Kyriakos and Kyriakos and Anor
[2013] FCCA 1249
•25 October 2013
FEDERAL CIRCUIT COURT OF AUSTRALIA
| KYRIAKOS & KYRIAKOS & ANOR | [2013] FCCA 1249 |
| Catchwords: FAMILY LAW – Property settlement – Consideration of Section 106B of the Family Law Act where transfer by the husband of assets post-separation – presumption of advancement and resulting trusts – lack of valuation and accounting evidence – significant contributions early in marriage by and on behalf of the husband – contributions by wife post separation – whether to adopt global or asset-by-asset approach in marriage of more than 16 years and where finances intermingled and indirect and homemaker/parent contributions of relevance – Section 75(2) factors. |
| Legislation: Family Law Act 1975 (Cth) Federal Circuit Court Regulations |
| Stanford & Stanford (2012) 87 ALJR 76 Charles Marshall Proprietary Limited Pty Ltd, the Grimsley (1956) 95 CLR 3535 Calverly v Green (1984) 155 CLR 242 Z & Z [2005] FLC 93-241 McMahon & McMahon (1995) FLC 92-606 |
| Applicant: | MS KYRIAKOS |
| First Respondent: | MR KYRIACOS |
| Second Respondent: | MR KYRIACOS |
| File Number: | MLC 7947 of 2009 |
| Judgment of: | Judge McGuire |
| Hearing dates: | 19 – 21 August 2013 |
| Date of Last Submission: | 21 August 2013 |
| Delivered at: | Melbourne |
| Delivered on: | 25 October 2013 |
REPRESENTATION
| Counsel for the Applicant: | Mr P Testart |
| Solicitors for the Applicant: | Mitrakas Savas and Co |
| Counsel for the First Respondent: | Mr Nehmy |
| Solicitors for the First Respondent: | Schetzer Constantinou |
| Counsel for the Second Respondent: | Ms Wheeler |
| Solicitors for the Second Respondent: | GSM Lawyers Pty Ltd |
ORDERS
That within sixty (60) days of the date of these Order the husband pay to the wife a lump sum of $198,000;
That should the husband fail to comply with Order 1 hereof then pursuant to Section 106B of the Family Law Act 1975 (“the Act”) the transfer of 24 units of the (omitted) Unit Trust made in or about July 2008 and from the husband to the second named respondent be set aside and it be and is declared that the husband hold legal title, interest and entitlement to same.
That should Order 2 hereof be activated then within seventy five (75) days of the date of these Orders, the husband and/or the second named respondent do all acts and things and sign all documents necessary to transfer to the wife a 42.3 per cent interest in the husband’s interest in (omitted) Unit Trust and thereafter the wife be entitled to and be paid 42.3 per cent of 24 per cent of the net income from rental and any other source of the (omitted) Unit Trust from the date of these Orders and should the husband and/or the second named respondent refuse or fail to transfer such interest to the wife then pursuant to Section 106A of the Act the Registrar of the Federal Circuit Court be able to execute any relevant documents and do all things necessary to effect the transfer to the wife.
That upon the activation of Order 2 hereof:
(a)Each of the husband and the second named respondent, by themselves, servants or agents, be restrained from:
(i)Causing, permitting or suffering the Trustee of the Unit Trust from exercising any power in the Deed constituting the Unit Trust for the purpose of, or which is calculated to or results in, the Units being in any way diminished from their present value, or whereby the Unit entitlements are in any way diminished from the entitlements disclosed by the accounts;
(ii)Causing, permitting or suffering the Trustee of the Unit Trust from exercising any power in the Deed constituting the Unit Trust for the purpose of, or which is calculated to or results in, the Wife being in any manner hindered from disposing of the Units to such person or persons upon such terms and conditions as she shall in her sole and unfettered discretion determine;
(iii)Doing any act or thing which has the effect of replacing the Trustee, or of relinquishing control of the Trustee so as to render the injunction nugatory;
That the wife be and is hereby entitled to the property situate at Property B, in the State of Victoria to the exclusion of the husband.
That the wife be solely responsible for and indemnify the husband in respect of any mortgage or loan secured by the property at Property B, in the State of Victoria and make her best endeavours to obtain a release for the husband from such liabilities within sixty (60) days of the date of these Orders;
That the husband be solely responsible for and indemnify the wife in respect of the judgment debt obtained by (omitted) Pty Ltd against the husband and/or (omitted) Pty Ltd.
That within sixty (60) days of the date of these Orders the wife transfer to and/or vest her right, title and interest in the following to the husband absolutely:
(a)Any property situate in Greece in which the husband holds title or interest;
(b)Any interest of the husband in (omitted) Pty Ltd (in liquidation);
(c)Any interest of the husband in (omitted) Pty Ltd;
(d)Any interest of the husband in (omitted) Superannuation;
(e)Any interest of the husband in (omitted) Super;
(f)All personalty and chattels including motor vehicles in the possession of or under the control of the husband as at the date of these Orders;
(g)The balances of any bank accounts or like investments in the name of or to the benefit of the husband as at the date of these Orders.
(h)That upon the making of the payment referred to in paragraph 1 hereof then any interest of the husband’s in the (omitted) Unit Trust.
That contemporaneously with the transfer Order in paragraph 8 hereof, the husband transfer to the wife all of his right, title and interest in the following absolutely:
(a)The wife’s interest in the property situate at Property S in the state of Victoria;
(b)(omitted) interests of the parties;
(c)All personalty and chattels including motor vehicles in the possession of or under the control of the wife as at the date of these Orders;
(d)The balances in any bank accounts or like investments in the name of or to the benefit of the wife as at the date of these Orders;
(e)The wife’s superannuation interest and entitlement with (omitted) Super.
That each party be solely responsible for and indemnify the other in respect of the following:
(a)Any and all liabilities incurred by that party since separation in either that party’s name alone or in joint names;
(b)Any and all liabilities attaching to any assets to be retained by the party pursuant to these Orders.
IT IS NOTED that publication of this judgment under the pseudonym Kyriakos & Kyriakos & Anor is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLC 7947 of 2009
| MS KYRIAKOS |
Applicant
And
| MR KYRIACOS |
First Respondent
| MR KYRIACOS |
Second Respondent
REASONS FOR JUDGMENT
Applications
These are proceedings for property settlement. The applicant is the Wife, who commenced proceedings by her application filed as long ago as 25 June 2010. The matter has endured a lengthy history, with delays apparently due to interlocutory hearings, and including an appeal. The matter came on for trial before me on 19 August 2013, and occupied three days of Court time. The Husband, Mr Kyriakos, is the first named respondent. His father, Mr Kyriakos, was joined as a party due to the Wife seeking Orders in respect of certain property, of which he is the legal owner.
The parties’ only child, X, born (omitted) 2002 (aged 11 years), was the subject of these proceedings until the Court was advised at the start of the trial that all issues in respect of X had resolved.
