Katic and Katic (No. 3)

FAMILY COURT OF AUSTRALIA

KATIC & KATIC (NO. 3)

[2014] FamCA 750

FAMILY LAW – PROPERTY SETTLEMENT – Proposed orders deal with property but giving the Commissioner an opportunity to be heard before division is implemented – Claim by son of the parties based on equitable estoppel rejected because of the nature of the representation but also lack of detriment.

Family Law Act 1975 (Cth)

Bevan and Bevan [2013] FamCA 116
Commonwealth v Verwayen [1990] HCA 39
Donis v Donis [2007] 19 VR 577
Flinn v Flinn [1999] VSCA 109
Foley & Anor v Foley [2006] QSC 347
Georginas v Kostrati [1998] 49 SASR 371
Giumelli and Giumelli [1999] HCA 10; 196 CLR 101
Grundt v Great Boulder Pty. Goldmines Limited (1937) 59 CLR 641
In the Marriage of P and P (1985) FLC 91-605
Kouper and Kouper [2009] FamCA 1080
Malpass and Mayson [2000] FamCA 1253; (2000) FLC 93-061
Omacini and Omacini (2005) FLC 93-218
Sidhu v Van Dyke [2014] HCA 19
Stanford and Stanford [2012] HCA 52; (2012) 87 ALJR 74
Thompson v Palmer (1933) 49 CLR 507
Townsend and Townsend [1994] FamCA 144
T and T (1984) FLC 91-588
Waltons Stores (Interstate) Limited v Maher [1988] HCA 7; (1988) 164 CLR 387

APPLICANT:

Ms Katic

RESPONDENT:

Mr Katic

INTERVENOR:

Mr B

INDEPENDENT CHILDREN’S LAWYER:

FILE NUMBER:

MLC

7934

2010

DATE DELIVERED:

10 September 2014

PLACE DELIVERED:

Melbourne

PLACE HEARD:

Melbourne

JUDGMENT OF:

Cronin J

HEARING DATE:

28, 29, 30 April 2014

REPRESENTATION

COUNSEL FOR THE APPLICANT:

Mr Laidlaw

SOLICITOR FOR THE APPLICANT:

Boon Legal

COUNSEL FOR THE RESPONDENT:

Mr Levine

SOLICITOR FOR THE RESPONDENT:

Allan McMonnies

COUNSEL FOR THE INTERVENOR:

Mr Sala

SOLICITOR FOR THE INTERVENOR:

James McConvill & Associates

COUNSEL FOR THE INDEPENDENT CHILDREN’S LAWYER:

Mr Whitchurch

SOLICITOR FOR THE INDEPENDENT CHILDREN’S LAWYER:

Agricola Wunderlich & Associates

Orders

That the husband forthwith do all such acts and things necessary to transfer to the wife all of his interest in the property at I Street, Suburb S upon a trust for its sale.
That for the purpose of paragraph (1) and the trust for sale thereunder, the husband provide to the wife vacant possession by no later than 15 November 2014 or such other date as the parties agree.
That subject to the order immediately hereafter, the wife be responsible for the organisation of the sale including the appointment of the agent and the conveyancer together with the determination of the advertising costs and agent’s commission.
That upon the settlement of the sale of the property, the net proceeds be applied as follows:
(a)First, to pay all sale costs, agent’s commission and expenses of the sale;
(b)Secondly, to discharge the outstanding tax liabilities of the husband and wife as set out in the reasons for judgment this day; and
(c)Thirdly, to pay the balance thereafter to the wife.
That the Registry Manager of the Family Court of Australia at Melbourne (Melbourne Registry) provide the Australian Taxation Commissioner the following:
(a)A copy of this order;
(b)A copy of the reasons for judgment this day; and
(c)A letter advising the Australian Taxation Commissioner that unless an application to intervene and seek alternate orders (pursuant to s 79(10) of the Family Law Act 1975 (Cth)) by 15 November 2014, the only proceeds of the sale of the I Street property to be paid directly to the Australian Taxation Commissioner will be those set out in paragraph (4)(b) above.
That the husband do all such things and sign all such documents as may be required to transfer to the wife (in its current state of completeness) one of the units at E Street, Suburb F.
That the application by Mr B for equitable relief as a result of his intervention in these proceedings is dismissed.
That the application by the wife for spousal maintenance is dismissed.
That each party otherwise retain the assets in their respective possession to the exclusion of the other party.
That save as to any intervention by the Australian Taxation Commissioner referred to in these orders, and any other application as to costs, all applications of the parties are otherwise dismissed.
That should any party seek costs arising out of these orders, such application be made by written submission and filed and served by no later than 10 October 2014 with such submission being endorsed with the fact that it has been so served on the other party and any recipient of such submission have until 24 October 2011 to file and serve any response and such response be endorsed with the fact that it has been so served on the other party and upon receipt of any such application for costs, it or they be determined in chambers.

IT IS CERTIFIED:

That pursuant to Order 19.50 of the Family Law Rules 2004 it was reasonable to engage counsel to attend.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Katic & Katic (No. 3) has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLC 7934 of 2010

Ms Katic

Applicant

And

Mr Katic

Respondent

And

Mr B

Intervener

Independent Children’s Lawyer

REASONS FOR JUDGMENT

The parties to this financial dispute are Mr Katic (“the husband”), Ms Katic (“the wife”) and Mr B (“the son”).
Among a number of disputed issues, three main questions arose. They were:
(a)Should the Court accept the parties’ indications of their respective tax liabilities where there is clear evidence of tax fraud?
(b)Does the son have any entitlement to the relief he seeks from his parents (or should it be just the husband) either by way of the transfer of a property and/or money compensation?
(c)What is the appropriate division of the remaining assets as between the husband wife?
As part of that third question, the Court has to consider the legal and equitable interests of the husband and wife in the property of either of them.
The easily recognisable property of the husband and wife is their former home at I Street, Suburb S and two unfinished units at E Street, Suburb F. These properties are not encumbered and their values were uncontroversial. I Street is owned jointly but the registered proprietor of the E Street units is the husband alone. Both the wife and the son claim equitable ownership of one or both of the units.
By a statement of claim filed in this Court on 28 June 2013 after being joined as a party to the proceedings as a result of his intervention, the son claimed one of the two units.
This Court is not a court of pleadings but it was clear that the son was asking that his claim be determined within the parameters of what he set out in that statement of claim and, more importantly, the evidence he presented in support of it.
The relevant part of the son’s pleading alleged:
(a)That in his presence, but as a child, the husband and wife discussed building the two units for the purposes of giving each of their children one of the units; in the case of the son, his unit would be transferred to him when he married;
(b)That whilst at secondary school in Year 10, the son was promised by the husband that if he worked for him without wages, one of the units would be left to him; and
(c)That the son did not claim wages nor was he paid any and that was a fact known to the wife.
The son alleged the unit was held on trust for him by the husband and wife (albeit the Certificate of Title to the E Street property is in the husband’s name alone). The son relied also upon estoppel principles because of the promise he said was made to him.
The statement of claim also pleaded that he had been told by the husband and wife that $200,000 found by them in a taped box given by his paternal grandmother to the husband in Country G in 2003, was a gift to him and was to be given to him upon attaining his majority. When the trial began, counsel for the son announced that the claim was no longer in issue and was abandoned. That was sensible in hindsight.
The evidence in this case was confusing and controversial and none of the parties was a satisfactory witness upon whom I could safely rely. The following reasons indicate why.

The Australian Taxation Office

The parties conducted a partnership until their separation. For reasons better explained below, the partnership understated its income for a number of years. It is possible, if not likely, that it also claimed business deductions improperly as well.
After the parties separated, the partnership accountant wrote to the Australian Taxation Office advising of undeclared income. It was not controversial that amended tax returns were then lodged with the Australian Taxation Office for the relevant years. Presuming, as I must, the amended returns were as a result of the self-assessment system and no investigation has occurred, I have no confidence that the assessments accurately reflect what has happened here.
The parties’ positions varied about what should be done with the ultimate tax liability. In the wife’s case, she wanted a property sold whereas the husband remained silent. It was known during the trial that the husband’s amended returns had been lodged but the wife’s position was, at best, vague. There was some clarification of all of this when the solicitors for the husband and the wife provided the new tax assessments after judgment was reserved. The respective liabilities were therefore common ground.
The husband’s solicitors sent to my associate and apparently copied into the solicitors for the wife, a copy of the husband’s assessment. A letter dated 17 June 2014 from the Australian Taxation Office addressed to the husband said that the returns from 1 July 2004 to 30 June 2009 had been “amended as per information received by your accountant”. This information was described as “voluntary disclosure”. With an administrative penalty and with an “estimated tax liability”, the husband is to pay $70,392.25.
In July 2014, both parties asked that the wife’s assessment be taken into account. The letter said that the Court was to be “informed” about the assessment. It provided for a tax claim of $104,260.71 against the wife.
The two documents warrant a comparison as the husband and wife were partners. The capital debt disparity is large but that seems to arise because of interest. The husband’s document said that it had been decided by the Australian Taxation Office to “remit all shortfall interest charges”. One reason, it was explained, was that the “taxpayer in good faith” had made “an unprompted voluntary disclosure”. It would appear that the Australian Taxation Office is prepared to accept the self-assessment. Because of the evidence and my findings that follow, I have little confidence that the figures are accurate particularly as they were prepared on the voluntary disclosure basis and only concern undisclosed cash received.
In T and T (1984) FLC 91-588, the Full Court held that where the evidence established breaches of Commonwealth laws, a court was entitled to bring those breaches to the notice of the Commonwealth Attorney-General. Indeed, I see no reason why, if a notice is to be given, it ought not be directly to some other appropriate prosecuting authority. In In the Marriage of P and P (1985) FLC 91-605, Lindenmayer J found that offences had occurred. The offences in that case related to tax evasion. His Honour thought that a federal court exercising the judicial power of the Commonwealth had a duty to protect the revenue of the Crown in the right of the Commonwealth. All of that was contemplated again by the Full Court in Malpass and Mayson [2000] FamCA 1253; (2000) FLC 93-061. Having reviewed all of the authorities, the Full Court said that it did not necessarily follow that the Court was always under a duty to report the commission of “possible offences” although it clearly had the power to do so. The Full Court said that it was a question of degree so that in cases of minor irregularities, it was unreasonable for the Court to burden itself with the duty to report. The Full Court thought that different considerations might apply in respect of more blatant and substantial irregularities. There is little doubt that the issue should be assessed on a case by case basis. Some courts have taken a strident view in relation to tax fraud or tax evasion saying that it is the duty of the Court to draw the evidence to the attention of the government (see Georginas v Kostrati [1998] 49 SASR 371). The distinction between the approaches relates to the degree of the fraud and also whether or not the evidence establishes the commission of an offence as distinct from its possibility. In this case, there is no doubt that this was a blatant endeavour by the partners to avoid the payment of tax through a record keeping system which would only disclose traceable payments. The argument between the husband and the wife was about who was responsible. I appreciate that the Australian Taxation Office relies heavily upon self-assessment but the evidence indicates a concession by the parties of taxation evasion of their revenue but also I consider there is the possibility (and it can only be put that way at its highest) of the claiming of deductions for expenses which were unrelated to the earning of the income stream. On that basis, I consider it is the Court’s duty to draw the evidence to the attention of the Australian Taxation Office. There is a further reason as to why this matter should be reported and that is that it is manifestly unjust to the Australian public for two warring parties to seek the assistance of a publicly funded arm of government to decide their dispute according to law whilst expecting the Court to turn a blind eye to the fact that it is probable that some of the divisible spoils do not morally belong to the parties. It is also ironic that s 79(10) of the Act requires a court to contemplate the position of creditors who are entitled to be considered where there is a possibility that they would not be paid; Thus, the Australian Taxation Office should not be ignored.
Despite ordering repayment of due and unpaid tax, because of my concern about the accuracy of the parties’ self-assessment, I propose to give the Australian Taxation Office an opportunity to claim any further amount due to the Commonwealth. If the Commissioner remains silent, I shall divide the parties’ property. Recovery of any currently unclaimed tax liability can then be a matter for the Commissioner.

