of the debts.
In his final submissions the husband says about the stock held at separation “this has all been reclaimed by the original suppliers who have realised returns as it is sold through legitimate business dealings.”
Connected to the consideration of the assets and liabilities of the C group are the issues relating to ownership and control of DT Pty Ltd and the business name and business C Australia.
B Pty Ltd (In Liquidation)
The liquidator Mr MR filed an affidavit on 16 November 2007. The liquidator makes no specific claim in the Family Court proceedings.
B Pty Ltd was incorporated at the instigation of the husband for the purposes of taking over the Trustee role of the SH & AM Karbines Family Trust.
The creditor who made application for the winding up of B Pty Ltd was the Australian Taxation Office who claimed to be owed $113,396.22.
The winding up order was made on 6 December 2006.
TA Pty Ltd (In Liquidation)
This liquidation was brought about by a judgment obtained by the State of South Australia for a loan of $86,524.33 pursuant to a loan agreement dated 8 September 2001.
Income tax returns for this company have not been produced beyond 2003. The wife does not accept the validity of the internal financial documents prepared.
The substantial debts claimed to be owed by the company include monies owed to DJ Pty Ltd, the South Australian Government, and C Pty Ltd (In Liquidation).
Based on the evidence provided to the Court and the liquidation of the company it is not appropriate to bring into account in the matrimonial proceedings any assets or liabilities relating to TA Pty Ltd (In Liquidation).
K Pty Ltd
The company was incorporated on 12 June 2002. The husband and wife are the directors and shareholders.
The husband claimed that C Pty Ltd (In Liquidation) owed K Pty Ltd $40,000.
Exhibit 21 purports to be a Balance Sheet for K Pty Ltd as at 30 June 2006. One item in long term borrowings is “loan – [Ms BU] $27,652.36”. Another item under “other long terms liabilities” is “[K] Pty Ltd $50,442.92”.
Exhibit 33 includes what purports to be a Balance Sheet for K Pty Ltd as at 30 April 2007 which repeats the loan due to Ms BU and also purports to show $55,828.23 owing to itself.
These inconsistencies highlight the danger of relying upon the accounts and financial records produced by the husband.
L Pty Ltd
This company was incorporated in November 1984. The directors were at one time the husband’s mother and husband’s sister. In 1992 the husband and wife replaced them as directors. The husband’s mother J Karbines and the husband are now the directors. The husband and wife own all issued shares. This company is the registered owner of the real estate at Y Street, G, which is mortgaged to Westpac to secure the loans for C Pty Ltd and K Pty Ltd.
The property at Y Street is a warehouse and office. The wife asserts that the businesses have been operating and continue to be operated by the husband at that property. The businesses carried on are the businesses formerly carried on by C Pty Ltd. The husband says these businesses are owned by his mother and DT Pty Ltd.
Since July 2006 no rent has been collected. The wife asserts that the husband’s failure to ensure that rent is collected for L Pty Ltd is a factor which should be brought into account by adding back the loss of rent. The husband accepted in his oral evidence in cross examination that the approximate rental value of the property is $28,000 per annum. The wife seeks to add back the sum of $56,000 (2 years rent).
If an allowance is made for notional rent it would also be appropriate to factor in potential income tax liability payable on any net profit made.
TA Pty Ltd
This is a company registered in September 1985. The husband and wife were directors and equal shareholders.
Mr F’s report (Exhibit 2) suggests that this is the company which owed TZ $392,000. (The amount which the husband’s oral evidence reduced to $45,000).
The Balance Sheet in Exhibit 33 includes an item “Supplier Control Account” $393,971 as a liability.
The balance sheet (in Exhibit 33) suggests that as at 30 April 2007 this company had as significant assets “Inventory Control Account” $176,217 and a loan due by “[C Pty Ltd]” of $111,612.88.
It is not appropriate to bring any assets or liabilities of this company into account in these matrimonial proceedings because of the lack of reliable evidence.
CD Pty Ltd
The particulars of this company were not the subject of reliable evidence. No documents which can assist the Court have been produced. The husband gave evidence that the business previously conducted by this company was taken over by K Pty Ltd some years ago.
The business name “[C] Australia”
The business name C Australia was first registered in September 2005. The owners of the business name were previously the husband and B Pty Ltd. On 10 May 2006 the business name was transferred to Mr T. The postal address for Mr T was the Queensland property owned by the husband and wife and occupied by the husband’s mother (and from time to time the husband’s sister).