The wife seeks Orders as follows:
a)That she retain the former matrimonial home situate at Property B in Victoria, to the exclusion of the husband;
b)That pursuant to section 106B of the Family Law Act 1975 (“the Act”) the transfer of 24 Units in the (omitted) Unit Trust from the Husband to his father be set aside; that the assets of that trust be included in the property pool; or, alternatively, that the second named respondent holds any and all of his right, title and interest in the Units on trust for the Husband;
c)That the Husband and/or the Second named respondent shall on or before the expiration of 30 days of the making of these Orders bring to account and pay to the Wife any and all rents, profits, dividends, payments, distributions or benefits of whatsoever nature or kind accruing or otherwise appertaining to the Units, without derogating from the generality of the foregoing shall:
a)Each make, file and serve an affidavit setting out a full account of the Unit entitlements;
b)Pay into the trust account of the Wife’s solicitors the full amount of such Unit entitlements for the sole use and benefit of the Wife absolutely;
d)That the Husband and/or the Second Respondent forthwith do all acts and things and sign all documents necessary to transfer the Units to the Wife for her own use and benefit absolutely;
e)That each of the Husband and the second named respondent, by themselves, servants or agents, be restrained from:
a)Causing, permitting or suffering the Trustee of the Unit Trust from exercising any power in the Deed constituting the Unit Trust for the purpose of, or which is calculated to or results in, the Units being in any way diminished from their present value, or whereby the Unit entitlements are in any way diminished from the entitlements disclosed by the accounts;
b)Causing, permitting or suffering the Trustee of the Unit Trust from exercising any power in the Deed constituting the Unit Trust for the purpose of, or which is calculated to or results in, the Wife being in any manner hindered from disposing of the Units to such person or persons upon such terms and conditions as she shall in her sole and unfettered discretion determine;
c)Doing any act or thing which has the effect of replacing the Trustee, or of relinquishing control of the Trustee so as to render the injunction nugatory;
f)Pursuant to section 106B of the Act the transfer of any and all shares in (omitted) Pty Ltd (“the (omitted) shares”) from the Husband to the Second named respondent be set aside as from the date of such transfer;
g)Further or alternatively there be a declaration pursuant to section 78 of the Act that the Second named respondent holds any and all of his right, title and interest in the (omitted) shares on trust for the Husband as and from the date of transfer, and there be consequential Orders accordingly;
h)That there be a declaration pursuant to section 78 of the Act that the Husband retains all his right, title and interest in the (omitted) shares for his own use and benefit absolutely;
i)That there be a declaration pursuant to s.78 of the Act that:
a)The Husband stands as the trustee of the Kyriakos Family Trust (“Family Trust”) as and from the date of deregistration of the company (omitted) Kyriacos Pty Ltd;
b)The Husband retains any and all of the benefits and entitlements ensuring to the Family Trust as and from the date of separation of the Husband and the Wife for his own sole use and benefit absolutely;
j)There be a declaration pursuant to s.78 of the Act that the Husband retains all his right, title and interest in the three parcels of real estate situate in Greece and referred to in affidavits filed in these proceedings;
k)That the Husband do all acts and things and sign all documents necessary to transfer all of his right, title and interest in the “(omitted)” to the Wife, such that she retain the entire interest of the parties therein for her own use and benefit absolutely;
l)The Husband forthwith do all acts and things and sign all documents necessary to transfer all of his right, title and interest in any and all Frequent Flyer points or similar entitlements in his name to the Wife, such that she retain the entire interest of the Husband therein for her own use and benefit absolutely;
m)The Wife make available for collection by the Husband any and all of his personal items remaining in the former matrimonial home within 14 days of the date of these Orders;
n)Otherwise each party be entitled to the exclusion of the other to all the property (including choses-in-action) in the possession of such party as at the date of these Orders;
o)Each party retain his and her superannuation entitlements to the exclusion of the other;
p)Each party be solely liable for and indemnify the other against any liability attaching to any of the assets retained by that party pursuant to these orders;
q)That the Husband indemnify the Wife in respect of any and all liabilities of whatsoever nature or kind in respect of the Kyriakos Family Trust and/or the (omitted) shares, and/or the (omitted) Superannuation Fund as and from the date of these Orders, and in respect of the Unit Trust, as and from the date of separation until the making of these Orders.
The Husband seeks Orders as follows:
a)That the Wife retain the property at Property B, for her own sole use and benefit and to the exclusion of the Husband;
b)That within 60 days of the date of the Orders the Wife cause there to be a release for the Husband of his obligations under the (omitted) Bank mortgage no. (omitted) secured by the property and indemnify the Husband accordingly in respect of that and any other liabilities attaching to the property but failing which the property be sold and the Wife retain the net proceeds of sale;
c)That each party otherwise retain all other property in their possession or name save for the Husband’s personal belongings, which the Wife is to make available for collection by the Husband at a time to be agreed, and failing agreement at 10 am on the first Saturday following the making of final Orders.
The second named respondent, Mr Kyriakos, seeks the following Orders:
a)That the Wife’s application for Orders pursuant to s.106B of the Act be dismissed;
b)That the Wife pay the second named respondent’s costs fixed in a sum of $60,000.
Background
The Husband is 48 years old and the Wife 46 years. The Husband says that on his birthday in 1984 his father transferred to him 24 Units in the (omitted) Unit Trust ((omitted)) Pty Ltd as the Trustee). The only asset of the Trust is a property at Property L in Victoria. It is not disputed that the Second named respondent purchased the property as to a one half interest in 1984. His nephews owned the other half. The Second named respondent placed his interest in the names of his son and daughters with the creation of the trust.
The parties married and commenced cohabitation on (omitted) 1991.
The Wife initially worked as a (occupation omitted). The Husband was employed as a (occupation omitted) and held shares in (omitted) Pty Ltd. His title was “(omitted)”.
Between the date of marriage and separation the Husband held an interest in (omitted) Pty Ltd as trustee for the (omitted) Unit Trust, trading as (omitted). These entities were generally what might be termed “family business” albeit involving extended family members. The husband’s interest was 6.46 per cent. His brothers held interests. The evidence suggests that the husband’s role in this business to be minimal if any.
Between mid-1991 and November 1993 the parties lived with the Husband’s parents. They did not contribute to rent and were substantially provided with board and lodgings by the Husband’s parents.
In August 1993 the parties purchased the former matrimonial home at Property B as joint tenants. That property was transferred into the sole name of the Wife in about 1996.
During the course of the marriage the Wife ceased (omitted) and worked at (omitted).
On (omitted) 2002 the child X was born. X is now 11 years old.
The parties separated on 21 September 2007. They agree that the marriage was suffering difficulties for some time prior to separation. Between June and September 2007 the Husband accompanied his parents on a trip to Greece. The Husband says that at the time he was suffering from problems associated with drug abuse and emotional illness. He concedes that his work productivity had diminished significantly. The Husband says that he has not been substantially employed since that time save and except for “helping out” in family businesses.
On 1 July 2008, the Husband transferred his 24 Units in the (omitted) Unit Trust to the Second named respondent. A document tendered in evidence suggests a consideration of $360,000. The Husband concedes that no money changed hands. At the same time the Husband transferred his 6.46 per cent interest in the (omitted) Unit Trust ((omitted)) Pty Ltd as Trustee) to his two brothers.
In November 2009 (omitted) was the respondent to a Writ issued out of the County Court of Victoria by (omitted), who were a supplier to (omitted). The Husband was living with his parents at the time. The evidence suggests that he took little or no active part in these proceedings, which were resolved in favour of the applicant company on a summary judgment. The evidence is that the Second named respondent accepted service of the Writ and it was he who had dealings with lawyers, such as they were. Judgment was entered against the Husband on 5 March 2010 for $189,738.62. It is generally agreed that the judgment debt remains unpaid and now sits at approximately $226,000. A bankruptcy notice was served on the Husband in respect of the judgment debt on 9 August 2011. However, no creditors petition has proceeded. It is the Husband’s evidence that he had consistently signed director’s guarantees in respect of credit with (omitted) over a number of years. (omitted) went into liquidation in November 2009 shortly after the death of the Husband’s uncle and co-director.
The Husband holds a 6.25 per cent interest in (omitted) Superannuation Fund, being a self-managed fund with the members including the Husband and his three siblings.
Following separation the Husband lived with his parents in a home owned by the Husband’s brother. The Husband now occupies a home effectively owned by his father, and situate at (omitted). The Husband deposes that he pays rent to his father, but receives ongoing financial assistance from his brother, Mr D, enabling him to do so. Mr D was a beneficiary of the husband’s transfer of his 6.46 per cent interest in (omitted).
The Wife continues to occupy the former matrimonial home at Property B together with X. The Wife meets the mortgage and outgoings on that property.
There was no evidence that the Wife has repartnered. She receives a Centrelink benefit.
There are three separate properties in Greece that are the subject of these proceedings. At least one of those properties has been sold since the separation of the Husband and the Wife. The Wife argues that the Husband does or did hold legal title to those properties. The Husband and the Second named respondent argue that any interest that the Husband holds or did hold was under “parental provision” which I understand at its highest to constitute something akin to title subject to a life interest.
The wife’s father died in December 2008. She benefited by one third of his estate in the form of an interest in real estate. The unchallenged evidence is that the wife’s entitlement is $213,000.
The Issues
The major and most complex issue in this matter is the content of the property pool. Specifically, the wife argues that 24 units of (omitted) Unit Trust or effectively 24 per cent of the value of the Property L property form a part of that pool. There is a valuation on the real estate and she calculates a 24 per cent interest to be worth $468,000. Secondly, she similarly argues that a 6.46 per cent interest in (omitted) Pty Ltd (as the trustee for the (omitted) Unit Trust trading as (omitted)) forms a part of the property pool. It is agreed that the husband formerly held those units in the name of the (omitted) Kyriacos Pty Ltd as trustee for the (omitted) Kyriakos Family Trust. (omitted) nominees operated a business manufacturing (omitted). It is not disputed that the husband, or a company or trust under his control, held the legal interest in both (omitted) Unit Trust and (omitted). It is agreed that he transferred his interests in (omitted) to his father, the second-named respondent and his interests in (omitted) to his brothers. The issue for the Court, therefore, is whether the husband’s interests remain his pursuant to the Presumption of Advancement as argued by the wife or, alternatively, their transfers back to the second-named respondent were proper in respect of them being held by the husband only on resulting trusts or alternatively whether they were transfers for valuable consideration? The arguments, of course, differ in that the advancements in both entities were made by the father and the second named respondent whereas the “transfers back” were made to the second named respondent only in the case of (omitted) and to the husband’s two brothers in respect of the (omitted) shares.
