Lau and Hsu

[2013] FamCA 294

FAMILY COURT OF AUSTRALIA

LAU & HSU [2013] FamCA 294

FAMILY LAW – PROPERTY – Application for property settlement orders involving a de facto relationship – Whether just and equitable to alter property interests and rights – Stanford v Stanford [2012] HCA 52 applied – Assessment of the contribution of the parties – Where the parties’ contributions to the property held by them is 52.5% to the wife and 47.5 to the husband – Consideration of factors under s 90SM and s 90SF of the Family Law Act 1975 (Cth) – Where an adjustment, pursuant to s 90SF(3), of 2.5% in the wife’s favour is appropriate – Where the outcome of the assessment of contributions and other factors has resulted in the husband receiving 45 per cent of the assets compared to the wife’s 55 per cent.

Family Law Act 1975 (Cth) – ss: 90SM; 75(2); 79; 90SF(3)(r)

Kowaliw v Kowaliw (1981) FLC 91-092

Stanford v Stanford [2012] HCA 52

Townsend and Townsend (1995) FLC 92-569

APPLICANT: Mr Lau

RESPONDENT: Ms Hsu

FILE NUMBER: SYC 3347 of 2010

DATE DELIVERED: 2 May 2013

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Aldridge J

HEARING DATE: 4, 5, 6 & 7 February 2013

REPRESENTATION

COUNSEL FOR THE HUSBAND: Mr Givney

SOLICITOR FOR THE HUSBAND: Shepherds The Family Law Specialists

COUNSEL FOR THE WIFE: Mr Morahan

SOLICITOR FOR THE WIFE: Chen Shan Lawyers

Orders

Pursuant to s 90SM

1. That the husband shall retain the motor vehicle in his possession.

2. That the husband and the wife shall each retain the household items and other personal items of property presently in their possession.

3. That, as between the parties, the wife is to have all right and entitlement to the Chinese Property B property and, to the extent that may be necessary, the husband is to take all necessary steps to transfer any interest he may have in that property to the wife.

4. That as between the parties the husband is to have all right and entitlement to the Chinese Property C property and to the extent that may be necessary the wife is to take all necessary steps to transfer any interest she may have in that property to the husband.

5. That the parties are to take all necessary steps to sell the properties at … D Street, Suburb S and … E Street, Suburb F.

6. That for the purpose of implementing the sales referred to in Order 5 above the parties shall do the following:

   (i)the parties shall list the properties for sale by public auction at the earliest possible date at a price to be agreed between the parties and failing such agreement, at a price nominated by the President of the NSW Division of the Australia Property Institute or his/her nominee;

   (ii)with such agent as the parties may agree to appoint and failing agreement as to the agent within fourteen (14) days to any such agent nominated by the President of the NSW Division of the Australian Property Institute, (“the agent”), the costs of and incidental to such appointment to be borne equally by the parties as and when same fall due;

   (iii)the parties shall each cooperate in every way with the agent including (without limiting the generality of the foregoing):

   (a)making the keys available to the agent;

   (b)allowing inspection of the properties at all reasonable times requested by the agent;

   (c)doing or saying nothing to hinder or prevent a sale being effected;

   (d)ensuring that each property including the grounds are in a neat and tidy condition at the time of inspection by the agent and prospective purchasers; and

   (e)signing all documents requested by the agents in relation to the listing for sale of each home except contracts or agreements for sale which have not been authorised by the parties’ solicitors.

   (iv)the parties shall each execute contracts for sale in the forms prepared by the solicitors having the conduct of the sales at a price agreed upon by the parties or, in the absence of any agreement, at or above the prices nominated by the President of the NSW Division of the Australian Property Institute;

   (v)the parties shall do all things and sign all documents necessary to instruct a solicitor or licensed conveyancer within seven (7) days of the date of these orders to have the primary conduct of the sales on behalf of both parties and failing agreements such solicitor or conveyancer as nominated by the President of the NSW Division of the Australian Property Institute and any costs properly paid to the solicitors will form part of the legal costs of sales and be deducted from the proceeds of sale;

   (vi)neither party may confer on any agent without the consent of the other party any right, any sole or exclusive agency in respect of the properties or to any commission; and

   (vii)if the agent shall certify in writing to the parties’ solicitors that it is reasonably necessary for the work specified in a Notice of Repairs to be carried out to the properties so as to assist in effecting a sale and provided the cost of any such work is less than $500.00 either party may cause such work to be carried out and the costs shall be recoverable by that party from the proceeds of sale.

7. That the proceeds of the sale of the properties referred to in Order 5 and Order 6 is to be dispersed as follows:

   (i)       in payment of the usual sale costs;

   (ii)in discharge of any mortgages or other encumbrances over the properties;

   (iii)in payment of any capital gains tax arising out of the sale of the properties and to enable this to be paid a sum is to be set aside and retained by the wife then paid when the capital gains tax is due and for that purpose the sum to be retained is to be calculated by the wife’s accountants;

   (iv)the balance divided between the parties so that taking into account the property retained by the parties there be a distribution of the net total assets of 45 percent to the husband and 55 per cent to the wife.

   (v)prior to payment to him of the husband’s share of the proceeds of sale pursuant to Order 7(iv)  there is to be deducted from that share and paid to the wife $7 850 being half the cost of the valuations obtained by the wife for use in this case.

8. That unless otherwise specified in these orders each party is solely entitled to the exclusion of the other to all other property and chattels of whatsoever nature and kind in the possession of such party as at the date of these orders and that for this purpose bank accounts are deemed to be in the possession of the person whose name appears on the bank’s records thereof, superannuation entitlements are deemed to be in the possession of the person who is named as the worker whose age and working future provides the conditions for payment out of such payment.

9. That the wife is to indemnify the husband against any claim made against him by G Pty Limited (in liq) or its liquidator for the recovery of director’s loans.