On 23 January 2007 the business name was transferred from Mr T to DT Pty Ltd and the postal address changed to the address of the husband’s accountant in Melbourne (Mr MS).
The evidence indicates that C Australia is the business name of the business which has been at all times carried on at the Y Street, G, property. There is no evidence of any consideration or monies being paid in respect of any of the transfers of the business name.
The liquidators of C Pty Ltd may take into account the benefits obtained by these transactions. The reports of the liquidator refer to the transfer of the business name C Australia to Mr T as being a voidable transaction because it is an unfair preference. The same arguments would appear to apply to any transfer to DT Pty Ltd (if DT Pty Ltd is considered to be a genuine independent entity).
The business name “[K]”
The business name K was registered in January 2005 with the husband’s mother as the sole proprietor. The husband said in cross examination that he and his mother were the joint proprietors. The nature of the business was expressed to be “retail air conditioning”. The evidence does not clarify whether K Pty Ltd transferred any of its assets, liabilities or business at any time to either the husband’s mother or the husband. The evidence of the husband was that he continued to engage in some air conditioning work and received monies for his work.
There were no financial statements or accounts produced for this business (as distinct from records of the company K Pty Ltd).
DT Pty Ltd
The wife submits that the husband is the sole beneficial owner of DT Pty Ltd and the business name C Australia. The wife’s submission is that the alleged control or ownership of the company by Mr T is a sham.
The husband denied the allegation that he was the sole beneficial owner of DT Pty Ltd and the business name C Australia or the businesses carried on by them. However, the husband’s evidence was that once the Family Court proceedings had been concluded he expected or hoped to be in a position to recover the businesses from Mr T and continue to operate them profitably.
The company DT Pty Ltd was incorporated in November 2006. The husband’s accountant Mr MS was initially the sole director, secretary and shareholder. On 15 February 2007 the husband was appointed the sole director and secretary and has remained so since that time. On 23 April 2007 the shares in DT Pty Ltd were transferred to Mr T. (The trial in the Family Court commenced on 30 April 2007).
The husband gave evidence that his mother J Karbines and his sister K Karbines have carried on various duties on behalf of the company DT Pty Ltd apparently for no financial reward. The company has occupied the Y Street premises and part of the S warehouse premises.
The husband maintained that he did not have the capacity to provide any financial records of DT Pty Ltd even though he was the sole director and secretary of the company.
Towards the end of the trial the husband produced a bank statement for DT Pty Ltd. The husband has used the bank account of DT Pty Ltd for his own purposes. He has made drawings against the bank account for personal expenses. There is no evidence that he has sought or obtained the approval of Mr T.
The husband claimed to have been paid wages of $250 per week for one day’s work for DT Pty Ltd. He produced bank statements which indicated that he received the benefit of approximately $40,000 per month which he asserted would be shown in his loan account.
When the S warehouse premises were sold the business of DT Pty Ltd moved to another property in S. The husband executed the lease of this property on behalf of DT Pty Ltd.
The husband says in his final written submissions “these are legitimate businesses with no physical or tangible assets (or liabilities) that simply sell stock made available from that returned to [NS Company] stock.”
The husband did not provide evidence from his accountant nor Mr T.
In the absence of any documentary evidence or other reliable evidence provided by the husband, and having heard the unsatisfactory evidence of the husband in relation to DT Pty Ltd, the Court is satisfied on the balance of probabilities that the business operated by DT Pty Ltd is a business which is controlled, operated and beneficially owned by the husband. The purported ownership of Mr T is a sham or ruse to reduce the claim of the wife to any share of these businesses operated by the husband.
There is however no reliable information as to the value of the assets and liabilities of DT Pty Ltd or the business operated by it or under the name of C Australia.
The husband maintained that he could have continued trading successfully in the businesses but for the Family Court proceedings. He maintained that the wife was responsible for the business problems. This is not supported by the evidence.
Motor vehicles
Three motor vehicles came into the possession of the family from the business operated by Mr TZ in Japan. The wife retains the Honda Legend motor vehicle. There is no reliable independent value provided to the Court for this vehicle. The parties’ son and daughter have also each had the benefit of a motor vehicle. The parties’ son sold his motor vehicle to pay off his credit card debts. The daughter retains her car.
The husband maintains that TZ is owed $45,000 for these three vehicles. The wife asserts that any debt due would be payable by TA Pty Ltd. The invoices are addressed to C Pty Ltd which is now in liquidation.
