Lynch and Kershaw and Ors
[2015] FCCA 2712
•13 October 2015
FEDERAL CIRCUIT COURT OF AUSTRALIA
| LYNCH & KERSHAW & ORS | [2015] FCCA 2712 |
| Catchwords: FAMILY LAW – Property – where the pool cannot be determined because the husband frustrated all attempts to value his businesses – where after asserting at trial that the businesses were worth nothing the husband in his written submission asked the court to accept that they were worth $310,000.00 – where eight months after separation the husband’s new partner purchased a property using $100,000.00 allegedly belonging to her together with a loan – where the evidence establishes that the husband transferred the $100,000.00 to his new partner from the businesses in a covert fashion – where that real property has since been sold and another real property purchased in the partner’s name – where the court is satisfied that the husband covertly transferred other funds to his new partner – how to do justice and equity to the wife – whether and if so how property in the new partner’s name can be brought into account. |
| Legislation: Family Law Act 1975 (Cth), ss.75, 78, 79, 90AE, 90AK, 106B |
| B Pty Ltd and Ors & K and Anor (2008) FLC 93-380 Hearn & Hearn [2015] FamCAFC 178 Robb & Robb (1995) FLC 92-555 Weir & Weir (1992) 16 FamLR 154 |
| Applicant: | MS LYNCH |
| First Respondent: | MR KERSHAW |
| Second Respondent: | MR B KERSHAW |
| Third Respondent: | MS KERSHAW |
| File Number: | NCC 943 of 2011 |
| Judgment of: | Judge Terry |
| Hearing dates: | 22, 23 & 24 April, 14 & 15 July & 4 September 2014 |
| Date of Last Submission: | 3 December 2014 |
| Delivered at: | Newcastle |
| Delivered on: | 13 October 2015 |
REPRESENTATION
| Counsel for the Applicant: | Mr Boyd |
| Solicitors for the Applicant: | Kilpatrick Hatton |
| Counsel for the First & Second Respondent: | Mr Bates |
| Solicitors for the First & Second Respondent: | Schofield Muir Lawyers |
| Counsel for the Third Respondent: | Mr Levick |
| Solicitors for the Third Respondent: | Mullane & Lindsay |
ORDERS
Pursuant to s.78 of the Family Law Act 1975 it is declared that the third respondent Ms Kershaw holds her interest in Property J2 on trust for the husband.
The money held in trust by Kilpatrick Hatton from the sale of Property B shall be the property of the wife and the husband and wife shall sign all documents and do all acts and things required to authorise Kilpatrick Hatton to pay this money to the wife.
The husband shall within 42 days of the date of these orders pay to the wife the sum of $262,173.00.
Until payment by the husband of the amount required by Order (3) together with any interest thereon (if applicable) the husband is restrained and an injunction is granted restraining him from selling, further encumbering or otherwise disposing of his interest in:
(a)Kershaw t/as (business omitted);
(b)(business omitted) (omitted);
(c)(business omitted) (omitted);
(d)(business omitted) (omitted);
(e)(business omitted) (omitted);
(f)(business omitted) (omitted).
Until payment of the amount referred to in Order (3) together with any interest thereon (if applicable) the third respondent is restrained and an injunction is granted restraining her from selling, further encumbering or otherwise disposing of Property J2.
If the husband fails to pay the amount required by Order (3) then:
(i)the property known as Property J2 shall be sold;
(ii)the wife is appointed trustee for sale of the property and shall do all acts and things required to sell the property;
(iii)the husband and the third respondent shall vacate the property no later than 56 days from the date of these orders;
(iv)until completion of the sale the husband and the third respondent shall be responsible for the repayments in respect of the loan secured on the property by mortgage in favour of the (omitted) Bank and the outgoings for the property as fall due;
(v)the third respondent shall upon being requested by the wife to do so sign all documents required to effect the sale of the property and procure the discharge of the mortgage registered over the property;
(vi)the proceeds of sale shall be utilised:
a)to pay the costs commissions and expenses of sale;
b)to pay the amount required to discharge Mortgage No. (omitted) registered over the property in favour of the (omitted) Bank;
c)to pay the wife $262,173.00 plus interest at the rate prescribed in the Family Law Rules from the expiration of the time for payment referred to in Order (3) until the date of payment;
d)to pay the balance as the husband or the third respondent may direct.
Any amount which remains due and owing by the husband to the wife after the completion of the sale of Property J2 shall until payment bear interest at the rate prescribed in the Family Law Rules.
The wife is declared the owner to the exclusion of the husband of the Holden (omitted) and the husband shall sign all documents required to transfer to the wife at the expense of the wife any interest he may have in the vehicle.
Subject to any other orders the husband and wife are each otherwise declared the owner of all assets and superannuation in their possession, under their control or registered in their name.
Pursuant to s.106A of the Family Law Act in the event that either party fails, neglects or refuses to execute any deed, instrument or document to give validity and effect to these orders a Registrar of the Federal Circuit Court at Newcastle is appointed to execute any such deed, instrument or document in the name of the party who defaults and to do all things necessary to give validity to the operation of the deed, instrument or document.
IT IS NOTED that publication of this judgment under the pseudonym Lynch & Kershaw & Ors is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT NEWCASTLE |
NCC 943 of 2011
| MS LYNCH |
Applicant
And
| MR KERSHAW |
First Respondent
MR B KERSHAW
Second Respondent
MS KERSHAW
Third Respondent
REASONS FOR JUDGMENT
Introduction
Ms Lynch and Mr Kershaw separated in June 2009 after a 14 year relationship/marriage. They both seek property settlement orders but there is a vast difference in their assertions about the value of the pool and therefore in the orders they seek.
Part of the pool is agreed. That part is worth $453,584.00 and consists of non-superannuation assets worth $322,423.00[1] (mainly the equity in a home unit in which the wife resides and the net proceeds of sale of another property which is held in trust) and superannuation worth $131,161.00.
[1] This differs slightly from the position asserted by the husband and wife at trial and I will explain later in the judgment how I have arrived at these figures.
The matters which are not agreed are firstly the value of the husband’s businesses and secondly whether assets in the name of the husband’s new wife Ms Kershaw should be included in the pool. Depending on the decision about these matters the pool is worth in its entirety between $763,584.00 and $1.42m.
