LAVAN & VIEN

[2015] FCCA 576

FEDERAL CIRCUIT COURT OF AUSTRALIA

LAVAN & VIEN [2015] FCCA 576

Catchwords:
FAMILY LAW – Whether husband or wife should have possession of business  ̶  whether husband should retain benefit of unpaid loan  ̶  whether wife had made a greater contribution than husband.

Legislation:

Family Law Act 1975 (Cth), ss.75, 79

Applicant: MS LAVAN

Respondent: MR VIEN

File Number: DGC 655 of 2010

Judgment of: Judge Phipps

Hearing date: 9 September 2014

Date of Last Submission: 9 September 2014

Delivered at: Dandenong

Delivered on: 17 March 2015

REPRESENTATION

Solicitor for the Applicant: Mr Pham

Solicitors for the Respondent: QNP Pham

The Respondent: Appearing on their own behalf

ORDERS

1. The parties have leave to commence these proceedings more than 12 months after the date on which the divorce order came into to affect.

2. That the wife pay to the husband the sum of $47,865 (“the payment”) on or before 19 May 2015 (“the date)”.

3. That contemporaneously with the payment:

   (a)the husband do all such acts and things and sign all such documents as may be required to transfer to the wife at the expense of the wife all his right, title and interest in the real property situated at and known as:

   (i)Property N;

   (ii)Property D.

   (b)the husband do all such acts and things and sign all such documents as may be required to transfer to the wife all shares in his name in [V] Pty Ltd (“the company)” and resign any office he holds as director or secretary of the company and otherwise transfer any interest he has in the company to the wife;

   (c)the wife do all things necessary to refinance the mortgages over Property N and Property D so that the husband has no liability for those mortgages and the wife indemnify the husband against all payments and liability pursuant to those mortgages and all apportionable rates, taxes and outgoings of the two properties of whatsoever nature and kind;

   (d)the husband and the wife do all things necessary to remove the husband as a signatory to any bank account in the name of [V] Pty Ltd;

   (e)the wife indemnify the husband against any liability for amounts due by [V] Pty Ltd.

4. That in the event that the whole of the payment has not been made by the date the husband and the wife do all things necessary to sell the property at Property N and upon completion of the sale, the proceeds of the sale be applied:

   (a)first to pay all costs, commissions and expenses of the sale;

   (b)secondly to discharge the mortgage and any other encumbrances affecting the real property;

   (c)thirdly so much of the payment as is then outstanding together with interest thereon at the rate of 8.5%;

   (d)fourthly the balance to the wife.

5. That in the event that the property at Property N is sold pursuant to paragraph 3, upon completion of the sale and payment to the husband pursuant to paragraph 4(c) paragraphs 3(a)(ii), (b), (c), (d) and (e) apply as at the date the payment is made.

6. That the husband shall vacate the properties at Property N and Property D upon the payment being made and thereafter the wife shall be entitled to sole possession and occupation as against the husband of both properties.

7. That the husband is declared to have the sole interest in the investment or loan of $100,000 with or made to Mr H or [K].

8. That the husband is entitled to possession and ownership of the Motor Vehicle [omitted] and the husband and the wife shall sign all documents and shall do all things necessary to transfer the registration of the said motor vehicle to the husband.

9. That the wife shall indemnify the husband against all payment and liability for loans made to the parties or [V] Pty Ltd by the parties’ daughters [X] and [Y].

10. That unless otherwise specified in these orders and save for the purposes of enforcing any monies due under these or any subsequent orders:

    (a)each party be solely entitled to the exclusion of the other to all superannuation and other property (including choses in action) owned by or in the possession of such party as at the date of these orders (the furniture, personal possessions, and like chattels in the property at Property N being deemed to be in the possession of the wife);

    (b)money standing to the credit of the parties in any joint bank account are to become the property of the wife;

    (c)insurance policies remain the sole property of the owner or beneficiary named therein.

    IT IS NOTED that publication of this judgment under the pseudonym Lavan & Vien is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT DANDENONG

DGC 655 of 2010

MS LAVAN

Applicant

And

MR VIEN

Respondent

REASONS FOR JUDGMENT

Issues and proposals

1. The parties married on [omitted] 1984 and divorced on 17 July 2010. They remain living in the matrimonial home separated under one roof. Both apply for property orders under s.79 of the Family Law Act 1975 (Cth). This application has been commenced more than 12 months after the date the divorce order has taken effect and so the consent of the parties or leave of the court is needed for the proceedings to continue. Both parties consent and apart from that each party would suffer hardship if leave was not granted because without an order of the court they cannot separate their financial relationship.