The invoices provided show the Honda Legend at $14,000, and the other two vehicles a total of $9,000, leaving $23,000 owing to C Pty Ltd if TZ is claiming the debt in the liquidation.
The husband has in his possession a vehicle which is on finance, the payments for which are being made by DT Pty Ltd. He also has a Holden Commodore motor vehicle and a Harley Davidson motor cycle. Part of the motor cycle is kept in Victoria and part in G (according to the husband’s evidence). There are no valuations produced for any of these vehicles.
The husband asserts that the Commodore is an asset of TA Pty Ltd and “is a business vehicle.”
Karaoke Machine
The wife has in her possession a karaoke machine. She alleges it was a gift from Mr TZ. The husband filed proceedings in the Local Court in Mount Gambier on behalf of Mr TZ against the wife seeking payment or the return of the karaoke machine. Those proceedings have been discharged.
Wife’s Inheritance (not real estate)
Apart from the property at D Street, G, the wife also inherited $96,000 from her late aunt. The wife gave evidence that she spent $20,000 on renovations of the property and retained the rest at the time of separation. She has since spent these monies on living expenses for herself and the children, University fees for the parties’ son and on her legal fees.
The “Supplier Aged Analysis” as at 30 June 2005 provided to Mr F showed no debt to GY Pty Ltd. There is no specific reference to a debt to GY or GY Pty Ltd nor is any document produced in support of the debts but it could be included in the “Supplier Control Account”
The husband represented GY at the creditors meeting on 16 April 2008.
The Court has not been provided with sufficient evidence to satisfy it on the balance of probabilities that there is debt due to GY or GY Industrial or Industries by C Pty Ltd, the Family Trust or any other person or entity which is a debt to be brought into account in these matrimonial proceedings.
YI Company
In Exhibit 3 the husband claims a debt to YI Company of $3,600. In the “Supplier Aged Analysis” as at 30 June 2005 C Pty Ltd entries show a debt to “[YI] Co” of $3,619.01. The liquidator’s report shows no claim from YI Company or any company or entity with a similar name.
“John UK”
Exhibit 3 provided by the husband lists a debt of $16,000 from “John UK”. The husband said this was money borrowed from a wealthy relative in the United Kingdom to pay part of his legal fees. In his final submissions the husband does not seek that this amount be taken into account. (No claim has been made by anyone to the liquidator of C Pty Ltd).
Willa
The judgment of the Court on 17 July 2008 in relation to the claims made by Willa provided that within 28 days the husband pay Mr Willa $23,446.
Credit card debts
The wife concedes that at separation the husband owed money on his American Express credit card but she was not aware of the amount. In Exhibit 3 the husband claims credit card debts of $42,000 as at 1 May 2007. The Court does not have sufficient reliable evidence to determine the amount outstanding on the parties’ individual credit cards at the time of separation. Taking into account the substantial amounts of credit card debt which have been incurred post separation by each of the parties, the Court will not bring into account these debts as liabilities, but will bring them into account in a general sense in assessing the parties’ financial circumstances.
Shareholders’ Loans
The Karbines Family Trust balance sheet as at 30 April 2007 purports to show shareholders’ loans of $715,243.25. The wife denies any loan account debts. The Court was not provided with evidence which supported the alleged loan accounts save and except that the liquidators of C Pty Ltd provided the Court with evidence in relation to their claim concerning the use of the monies of C Pty Ltd for the payment of the mortgage in relation to the Queensland property.
The reports from the liquidators for C Pty Ltd and B Pty Ltd do not disclose the shareholders’ loans due by the husband and wife.
The inconsistencies in the documents provided to the Court and the absence of any other document which confirms the existence of these loan accounts means that it is not established on the balance of probabilities that either the husband or the wife owe the Trust the monies which appear to be entries in the balance sheet.
Other Debts
The husband and wife guaranteed the business debt to Westpac Banking Corporation (the 4th Intervener) who seek payment of all monies owing before any distribution to the parties. After the sale of the S property Westpac Banking Corporation were still owed $320,560.
There is the mortgage on the Queensland property for $252,118 due to Commonwealth Bank and half of ANZ mortgage on M Street $49,491. The 1st Intervener’s judgment in relation to the Queensland property was $65,301. The 1st Interveners costs in relation to this judgment are anticipated to be approximately $25,000.