There is a similar argument in respect of three properties situate in Greece. It seems that at least one property has been sold. The wife argues that these properties are legally owned by the husband and hence should be brought into the pool and/or that any proceeds of sale have or should have been the property of the husband in his hands.
There is an issue as to whether the Court should adopt a global asset approach or the alternative of an asset-by-asset approach. Counsel for the husband suggests the latter.
There are issues generally as to the weight that the Court should give to the various contribution factors and the relevant considerations under s.75(2) of the Act.
Subject to the arguments as to legal and equitable interest set out above, Counsel for the second-named respondent says, pursuant to the recent High Court decision in Stanford & Stanford[1] that it would not be just and equitable as between the parties to make any alteration of their legal or equitable interests. In practical terms, Counsel notes that the wife already holds title to the former matrimonial home albeit subject to a mortgage in the joint name of the husband and the wife.
[1] (2012) 87 ALJR 76
There is an issue as to the status of the judgment debt in a sum of approximately $226,000 resulting from summary judgment taken by (omitted) Pty Ltd against the husband pursuant to his personal guarantee in respect of the goods obtained on credit by (omitted) Pty Ltd, a company of which the husband was joint director. The wife says that this debt was incurred and a judgment obtained post-separation and without her knowledge or input and hence she should bear no responsibility. The husband argues that the debt incurred as a result of his personal guarantee was simply the last in a long line of such guarantees given during the course of the marriage. I am asked to infer that the family benefited from their interest in (omitted) Pty Ltd and that the liability is properly one of the marriage and should be included in the property pool.
There is a dispute between the parties as to the actual date of separation. The husband was suffering personal and drug issues during the later stages of the marriage. He travelled to Greece for a period with his parents. He says the marriage ended prior to the trip to Greece. The wife says he returned to the family home for about 10 days upon his return from Greece. The ambit of the dispute is between July and September 2009 and little turns on it. In any event I prefer the evidence of the wife that the husband returned to the matrimonial home for a few days upon his return from Greece and it was then that the communications of separation took place between them.
There was argument throughout the trial as to how I should deal with the evidence generally and in respect of what the wife says was a lack of disclosure and discovery by the husband and the second-named respondent. She asks that I take a more robust and less precise or cautious view in respect of the property pool in accordance with authorities such as Chang v Su[2]. I have no valuation evidence of the Greek properties. There is no accounting or valuation evidence of the various trusts save a property valuation of the only apparent asset of (omitted) Unit Trust being one piece of real property. There are no financial statements or returns for the relevant trusts since 2009. No expert evidence was adduced. So as to do justice to these parties under s.79 of The Act I agree that I must take a less cautious and more robust approach and particularly in respect of assets in the hands of the husband or his father and in respect of which there has been a lack of full and proper valuation evidence and discovery.
[2] (2002) FLC 93-117
The Evidence
The applicant wife relied on her trial affidavit and financial statement both filed 8 July 2013. She also relied on an affidavit of Ms B filed 8 July 2013. Ms B provided a translation of various Greek legal documents in respect of the three properties in Greece. Her affidavit annexes the original documents and their translations into English. She was not required for cross-examination and her affidavit was read into evidence. Finally, the wife relied on affidavits of Mr R and Mr B. They are both valuers. Mr R provided a valuation of the former matrimonial home at Property B at $910,000. He was not required for cross-examination and his affidavit was read into evidence. Mr B provided an affidavit with valuations of a commercial property at Property M, Victoria and the property at Property L being for $1,950,000. He was not required for cross-examination.
The husband relied on his trial affidavit and sworn financial statement both filed 6 August 2013. Affidavits were filed on behalf of the husband by Mr L (14 August 2013), Mr C (16 August 2013), Mr M (16 August 2013) and James Constantinou (15 August 2013). None of the deponents were required for cross-examination.
The second-named respondent relied on affidavits filed 28 January 2011, 31 May 2011, and 14 August 2013 together with his financial statement filed 19 August 2013.
Applicant Wife’s Case
The applicant wife argues that the 24 units in the (omitted) Unit Trust which effectively is a 24 per cent interest in the Property L property should be included in the pool of property as an asset in the hands of the husband as $468,000. She says that it is his by way of the Presumption of Advancement. She argues that there was no resulting trust in favour of the second named respondent and that the subsequent transfer back was improper and either motivated by, or simply serves to, decrease the property pool available for distribution under s.79 of the Act. She argues that this transaction together with that of the husband’s shareholdings in (omitted) Pty Ltd transferred to his brothers both be set aside under the provisions of s.106B of the Act.
The wife argues that the husband has or should have the benefit of the interest in or proceeds of sale of three properties in Greece which were legally transferred to him by his parents. She says that these interests should be included in the property pool.
Should the (omitted) Trust units and the shares in (omitted) Pty Ltd be included in the pool, then the wife acknowledges that they represent contributions on behalf of the husband. She says, however, that she also worked in the family businesses and made a superior contribution as homemaker and parent. She says that she has made substantial and superior post-separation contributions and particularly to the care and support of the parties’ child.
She argues that the judgment debt held by (omitted) against the husband is not a liability of the marriage. She says that it was incurred without her knowledge or input and post-separation.
She says that she should receive a further adjustment after consideration of the relevant factors under s.75(2) of the Act. She has the primary care of the child of the marriage. She is not in the workforce and has not pursued her career as a (omitted) for some years by reason of her obligation to the family and by working in the family businesses. To the contrary, she says that the nature of the Kyriakos family is that the husband has been and will continue to be financially supported through his parents and his brothers.
The wife seeks an order effectively whereby she receives the former matrimonial home unencumbered. She also seeks an order transferring the interest in the (omitted) Unit Trust to her. The implication is that she would hope to dispose of that interest (probably back to the family) thereby allowing her to satisfy the home mortgage ($198,000) and leave her with cash funds of approximately $270,000 given her argument that the husband’s interest is valued at $468,000.
The wife justifies these orders with an emphasis on the lack of disclosure by the husband resulting in a lack of the precise valuations of the property remaining in his possession which would be the three properties in Greece together with his interest in (omitted) and his superannuation entitlements of $85,000.
The Husband’s Case
The husband says that the interest in (omitted) Unit Trust and (omitted) Pty Ltd were always held on a resulting trust for his father and that legal titles were returned to the father, or by direction to his two brothers in the case of (omitted). He makes a similar argument in respect of the Greek properties. The husband argues that any Presumption of Advancement is rebutted by the resulting trusts. He argues that the Greek properties “always belonged to” his parents and says that he is ignorant of any alleged legal transfers to him.
The husband argues that should the assets of the (omitted) Unit Trust and/or (omitted) be found to be his property, then it is proper and consistent that the judgment debt owing to (omitted) Pty Ltd ($226,000) also be included in the pool. He suggests that it is likely that the judgment debt will be pursued (and it is proper that it should be) should there be an Order pursuant to s.106B setting aside the transfers of his interests in (omitted) and/or (omitted) and thereby returning legal interest in those entities and their assets to him.
The husband says that should the assets of the trust and the company be included in the pool, then he should be given significant credit for the contributions of the same on his behalf by his parents. If the Greek properties are also included then he mounts the same argument.
The husband points to a number of factors under s. 75(2) of the Act which are relevant to him. He says that he suffers emotional illnesses and is a recovering drug addict. He says that he has no immediate capacity for employment and is reliant upon Centrelink and the goodwill of his family. I am asked to find that his prospects are not good.
The husband proposes that the wife should retain the former matrimonial home currently registered in her name but also take sole responsibility for the mortgage and provide him with a release under that mortgage. In all other respects, each party would retain those items of property, including superannuation, currently in his or her possession.