An accountant was appointed to value the businesses in 2011 but in 2013 he declared himself unable to arrive at a value. I am satisfied that the accountant was unable to complete the valuation because the husband failed to provide all the information requested of him and because the records he did provide were unreliable.
The wife’s counsel asked me to place the businesses in the pool at a value of $645,425.00. The husband, after asserting throughout the trial that the businesses were worth nothing, in written submissions asked me to place them in the pool at a value of $310,000.00.
An issue for me is whether it is possible to form any view about the value of the businesses.
Ms Kershaw had net assets of $353,000.00 at the time of trial and it was the wife’s case that $320,287.00 of these assets should be included in the pool because they derived from funds covertly transferred to her by the husband.
The husband denied any covert transfer of funds but submitted that even if this was established Ms Kershaw’s assets could not and should not be included in the pool.
For reasons which I will give later I am satisfied that there was a significant covert transfer of funds. $100,000.00 was transferred from the businesses to Ms Kershaw in the first seven months after separation which she used together with a bank loan to purchase a property at Property F and further funds were covertly transferred to her subsequently.
I will nevertheless need to carefully consider the husband’s argument that there is no legal basis for including any of Ms Kershaw’s assets in the pool available for distribution between the parties.
On the wife’s case the pool is worth $1.42m. She submitted that she should receive 55% of this on the basis of contributions and that there should be no adjustment for s.75(2) matters. This would entitle her to about $784,000.00 which in turn would allow her to retain the unit in which she is living together with the money in trust and her superannuation and other small items and would require the husband to pay her $405,000.00.
The wife sought an order that if the husband failed to pay this amount then the unit in Ms Kershaw’s name should be sold. As there is equity of only $262,173.00 in this unit the wife would under this proposal need to also have recourse to the businesses.
On the husband’s case the pool is worth $763,584.00.
The husband submitted that the parties’ superannuation, which is nearly equal in amount, should be left as it was and that the remaining pool of $632,413.00 should be divided 57.5% to him and 42.5% to the wife. He submitted that he should be assessed as having contributed more because he received an inheritance not long before separation and that he should receive an adjustment for s.75(2) matters because he was 16 years older than the wife and approaching retirement age.
The husband submitted that the effect of this would be that the wife could retain her unit and the money in trust subject to making a payment of $36,855.00 to him.[2] The businesses would remain with him and Ms Kershaw’s assets would remain untouched.
[2] The husband’s preferred position even during final submissions was that the wife be required to transfer ownership of the unit in which she has been living for the last five years to him in exchange for a cash payment. However he implicitly conceded during final submissions that the court was unlikely to make such an order.
Ms Kershaw took an active part in the proceedings. She denied that the $100,000.00 which appeared in her bank accounts in 2009 and early 2010 came from the husband (which I do not accept) and denied any other covert transfer of funds (which I also do not accept) but her counsel submitted that even if the court did not accept these denials nevertheless for a variety of reasons it could not and should not add Ms Kershaw’s assets to the pool available for division between the husband and wife or make an order for the sale of real property in Ms Kershaw’s name.
The husband’s son Mr B Kershaw was joined as a party after the husband gave him an interest in one of his companies. Mr B Kershaw filed documents after he was joined but although he was nominally represented by the husband’s counsel at trial he did not take any further part in the proceedings and no orders were sought against him.
The evidence
The wife relied on her 2nd amended initiating application, affidavit and financial statement filed on 3 April 2014 and the affidavits of her son Mr N filed on 24 October 2014 and her friends Mr W and Ms K filed on 30 October 2013.
The husband relied on his amended response, affidavit and financial statement filed on 4 April 2014 and a proof of evidence which is Exhibit JJ.
Ms Kershaw relied on her response, affidavit and financial statement filed on 4 April 2014, her affidavit filed on 3 September 2014 and the affidavits of her son-in-law Mr T and her sister Ms L filed on 4 April 2014.
The husband annexed to his affidavit a report prepared by Mr G, the accountant who was jointly instructed by the parties to value the businesses. No objection was made to the husband attaching this report to his affidavit and no party sought to cross-examine Mr G.
An assessment of the witnesses
The wife was a satisfactory witness. There was no suggestion by either the husband’s counsel or Ms Kershaw’s counsel that her credit was open to question.
Mr N and Ms K and Mr W were also satisfactory witnesses whose credit was not challenged by counsel for the respondents.
The husband was untruthful and unreliable on numerous occasions. He was particularly untruthful on the issue of where the money which appeared in Ms Kershaw’s bank accounts after he commenced a relationship with her had come from but there were many other instances of him giving unsatisfactory evidence. For example:
i) The wife said that at separation the husband removed $16,000.00 from a joint account. In his affidavit the husband agreed that he had removed the money but said that he had used it to discharge a debt to (omitted) Bank. During cross-examination he was shown documents which demonstrated that the money was paid into a (omitted) Bank line of credit which was either in credit or had a very small debit and that an equivalent amount was withdrawn from the line of credit on the same day and deposited into the husband’s personal bank account.
ii) In the financial statement he filed on 7 November 2011 the husband said that his weekly income from salary and wages was $900.00 per week. He is currently receiving $1,500.00 per week and when asked for an explanation said that the earlier figure did not include commissions.
iii) The husband made no reference to Ms Kershaw or loans to Ms Kershaw or loans by Ms Kershaw to his businesses in his first affidavit in the proceedings filed in 2011. He began to provide information about transactions involving her only after a subpoena was issued to a mortgage broker and inspection of the documents (allowed over the husband’s objection) revealed information about Ms Kershaw’s purchase of a real property in March 2010.
iv) In an affidavit filed on 29 October 2013 the husband alleged that “Ms Kershaw and I to this day have never intermingled our finances” which was a blatant untruth.
Ms Kershaw was also untruthful and unreliable. The evidence she gave about the source of money which appeared in her newly opened (omitted) Bank account between September 2009 and January 2010 stands out in this regard but there were many other reasons to be concerned about her evidence. For example:
i) She said that she and the husband simply commenced a “courting relationship” in (omitted) 2009 and did not mingle their financial affairs until they married in (omitted) 2012 but this was conspicuously untrue. The husband made Ms Kershaw a director of his company (business omitted) in August 2009 although that was later reversed, in October 2009 she transferred $40,000.00 from her bank account (allegedly by way of a loan) to one of the husband businesses which the business later returned to her (allegedly by way of repayment) and she received and banked $9,000.00 from the husband in October 2009 which he had allegedly asked her to “mind” and then repaid it to him in January 2010.
ii) The issue of whether Ms Kershaw had any significant assets prior to commencing her relationship with the husband was highly relevant and Ms Kershaw stonewalled all attempts by the wife’s solicitors and the wife’s counsel at trial to discover the identity of bank accounts she had immediately prior to the relationship commencing.