Both the husband and wife face possible “trading while insolvent” claims by the liquidator. The wife does not admit that the debts relied upon by the liquidator are all debts payable by C Pty Ltd (or by implication B Pty Ltd). Due to the unsatisfactory standard of evidence concerning many of these debts this Court is unable to quantify with any reliability the amount of any likely claim by the liquidator.
The prospect of some claim being made is taken into account but not at any defined amount.
There is also the possibility foreshadowed by the liquidator of B Pty Ltd that action may be taken to set aside the transfer of assets to Mr O, the husband’s mother and DT Pty Ltd as preferential transactions.
The evidence given and the failure to call other evidence in this Court supports the finding that these transactions were shams designed to hide the ongoing control by the husband of all assets and businesses formerly operated by C Pty Ltd for the SH & AM Karbines Family Trust.
Husband’s Superannuation
The husband and wife are both members of the C Pty Ltd Superannuation Fund which is managed by AMP. Exhibit 15 produced by the husband indicated that the withdrawal value of the husband’s superannuation was $17,052 as at the 31 May 2005.
The husband gave evidence on the 1 May 2007 (transcript page 100) that he had telephoned AMP “the other day” and was informed that the account stood at $14,000. In May 2008 the husband produced Exhibit 38, which showed a withdrawal value of $632.09. The husband’s evidence was that AMP had informed him that the reduction was due to the payment of premiums due in respect of life insurance policies. The wife does not accept this.
The husband denied receiving any payment from the insurance as a withdrawal due to hardship grounds. He provided no other information in relation to the life insurance policy premiums, nor documentary evidence concerning the withdrawals.
On the 29 May 2008 the husband was given another 14 days to provide to the Court particulars of the reduction of the AMP Superannuation Fund. He has failed to do so.
The wife asserts that the conclusion should be drawn that the husband has withdrawn the funds for his own use.
Exhibit 38 indicates a superannuation value of $632 but the evidence of the husband does not explain adequately what has happened to the balance of the monies since May 2007. It is therefore appropriate to conclude that the husband has had the benefit of the superannuation which was in excess of $17,000 at the end of May 2005.
Wife’s Superannuation
The wife’s superannuation in C Pty Ltd Superannuation Fund was $19,905 at the end of May 2008. She also has a SL Staff Superannuation Fund of $993. Her current employment which commenced in April 2008 also provides superannuation benefits. The wife estimated the value of one month’s superannuation payment to be 9 per cent of her salary or $240 for one month.
The wife’s superannuation interests are therefore $21,138.
Summary of Assets and Liabilities
Assets
Former matrimonial home at A Street, G $840,000.00
Queensland property $480,000.00
3. G Street, G (subject to order for sale)
half interest of husband and wife $42,500.00
4. M Street, G (subject to order for sale)
half interest of husband and wife $250,000.00
Y Street, G (registered proprietor L Pty Ltd) $450,000.00
6. S Factory (registered proprietor C Pty Ltd (In Liquidation))
Sold and company’s share of proceeds used to reduceWestpac Debt.
7. D Street, G (inherited by wife)
Sold in January 2008 – net proceeds $241,780.00
BF Pty Ltd Loan $45,000.00
SH & AM Karbines Family Trust (Trustees in Liquidation)
10. C Group of Companies assets and liabilities unable
to determine net value.
Total Assets: $2,349,280.00
11. Not included but taken into account generally when assessing
contributions:
(a) rent foregone on Queensland property ($65,000) taking into
account husband’s mother’s contribution of $50,000 gift
and to otherwise assist with property and business.(b) rent not collected for Y Street, G ($56,000).
Superannuation
(a) Husband’s superannuation May 2005 $17,052.00
(b) Wife’s superannuation $21,138.00
Total Assets and Superannuation: $2,387,470.00
Liabilities
Westpac mortgage on A Street, G $320,560.00
Commonwealth Bank mortgage on Queensland property. $252,118.00
3. ANZ Bank mortgage on M Street, G
half of $98,981 $49,491.00
Judgment in favour of Liquidator re Queensland property $65,301.00
Estimate of costs of liquidator for Family Court action $25,000.00
Judgment in favour of Willa $23,446.00
7. Possible claims by liquidators against husband and wife
as directors Not Known
Costs of sale and possible Capital Gains Tax Not Known
Total Liabilities: $735,916.00
Net Assets: $1,651,554.00
Contributions
The wife submits that contributions up to separation should be considered equal except for the husband’s mother’s contribution to the purchase of the Queensland property of approximately $50,000 and the wife’s inheritance from her aunt’s estate. The inheritance from the wife’s late aunt was shortly before the separation and is now represented by the proceeds of sale of D Street, G (sold in January 2008) $241,780. The wife asks the Court to determine the contributions as 65 per cent to the wife and 35 per cent to the husband. The wife sought a further contribution adjustment of 10 per cent as a result of the loss of a significant quantity of stock since the date of separation.
