Konda and Konda & Ors
[2016] FamCA 1060
•9 December 2016
FAMILY COURT OF AUSTRALIA
| KONDA & KONDA AND ORS | [2016] FamCA 1060 |
| FAMILY LAW – PROPERTY SETTLEMENT – Transactions to defeat orders – Where the husband’s disposition of assets would defeat the wife’s anticipated relief under Part VIII of the Family Law Act – Where the husband transferred property to his brother – Where the brother was joined as the second respondent – Where the husband transferred funds to family members in India – Application of Halabi v Artillaga (1994) FLC 92-470 – Where other property is transferred through arm’s length transactions – Where the wife receives relief under s 106B – Decided wife entitled to property settlement amounting to 85 percent of the parties’ ascertained assets FAMILY LAW – PRACTICE AND PROCEDURE – Where the 3rd respondent does not appear at trial – Where the 3rd respondent has not filed any documents – Where no final orders will bind the 3rd respondent – Decided the question of procedural fairness is moot |
| Family Law Act 1975 (Cth), ss 75, 79, 106B |
| Atco Controls Pty Ltd (in liq.) v Newtronics Pty Ltd (recs and mgrs appt) [2009] VSCA 238 Vetter v Lake Macquarie City Council (2001) 202 CLR 439 |
| APPLICANT: | Ms Konda |
| 1st RESPONDENT: | Mr Konda |
| 2nd RESPONDENT: | Mr Vohra |
| 3rd RESPONDENT: | Mr Saiva |
| FILE NUMBER: | NCC | 2028 | of | 2013 |
| DATE DELIVERED: | 9 December 2016 |
| PLACE DELIVERED: | Newcastle |
| PLACE HEARD: | Newcastle |
| JUDGMENT OF: | Austin J |
| HEARING DATE: | 21, 22 & 23 November 2016 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Graham |
| SOLICITOR FOR THE APPLICANT: | Nash Allen Williams & Wotton |
| COUNSEL FOR THE 1ST RESPONDENT: | Ms Conte-Mills |
| SOLICITOR FOR THE 1ST RESPONDENT: | Cambridge Law Solicitors |
| COUNSEL FOR THE 2ND RESPONDENT: | Not Applicable |
| SOLICITOR FOR THE 2ND RESPONDENT: | Mr Haricharan, Hunter Family Law Centre |
| COUNSEL FOR THE 3RD RESPONDENT: | Not Applicable |
| SOLICITOR FOR THE 3RD RESPONDENT: | Not Applicable |
Orders
Pursuant to s 106B of the Family Law Act:
(a)The disposition by the first respondent to the second respondent of the real property comprising Folio Identifier …, described as B Street, Suburb C, NSW (“the Suburb C property”), by transfer (by registered dealing number …) in or about August 2012 is hereby set aside and the first and second respondents shall forthwith do all such things necessary to convey the first respondent’s former interest in the Suburb C property back to the first respondent; and
(b)The disposition by the first respondent to the second respondent of his shareholding in D Pty Ltd by transfer (by registered ASIC document number … or 1…) in or about July/August 2013 is hereby set aside and the first and second respondents shall forthwith do all such things necessary to convey the first respondent’s former interest in the corporation back to the first respondent.
Following compliance with Order 1(b) hereof, the first respondent is declared the sole legal and beneficial owner (as between the parties) of his shareholding in D Pty Ltd.
Following compliance with Order 1(a) hereof, the applicant and first respondent shall forthwith do all such acts and things and sign all such documents as may be necessary to list the Suburb C property for sale by public auction.
For the purposes of implementation of Order 3 hereof:
(a)The applicant shall be the trustee for sale;
(b)The solicitors chosen by the applicant shall act for the parties on the sale;
(c)The property shall be listed for auction sale within 12 weeks of the date of these orders;
(d)The auctioneer, in the event of disagreement between the applicant and first respondent, shall be the auctioneer chosen by ballot from their respective choices;
(e)The reserve price shall be as agreed between the applicant and first respondent and, in the event of disagreement between them, the reserve price nominated by the auctioneer;
(f)In the event the property is not sold by auction, or private negotiation within a further 7 days, then the property shall be submitted to successive auctions within further 6 weeks periods until sold, otherwise on the same terms and conditions as applied to the first auction;
(g)The parties are restrained from charging, mortgaging, or otherwise encumbering the property; and
(h)The applicant and first respondent shall cause the net proceeds of sale (after payment of all costs, commissions, and expenses of the sale, including any outstanding Council and water rates) to be held in trust by the solicitors pending compliance with Orders 5 and 6 hereof.
The applicant and first respondent shall forthwith do all such acts and things and sign all such documents as may be necessary to list for sale by public auction the real property comprising Folio Identifier …, described as E Street, Suburb F, NSW (“the Suburb F property”).
For the purposes of implementation of Order 5 hereof:
(a)The applicant shall be the trustee for sale;
(b)The solicitors chosen by the applicant shall act for the parties on the sale;
(c)The property shall be listed for auction sale within 12 weeks of the date of these orders;
(d)The auctioneer, in the event of disagreement between the applicant and first respondent, shall be the auctioneer chosen by ballot from their respective choices;
(e)The reserve price shall be as agreed between the applicant and first respondent and, in the event of disagreement between them, the reserve price nominated by the auctioneer;
(f)In the event the property is not sold by auction, or private negotiation within a further 7 days, then the property shall be submitted to successive auctions within further 6 weeks periods until sold, otherwise on the same terms and conditions as applied to the first auction;
(g)The parties are restrained from charging, mortgaging, or otherwise encumbering the property;
(h)The applicant and first respondent shall cause the net proceeds of sale (after payment of all costs, commissions, and expenses of the sale, including any outstanding Council and water rates) to be held in trust by the solicitors pending compliance with Orders 3 and 4 hereof; and
(i)The husband may occupy the property pending its sale pursuant to these orders, provided he meets all expenses incurred in respect of the property as and when those expenses fall due (including loan repayments, Council rates, water rates, and insurances), maintains the property in a reasonable state of repair, and facilitates inspection of the property by prospective purchasers.
Upon completion of the sales pursuant to Orders 3-6 hereof, the applicant and first respondent shall cause the solicitors to disburse the proceeds of the sales as follows:
(a)First, to pay the sum of $181,089 to the wife or at her direction;
(b)Secondly, to pay 85 per cent of the balance then remaining to the wife or at her direction; and
(c)Thirdly, to pay the residue to the husband or at his direction.
Unless otherwise provided:
(a)Each party shall be the sole legal and beneficial owner (as between the parties) of all other assets in their respective possession as at the date of these orders, and for that purpose bank accounts are deemed to be in the possession of the person named as the account holder and superannuation entitlements are deemed in the possession of the superannuant.
(b)Each party shall be solely liable for and shall indemnify the others against any and all debts attaching or relating to the property in their respective possession, and any debts in their respective sole names, including any individual liability for capital gains tax arising out of the sale by the parties of property pursuant to these orders.
In the event of any party refusing or neglecting to sign within 7 days of a written request to do so any document necessary to implement the terms of these orders the Registrar of the Family Court of Australia at Newcastle is empowered to execute such documents on behalf of the parties pursuant to s 106A of the Family Law Act.
Costs are reserved for 28 days.
All outstanding applications are dismissed.
Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Konda & Konda and Ors has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).
| FAMILY COURT OF AUSTRALIA AT NEWCASTLE |
FILE NUMBER: NCC 2028 of 2013
| Ms Konda |
Applicant
And
| Mr Konda |
First Respondent
And
| Mr Vohra |
Second Respondent
And
| Mr Saiva |
Third Respondent
REASONS FOR JUDGMENT
Introduction
The applicant wife brought these proceedings against the respondent husband to adjust their property interests pursuant to Part VIII of the Family Law Act 1975 (Cth) (“the Act”) following the breakdown of their marriage in July 2013.