Ms Kershaw agreed during cross-examination that she did have bank accounts prior to June 2009 and given that part of her income was Centrelink benefits she must have done. When asked in cross-examination why she had not produced bank statements for those accounts she said that she thought that she had only been asked to produce bank records since June 2009 but this was not true. In a letter dated 26 November 2013 sent by the wife’s solicitors to Ms Kershaw’s solicitors Ms Kershaw was asked to produce among other things:
Statements for all bank, building society or financial institution, accounts and credit cards from 1 July 2008 to date. [underlining as in the original].
When asked during cross-examination to at least tell the court which banks or financial institutions she had accounts with prior to June 2009 she said that she could not remember.
Many other examples of demonstrably wrong or suspect evidence given by the husband and Ms Kershaw will be referred to later.
Mr T and Ms L gave evidence about discrete issues in support of Ms Kershaw. For reasons which will become apparent later in the judgment I do not accept their evidence.
Background
The husband and wife met when they were both employed at (omitted business) in 1994. They commenced cohabitation in late 1995, married on (omitted) 1996 and separated on 24 June 2009. They had a marriage/relationship of about 14 years.
There are no children of the relationship. The wife has a son Mr N who was born in about 1991, and he lived with the parties throughout their relationship. The husband has a son Mr B Kershaw who was born in 1978. He did not live with the parties.
The wife was employed throughout the relationship. For most of the time she worked as a (occupation omitted) at two different (employers omitted) but in the last year of the relationship she worked full time in the businesses the husband commenced during the parties’ relationship.
The husband, who appears to have been involved in (businesses omitted) for much of his adult life, was employed as a (occupation omitted) until (omitted) 1996 after which his income derived from businesses he established. His first businesses were (omitted businesses) and (omitted) but in 1997 he became involved in (businesses omitted) and in 2003 in importing (omitted) from the (country omitted) and selling them in Australia.
At the time of separation the husband was the sole director and shareholder of two companies, (business omitted) and (business omitted). The first imported the (products omitted) into Australia and the second retailed them.
During the relationship the parties bought and sold several properties. The only one which now remains is Property J1 which was purchased in November 2008 in the wife’s name. A property at Property B was sold after separation and the net proceeds are held in trust.
In or about (omitted) 2009 the husband formed a relationship with Ms P who became Ms Kershaw by deed poll in 2010 and married the husband in (omitted) 2012. I will hereinafter refer to her as Ms Kershaw.
The husband and Ms Kershaw both alleged that they did not commence cohabitation until close to the time they married. Mr N on the other hand alleged that from August or early September 2009 Ms Kershaw began moving her belongings into the unit in Property J1 where he was then living with the husband and began staying in the unit sharing a bedroom with the husband.
Not a great deal turns on whether the husband and Ms Kershaw were sharing a residence at any particular time prior to their marriage but neither was an honest witness. Their claim that they did not commence living together until late 2012 is more likely to have been made to try and make credible their claim that Ms Kershaw purchased real estate between 2010 and 2012 as part of an individual financial endeavour unrelated to her relationship with the husband than because it was true.
In September 2009 Ms Kershaw began to work in the husband’s businesses and in January 2010 she contracted to purchase Property F for $415,000.00. The sale was completed in March 2010 and apart from $2,000.00 which was paid by the husband, the purchase price and costs of purchase were paid by means of a loan for $322,000.00 from the (omitted) Bank and $100,000.00 from a (omitted) Bank account in Ms Kershaw’s name.
Ms Kershaw’s evidence was that the $100,000.00 was derived from cash she had prior to her relationship with the husband, employment entitlements and Centrelink benefits she obtained shortly afterwards and the proceeds of sale of furniture to her sister, a car to her son in law and caravans to unrelated parties.
However it was the wife’s case and I am satisfied that it is so that the $100,000.00 was covertly transferred to Ms Kershaw by the husband.
The husband moved into the Property F property immediately after it was purchased, allegedly as a tenant, and his “rent” paid the mortgage.
After the purchase of Property F there were further suspect transfers of funds between the businesses and Ms Kershaw or diversion of sale proceeds of business assets to Ms Kershaw which I shall discuss in detail later in the judgment.
In February 2011 Ms Kershaw purchased a property in Property L. She sold that property in January 2012 and net proceeds of $133,387.31 were deposited into her (omitted) Bank account. The mortgage reduced by $87,850.00 in the 11 months between the purchase and sale of this property.
In November 2012 Ms Kershaw purchased Property J2 and about a week after settlement the husband and Ms Kershaw married and moved into this unit. As a result they became near neighbours of the wife.
The husband’s response when asked why he and Ms Kershaw bought a unit in the complex where the wife was living was disingenuous. He alleged that it was Ms Kershaw’s decision. I do not believe him.
The husband agreed that he had called the wife names such as “fat slut” around the units and had made such comments on Facebook. He alleged that this was in response to things the wife had done but gave no particulars of anything the wife was alleged to have done.
In December 2013 Ms Kershaw sold the Property F property and net proceeds of $98,122.39 were paid into the Property J2 mortgage by court order.
At the time of trial the husband was continuing to operate businesses which imported and sold (omitted) although the names of the companies running the businesses had changed. Ms Kershaw continued to be employed by the businesses.
The applicable law
Pursuant to s.79 (1) of the Family Law Act 1975 the court can make such orders as it considers appropriate altering the interests of the husband and wife in property. However s.79 (2) provides that the court shall not make an order under this section unless it considers that it would be just and equitable to do so.