10. That in the event that, upon the conclusion of the winding up of G Pty Limited (in liq), there is to be a distribution to the shareholders the parties are to do all such things and acts necessary to ensure that the distribution is divided so that the husband receives 45 percent and the wife 55 percent of the distribution.

11. That in the event either party refuses or neglects to execute any deed, document or instrument necessary to give effect to all or any of these orders, then the Registrar of the Court shall be appointed pursuant to s 106A of the Act to execute such deed, document or instrument in the name of the said defaulting party and to do all acts and things necessary to give validity and operation to the deed, document or instrument upon the Registrar being provided with verification of such refusal or failure by way of affidavit.

12. That documents produced on subpoena be returned to the person who produced the same.

13. That all outstanding applications are dismissed.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Lau & Hsu has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYC 3347 of 2010

Mr Lau

Husband

And

Ms Hsu

Wife

REASONS FOR JUDGMENT

Introduction

1. In these proceedings the husband Mr Lau seeks orders for alteration of property interests held by him and Ms Hsu. They lived in a de facto relationship from 1991 to 2008. The application is thus brought under section 90SM of the Family Law Act. For ease of reference and without intending any disrespect I shall refer to the parties as the “husband” and the “wife”.

2. Particular issues that need to be determined are:

   ·Whether …, L Street, Suburb C in China (“Chinese Property C”) is owned by the husband’s parents or by the parties;

   ·Whether the attempt by the husband to establish a business in China, which ultimately failed, was such a reckless or imprudent venture that the losses arising from it should be held to the husband’s account;

   ·Whether the failure by the wife to defend winding up proceedings taken against G Pty Ltd in late 2012 and her failure to pay the debt that gave rise to those proceedings constituted reckless or imprudent conduct by her so that the value of the business that was lost by reason of its winding up should be held to her account;

   ·Whether the sum of RMB 585 169 (approximately $128 000) received by the husband from his relatives in China was constituted by gifts made by his relatives or loans and whether that money was used for the purpose of the Chinese business;

   ·The fate of $121 000 which the husband took from the bank account of G Pty Ltd and forwarded to China.

Background

1. The husband was born in China in 1961 and is 51 years old.  He presently works as a driver.  The wife was born in 1964, also in China, and is 48 years of age.  She has very recently commenced a manufacturing business.

2. They have two children.  The elder was born in 1992 and is at university and the younger born in 1995 is in her last year at school.  Both reside with the wife.

3. After commencing cohabitation in 1991 the husband and the wife worked as tradespeople, with the wife taking some time off for the birth of the parties’ first child, until 1995 when G Pty Ltd was established.  Originally there were three shareholders who each contributed $10 000 capital, one of which was the husband.  After a few months the interests of the other two parties were purchased by the parties for $10 000 each and the husband and the wife became the shareholders and directors of the company.  Both worked in the business with the husband contributing to creating the product and making deliveries and the wife contributing to creating the product. 

4. In 1997 the parties purchased a property at I Street, Suburb H (“the Suburb H property”) for $248 000 which was financed by savings of $75 000 and a mortgage. 

5. In 2000 the parties purchased business premises at E Street, Suburb F (“the Suburb F property”) for $510 000 contributing $160 000 themselves and borrowing the balance.  The premises were let to a third party until 2003.

6. In 2001 the property at Suburb H was sold for $390 000 with the parties realising $200 000. 

7. In 2003 the parties moved their business to the Suburb F property and purchased a property at D Street, Suburb S (“the Suburb S property”) which was purchased for the sum of $750 000 which was financed by a draw down on Citibank mortgage over the Suburb F premises of $150 000 and borrowing the balance. 

8. In 2004 the parties purchased a property at J Street, Suburb K (“the Suburb K property”) for $660 333.  A deposit of $132 000 was paid and the rest borrowed.

9. At some stage in either 2004 or 2005 a property being … M Street, Suburb B in China (“Chinese Property B”) was purchased and registered in the name of the wife’s sister.  It is common ground this purchase was acquired from funds of the parties and that it was owned by them notwithstanding it was held in the name of the wife’s sister. 

10. In 2006 and 2007 the Suburb S property was renovated and the old dwelling being replaced by a new home.  The costs of the renovation of $550 000 were borrowed by extending the loan already secured over that property. 

11. In 2007 the husband formed the view that it would be desirable to attempt to set up a manufacturing business in China.  The husband spent about three months in 2007 in China, six months in 2008 and a few months in 2009 trying to establish the business.  It was ultimately not successful.  The initial start up costs of $50 000 were provided by G Pty Ltd.  The wife alleges that other funds of G Pty Ltd were taken without her knowledge and consent and used by the husband for the purposes of this business.  The husband contends that he borrowed from his family in China in order to try to establish the business. There was also an issue as to what extent the wife agreed with the proposal to establish a business in China. 

12. There was an initial separation of the parties in January 2008 with the husband living in premises in Suburb N.  Between March 2008 and August 2008 the husband was in China and on his return he moved to the property in Suburb F.  In late 2008 he moved back to the Suburb S property for a few months before the parties again separated.  They did not subsequently resume cohabitation. 

13. Since the time of separation the husband has not involved himself at all in the business of G Pty Ltd and it has been the responsibility of the wife to manage that company since that time.

14. In July 2010 the Suburb K property was sold for $630 000 and the net proceeds of sale after payment of securities were $64 000.  The parties divided this sum equally between them.

15. On 31 August 2012 the Government Insurance Office, the worker’s compensation insurer for G Pty Ltd, issued it with a statutory demand in the sum of $16 801.52.  That sum was not paid and on 11 December 2012 the Supreme Court of New South Wales ordered that the company be wound up. 

16. In June 2009 a company known as O Pty Ltd was incorporated.  Its sole director and shareholder has always been the wife.  On 20 January 2013 it entered into a lease in respect of premises at P Street, Suburb Q (“the Suburb Q premises”).  Although the wife early in her evidence said that the lease has not been completed because she had not yet paid the bond of $20 000 she agreed, when shown photographs of the Suburb Q premises and the business being conducted there taken during the course of the hearing, that she was in possession of the premises and that O Pty Ltd was engaging in manufacturing.  Her evidence was that the business had reached the stage of making samples for supply to potential customers.  Until this evidence was given in cross examination late in the trial the wife had not disclosed the new business venture.