2. The parties largely agree on the assets comprising their property but only some of the liabilities.  The agreed assets, including superannuation, and liabilities are:

   Assets

   Property N       $ 600,000

   Property D,   $ 980,000

   [V] Pty Ltd   $   10,000

   Motor Vehicle [omitted]                           $   23,000

   Liabilities

   Mortgage Property N   $441,588.40

   Mortgage Property D   $654,681.00

   Superannuation

   Husband   $  82,878

   Wife   $  65,951

3. The wife asserts that these amounts should be added back into the property pool against the husband

   Legal fees   $  10,000

   Personal loan to Mr H       $100,000

   Unknown credit card usage                 $  28,505.79

   plus interest

   Unauthorised transfer to Vietnam            $  10,000

   plus interest

   Unauthorised transfer to Vietnam            $  22,000

   plus interest

   Personal loan   $    5,000

   plus interest.

4. The wife asserts that additional liabilities of [V] Pty Ltd are loans of $205,000 from the parties’ daughter [X] and $60,000 from their daughter [Y].

5. The husband asserts that the wife without his authority transferred a total of $315,852.83 to their daughter [X].  The wife says that an amount of $195,000 was paid back by [X].  The husband says he has no knowledge of this.  The husband says this amount should be added back against the wife.

6. The wife proposes that the property be divided 65% to her and 35% to the husband and this be done by transferring both pieces a real estate and the business to her and the husband paid an amount of money.

7. The husband proposes that there be an equal division of the property.  He proposes transferring the former matrimonial home to the wife.  He proposes transferring the factory premises in Property D to [Y] who upon her paying for it.  [Y] is not a party to the proceedings and so no order can be made that would require her to pay for a transfer of the property.  The husband’s proposal could be achieved by transferring the property to him and he could then transfer it to [Y].  I will treat his proposal as a proposal that the factory premises be transferred to him.  He proposes that the business be transferred to him.

8. The issues about what constitutes the property pool requires a consideration of the history of the parties relationship and acquisition of property.

History

1. Both parties were born in Vietnam.  They met in a refugee camp in Thailand and married there on [omitted] 1984.  Their first daughter [X] was born at the refugee camp on [omitted] 1985.  They arrived in Australia with other members of the wife’s family on 13 January 1986.  They lived in [suburb omitted].

2. Both husband and wife started work [in regional Victoria] leaving [X] in the wife’s parent’s care.  After two months they returned to Melbourne and both worked.  Their second child, [Y] was born on [omitted] 1987.  The wife returned to work two months after her birth and her parents cared for [Y].  The parties purchased a house at Property U, the house being purchased in the name of the wife and her younger sister who, according to the wife, deposited 50% of the total value of the house.

3. In 1988 the parties bought a [business] in [omitted] for $38,000.  They used their house at Property U as security for the loan.  The wife says that both she and the husband worked long hours often from 7.00am until midnight, seven days a week and travelled to and from work in the same vehicle.  After two years they sold the business for $65,000.

4. The parties then learnt skills in the [omitted] trade and withdrew their share in the house at Property U to have the necessary funds to set up [business omitted] at the end of 1989 in [M].  Initially they left their daughters with the wife’s parents and worked long hours living temporally at the rear of the [business].  When Ms K reached school age the two children came to live with the parties in [M].  Eventually the parties purchased a house at [address omitted], [M].

5. [Z] was born on [omitted] 1995.  Shortly after that the parties closed the [business] in [M] and moved the business to [omitted].  In 1997 they bought land at Property N and completed construction of a house in 1999 which has remained their residence.

6. The parties sold [business omitted] for $145,000 in 2000.  At the end of 2000 they purchased a [omitted] business, for $450,000 then located in [omitted].  In 2003 they purchased the property at Property D, using their residence and the wife’s younger sister’s property as security.

7. On 11 September 2003 [V] Pty Ltd commenced business in the Property D premises.  The wholesale business formally conducted by [omitted] continued under the new name.  The business included a retail shop at the front of the premises.  The business went well [omitted].