The husband and wife both sought property settlement orders; neither are content for the wife to continue to own Property J1 which is in her name and for the husband to continue to own the businesses which are in his name and to each go their separate ways. I am satisfied that it is just and equitable to consider altering the parties’ interests in property.[3]
[3] Hearn & Hearn [2015] FamCAFC 178
I intend to take the usual steps to resolve what particular alteration of their interests would be just and equitable and those steps are:
i) to identify and value the assets and liabilities of the parties;
ii) to assess the contributions of the parties under s79(4)(a), (b) and (c);
iii) to consider the matters in s.79(4)(d), (e), (f) and (g), which include the matters in s.75(2) so far as they are relevant, and determine whether any adjustment should be made as a result to the contribution based entitlements;
iv) to consider the effect of those findings and resolve what orders are just and equitable in all the circumstances of the case.
It is usual for the court to assess contributions and s.75(2) matters on a percentage basis but this is not mandated by the legislation and there are cases, and this is one, where it is simply not possible to translate findings about contributions or s.75(2) matters into percentages. The only thing mandated by the legislation is that the court shall not make an order pursuant to s.79 unless it is just and equitable to do so.
S.78(1) of the Family Law Act also potentially has relevance in this matter. It provides as follows:
In proceedings between parties to a marriage with respect to existing title or rights in respect of property, the court may declare the title or rights, if any that a party has in respect of the property.[4]
[4] Family Law Act 1975 (Cth), s.78(1).
S.78 (1) would allow the court to declare that the husband and wife were the beneficial owners of property in Ms Kershaw’s name (the order sought in the wife’s amended response) or alternatively that the husband was the beneficial owner.[5] Ms Kershaw is a party and would be bound by the declaration and s.78(2) empowers the court to make consequential orders which can include an order for sale.
[5] Valceski v Valceski [2007] NSWSC 440.
In his written submissions Ms Kershaw’s counsel argued at length that the court either should not as a matter of law or could not except to a limited proportion of the sale proceeds of the Property F property declare the husband the beneficial owner of Ms Kershaw’s property.
In response to this the wife’s counsel in submissions in reply argued that the court did not need to make a declaration of trust pursuant to s.78(1) in order to justify property in Ms Kershaw’s name being used to satisfy the wife’s claim for a property settlement. He submitted that Part V111A of the Family Law Act would allow the court to make such an order notwithstanding that no s.78(1) declaration had been made.
The relevant section in Part V111A is s.90AE. S.90AE(1) gives the court power to make orders affecting creditors but s.90AE(2)-(4) provides as follows:
Court may make an order under section 79 binding a third party
(2)In proceedings under section 79, the court may make any other order that:
(a)directs a third party to do a thing in relation to the property of a party to the marriage; or
(b)alters the rights, liabilities or property interests of a third party in relation to the marriage.
(3)The court may only make an order under subsection (1) or (2) if:
(a)the making of the order is reasonably necessary, or reasonably appropriate and adapted, to effect a division of property between the parties to the marriage; and
(b)if the order concerns a debt of a party to the marriage--it is not foreseeable at the time that the order is made that to make the order would result in the debt not being paid in full; and
(c)the third party has been accorded procedural fairness in relation to the making of the order; and
(d)the court is satisfied that, in all the circumstances, it is just and equitable to make the order; and
(e)the court is satisfied that the order takes into account the matters mentioned in subsection (4).
(4) The matters are as follows:
(a)the taxation effect (if any) of the order on the parties to the marriage;
(b)the taxation effect (if any) of the order on the third party;
(c)the social security effect (if any) of the order on the parties to the marriage;
(d)the third party's administrative costs in relation to the order;
(e)if the order concerns a debt of a party to the marriage--the capacity of a party to the marriage to repay the debt after the order is made;
Note: See paragraph (3)(b) for requirements for making the order in these circumstances.
(f)the economic, legal or other capacity of the third party to comply with the order;
(g)if, as a result of the third party being accorded procedural fairness in relation to the making of the order, the third party raises any other matters--those matters;
Note: See paragraph (3)(c) for the requirement to accord procedural fairness to the third party.
(h)any other matter that the court considers relevant.
S.90AE(2)(b) is on its face broadly worded but there are two immediate problems for the wife in attempting to rely on it. First, no evidence was given at trial which would allow me to make findings in relation to all the matters referred to in s.90AE (4) and it is mandatory that all those matters be considered. Second, before making an order relying on s.90AE I would be required to grapple with s.90AK and no party addressed this issue in submissions. S.90AK provides as follows:
Acquisition of property
(1) The court must not make an order or grant an injunction in accordance with this Part if the order or injunction would:
(a) result in the acquisition of property from a person otherwise than on just terms; and
(b) be invalid because of paragraph 51(xxxi) of the Constitution.[6]
[6] Family Law Act 1975 (Cth), s.90AK.
S.90AE may seem broad on its face but it was read down in B Pty Ltd and Ors & K and Anor (2008) FLC 93-380. The facts in that case were very different to the facts in the case before me but the Full Court said as follows:
In our view, all that s 90AE(2)(b) does, of relevance to the wife’s claim here, is to enable the court to adjust the property interests of a third party for the purpose of effecting a division of the present property of the parties to the marriage, between those parties. Only in the sense that altering interests may leave a bundle of rights or interests that are consequent upon the alteration, may the exercise of power create interests, but these “new” interests will be the residue of what already existed at law. Except in this sense, the subsection does not create a new cause of action derived from rights not previously known to the law. In this sense, the subsection resembles a machinery provision, though in our opinion it is more than that.[7]
[7] B Pty Ltd and Ors & K and Anor (2008) FLC 93-380
I am not convinced that s.90AE(2)(b) can be called in aid by the wife.
Finally I note that no attempt was made by the wife to rely on s.106B of the Family Law Act which allows the court to set aside transactions which are made to defeat an existing or anticipated order or which, irrespective of intention, is likely to defeat such an order. No doubt the wife considered that this would be a difficult path to go down given the number of transactions back and forth between the businesses and Ms Kershaw and the on-sale by Ms Kershaw of the Property F property.
The assets and liabilities of the husband and the wife
The non-controversial pool
The non-controversial items in the pool are as follows:
| Description | Ownership | Value |
| Furniture | Husband | 11,000.00 |
| (omitted) Motorcycle | Husband | 11,000.00 |
| Holden (omitted) | Joint | 20,000.00 |
| Jewellery | Wife | 8,895.00 |
| Property J1 | Wife | 580,000.00 |
| Property B sale proceeds | Wife | 88,066.00 |
| Total | 718,961.00 |
In their written submissions the wife’s counsel contended and the husband’s counsel agreed that amounts in the parties’ bank accounts as disclosed in their most recent financial statements should also be included as assets but I do not intend to do this. The parties have been separated for five years. There was nothing to suggest that either of them had preserved any amount from years ago and amounts in bank accounts often fluctuate from week to week.