Chinese Property C

1. The issue is whether Chinese Property C is owned by the parties or the husband’s parents.

2. Chinese Property C is registered in the name of the husband’s parents.  It is valued by a single expert in this case at $400 000.  It is agreed between the parties that they provided the husband’s parents with $20 000 which was used by them as the deposit.  The wife’s evidence in her affidavit sworn 3 February 2013 as to what subsequently occurred was simply this:

   40.About March 2001, when I looked at the business bank statement, I noticed there was a withdrawal of a cheque in an amount of approximately $15 000.  I was surprised because that was the only balance of our business bank account at that period of time, and I had no knowledge of this withdrawal.  I then asked the Applicant words to the following effect:

   Me:  “Where did this money go?”

   Husband:  “My parents can’t afford the mortgage payments, they wanted us to take this unit as our own, so we can use it as a holiday house somewhere we can stay when we’re in [China].”

   The wife asserts that thereafter the parties paid the balance of the mortgage payments until it was fully repaid about five years later. 

3. The wife did not tender any documents that evidenced the transfer of $15 000 referred to or the making of any of the other mortgage payments.

4. The wife said that the property was registered in the name of the husband’s parents because the law in China prohibited non-citizens from owning property.  It was agreed that the parties became Australian citizens in 2007.  The reason given by the wife for the registration of the properties in the husband’s parent’s names is therefore difficult to accept.

5. The husband’s case was quite different.  He says that when he was living in China he had been married and then divorced.  At that time, his parents were living in a five bedroom unit of which they had the use of the common areas and two of the bedrooms.  The husband says he was ordered by the Court dealing with his divorce to find accommodation for his then wife which he did by his parents removing themselves from one of the bedrooms in the flat so that the husband’s former wife could move into the one vacated by them.  The husband’s parents stopped paying rent in respect of that bedroom and the former wife commenced doing so. 

6. There seemed to be no challenge by the wife to that evidence.  Although initially the husband asserted that those facts gave rise to a legal obligation from him to his parents he later retreated from that position.  In relation to the payment of the $20 000 towards the deposit the husband said it was a gift in recognition of, at least, a moral obligation owed by him to his parents.  At the same time a gift of $10 000 was made to the wife’s parents.  The husband denies that any further payments were made by the parties towards that property. 

7. The husband annexed to his affidavit a letter written in Chinese, said to be written by the wife to the husband’s parents following the purchase of Chinese Property C.  No translation of that letter was provided, as had been foreshadowed in the affidavit. In the wife’s affidavit, however, she summarised, without objection, the letter as follows:   

   41.In that letter, I told the husband’s parents we were struggling financially and the business was not going well.  To buy this unit would create a lot of pressure on us.  I asked the Husband’s parents what the mortgage payments arrangements was, because when I asked the husband about all these he never answered me.  I also told them in that letter, we had about $600 000 mortgage that we had to pay as well.

8. In that affidavit she summarised, without objection, the letter from the husband’s parents as follows:

   At the time we were in Australia in about September last year, [Mr Lau’s first name] (ie the husband) promised us to buy us a property because of our living situation in the current unit is not good, so we asked [the husband] to buy us a unit.  If you do not agree on buying this unit for us, why did you pay the deposit for us in the first place. (as per original)

9. It is plain from these letters that the wife was concerned about payments being made by the husband towards Chinese Property C.  It is less clear what is meant by the phrase “buying the unit for us” as it could mean buying it merely for the parents to live in or could mean purchasing it as a gift.

10. The wife agreed that on their many visits to China the parties and members of their family had regularly stayed at Chinese Property B after its purchase but had never stayed at Chinese Property C, which seems inconsistent with her assertion that it had been intended as their holiday home. Chinese Property B was purchased for that purpose and was used as such.

11. Ms W, the husband’s mother, agreed that the Chinese Property C mortgage was paid off and that her son had helped by paying the deposit.  She specifically denied that he sent any money from Australia other than for the deposit. 

12. On 22 March 2010 the solicitors then acting for the husband wrote a letter to the wife seeking to resolve  the property issues.  Paragraph 3 said:

    We understand that the assets of the relationship comprise substantially the following:

    The fourth entry under that heading was:

    Two properties in [China].

1. This must be a reference to Chinese Property C and Chinese Property B, it not being suggested by anyone that there was any other relevant property in China.  It is also obvious that the instructions for this letter must have been given by the husband.  This letter was tendered by the wife in her case, that is after the cross examination of the husband had been concluded, without objection, and was therefore not the subject of cross-examination.  It was also not the subject of any evidence in reply by the husband.

2. The second matter is somewhat more complicated.  The wife relied upon a document signed by the parties on 14 June 2009 as an admission by the husband that Chinese Property C was owned by them and that a 65 percent division of their property to the wife was appropriate.  I shall deal with the second aspect of the matter later.

3. On that day there was a meeting between the husband and the wife attended by some neighbours who had been asked by the wife to be present as witnesses.  Prior to the meeting, she had prepared a type-written document which listed, on the second page, the assets of the parties according to her.  During the course of the meeting, the wife had in her hand-writing created two columns headed “Assets and Debts” and figures were hand-written in Aramaic numerals.  Each of the assets was described in both English and Chinese characters and was numbered. Towards the bottom of the document, in hand-writing, there is a list of the assets that the wife said it was agreed each party would take.  That distribution represented a division of the property of 65 percent to the wife and 35 percent to the husband. Both Chinese Property C and Chinese Property B were referred to with the husband described as receiving Chinese Property C and the wife receiving Chinese Property B as part of the agreed division.  The parties signed it and the document was also witnessed by two of the neighbours who were present. 