8. The wife estimates that from 2003 to 2006 the business earned on average about $5,000 in profits per week.  From 2006 she says it started to experience problems.  She says it was a combination of increased competition and the husband’s behaviour.  The husband alleges that the wife was falsifying accounts in order to justify the amount of money owed by the business.  This issue is discussed later in these reasons. 

9. The retail business closed in 2007.  The wife says this was because they could not find a good [occupation omitted].  She says the premises could have been leased but the husband would not agree.  The husband disputes this was so.

10. When the parties’ child [X] purchased a residence in October 2011 the wife withdrew two amounts, $156,852.83 and $159,000, a total of $315,852.83, from the business bank accounts to help with the purchase. [X] later returned $195,000 and the wife paid that back into the business account.

11. [X] gave evidence.  She said that the balance remaining after she had repaid the $195,000, $120,852.83, was payment to her for all the unpaid work she had done in the business.  She commenced while she was in her teenage years and did office and bookkeeping work and worked in the factory if that was necessary.  She continued while she was in University.  The wife accepts that the $120,852.83 was payment for work done.  The husband does not.  The amount of time [X] worked in the business was not calculated and probably cannot be.  It extended over a period of many years and included periods of full-time work.  I accept that the wife considers that it was a payment to the parties’ daughter for her work in the business.

12. The husband asserts that the wife withdrew the money from the business without his knowledge.  I accept the evidence of the wife and [X] about the use to which the money was put and the return of money by [X].  If the balance of $120,852.83 was not payment for work done it was a loan.  The husband is not asserting that there should be any attempt to recover it from the parties’ daughter.  He claims that it was an unauthorised withdrawal by the wife and it should be added back against the wife.  The wife does not have the money.  It was not a premature withdrawal of capital.  Neither party proposes that it be treated as an asset recoverable from the daughter.  It was not waste, it was not an extravagant payment; the parties’ daughter received good value for the money when she used it to assist her in purchasing a residence.  There is no ground for adding the money back against the wife.

13. The husband concedes that he paid $10,000 in legal fees to Asia Pacific Lawyers.  These must be added back into the property pool against the husband.  The wife’s evidence is that she has borrowed money to pay for legal expenses and not used any of the parties’ money.  I accept what she says.

14. The husband paid $100,000 to a business [K] which he describes as a company specialising in property development.  The company is owned or controlled by Mr H, a friend or at least acquaintance of the husband.  The husband says that he verbally advised the wife that the amount would be used as an investment in [K] and that he wrote the cheque in her presence.  The wife says she did not know of the investment until after the payment was made, but even on the husband’s evidence he does not assert that the wife agreed to or approved of the investment. 

15. The husband’s evidence does not make it clear whether the money was an investment or a loan.  The husband says in his one affidavit that he is currently waiting for [K] to return the amount to the business.  He says the chance of receiving the amount is fairly low as [K] is not doing very well.

16. Another of the wife’s claims that there should be money added back against the husband is for an amount of $28,505.79.  He says that the money was lent to Mr H and was paid back.  The wife does not accept that it was paid back.  Whether it was or not the husband had a continuing business transaction with Mr H.

17. The husband gives no detail of the investment with [K].  Nor does it give any detail of why it is unlikely that the money will be paid back. Mr H was not called to give evidence.  No explanation was given why he was not.  If he was a witness he would be the husband’s witness.  The husband gives no explanation of why he was not called.  The husband was represented by lawyers at one point in the proceeding but was not at the hearing.  This is no impediment to the usual implication that Mr H would not have given evidence favourable to the husband’s cause if called.  The husband could have given evidence why the money paid to [K] was unlikely to be repaid.  He said that money subsequently lent to Mr H was repaid. The husband referred to it being a property investment but gave no detail of what that evidence was.

18. I am entitled to and do draw the inference from all the evidence that either the husband has a profitable or potentially profitable investment with [K] or Mr H or that he has a loan which will be repaid. I consider the appropriate way of dealing with the $100,000 is to treat it as an asset which should be credited to the husband in the orders I make. This can either be done by treating it as a matter to be taken into account under s.75(2)(o) or as a just and equitable way of putting into effect the conclusions I have reached after I take into account the considerations under s.79 (4).