The Second-Named Respondent’s Case
The second-named respondent, Mr Kyriakos, argues along the same lines as the husband. Mr Kyriakos says that any Presumption of Advancement should be rebutted because of resulting trusts in his favour. He bases this on his claimed intention at the times of transfer. He says that the motivation for the resulting transfer back to him in 2008 was to protect the husband and wife from exposure to debt and notably the (omitted) judgment. He argues the transfer back to him (or the brother) to be legally and morally appropriate given that the husband always held his interests subject to the resulting trusts.
Mr Kyriakos also claims ignorance as to any alleged legal transfers of the Greek properties to the husband. He says that his understanding was that such documents were a way of “parental provision” only.
The Relevant Law
Until recently, it was generally accepted that there was a well-settled approach for trial Courts to follow in respect of a property settlement application[3]. That is, the Court will identify the property of the parties including assets, liabilities and financial resources. Superannuation is to be treated as property for the purposes of this process. The Court is then to attribute a value to each item in the pool and usually relevant as at the date of the trial. Secondly, the Court is to assess each party’s contributions under the sub-headings in s.79(4) of the Act and then make a determination as to a distribution (usually on a percentage basis) of the property pool. There is then a third step, which considers whether any further adjustment is appropriate after consideration of the relevant matters under s.79(4)(d)-(g) including the relevant matters under s.75(2) of the Act. Arguably, there is then a “fourth step” whereby the Court is to stand back and consider whether the actual orders proposed to be made after this course of consideration would be just and equitable in the sense of the Orders themselves rather than just the proposed percentage distribution.
[3] Hickey & Hickey v Attorney-General for the Commonwealth of Australia (Intervener) (2003) FLC 93-143
However, recent decisions of the High Court in Stanford (Supra) and then the Full Court of the Family Court in Bevan & Bevan[4] have caused a reconsideration of the process. Whilst Stanford has caused much judicial and academic debate, I respectfully agree with the plurality in Bevan that the jurisprudence fundamentally remains unchanged. The High Court in Stanford found that it is for trial judges to make a determination as to whether it is just and equitable as between parties to make any orders for alteration of the property interests on a consideration of the particular circumstances of the parties and their legal and equitable interests in property and not by some religious adhering to a staged process of addressing contributions and relevant s. 75(2) factors. The Full Court in Bevan said that this has always been the case and suggested that the strict “four-step approach” had perhaps achieved some unjustified status. It seems that the result of the recent debate is as follows:
a)a Court should firstly identify, according to ordinary common law and equitable principles, the existing legal and equitable interests of the parties or either of them in property;
b)a Court should then consider whether it is just and equitable to make any order altering those interests of the parties in their property.In a pragmatic sense, the High Court in Stanford was confronted with an unusual factual platform and noted that it ordinarily would not be a difficult exercise where parties have separated and their common interest and usage in property has ended to find it to be just and equitable to alter their property interests.
c)If the Court concludes that it is just and equitable to alter the property interests, then it moves to consider the various contributions by and on behalf of the parties under ss.79(4)(a)-(c) of the Act and then determine their contribution-based entitlements.
d)After considering the contributions, the Court should then identify and assess any relevant matters under ss.79(4)(d)-(g) including the matters in s.75(2) of the Act insofar as they are relevant. In doing so, the Court will determine whether any further adjustment on the part of either party is appropriate and justified.
e)Having completed this process, the Court will, in my view, then still “stand back” and consider pursuant to s.79(2) of the Act whether the proposed orders are just and equitable, as distinct from simply the percentage distribution following considerations of contributions in s.75(2) factors[5] Indeed, I understand the Full Court in Bevan to be emphasising that the consideration of justice and equity permeates the entire process.
[4] [2013] Fam CAFC 116
[5] Russell v Russell (1999) FLC 92-877
Section 106B of the Family Law Act
This section assumes a real importance in this matter given the orders that the wife seeks. The Act under the heading “Transactions to Defeat Claims” states at s.106B:
(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 will or personal property dealt with by any such instrument or disposition 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.
(4) A party or a person acting in collusion with a party may be ordered to pay the costs of any other party or of a bona fide purchaser or other person interested of an incidental to any such instrument or disposition and the setting aside or restraining of the instrument or disposition.
(5) In this section:
Disposition includes:
(a) a sale or gifts; and
(b) the issue, grant, creation, transfer or cancellation of or a variation of the rights attaching to, an interest in a company or a trust.
Section 106B now appears under Part XIII of the Act – “Enforcement of Decrees”, whereas its predecessor, s.85, was found in the General Powers of the Court relating to property settlement in Part VIII. This may be relevant if I understand correctly an argument mounted with some vigour by Counsel for the second-named respondent that I should determine the wife’s entitlement and only activate s.106B if the wife’s entitlement cannot be met from the available assets legally in the hands of the parties. A similar point was argued by the appellant in the Full Court in Coventry & Coventry and Smith[6] in that s.106B, now under the Enforcement Division of the Act should not be utilised to enlarge the property pool. In Coventry, the Court noted the argument of Senior Counsel for the appellant at paragraph 139 as follows:
It is submitted that (sic) is clear, as a matter of the position of the section and particular (sic) the 2000 amendment moving it into “enforcement”, that the sequence must be: (a) the size of the pot is determined; (b) the appropriate alteration of property interests in favour of the wife is determined or at least reaches the stage of an anticipation; (c) an obstacle is encountered that there has been a transaction to defeat that order in favour of the wife or that anticipated order in favour of the wife out of the existing pot. The section can be used for enforcement and not for the purposes of enlarging the pot.
[6] (2004) FLC 93-184
However, that argument was rejected by the Full Court at paragraph 146:
We would with respect adopt those observations. In our view, S106B does not operate, as senior counsel for the appellants submitted, primarily as a section relating to enforcement but enables the Court, in proceedings under the Act, including proceedings brought pursuant to S79, inter alia, to set aside the making of an instrument such as the Deed of Variation and thus restore substantial rights to the husband.
We accept the following submission made on behalf of the wife, namely:
(iv) as to the argument that at the time of the Deed, the Husband did not have the assets of the No. 1 Trust, such that he could transfer them away. The reality is that the Trial Judge after having set aside the Deed of Variation has effectively restored the position that existed prior thereto and has categorised the Husband’s interest in the No. 1 Trust as “property”.
Law as to Presumption of Advancement and Resulting Trusts
It is usual that when a donor purchases a property in the name of another, or transfers property to another, equity will apply a presumption of a resulting trust with the recipient holding on trust for the donor. However, where the donor and the recipient stand in particular relationships, then the presumption is one of advancement rather than of a resulting trust. Transfers from husbands to their wives and from parents to their children raise presumptions of advancement[7]. A presumption of a resulting trust assumes that the recipient was not meant to receive the property beneficially. On the other hand, the presumption of advancement presumes an outright gift was intended. Each presumption can be rebutted. Presumption of a resulting trust is rebutted by evidence of an intention to make a gift. Presumption of advancement obligates the donor to show that they formed no intention to make a gift to the recipient thereby rebutting the presumption and enlivening a resulting trust. It seems, therefore, that the intention of the donor is crucial to both the presumption and its rebuttal. It is the intention of the donor at the date of transfer or advancement which is relevant[8]. Traditionally, therefore, a feoffment to a stranger raised a presumption of resulting trust whereas a feoffment to a child raised the presumption of advancement on the basis of natural love and affection supplying the consideration. As long ago as the 17th century, Lord Nottingham in Grey & Grey[9] observed:
The law will best appear by these steps. (1) Generally and a prima facie, as they say, a purchase in the name of a stranger is a trust, for want of a consideration, but a purchase in the name of a son is no trust, for the consideration as a parent. (2) But yet it may be a trust, if it be so declared antecedently or subsequently under the hand and seal of both parties. (3) Nay, it may be a trust, if it be so declared by parol, and both parties uniformly concur in that declaration. (4) The parol declarations in this case are both ways; the father and son sometimes declaring for, and sometimes against, themselves. (5) Ergo, there being no certain proof to rest on as to parol declarations, the matter is left to construction and interpretation of law. (6) And herein, the great question is, whether the law will admit of any constructive trust at all between father and son? … The father who would check and control the appearance of nature, ought to provide for himself by some instrument, or some clear proof of a declaration of trust, and not depend upon any implication of law; for there is no necessity to give way to constructive trusts, but great justice and conscience in restraining such constructions.
[7] Charles Marshall Proprietary Limited, the Grimsley (1956) 95 CLR 3535
[8] Calverly v Green (1984) 155 CLR 242 at 246-251
[9] Grey & Grey (1677) 36 ER 742
The underlining presumption of advancement therefore is of full legal title and unconditional. The onus rests with the donor to show that another arrangement was intended, namely, a resulting trust. The standard of proof is the normal civil one (Briginshaw & Briginshaw and Damberg & Damberg)[10].