4. It was not suggested that this was a binding agreement and it obviously could not be.  Its significance was said by the wife to be the admissions made by the husband.

5. The husband says, with some force, that he had not been aware of the meeting that was to take place, was taken by surprise and he agreed because it was the simplest way.  When it was put to him in cross examination that he agreed with this document he said, “No it’s not right as this agreement is not right, I signed because I didn’t want to impact upon the children”.  The husband did not have the benefit of any legal advice prior to signing this document. 

6. Taking those matters into account, however, it does seem that this document contains a statement that Chinese Property C was an asset owned by the parties.  The husband did not refer to this document in any of his affidavits subsequently prepared.  In cross examination he said that was because he had not had time to read it until yesterday, that is, the day before he gave evidence. He gave no explanation at any time as to why he agreed on the inclusion of Chinese Property C in this document.  Even taking into account the circumstances it contains a clear statement as to the parties’ ownership of this property.  Whilst it may not carry significant weight on its own it is consistent with the solicitors’ letter and clarifies the identity of the two Chinese properties to which it refers.

7. I was urged by both parties to determine the issue of the ownership of Chinese Property C by having regard to the demeanour of the parties when they gave evidence and the general manner of answering questions.  Both parties, and indeed all the witnesses, gave evidence via interpreters.  This makes the task of credit finding on such a basis more difficult.  I am reluctant to do so, in any event.  I did not discern such a difference between the demeanour of the parties when giving evidence or the general nature of their answers that would enable me comfortably to come to such a finding.  The evidence of the other witnesses was given by telephone.  I will not therefore determine this issue on that basis.

8. I accept, on the basis of the two letters referred to earlier that there were funds sent to China by the husband which were used for the purchase of Chinese Property C.  Taking this into account with what must be a reference to Chinese Property C in the solicitor’s letter, which is supported by the 14 June 2009 document, I am satisfied on the balance of probabilities that Chinese Property C was acquired with funds of the parties and is owned by them notwithstanding it is registered in the name of the husband’s parents. Accordingly, I will include Chinese Property C as an asset of the parties.

The Business in China

1. The wife asserts that that the business in China was established without her consent, that money was taken from G Pty Ltd for its establishment and support without her knowledge and that it failed causing a loss to the parties which loss should be borne entirely by the husband.

2. In 2006 the parties travelled to China and attended a trade exhibition.  According to the wife the purpose of the visit was to look at the exhibition with a view to ascertaining whether a space should be booked by them for the following year.  They returned to the exhibition in 2007 having booked a display space and products manufactured by the husband was displayed.  At that time the husband took the wife to inspect some land that he thought was suitable to buy for the construction of a factory but that purchase did not proceed.  It is evident that by the time of the exhibition in 2007 the business in China had commenced at least to the stage of having products to display.  According to the husband, it was conducted through a company known as R Limited (“the China company”).

3. During 2006 and 2007 approximately $50 000 was forwarded from G Pty Ltd to the China company and the husband’s evidence was that overall the sum of $100 000 was provided by G Pty Ltd.  The business did not go as well as he anticipated and he borrowed money from his relatives to keep the business going but it eventually failed and he sold what was left of the business in March 2009.  He placed in evidence an invoice which included a number of items some of which were said to be unused materials from business in China. He also tendered two other invoices directed to G Pty Ltd in July 2007 and October 2007 for the supply of completed products from the China company to G Pty Ltd. 

4. The wife said that the initial provision of funds in 2006 and 2007 had been made without her knowledge.  Having regard to the joint trips to China in 2006 and 2007 and the display of products in 2007 I do not accept that she was unaware of the payments because she was aware of the proposal to return to the exhibition and to display products there. That would obviously involve some expense. 

5. The wife was also critical of the husband for drawing a cheque for $26 000 in early July 2007 which she said left G Pty Ltd with little cash.  Whether that is the case or not is not an issue of critical importance in this case.

6. There was a dispute as to what inference, if any, should be drawn from the absence of any evidence as to the conduct of the China business.

7. The husband did not seek to place in evidence any detail of the business in China and in particular did not tender any evidence relating to its trading activity or its accounts.  The wife contended that they had not been disclosed prior to trial.

8. On 27 September 2010, the solicitors then acting for the husband wrote to the solicitors then acting for the wife, relevantly as follows:

   In relation to financial disclosure we enclose;

   1.        Registration of Business Name in China.

   2.        Document in relation to the end of lease of factory premises in   China.

   3.        Closing bank statement in relation to [the China company].

9. On 19 October 2010 the husband’s solicitors at the time again wrote to the solicitors then acting for the wife writing relevantly as follows:

   We enclose by way of further disclosure;

   6.        [The China company] [product] Invoices.

   7.        List of assets of [the China company] as at 2008.

   8.Financial statements and audit report of [the China company] to December 2007.

   9.        End of lease agreement for [the China company].

   10.      Draft balance sheet.

   11.      Client’s financial questionnaire.

   Please note items 1 – 9 will be forwarded in the post.  Please let us have                your comments relating to the draft balance sheet.    

10. No response was ever received asserting that the documents had not been received in due course.  The wife did say in evidence that she had not seen them but that does not establish that they had not been disclosed to her solicitors as the above letters indicate.

11. The husband said that he had provided the records for the China business to his lawyers.

12. I was asked to conclude that the failure of the business in China had been conducted recklessly or wantonly because of the failure of the husband to produce its accounts or evidence of its good management. I decline to do so. There has been disclosure to the wife.  Further, the failure to adduce evidence can lead to an adverse inference leading to the easier acceptance of other evidence.  It is not evidence itself.

13. In Kowaliw v Kowaliw (1981) FLC 91-092 Baker J said at 76, 645:

    If a party has acted in the manner to which I have referred earlier either   by:

    (a)      Embarking upon a course of conduct designed to reduce or   minimise the effective value or worth of matrimonial assets, or 

    (b)      acting  recklessly, negligently or wantonly with matrimonial assets,            the overall effect of which has reduced or minimised their value. 