19. The other matters the wife alleges against the husband are the unknown credit card usage of $28,505.79 already referred to, unauthorised transfers to Vietnam of $10,000 and $22,000 and a personal loan $5000.  The husband says that the $28,505.79 was paid back and denies any unauthorised transfers or loans.  Even if they did happen as the wife alleges they are not such large amounts that they should be added back into the property pool.

20. The wife and the party’s children [X] and [Y] say that both lent money to the business when it was in financial difficulties. [X] lent $205,000 and [Y] $60,000.  The husband does not accept that they did.  Both children have filed affidavits.  The husband cross-examined [X] but did not wish to cross-examine [Y].  Bank records relevant to the amounts lent were produced and put into evidence.  I accept that those amounts were lent by the parties’ daughters.

21. The parties agree that the value of the business is $10,000.  The valuation by [omitted] Property describes it as nominal and says that it excludes goodwill and plant and equipment.  Under general comments the valuation says:

    As the business has no good will value, its only value lies in its Client Base and its tangible assets either-in their Existing Use Value to the proprietors of the business, if one of the existing proprietors wishes to continue operating the existing business, or if another proprietor can be found to carry on the existing business and on the basis of those assets being continuing assets to the business, or-in their Realization Value or sale of an individual item basis.

22. The valuation then notes that the Balance Sheet at 30 June 2014 shows tangible assets to be:

    Property improvements                    $126,627

    Plant and Equipment to   $  62,500

    Motor vehicles   $  56,895

    Furniture and Fittings   $    9,555

23. The valuation then notes that these are written down values and neither existing use values nor market or realisation values.  The property improvements will be part of the building and so not separately realisable.  The parties have dealt with motor vehicle separately and so it is only plant and equipment and furniture and fittings.  There is no evidence of existing use values or market or realisation values.  The parties have approached the case on the basis that the business is valued at $10,000 and have not sought to include any additional amount for goodwill or plant and equipment.  Therefore I must approach the decision on the basis of the business is valued at $10,000.

Assets and liabilities

1. The assets and liabilities are:

   Assets

   Property N   $600,000

   Property D   $980,000

   [V] Pty Ltd   $  10,000

   Motor Vehicle BMW [omitted]                   $  23,000

   [K] Mr H loan   $100,000

   Legal costs husband $10,000

   Total   $1,723,000

   Liabilities

   Mortgage Property N   $441,588.40

   Mortgage Property D   $654,681

   [X] loan   $205,000

   [Y] loan   $  60,000

   Total   $1,361,269.40

   Net assets   $   361,730.60

   Superannuation

   Husband   $  82,878

   Wife   $   65,951

2. Neither party applies for a splitting order for superannuation.  The amounts for each party are, in terms of superannuation, relatively low and close together and so they can be ignored.

Contributions

1. The wife asserts that because she made a greater contribution to the parties’ various businesses and to the care of the children that she should receive a greater proportion of the assets.  The history described above show that both parties worked very hard initially as employees and then in the various businesses that the parties owned.  Since the parties’ relationship deteriorated each makes allegations against the other about the conduct of the business.  The business has not been profitable in recent years.  The husband says it should have been and makes a vague allegation that the wife must have been taking money.  The wife asserts that the husband has been taking money.  Plainly there is distrust between the parties.

2. Each party drew a weekly salary of $500 less tax from the business.  The wife says that she used her salary for the care of the family while the husband spent his on himself.  She says that he spent $200,000 in travelling expenses to Vietnam, buying gifts for himself (and others) and giving money to his relatives and friends in Vietnam.  She says that some spending she allowed him because otherwise he would scream and shout that he was entitled to it.  She says that he purchased extravagant gifts from himself, the one example he gives that in 2008 he purchased a BMW 2006 model 325 Sport for about $65,000 as a company car for himself to drive

1. She makes two allegations about lack of action by the husband which prejudiced their finances.  The first is that in 2007, after the retail shop closed because they could not find a good [omitted], many people were interested in leasing the shop but the husband would not agree.  She says there were additional premises next to the [omitted] shop which could also have been leased but the husband would not agree to that.  She estimates the shop would have a yield of at least $1,200 per week and the building at least $500 per week.

2. The husband disputes his refusal to agree to leases.  What seems to have occurred is that this is part of the deadlock between the parties because their relationship had broken down.  The evidence is allegation and counter allegation and I cannot draw any conclusions which affects contributions.