The husband submitted that the contributions during the marriage would have been equal but for:
“The Husband supplied the first matrimonial home, the sale of which was used to purchase the [A Street] residence, and
The husband’s mother’s contribution to the purchase of the Queensland property (approximately
$50,000).The wife’s inheritance from the [Aunt’s] estate is a windfall to both parties, as at that time the Husband asserts there was no discussion of separation, and he actively assisted in readying the house for subsequent use as a rental property.”
(Page 10 of husband’s submission) (The sum of $50,000 in the husband’s submissions appears to have a line through the amount although this may be a mistake and an attempt to emphasise the amount.)
I accept the evidence of the wife that at the time of the purchase of the H Street, G, property the husband provided $20,000. This was shortly before the marriage in 1983 and is therefore approximately 25 years ago.
The contribution by the husband’s mother of $50,000 towards the purchase of the Queensland property should be seen as a substantial gift and brought into account of behalf of the husband.
The wife’s inheritance of the D Street property and $96,000 cash was received after the wife’s aunt died in August 2004 shortly before the separation of the parties in January 2005. The husband carried out some renovations to the property. Some of the money inherited by the wife was spent on these renovations. I take into account that some of the inherited money was spent by the wife on legal fees. The net proceeds of sale of the D Street property inherited from the wife’s aunt is represented by $241,781 in the trust account of the wife’s solicitors awaiting the determination of the Court. This should be considered an asset from which the wife has made the substantial contribution it being a significant sum received as an inheritance from her aunt shortly before the parties separated.
The contributions the husband has made towards the renovations of the property and preparing it for lease should be taken into account but are not as significant as the substantial inheritance received by the wife.
The Court was not required to consider competing claims about the value of the non-financial contributions of the parties as parent and home maker. In the absence of evidence or submissions to the contrary the Court takes into account both parties played a role as homemaker and parent and contributed to the running of the business prior to separation.
The wife seeks to bring into account a further 10 per cent as a result of the reduction in the value of the stock from $690,370.25 (book value) in the C Pty Ltd balance sheet at 30 April 2005 (shortly before the date of separation) to a minor amount of approximately $1,000.
The various books of accounts indicate there was substantial stock at about the date of separation. The husband has not fully accounted for the significant reduction. The husband has also claimed significant debts owing to various suppliers such as NS Company and DJ Company.
There is considerable doubt about whether the husband’s dealings with DT Pty Ltd and Mr T were at arms length. The Court is satisfied that the creation of DT Pty Ltd was a tactic by the husband to avoid bringing the assets of the businesses into account in these proceedings.
In any event the evidence clearly indicates that the husband has had the responsibility for, but also the benefit of, the various businesses since shortly after the parties separated.
The Court does not accept that the wife should bear responsibility for the liquidation of the companies nor the alleged downturn in the profits of the businesses.
The husband has failed to take steps to set aside the judgment for the debt which brought about the liquidation of C Pty Ltd.
The wife has resided in the property at A Street since the separation. This has been a substantial benefit to her.
The husband’s mother has resided rent free in the Queensland property for some years. She has maintained the premises and initially provided funds which were used towards the purchase of the property.
Taking into account the contributions by the husband’s mother, the significant contribution by the wife of the proceeds of sale of the inherited property at D Street, G, ($241,781) (which represents a significant percentage of the net assets of the parties) and the evidence concerning the husband’s dealings with the Trust, companies and businesses since separation, it is appropriate to consider the contributions of the parties as 70 per cent to the wife and 30 per cent to the husband.
Section 75(2) factors
The wife is employed. She is now receiving an income of $518 net per week. Both children reside elsewhere and are now independent. The wife has provided financial assistance to the children.
The husband gave inconsistent evidence about his earnings and employment. His earlier evidence suggested he was only receiving $150 per week from DT Pty Ltd as income for working for them for one day a week. Later he conceded that up until around August last year he was “actually receiving $500” per week but claimed that this was reduced. Under cross-examination the husband admitted earning money installing and repairing air conditioners.