    Then such conduct in my view and the economic consequences which flow there from are clearly matters to which the court may have regard pursuant to the provisions of  s 75(2)(o).  If, on the other hand, losses of a financial kind have been suffered by the parties to a marriage in the course of the pursuit of matrimonial objectives, such as the gaining of income or the acquisition of assets whether the liability for such losses be joint or several then, in my view, such losses should be shared by the parties (though not necessarily equally) in taking into account when altering property interests.

14. The wife’s case was that given that she did not consent to the business being established; that it was established without her knowledge; that funds were taken from G Pty Ltd without her knowledge; that the husband has not accounted for those funds in a proper way or given proper disclosure in relation to the business in China and because it lost substantial amounts of money the costs of the establishment of that business should be brought to the husband’s account because he acted recklessly, negligently or wantonly in doing so.

15. I have found that the wife did know of the establishment of the business, I think it was more likely than not that she knew that at least some of the money had been sent to China. 

16. The evidence therefore does not establish that the husband acted in such a way that the losses in China should be brought to his account solely.  It is a case of a business venture engaged in by the parties, albeit it appears that one being keener on that business than the other, which was hoped would financially advantage the parties but did not turn out as they had envisaged.  The venture was undertaken as part of the relationship even if the wife did not, or did not completely, agree with the establishment of the China business.

Loans from relatives

1. The husband contended that he had borrowed significant sums from his relatives which he used in the business in China.  He sought to have the advances, which remain unpaid, taken into account on the balance sheet.

2. The husband’s evidence was that between April 2008 and May 2009 he made many borrowings from his relatives in China including his parents, his two sisters and his brother-in-law.  The total of those advances is RMB585 169 ($128 000).  The husband’s two sisters Ms T and Ms U, his mother Ms W and the brother-in-law Mr V gave evidence to that effect.

3. Mr V and Ms W agreed that they had no documents recording the loans.  Ms U and Ms T said they had copies of records they had made at the time of the advances although there were no formal agreements or, as they said “borrowing notes”.  Ms T said that to require a borrowing note from the husband would be unacceptable because they were brother and sister and not foreigners.  Each of the witnesses maintained their evidence that the payments were loans which were required to be repaid.  Counsel for the wife did not press for the production of the records to which they referred in evidence.

4. Ms T said that some of the funds borrowed were used by her to purchase a car for the husband to use in China which he in turn said was used for the business.  The husband had said that the car had to be purchased in his sister’s name because it was necessary to have a driver’s licence in order to buy a car in China.  Ms T said that was not correct, that one did not need a driver’s licence to purchase a car in China and she had bought the car for the husband because he did not have sufficient funds to buy it and could not borrow the necessary funds.  She also said, contrary to the evidence of the husband, that she and her husband had never borrowed the money for a bond they had to pay. 

5. The evidence of the husband and his relatives that he borrowed money from them for the purposes of the business in China is not inherently improbable.  Two of the witnesses said that they had written notes of the loans – this was not taken up further by the wife.  In the absence of any evidence to the contrary I accept their evidence. The discrepancies just noted do not persuade me that their evidence is unreliable.  Accordingly, I find that the husband did borrow the sum of $128 000 from relatives, did use it for the business and it should be taken into account in the balance sheet as a liability of the parties. 

The sum of $121 000

1. The wife contended that the husband had misappropriated $121 000.

2. The wife gave evidence that in November 2004 she found that two G Pty Ltd cheques had been issued; each in the sum of $30 000.  The cheque butts were blank.  Later in March 2005 she noticed that another cheque had been written on the G Pty Ltd account, this time in the sum of $61 008 and again the butt was blank.  She says that the butts later contained entries of “container” for the first two cheques and “supplies” for the third cheque.  MYOB records for the third cheque contained the entry “China supplies”.  It is not necessary for me to determine the significance of these entries because the wife agreed that $50 000 was returned to Australia twelve months later and that part of the $121 000 was used to buy Chinese Property B.  The evidence does not disclose what happened to the balance, if there was a balance.  This evidence demonstrates that the husband was prepared to remove funds from G Pty Ltd without the knowledge or consent of the wife.  I think that it is more likely than not that after the initial funds for China were taken from G Pty Ltd the later payments from its account were made without the consent of the wife.  Other than for this finding this issue is of little significance.

G Pty Ltd

1. The husband contends that G Pty Ltd was a profitable business and I am asked to infer that its liquidation in December 2012 occurred because of reckless, negligent or wanton conduct by the wife. There was also an assertion that her present business was effectively the re-birthing of G Pty Ltd.

2. The wife effectively became the sole controller of this business from 2008 when the parties separated and the husband went to China.  As can be seen from the background listed above, it had obviously been a successful business for some time because it enabled the parties to purchase significant assets both in Australia and in China and to maintain the borrowings upon them.  Pursuant to an order of this Court, a forensic accountant valued G Pty Ltd in April 2012 as having a value of $368 925.  In doing so the valuer used a future maintainable earnings basis because of the history of consistent profit making.  In coming to that view, the valuer had the accounts of G Pty Ltd from years ending 30 June 2009 to 30 June 2010 plus a profit and loss statement from July 2011 through to December 2011.  The trading income was as follows:

   2008              $731 199.68

   2009              $839 943.53

   2010              $1 301 311.29

   2011              $1 160 586.37

3. Sales for the six month period of July to December 2011 were $477 013.72.  A significant profit was made in each year.  No evidence was adduced before me as to the state of the business from December 2011 until it was wound up on 11 December 2012 save as appears below.  The income for 2011 was less than in 2010. The trading figures for the last six months of 2011 seem to be lower again but care needs to be taken as they are not full year figures and might be affected by seasonal variation, yearly sales patterns or other variations. No evidence was led as to why the trading income was lower in 2011 than in previous years.