No evidence was produced of the value of motor vehicles or furniture and both counsel proposed to deal with is by treating the estimates the parties had made about the value of these items in their financial statements as admissions against interest.
The wife’s counsel contended that the husband’s furniture should be included at $11,000.00 and his (omitted) motorcycle at $11,000.00 which was an average of figures in different financial statements he filed. The husband’s counsel contended that the husband’s furniture should be included at $6,000.00 and his (omitted) motor cycle at $8,000.00 which were the estimates in his most recent financial statement. He was content for the averaging process to apply to the Holden (omitted) which the wife has and wishes to keep.
The husband was not a witness of credit and I can understand why in those circumstances instead of relying on his most recent estimates as an admission against interest the wife’s counsel proposed averaging the amounts, and to be fair having adopted that approach he applied it to both parties estimates of value of the Holden (omitted).
It is an unusual approach but in the unusual circumstances of this case I propose to adopt it and use it to fix a value for the husband’s furniture, the husband’s (omitted) motorcycle and the jointly owned Holden (omitted).
The liabilities in the name of the husband and wife referrable to the relationship were agreed to be as follows:
| Description | Ownership | Value |
| Property J1 mortgage | Wife | 390,183.00 |
| Capital Gains Tax sale of Property B | Wife | 6,355.00 |
| 396,538.00 |
The parties superannuation was agreed and is as follows:
| Description | Ownership | Value |
| (omitted) Super Fund | Wife | 67,240.00 |
| (omitted) Super | Husband | 63,921.00 |
| Total | 131,161.00 |
The non-controversial assets are therefore $322,423.00 non-superannuation assets and $131,161.00 superannuation, a total of $453,584.00.
The husband’s businesses
The first controversial matter is the value of the husband’s businesses.
The husband had his own business (business omitted) between 1971 and 1986. I am uncertain about what he did between 1986 and 1994 but when he met the wife in 1994 he was employed as a (occupation omitted).
In 1995 the husband and wife commenced cohabitation and in 1996 the husband experimented with a couple of small businesses unrelated to (omitted). However in 1997 he formed a partnership with Mr R which involved (business omitted) for Mr R’s company. The partnership used the registered business name (business omitted).
In 2000 the husband commenced a business, (business omitted), as a sole trader. This business marketed and advertised other (omitted) industry businesses.
In 2003 the husband and Mr R registered (business omitted) with the capital of (business omitted) moving to the company. The company contracted with a (country omitted) company to build (products omitted). The (products omitted) were then imported and finished off when they arrived in Australia by (omitted).
The wife’s witness Mr W, who was at one time a friend of the husband as well as the wife and did odd jobs for the husband in his businesses, said that when the husband sold an (product omitted) he would also often sell a (product omitted) to go with the (product omitted), usually an (product omitted) and they too would be stripped and (omitted) installed. The husband did not dispute this.
Mr W said and the husband did not dispute, that the husband also sold (product omitted) accessories through the internet, the (business omitted) and (business omitted) and “The (omitted)” magazine.
In 2008 (business omitted) changed its name to (business omitted).
In October 2008 the husband incorporated (business omitted) which took over from (business omitted) as importer and in April 2009 he bought Mr R out of (business omitted).
When the parties separated in June 2009 the companies which were in existence were (business omitted) and (business omitted). (business omitted) and fitted out the (product omitted) and (business omitted) retailed them in Australia. The husband was the sole director and sole shareholder of the companies.
On 2 October 2009 the husband incorporated (business omitted) which took over the operation of (business omitted). He installed Ms Kershaw and his son Mr B Kershaw as directors of the new company and Mr B Kershaw became a shareholder.
After the wife’s solicitors protested about the husband’s actions, Ms Kershaw and Mr B Kershaw resigned as directors and the husband became the sole director of (business omitted). The husband did not mention the shareholding issue in his affidavit but in an affidavit Mr B Kershaw filed on 20 July 2011 he said that he was an ‘equal shareholder’ in (business omitted) but that he had no financial or beneficial interest in that shareholding.
The husband asserted that (business omitted) ceased trading in 2009 and that (business omitted) became responsible for both the importation and fitting out and sale in Australia of the (products omitted).
In April 2011 the wife filed an application for a property settlement.
On 20 July 2011 the husband filed a response, affidavit and financial statement. In his financial statement he estimated the value of his interest in (business omitted) as $310,000.00.
On 18 August 2011 an order was made by consent for the husband and wife to obtain a joint valuation of (business omitted), (business omitted) and (business omitted). They were ordered to each cooperate with the expert including promptly providing any information or documents requested by him.
Mr G of (omitted) was instructed to carry out the valuation. He was initially asked to prepare a valuation as at separation but was later also asked to prepare a valuation as at 31 December 2011. Later he was also asked to value other companies.
In 2012 the husband incorporated (business omitted) with a view to once again separating what he called his asset holding entity from his trading entity. (business omitted) became the importer of the (products omitted) from the (country omitted). In 2013 it changed its name to (business omitted).
In late 2013 the husband incorporated (business omitted) to take over the role of retailer and in 2013 (business omitted) and (business omitted) went into voluntary liquidation.
Mr G never completed a valuation of any of the businesses.
After the order was made for the preparation of the report the matter was mentioned on 17 November 2011 (court told report almost ready), 16 February 2012 (court told parties confident report almost ready), 23 April 2012 (report still not ready), 20 July 2012 (order made for the husband to supply documents), 21 November 2012 (order made for the husband to supply documents wife’s costs reserved), 25 February 2013 (order made for the husband to supply documents), 20 May 2013 (husband ordered to provide documents) and 20 June 2013 (husband ordered to provide documents).
On 26 July 2013 Mr G provided a report in which he said that he could not come to a conclusion about the value of the businesses because of lack of documents and discrepancies in information provided. He observed that:
· The records of the business entities provided by the husband were so inaccurate as to preclude the settling of an opinion as to value.