[10] (1938) 60 CLR 336 and [2001] NSWCA 87 at [42]
(omitted) Unit Trust
The second named respondent purchased a one half interest in a commercial property at Property L in 1984 together with his two nephews who held a half-interest between them. A unit trust was established and his half interest was held as to 24 units in the husband, 24 units in the husband’s sister, and the second named respondent retained two units. Despite the wife’s evidence that she understood a gift of the units to the husband at their wedding in 1991, I am satisfied on the weight of evidence that the transfer occurred in about 1984.
I accept the evidence of both husband and second named respondent that there was no consideration given by the husband for the units.
All parties agree that the husband (and the wife) received an income of about $10,000 per annum from the trust throughout the marriage. The husband had no role in the running of the company. The second named respondent remained a director at all times.
The lack of any contributing consideration by the husband to the asset of the trust and the fact of the second named respondent remaining a director is not inconsistent with a gift and do not in my view rebut the presumption of advancement.
The second named respondent says that he established the trust and advanced the units to his children under “the advice of the accountants”. He did not in his evidence elaborate on this statement. Hence, acting on such advice does not in itself, in my view, rebut a presumption of advancement.
In cross-examination the husband was asked, “Why the transfer of the units to your dad happened in - on 1 July 2008?” His response was:
Because he asked me to and I do whatever he says and because in my eyes they weren’t mine.
and later
I recollect that there was some risk because of debt incurred by (omitted) so that’s probably what happened.
The husband’s units in (omitted) Unit Trust were transferred to his father on 1 July 2008. That transaction is evidenced by a document before me in evidence which discloses a consideration of $360,000. Both the husband and the second named respondent agree that no money was actually paid. The husband says that this was perhaps because he owed money to his father. He was unable to be more specific or to particularise what money was owed and why? The second named respondent’s evidence was no more enlightening in this respect. However, both the husband and the second named respondent agree that the transfer was made to protect the husband from exposure to debt namely the financial pressures being endured by (omitted) where the husband had provided a personal guarantee to a supplier. It is clear that this risk protection was the sole motivation for the transfer in July 2008.
The onus is on the second named respondent as donor to convince the Court on the balance of probabilities so that his intention at the time of the original transfer of the units to the husband in 1984 was on the basis of a resulting trust. Consequently, the motives of the donor (and the husband) at the time of the transfer back to the second named respondent in 2008 are immaterial. In my view, there is no evidence of sufficient probity so as to conclude on the balance of probabilities that the units were held on a resulting trust. The advice of the accountants is unparticularised and unsubstantiated. The continued director’s role by the second named respondent is not inconsistent with a gift. There are, however, a number of factors which do, in fact, give weight to the presumption of advancement. The fact that the husband and the wife received the income from the units is significant. In Re Kerrigan; ex parte Jones[11], the Court dealt with a situation where a father loaned sums of money and placed a mortgaged security in the names of his sons. The mortgage interest payments were collected by the father’s solicitor and paid to the father rather than to the children. In that case the Court found that the legal title to the mortgaged debts was held by the children on a resulting trust for the father.
[11] (1946) 47 SR (NSW) 76
Further, I find the written contract entered into by the husband and second named respondent in July 2008 for the transfer of the units to the father to be of some relevance. Although not paid, that contract provides for a consideration of $360,000 to the husband. In my view, consideration in such an amount and in those terms is inconsistent with the units having been held on a resulting trust but is consistent with the husband holding full and beneficial title to the shares. Nevertheless, it is for the donor to prove there is a resulting trust against the presumption of advancement. In all of the circumstances, I am satisfied that the presumption of advancement has not been rebutted.
This was an issue as to the value of the 24 units in (omitted) Unit Trust. The valuation difficulty is compounded by financial statements for the trust not having been prepared and taxation returns not lodged since 2009. The most recent financial statements from 2009 disclose some liabilities of $531,392. Those are, however, almost entirely in the form of beneficiary loans. There was no formal accounting evidence adduced to assist me which together with no current financials does not allow me to find that there are any current liabilities in this family entity. The parties agree that the only tangible asset of the trust is the property at Property L. It has an agreed value of $1,950,000. There is no encumbrance. The 24 units, therefore, have a gross value of $468,000. The “consideration” on the transfer document between the husband and his father in July 2008 was $360,000. However, no justification whatsoever for this figure was forthcoming in the evidence. I note that no money was paid to the husband. In all of those circumstances I determine it proper to attribute a value to the husband’s interests at $468,000.
The wife urges that I set aside the transaction of 1 July 2008 whereby the units were transferred from the husband to the second named respondent. Given my findings, such a course is obviously available to me[12]. I note, however, the rationale, of that transfer and I accept the general submission of Ms Wheeler of Counsel for the second named respondent that I should only follow this course if the wife’s entitlement (including in the pool the husband’s equitable interest in the (omitted) Unit Trust) cannot be satisfied from other assets. Consequently, the pool of property will include the husband’s equitable interest in 24 units in the (omitted) Unit Trust as a value of $468,000.
[12] Section 106B and Part VIII AA of the Family Law Act 1975
(omitted) – (omitted) Unit Trust
(omitted) Pty Ltd is the trustee company of (omitted) Unit Trust ((omitted)). It also manufactures (omitted). In or about 1991 the husband was gifted by his father 26,000 units in the trust or a 6.4 per cent interest. Again, he made no payment. He had no role in the day-to-day operation of the business although he was a director until 1999. Also in 2008 and at the instigation of the second named respondent, the husband transferred his units to his two brothers. The husband’s unchallenged evidence is that there was on this occasion some consideration for the transfer being the receipt from his father of further share holdings in (omitted) Pty Ltd (which subsequently fell into liquidation). Again, this transaction was motivated by what the second named respondent saw as his son’s exposure to debt in (omitted) by reason of his personal guarantees. Those fears, were of course, realised and (omitted) entered into liquidation. During cross-examination the second named respondent gave a response in respect of this sequence of events and his understanding of the financial difficulties being suffered by (omitted) as “because I am a businessman”. Given the complex family and company structures and the apparently blind compliance by the husband with his father’s demands, one might conclude that the second named respondent is indeed a very astute businessman. I might also easily conclude the patriarchal, dynastical and hierarchal nature of the familial relationships. Nevertheless, it is not for the Court to speculate as to who “held the strings” within this family but rather to consider the established law as to presumptions of advancement and resulting trusts as it applies to those particular facts and the courses, options and procedure available to the Courts.
To my mind the facts differ significantly in the transactions involving (omitted) with those of the (omitted) Unit Trust. I am satisfied that there was an advancement by the gift to the husband of the 6.4 per cent interest in (omitted). However, there was clearly a subsequent transfer of that interest for valuable consideration, namely shareholdings in (omitted) Pty Ltd. Further, the 6.4 per cent interest was transferred to the husband’s brothers. They have not been joined as parties to the proceedings. They are not witnesses in the proceedings. They have not been accorded procedural fairness. I am obliged to consider third party rights in any application pursuant to s.106B. In my view, I cannot properly do so without evidence from the brothers who quite clearly hold legal title. Counsel for the wife advised in his final submissions of ignorance of the owners of the husband’s former shareholding. This however, is a matter addressed in trial preparation and interlocutory procedure and even such a mitigatory plea from Counsel does not permit me to disregard the requirements of s.90AE(3) of the Act. I am satisfied that the husband held his interest in (omitted) by reason of advancement from his father but that he disposed of that interest for valuable consideration.
The real issue, therefore, in respect of the disposal of the (omitted) shareholdings is whether the husband should be brought to account for what has resulted effectively in a loss of those assets not now available for inclusion in the property pool. In any event, it is difficult to attribute a value to what would have been a 6.46 per cent interest. There has been no formal valuation of the assets of (omitted). Not surprisingly, there are no recent financial statements and taxation returns have not been lodged for some years. I note again the apparent motivation in the transactions being to protect the husband (and the wife) from exposure to debt. Whilst I accept the wife’s evidence generally that she was not made privy to these transactions or their motivations or, for that matter, probably the extent of the financial woes of (omitted), I can only conclude that the motivation (whatever its moral or legal validity?) was admirable within this family and I cannot therefore find that the transactions were reckless, wanton or negligent on the part of the husband. Consequently, I conclude only that the asset has now been disposed of and is not available for the property pool. I have no evidence of value and attempts during the trial to elicit such evidence from historical financial statements were of minimal or nil assistance to me. In any event, such interest eventually manifested in an increased interest in (omitted) which is now valueless on account of liquidation.