4. A statutory demand from the workers compensation insurer of G Pty Ltd was served on 31 August 2012 in the sum of $16 801.52.  The wife said in cross-examination that she disputed the amount of this debt believing it to be about $7 000.  It was put to the wife in cross-examination that she could have paid this debt at any time in November because on 7 November 2012 the balance in the company’s bank account was $25 000 and on 13 November the balance was $43 000.  She replied variously that to her mind the amount correctly owed was always $7 500, that the company owed many creditors that it had to pay, that she had discussed the incorrect amount with the worker’s compensation insurer and that if she paid this bill the company could not operate. 

5. In December the wife travelled to China with the children.  When it was put to her that if she could afford to pay for such a trip she could have paid this debt, she replied that she had bought the tickets for the trip in September and they were the only relevant expense because they stayed with her sister in Chinese Property B. 

6. The husband’s case is quite stark.  It was submitted that the conduct of the wife in not paying the worker’s compensation debt was “akin to burning a house down or removing $368 925 from a bank account.”  In those circumstances he contended that it was appropriate that that sum be added back to the pool of assets in accordance with Kowaliw and Kowaliw (supra) and Townsend and Townsend (1995) FLC 92-569. The husband, quite properly, in my opinion, was very critical of the wife for not adducing any evidence as to the performance of G Pty Ltd since December 2011.

7. The wife countered with the suggestion that I could infer from the reduction in the amount of gross trading as noted above that the company was not faring as well as when it was valued.  The difficulty with this submission is that the financial position of G Pty Ltd during 2012, including its trading performance, was entirely within the wife’s knowledge and she chose not to adduce evidence of it. The trading figures noted above are not, of themselves, capable of supporting an inference that the company was in financial difficulty in 2012. Indeed, the booking of tickets in September for travel to China in December would tend to point in the opposite direction and indicate that G Pty Ltd could afford to purchase them.

8. Also, according to the wife, her initial response to the statutory demand was to query its amount not to query whether the company was in a position to pay it.

9. Finally, in support of the wife’s assertion that the company could not pay its debts she relied on a document headed “Creditor Listing by Claim: [G Pty Ltd] (In Liquidation)” said by the wife to have been received by her as attached to the Notice of Liquidator Appointment.  Whilst that may be so, it is obviously not a document that was created at the same time as the notice.  There are two reasons for this.

1. Firstly, I infer from the form of the document itself that it was produced by the liquidator.  This is not only because of the heading but also because it contains several columns, the first of which is headed “Unsecured Creditors” and has a list of unsecured trade creditors underneath followed by a column of creditors.  Remaining columns across the page are headed “RATA, Advised, Claimed, Admitted, Rejected, Under Consideration, Distributed, Remaining, Control Value”.  If it was produced by the liquidator, it was obviously produced after the appointment and after he received the Notice advising him of it. 

2. Secondly, the document bears a date on the bottom left hand corner of 4 January 2014.  The liquidator was appointed on 11 December 2012.

3. Under the heading “Advised” appear seven creditors totalling $85 070.55.  The husband for the winding up order is noted as having a debt of $5 938.60 and to the Australian Taxation Office a debt of $76 349.88.  If they are the creditors of G Pty Ltd then there is some force in the wife’s evidence that throughout November she did not have the cash available to pay all the creditors in full. 

4. Finally, the husband relies upon the wife’s commencement of the new business, her failure to disclose that new business either before the trial or in her evidence-in-chief, her initial reluctance in cross examination to agree there was a business operating or to provide the details of it in support of the submission that her new business is effectively carrying on the business of G Pty Ltd but now for her benefit solely.  I gather from his submissions that the point really sought to be agitated is that the wife’s new business will spring into the same position as G Pty Ltd so that what would otherwise have remained in G Pty Ltd will now be solely available  to the wife. 

5. This was not put in terms to the wife.  It was not suggested that the new company was a ‘phoenix company’ or a rebirthing of the old company to the wife’s benefit and the husband’s detriment.  As the evidence stands, I am not prepared to find that the wife engaged on a course of deliberate conduct in not defending the winding up proceedings and setting up a new business to carry out the business of the old that was designed to reduce or minimise the worth of matrimonial assets.  There is simply insufficient evidence to do so.

6. The issue then is whether the wife acted recklessly, negligently or wantonly in relation to matrimonial assets in failing to pay the amount under the statutory demand or otherwise deal with the winding up application.  I have some disquiet about this, given her failure to adduce any evidence as to the financial position of G Pty Ltd throughout 2012.  Further, she gave some evidence that since the separation she had managed to acquire a significant new customer, namely X Company at a considerable cost caused by travel expenses. She did not say what her reasons were for not paying the worker’s compensation insurer’s debt other than what was revealed in cross examination and to which I have previously referred.

7. The accounts of G Pty Ltd show that in 2010 and 2011 directors’ loans (i.e. to the husband and the wife) which ultimately totalled some $79 000 were made.  These funds were received solely by the wife and used by her principally to pay legal fees in relation to this property dispute with the husband and to make mortgage repayments.  As can be seen from the above list of properties, these mortgage payments were considerable.  In addition, between October 2009 and March 2010, the wife spent at least $89 826.65 on landscaping, installing a water tank, fences and a driveway on the Suburb S property because the council had refused to provide a final occupation certificate until they were completed.  It was the wife’s evidence that she last paid the mortgage on Suburb S in November 2012 and it is now three months in arrears and that, although she has paid her car lease for December, she has not paid the January payment and does not know from where the funds to pay it will come. 

8. In 2007 the wife opened another bank account in the name of G Pty Ltd or O Pty Ltd (it is not clear to me on the evidence which it was) but that account was solely under her control.  From that date all of the income from G Pty Ltd has been paid into that account and, notwithstanding the liquidation of the company in December, the wife has been using the funds in that account to pay business and private expenses including the mortgages and car lease in January. 

9. At the conclusion of addresses I ordered that the liquidator be given notice of these proceedings and gave the liquidator 14 days to make an application to the Court to be heard if he so chose. The liquidator was so notified by the husband’s solicitors.  No such application was made.