Background

The applicant in the proceedings was the wife. She is 42 years of age. The husband is 46 years old. They were born in Country G where they met in 1988. They migrated to Australia in 1998 with, at that time, their only child, the intervening son. He was born in 1992 and is now 21 years old.
The son attended local schools and assisted his father with work on weekends and during holidays on what was to become the parties’ home. Although it was something of a controversy, I find he wanted to leave school during Year 10 and did so at the end of the 2008 year. There was some confusion about whether it was 2008 or 2009 but (and the son seemed oblivious as to which) I put that down to his memory. The husband produced, and attached to his trial affidavit, a certificate showing the son completed Year 10 in 2008. The son began work at the start of 2009.
In the early years of the marriage before coming to Australia, the husband and wife both worked as labourers, lived with the husband’s parents and amassed no property. They arrived in Australia with virtually nothing.
On arriving in Australia, the wife worked as a cleaner and the husband as a labourer in a business where he learned his present trade.
Without English language skills, the parties were assisted with translations by a friend from a church they joined. They received donations of furniture and lived initially on Centrelink benefits. They attended language classes. Their friends obtained employment for the husband which eventually became contract work.
Only a year after arriving, the husband started his own business. So financially rewarding was it that a partnership with the wife was created. Ironically, in the light of how the partnership did not declare a significant portion of the earnings, the wife described that as being done to minimise tax liabilities.
The wife’s task was to undertake the administrative functions of the new business and to do that, she completed a small business course at a university. The parties’ accountant told the Court that the wife’s bookkeeping skills were apparent. It was the wife who wrote cheques for payments of materials.
In 2001, a second son, C, was born.
In April 2010, the marriage came to an end when the wife left the parties’ home taking C with her. By the time of separation, the son had worked for his father for just over 15 months.
The modest beginning for the partnership led to various controversies all of which were about money and as to who was telling the truth.
In respect of findings throughout these reasons, I have determined issues on the balance of probabilities.

The parties as witnesses

Every case involving language translators is difficult. All parties relied upon translations both in evidence and in simply participating in the court process. Objection was taken by the husband’s counsel to the wife’s use of an interpreter. It was said the wife had been refused an interpreter in family violence proceedings in the Magistrates’ Court. I ruled she could use one. It is an access to justice issue and Australia is a signatory to the United Nations Convention on political rights which includes the right to having evidence in court proceedings translated.
Despite having been in Australia for more than 20 years, the wife resorted to the translator’s assistance at times. I do not find she abused the right nor was she disadvantaged by the process. If she had the advantage of understanding the cross-examination whilst the phrase was being translated, in this particular case, there was little forensic assistance to her because all of these issues had been trawled over in affidavits, discovery of documents and in cross-examination in the Magistrates’ Court.
Having said all of that, the wife was evasive as a witness. She expressed fear of the husband. There is justification for that fear. An intervention order was made just after separation and others have been made since. The wife’s desire was to keep her residential and employment details confidential. Despite that protection being provided in giving evidence, the wife was still evasive about what had happened to money she took at separation. Of $200,000 that she withdrew from the parties’ bank, none apparently remains.
The absence of clarity as to what happened to that money exacerbates the difficulty in treating what she has paid for legal fees, living expenses, chattels she acquired and simple things like medical treatment and holidays. Because of the long lead-in time for this trial and the various interlocutory hearings, I do not accept she was unable to be precise. I find she was deliberately evasive and unco-operative.
In a summary of argument filed on 12 October 2013 by the husband’s solicitor, it was asserted that the “Asset pool” included $417,679 that the wife “took from the business” during the marriage that she had not declared for taxation purposes. This was said to be the undeclared or “omitted” income as calculated by the parties’ accountant. The evidence did not support an assertion that the wife took that money. The parties certainly did not declare all of their earnings but I find that the only evidence relating to money “taken” by the wife was the sum that she removed from the bank account unilaterally at the time of separation. The husband called that stealing. There was hypocrisy in his statement.

The wife was also cross-examined about property she owned in Country G. She could not identify the details nor confirm a picture of a property that the husband said was hers. As to precisely what portion of the property she owned, I am uncertain. Knowing the husband’s case was that she had provided financial assistance to her extended family, this evidence was important if for no other reason than for her own credibility. Her financial statement showed no such interest but she conceded she had small parcels of land overseas. She was evasive and responded to questions by simply saying that her answer was whatever was written on “the paper”. I understood that to mean that I should rely upon her affidavit. I cannot.
The wife filed an affidavit in reply to the husband’s affidavit in which these assertions had been made by him. The wife did not deny the assertions.
Another example of the wife’s dishonesty was that in cross-examination, she conceded she had lent a sum of $8000 to a woman she described as a friend she met in a refuge. She conceded that that had occurred in November 2012 and she had not been repaid that loan by that woman. That was not referred to in her financial statement at all. This approach to candour was worrying. I could not get a sense of her true financial position.
It was the wife’s case that the husband controlled her and dictated what income was disclosed to the Australian Taxation Office. Despite the fear that I accept the wife has of the husband, I find the taxation dishonesty was a joint enterprise.
For her part, the wife wrote the amounts of income that were declared into a ledger which was produced to the accountant, but other workbook records were maintained by the wife. These were also produced in evidence indicating a careful delineation between cash and cheques but just who wrote what in those books remains unclear.
The husband’s understanding of the English language was not to the standard of the wife. In the Court, he relied entirely on a translator. His case was that he did not understand the taxation documents he was asked to sign by the accountant. The accountant told the Court that he had minor discussions with the husband. He described them as being limited to conversations with “yes or no” responses but I understand that to mean he asked questions and obtained those answers. When the accountant was cross-examined about the declaration on the partnership return as well as the personal income tax return, he simply said that the husband signed them.
When challenged, the accountant responded that he thought the husband understood what he was signing but curiously then said that the husband’s interest (as far as tax obligation was concerned) was in the “bottom line”. By that, I inferred the accountant had no doubt the husband understood the profit he was declaring as well as the modest tax on it. That being the case, even absent an ability to read words in the tax document, there can be little doubt that the husband understood from year to year what his profit was and what his taxation liability was as well. It was certainly clear he knew he was not declaring all the money he was making.
In the son’s evidence, he said he watched the wife collect money for work done by his father. He said if a bill needed to be paid, the wife drew the cheque but it was then signed by the husband. That was a curious position for a partnership where it was asserted that the wife was the record keeper. The son also saw his father hand over money to the wife to deposit in the bank so there could be no question about the husband’s understanding of how much work was being done and how much money was being paid and received. The son gratuitously recalled an unidentified occasion when the husband asked the wife why the profit was not reflected in the bank reconciliations and statements. This was a reference to his father who had espoused not understanding the figures in his own tax return and had nothing to do with the banking.
I find the husband knew that the profit as disclosed to the accountant, was much less than his actual earnings. The husband cannot rely upon ignorance to avoid responsibility. Thus, I do not accept his evidence and therefore his case, that the wife was solely responsible for this fraud on the Australian public.
Below, I shall turn to the “shoe box” money issue which I have said was abandoned. This evidence of the husband about cash brought into Australia was, I find, an attempt to explain how so much cash was awash in the parties’ household in circumstances where large undeclared income was being received. For the same reasons as I set out below (as to why I reject the son’s credibility), I also do so in respect of the husband.
The absence of confidence in the evidence of all of the three parties leaves me in a position where unless a statement about a particular fact is corroborated by documentary proof, I would not accept the evidence of that person alone.

The son’s evidence

The son’s evidence was largely, but not entirely, directed to his claim for relief concerning his reliance on the promise of the husband. He supported the evidence of the husband as well. He relied on two affidavits. In cross-examination however, he admitted he had not mentioned having received a large sum of money from his father. When challenged about why he had not corrected his evidence when he began his case, he said he had not been paying attention despite being in the courtroom as a party. That statement alone gives me little confidence about the accuracy of his evidence.
There is no doubt the son felt an obligation not to seek wages but I shall deal with that claim separately. As a witness, he was assisted by an interpreter to whom he resorted on rare occasions. Sadly, he was aligned with his father to such an extent that there is now no relationship with his mother. Nothing in the evidence suggested he had not been cared for and raised appropriately by the wife. His disdainful approach to his mother arose out of his allegiance to the husband and his subjective view that the wife had stolen money from his father’s business. That that money might have belonged to her as a partner seemed to escape him and that, along with his constant reference to the wife as “she” or “her”, tainted his objectivity.
For reasons which were not apparent (and, as the affidavit was drawn by a lawyer, should not have been obscure) the son deposed to incidents relating to his mother having been arrested for “shoplifting” in 1998 and to her admission in 1999 of having stolen two bottles of champagne she took from a home that she cleaned. Whilst the wife did not respond to the “shoplifting” allegation, she denied the second. What conclusion the son would have me draw other than as to the wife’s credit, was not stated.
I have taken into account the son’s age and his lack of education along with his constant association with his father, but his lack of objectivity and lack of candour meant that he only saw his and his father’s perspective. One such example can be seen in what was described as the money in the shoebox. This particular incident damaged the son’s credibility.