The Greek Properties
The wife says that the husband has interests in a number of properties in Greece. She relies on an affidavit of Ms B who is a translator. Her affidavit annexes five separate legal documents in the Greek language. Ms B has translated those documents and there are five coinciding documents in English. No issue was taken with the translation. The documents are before me by way of the affidavit and technically as exhibits 1 to 5, (Greek originals) and 6-10 (English translations). I did not have the benefit of any expertise in Greek law. The Greek author of the documents did not give evidence. No objection was taken as to the contents of Ms B's Affidavit. I must therefore, only read the documents on their face. Counsel for the husband has suggested that it is dangerous or improper for me to do so in that I would be applying my own interpretation of Greek legal documents. The second named respondent’s position is best put by his Counsel, Ms Wheeler, in her final submissions as follows:
The wife also says she wants a declaration that the husband is entitled to whatever his interest is in the Greek properties. My client’s evidence is loud and clear that he is the owner of those Greek properties. What he says is akin to those properties have been made provision for the children upon his and his wife’s death, and one of them was sold in any event. She just doesn’t, in my submission, establish that the husband has a present entitlement those properties.
The wife does indeed seek a declaration in respect of the Greek properties. She relies on those documents attached to the Affidavit of Ms B. I am satisfied that I am able to accept and read the documents on their face without any further expert evidence in the same way as an Australian Legal document came before me as evidence without objection. It then remains for me to apply weight to the evidence as well as to accept or reject it as evidence of the wife’s assertion. There are five documents as follows:
1) Number 850. Proposal to provide, as a parental provision, bare, ownership and retention of Usufruct, in residential property. The document was executed on 8 September 2008. The donor was the husband’s mother and wife of the second named respondent, Ms K. She provided title by way of parental provision to her four children including husband whilst retaining Usufruct, for the duration of her lifetime and that of her husband’s ….. the right to enjoy and derive profit and benefit from that property although title is held by another – another or others.
2) Number 987 Acceptance of a proposed parental provision of bare ownership – by the husband and his three siblings. This document was executed on 5 June 2009.
3) Number 35482 -Parental provision of bare ownership of residential property. This document was executed on 8 September 1992. The donors the second respondent and his wife. It provides for the transfer of bare ownership to the husband with a lifetime Usufruct in the donors.
4) Number 3613 entitled Parental provision of a horizontal residence and right to Usufruct, valued at: 3,900,572 drachma. This document was executed on 9 August 1999. It involves the second respondent as donor and his wife Ms K, holding a power of attorney on behalf of the husband. It provides (page 7) ”that he (the donor) withdraws from any right of exercise of Usufruct on the above properties and recognises and names his son, the second contracting party, sole, Usufructuary who can from this day forth, own, possess the above-mentioned right, freely, as he desires and the Law determines. Subject of the document are two apartments (numbers 3 and 4).
5) Number 3.972 entitled –Purchase and sale of apartment (the numbered 4, it’s with the numeral 4, apartment on the ground floor) …objective determination of value 22,955.15 euros. The document was executed on 23 September 2002. It purports to be the sale of apartment number 4 by the husband through his attorney.
The husband, not unusually in this matter, seemed ignorant as to these various transactions. The second named respondent’s evidence was that he considered that the Greek properties to be his. My reading of the documents suggests otherwise. I am satisfied that the first document transfers title to a property to the husband and his three siblings but subject to effectively a life interest in favour of his parents. I have no evidence as to value of the property. I am satisfied otherwise that the titles to two apartments originally transferred to the husband were originally subject to Usufruct in favour of his parents. It is clear that the Usufruct was relinquished and that the husband achieved full beneficial title in two properties/apartments 3 and 4 (document 4). Equally, it is clear that apartment 4 was sold in 2002 for 22,955.15 euros. The second named respondent agrees that this sale occurred. Document 5 makes it clear that the second named respondent conducted the sale under a power of attorney. The second named respondent’s unchallenged evidence is that he paid the proceeds of the sale “to the bank”.
The inescapable conclusion for me from these documents and the line of the transactions is that the husband is the bare and beneficial owner of apartment 3. He is so by reason of the documents which are exhibits NB4 and NB9 in various translations. It seems to me that the husband has held full beneficial interest since 1999. Again, however, I have no valuation in respect of that property. The documents themselves, of course, suggest the transfer to the husband with the only consideration being natural love and affection. There is no evidence before me that the wife has made any direct contributions to any of the Greek properties. It follows that I must include one Greek property in the pool of property at value unknown. I must also consider the fact of the sale of one property although I have absolutely no evidence as to the net proceeds obtained from that sale but accept the unchallenged evidence of the second named respondent that the proceeds of sale were paid to the bank.
(omitted) Pty Ltd (“(omitted)”) debt and “(omitted)”
(omitted) operated a (omitted) business that was commenced by the second named respondent and his brother-in-law, Mr I. The husband was given a 33.3 per cent shareholding at the time of establishment of that company. He was then 23 years old. As mentioned above, he was later to receive a larger shareholding. The husband concedes that he paid no consideration for his original shareholding in (omitted). He was a director but claims to have had little responsibility in the management of the company. He described himself as a “(omitted)”.
Over a number of years the husband signed personal/directors guarantees in respect of credit given to (omitted) from suppliers. One was to (omitted). It is clear from the evidence of the husband, the wife and the second named respondent that (omitted) endured financial difficulties. This may have been in part to be the husband’s personal problems and perhaps those of Mr I. There was reference to the husband and Mr I spending time gambling at (omitted). The evidence of both the husband and the wife is of the husband losing interest in or neglecting the business. The husband concedes that he developed a drug problem around this time. It was the (omitted) liabilities that motivated the transfer of assets intra-family and so as to remove the husband’s exposure to judgment creditors.
(omitted) issued a writ out of the County Court in Melbourne on 10 November 2009. The statement of claim sought payment of monies owed in the sum of $189,738.62 for goods sold and delivered. (omitted) Pty Ltd was the first named defendant and the husband the second defendant. Summary Judgment was entered against the second named defendant for the debt together with interest and costs on 5 March 2010. On 9 August 2011 the husband was served with a Bankruptcy Notice in respect of the outstanding debt. No further action has occurred on the Bankruptcy Notice. In the meantime, Mr I had died and (omitted) has been placed into the hands of the liquidators. The husband deposes that in November 2009 an arrangement was reached between the liquidator and his uncle’s estate with the details being confidential. This fact was not pursued further at the trial before me.
There was general agreement between the parties that the debt pursuant to the summary judgment now sits at approximately $226,000. There is no evidence that this debt has been forgiven. The expectation of the husband is that it would be pursued if his financial circumstances permitted. Of course, at this time he is unemployed and has no assets for any creditor to attach. I am of the view, however, on the evidence that the debt remains as it has not been forgiven or settled. I agree that it is likely that (omitted) would pursue the husband if his financial position improved or at least it is available for them to do so.
The wife says that she should not be responsible for the debt and it should not be brought into property pool. She says she received no notification as to the writ or summary judgment until only just before this trial. I am satisfied that the second named respondent took full responsibility for dealing with that litigation and it was he who made all of the relevant decisions. The wife argues that the husband could have resigned his directorship earlier and avoided liability under his personal guarantee. She says that the judgment debt was not incurred during the course of the marriage but rather more than a year after separation and also after the husband had transferred his attachable assets to his father and his brothers. I note that the interest in the former matrimonial home had transferred from joint names into that of the wife as long ago as 1996 also apparently to protect the husband from exposure to debt. In this sense then this may have been a “family practice” that was not foreign to the wife. The essence of the wife’s complaint, however, is that she was not informed and was not provided with the chance to be involved in this particular litigation with (omitted) and the intra-family transactions which preceded it. However, this in itself does not, in my view, necessarily result in the debt not being included in the pool of property. Rather, I am satisfied that the actions of the husband (or his father) were done to protect other assets rather than to avoid any entitlement of the wife under the Family Law Act. Proper courtesy may have seen the wife informed of the suit and the course taken by the husband but the absence of such courtesy does not of itself necessarily remove what I find to be a current liability from the property pool.