Due to the wife’s complaints about the husband’s failure to fully and frankly disclose his financial circumstances, procedural orders were made for both parties to give comprehensive disclosure of their financial affairs pursuant to Chapter 13 of the Family Law Rules 2004 (Cth) (“the Rules”) and to file undertakings attesting to their compliance. The husband’s compliance with his disclosure obligation was demonstrably unsatisfactory and attention focussed upon his transfer of numerous assets to third parties at or about times when the marriage was either in jeopardy or ending.
Some days after the spouses’ separation, the husband told the wife she would “end up with nothing”,[1] but he was wrong. She will receive plenty to satisfy her lawful entitlement.
[1] Wife’s affidavit, para 226
Short history
The spouses met in 2004, married a month later, and separated in July 2013.[2]
[2] Wife’s affidavit, paras 1, 5, 11, 567; Husband’s affidavit, para 1
Their three children were born between 2006 and 2008 and are now between ten and eight years of age. They live with the mother and spend time with the father pursuant to final parenting orders made in December 2014.
These proceedings were commenced in August 2013, only a month after the spouses’ separation, in the Federal Circuit Court. Due to the husband’s transfer of assets to his brother and other associates, his brother was joined to the proceedings as the second respondent in November 2013.[3] Another of the husband’s associates was later joined to the proceedings as the third respondent when the wife filed her Amended Application in March 2015.
[3] Order 4 made on 7 November 2013
After the Federal Circuit Court made the final parenting orders between the spouses in December 2014, the residual dispute over the parties’ property interests was transferred to this Court for determination.
Once in this Court, the parties’ outstanding applications for interim relief were entertained in July 2015 and interim orders were made preserving many of the assets which were in dispute between them. More interim disputes between the parties were heard and determined in November 2015 and March 2016. Procedural orders were made to bring the litigation to trial in November 2016.
The third respondent has not filed any process and has never appeared at any Court event. The wife’s attempts to serve him in May 2015 failed and so, in June 2015, the registrar ordered that he could be validly served with the wife’s process by pre-paid post sent to two different addresses.[4] The wife’s solicitor subsequently filed an affidavit proving service upon the third respondent in accordance with that order.[5] In any event, none of the final orders will bind him so the question of procedural fairness is moot.
[4] Order 1 made on 22 June 2015
[5] Affidavit of Mr G filed on 20 July 2015
Evidence
The wife relied upon:
(a)Her affidavit filed on 14 October 2017;
(b)Her financial statement filed on 13 October 2017;
(c)Her undertaking as to disclosure filed on 30 May 2016;
(d)The affidavit of Ms H filed on 13 October 2016; and
(e)The affidavit of Dr I filed on 13 October 2016.
Although Dr I was an adversarial expert, neither the husband nor second respondent objected to the wife’s intended reliance upon his evidence and so leave was consensually granted for her to do so.
The husband relied upon:
(a)His affidavit filed on 14 November 2016;
(b)His financial statement filed on 1 November 2013; and
(c)His undertaking as to disclosure filed on 11 July 2016.
The husband’s affidavit was filed and served a month late,[6] but neither the wife nor second respondent took objection and so the husband was permitted to rely upon it. The documents described as annexures in the body of the husband’s affidavit were not actually annexed and so (after some objections by the wife) some, but not all, of those documents were separately identified by the husband and tendered as an exhibit.[7]
[6] Order 6 made on 25 August 2016
[7] Exhibit H3 (comprising Annexures A-G, I, M, O; excluding Annexures H, J, K, L, N)
The husband failed to file any updated financial statement as ordered,[8] which default he did not satisfactorily explain, so he instead relied upon the only financial statement he filed in the litigation over three years ago.
[8] Order 5 made on 25 August 2016
The second respondent relied upon:
(a)His affidavit filed on 7 October 2016;
(b)His financial statement filed on 15 May 2014; and
(c)His undertaking as to disclosure filed on 18 May 2016.
As noted, the third respondent did not appear at trial and did not file any document in the proceedings following his joinder as a party. The husband said in cross-examination he did not know the third respondent’s current address, which evidence is difficult to accept since he admitted he knew the third respondent still lived in the Newcastle area, they had a past business association, and he deposed he was currently indebted to the third respondent for a large sum of money in relation to his conduct of these proceedings.[9]
[9] Husband’s affidavit, para 101(b)
Legal principles
Orders under s 79 of the Act altering the property interests of spouses may only be made if the Court is first satisfied, pursuant to s 79(2), it is just and equitable to make such orders. The Act then identifies in s 79(4) the matters the Court must take into account in considering what order, if any, should be made (see Stanford v Stanford (2012) 247 CLR 108 at [22], [35]). While those two inquiries are not to be conflated (see Stanford at [35], [40], [51]), it is permissible for the factors within s 79(4) to inform the inquiry under s 79(2) (see Bevan & Bevan (2013) 49 Fam LR 387 at [83]-[89], [163], [169], [171]-[172]).
It is necessary to begin consideration of whether it is just and equitable to make a property settlement order by identifying the existing legal and equitable property interests of the spouses. It must not be assumed that their rights to or interests in marital property are or should be different from those that then exist or that a spouse has the right to have the spouses’ property divided by reference to considerations set out in s 79(4) of the Act (see Stanford at [37]-[40], [50]). Commonly, however, it will be just and equitable for the spouses’ property rights to be altered because the breakdown in their relationship will end their fiscal unity and deprive them of common use of their property (see Stanford at [42]; Bevan & Bevan at [68]-[70], [82], [164]-[165]).
If and once determined it is just and equitable for the property interests of the spouses to be altered, the process of evaluating the proper orders to make is dictated by the factors enumerated within s 79(4) of the Act. The court must necessarily identify and assess the spouses’ contributions within the meaning of ss 79(4)(a)-(c) and then take account of the relevant matters referred to in ss 79(4)(d)-(g) and 75(2).
Existing property interests
The wife’s current assets, liabilities, and superannuation comprise:
No.
Assets
Value
Total
1
Motor vehicle 1
1,000
2
Household contents
500
Sub-total
1,500
1,500
Liabilities
3
CBA Mastercard
3,000
3,000
Superannuation
4
Child Care Super
3,000
3,000
Net assets and superannuation
1,500
The findings about the wife’s financial circumstances are drawn from her financial statement, recently filed in October 2016. In final submissions, the husband admitted the correctness of the findings.
Given the husband has no declared superannuation interest, his current assets and liabilities comprise:
No.
Assets
Value
Total
5
E St, Suburb F (100 per cent)
755,000
6
J Street, City K, NZ (50 per cent)
202,500
7
L Street, City K, NZ (50 per cent)
200,000
8
CBA Acc
860
9
Motor vehicle 2
15,000
10
Household contents
50,000
Sub-total
1,223,360
1,223,360
Liabilities
11
Mortgage (Suburb F)
590,000
12
Mortgages (NZ) (50 per cent)
225,000
13
CBA credit card
30,050
Sub-total
845,050
845,050
Net assets
378,310
The husband also admitted the correctness of those findings during final submissions. Such findings about his financial circumstances are largely drawn from his financial statement filed in November 2013. The evidence in that document may be outdated, which was why he was ordered to file an updated financial statement by October 2016, but his failure to do so was not satisfactorily explained. Evidence about his current personal financial affairs was entirely within his dominion but he did not deign to provide it. Nor did the parties avail themselves of the procedural orders made in March 2016 requiring their procurement of single expert valuation evidence in respect of the Suburb F and New Zealand real properties.[10] The findings therefore reflect the available evidence.
[10] Orders 3-4 made on 22 March 2016
The husband bought the Suburb F property shortly before the spouses’ final separation in July 2013. It is uncontroversial that he holds sole legal and equitable proprietary interest in the property.[11] There is no evidence as to the current value of the property, but the husband previously admitted its value to be $755,000.[12] It was bought with a bank loan of $604,000,[13] but the husband said in cross-examination the debit balance of the loan is now $590,000.