The money in the shoebox

I have already mentioned that the son (and the husband) abandoned the claim for a sum of $200,000 said to have been a gift from the husband’s mother for the son. That would have been the end of the matter except that the evidence was before the Court and it was relied upon. I deal with it on that basis.
The husband’s evidence was that in 2003, whilst in Country G, his mother handed her grandson, the son in these proceedings, a shoebox containing $200,000. He said his mother told him this parcel was to be opened on returning to Australia. Using language in the third person in his affidavit, the husband said the box was opened in Australia and a note was found addressed to him from his mother with a request to give the $200,000 in notes in the box to the son. It was not explained why the child C was excluded from all of this, he having then been born. The husband’s explanation for the gift was that his mother wanted to qualify for a pension in her native land. The money was said to represent his father’s savings when he had worked in Germany. How it could be converted to Australian dollars could not be explained although evidence was given that the parties had travelled within Country G for the purposes of exchanging Australian dollars themselves. The very clear inference was that no-one knew precisely what was in this box until the parties arrived in Australia. How $200,000 in notes got into the box remained a mystery.
Given the size of the amount, the story is implausible. The husband’s parents were never in Australia and otherwise were apparently not significant property owners. Importantly, the husband said that after opening it, the son kept the money in a box with his valuables except $50,000 which the husband and wife took from the box and spent upon their arrival back in Australia.
The evidence about a $200,000 deposit in the Commonwealth Bank in December 2009 was contentious. The wife said $150,000 was from cash stored in the house and $50,000 came from the partnership account. The husband’s evidence in chief was somewhat obscure but I understood his long paragraph (43) in reply to the wife’s evidence to say that the deposit came from the shoebox. The shoebox originally was said to have been $200,000 but the husband had taken $50,000 for business purposes so it had to be replaced. The position became more confusing when the husband was cross-examined because (contrary to what the wife seemed to assert) it was put to him that the $200,000 came from three sources. First, an earlier $100,000 term deposit, secondly $50,000 from the business account and thirdly, $50,000 cash. The husband seemed to agree but he was then asked whether this was the shoebox money and he again agreed. When it was suggested to him that he had been wrong in his affidavit (paragraph 43), his response was that it was a “mistake” with “the solicitors’. He then maintained that the shoebox money remained in the container from 2003 save for the $50,000 that had been taken for the business.
All of this seems implausible. Why would not someone want to earn interest on the gift? Why not put it in the security of a bank rather than under the bed? These questions might have been answered by the husband’s suspicions about banks but the agreed tax fraud whereby significant cash was retained in the home is the more plausible explanation. That is strengthened by the wife’s evidence about the Country G trip.
In her affidavit in reply, the wife said that she had gone to Country G in May 2003. She denied any shoebox was given to the son by the paternal grandmother. She denied the husband’s grandfather had worked in Germany but said his father had. She noted that the paternal grandmother did not have to divest herself of property to receive a pension and indeed, said she was entitled to that pension in 1999.
With all of that apparent conflict in the evidence of the husband and the wife, the son said that in or about 2003, his grandmother gave $200,000 to his father “to hold on trust for my benefit until I was an adult”. Those words although given in evidence by the son, were clearly the language of a lawyer. Much of what followed in the son’s evidence was clearly a reconstruction. What was missing was any evidence from the son supporting the husband’s version that the money was kept by him rather than by the husband. Indeed, he said that “my father has now transferred the money to me as I am an adult”. Thus, the son maintained he had received and retained the shoebox money and the husband said the deposit in the bank was from savings. The wife said the deposit was money hidden in their home. The varying and various versions are confusing and troubling.
The son attached to his affidavit a statement from the paternal grandmother witnessed by a notary public. The statement is dated February 2002. It said the $200,000 was given to the husband in 2001. The notary public signed the document on the same day in 2002.
The evidence of the husband and the son was that this document was inside the box when they arrived back in Australia in 2003. The interpretation they would have the Court accept is that all this was prepared a year before the husband and wife arrived in Country G. Even allowing for the language difference, it stretches credulity to accept that the tense could refer to 2003. The words used referred to “during the period of the year 2001” are clear. The translation refers to the son as being “only ten years old”. The past tense was used. In February 2002, the son was nine years of age.
In 2003, when the parties were in Country G, the son was ten years old.
To compound the problem, in cross-examination, the son said the money was given in 2003 but that could also have referred to the intention rather than the delivery. Even as late as April 2014, the husband maintained the money came from his mother. I do not believe him.
There was also considerable controversy about the absence of the original document in the shoebox and the poor quality of the photocopy. If he could have been called, the notary public was not. The son’s explanation was that the notary had destroyed documents but that does not mean his evidence might not have been helpful. It was a crucial omission.
There is no other evidence to explain the date discrepancy between 2001, 2002 and 2003. There is no doubt the husband and wife were in Country G in 2003 and not otherwise.
It was the wife’s case that the document was concocted. As no other plausible explanation for the discrepancy was proffered and I have already indicated my reticence about accepting anything that the parties say, I accept it was concocted. The son’s alignment with the husband explains the blind acceptance of him relating to the husband’s story. Nothing in his evidence indicated that he had clear knowledge of what had occurred in that time many years ago. The absence of objectivity severely damaged the son’s credibility.

The accountant Mr P

The accountant of the husband and wife until separation was Mr P. He is a qualified accountant. He swore an affidavit in support of the husband’s case and I deal with his evidence here because I do not accept the accuracy of his blind faith that everything he was told was as he portrayed it in the tax returns he prepared.
Mr P explained that he was given the bank statements which he reconciled. I am not sure how he did that. He was given the BAS documents which had been prepared by the wife. He described the third source of information as a cash book. That book was not tendered in evidence. The wife described the existence of such a book. Mr P said the book was in the wife’s handwriting and showed columns of expenditure. He principally dealt with the wife. He showed her how to do the BAS documents.
When told in cross-examination that the husband had said that he had not known of all of this tax detail over the years, Mr P’s retort was that the husband signed the declaration which said that he had the evidence to support the information in the taxation return. Mr P clearly did not pursue an examination of the minute details of such things as invoices. Having heard the evidence of Mr P, I conclude that he had little doubt that the husband understood the figures involved.
For Mr P to lodge the return other than with the declaration signed by one of his clients would have been professionally irresponsible. What was curious though was that it was the husband who signed the partnership return even though the wife was also a partner and Mr P did not seem to have any difficulty with her language communications. That is particularly so where the declaration refers to significant sanctions for false information.
The partnership, as distinct from the individuals, declared taxable income in the following years:
2004  $24,000
2005  $40,000
2006  $38,000
2007  $56,000
2008  $54,000
2009  $37,000
An examination of the books (other than the cashbook) tendered in evidence at various times showed large amounts of money being received.
Whilst the declared sums of partnership profits were modest, that was so because of the deductions claimed. For example in the 2005 year when the profit was $40,000, the revenue was $206,000. The deduction for “other expenses” alone was $158,000. If, as I accept, there was significant unbanked money, it must mean that the revenue was much higher than $206,000.
Also, if the taxable profits before distribution were so modest, how did the parties afford to build their now unencumbered home and the unencumbered E Street units? Whilst they clearly did not pay for their own labour, the husband’s evidence was that there were contractors used on the site. How were they paid and how were they dealt with in the tax returns if at all? In addition, the materials would have had to have been paid from the taxable profits before distribution. If the parties were building their own home or indeed the two units, if that occurred from after-tax profits, how was it undertaken with such modest declared incomes? How did the parties support themselves and two children with such limited funds whilst paying for contractors and materials? With all of that, how did the parties manage to pay their tax? It would appear that the tax that was paid was nominal because of the income splitting arrangement that was made available to them by Mr P.
Mr P said that it was conceivable that all of the materials used to build the home and the units had been claimed as deductions but he did not check any of the invoices. As he said, if other funds were being used for expenses, he would not have known about it but then, nor did he ask.
It was only after separation that Mr P went to the husband’s home and there found books he had not previously seen that indicated to him that there had been a gross under-disclosure of income. He wrote a letter immediately to the Australian Taxation Office. But even at that point, Mr P had not contemplated how the parties unencumbered assets had got to the level they had. No balance sheets were produced so I am unsure how Mr P was treating the E Street units. The evidence of the husband was that the units were to be rented out upon their completion until disposed of to the two sons. The disposal of the son’s unit was not to occur until he married and the child C is still very young. Mr P did not inquire about how the rental of those properties would be handled. He did not inquire how the material for the building of the units and also the home were so described. I do not know whether the parties’ assets were built with material the cost of which was deducted for tax purposes.
Thus, whilst it may be that Mr P was not the conscience of the Australian Taxation Office, he did not impress me as having seriously challenged the truthfulness of the tax affairs of his client. He too signed the returns as agent on the basis of the information provided but his attention to detail was peripheral. He had retained no notes of clients’ instructions or conversations.
Mr P was pressed about a broad guess as to what amount of money might be outstanding to the Australian Taxation Office. Understandably, he was unsure but he thought the debt would not be under $160,000. He was right.
In his written evidence, Mr P supported the position of the husband that the wife was the person responsible for the fraud. He made clear the wife was the bookkeeper. That partisanship became evident too from cross-examination of the husband. The husband said that Mr P had lodged an amended 2012 return indicating that there were “issues” about the “ex-wife”. He said the return was done on his income.
Whilst Mr P thought the wife might have had the skills to do the books, he also thought the husband knew exactly how much he earned. If he thought that the level of the husband’s understanding was poor other than as to basic profit and tax, why did he have the husband sign the returns? He knew that the wife was a partner and she had prepared the financial documents he relied upon. Here, the wife alleged that there were discussions with Mr P about how much tax should be paid. That is, the wife alleged that the accountant was prepared to work backwards for the purposes of determining what to declare. Implausible though that might seem for a professional, the evidence of Mr P indicates to me that he was not troubled about the accuracy of financial information. He said the bank statements and the book he was given, balanced. Looking at the records tendered, that could only occur if he accepted that what was paid out was a genuine business expense to earn the income. He knew that at least one large deposit of cash had been made. I find it difficult to accept his evidence about the books balancing. Since the wife left, Mr P has looked after the business affairs of the husband but it seems he has now begun acting for the son as well. The evidence of both the husband and the son would have me accept that Mr P now does the returns and indeed, makes decisions to help them. One of those appears to be setting-up the son as a contractor and claiming a deduction for that in the husband’s books of accounts.