· Inventory values were understated by at least $417,425.00.
· In addition to the (products omitted) disclosed in the Inventory for the close of the financial year there were extra (products omitted) which he had discovered.
On 8 November 2013 the court and the parties gave up and the matter was listed for a final hearing in April 2014.
I am abundantly satisfied that the valuation of the businesses was never completed because the husband frustrated the process.
The husband elected not to directly challenge Mr G about anything in his report but in his trial affidavit he tried to rebut the criticisms made by Mr G by mentioning one or two (products omitted) which he claimed Mr G had wrongly identified as missing.
The husband’s counsel submitted that at worst the problems were the result of inadvertence or sloppy bookkeeping and that the husband should not be penalised for the expert’s inability to arrive at an opinion about value.
I do not accept this. I am satisfied that the husband actively took steps to prevent a valuation of the businesses being obtained.
The husband’s conduct in regard to co-operating in the valuation of the businesses must be considered in the context of his utterances after separation and his behaviour during the course of these proceedings.
Mr N gave evidence which I accept as he was not successfully challenged about it in cross-examination, that shortly after separation the husband said to him:
I am going to make sure I do anything I can to make sure I don’t have to give your Mum anything. I have been done over twice before.
Mr W alleged that in July 2009 he had a conversation with the husband as follows:
Mr W: Why don’t you just give Ms Lynch $100,000.00 and she will be out of your hair and you can both get on with your lives?
Husband: I will make sure she gets nothing. There are a lot of things that I can hide that she will never know about. My other wives took everything I ever had, that is not going to happen again.
Ms K said that she was present at this conversation and remembered something similar conversation although she recalled the husband saying:
I’ve got things hidden in places Ms Lynch will never find. I will make sure she gets nothing.
The evidence of Mr W & Ms K was credible. Mr W made a mistake about the dates when he met the husband and wife but he was not successfully shown to be unreliable in cross-examination.
Other relevant behaviour by the husband was informing the court on 27 February 2013 that any sales contracts were destroyed by the companies/businesses following the delivery of the (products omitted), which defies belief given the record keeping requirements of the ATO, objecting to the wife being permitted to inspect documents produced on subpoena by (business omitted) seeking information about loans applied for by Ms Kershaw, which documents led to the uncovering of the husband’s transfer of about $100,000.00 from the businesses to Ms Kershaw, and being comprehensively dishonest throughout the trial about the transfer of money from the businesses to Ms Kershaw.
It is also relevant to note that in her trial affidavit the wife made some allegations about violence. She alleged that the husband became angry easily and sometimes would not speak to her. She alleged that on one occasion he punched holes in the wall of the Property B property and also smashed dinnerware, vases and items in the buffet and the police were called.
The parties separated on 24 June 2009 and the wife alleged that this was after an argument during which the husband punched her in the head three times with his fist.
The wife alleged that after separation the husband stalked her by repeatedly driving past her home and making numerous calls to her mobile phone. She complained to police who applied for an ADVO on her behalf and on 26 February 2010 this was settled by the husband giving an undertaking not to contact the wife or approach or harass her.
On 28 December 2010 the husband drove past the wife’s unit and then returned and pulled up in front. The wife’s partner asked the husband what he was doing and the husband lunged at the wife’s partner and smashed the wine glass which was in his hand. The husband was charged with assault and pleaded guilty and in May 2011 a final ADVO was made for the protection of the wife’s partner.
The husband’s aggressive pre-separation behaviour toward the wife, his aggressive post-separation behaviour to her new partner and his behaviour after he commenced living in Property J2 in late 2012 in the form of calling the wife offensive names around the unit block are consistent with the wife’s claim that he intended to do whatever he could to ensure that she received as little as possible by way of property settlement.
The husband’s failure to cooperate in the valuation of the businesses had the triple effect of delaying the finalisation of the proceedings, covering up for as long as possible the covert transfer of funds from the businesses to Ms Kershaw and leaving it open to question whether the court could make a finding about the size of the pool.
In regard to the last matter the wife’s counsel and the husband’s counsel both took the position that the pool could be determined by means of the court assigning a value to the businesses notwithstanding the lack of a formal valuation.
The wife’s counsel referred first to the evidence of Mr W & Ms K that the husband had told them that if everything was sold up he and the wife would have $1.3m. The husband said that he did not recall saying this but he might have done so although if he did it meant something different to what the wife’s counsel was claiming.
At one point in his submissions the wife’s counsel did not seek to place any weight on this, conceding that it may have been “little more than braggadocio”, but at the end of his submissions suggested that the court might be satisfied on consideration of the evidence that it was not an idle boast.
It would dangerous for me to give weight to this throw away statement to Mr W & Ms K. I cannot be sure what the husband was referring to and the wife’s counsel implicitly accepted this by taking an alternative tack. He referred to the fact that in his report Mr G said that the inventory value of the (products omitted) the husband disclosed was $228,000.00 but that he considered that the inventory values were understated by at least $417,425.00. The two figures added together total $645,425.00 and the wife’s counsel submitted that doing the best it could the court should place a value of not less than $645,425.00 on the businesses.
The husband’s counsel submitted that focussing on the inventory was not a legitimate way to arrive at a value because it took no account of the liabilities of the businesses and there is merit in this submission.
The husband maintained throughout the trial that the businesses were worth nothing but unexpectedly in written submissions his counsel said that the husband had estimated that a financial statement filed in 2011 that the businesses were worth $310,000.00 and he was willing to have them included at this amount. The husband’s counsel made the following submission:
It will be noted that whilst the husband has at times maintained that the (omitted) business (in it’s varying entities) should have a nil value he recognises that he has attributed a value to it when swearing his first financial statement on 20 July 2011. He thus concedes on the basis that such was an admission against interest made on oath by him that such must be taken (at least) to reflect a value of the entities at that date, although not presently.
For the purpose of his final position to the Court he is content to include in the asset pool that value as reflecting the worth of the business entities.
This is a very curious submission and looks very much like a last minute attempt by the husband to avoid disaster in the face of him belatedly realising that the court was unlikely to buy the story about how Ms Kershaw acquired the cash to purchase the Property F property.
To allow the husband to include the businesses at a value of his choosing would be to allow him to benefit from having frustrated the valuation process and I cannot place weight on the husband’s last minute concession save for this: it is open to me in light of it to find that $310,000.00 is the very minimum the businesses are worth.