[11] Wife’s affidavit, paras 206, 526; Husband’s affidavit, paras 12-17
[12] Husband’s financial statement 1/11/13, para 35
[13] Husband’s affidavit, para 14
The husband also holds sole legal title in the two New Zealand properties,[14] though he alleged he holds a one-half interest in each property on trust for his cousin, the existence of which equitable interests the wife disputes.[15] The only evidence adduced upon which the existence of the cousin’s one-half equitable interest in each property could possibly be established was the husband’s self-serving assertion that he purchased the two properties “jointly in trust” with his cousin, and further, his cousin “pays the mortgages for both properties and for all expenses associated with both properties”. However, the husband previously deposed in his financial statement that his cousin only pays one-half of the mortgage repayments.[16] Notwithstanding the paucity of evidence, the husband was not challenged about the accuracy of it. He was only challenged about his failure to adduce corroborative evidence from his cousin, but the absence of corroboration does not mean the husband’s own evidence must then be rejected. I find the husband only holds a one-half equitable interest in each property. In the absence of his challenge, no submission was made by the wife, either as to fact or law, which would warrant outright rejection of his evidence.
[14] Exhibit H4
[15] Wife’s affidavit, paras 472, 550; Husband’s affidavit, paras 40-41
[16] Husband’s financial statement, para 18
There is no reliable expert evidence about the current value of the New Zealand properties because the parties did not have them valued by a single expert as ordered. The husband previously admitted the values of his one-half interests at $200,000 and $150,000 respectively,[17] but he adduced evidence of two market appraisals in an attempt to prove their current values at $405,000 and $400,000,[18] meaning his one-half shares would be valued at $202,500 and $200,000 respectively. The husband deposed the properties are “cross secured” by mortgages, the total current debit balance of which is about $450,000,[19] so his half share would be about $225,000.
[17] Husband’s financial statement, para 36
[18] Exhibit H3 (Annexure F)
[19] Husband’s affidavit, para 40
The wife repeatedly asserted throughout these proceedings that the husband owns undeclared property in India. However, she admitted at a directions hearing she could not prove such an assertion[20] and she conceded her inability to do so again in her affidavit.[21]
[20] Notation C(ii) made on 25 August 2016
[21] Wife’s affidavit, para 522
The husband formerly alleged that he was personally indebted to M Pty Ltd for $297,777,[22] but that alleged liability is not now taken into account. First, there is no evidence that any such liability now exists, some three years afterwards. Secondly, it is unlikely the husband ever had any such personal liability. The husband deposed his dealings with M Pty Ltd were only ever in a role as a “consultant”[23] and in cross-examination he acknowledged that his services were provided by his employer D Pty Ltd so, in all probability, any liabilities for services provided or products supplied were liabilities as between M Pty Ltd and D Pty Ltd. The husband ultimately conceded any such liability must have been a corporate and not a personal liability.
[22] Husband’s financial statement, para 54
[23] Husband’s affidavit, paras 45-47
The husband deposed he had liabilities to family members and other associates in respect of his legal fees in these proceedings and to meet his general living expenses,[24] but no such alleged debts are taken into account. The parties agreed their liabilities for legal fees ought not be taken into account, consistently with authority (Chorn v Hopkins (2004) FLC 93-204 at [55]-[60]), and the evidence adduced by the husband about debts to family members, which entailed nothing more than asserted conclusions of his liability, fell far short of satisfactory proof that he and the alleged lenders intended to create legally enforceable commercial contracts. Agreements made in a domestic or family context are ordinarily not enforceable because the parties did not intend to create legal relations with one another (see Balfour v Balfour [1919] 2 KB 571; Cohen v Cohen (1929) 42 CLR 91 at 96; Jones v Padavatton [1969] 2 All ER 616 at 620-621; Henderson v Miles [2005] NSWSC 710 at [24]; Magill v Magill (2006) 231 ALR 277 at 326; Atco Controls Pty Ltd (in liq.) v Newtronics Pty Ltd (recs and mgrs appt) [2009] VSCA 238 at [60]). The husband bore the onus of establishing the intention to create commercial loans, but his bare assertion of debt did not objectively prove such intention (see Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95 at 105-106).
[24] Husband’s affidavit, paras 99-101
Unsurprisingly, the wife’s interest was piqued by how the husband could contend his current net worth was only $378,000, when he represented his net worth in bank loan applications to be about $1.1 million in December 2011[25] and about $1.66 million in September 2013.[26] In November 2013, only two months after informing the bank he was worth $1.66 million, the husband filed his financial statement in these proceedings deposing he was effectively insolvent, with liabilities exceeding his assets by about $150,000.
[25] Exhibit W2
[26] Exhibit W3; Wife’s affidavit, paras 553-554, 580
In respect of the representations made about his financial circumstances in the bank loan applications in 2011 and 2013, the husband obfuscated in cross-examination and tried to attribute responsibility for the representations to his loan broker, but he was impelled to admit he was the one who furnished the broker with the financial information to support the loan applications and, since the broker was acting as his agent, the responsibility for any misrepresentation to the banks fell to him. Either the husband authorised the provision of truthful information to the banks, which means the estimates of his financial circumstances were reliable, or he alternatively authorised misrepresentations to the banks, in which case his veracity was impeached and there is even more need to evaluate his evidence carefully.
Alienated assets
The husband’s alienation of property interests at or about the times of the spouses’ threatened separation in 2012 and their final separation in 2013 was an issue of intense speculation by the wife. She suspected he transferred his proprietary interests in numerous assets to defeat her anticipated relief under Part VIII of the Act and sought orders repatriating such assets to the husband’s control so they could be the subject of property adjustment orders in her favour. The wife relied upon s 106B of the Act as the foundational power to set aside most of the husband’s transfers of property interests.
Section 106B of the Act provides, relevantly, as follows:
(1)In proceedings under this Act, the court may set aside or restrain the making of an instrument or disposition by or on behalf of, or by direction or in the interest of, a party, which is made or proposed to be made to defeat an existing or anticipated order in those proceedings or which, irrespective of intention, is likely to defeat any such order.
…
(2) The court may order that any money or real or personal property dealt with by any instrument or disposition referred to in subsection (1), (1A) or (1B) may be taken in execution or charged with the payment of such sums for costs or maintenance as the court directs, or that the proceeds of a sale must be paid into court to abide its order.
(3) The court must have regard to the interests of, and shall make any order proper for the protection of, a bona fide purchaser or other person interested.
…
(4AA) An application may be made to the court for an order under this section by:
(a)a party to the proceedings; or
(b)a creditor of a party to the proceedings if the creditor may not be able to recover his or her debt if the instrument or disposition were made; or
(c)any other person whose interests would be affected by the making of the instrument or disposition.
(4A)In addition to the powers the court has under this section, the court may also do any or all of the things listed in subsection 80(1) or 90SS(1).
Although the wife conducted her case alleging the husband’s dispositions were actually intended by him to defeat property adjustment orders in her favour, which he stoutly denied, it is strictly unnecessary to determine that factual dispute. The Act does not require proof of such mischievous intent as a pre-requisite for engagement of s 106B. There mere disadvantageous effect of the subject disposition may suffice. As Nicholson CJ explained in Halabi v Artillaga (1994) FLC 92-470 at 80,884:
The authorities establish that the intention in question must be one to defeat an anticipated order and not a claim in the proceedings, and that the test as to whether the instrument is likely to have this effect is an objective and not a subjective one (see Whitaker and Whitaker per Nygh J, Pflugradt and Pflugradt per Elliot J, Holley and Holley , ANZ Banking Group Ltd v. Harper (supra), Hadjuk and Hadjuk ).