Mr P was at pains to point out that he prepared documents from what he was instructed but the knowledge of the husband and the son about what Mr P was doing now, would suggest otherwise. It came to light that the current construction of the returns was (at best) artificial and neither the husband nor the son knew anything about the son being named as a contractor. This leaves me with doubts about what Mr P said was the accuracy of the previous returns. The wife’s evidence was that there was discussion about what tax the partners were prepared to pay. That was denied by the husband but he (and the son) left all of the structure and planning of the tax returns to Mr P. Whilst it might be legitimate to minimize the tax, the client should surely understand how that operates. In this case, that is particularly so where the son was claiming he had received no wages. It seems he turned a blind eye to the contractor concept.
Mr P knew or should have known that the son was not being paid as a contractor or employee even if (as it now appears) the son was paying or having paid for him, the relevant tax upon the deduction for the payment described as “contractor”. The husband acknowledged that Mr P “mentioned” something in 2012 about paying the son.
Mr P’s evidence was largely unhelpful in that it suggested the only consideration that the Court need worry about was the understatement of income. Even on that, his evidence was limited to what he observed in books which would have to be taken to be unreliable. On the evidence of the husband about a lack of understanding of what he was signing and more recently about the contractors’ deduction (to which I shall shortly come) in 2012, the professionalism of Mr P is concerning. To point to a declaration signed by a tax payer whose English language skills were as limited as Mr P understood them to be, as a defence to say he had no responsibility for the accuracy of the information provided to the commissioner, is perplexing. Where is the inquiry? Where is the professionalism? If a profession is to be defined as one involving more than manual labour and the agent is simply the conduit of the tax payer by filling in computer forms, the Australian Government should examine that role.
The evidence of Mr P convinced me that the Court could not rely on the income position of the husband. It also raises doubts about whether the son has been working without wages even if he maintained he was not being paid. It raised the question of how his position of contractor is reconciled with his claim of not having received wages. It also gives rise to doubt as to what cash the parties have to divide as an asset.

The controversial issues

The son’s claim

All parties acknowledged the jurisdiction of the Court to determine the claim for relief by the son. The statement of claim defined the issue. Relevantly, paragraph 16 set out as a material fact the following:
The son was present when [the husband and the wife] discussed that the [husband] would pull down the house at [E] Street to build two town houses and one would be for the [son] when he got married and the second for [the child C].
In paragraph 17, the son alleged as a material fact as follows:
In 2008 at the age of 16 [the son] ceased attending secondary school where he was then in Year 10 and decided he wished to work with his father [the husband] [in the husband’s trade]. He had been promised by his father that if he worked with him and not claim wages, one of the two townhouses he was building at [E] Street, [Suburb F] would be left to him [grammatical errors have been included].
This allegation did not accord with, nor was it supported by, the son’s evidence.
In these proceedings, the son claims one of the units as an owner. It is unnecessary for me to determine which of the two units should be Court’s focus notwithstanding it would appear that each has a different title and the son at various times has equivocated on which one. To use his words, one of the units should be excluded from his parents’ “matrimonial pool”. Having heard his evidence, I doubt very much whether he had any hand in the drafting of the affidavit that was his evidence in chief. Be that as it may, he claimed ownership or in the alternative, money compensation, as an owner in equity requiring his parents to make good his entitlement if he is not to have the unit.
There are some curious features of the claim. First, the legal title holder and registered proprietor is the husband yet the claim is against both parents. It is apparent from the evidence that the husband is now willing to transfer the title to the son but the wife is not.
For her part, the wife also sought that there be an alteration of the interests in the units in her favour and argued that it was not just and equitable to ignore her claim notwithstanding the husband was the registered proprietor. She claimed an equitable interest by virtue of her contribution both financially and non-financially to the acquisition and conservation of the units. It is not necessary for me to examine that issue in depth as it was not part of the husband’s case that it was not just and equitable to make an order altering the interests of the parties’ in various properties. The very fact that the son sought to bring his claim against the wife supported by the husband, indicated that all parties recognized the wife’s legitimate interest in the units.
The wife who denies the son’s entitlement, has a caveat on the properties which preclude the husband from transferring any of the units.
The husband also wanted one unit excluded from the calculation of the division of property between himself and the wife. Excluding the unit from the property of the husband and wife could only occur if the son was shown to be its owner. The son’s claim was that a trust had arisen by virtue of the arrangement between he and the husband (or as he would have it, because of the promise of the husband and wife) and that by virtue of that and his efforts in working without wages, the wife is now estopped from arguing that it is not his unit.
It was submitted by the husband and also the son that the facts of this case give rise to a proprietary estoppel.
Having no confidence in the truthfulness of the three parties, the analysis of their evidence requires the Court to look for something that would make one version more plausible than the others.
The son’s evidence in chief was that he had contributed to the costs of building the unit through his “free” labour. He said he “helped” build the units on the “understanding” and “in the reliance” that one of the units would ultimately be gifted to him. The affidavit filed on 23 May 2013 was sworn without any reference to any interpreter and with no indication the document was prepared by a lawyer. The son, who was then acting for himself, filed it with the Court.
The same affidavit made statements that he was not paid a wage in reliance “of” his father’s promise that he would be given one of the units that he asserted he and his father built. It must be said that no-one objected to these statements being led in evidence despite them being arguments, conclusions or opinions.
The son filed a second affidavit of evidence only weeks later but this time it was prepared by a lawyer. Whilst the probative value of the statements did not get much better, again, no objection was raised. This time, the son said that he started working with his father and they “had reached an agreement” whereby he would work for no wages “on the basis” that when the unit was finished, he would receive one. Of course, that version was different from that of the parents who said (and indeed, the son later seemed to agree) the unit was to be given to him when he married.
Taking a cautious approach, it is conceivable that there were two different periods of time when these discussions occurred. The first, which occurred whilst the son was still in school concerned the unit being transferred when he married. The second which occurred after he left school, concerned him receiving the unit when it was finished but that was based on his not taking wages. The first therefore could be seen as family planning and the second a specific contractual type of arrangement between an employer and employee. Although in the period before leaving school, the son worked with his father, equity could not be called upon to intervene on any basis. Like many children, the son enjoyed working with his father and this was a family that did things together. Nothing in the evidence justified a claim arising out of weekend and holiday work as a child. He was certainly aware that his parents were doing this long term planning but the evidence does not support any conclusion that a trust arose out of those early conversations. By the time the son left school, the E Street unit development was under way. It is the period from 2009 that I consider is the focus of the son’s claim.
When cross-examined, the son acknowledged that when he began working for his father, he approached him and said that, as the father (as distinct from his parents) was going to give him a unit, he was prepared to work for no wages. In a slightly different answer, he said words to the effect that if his father gave him the unit, he would work for no wages. There is no evidence about how long this wage-free work was to continue. It is conceivable that the employer/employee type of arrangement meant that as soon as the unit was completed, he would receive it and thereafter claim wages from his father. That was not the evidence.
Before having access to either of the son’s affidavits, but with knowledge of what the son had said in the interlocutory stages of the proceedings in 2011 and 2012, the wife filed her evidence in chief. She denied the son was promised either unit. In her subsequent affidavit, the wife equivocated by saying that she was not aware of any promise having been made to the son. None of that can really be correct because in giving evidence on 17 October 2013, she acknowledged that the husband had said the unit would be the son’s “once you get older and marry correctly”. She went further and said that he stated the assets would “go to the government” if the arrangement was not in place. Whilst this conditional marriage concept was denied by the son, I accept that conversation occurred. The wife’s inconsistent evidence was disconcerting. Much of what the wife was talking about occurred before the son left school and I am not prepared to find that she was involved in any discussions in the last 18 months or so of the marriage. I am satisfied that conversations involving her all occurred before the son left school. In my view, they are of little or no relevance other than that they form the foundation for the son feeling some sense of obligation not to claim wages once he committed himself to be a worker for his father (or for 18 months, the partnership).
The wife did not dispute that the son had worked on the unit site and added that although he was not paid a “proper wage”, he enjoyed care, food and necessities in the family home. She must have known that because she was providing for him and she was in charge of finances. It was the evidence of both husband and son that this largesse for the son has continued since the husband and wife separated. I return to that below on the question of what detriment the son has suffered.
The husband’s evidence did not advance the situation much more. He said that he promised the son “in the wife’s presence” that the units would be “rented out and then given to our sons”. This version was another twist on what was said. I find there were no doubt many conversations about building the units and giving them to the two children. I find that those conversations occurred before the son left school and were unrelated to the wages question.
The husband’s evidence lacked specificity about when the arrangement was made concerning the wages. In his evidence, the husband said that he told the son:
Look at this land. I would like to build for you (and for the other child), one town house. I have received some benefits from my parents and it is the purpose of my life to give something to my children.
Importantly, the husband said that the son responded:
If the houses (sic) are for me, you do not need to pay me, any money. I will agree to help you.
Considering the prospective nature of the words used, that conversation could only be construed to have occurred before the construction commenced on the E Street land. The old house was bought in January 2007 and a subdivision was done before construction commenced. The son left school at the end of 2008 and began working with the husband in very early 2009. The son’s evidence was that he laboured on the E Street site “throughout 2008, 2009 and 2010”. He said that when he left school, the old house had been bulldozed.
Bearing in mind my earlier remarks about truthfulness, the more plausible explanation for all of this is that there was a conversation between father and son and that it occurred after the son left school to commence full time employment with his father. That is the time when wages and/or working for no payment would more likely be a subject for consideration.
Thus, I find that the non-payment of wages issue arose out of a conversation between the husband and son in early 2009. It was not an arrangement that had the involvement of the wife. The proposer of the arrangement was the son. Should equity intervene?
In respect of the promise, the son claimed against both his father and his mother. The claim related to the mother because of her silence in acquiescing with the husband. The claim was that the conduct by the parents was a representation upon which the son relied by acting as he did to work without wages and that the loss of wages was a detriment to him.
The wage discussion was revisited in the son’s re-examination by his own counsel. He again confirmed that when his father told him about getting the unit, he had agreed he would work for no wages. The time of the conversation must therefore have been 2009 and it did not involve the wife. The son’s evidence in re-examination became confusing when he was asked when the husband first spoke to him about the unit and he replied he was not sure but the end of 2009 or 2010. He then repeated that the conversation was along the lines of one unit for him when he married and one for his brother but that it was he who said to his father that he would work for no wages if he gave him the unit. He thought his mother was very happy with the whole idea.
The essential factors that give rise to an estoppel are found in Grundt v Great Boulder Pty. Goldmines Limited (1937) 59 CLR 641, Thompson v Palmer (1933) 49 CLR 507, Giumelli and Giumelli [1999] HCA 10; 196 CLR 101 and can be distilled as:
(a)There must be a representation or conduct amounting to a representation which is intended to induce a course of conduct on the part of the person to whom the representation is made. To establish proprietary estoppel, the evidence comes not only from the statements made but also the conduct exhibited. The claimant must show that the words or conduct go beyond mere statements of intention to a point where it can reasonably be assumed that what was represented was an irrevocable promise. The promise must be definite even though it may not necessarily be precisely defined. (Flinn v Flinn [1999] VSCA 109). Thus, anything that might be said about the vagaries of which unit the son was to receive, becomes irrelevant if the promise is established by the representation;
(b)There must be an act or omission resulting from the representation whether by action or conduct, by the person to whom the representation is made; and
(c)The claimant needs to show detriment to such person as a consequence of the act or the omission.
As for the wife standing by and allowing the son to assume that if he continued working for his father without wages he would be given the unit, mere silence cannot amount to a representation unless a duty arises to disclose opposition where it is known that the conduct is being based on a particular assumption. For example, if a person knows that the other is labouring under a mistake and no attempt is made to correct that mistake in circumstances where a duty would be expected to arise to do so, mere silence can amount to a representation. (see Thompson v Palmer (supra) and Waltons Stores (Interstate) Limited v Maher [1988] HCA 7; (1988) 164 CLR 387).
In Waltons Stores (supra) Deane J (para 18) observed that an estoppel operates negatively to preclude the denial of, or a departure from, the assumed or promised state of affairs and does not of itself constitute an independent cause of action. Whilst the husband has not departed from any promise, it is said that the wife has.
As Mason CJ said in the Commonwealth v Verwayen [1990] HCA 39, estoppel in its various forms is intended to serve the same fundamental purpose which is to protect against the detriment which would flow from a person’s change of position if the assumption or expectation that led to that position, were deserted.
Although it was not argued, I accept that the wife benefitted directly from the son’s work because she was a partner in the business. She must have known therefore that the agreement between the father and the son related to him not being paid and she said nothing about it. To that extent, she must be seen as having acquiesced. However, that only affects the argument about representation and reliance but not detriment. It is in the area of detriment that I find the son’s claim cannot succeed.
Counsel for the wife submitted, based on the decision of Mullins J in Foley & Anor v Foley [2006] QSC 347, that to the extent the son could claim at all, it could only be against the husband because the wife had not consented to any arrangement. I reject that on the basis of her silence in circumstances where she was a mother and business partner. She knew or must have known what was going on. She was not troubled however because of the benefits the son was receiving in the home. It was also submitted by counsel for the wife that equity looks to rectify the failure of the promise but does not necessarily require provision of precisely what was promised. I accept that. In my view, the ownership or compensation are matters relating to the remedy. Even if the wife was not a party to any such commitment or she was not an owner of the claimed property, the son could still seek the alternative relief of money compensation (see Sidhu v Van Dyke [2014] HCA 19 and Donis v Donis [2007] 19 VR 577).
The onus of proof in respect of the son’s claim lies with him. Would he have remained working for his father without wages had there not been some promise that he would receive a unit in the future? I find he did not rely upon the promise of his father but rather offered to work without wages because of his sense of obligation because of what he saw as his father’s generosity.
The husband acknowledged in his evidence that “the parties” did not pay wages but he said the son lived at the home and was helped out with money. He went on to say that the son worked six days a week, for approximately eight hours a day, on the E Street units. The husband was not challenged about that but I accept the son is more likely to be accurate when he said that he worked most weekends (as distinct from every day of the week) on the units for no wages throughout 2008, 2009 and 2010.
During the limited time after the son commenced work until the wife left, even on the son’s evidence, he was provided accommodation, food, clothing, a car and from time to time, cash when he needed it. He agreed he spent lots of money on his car. None of this was quantified. Indeed, none of this was mentioned in the son’s evidence in chief.