3. The other allegation is that the husband refused to agree to a refinancing of the business when offered by BankWest.  She says the offer was to reduce the interest rate from around 7.3% to 4.84%.  She says the husband refused to sign the documents.  Again this, if it happened, is a consequence of the breakdown in the parties relationship and I cannot draw any conclusions which affects contributions.

4. The best that I can conclude from the evidence is that each contributed equally to the business and the welfare of the family.

5. The wife’s parents cared for the parties’ children for considerable periods but this cannot be taken into account s.79(4)(c) refers to contributions by the parties to the role of homemaker and carer of the children whereas s.79(4)(b) & (c) refers to financial and non-financial contributions made by or on behalf of the party. The role of the grandparents cannot be taken into account. My conclusion is that the parties’ contributions were equal.

Section 75 (2)

1. The parties are both dependent on the business for their incomes. The wife was born on [omitted] 1959 and is aged 56. The husband was born on [omitted] 1956 and is aged 58. The wife has had some ill-health and hospitalisation but continues to work in the business as does the husband. The business has not been profitable, to an extent which is unquantifiable because of the deterioration in the relationship between the parties. If the business cannot continue each will have to find alternative means of income. The business will have to become the property of the one party only because the parties cannot continue to cooperate to run it. For reasons I give later I have determined that it should become the property of the wife. The parties various businesses have depended upon their combined efforts. Given the current state of the business and the fact that the wife will have to operate it on her own and employ a person or persons to do the work currently done by the husband I cannot conclude that she, as owner of the business, will be in a better financial position than the husband. Consequently, I consider that no adjustment should be made under s.75(2).

Just and equitable

1. For reasons I have already given I consider that I should conclude that the investment or debt with [K] or Mr H is recoverable and that it will be recovered.  I also conclude that the husband is capable of recovering it because of his friendship or association with Mr H and that the wife cannot.  For these reasons it is just and equitable to treat $100,000 as an asset that should become the property of the husband.

2. The business owes a total of $165,000 to the parties’ daughters.  The husband does not acknowledge this but the wife does.  The daughters will not call in the money unless they are satisfied that the business can pay them.  The mother and her daughters will be able to negotiate this.  I am satisfied that the father and his daughters will not.  The debt to the daughters is $165,000 whereas the business is worth only $10,000.  If the business is to have any hope of survival it depends on the goodwill of the daughters and that will only be there if the mother is the owner of the business.

3. The husband acknowledges that the wife managed the business finances.  The circumstances surrounding the loans by the parties’ daughters confirm this.  The wife knew that the daughters had lent $165,000.  The bank entries show that this is the case.  The husband’s description of his involvement of the business shows that much of his time was spent in deliveries and when not delivering he was helping with the preparation of orders.  The wife was involved with the office work.

4. If I was to conclude that the husband should become the owner of the business I would consider it just and equitable to order that the $165,000 loan by the daughters be repaid.  In practical terms this would have to mean sale of property.  If I ordered that the business be transferred to the wife, repayment of $205,000 by [X] and $60,000 by [Y] be the responsibility of the wife that is a just and equitable way of dealing with those debts.

5. For these reasons the just and equitable way to put into effect the conclusions I have reached on contributions and adjustments is to order that the business and the premises on which it is conducted become the property of the wife.

6. The husband has accepted that the residential premises should be the property of the wife.  This was accompanied by his proposal that the business premises be transferred to their daughter [Y] upon her paying the purchase price for it.  The residential premises must become the property of one or other of the parties.  Given that the husband, admittedly conditionally, has accepted that it should go to the wife the just and equitable conclusion is that that is what should occur.  The wife must make the necessary payment to the husband and pending that she should have sole occupation of the residential premises.

7. Each party receives 50% of the net assets of $361,730.60, that is $180,865.30.  The husband will receive the benefit of the $100,000 loan investment with [K] or Mr H and his BMW motor vehicle valued at $23,000.  The $10,000 he paid for legal expenses from the business will be credited to him.  Consequently, the payment to the husband is $180,865.30 less $133,000, that is $47,865.

I certify that the preceding forty eight (48) paragraphs are a true copy of the reasons for judgment of Judge Phipps

Date:  17 March 2015