The section therefore lays down two sets of circumstances which will cause it to operate, namely that an instrument has been made with the intention of defeating an anticipated order in the proceeding, or secondly, regardless of the intention with which it has been made it is likely to have the effect of defeating such an order.
Once s 106B is engaged, the Court must then consider whether discretion will be exercised so as to grant relief. The exercise of discretion should not be confused with the initial issue of whether the subject transaction falls within the ambit of the section. The proper approach is described by Nicholson CJ as follows (see Halabi v Artillaga at 80,885):
…first determine whether the requirements of ss (1) have been satisfied, and if so, to treat the disposition as not having been made for the purpose of arriving at an appropriate order pursuant to s 79, and then having done so, to determine whether, having regard to the rights of the bona fide purchaser or person interested under ss (3), a discretion should be exercised to set the instrument or disposition aside. The exercise of such a discretion may well depend upon whether if this is not done there are sufficient funds available to the party who has made the disposition to satisfy the order without setting the instrument or disposition aside.
Although Nicholson CJ discussed the operation of s 85 (which was the antecedent legislative formulation of s 106B), the process remains the same under s 106B. The same principles enjoy the recent endorsement of the Full Court (see VC & GC & Ors (2010) FLC 93-434 at [153]-[154]).
In that statutory context, the evidence about and findings in relation to, the subject transactions are as follows.
Suburb N property
The Suburb N property was purchased by the husband in his sole name in late 2008 for the price of $230,000.[27] The purchase was funded by way of bank loan in an amount of $269,500, which loan was secured, at least in part, over the real property taken into the marriage by the wife.[28]
[27] Wife’s affidavit, para 517; Husband’s affidavit, para 70
[28] Husband’s affidavit, paras 35-36
The second respondent was neither a purchaser nor a borrower in the transaction.[29] According to the evidence, he made no financial contribution to either the acquisition of the property or towards any expenses associated with its retention. Nevertheless, the husband transferred the whole of his unencumbered legal interest in the Suburb N property to the second respondent in August 2012.[30] That occurred shortly after the husband informed the second respondent that the wife had threatened to separate from him and make a property settlement claim upon him of $400,000.[31]
[29] Husband’s affidavit, para 70
[30] Wife’s affidavit, paras 508-509, 514
[31] Second Respondent’s affidavit, para 46
The transfer document between the husband and second respondent disclosed consideration of $90,000.[32] Even though the wife apparently believes none of the consideration was actually paid by the second respondent to the husband for the transfer,[33] the husband said in cross-examination that sum was paid to him by the second respondent, albeit in tranches over several months between August and November 2012. The husband said the monies were deposited to the corporate bank account of D Pty Ltd, the statements for which account were tendered in evidence and could easily have been checked,[34] so in the absence of his contradiction I accept the husband’s evidence about his receipt of the payments.
[32] Wife’s affidavit, para 515
[33] Wife’s affidavit, paras 439, 464
[34] Exhibit R2
Pursuant to interim orders made in July 2015,[35] the Suburb N property was sold by the parties and the net proceeds divided between them in stipulated shares: the wife (25 per cent), the husband (25 per cent), and the second respondent (50 per cent). That occurred in March 2016.[36] Because the property was sold to an unrelated third party at arm’s length it is no longer possible to set aside the earlier disposition of the property between the husband and second respondent under s 106B of the Act. That, however, does not render the transfer between the husband and second respondent meaningless in the adjustment of property interests between the spouses.
[35] Orders 5-7 made on 30 July 2015
[36] Second respondent’s affidavit, paras 56-60
The second respondent had no legal or equitable interest in the property until he acquired it from the husband for only $90,000. When it was later sold, the second respondent received $164,224,[37] which he kept and spent. The second respondent therefore enjoyed a windfall of about $74,000 at the expense of the spouses, which financial benefit was conferred upon him by the husband without the wife’s knowledge or consent. Any suggestion by either the husband or second respondent that the wife knew of and acquiesced to the husband’s disposition of that property to the second respondent is rejected as false. The sum of $74,000 is not notionally added-back to the spouses’ property interests, but it is relevant to the ultimate distribution of existing property interests between them pursuant to s 75(2)(o) of the Act.
[37] Second Respondent’s affidavit, para 60
The husband and second respondent conducted a garbled case about the second respondent’s entitlement to some form of equitable interest in the Suburb N property or that its transfer to him represented commensurate consideration for his unpaid work, but such contentions are rejected.
The husband finally conceded he did not hold any interest in the property on trust for the second respondent and he could not identify any other recognised basis upon which the second respondent acquired an equitable interest in it. In fact, the husband represented to a bank in a loan application made in September 2013 (which was a year after he allegedly transferred the property to the second respondent) that he was the sole owner of the Suburb N property.[38]
[38] Exhibit W3; Wife’s affidavit, para 553, Annexures Y-Z
The second respondent was always employed by D Pty Ltd, not by the husband personally, so any benefit due to him for services rendered was payable by that corporation not the husband. Although the second respondent asserted he always held a one-half equitable interest in the property pursuant to a constructive trust, he could not explain in cross-examination the logic of how he came to hold exclusive legal and equitable interest in the property for which he only paid $90,000, when he admitted it was worth $380,000.[39] Nor could that be explained by his lawyer in final submissions.
[39] Second respondent’s financial statement, para 36
Suburb C property
The Suburb C property was purchased by the husband in his sole name in 2010 or early 2011 for the price of $650,000.[40] The purchase was funded entirely by bank loan.[41]
[40] Wife’s affidavit, para 523; Husband’s affidavit, paras 39, 72
[41] Husband’s affidavit, paras 39, 72
The second respondent was neither a purchaser nor a borrower in the transaction. The husband paid the utilities and took the rent.[42] According to the evidence, the second respondent made no financial contribution to either the acquisition of the property or towards any expenses associated with its retention. Nevertheless, as with the Suburb N property, the husband transferred the whole of his unencumbered legal interest in the Suburb C property to the second respondent in August 2012.[43] Again, that occurred shortly after the husband told the second respondent the wife had threatened to separate from him and make a property settlement claim upon him of $400,000. The husband admitted in cross-examination the wife had demanded $400,000 from him, otherwise she would “destroy” him.
[42] Husband’s affidavit, para 38
[43] Wife’s affidavit, paras 524-525
The transfer document between the husband and second respondent disclosed consideration of $50,000,[44] but as the wife alleged[45] and the husband admitted in cross-examination, the second respondent paid none of that consideration for the transfer. The second respondent is still the sole legal proprietor of the property. The property was unencumbered at the time of transfer and, although its current value is unknown, it is difficult to envisage it being worth less than the $650,000 for which it was bought over five years ago.
[44] Husband’s affidavit, paras 79-80
[45] Wife’s affidavit, para 465
The wife sought that the disposition of the property by the husband to the second respondent in August 2012 be set aside pursuant to s 106B of the Act, so that the husband’s ownership of the property would be restored. I am satisfied the transfer of the property, at the time it was made, would likely defeat an anticipated property adjustment order between the spouses. On the evidence of the second respondent, the validity of which was not challenged by the husband, the husband told the second respondent that, in response to the wife’s threat to separate and seek property settlement relief against him, he would transfer a one-half share in the property to the second respondent.[46] But the husband did not confine the disposition to a one-half share. He instead transferred the whole of the legal title in that property to the second respondent.
[46] Second respondent’s affidavit, para 46
The husband and second respondent sought to resist the disposition being set aside on the basis that, as in respect of the Suburb N property, the second respondent enjoyed some form of equitable interest in the Suburb C property or that its transfer to him represented commensurate consideration for his unpaid work.[47] Their contentions are rejected.