When cross-examined about the agreement concerning wages, the son said he was also promised a share in the business but I understood him to mean that was only to arise when the husband retired. The son confirmed that he was still working in the business now because he would take it over one day. That was a curious explanation in the light of his most recent tax return indicating that he was telling the Tax Office that he was a contractor.

The contractor

In his most recent tax return, the son disclosed earnings of $74,000. That amount was consistent with the deduction in the husband’s business expenses for contractors. However, when the husband was cross-examined about it, he said he knew nothing of it. I have already dealt with the evidence of Mr P. The son’s evidence was that he had been registered for tax purposes as having his own business. The son was not pressed about the $74,000 and what it all meant but Mr P obviously thought of the tax minimisation idea because there is no other explanation. For the purposes of considering the son’s claim of detriment therefore, there is no other explanation than that the son and the husband both told the Australian Taxation Office that the son was entitled to $74,000. When dealing with the income of the business conducted by the husband subsequent to separation, one must ask what happened to the $74,000 but as the son has retained a significant portion of cash belonging to the husband, (for reasons that follow below) even if there has been some detriment by not claiming wages or indeed his contractor’s money, the son has an entitlement from his father’s business in lieu of wages. At first blush one might consider that the assets of the husband and wife were pregnant with a debt for wages or contractors’ fees to the son. That was not the way the case was presented and ultimately, as there remains considerable scepticism in just what the husband has retained and also what he has given to the son, I have not concerned myself with that argument.
The son was pressed about the other benefits he received. Over the space of the five years since he left school, he acknowledged in evidence (as did his father) that he had been accommodated, provided with food, a computer and a car. He proudly acknowledged that significant money had been spent on the car because that was one of his passions. That money came from the husband. He received cash and although it was somewhat vague, he received it when his supply of money was running low and he did not want to touch a term deposit. The term deposit arose from when the husband took the remaining balance of the partnership’s monies after separation as a result of the wife taking $200,000. The husband deposited that into a new account that was set up for the son. The son was questioned about this money and he was asked whether it was “like pay” and his response was that it was his for his six years of work. Nothing in the evidence suggested that the money was to be “clawed back” by the wife nor indeed by the husband.
The husband conceded that after separation, he moved money around unashamedly to protect it from being taken by the wife. Giving it to the son was either for the purposes of paying him money for his own benefit or alternatively to be held on trust by the husband. There is no doubt that the money is in the hands of the son and I find that he has absolute control of it. Thus, in respect of detriment, the son has been amply compensated for the fact that he did not work for specific wages. If I add to that, the $74,000 referred to above as the money claimed for tax purposes by the son as a contractor in his own right, there is no detriment that the son has suffered.
It is also ironic that the $74,000 paid for a contractor as a deduction from the business seems extraordinarily high when the declared partnership income in past years was much less than that.
In my view, the proper approach is to treat the $74,000 as the son’s income and hence his wage. I find that he has suffered no detriment at all.
The son’s claim must therefore fail.

Some disputes about facts that affect assets

The money in the wall and the cashbox under the stairs

In her evidence, the wife said that the husband received significant cash whilst working and at times she drove him to collect it. She said that in his presence, she counted sums between $2000 and $10,000 in cash. He denied that save that he acknowledged that when they were paid in cash, they counted the money together and it was the wife who usually took it and told him that she had deposited in the bank. There is therefore little dispute that large amounts of cash were received. It was the husband’s case that the wife was responsible for all of the bookkeeping and the banking. He acknowledged that they counted whatever cash was received together, but nothing in the hearing indicted what the husband thought the wife had done with the money.
It was the wife’s evidence that the money was kept in a blue steel box suspended from the ceiling under the stairs and the husband counted it once or twice each month. She said he told her that there was something like $70,000 but at no stage did she count it. She said she last saw the money being counted prior to leaving. For his part, the husband simply denied that occurred. The husband’s evidence was corroborated by the son who said he had never heard of any large amounts of cash being kept hidden in the house and he had never seen a blue steel box suspended from the ceiling under the stairs. He confirmed that he went there regularly to get items such as beer bottles. It was not clear from his evidence as to whether that was the current position or at the period of time prior to 2010. Presumably, he would not have been getting beer bottles prior to his 16^th birthday. He also added that he had never seen or heard of a key to the locked box.
The wife was cross-examined extensively about the period of time when separation occurred. She was asked if she knew there was so much cash in this steel box why it was that she took money out of the bank. She maintained that she was following the advice of the domestic violence workers who were assisting her.
Having accepted that there was initially a large amount of unbanked cash, it is most probable that it was kept somewhere secure. I find there was a locked box but can make no finding as to what was in it. While there was evidence from the son about this box, it is hard to give his evidence any weight for the reasons earlier mentioned. It is for the wife to prove the existence of the asset, in this case, the cash, and she has not been able to do so.
The wife also said that there was other money hidden behind the brick wall of the garage which was later moved. She said the husband counted it in around 2008 and told her it was about $400,000. She then said that because the husband changed the hiding place, she had to clean up the mess from the removal of bricks and the rebricking of the wall. This too, the husband denied. The son’s evidence was that he had never seen any evidence of brickwork or plaster being removed or replaced in the garage. This all occurred however prior to the significant deposit being made in the partnership bank account and it seems plausible that large sums of cash were retained in the home. For reasons earlier mentioned, I accept that this money was hidden and then ultimately banked. I am not in a position to make a finding as to the quantum nor would I on the basis of the evidence presented by any of the parties.
All of the evidence in relation to the hidden money is supported by the earlier findings about the term deposit but its significance lies in the fact that the wife acknowledged that sums were not declared for tax purposes.
With the acceptance by the husband that there has been an understatement of income (albeit in his view caused by the wife), some explanation is necessary for its whereabouts. Mr P’s evidence was that, on what he found, in 2004/2005 financial year, $99,000 was “omitted”. In 2006, it was $114,000. In 2007, it was $61,000 and so on.
In 2001, the husband and wife bought the vacant land upon which the I Street home now stands and the home was built. Both parties said the purchase occurred with borrowings between $40,000 and $50,000. In his last attendance in the witness box, the husband said that he had been thinking about the history of things and had remembered that he had borrowed further monies. In my view, it matters little. No documents were tendered to establish such a borrowing and I find it is more likely than not that the acquisition money but also money for the various home improvements, came from the earnings of the business. There was no other source.
In 2007, the E Street property was purchased and it would seem without money being borrowed. The units were then constructed. If in 2009 as I have found, $200,000 was banked, how did the husband and wife provide $194,000 in cash for the E Street house in January 2007? In addition to buying what was then an old house, the husband knocked it down and began building the units. There was plenty of cash to do all of that and I find the materials were being sourced by the business and most likely claimed as business deductions.
In respect of that period of time, the wife claimed she was as much involved as the husband in the business and house building. I accept she undertook such laborious tasks as laying the concrete slab. The husband seemed amused that the wife was involved in labouring. He said that site builders could be called about the wife’s involvement. It matters not the extent of the labouring but that she was involved. Many hands were involved in the tasks. There does not seem to be any dispute that she obtained a building licence so that she could be the registered builder.
During his cross-examination, the husband volunteered that in the early days of the business, both parties were receiving Centrelink payments. That was in 2003. How the parties or either of them were eligible for government assistance when on the evidence of Mr P, $99,000 alone was omitted in the following year when the partnership was declaring $24,000, remains unclear. The husband said that in the early period of the business, things were not going well and he took in additional work undertaking repair of goods for sale. How that money was accounted for or whether Mr P included it in the income tax returns was also not mentioned. The husband said this money went towards paying off the money that he had borrowed for the acquisition of the home. I find therefore that at least by 2003, there was money coming into the household and large amounts of money were not banked. The wife’s version of the money in the wall and the cashbox therefore, is quite plausible.
There is no evidence to confirm that the money remains hidden in any cavity in the house. The son’s evidence does not assist me in respect of that. No application for an Anton Pillar type of order was ever sought.
In 2011, the husband opened a bank account and by the end of 2012, $117,000 had been saved. Between July 2012 and June 2013, the bank statements showed deposits of $271,000. The husband said no other money than business income was banked in those accounts. Those same records show considerable withdrawals. Counsel for the wife endeavoured to have the husband distinguish business and personal expenditure but the task was large and unhelpful. The husband’s vague evidence supported by the son was that his working life was handicapped by injury and disability yet the bank deposits would suggest there was plenty of work up until 2013.
I find that the income of the business is now being deposited in the bank. Whether the cash opportunities have now ceased or the husband is conscious of the past problems, remains a moot point. The son’s evidence was that he has now stepped into the shoes of the wife in undertaking the banking. Thus, I find, to the extent that there were residual and unbanked savings in cash at the time of separation, I consider they have now gone. To that extent therefore, the allegations of the wife about hidden money do not assist.