At this stage of the exercise I can only record that I am unable to place a value on the husband’s businesses save to say that based on his dishonesty and belated admission I am satisfied that they are worth no less than $310,000.00.
Ms Kershaw’s assets
The second contentious issue was whether any of Ms Kershaw’s assets should be added to the pool.
According to her financial statement Ms Kershaw has the following assets:
| Description | Value |
| Property J2 | 590,000.00 |
| Holden (omitted) motor vehicle | 27,500.00 |
| Personal items and cash | 12,500.00 |
| Loans to husband’s companies | 50,892.00 |
| 680,892.00 |
Ms Kershaw has the following liabilities:
| Description | Value |
| Mortgage on Property J2 | 320,605.00 |
| Balance Property L home loan | 7,222.00 |
| 327,827.00 |
Ms Kershaw thus has net assets of $353,065.00 and to break them down further she has equity of $262,173.00 in Property J2 (which includes a deduction of the balance owing on the Property L loan), a motor vehicle and personal items and cash and an alleged debt owed to her by the businesses.
Ms Kershaw also disclosed that she had $19,496.00 superannuation as at April 2014 but it was not suggested that this should be taken into account.
The wife contended that when Ms Kershaw commenced a relationship with the husband she had no significant assets and that the foundation of her fortunes was $100,000.00 covertly transferred to her by the husband between August 2009 and January 2010 which Ms Kershaw applied to the purchase of Property F.
The wife alleged that further suspect sums later appeared in Ms Kershaw’s bank accounts which could be traced to the businesses. It was her case that as Ms Kershaw had been unjustly enriched at her expense at the very least the equity in Property J2 and the loans owed to Ms Kershaw by the businesses should be added to the pool.
Ms Kershaw claimed that she did have assets when she commenced a relationship with the husband and that the foundation of her current wealth was those assets. She denied that the husband had covertly transferred any money to her and said that the wife simply had no legal basis to touch her assets.
I am abundantly satisfied that the wife’s assertions about covert transfers is correct.
Ms Kershaw was 52 when she met the husband. She was employed part-time as a (occupation omitted) at a (employer omitted) in Sydney and was earning an average of $520.00 per week gross; she provided evidence of her income. She had the care of her teenage son X who suffers from disabilities and was receiving a carer’s pension of $59.00 per week and a top-up part pension from Centrelink which varied depending on her income from employment, together with Family Tax Benefit.
Ms Kershaw estimated that her average weekly income from Centrelink was $401.00, giving her a total gross income of about $921.00 per week.
Ms Kershaw and X were living in a Department of Housing unit. Ms Kershaw said that the rent and utilities were subsidised because of X’s disability and that she was able to obtain money from a trust fund to help with the care of her sons Y and X. She alleged that she had disposable income of $721.00 per week after payment of rent, water and car expenses.
Ms Kershaw claimed that far from being penniless she had the following assets in July 2009:
i) 2 caravans stored at her sister Ms L’s home on the mid-north coast;
ii) cash at home made up of:
·$10,000.00 being a lump sum payment received from the former husband’s superannuation following his death. Ms Kershaw did not say when she received the lump sum but the former husband died in 2005;
·$1,105.10 one off payment from Centrelink on 15 July 2009;
·$1,483.45 one off payment received from Centrelink on 29 July 2009;
·Other accumulated cash and savings.
iii) a Holden Commodore motor vehicle registered in her name but sold to her daughter Z and son in law Mr T in 2007 on condition that they pay her for it when they had the money to do so;
iv) a Kia Sportage motor vehicle which she used;
v) furniture;
vi) superannuation.
Ms Kershaw said that (hobby omitted) with the intention of on-selling them was a hobby of hers. She said she renovated and sold one (hobby omitted) while with her husband Mr D in 2003 and that from 2007 she had renovated (hobby omitted) herself with the intention of on-selling them.
Ms Kershaw said that she kept the (hobby omitted) at her sister Ms L’s property in (omitted) NSW so that she did not have to pay storage costs and that she did not have to register them as they were not taken on road until ultimately sold.
In her affidavit Ms Kershaw said as follows about the cash at home:
Throughout my life I have always felt more comfortable keeping my money in cash at home, rather than holding money in bank accounts. I regularly had large amounts of cash in my home as a result.
I am a compulsive gambler and I keep cash in the house to fund my gambling addiction.[8]
[8] Paragraphs 74 and 75 if Ms Kershaw’s trial affidavit.
Ms Kershaw alleged that in August 2009, a month or so after she commenced her relationship with the husband, she telephoned a mortgage broker about obtaining a loan to purchase a property and told him that she had a couple of (hobby omitted) and cash at home. She alleged that she was informed that she needed to sell assets and put the money from those sales as well as the cash she kept at home in a bank account. She said that as a result she began selling assets and depositing cash in a bank account. She said that she taught herself to deposit large wins but also still kept cash at home so that she could gamble more easily.
On 27 August 2009, Ms Kershaw opened a (omitted) Bank Account. By January 2010 there was $100,000.00 in the account and she claimed that it was built up as follows:
Date Deposit Source of funds Withdrawal 27/8/2009 4,757.00 Wages and Centrelink and cash from home 08/9/2009 7,837.00 Cash from home including gambling winnings 08/9/2009 34,000.00 First instalment sale of (hobby omitted) to Mr T 15/9/2009 8,000.00 First Instalment sale of Holden Commodore to son in law Mr T 22/9/2009 6,000.00 Balance from Mr T 26/9/2009 3,000.00 Cash from home including gambling winnings 9/10/2009 Loan to (business omitted) 40,000.00 28/10/2009 9,130.00 Sale of furniture and whitegoods to sister Ms L 29/10/2009 9,000.00 From husband, from a bank account he had closed and which he asked her to mind as he did not want to keep it in cash. 3/11/2009 4,500.00 Cash from home including gambling winnings 10/11/2009 6,000.00 Final payment from Mr T for Holden Commodore 24/11/2009 47,500.00 Repayment of $40,000.00 from (omitted business)’s plus cash at home $7,500.00 24/11/2009 130.70 Cash to bring account up to $100,000.00 15/1/2010 Account Closed 100,723.52[9] [9] Some minor interest credits and one minor IB transfer are not included in the table.