[47] Husband’s affidavit, paras 73-74; Second respondent’s affidavit, para 40
The husband conceded in final submissions that, prior to the disposition, the second respondent had no equitable interest in the property pursuant to any express, resulting, implied, or constructive trust. No other equitable doctrine could be identified which invested the second respondent with any proprietary interest in the property. Just as the husband did with the Suburb N property, he represented to a bank in a loan application made in September 2013 that he was still the sole owner of the Suburb C property.[48] As already indicated, if the second respondent’s services went unpaid, any remedy he may have is against his employer, D Pty Ltd. The husband had no personal obligation to rectify such iniquity. Even if the husband did have such a personal obligation, the property was worth some $650,000 and the second respondent’s services could not have been worth anything like that amount.[49]
[48] Exhibit W3; Wife’s affidavit, para 553, Annexures Y-Z
[49] Wife’s affidavit, paras 440, 459
The second respondent sought to assert he had an equitable interest in the property pursuant to a constructive trust but, as with the Suburb N property, neither he nor his lawyer could rationally explain how that was so. The second respondent actually deposed that he currently holds a one-half interest in the property on trust for the husband,[50] so he must inferentially accept that at least a one-half interest in the property should be conveyed back to the husband.
[50] Second respondent’s affidavit, para 48
The second respondent had no proprietary interest in the Suburb C property prior to its transfer to him and his acquisition of sole and exclusive proprietary interest in it for no consideration was entirely unjustified. The disposition should be set aside, pursuant to which the husband will resume sole and exclusive ownership of the property. It will be included amongst his property interests, but it will need to be sold to realise its proper value. The second respondent said in cross-examination he was willing to buy it for only $610,000, but the wife believes he marketed the property for sale in 2013 for as much as $1,500,000.[51] Given the huge disparity in the parties’ views about the potential value of the property and the manner in which the husband and second respondent tried to place the property beyond the reach of any property settlement orders, the wife wisely proposed that she be appointed the trustee for sale.
[51] Wife’s affidavit, para 525
Business licenses
At some point during the spouses’ marriage, the husband purchased some business licenses which were used in some business venture. The husband withdrew money from the coffers of D Pty Ltd to purchase the licenses and, when he later sold them to the third respondent in August 2013, the net sale proceeds were deposited back to the accounts of D Pty Ltd.[52] The licenses were just an asset the husband bought and sold in the ordinary course of business, for which purpose D Pty Ltd was his creditor. The wife was suspicious about the contemporaneity between the spouses’ final separation in July 2013 and the disposal of the licenses in August 2013, but that overlooks the deposit of the sale proceeds to the credit of D Pty Ltd to repay the debt. The husband’s shareholding in that corporation is yet to be discussed.
[52] Wife’s affidavit, paras 502, 552, 555, 584, Annexures Y-Z; Husband’s affidavit, para 48
At the commencement of trial, the wife sought an order to the effect that the three respondents ensure payment of the business licenses sale proceeds to her, but in final submissions she reluctantly accepted no order to that effect could conscionably be made and she abandoned it.
Shareholding in D Pty Ltd
At some point during the spouses’ marriage, the husband established the corporation named D Pty Ltd. It was the corporate vehicle through which he conducted business.[53] The husband was and remains an employee of the corporation.
[53] Husband’s affidavit, para 43
The wife asserted that, in April 2012, the husband was the sole director of and shareholder in the corporation,[54] though that was in dispute. The husband instead asserted he and the second respondent were jointly the directors of and shareholders in the corporation.[55] Unfortunately, that discrepancy in the evidence was never directly addressed by the parties.
[54] Wife’s affidavit, paras 579, 590
[55] Husband’s affidavit, para 42
Regardless, by September 2014, the husband and second respondents were both directors of the corporation, but the second respondent was the only shareholder. Those changes occurred between July and November 2013,[56] hard on the heels of the spouses’ final separation. The second respondent therefore acquired at least a one-half proprietary interest, but possibly the entire proprietary interest, in the corporation.
[56] Wife’s affidavit, para 601, Annexures AI-AJ; Husband’s affidavit, para 44
The husband adduced inconsistent evidence about the circumstances under which he transferred his shareholding in the corporation. He deposed in his financial statement that he received no consideration,[57] but in cross-examination he said the second respondent paid him consideration of about $26,000 (being his estimate of one-half of $55,035.95).[58] The latter evidence would be consistent with the husband and second respondent initially having joint shareholdings and the husband transferring to the second respondent only his one-half share, but the former evidence would still not exclude that possibility. The wife believed the second respondent paid nothing for the transfer of the shareholding in the corporation by the husband,[59] though the basis of that belief was never elaborated. The second respondent adduced no evidence at all about the circumstances under which he became a director of and shareholder in the corporation. He seemed to have little knowledge of the corporation, leaving open the inference that the husband still controls it. In cross-examination he was asked if he looked at any documents before his appointment as director of D Pty Ltd and he replied “not really”. Even in his capacity as a director, which status both obliges and permits his intimate knowledge of the corporation, he asserted he did not have the corporations’ tax returns and suggested the wife direct her inquiries to the husband.[60]
[57] Husband’s financial statement, para 59
[58] Husband’s affidavit, para 42
[59] Wife’s affidavit, para 555
[60] Wife’s affidavit, para 561, Annexures AA-AC
Despite the unsatisfactory state of the evidence, the husband and second respondent were most probably joint directors and shareholders of the corporation and the husband transferred his one-half shareholding to the second respondent. That transaction occurred very shortly after the spouses separated in July 2013. The husband deposed he transferred his shareholding to the second respondent because he was “not seeing” his children and was suffering from “severe depression”,[61] which evidence is hardly compelling. Those reasons may have been an influence, but they were probably not the motivating factors. There was no evidence to prove he suffered clinical depression and, although he might have wished to see more of the children, he prized his entrepreneurial skill and historically devoted most of his energy to the business rather than the family. I find he transferred the shareholding in an attempt to defeat an anticipated property settlement order in favour of the wife following upon their recent separation. It was a valuable asset and he sought to protect it from the wife. Even if that was not his intention, that was the plain effect of the transfer.
[61] Husband’s affidavit, para 42
There is no reason why, in the exercise of discretion, the disposition of his shareholding should not be set aside pursuant to s 106B of the Act. He is still a director of the corporation, he is still an employee of the corporation, he still works in the business conducted by the corporation, and he still treats the corporation as his own. As an obvious example, in November 2013, after the husband divested himself of any shareholding in the corporation to the second respondent, he deposed the corporation was still paying the mortgage repayments upon his property at Suburb F.[62] He admitted in cross-examination that was still happening even now.
[62] Husband’s financial statement, para 18
The husband’s transfer of the shareholding to the second respondent was an artifice and the disposition will be set aside, in which event the husband will resume ownership of his one-half shareholding in the corporation.
The value of the husband’s share is not known because the parties did not have it valued by an expert, despite procedural orders requiring that to occur.[63] In such circumstances, the wife did not seek the transfer of the shareholding to her as part of the property settlement, but rather invited the Court to make an order for the husband to retain it and to take that fact into account, under s 75(2) of the Act, as it is a very substantial financial resource in the husband’s hands.
[63] Notation D made on 25 August 2016
There is little doubt the corporation is a valuable trading entity, even though the husband and second respondent have not produced the corporation’s tax returns up to and including the 2013 financial year to verify the fact.[64]
[64] Wife’s affidavit, paras 564-565
In 2008, the husband’s tax return declared his annual taxable income at $107,428.[65] The corporation was the source of his income.