The money in the bank at the date of separation

The wife said that the business account at the National Australia Bank at separation contained $352,000. She then withdrew $200,000 and deposited it into an account in her sole name. The husband then closed the joint bank account and retained the balance. The joint account was with the Commonwealth Bank and the business account was with the National Australia Bank. Shortly after separation, the husband drew $190,000 from the business account with the National Australia Bank and he opened a new account.
The husband later transferred various large sums to the son and there they remain. He and the son agreed that the money was transferred to put it beyond the reach of the wife because she would “steal” it. As I earlier said however, the son seemed to also justify its retention because of all his hard work.
It is therefore important to look at what happened to the otherwise joint funds in existence at the time of separation. There is little doubt on the evidence of the son that the monies controlled by the husband and monies received since the time that the wife left, have been retained even if they have been in the hands of the son. The money taken by the wife is a little bit more difficult to deal with but each needs to be considered.

The wife’s money

The wife said she used some of the money for living expenses for the child C and herself and she had not received any maintenance from the husband. Counsel for the husband pushed the wife to explain what happened to the $200,000 bearing in mind she was also receiving Centrelink benefits, working in a hospitality industry position and had also received $60,000 by way of a partial property settlement. The evidence of the wife was very unsatisfactory and evasive. She explained that she had paid rent, purchased furniture, bought a motor vehicle and otherwise spent $300 per week on food and general living expenses. All of this information should have been comprehensively discovered but it was not. Apart from a general statement about spending $9800 to $10,000 on furniture, no details were produced. The wife explained the acquisition of a motor vehicle at a price of between $18,000 and $19,000 but then explained that she had an accident in which the vehicle was written off and she received the insurance. She said that she received $1000 or $2000 less than the price that she had paid for the car which must have meant that she received something between $16,000 and $18,000. She then acquired another vehicle.
Whilst the wife claimed to have spent much of her money on rent, she agreed that she was living in a refuge for a year. There, she did not pay rent but rather covered her own needs. She conceded at that time she was receiving Centrelink benefits.
When asked about where a lot of the money otherwise went to, she pointed to $54,000 going on legal fees and further money was required for a psychiatric report and the valuation of the house.
Counsel for the husband tracked the wife through her statements shown in financial statements filed with the Court and it was clear that by July 2011, she was still holding $175,000. She could not remember when monies were paid to her solicitors and at best thereafter, thought that it was between $34,000 and $35,000. By October 2012, she had approximately $120,000 left and whilst she maintained that this money went on living expenses, she had other sources of income to which I have already referred. In May 2012, she was receiving $541.50 per week by way of wages. The money that had been taken from the joint account had been invested and she was receiving interest on that money. The wife’s tax return was called for and she produced it showing that she earned $23,799 in the 2012 year.
Bearing in mind her stated expenses in her financial statement, there was little explanation as to where all of the money went that had been taken from the joint account. She then began to say that she had spent money on holidays and even that was disputed by the husband. Much of this cross-examination was an attempt to show that the wife had sent money to her extended family particularly to a sister in Country D. She was emphatic in denying that but then when pressed, acknowledged that she had lent a woman $8000. She had met the woman in the refuge, made the loan and it still had not been repaid. None of that appeared in her financial statement.
By April 2013, the wife said that there was $50,000 of the $200,000 remaining. Again when pressed as to how she explained where all of the money had gone, she proffered that she bought computers and had her teeth fixed.
It was probably fair to accept that by this exhaustive process, the balance of the money could be shown to have been spent but I would not accept that it was all on ordinary living expenses bearing in mind the example of the money lent to the woman in the refuge. In her financial statement sworn in April 2013 however, the wife did disclose that she had $10,000 worth of furniture consistent with her statement that she had acquired that immediately after separation because she took nothing from the home.
Because I do not accept that all of the money went on genuine living expenses and a significant portion did go in legal fees, it would normally not be appropriate to simply ignore the $200,000 taken at the time of separation. It is difficult, and inappropriate, to simply guess or “pluck” a figure. The evidence does not enable me to find what happened to the money.

The husband’s money

Whilst the focus of the husband was on the wife’s expenditure and the use of the capital, his position was equally vague. The husband filed a financial statement on 30 May 2013 in which he indicated that as sole trader, he was earning $1000 per week from the business he commenced after abandoning the partnership. $1000 per week might be consistent with the tax returns but having regard to the large sums of money involved, I do not accept the business profit had plummeted. It is important to note that in filing that financial statement, the husband described the $1000 per week as an estimate. The husband said in evidence in chief that that statement was true and correct. He too confirmed that, of the capital sum which he said was $102,000 in the business account, he had paid his legal fees. He said that there was $18,000 left some six months later after he had sworn the financial statement. He was asked how much he had paid in the “last couple of months” and he said he paid between $55,000 and $60,000 from the business account. When cross-examined, he confirmed that the business account had $53,000 to $54,000 in it but there was also an account in the son’s name of $150,000 which was the money left over after the wife left. This was the money that he had taken from the joint account after the wife had taken her $200,000.
Then, another bank account appeared which was in the name of the son. That had $230,000 in it. The husband explained that that money had come from his father and mother in Country G because his father had died in 1999 and his mother died in 2010. None of that had been mentioned in his evidence in chief. Where he received that money is one thing but not to disclose it is another. That cavalier approach to disclosure adds to my concern about his truthfulness.
A careful examination in cross-examination of the husband’s records indicated that he had disclosed a bank statement for an account that had been closed. When tested about the importance of being accurate, the husband indicated that one of the problems may have been how things were interpreted to him but I do not accept that there could be any misunderstanding about bank balances. The financial statement showed only one account and there were clearly more. When asked about the inaccuracy of the financial statement filed at the court, he said that the solicitor asked him for statements and he provided them and when he did not have the current details, he was asked to guess and he did so. No evidence was called from the solicitors to deny all of this.

Counsel for the wife probed not only various records but also the timing of the signing of documents. On the day prior to the husband signing a financial statement in 2012, he withdrew $204,000 from the National Australia Bank. When asked why he did not disclose the money that he had taken from the bank account, he simply acknowledged he had not. A Commonwealth bank account showed a withdrawal of $231,000 in April 2012 which was the day before his financial statement was sworn and filed. The husband acknowledged that the withdrawal had been made and he was asked what happened to that money. His response was that he had taken it and put it into his son’s account and when asked why, he explained that this was the money from the shoe box from Country G. Having regard to my findings as set out above, I reject the husband’s evidence in respect of that issue.
Counsel for the wife probed about a bank account with the Commonwealth Bank that had $236,000 in it as at 30 May 2013. It was put to him that this was his money notwithstanding he seemed to be saying that it belonged to his son. He said words to the effect that there was not enough proof that it was his money. That cavalier approach to the truth was very concerning.
When pressed as to why he moved all of this money around, his answer was that all of the money disappeared from the business account because the wife had stolen it and so he gave it to his son because he had been working in the business. This seems consistent with a payment to his son for services rather than the opposite as had been alleged by both the husband and the son. Without cross-examination, none of this evidence would have come to light. The husband’s position supported by the son was that all monies were now banked. In the 2009 financial year the partnership revenue was said to be $156,793. That year ended only weeks after the separation occurred. In the 2011 year, the husband had abandoned the partnership and begun a business in his own name. His tax return showed a total income of $52,635. Of that sum, $12,821 came from interest on three bank accounts. Thus, the balance, $39,814 was a distribution from some sort of partnership. I do not know what the revenue was that year but in the 2012 year, the new business had sales of $229,761 of which purchases were $85,466 and a gross trading income of $147,495. Offset against that was claimed expenses of $99,305 of which the “contract payments” were $74,360. If one accepts that the “contract payments” was indeed simply the deduction for the son, in the 2012 year, the profit of the business was over $100,000. However having dismissed the son’s claim based on the fact that he was receiving wages, I find that the business is still earning a significant income and the son could be well paid from it should the husband so decide.
The husband’s new business bank account was analysed for the financial year ended 30 June 2013. The revenue in that year, if it is reflected in the deposits in the bank account, showed deposits of over $260,000. Again, I have no understanding or explanation about how that translates into taxable income in the hands of the husband.

Discovery

Throughout her affidavit, the wife had complained bitterly that the husband’s discovery had been grossly inadequate and she had had to pursue all of these records herself, a statement repeated by her counsel in final address. All of that came at a cost because of the issuing of subpoenae and the obvious legal fees involved. Discovery in the witness box is an equally problematic approach to litigation because a trial judge has to try and work out whether all of the evidence accurately and comprehensively discloses a financial position. It was also unnecessarily time consuming in this case, because of the allegations of understating of income, the large amounts of cash that were clearly around (as is evident from the $150,000 going into the term deposit in 2009 and the statements of the accountant that there had been a defrauding of the revenue), the husband’s position of moving money around and his not providing a comprehensive explanation as to where the money came from. That leaves me with a position where I should take a robust approach. That is particularly so where I have rejected the evidence about the shoebox money.
The unsatisfactory evidence of both parties leaves me in a position where I am not prepared to make a finding as to what monies have been spent on legal fees nor what monies the husband has retained for himself. All of that arose in a discussion with counsel during the hearing about “add-backs”.