I am of the view that the husband’s blame lies only in not informing the wife of the (omitted) situation. He did not, in my view, act wantonly, negligently or recklessly in delegating the responsibility for handling this situation to his father. From seeing both of them give evidence, I have little doubt that the second named respondent is by far the more astute businessman. I do not comment on any of the morals of the various transactions which have left the husband on the face of it as having become a “man of straw” and without assets for (omitted) to attach and enforce their judgment. (omitted) provided the husband, and hence the family, with an income for a number of years. It provided the wife with employment and an income. Significantly, I have included in the pool of property the husband’s current equitable (formerly legal) interest in the (omitted) Unit Trust. In all of those circumstances, I am of the view that the liability to (omitted) is a current liability which should be included in the property pool.
The property pool
Consequently, I find the property pool including my findings above and the items agreed between the parties to be:
Assets
a)Property B - $910,000;
b)Property S (wife’s one third share) - $213,000;
c)Toyota (model omitted) (husband) - $14,000;
d)(model omitted) Toyota Sedan (wife) - $8,840;
e)(omitted) (joint) - $4000;
f)Shares in (omitted) Unit Trust (husband’s equitable interests) - $468,000;
g)Husband’s legal interest in Greek property – not known.
Tangible Assets - $1,617,840 (plus interest in Greek property)
Liabilities
a)(omitted) Bank mortgage Property B (joint) - $171,000;
b)(omitted) Judgment debt - $226,537;
c)(omitted) Bank extended mortgage (joint) - $27,000;
d)Property B outstanding rates and utilities (wife) - $9460;
e)(omitted) Arrears - $1620;
Total liabilities - $435,617
Net Tangible Assets - $1,182,223 (plus interest in Greek property)
Superannuation
h)(omitted) Super (husband) - $55,546;
i)(omitted) Superannuation (husband) - $36,570;
j)(omitted) Super (wife) - $27,519;
Property pool – inclusive of superannuation - $1,301,858 (plus interest in Greek property)
There are other items which might have been included as “add-backs” into the pool prior to the recent decisions Stanford (Supra) and Bevan (Supra). I accept the submissions of Counsel for the husband that the proper course is for property which has been disposed of by one or other of the parties since separation be properly dealt with under s.75(2)(o) of The Act rather than by add-back to the pool given the premise that the Court should properly deal only with the legal and equitable interests of the parties or either of them existing as at the date of the trial. Specifically the wife has had the benefit of the following:
a)Further inheritance- monies -$44,967;
b)(omitted) Bank trust fund - $33,500;
c)(omitted) shares - $9900
Totalling - $88,367
The husband, on my findings, has an entitlement to the proceeds of one Greek property sold by his father under a power of attorney for approximately 22,000 euros. As mentioned above, I accept the second named respondent’s evidence unchallenged that he conducted the sale and that the proceeds were paid “to the bank”. The evidence takes me no further. I have no settlement statement. I have no evidence as to any mortgage either then or now. I have no valuation evidence.
Contributions
Asset-by-Asset or Global Approach:
Counsel for the husband argued that it is more appropriate for the Court in this matter to consider the contributions of the parties on an asset-by-asset approach rather than a global sense. His argument was not without merit given the unusual background and historical dealings with particular assets. I note, for instance, that the shares in (omitted) Unit Trust were gifted to the husband prior to the marriage. I note that the Greek property appears to have been gifted to the husband without the knowledge of the wife and soon after their marriage. I note that the wife’s inheritance was achieved post-separation. It is clear, that either an asset-by-asset or global approach is available and open to the Court[13]. Counsel for the wife in his final submissions argued for the global approach. The High Court in Norbis (supra) observed:
… which of the two approaches is the more convenient would depend on the circumstances of the particular case. However, there is much to be said for the view in most cases that the global approach is more convenient. It follows that the Full Court is quite entitled to prescribe that approach as a guideline in order to promote uniformity of the approach within the Courts. In saying this we are not to be understood of denying the legitimacy of the trial judge’s ascertainment in the first instance of the financial contributions of the parties by reference to particular assets. It is difficult to conceive how the trial judge in many cases could otherwise take account of such contributions as is required by s. 79(4) of the Act…
… again, it seems to ask that it would depend on the circumstance of the particular case, though in the majority of cases the global approach will be more convenient…
[13] Norbis & Norbis [1986] FLC 91-712
In Z & Z[14] Finn J dealt with a situation where there had been significant accruing of assets or liabilities between separation and the trial. The wife’s post-separation inheritance and the husband’s transfer of shareholdings might be relevant in this respect. Her Honour said in Z & Z:
It is my impression that there are currently coming before the Court a significant number of cases in which the period between the parties’ separation and the hearing of their property settlement proceedings is substantial. The delay seem often to arise at least in part, because the parties seem to have reached some form of informal (or even formal) settlement from which one party later resiles (often for good reason). In these long separation periods, the parties will usually have built up substantial new assets and incurred substantial liabilities. In an endeavour to satisfy then the orders which are eventually made by the Court in these somewhat complicated cases are just and equitable, it can, in my view very useful for judges to assess contributions to property on an asset-by-asset basis.
[14] [2005] FLC 93-241
In the matter before me I note that the parties separated as long ago as 2007 and I must look at their dealings with assets within this context.
The Full Court in the well known decision of McMahon & McMahon[15] favoured an asset-by-asset approach suggesting that factors such as a marriage of short duration and unhappy nature, strict division of assets and finances, and the method of dealing with finances were factors which might favour the asset-by-asset approach.
[15] (1995) FLC 92-606
On reflection, I am of the view that I should consider the contributions on a global sense in the matter now before me. Whilst there are assets, such as those mentioned above, which may not have been the subject of direct financial contributions by one or other of the parties, this was a lengthy marriage of some 16 years duration and it is now 22 years since the marriage. There have been contributions by the parties directly to some of the assets through their own employment. There have been contributions by or on behalf of the parties. There have been indirect contributions such as the parties living for some two years with the husband’s parents. There have been contributions to the child of the marriage and, in particular, contributions by the wife post-separation in this respect. While some of the financial dealings have been unilateral, the parties have generally mixed their assets and finances. In all of those circumstances I favour the global approach.
Particular Contributions
On my findings as to the property pool, the husband has made some significant contributions. They include:
a)The introduction of 24 per cent of the (omitted) Unit Trust into the marriage with a current value of $468.000. However, this contribution was made in 1984 and the value then is unknown and it is impacted in weight by the various contributions made by both parties in the subsequent 22 years.
b)The husband similarly brought in 6.4 per cent interest in (omitted) and 33 per cent interest in (omitted). Neither have any current value in the hands of the husband. Any weight to be attached to these contributions must also consider the other subsequent contributions made directly and indirectly by each of the parties;
c)The husband has contributed his interest in a Greek property by way of advancement from his parents. The value is unknown. The husband did not indeed appear to understand the nature of his own right and interest. Nevertheless, I find that the property is his and hence it was a contribution on his behalf;
d)The parties lived with the husband’s parents for almost three years following the marriage. The evidence suggests they were provided with rent free accommodation and perhaps almost full board and lodging during that period enabling them to save so as to purchase their former matrimonial home together with the assistance of a mortgage. This is a significant contribution by or on behalf of the husband albeit again some 20 years ago and is to be seen in the context of subsequent contributions. The husband’s parents made other valuable contributions to these parties during the marriage;
e)The husband had savings of about $16,000 at the commencement of the relationship;
f)The husband worked long hours and productively in the family businesses until about 2006 when his behaviour deteriorated. His support of the wife and X was then neglected. He concedes that he began using drugs. His income from the businesses became limited, if any, and this eventually lead to the demise of the marriage and the ultimate demise of his interests in (omitted). This business had been the prime source of income and support for the parties. Both parties worked within (omitted). The husband held a 33 per cent interest. He concedes drug problems and there was evidence that he and his co-director, his uncle, favoured gambling at the casino during this period. The result was loss of a significant asset as well as a source of support for the family unit. I am of the view that the husband’s behaviour and attitude was the major contributor to these losses and as a result there have been more onerous responsibilities for the wife in respect of her own support and that of X. This is a significant “negative” contribution by the husband and it is difficult to see that the wife made any “contribution” to the (omitted) judgment debt which now sits unsatisfied.
g)There have been some contributions from members of the husband’s family towards the support of the wife and X. The husband’s brother has contributed $480 per month “child support” on behalf of the husband although the husband’s arrears on his assessment total more than $20,000 at the date of the trial. There has also been payment of $12,500 made to the wife. I accept the wife’s evidence that this was not a form of child support but rather made to assist with mortgage and other necessary payments following separation.