[65] Wife’s affidavit, paras 559, 571
In 2009, the corporation disclosed annual sales income of nearly $3.8 million and gross annual profit of $433,598.[66] The husband’s income for that year was $111,294.[67]
[66] Wife’s affidavit, para 557
[67] Wife’s affidavit, para 571
In 2010, the husband’s taxable income was $127,023.[68]
[68] Wife’s affidavit, para 571
In 2011, the corporation disclosed annual sales of over $3.9 million and net profit of $52,043.[69] The husband’s taxable income was $129,332.[70]
[69] Exhibit W4
[70] Wife’s affidavit, para 574
In 2012, the corporation had annual sales of over $4.1 million and post-tax profit of $97,596.[71] The husband declared his personal income to be $237,622, about half of which appears to have been derived from his employment with the corporation.[72] It seems the husband leased a commercial property and may have additionally conducted business in his own right, separate from the corporation.[73] The husband deposed he did not renew that lease when it expired in August 2015.[74]
[71] Exhibit W4
[72] Wife’s affidavit, paras 558, 572, 573; Exhibit W4
[73] Wife’s affidavit, para 535
[74] Husband’s affidavit, paras 61-62
In September 2013, the husband disclosed in a bank loan application that his current annual income was $230,263,[75] though he deposed in his financial statement filed in November 2013 that his annual income was only $47,060.[76]
[75] Exhibit W3
[76] Husband’s financial statement, para 9
There is no evidence about financial performance after 2013 but, until then, the trend for D Pty Ltd was burgeoning sales and increasing profits, which reflected in increasing income for the husband. That is all the more reason to doubt the integrity of the husband’s transfer of his shareholding in the corporation to the second respondent for so little or no consideration.
Until the parties separated in July 2013, they banked money indiscriminately between their joint account and the business account of D Pty Ltd. In cross-examination the husband said he was not surprised that about $6 million washed through the parties’ joint account in a five-year period preceding their separation. Of course, that may represent the gross income of the business rather than its profit, but it reflects the corporation’s prosperity.
Shareholding in O Pty Ltd
In April 2012, the husband was one of three directors in O Pty Ltd and he held a one-third shareholding in it. The third respondent was also a director and equal shareholder.[77] That corporation conducted businesses in the upper Hunter Valley of NSW.[78] The husband transferred his shareholding to the third respondent for consideration between July and October 2013. He also resigned his directorship at that time.[79]
[77] Wife’s affidavit, paras 577, 588; Husband’s affidavit, paras 53-54
[78] Wife’s affidavit, para 602; Husband’s affidavit, paras 55-56
[79] Wife’s affidavit, paras 602, 604, Annexures Y-Z, AK-AL; Husband’s affidavit, para 57
At the commencement of trial, the wife sought orders to the effect that the husband’s transfer of his shareholding in the corporation to the third respondent be set aside and that all three respondents transfer to her their respective shareholdings in the corporation. However, there was no rational basis upon which the third respondent could be forced to transfer his own shares in the corporation to the wife. As for the husband’s former shares, the husband deposed he sold them to the third respondent and there was no reason advanced to explain why the transaction should be suspected as uncommercial. In final submissions the wife accepted she could not press for the orders she proposed and she abandoned them.
Shareholding in P Pty Ltd
The wife discovered the third respondent is a director of and shareholder in P Pty Ltd and that rent from a business premises leased personally by the husband was being paid to that corporation.[80] P Pty Ltd also uses the same registered office as D Pty Ltd.[81] On the basis of those facts alone, the wife apparently suspected some impropriety between the husband and either or both of the other two respondents. Importantly, she adduced no proof of any proprietary interest held by the husband in the corporation. The husband deposed to his knowledge of the corporation,[82] but he was never challenged with the proposition that he had a past or present shareholding in it.
[80] Wife’s affidavit, para 585
[81] Wife’s affidavit, para 587
[82] Husband’s affidavit, paras 63-64
At the commencement of trial, the wife sought orders to the effect that the husband’s transfer of his shareholding in the corporation to the second respondent be set aside and that all three respondents transfer to her their respective shareholdings in the corporation. Her proposal was misconceived. There was no evidence that either the husband or second respondent ever had shareholdings in the corporation and there was no evidence of any transfer of shares in the corporation as between the husband and the other respondents. In final submissions the wife accepted she could not press for the orders she proposed and she abandoned them.
Shareholding in Q Pty Ltd
In April 2012, the husband was one of two directors in Q Pty Ltd, though the evidence is unclear whether he held a one-half or a one-third shareholding in it.[83] The husband deposed he sold his shareholding to the other director for $20,000 in or about July 2012.[84] That evidence was not contradicted. The wife simply deposed the other director ceased to hold office in July 2013.[85] In any event, the husband deposed the corporation ceased trading and was de-registered in April 2014,[86] meaning the shares in it are now worthless. That evidence was not challenged.
[83] Wife’s affidavit, paras 578, 589; Husband’s affidavit, para 49
[84] Husband’s affidavit, para 49
[85] Wife’s affidavit, paras 578, 589
[86] Husband’s affidavit, para 51
The wife did not seek any order in respect of the husband’s former shareholding in the corporation. She merely contended his transfer of the shareholding to the third party was significant because it occurred contemporaneously with his transfer of the Suburb C property to the second respondent and helped prove the husband’s intent to cheat her. It did not.
Cash transfers to India
Between October 2007 and November 2013, approximately $1.3 million in cash was transferred out of Australia to the husband’s mother and brother in India.[87] The wife contended, and I accept, she knew nothing of those cash transfers.[88] The spouses disputed the husband’s responsibility for many of the cash transfers and the reasons for them.
[87] Wife’s affidavit, paras 537-548
[88] Wife’s affidavit, para 541
It is uncontentious that the husband transferred about $340,000 to his mother and brother between October 2007 and November 2010.[89] The only dispute about those particular cash transfers was the reason for them. The wife contended the husband was spiriting money out of the country to stockpile assets in India without her knowledge or consent, whereas the husband contended in cross-examination the cash transfers were made to repay debts he owed his family. The husband earlier deposed the cash transfers he made were for two purposes: to repay family loans and to pay for this family’s living expenses when staying temporarily in India, though he did not apportion the money between those two purposes.[90]
[89] Wife’s affidavit, paras 538, 542
[90] Husband’s affidavit, paras 86, 88, 89
The cash transfers admitted by the husband only occurred between October 2007 and November 2010 and, during that period, the family only spent a couple of months staying with the father’s family in India in 2010,[91] so very little of the $340,000 he admits having transferred could account for their living expenses in India.
[91] Wife’s affidavit, para 425
As for the existence of family loans and his obligation to repay them, the wife asserted she knew nothing of it and the husband’s evidence about it was threadbare. He alleged his father loaned him USD $130,000 – $150,000 (equating to say AUD $200,000) to start a business in 2006,[92] but the second respondent deposed the husband had $52,000 in cash after he closed the business.[93] The husband admitted in evidence he closed the business in about December 2006 after only six months trade. Even if the husband’s father did loan him the start-up money, he had about $52,000 to repay him, so the balance of the loan would only have been about $150,000 – far less than the $340,000 he actually transferred. In any event, the cash he transferred to India was paid to his mother and brother, not his father.
[92] Husband’s affidavit, para 89
[93] Second respondent’s affidavit, para 26
The $52,000 cash was not used to finance the business in which the husband became interested, through D Pty Ltd, because he said in cross-examination he used a credit card and bank loan to establish that business. Consequently, the husband’s evidence cannot adequately account for the money he admittedly transferred back to India.
The spouses also disputed the husband’s responsibility for more cash transfers made to the husband’s mother and brother, amounting to about $960,000, between October 2009 and November 2013 in the names of Mr R, Mr S, and Mr T.[94] The wife alleged the husband was responsible for those cash transfers, with the intention of surreptitiously achieving the same purpose as the cash transfers in his own name, but the husband denied it.[95]
[94] Wife’s affidavit, paras 540, 543
[95] Husband’s affidavit, para 90
The husband denied any knowledge of, or association with, either Mr R or Mr S. In the absence of his contradiction, I accept his evidence. That necessarily means cash transfers of about $300,000 must be discounted because they cannot be reasonably attributed to the husband. But the situation with Mr T, whose name was used to transfer about another $660,000, was quite another thing.