10. A finding that a party has engaged in conduct in relation to the property of the parties that is reckless, negligent or wanton must, of course, be based on the evidence and the inferences that can be drawn from it.  The evidence on this point was sparse. I have concluded that the evidence in this case does not, on the balance of probabilities, establish that the conduct of the wife in not paying the worker’s compensation debt or defending the winding up application fell into any of those categories.  Payment of the mortgages was no doubt a significant burden upon the finances of the company.  The company was further burdened by the payment of the expenses for the completion of the Suburb S property and the borrowings from the company for legal fees and the payment of mortgages.  At least up until the end of December 2011 its gross sales were reducing.  The company did not have sufficient funds in its bank account in November 2013 to pay all of the debts listed in the document produced by the liquidator as discussed earlier.

11. I find that it is as likely that the company simply became overburdened by debt as it is that the wife acted negligently or recklessly in not taking steps to pay the worker’s compensation insurance that led to the demise of the company.  In coming to this view, I have taken into account the unexplained failure of the wife to adduce evidence of the financial position of G Pty Ltd in 2012 and weighed it against the factors just mentioned.  I infer from that failure, that evidence of the financial position of G Pty Ltd would not assist the wife thus making the making of an adverse finding on the evidence easier to draw. The failure of the wife to adduce evidence of the financial position of G Pty Ltd is not evidence that the financial position of the company remained strong.

12. In those circumstances, I do not find that conduct was such that requires it to be taken into account either as an “add back” or as a s 90SF(3)(r) factor. As with the attempts to establish a business in China this business failed in circumstances where it is appropriate that the loss be borne by the parties and not apportioned to one of them.

13. There was no evidence to the likely fate of the liquidation of the company’s assets and liabilities.  I am not prepared to put a value on them and will not take G Pty Ltd into account as an asset in the balance sheet.  If there is, ultimately, distribution I will make an order that it be between the parties in the proportion of determining the overall property interests which are to be altered.

Applicable Principles

1. According to guidelines established through a series of leading decisions, the Court is required to determine the following matters:

   ·having regard to the breakdown of the marriage, if any, whether it is just and equitable to consider the alteration of the parties interests in their property;

   ·the assets, liabilities and financial resources of the parties to the marriage;

   ·all relevant contributions of each of the parties, within the meaning of paragraphs (a) to (c) of section 79(4) must be identified and weighed against each other;

   ·the matters in paragraphs (d) to (g) of section 79(4), particularly paragraph (e) which takes up by reference the provisions of section 75(2) and which must be considered along with a determination made as to what, if any, alteration should be made to the entitlements of the parties earlier assessed on account of contribution;

   ·an order under section 79 must not be made unless the Court is satisfied that, in all the circumstances, it is just and equitable to make the order.

2. I include in the balance sheet the husband’s vehicle at the value given by him in his balance sheet.  I have also added back the surplus received by the parties from the sale of the Suburb K property.  I have included no figure for the value of the wife’s Lexus motor vehicle as it was agreed that its value approximately equalled the amount outstanding on the lease.

3. There being no dispute as to the items in the balance sheet other than those discussed above, I find the balance sheet at the date of hearing to be:

BALANCE SHEET
Assets	Joint	Husband	Wife
D Street, Suburb S	1,950,000
E Street, Suburb F	900,000
Toyota Camry	7,000
Chinese Property B	83,000
Chinese Property C	400,000
Total	3,333,000	7,000
Add Back	Joint	Husband	Wife
Suburb K	35,000	35,000
Total	3,333,000	42,000	35,000
Assets
Total assets  $3,410,000
Liabilities	Joint	Husband	Wife
D Street, Suburb F	876,000
E Street, Suburb F	500,000
Husband’s family	128,000
Liabilities	1,376,000	128,000
Total Liabilities	1,504,000

Husband’s superannuation	47,050
Wife’s superannuation	23,270
Total superannuation	$70,320
Total Assets	$3,480,320
Less Total Liabilities	$1,504,000
Net Assets	$1,976,320

Sub-section 90SM(3) of the Act

1. I must first determine whether it is just and equitable that there be an alteration in the property rights of the parties. This must be done by consideration of the relationship, its breakdown, if any, the property held by the parties and the basis on which it was held and used by them. The determination is not to be conflated with the consideration of matters arising under section 90SM(4). [1]

   [1] Stanford v Stanford [2012] HCA 52

2. In the present case I am satisfied that it is just and equitable to make orders altering the interests of the parties to the property held by them.  They are no longer living in a relationship.  The basis on which the ownership of their property and the use of it by reason of them being in a relationship and living together has ended and it is appropriate that their property interests are altered so as to meet their new needs and circumstances. The parties join in seeking such an order.

Sub-section 90SM(4)(a)(b)(c) and (d) of the Act

Contributions

1. At the time cohabitation commenced there was no suggestion that either of the parties had any significant assets.  There is no doubt that thereafter both parties worked very long and hard.  When the business commenced in 1995 neither party suggested it was anything other than a partnership with the proceeds of the business being used for the benefit of their family.  Both parties submitted that their financial contributions up to the time of separation were equal and I so find. 

2. The wife has had the management and control of the business of G Pty Ltd since separation and has applied the proceeds of that company to pay for the improvements to the Suburb S property and to maintain the mortgages.  I find that she has made a greater financial contribution overall than the husband for that reason. 

Non-Financial Contributions

1. As I have said, both parties worked hard in the business.  The husband worked most weekends but the wife did not.  On the other hand, she had the care of the two children which was primarily in her hands.  On many occasions the wife would collect the children from school and they would sleep at the factory so the parties could continue to work late into the night.  I find that their non-financial contributions to the welfare of the family up to separation are equal. 

2. Again, after separation the burden has fallen on the wife almost solely and I find that she has made a greater non-financial contribution for that reason. 