The wife has also made significant contributions and, in particular:
a)The wife’s inheritance in the sum of $213,000 was received post-separation. There has been no contribution by or on behalf of the husband and it should therefore be accorded its full weight. There is evidence of a further inheritance or additional benefit to the wife from the same inheritance and which has now been spent by her;
b)The wife’s post-separation contribution to X has been substantial and important. The husband is seriously in arrears with his child support. The wife has the actual and financial responsibility for the support for X, over and above the contributions from the husband’s brother. This has been the situation since separation in 2007. It is a relevant and weighty contribution by her over some six years;
c)The wife also worked hard and productively during the marriage. She is a trained (omitted). For a period she worked as both a (omitted) and as a (omitted) in (omitted). She eventually gave up (omitted) and took on a greater role in (omitted). She was also the primary career of X and primary home maker;
d)The wife had savings of some $8,000 at the commencement of cohabitation.
In summary, both parties have made significant contributions to this marriage both directly and indirectly. The husband’s contributions occurred mainly at the commencement of the relationship which is now some 22 years ago. There have been many and varied subsequent contributions including, and importantly by the wife to the family and their child. She has worked and contributed to the family businesses. Her far superior contributions to X have come late in the marriage. I accept that the wife was oblivious to the crisis facing (omitted) and the subsequent litigation. No responsibility for the demise of (omitted) can be attributed to the wife.
After considering the nature and quantum of each of the contributions, I am of the view that there should be a 20 per cent loading in favour of the wife on account of contributions. I note that for instance that her inheritance constitutes almost 20 per cent of the property pool alone and it is difficult to see the husband having made any direct or indirect contributions to this asset which is included in the pool. I give significant weight to her post separation contributions and consider the husband’s contributions to be important but having taken place some time ago excepting his negative contribution to the loss of (omitted) and the accruing of the (omitted) Debt.
Section 75(2) Factors
The wife is the major carer for X. She has had this role since separation and during the marriage. She juggled this responsibility with working. X is just eleven years of age and this responsibility will continue for some time. I note and accept the impact on the wife’s earning capacity.
Further, the wife has the primary responsibility for financial support of X. Whilst there has been some contributions from members of the husband’s family, there is no obligation on them or certainty that they will continue. Certainly, the husband has not been willing or able to accept any personal responsibility for the support of X and his own evidence gives little confidence or expectation that he will make any greater actual or financial contribution to his daughter.
The wife is reliant on Centrelink benefits for own support.
The husband’s personal financial position looks dire and pessimistic. Nevertheless, a close examination shows that he has benefitted substantially from his family, their altruism and generosity towards him, and that this is likely to continue. It is fair to say that these family businesses and company structures, including members of extended family, are substantial and complex. I am satisfied that the second named respondent sits at the pinnacle of the hierarchy and exhibits major, if not ultimate control. The evidence is that he has been extraordinarily generous to his son despite that son’s personal failings. The husband is provided with a motor vehicle by (omitted). He lives in accommodation owned effectively by his father. The “rental” that is paid is contributed to by the brother and I suspect is effectively a cyclic process within the family. The husband was taken overseas for a number of months by his family when the marriage broke down and the husband’s behaviour deteriorated. He lived with his parents in a house owned by his brother prior to moving into his father’s house at (omitted). He has, on my findings, historically been provided with interests in family companies and properties in Greece. There is an obvious acceptance and understanding of family responsibilities within the Kyriakos family unit. To put it bluntly, Mr Kyriakos will be “looked after”. It has already happened with his accommodation, motor vehicle and some work when he feels able. Having seen and heard the second named respondent give evidence, I am satisfied that a provision will be made for his son. Mr Kyriakos volunteered as much in his evidence. As such, the evidence of the husband’s mental health, such as it is, is of little weight.
In summary, I find the evidence as a whole to be much more optimistic as to the future provision and support for the husband than it is for the wife and X. In all of those circumstances I am of the view that there should be a further adjustment for the wife of 15 per cent of the property pool on account of the relevant s.75(2) factors. In doing so I also take into account evidence that the wife has had the benefit of, and disposed of, some $88,000 in assets since separation. This, however, includes about $44,000 being her post-separation inheritance and is over some six years since separation which equates to only about $14,600 per year which, in my view, is reasonable expenditure for the ordinary needs of herself and X.
Conclusion
Consequently, and after consideration of the contributions and relevant s.75(2) factors, I am of the view that the wife should receive 85 per cent of the net property of the parties. A mathematical calculation is difficult given that I have no valuation evidence in respect of the Greek property. I simply take it as an asset in the hands of the husband. I also consider him to have an equitable interest as to 24 per cent in (omitted) Unit Trust. Given my comments as to the nature of the Kyriakos family and the decisions taken on behalf of junior members of that family by the second named respondent, I do not necessarily intend to invoke an Order under s.106B of The Act in respect of the transaction of July 2008 in respect to (omitted) Unit Trust unless and until the wife’s entitlement cannot be met otherwise.
Leaving aside the Greek property for the moment, given the lack of valuation, and purely as a mathematical exercise, I have found the pool of property inclusive of superannuation valued at net $1,301,858. In a relatively long marriage and on the evidence before me, I see no reason to treat the parties’ superannuation entitlements differently to the tangible assets.
The wife’s entitlement at 85 per cent would give her property at a value of $1,106,579.
The wife currently has:
· Property B - $910,000;
· Wife’s Superannuation - $27,519;
· Inheritance – (omitted) - $213,000;
· (model omitted) Toyota - $8840;
· (omitted) -$4000;
Totalling - $1,163,359
· Mortgage - $171,000;
· Loan - $27,000;
· (omitted) arrears - $1620;
· Property B arrears of rates and utilities - $9460
Totalling - $209,080
Net assets - $954,279
Consequently there would be a further cash adjustment on the wife of $152,300.
The husband has retained the following
· Equitable interest in (omitted) Unit Trust - $468,000;
·Toyota (model omitted) - $14,000;
·(omitted) Superannuation - $36,570;
·Husband's (omitted) Superannuation - $55,546;
· (omitted) Debt - $226,537;
Total assets - $520,116
Total Net assets - $347,579
The husband’s entitlement at 15 per cent would give him property at a value of $195,294 thereby leaving a cash adjustment to the wife of $152,300.
On such a mathematical exercise but remembering that the Greek property is not included, the husband would therefore be liable to a cash adjustment on the wife of approximately $152,300. It remains, however, for the Greek property to be taken into account as in the hands of the husband. The exercise for the Court is not, of course, a simple accounting one as above. I produce those figures only as a demonstration of the distribution of the assets with some known value. Justice and equity must be done as to the Orders themselves and in the particular circumstances of the parties and not just as to the percentage calculations.[16] Consequently, given my findings otherwise as to the property pool, the history of this marriage, the contributions of the parties and the current particular circumstances of each of them, I am of the view that Orders which give the wife the former matrimonial home unencumbered by the mortgage and loan would do justice and equity between these parties. Such Orders would give proper recognition to the particular circumstances of each of these parties both historically, during the marriage and into the future. This would require a payment by the husband to the wife of $198,000.
[16] Russell v Russell 91999) FLC 92-877
I am mindful of the husband’s own personal financial situation but also of his supportive family and the fact that his father is the second named respondent and a party to these proceedings. I therefore propose to give the husband (and his family) an opportunity to meet the Order by way of a simple cash adjustment to the wife. This would not necessitate any Order under s.106B of The Act setting aside the transfer of the (omitted) Shares from the first respondent to the second named respondent in July 2008 and thereby returning the legal interest to the husband. If, however, the husband is either unable or unwilling to make such a cash payment then an Order under s.106B would be inevitable given my findings as to that transaction. That would result, on my calculations, in the husband’s current equitable interest reverting to a legal one and in turn the wife would be entitled to some 42.3 per cent of the husband’s entitlements (given the valuation of $468,000). It would then be open for the wife to either retain or dispose of her entitlements either within the family or otherwise. The situation in respect of the (omitted) debt remains unchanged and is the sole responsibility of the husband who will indemnify the wife accordingly and whether or not there is a reversion to the husband of a legal interest in (omitted) Unit Trust. Whether such reversion is of interest to (omitted) is immaterial to my findings. I will make Orders accordingly.
I certify that the preceding one hundred and four (104) paragraphs are a true copy of the reasons for judgment of Judge McGuire
Date: 25 October 2013
Key Legal Topics
Areas of Law
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Family Law
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Equity & Trusts
Legal Concepts
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Injunction
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Remedies
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Constructive Trust
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Fiduciary Duty
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Costs
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