Mr T undoubtedly departed Australia on 24 July 2010 and did not return.[96] Self-evidently, he could not transfer money out of Australia after that date if he was not present in the country, so someone else must have made the cash transfers in his name, at least after his departure date.
[96] Wife’s affidavit, para 546, Annexure V
Mr T is related to the husband.[97] The husband admitted Mr T arrived in Australia on a student visa. He worked in business run by the husband and lived with the family for a while. The husband admitted he and Mr T fell out and he sent him back to India, as the wife deposed.[98] The wife said that occurred while they lived at Suburb N, between 2009 and 2011,[99] which tallies with the departure date in Mr T’s passport.
[97] Wife’s affidavit, para 545
[98] Wife’s affidavit, para 547
[99] Wife’s affidavit, para 425
The wife adduced in evidence written statements allegedly made by Mr T, in which statements he alleged the husband’s fraud and, in particular, the husband’s fraudulent use of his identity to send money to the husband’s mother and brother in India.[100] The statements appear to be authentic and the husband did not challenge their admissibility. The wife also annexed to her affidavit an apparently authentic extract from Mr T’s passport, which she could likely only have obtained from Mr T voluntarily, so that added weight to the provenance and reliability of his purported statements about the husband.
[100] Wife’s affidavit, para 548, Annexures W, X
In cross-examination, the husband admitted he knew of no reason why Mr T would be indebted to his mother or brother at all, let alone for so much money or over so many years. Curiously, even though the husband knew of the wife’s allegation that he used Mr T’s identity to make the cash transfers to India, he conceded he did not ask his mother about why she had received so much money from Mr T and he did not attempt to call either his mother or brother as witnesses to give evidence confirming the payments they received in Mr T’s name were not from him (the husband). The husband deposed he asked Mr T about the wife’s allegations and Mr T denied knowledge of the written statements purporting to be his, which she adduced in evidence.[101] Perhaps Mr T was trying to save face with the husband, denying to him what he had already admitted to the wife. The husband deposed he had a contradictory written statement from Mr T,[102] but he did not tender it in evidence.[103] Nor did the husband attempt to call evidence from Mr T.
[101] Husband’s affidavit, para 90
[102] Husband’s affidavit, para 91
[103] Exhibit H3 (from which Annexure L was omitted)
The weight attributable to evidence is liable to correlate with the respective power of the parties to produce and contradict it (see Vetter v Lake Macquarie City Council (2001) 202 CLR 439 at 454; Burke v LFOT Pty Ltd (2002) 209 CLR 282 at 330). The wife produced probative evidence, apparently from Mr T, which supported her case. The husband did not object to it. The husband’s efforts to produce his own evidence and contradict the wife’s evidence, which was well within his power, were weak by comparison. I accept the wife’s submission that the available evidence justifies an inference the husband was responsible for the cash transfers made in the name of Mr T to the husband’s relatives between October 2009 and November 2013, being both before and after Mr T’s departure from Australia in 2010. Those cash transfers amounted to about $660,000. As the husband denied making such cash transfers, he was unable to offer any reasonable explanation for why the cash transfers were made. Most probably it was to accumulate assets or cash reserves in India, which were not disclosed by him in these proceedings.
I also accept the wife’s submission that the husband’s dissipation of the cash by international transfers, being most of the transfers in his own name and all of those in Mr T’s name, should sound in an adjustment in her favour pursuant to s 75(2)(o) of the Act.
Conclusion
The Suburb C property will be restored to the husband’s ownership, but will need to be sold to realise its true value. The net proceeds of its sale will be distributed between the parties in the same proportions as their other assets.
The following facts and circumstances will be taken into account in the determination as to the parties’ ultimate proportional entitlements to the existing assets:
(a)The husband’s conferral upon the second respondent of sole ownership of the Suburb N property, which cost the parties about $74,000;
(b)The husband’s retention of his shareholding in D Pty Ltd (following reversal of his disposition of that shareholding to the second respondent), which shareholding provides him with a very valuable income-generating vehicle; and
(c)The husband’s transfer of cash to India, which transfers amounted to perhaps as much as $1 million (up to $340,000 in his own name and $660,000 in the name of Mr T).
Section 79(2)
Both parties proposed that their existing property interests should be adjusted, so it must follow that they each consider that outcome to be just and equitable.
It plainly is just and equitable for their property interests to be adjusted. It is patently unfair for the wife to have net assets of only $1,500, but for the husband to possess declared assets of $378,310, aside from the unencumbered Suburb C property which will be transferred back to him.
Sections 79(4) & 75(2)
The wife brought into the marriage an encumbered real property, which was sold a few years later. The net proceeds of sale apparently amounted to about $150,000 (even though there were references to other figures in the evidence) and were deposited into the parties’ joint bank account and used to advance the family’s interests.[104] There was no evidence of any initial contribution of assets by the husband, though I assume he had some modest personal property, just like the wife.[105]
[104] Wife’s aff, paras 311-314, 317, 324, 426, 428, 430, 505; Husband’s aff, paras 23-32
[105] Wife’s affidavit, para 428
It was common ground the spouses organised their family life by designating the wife as the homemaker and carer for the children and the husband as the breadwinner.[106] The only extra financial contribution made by the wife was her saved disability pension payments.[107] The wife also helped the husband in his business venture by buying stock for him.[108]
[106] Wife’s affidavit, paras 244-248, 254, 271-272, 278, 302-304; Husband’s affidavit, para 102
[107] Wife’s affidavit, paras 377-378, 424, 488, 615, 621
[108] Wife’s affidavit, paras 253, 483-484
The husband’s business activity and the income he derives have already been the subject of analysis and findings. He has a high income-earning capacity. The wife personally observed him to act as if operating many businesses all over the Hunter Valley.[109] Just before the spouses’ separation in July 2013, the husband had $265,531 in his bank account, but by October 2013 he had reduced the credit balance to only $9,234.[110]
[109] Wife’s affidavit, paras 427, 477-479, 603
[110] Wife’s affidavit, paras 566-569
Despite the husband’s proven capacity to earn high income, he admitted he is currently indebted for child support in an amount approximating $9,000. He has only paid child support totalling about $13,261 for the three children since the spouses separated over three years ago.[111] He presently pays $20.30 per week.[112] Although he deposed to current weekly income of only $489,[113] he has the immediate capacity to earn much more through his operation of the business owned by D Pty Ltd.
[111] Wife’s affidavit, paras 283-284
[112] Wife’s affidavit, para 288; Husband’s affidavit, para 96
[113] Husband’s affidavit, para 7
The husband deposed that he currently lives in the Suburb F property and he did not challenge the wife’s allegation that he has travelled overseas several times each year since they separated.[114] By comparison with his comfortable lifestyle, the wife and three children live off Centrelink benefits and can only accommodate themselves in the wife’s mother’s garage.[115]
[114] Wife’s affidavit, para 631
[115] Wife’s affidavit, paras 291-293, 296
The wife adduced vast amounts of evidence about the husband’s violent and hostile treatment of her, with the intention of contending she was entitled to a greater share of the spouses’ property due to her contributions being rendered more arduous by the adversity and oppression under which she made them (see Marriage of Kennon (1997) 22 Fam LR 1). For his part, the husband flatly denied any “domestic and family violence” at all.[116]
[116] Husband’s affidavit, para 6
Both spouses were challenged about their evidence in relation to the husband’s marital conduct. Most likely the husband was an overbearing and assertive domestic partner but, nonetheless, it is difficult to determine the wife was repeatedly physically and sexually assaulted in the manner she alleged when neither party was corroborated. The wife fled the relationship in July 2013, sought police assistance, and an apprehended violence order was obtained in her favour against the husband.[117] It is unlikely she would have taken those steps unless she genuinely considered it necessary, but such facts are just as consistent with her finally breaking free of the husband’s dominance. There was no evidence she ever reported to the police the physical and sexual assaults by the husband she alleged in her affidavit.