In his final written submissions the husband conceded that his evidence to the Court had been confusing but asserted that his income was “a private nature” and that he would “resist attempts by hostile parties to investigate it further…”. His written submissions asserted that the confusion had arisen because he had tried to be “very protective of my sources of support”.
The evidence of the husband was very unsatisfactory. The Court does not accept his evidence about his income as truthful. The husband has a capacity to earn a significant income based upon his experience and his knowledge of the markets.
Both parties have incurred substantial debts post separation including credit card liabilities and substantial legal fees both in relation to these proceedings and other civil proceedings. There is the possibility that the liquidators may seek to recover funds from the husband and wife based on claims of trading whilst insolvent.
Whilst the husband asserted that his health had been affected by the wife’s actions and the Family Law proceedings, no medical evidence was provided. The age and health of the parties are not considered to be significant factors.
Weighing all of the factors under s 79(4) and s 75(2) I am not satisfied that any further adjustment is appropriate.
The result is an adjustment of 70 per cent to the wife and 30 per cent to the husband.
Assets to be retained by the parties
Both the husband and wife seek to retain the property at A Street, G. The wife seeks to bring into account the figure $840,000 while the husband suggests that the same should be brought into account at a lesser amount. The wife also seeks to retain 50 per cent of the proceeds of M Street, G ($200,509), her proceeds of sale of D Street, G ($241,780), the loan to BF Pty Ltd ($45,000) and her superannuation ($21,138). She seeks to retain assets worth $1,348,427 in total.
The wife proposes that Y Street, G, be sold and that the proceeds of sale be used to discharge the mortgage to Westpac. She further seeks that the Queensland property be sold and, after the discharge of the Commonwealth Bank mortgage and the amount owing to the liquidator (both by way of judgment and costs) be allocated to the husband. The wife proposes that the net proceeds of sale of G Street, G, be allocated to the husband.
The wife also seeks that sums allocated to the husband be retained pending resolution of costs issues.
Otherwise the wife proposes that she resign from any office holding in any of the companies in the corporate structure and transfer any asset relating to the husband or companies provided that he indemnify her in relation to any debts.
The husband proposed that he receive “a 75% split, plus the entire business liabilities of $1,058,966.51, and that the wife receive 25% of the assets, unencumbered by business debts”. The figure of $1,058,966.51 is the total of the debts claimed by the husband to be owing. These include debts to Ms BU ($15,574 and $32,552.36); DJ company ($200,642.20); GY company ($30,000); J Karbines (husband’s mother) ($188,282.30); K Karbines (husband’s sister) ($19,367.18) K Pty Ltd/Mr BD ($60,400); M Kargbines (husband’s father) ($14,000); P Karbines (husband’s brother) ($28,123.57); X Pty Ltd (a company operated by the husband’s brother) ($18,660); … Telco ($4,048.02); S Karbines (the husband himself) ($42,529.77); NS Company ($127,500); the PC Partnership (UK debt) ($31,042.79); TRU Energy ($393.48) and Westpac Banking Corporation ($230,752.23).
The husband also sought to retain as his own property the former matrimonial home at A Street, G, and the property at Y Street, G, together with the property in Queensland and the whole of the interest in the assets of SH & AM Karbines Family Trust, K Pty Ltd, L Pty Ltd, TA Pty Ltd, his superannuation and personal property.
Just and Equitable
The Court gives consideration to the proposals of each party.
Section 79(2) requires that the Court not make an order unless the Court is satisfied that, in all the circumstances, it is just and equitable to make the order. The adjustments discussed above result in the wife receiving 70 per cent of the net assets (including superannuation) and the husband 30 per cent (including superannuation).
Seventy per cent of the net assets including superannuation is calculated as follows:
70 per cent of $1,651,554 is $1,156,088.00
The value of the assets to be retained by the wife is brought into account as follows:
1. A Street, G $840,000.00
2. Proceeds of sale of D Street, G $241,781.00
3. Loan to BF Pty Ltd $45,000.00
4. Wife’s superannuation $21,138.00
Total: $1,147,919.00
Seventy per cent ($1,156,088) less the above assets ($1,147,919) equals $8,169 which will be payable to the wife from the sale of the M Street, G, property.