Add-Backs

“Add-backs” have always been problematic because, whilst in some cases, a premature distribution of an asset in which another party has an interest can be traced to an extant asset, there are other cases such as here, where the money has simply vanished. In Kouper and Kouper [2009] FamCA 1080 Murphy J said that adding back an asset into some pool was the exception not the rule. He gave an example of such an exception being where one party had embarked upon a course of conduct designed to reduce or minimise the effective value of assets. That was the case in Townsend and Townsend [1994] FamCA 144 as it was in Omacini and Omacini (2005) FLC 93-218.
In Bevan and Bevan [2013] FamCA 116, the Full Court discussed “notional property” and drew attention to the fact that s 79 was about the alteration of property. If the property has vanished, it is unlikely that notional property could fit within that definition. The Full Court said that s 75(2)(o) provided ample scope to ensure that adjustments could be made to achieve a just and equitable outcome particularly when dealing with unilateral disposal of property by a party.
Here, the wife argued that the money she took at separation had been extensively used for reasonable living expenses but at the same time, she had to concede that she had paid lawyers and there was also the money lent to the woman in the refuge. Money used from the joint resources of the parties to pay legal fees has to be carefully contemplated because it may amount to a conflict with the provisions of s 117 of the Family Law Act 1975 (Cth) (“the Act”) which requires that each party pay their own legal fees. The husband on the other hand whilst acknowledging money had been given to his son, also acknowledged that he had paid legal fees. Although it was not clear whether this expenditure was from savings accrued at separation or from his post-separation exertion, I accept that that money came from the latter but to an extent, the wife contributed to the creation of the partnership earning capacity. It is unfortunate that his lack of candour in the discovery process makes the task so much more difficult.
The most efficacious way of dealing with the matter is to presume that the bulk of the wife’s money has been used on living expenses and because the husband has not provided any assistance in a periodic way to assist her whilst at the same time having the use of the parties’ other facilities such as the home, I should ignore the money taken by the wife and concentrate on the money that the husband had in the business bank account.
I also have not forgotten that a partial distribution of money was made to the wife by court order. There was debate about where that money came from but I accept that, on the balance of probabilities, it was the jointly saved money. On the wife’s evidence, that has now gone. The husband’s money has gone too because he has given it to the son. Both those sums should be largely, but not entirely ignored.

The motor car

At separation, the husband had a 2002 Ford and the wife became aware that he had sold it. He said that that was for $3800. Although he indicated that he was attaching the receipt to his affidavit, no such exhibit existed. Counsel for the wife submitted that the best evidence was that there was $3800 retained by the husband. The husband remained silent on the subject of what happened to that money and I have concluded that it was still in the husband’s possession because he did not say otherwise. Accordingly, that should be treated as an asset of the parties.
In the same way, the wife’s current motor vehicle had its genesis in the $200,000 she took on 16 April 2010. To ensure that there is no “double-dipping” here, because I intend to ignore the $200,000, I should add into the assets of the parties the amount conceded by the wife as an admission against interest in relation to at least that motor vehicle.

Assets and liabilities of the parties

It will be apparent from the confusing traversal of all of the finances of these parties that I have found it very difficult to work out what is currently in existence for the purposes of determining the legal and equitable interests of each of the parties. In respect of the bank balances, there were at least two bank accounts in existence in September 2013 immediately prior to these proceedings beginning. The NZ Rendering Commonwealth Bank Account had $75,738.67 in it and the husband’s own account with that bank shortly prior to that time had a balance of $5955.57 (see Exhibit W10). In final submission, counsel for the wife said that the husband had saved approximately $80,000 as at trial. It can be seen from the figures just mentioned that the approximation was correct. The husband had filed a financial statement in May 2013 in which he referred to bank balances as $102,000 but then a line or so later seems to have transposed the numbers so that the figure became $120,000. Against that, the husband’s outline of case document drawn by his solicitor in October 2013 disclosed in the “Asset Pool” bank accounts of $53,000. Where that came from is uncertain. When he was cross-examined at the resumed hearing in April 2014, he said he did not know what the balance of his accounts was because they varied a lot but he thought that it was between $75,000 and $80,000.
In the final submission prepared by counsel for the wife, he drew attention to what the wife asserted was the asset position at the time of separation and that which had transpired after significant time and cross-examination at trial. In addition to the $80,000 just referred to (which was clearly a moving feast) there was also reference to a Suburb H Rendering Account of $21,125. Just where that figure came from also remains somewhat confusing. It must be remembered that both the husband and the son were living out of the account which seems to have been the business operating account.
Counsel for the husband did not address the finer details of the assets and I find in the circumstances that it is probable that the figure proposed by counsel for the wife are accurate. Some comfort can be drawn from the fact that whilst the business account may be relatively modest, much of the trial had focussed on the monies removed by the parties and particularly the husband.
I have already addressed the issue of the money taken by the wife at the time of separation. I accept that the husband then transferred $150,000 of the balance of the joint account to the son but there was also a further account in the son’s name acknowledged to be $230,000. It was the husband’s evidence that that came from his mother and father. His mother had died in 2010 and his father had died in 1999. It was suggested by the husband that this was the shoebox money. Again, I do not accept that.
By May 2013, the son’s account was in credit to the extent of about $236,000. In cross-examination, the husband was challenged that this money was his rather than that of the son. The curious response of the husband was words to the effect that there was not enough proof of whose money it was. When he was asked why he had given the money to the son, he said that the son had been working. This created a problem for the son in respect of his detriment argument and the non-payment of wages. To compound that problem, when further being examined about the money in the account held by the son, the husband made reference to the fact that the money was his and that of the son. He said words to the effect that this had been given to the son because he had worked for nothing for five to six years. Again, the detriment argument of the son must fail for that reason.
Doing the best I can and based on the matters set out above, I find that the parties have either a legal or equitable interest in the following:
The business  21,125
The wife’s motor car  21,000
The husband’s proceeds of sale of car  3,800
The I Street home  600,000
The 1^st E Street unit  270,000
The 2^nd E Street unit   270,000
The current balance of the business in its
present form  80,000
Sub-total  $1,265,925
Less the known tax debts  174,653        $1,091,272
I do not propose to put into that list the money taken by the wife for the reasons set out earlier nor the money held by the son. The husband had given away that amount of money. There is no application here to set aside the transaction of the transfer of the funds to the son. I do not intend to include the partial property settlement received by the wife on the basis that that money also appears to have been spent and may very well be reflected in the car referred to above. All of those monies are however taken into account below.
The evidence of both parties was entirely unsatisfactory as to their current financial position and having regard to my findings about credit, would not believe any of them on what exactly they now have. It is impossible to try and add back such things as legal fees. I do not confidently know where the money came from on either side.

The approach

In Stanford and Stanford [2012] HCA 52; (2012) 87 ALJR 74, the High Court observed that the first step in the process was to decide whether or not it was just and equitable to make an order. Their Honours observed that one could not start from an assumption that because there was a relationship, an entitlement naturally arose. Parties set up structures during their relationship for a variety of reasons and therefore, it is necessary to show that it is just and equitable to depart from the existing legal and equitable interests. Their Honours gave a number of examples as to how that justification might arise including for example, the loss of the use of a home.
It is clear from the assets set out above that there was a partnership in which the husband and wife had joint legal interests. Whilst there has been considerable argument about who took what money, the evidence supports the conclusion that what is currently under the control of the husband had its genesis in the partnership. To that extent, albeit that the assets in those bank accounts might be said to be the husband’s, I am satisfied that the wife has an interest in them.
The same must be said of the proceeds of the sale of the 2002 Ford because it would seem that that had been the parties’ vehicle. The wife’s 2004 Nissan which was sold and put into the list of assets by counsel for the wife at $21,000, came from the money that the wife took from the business bank. All of those assets therefore can be seen to have been owned in one form or another by the parties themselves.
There is no dispute about the I Street home. The two E Street units are in the husband’s name alone but their genesis was the partnership and on the evidence which I accept of the wife, she undertook some tasks even if not the same as those of the husband in relation to the development of those units.
Thus, to leave the assets as they currently stand according to the titles would be inappropriate and unjust. I find therefore that it is just and equitable to make an order altering the interests of the parties in those assets.

The income tax debt

Having heard the evidence of Mr P, I have no confidence about the accuracy of the assessments. In terms of the way in which the tax liability should be approached, there are three possible options. One is to simply delay making any orders. The position will then clearly be known (s 79(5)). A second option was that proffered by counsel for the wife. He submitted that a solution would be to have the units and the house transferred to the wife and for her if necessary, to sell them but that she be restrained from taking any steps in relation to the proceeds of the sale of units until such time as the tax debt had been paid and thereafter, a distribution could occur. A third alternative is for me to indicate that on the evidence, both parties are equally liable for the debt but if indeed, the Taxation Office decides that it is not in a hurry to chase the sum, no doubt they will concern themselves with how they would recover in the future against the individuals.
In my view, the most appropriate course of action is to find that the parties are equally liable for any debt accrued to separation and if the Taxation Office does not intervene by a particular date and seek to be heard, then the debt should be ignored for the purposes of a distribution. In my view, that third option is the most equitable outcome. If the Tax Office considers it should pursue recovery, it can do so in the normal way. The Registry Manager should bring the matter to the attention of the Australian Taxation Office by providing them with a copy of these reasons.

Submissions

Counsel for the husband spent significant time in his final address in relation to the interest of the son.
In respect of the other matters as between the husband and the wife, counsel for the husband submitted that I should conclude that in respect of the money that the wife took and the $60,000 given to her in a partial property settlement, there had not been adequate disclosure and that she still had it. I reject that. I do not know what has happened to that money but I am not confident she still has it. I am also confident the husband has not made adequate disclosure. That finding is evident from the constant barrage of questions put to the husband by counsel for the wife about where all the money went when it was shifted around. In addition, the large revenue (as distinct from profit) over a period of nearly four years was not well (if at all) explained by the husband. With my findings about credibility and concerns about tax evasion, I have not been satisfied that the husband’s position has been comprehensively disclosed. In respect of the wife’s disclosure, I agree she has not been candid but there was no reliable evidence she has sent money off-shore. There is no evidence she has retained the large sum she took at separation and she has had to live on that money since then. Whilst counsel for the husband did expose the wife’s inability to explain her expenditure, none of that convinces me she still has the money.
In relation to the husband’s earning capacity, counsel submitted that the husband was no longer young, but was involved in a physically demanding task as a self-employed person who could not undertake that task forever. No expert evidence supported that. He observed that the husband was also limited by his language difficulties.
Counsel for the wife submitted that there should be a determination overall as to 70 per cent to the wife and 30 per cent to the husband factoring in that certain assets were outside of the contemplated “pool”.
The 70 per cent arose on the basis of 55 per cent to the wife for contribution taking into account what had occurred subsequent to separation and a further 15 per cent adjustment for the matters set out in s 75(2). For the reasons that follow, I consider that within a possible range but too generous to the wife taking into account that if those orders were made, there would be no prospect of the husband retaining any real property.
Counsel for the wife urged the Court to find that this was a case of non-disclosure by the husband both in respect of assets but also the movement of funds. He referred to the fact that there had been significant failures in respect of disclosure in financial statements as well as unilateral transfers of funds without notice to the wife. I accept that submission.