[117] Wife’s affidavit, paras 194-196, 224
There was undoubtedly an imbalance of power in the spouses’ marriage. The husband told the wife that, according to his cultural beliefs, a woman’s throat would be cut if she did not respect her husband.[118] The implicit message was for her to be submissive, which she well understood and which was the course she adopted throughout the marriage.[119] The husband kept her passport, controlled their finances, told her what she could wear, told her his business interests were none of her concern, and criticised her housekeeping skills.[120]
[118] Wife’s affidavit, para 138
[119] Wife’s affidavit, para 183
[120] Wife’s affidavit, paras 165, 250, 349, 419
The Full Court in Kennon held (at 24) that, for the violent conduct to be relevant, it would be necessary to show it had “discernable impact upon the contributions of the other party” and the conduct would not be relevant when it “does not have that effect”. The Full Court also observed (at 18) that, in the absence of any evidence linking a party’s impaired state of health with the nature and quality of that party’s contributions, there is no basis for finding the party should receive an adjustment for that factor.
The wife certainly suffers from an anxiety condition, but that has been the case for a long time. She began receiving her disability pension well before the marriage and she conceded her anxiety condition was one reason why she was entitled to the pension. Moreover, she had cosmetic surgery in about 2010 and was unhappy with the result, so she sued her surgeon. Part of her claim for tortious damages related to the anxiety, stress, and loss of confidence she alleged was attributable to her dissatisfaction with the surgery.[121] It is therefore clear, on the wife’s own admission, that her psychological state was disturbed well before she met the husband and her condition was exacerbated by her surgery during the marriage. No doubt her anxiety condition was also exacerbated by the way in which she was treated by the husband, but it is impossible to say to what extent. She wrote love letters to the husband early in their relationship,[122] so she must not have regarded him so poorly at that point in time.
[121] Exhibit H1; Husband’s affidavit, paras 111-112
[122] Exhibit H2
The wife’s general medical practitioner deposed to the direct connection between the wife’s anxiety and the domestic violence to which she was subjected by the husband,[123] but his opinion was obviously skewed. His opinion was offered entirely in reliance upon the history he was given by the wife and she conceded in cross-examination the doctor was unaware of the litigation she brought against her former surgeon seeking damages for psychological harm caused by the negligent performance of that surgery.
[123] Dr I’s affidavit
The evidence did not carry sufficient probative weight to justify any extra adjustment in the wife’s favour pursuant to Kennon principles.
Conclusions and orders
Both spouses revised their proposals throughout the trial.
The husband began the trial admitting the wife was entitled to not less than 55 per cent of the parties’ net assets, but ended the trial conceding she was entitled to 60 per cent. He contended their spousal contributions were equivalent, but he conceded the considerations that warranted an adjustment in the wife’s favour were: her inferior health, her continuing care of the children, his significantly greater earning capacity, and the comparatively low rate of child support paid by him in the past and probably into the future. Axiomatically, in admitting the wife’s entitlement to 60 per cent of their assets for those reasons, he ignored the effect of the findings now made about his conferral of large monetary sums on the second respondent, his mother, and another brother. For reasons already given, those facts must also result in an adjustment in the wife’s favour.
The wife’s ultimate submissions about her entitlement bore no correlation at all to either the orders proposed in her Further Amended Initiating Application filed on 22 December 2015 or the orders proposed in her Case Outline filed on 17 November 2016. During final submissions, she initially asserted she was entitled to 60 per cent of the parties’ net assets, but eventually submitted for a greater percentage, which she deliberately omitted to specify.
The wife’s overall entitlement is assessed at 85 per cent of the parties’ ascertained assets, for the following reasons:
(a)Her initial capital contribution of an asset with a net value of about $150,000, unmatched by any initial capital contribution by the husband;
(b)The general equivalence of the spouses’ contributions during their cohabitation;
(c)The husband’s unilateral transfer of the Suburb N property to the second respondent for uncommercial consideration, which cost the parties about $74,000;
(d)The husband’s unilateral dissipation of the parties’ wealth by transferring very large sums of cash to his family members in India over many years;
(e)The husband’s high-income-earning capacity, especially once his shareholding in D Pty Ltd is restored to his ownership pursuant to an order under s 106B of the Act;
(f)The wife’s lack of any material earning-capacity, due to her ill-health and her continuing primary responsibility for the care and supervision of the spouses’ three young children; and
(g)The paltry child support paid by the husband for the children in the years since separation and the likelihood the wife will bear the primary financial burden of maintaining the children for the foreseeable future.
In broad terms, the husband’s estimate of the wife’s entitlement to 60 per cent of the existing assets for the reasons he acknowledged was reasonably accurate. The extra 25 per cent (which amounts to about $257,500) is to redress the wife’s disadvantage resulting from the husband’s transfer of the Suburb N property to the second respondent and his payment of large sums of money to his other family members in India over a period of years, which cash he either paid to them unjustifiably or they were merely recipients and still hold it on his behalf. The value of property and cash he conferred upon them was larger than the 25 per cent adjustment to the wife by a factor of at least three and perhaps even four. In isolation, $257,500 is a large sum, but not particularly so when placed in context. It is not much more than the husband declared as his annual income in both 2012 and 2013 and, unlike the wife, he has many more productive income-earning years ahead of him. Although the overall adjustment in the wife’s favour is substantial in percentage terms, ultimately, the critical issue is the real effect of the adjustment in monetary terms. It is the final adjustment of property interests between the spouses which must be just and equitable; not just the underlying percentage division of the parties’ net assets (see Marriage of Clauson (1995) 18 Fam LR 693 at 710; Lester & Lester [2014] FamCAFC 209 at [76]-[81]; Marriage of Phillips (2002) 29 Fam LR 128 at 140-141).
The known assets are valued at about $380,000. In addition, the Suburb C property will be restored to the husband’s sole ownership and, allowing for its value being no less than the $650,000 for which it was purchased about five years ago, the parties’ assets will be worth about $1,030,000. The wife’s 85 per cent share of the existing property will therefore amount to about $875,500.
The husband would be left with 15 per cent (about $154,500), but he will also have back his unquantified, but nonetheless valuable, shareholding in D Pty Ltd and he has had, or will have, the benefit of the large cash sums he transferred to his family members here and in India.
The orders will consequently make provision for:
(a)The husband’s dispositions to the second respondent of both the Suburb C property and the D Pty Ltd shareholding to be set aside, both of which assets will be restored to the husband’s ownership.
(b)The sale of both the Suburb C and Suburb F properties (by the wife as trustee), and the division of the net sale proceeds in the following manner:
(i)The sum of $181,089 to the wife (representing 85 per cent of the husband’s other net assets (items 6, 7, 8, 9, 10, 12, 13) less 15 per cent of the wife’s net assets (items 1-4)); and
(ii)Of the remaining balance, 85 per cent to the wife and 15 per cent to the husband.
(c)The husband’s retention of his shareholding in D Pty Ltd;
(d)The wife’s retention of her superannuation interest; and
(e)The parties’ retention of all other items of personal property and their respective indemnities against personal liabilities of the other.
Such orders represent a just and equitable adjustment of the parties’ property interests.
There was no proper basis upon which to give the husband an initial opportunity to buy-out the wife’s proportional interests in the real properties. The true value of the properties are unknown and need to be tested on the market, but additionally, the husband’s proposal for property settlement set out in his Response filed on 8 September 2016 implied he needed a full year to pay the wife only $200,000. The prospect of him raising and paying to her some $875,500 within the next couple of months must therefore be remote.
I certify that the preceding one hundred and seventeen (117) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Austin delivered on 9 December 2016.
Associate:
Date: 9 December 2016
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