The assets which will be retained by the husband would therefore be:
1.Queensland property ($480,000 less Commonwealth Bank
mortgage $252,118, less liquidator’s Judgment $65,301,
less estimated cost of legal cost of liquidator Family
Court action $25,000 sub-total liability of $342,419)
Net: $137,581.00
2. Expected half-interest of G Street, G $42,500.00
3. Proceeds of sale of M Street, G ($250,000 less ANZ
Bank mortgage share $49,491, less Willa judgment
$23,446 less amount payable to wife $8,169
sub-total of liabilities $81,106)Net: $168,894.00
4. Y Street, G ($450,000 less amount required to
discharge Westpac Banking Corporation
mortgage $320,560)Net: $129,440.00
5. Businesses and net assets of the entities of the C Group
of companies (including K Pty Ltd, the business name
“K”, L Pty Ltd, TA Pty Ltd,CD Pty Ltd, the business
name C Australia, DT Pty Ltd, together with any
remaining assets of C Pty Ltd In Liquidation), B Pty Ltd
(In Liquidation) and TL Pty Ltd (In Liquidation) and theSH & AM Karbines Family Trust – value not known)
Total:$478,415.00
The total net assets retained by the husband is $478,415 plus the unknown value of the Company Group and Trust assets retained by the husband.
(These figures may alter due to claims for interest and costs).
Taking into account the unusual features of this case, particularly in relation to the lack of accurate information concerning the assets and liabilities of the group of companies operated since separation by the husband, the adjustment on the basis set out above is just and equitable. The retention of the assets sought by the wife is also just and equitable.
On several occasions costs orders have included a direction to await this final judgment. Such orders were made on 4 May 2007; 7 June 2007; 24 October 2007 and 6 June 2008.
For the above reasons I therefore make orders by way of final property settlement between the parties pursuant to section 79 of the Family Law Act;
I certify that the preceding three hundred and fifty three (353) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Dawe
Associate:
Date: 19 December 2008
- AGLC
- Karbines & Karbines and Ors (No. 2) [2008] FamCA 1115
- Case
- [2008] FamCA 1115
- Decision Date
CaseChat Overview and Summary
The primary legal issues before the court were to ascertain the extent of the husband's beneficial ownership of the business, to determine the existence and proof of alleged debts, and to assess the contributions of each party to the acquisition, conservation, and improvement of their property. The court also considered the impact of the wife's inheritance and the husband's mother's contribution to the purchase price of a property.
Dawe J found that the wife's contributions, particularly through an inheritance, were significant, leading to an assessment of contributions favouring the wife by 70% to 30%. The court determined that no further adjustment was warranted under section 75(2) of the Family Law Act 1975 (Cth). The court then made detailed orders regarding the sale and distribution of proceeds from various properties, the discharge of mortgages and debts, the transfer of interests in companies and properties, and the retention of specific assets by each party. The husband was also ordered to indemnify the wife against various debts and liabilities. The question of costs was reserved.
Orders
Orders of the court
1.
That within 28 days from this date the husband and wife as sole shareholders of L Pty Ltd do all things necessary to ensure the sale of the real property at Y Street, G at a price and in a manner to be agreed between the husband and the wife and in default of agreement as ordered by this Honourable Court.
2.
That upon the sale of Y Street the proceeds of sale are to be distributed as follows:
(a) in payment of the agreed costs of sale;
(b) in payment of all monies owing to Westpac Banking Corporation (“Westpac”) to discharge all mortgages, debts, loans or other amounts due or guaranteed by the husband and wife and in particular but not limited to all sums necessary to discharge any and all mortgages secured over Y Street and A Street, G (“A Street”) and all monies owing to Westpac by K Pty Ltd, C Pty Ltd (In Liquidation) and L Pty Ltd to fully release and discharge the wife and the said properties at Y Street and A Street (“the properties”) from all liabilities.
(c) in payment of the balance (if any) to L Pty Ltd.
3.
That notwithstanding paragraphs 1 and 2 of these orders if within 28 days from this date the husband provides to the wife’s solicitors written confirmation and proof of the discharge of the Westpac mortgages over Y Street and A Street and the full release of the wife from any and all claims, monies due, guarantees or indemnities to Westpac and upon written confirmation by the wife’s solicitors of the full discharge the order for the sale of Y Street is to be discharged and the Y Street property is to remain the property of L Pty Ltd.
4.
That within 7 days of the discharge of the Westpac mortgage over the A Street property (whether by action of the husband or sale of Y Street) the husband do transfer to the wife all his estate and interest whatsoever in A Street, G, which property is hereafter declared to be the sole property of the wife free from any claim by the husband.
5.