It was submitted by the wife that she could not know whether the husband was declaring everything and therefore I should take a more robust approach in relation to such things as the money in the wall and the money in the steel box. I have dealt with those matters above. Against that, it must be said, the wife’s disclosure was equally inadequate.
In relation to tax, counsel for the wife submitted that the issue should be dealt with by a quarantining of money because the wife knew that it was to be paid and she wanted the issue addressed. Her concern was that she would face the full tax liability if quarantining did not occur because the husband would avoid payment if he had no property. The correct course is to presume the tax affairs are now to the satisfaction of the Commissioner. If not, an intervention can occur.

The assessment

Having determined that it is just and equitable to make an order, s 79(4) requires the contemplation of a variety of factors to guide the Court in ultimately coming to that just and equitable outcome.
In his outline of case, the husband asserted he made a greater contribution “towards the assets of the marriage”. That was a reference to his physical skills but it ignored the evidence of all parties that the wife was the homemaker and parent but also a partner in the business. Bearing in mind the nature of their respective roles in the partnership, the submission was inappropriate.
In the early part of the marriage, the husband received modest financial assistance from his family including being provided with accommodation but according to the son’s evidence, the husband returned the compliment by assisting in return. As it is so long ago and modest in value, I find that sort of contribution has little or no impact on this case because is offset by other contributions of the wife. Both the husband and wife came to Australia with virtually nothing and built up their assets to what they now are. Ironically, it was the husband who said that he remembered the poverty and devastation caused by the Country D war and he did not want his children to suffer as he and the wife had done. He therefore worked hard and he said he had instilled a good work ethic in his son. It is a pity that it was not a work ethic that took into account the obligations to the people of Australia in respect of revenue obligations.
As earlier indicated, there was a factual dispute about whether the wife helped pour concrete and indeed, undertook physical labour. In cross-examination, the husband scoffed at the idea and suggested she call the relevant onsite builder. What was not in dispute was that the wife assisted with language skills, went to a university to learn management skills and then implemented them. She organised a building authorisation for the units. She undertook not just banking operations but also the collection of money. She was responsible for the BAS returns and the collation of details for the accountant to complete the returns. During all of that time, it was the uncontroversial fact that she also ran the home.
It is also significant that after separation, the wife had the sole care of the child C. The issue surrounding the parenting dispute was settled but not without the Court having to read the family consultant’s report. There, C indicated no desire to spend time with his father. His fear arose out of a tumultuous relationship but in any event, it meant C was cared for entirely by the wife and that situation has not altered since April 2010. No child support has been paid by the husband but then again, nor was it sought by the wife.
The husband was of the view that the wife stole the money from him. That money was taken from the business account and he had made a court ordered payment but those were both simply a distribution of capital funds to which both parties were entitled arising from their partnership. Subsequent to separation, whilst the husband has done all of the physical work in the former partnership business, he has also reaped his rewards. He had large sums of money available to him and could have paid child support. He has sent significant sums of capital to the son to put them out of reach of the wife. Since separation, he has lived in the luxury of the parties’ former home whilst the wife has lived in refuge accommodation and ultimately paid rent. The wife therefore has been the sole financial supporter of C from her resources and those of the parties generally as I have earlier indicated.
On any view however, whilst up until separation the parties had contributed equally, I could not ignore the lengthy period of time since separation during which time the wife has physically and financially supported C absent any relationship with his father. Whether the husband was restrained from having that relationship or not, the fact of life is that the wife has made that contribution alone.
Because of the four year post-separation contribution by the wife as well as the fact that the husband has had the benefit of all of the resources to a much greater extent than the wife (taking into account the capital each took and what the husband paid to the wife), I find that her contribution is still greater than that of the husband.
It is useful but not critical to assess that contribution in money or value terms. I would assess the contributions of the wife as to 55 per cent and the husband 45 per cent of the known equity in all the assets.
Subject to any intervention by the Commissioner, what I have described above shows the interests of the husband and wife. Each should have to contribute to the taxation liability.
Section 79(4)(e) is one of the factors that a court must consider. It draws in s 75(2). Taking all of those matters into account, I make the following findings:
(a)The wife has and will continue to have the care of a child under the age of 18 at least for the next few years;
(b)The husband has a much greater earning capacity than the wife notwithstanding his assertion that his physical labouring days are uncertain. He produced medical evidence but did not rely upon it nor could he have;
(c)The wife was tested under cross-examination as to her skills and notwithstanding I accept that she has undertaken a business course, it cannot be ignored that she worked in a hospitality industry position earning a very modest $150 per week as a part-time cleaner;
(d)The wife has relied upon taxpayer-funded social security benefits;
(e)I do not know with any certainty what the husband’s current earning capacity is and for the reasons I have outlined earlier, I am not at all comfortable with his statement that he is earning an estimate of $1000 per week from this business;
(f)The husband has the benefit of the assistance of his son and to the extent that his earning capacity is limited, he can always rely upon the son to continue the business;
(g)Another factor is any spousal maintenance claim and the relevant matters that may affect it and in this case, the wife seeks a capital sum but for reasons that follow, I propose to deny that to her on the basis that the assets I anticipate she will receive from the settlement will adequately support her. If I am wrong about that, she can take the appropriate legal steps later;
(h)There is little prospect that the wife will have the benefit of any child support from the husband bearing in mind his income tax returns suggest an income much lower than I accept he is indeed capable of earning but I take into account that she has not pursued it;
(i)Neither party has any superannuation or similar financial resources and each is also quite some time away from retirement.
On any view, there is a significant economic disparity between the parties. That gap will not be erased in the foreseeable future and on the modest assets that will be in existence for division (other than those which I have ignored that each has access to) there is still a very significant disparity in favour of the husband. In my view, that disparity justifies a real and significant adjustment in favour of the wife.
Bearing in mind the contribution weighting already in favour of the wife, a further adjustment in my view is fair and I would divide the assets mentioned earlier as to 65 per cent to the wife and 35 per cent to the husband.
The percentage division will produce slightly variable results depending on expenses of sale. In my view, the better way to reflect the 65-35 per cent division is to divide the assets roughly along those percentage lines. That is what I propose to do because it is more efficacious for the sales and also a fairer way of obtaining the outcome.
It is not the percentage outcome but the underlying value which must be just and equitable. The amounts each party will receive are modest. The past records of the business when the parties were operating a partnership showed they had an enormous capacity to earn income and whilst the husband says that things have now changed, I find that the husband has a capacity to work hard with the assistance of his son but who he will now have to pay, and can make up the ground if indeed the assets are removed from him. The wife’s position is quite the opposite. Whatever she receives in this settlement, will be her future capital base. She has no superannuation and does not have the earning capacity of a like nature with the husband.
As such, even taking into account the tax debt being unclear, a division as to 65 per cent to the wife of the assets set out above is fair. Furthermore, the asset list above ignores the son’s holdings for the husband and the money that the wife has already retained if there is any left. To the extent that the wife had any equitable obligation to the son, that has been well and truly satisfied by her having to forego what the husband transferred to the son beyond her control. Despite my criticism of the wife in terms of her explanations about where the money was used, it pales into insignificance by comparison to the access to money that the husband has had.
This is not a mathematical exercise but one that must reflect a just and equitable outcome. The wife did not wish to live in the house so in my view, the I Street home should be sold along with one of the two E Street units.
From the proceeds of the sale of the I Street home, each of the tax liabilities (that is, totalling $175,000 or thereabouts together with interest to the date of payment) should be paid along with the relevant costs of sale. I do not propose to speculate about what price it will bring or what it will cost to sell because at all times the husband has known that he had to provide cash to the wife. I will give liberty to apply in respect of the implementation of the sale order.
The wife will retain her motor car and in my view, that amounts to approximately 65 per cent but I do not intend this to be a precise mathematical approach. As earlier indicated, it is not critical that the percentages precisely reflect the actual money outcome because there will be variations with sale expenses. There should be no other transfer of money and each party should otherwise retain the assets in their respective possessions.
That proposed order however is subject to a 60 day embargo to enable the Australian Taxation Office to decide whether or not it wishes to intervene. In the event that no such application is made by the cessation of the 60 days, these orders will be self-executing.
Counsel for the wife sought that there be an order under s 106A of the Act for the purposes of having documents signed in the event that either party refused or declined to do so. I do not intend to make that order because I accept that both parties have obligations and will comply with these orders.
Because the wife will be the holder of the majority of the assets, she may decide whether or not she wishes to negotiate with the husband in respect of a sale of those properties bearing in mind her evidence is that she does not wish to live in either of them.

Spousal maintenance

For the wife to be entitled to spousal maintenance, she must establish that she cannot support herself adequately without that money. That issue must be contemplated before any question arises as to the capacity of the husband to pay.
In making that determination, the Court must take into account all of the matters set out in s 75(2) of the Act.
Bearing in mind the uncertainty about the tax debt, it seems that the wife will have a home or at least its proceeds and one unit from which she could draw income if necessary. The wife has the limited capacity to earn an income. In my view, there is no basis to say that the wife cannot adequately support herself now that these orders are being made. That issue may be reviewed if indeed the Taxation Office intervenes within the 60 days. Accordingly, the wife’s application for a lump sum payment of spousal maintenance must be dismissed.

Costs

I shall make the usual provisions in relation to submissions for costs but that can also be delayed until such time as the outcome is known of the Australian Taxation Office position. In respect of the Taxation Office position, I shall have the Registry Manager of the Melbourne Registry of the Family Court of Australia forward a copy of the orders and the reasons for judgment this day marked with a request that it be considered urgently and endorsed with the tax file references of the parties.

I certify that the preceding Two Hundred and Twelve (212) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin delivered on 10 September 2014.

Associate:

Date: 10 September 2014

[2014] FamCA 750

10 September 2014

Key Legal Topics

Areas of Law

Family Law

Equity & Trusts

Tax Law

Legal Concepts

Costs

Remedies

Constructive Trust

Standing