Contributions to the welfare of the family

1. Both parents have worked hard for the benefit of the children.  Since separation the wife has been primarily responsible for the welfare of the children with the husband seeing them only on a few occasions.  They still live with their mother. The husband has not paid any significant amount for the support of his children since separation and currently has the sum of $7 908 outstanding as unpaid child support.

2. Counsel for the husband properly conceded that the wife’s post-separation contribution of maintaining the business and the family post separation was greater than that of the husband.  She also had the benefit of the business, the payment of legal fees and overseas travel expenses on three occasions in 2012 and had the occupation of the family home.  Taking all these factors into account, I find the contribution by the parties to the property held by them is 52.5 percent to the wife and 47.5 percent to the husband.

Sub-section 90SF(3) Factors

1. Both parties are still of working age and are in good health.  The husband works as a driver, although not full-time and he said his work was regular.  There is no reason why that should not continue for some time. 

2. The wife has commenced a new business almost identical to that carried on by G Pty Ltd.  It is in its very early days and it is impossible to see whether it will succeed or not.  I cannot assume that it will shortly, or at any time, return the profit that G Pty Ltd did.  It has only just commenced business and whether or not it will be successful is speculation.  If the business fails she will have to resort to her skills as tradesperson.  Nevertheless, the orders that I propose will not have any effect on the ability of either party to earn income.  The wife has a present obligation to support the child going to school and currently has both children living with her.  The husband has made no significant child support payments. 

3. The husband now lives with a new partner and her daughter. He pays $240 per week as a contribution to rent and seemingly no other outgoings. The costs to him of his accommodation and support are therefore modest.

4. In my opinion, there should be an adjustment of 2.5 percent in favour of the wife taking into account these matters.

5. As discussed earlier, I do not propose to take into account as a factor under s 90SF(3)(r) the conduct of the husband or of the wife, said by each of them to have reduced the value of the assets held by the parties.

6. The wife contends that the document signed by the parties on 14 June 2009, referred to previously, is an admission by the husband that a division of the property as to 65 percent to the wife is appropriate.  I do not accept that I should give that document any weight in determining what is an appropriate division of property.  The husband was not given warning of the meeting and did not have the opportunity to obtain any legal advice or time for consideration.  Indeed, he has disavowed it.  Further, the fact that a person may agree to settle proceedings on a certain basis is not necessarily an admission by them that such a settlement is appropriate.  For example, acquisition of a particular property could be more important to a person than the overall percentage distribution.  In any event, the agreement was not honoured by the parties.  The document provided that the Suburb K property was to have been retained by the husband.  In fact it was subsequently sold and the parties divided the proceeds equally between them.

7. An appropriate division of the property as determined by me, therefore, is 55 percent of the property to the wife and 45 percent to the husband. 

Form of Orders

1. The loan accounts of G Pty Ltd show that the parties are liable to G Pty Ltd in the sum of $79 191.20.  As that company is now in liquidation, it is not appropriate to take this figure into account in the division of the property between the parties as no value for the company is being taken into account.  However, it is possible that the liquidator of G Pty Ltd may take proceedings against the parties to recover that loan.  The evidence of the wife was that she used this sum for payment of legal expenses and some mortgage repayments.  No further detail was given as to what portion was spent on each of those items.  In those circumstances, since the loan was entirely for her benefit, it is appropriate, in my opinion, for there to be an order that the wife indemnify the husband against any claim the liquidator might make against him pursuant to that loan account.

2. No evidence has been given as to whether or not the liquidation of G Pty Ltd is likely to result in a surplus.  Experience would suggest that a surplus is unlikely where a creditor has applied for the winding up.  Nevertheless, it remains a possibility and as a consequence an order should be made that any surplus be divided in proportion that I have determined the other assets should be divided.

3. Since the commencement of these proceedings the wife paid $3 000 for the valuation of the two China properties, $12 000 for the business valuation of G Pty LTd and $700 for the valuation of the Suburb S and Suburb F properties.  The amount the parties receive from the property settlement should be adjusted so that the costs of those valuations are borne equally. 

4. The property division which I have determined is appropriate is for the husband to retain Chinese Property C and his Camry motor vehicle and for the wife to retain Chinese Property B. She seeks to retain the Suburb S property.  No splitting order was sought by either party in relation to the superannuation assets of either of them, which I have taken into account in the pool, and it is appropriate that each party should retain the benefit of their superannuation.  Each has received the benefit of $35 000 from the sale of the Suburb K property which should be taken into account.

5. Having regard to the above balance sheet, the distribution that I have found is appropriate and assuming that the wife retains the Suburb S property, the husband is entitled to receive 45 percent of the net assets of $1 976 220 namely $889 299.  He will, pursuant to the orders, receive the benefit of Chinese Property C, retain his motor vehicle and superannuation.  He has also already had the benefit of $35 000 distribution from the sale of the Suburb K property.  This leaves a figure of some $400 249 to be paid to him to achieve that property division. 

6. The equity in the Suburb F property is insufficient to pay this sum because costs on sale and capital gains tax will be incurred and will need to be paid.  No evidence was given by the wife as to her ability to refinance using either or both of the Suburb F and Suburb S properties to obtain funds in that amount to pay to the husband.  The fact that the Suburb S mortgage is three months in arrears, that the car lease is about to fall into arrears and that she has just commenced an entirely new business venture lead to the inference that she does not.  In my view, it is therefore necessary that both the Suburb S property and the Suburb F property be sold and the proceeds divided in a manner to give effect to the appropriate division I have determined. 

S 90 SM(1)

1. Taking all of the above matters into account I am satisfied that the orders I propose to make are appropriate, that is to say, just and equitable taking into account of all the matters I have discussed under the headings ss 90 SM(4) and 90 SF (3) of the Act as set out above.  The orders meet the obligation finally to determine the financial relationship between the parties and avoid further proceedings between them.

I certify that the preceding one hundred and eight (108) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Aldridge delivered on 2 May 2013

Associate: 

Date:  1 May 2013