That upon noting that previous orders of this Court provide for the payment of monies due to the 1st Intervener, C Pty Ltd (In Liquidation) and the option of the liquidator to sell the property at …, Queensland (“the Queensland property”) it is further ordered that if the Queensland property has by this date not been made the subject of contract for sale then it is further ordered that the Queensland property be sold at a price and manner to be agreed between the parties being the husband, wife and 1st Intervener, C Pty Ltd (In Liquidation) provided that the proceeds of sale are to be paid:
(a) firstly, in discharge of any mortgage secured over the Queensland property;
(b) secondly, in payment of monies due to the 1st Intervener pursuant to the order of this Court (including any interest accrued in accordance with the Family Law Act and Rules);
(c) thereafter, any remaining proceeds to stand initially to the credit of the husband in a Trust Account of the solicitors acting for the wife pending any further order of the Court in relation to costs.
6.
That the net proceeds of sale of M Street, G, being the share of proceeds due to the husband and wife be paid as follows:
(a) by payment due to the 2nd Intervener, Mr Willa, of the sum due pursuant to orders of this Court (including any interest calculated in accordance with the Family Law Act and Rules);
(b) by payment of the sum of $8,169 to the wife;
(c) the balance (if any) to stand initially to the credit of the husband in a Trust Account of the solicitors acting for the wife pending any further order of the Court in relation to costs.
7.
That the net proceeds of sale of the property at G Street, G, due to the husband and wife pursuant to the orders of this Court be paid initially to the credit of the husband in a Trust Account of the solicitors acting for the wife pending any further order of the Court in relation to costs.
8.
That any application for an order for adjustment of costs, indemnity for costs or claim for costs of the husband, wife or any intervener in these proceedings be made within 28 days from this date.
9.
That the husband do indemnify the wife and keep the wife forever indemnified with respect to:
(a) all debts and liabilities of the husband;
(b) all or any claim, debt, monies due or payable or alleged to be due and payable by the wife to J Karbines; M Karbines; K Karbines; P Karbines; the Karbines Family Trust; K Pty Ltd; L Pty Ltd; TA Pty Ltd; C (UK) Pty Ltd; TL Pty Ltd (In Liquidation); CD Pty Ltd; DT Pty Ltd; B Pty Ltd (In Liquidation) and C Pty Ltd (In Liquidation) SAVE AND EXCEPT any claim by the liquidator against the wife as director of C Pty Ltd for permitting the company to trade whilst insolvent which relates to any claim arising from trading prior to the 14 January 2005 (the date of separation of the husband and wife).
10.
That upon compliance by the husband with the above-mentioned orders the wife do resign from any office held by her in any of the aforementioned companies or trusts and in particular but not limited to K Pty Ltd; L Pty Ltd; TA Pty Ltd; CPty Ltd (In Liquidation) and do transfer to the husband and/or his nominee any shareholding in any of the said companies or entities and any credit loan account in the said companies or entities which shall thereafter be the sole property of the husband and free from any claim by the wife SAVE AND EXCEPT in accordance with these within orders.
11.
That the wife do retain as her sole property free from any claim by the husband the following:
(a) the wife’s Honda Legend motor vehicle;
(b) the motor vehicle in the possession of the parties’ daughter;
(c) any entitlement to the proceeds of sale of the motor vehicle formerly in the possession of the parties’ son;
(d) all of the wife’s superannuation entitlement or interest;
(e) the net proceeds of sale of D Street, G;
(f) the wife be entitled to claim as her sole property free from any claim by the husband all monies due to the parties by BF Pty Ltd;
(g) all items of furniture and household effects, chattels and other personal property in the possession of the wife.
12.
That subject to compliance with the above mentioned orders the husband do retain as his sole property free from any claim by the wife:
(a) any interest of the wife in the Karbines Family Trust, K Pty Ltd, L Pty Ltd, TA Pty Ltd, together with any assets remaining upon discharge of the liquidation of B Pty Ltd and C Pty Ltd;
(b) husband’s superannuation interest or entitlement;
(c) any motor vehicles or motor cycles or motor cycle parts in the possession of the husband;
(d) all items of furniture, household effects, chattels and other personal property in the possession of the husband.
13.
The question of costs and the payment of orders for costs is reserved to a date to be fixed.
Liberty to apply for consequential orders.
Background
Background to the litigation
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Evidence
Evidence Before The Court
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Decision
Reasons for decision
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Ratio Decidendi
Legal Principle Established
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