Even absent cross-checking Ms Kershaw’s evidence about the source of these deposits with withdrawals from the husband’s business accounts there are many reasons to be suspicious about Ms Kershaw’s claims.
There was no independent evidence that Ms Kershaw ever had any cash at home and her explanation for keeping cash at home rather than in the bank is implausible; if she had the serious gambling habit she claimed how was she able to preserve intact $10,000.00 which she must have received from her former husband’s superannuation years before for example.
Ms Kershaw alleged in her affidavit that her bank records showed large withdrawals at or near pubs and clubs but no attention was drawn to any such records during the hearing. If she ever had a gambling addiction it seems to have ceased upon her commencing her relationship with the husband; she was not tempted to gamble any of the large cash sums she was allegedly handed by her sister and she virtuously deposited into the bank the $9,000.00 the husband gave her to “mind”.
The story about the (hobby omitted) is implausible for many reasons.
There was no independent evidence in the form of registration papers or bills of sale that Ms Kershaw ever owned (hobby omitted), neither Ms Kershaw or her sister or her son-in-law were able to describe the (hobby omitted) when asked during cross-examination and none of the purchasers were traced by Ms Kershaw and called to corroborate Ms Kershaw’s story.
Ms Kershaw alleged that she sold a (omitted) to Mr T in September 2009 for $40,000.00 and received the money in two instalments of $34,000.00 and $6,000.00 and deposited both amounts into her (omitted) Bank Account account. She said that there was no paperwork in connection with the sale.
Ms L said that Mr T came to her property and paid her the two amounts of $34,000.00 and $6,000.00 in cash but she said that some paperwork changed hands. She said that her sister had left papers with her in 2006 in case anyone wanted to purchase the (omitted).
Inconveniently for Ms Kershaw, investigation of her bank account revealed that the $34,000.00 was not deposited into her account in cash but was transferred into her account by one of the husband’s companies. When confronted with this she said that the cash was deposited into the husband’s business account first because her account had no net banking facility and then transferred to her.
In her affidavit Ms Kershaw said that the deposit of $9,130.00 was cash from the sale of furniture to her sister. She said in cross-examination that she and her sister agreed on a price of $9,000.00 for the furniture and she agreed that $9,130.00 was an odd amount. She claimed that her sister obtained $9,000.00 cash from the sale of (omitted).
Ms L said that she purchased furniture from Ms Kershaw for $9,130.00 and that she paid her in cash. She alleged that she gave her sister the cash for the furniture and the second lot of cash from Mr T at the one time on a visit to the (omitted).
One would have expected both these amounts to then both be deposited at the same time but Ms Kershaw banked $6,000.00 on 22 September 2010 and $9,000.00 on 28 October 2010.
On the evidence outlined above in January 2010 Ms Kershaw would have had one (omitted) left. She agreed that she did not mention owning any (omitted) when she made a home loan application to the (omitted) Bank in early 2010 and said that this was because she had already sold the (omitted) by then.
Ms Kershaw’s evidence about the $9,000.00 deposited on 29 October 2010 was that the husband told her that he had $9,000.00 in cash after closing an account and asked her to put it into her account and give it back to him when she was ready. She was asked during cross-examination if the husband knew she had a gambling problem when he gave her the money and she said that he probably didn’t.
Ms Kershaw alleged that she had sold her Holden Commodore to her son in law Mr T in 2007 and told him he could pay her when he was able. She alleged that by sheer coincidence he paid her $8,000.00 in the critical period of September 2009 and $6,000.00 in November 2009.
The vehicle remained registered in Ms Kershaw’s name until 8 January 2011 when it was traded in by Ms Kershaw’s daughter (Mr T’s wife) for $2,000.00 on another vehicle. Ms Kershaw said that it remained registered in her name because Mr T was bankrupt and Mr T gave evidence corroborating Ms Kershaw’s account but this does not dispel the suspicion created by the story.
Ms Kershaw’s story about the source of the deposits into her (omitted) Bank Account becomes unbelievable beyond reasonable doubt when a comparison is made of the deposits into the account and withdrawals from the husband’s companies (and on one occasion from the husband’s (omitted) Bank account). That shows as follows:
Date
Amount of Deposit
Source alleged by Ms Kershaw in her trial affidavit
Source alleged by Ms Kershaw other occasions
Corresponding withdrawal from the husband’s companies
27/8/2009 4,757.00 Wages from (employer omitted) and Centrelink payments and cash from home
Termination payment from (employer omitted) (letter from husband’s solicitor dated 5.7.13)
Wages from (employer omitted) (affidavit sworn 6 November 2013)27/8/2009 Cash cheque written by (business omitted) for $4,757.00
Deposit to (omitted) Bank Account was cash
08/9/2009 7,837.00 Cash from home including gambling winnings Termination
Payments from (employer omitted) (letter from husband’s solicitor dated 5 July 2013)
Cash from home including gambling winnings (affidavit filed 6 November 2013)8/9/2009 cash cheques
written by (business omitted) for $2,608.00 and cash cheque written by (business omitted) for $4,592.00 on 8/9/2009It is conceded that this is not an exact match however the deposit to (omitted) Bank Account included a cheque from (omitted), a customer of the husband’s business, for $929.00 and the balance of $6,908.00 was cash.
08/9/2009 34,000.00 First instalment sale of (omitted) to Mr T Sale of unregistered (omitted) (solicitors letter 5 July 2013) First instalment of sale of (omitted) to Mr T 8/9/2009 (omitted) Bank Transfer from the account of (business omitted)
titled “(omitted) Bank Transfer Mr B Kershaw”(omitted) Bank Account records confirm the $34,000.00 was a transfer from (business omitted) and the reference was Mr B Kershaw.
15/9/2009 8,000.00 First Instalment sale of Holden Commodore to son in law Mr T Uncertain – may have related to former relationship (solicitor’s letter 5 July 2013) First instalment of sale of Holden Commodore to Mr T (affidavit 6 November 2013) 15/9/2009 cash cheque written by (business omitted) for $8,000.00
(omitted) Bank Account records confirm the amount was deposited in cash
22/9/2009 6,000.00 Balance from Mr T Uncertain – may have related to former relationship (solicitor’s letter 5 July 2013) Balance of purchase price of (omitted) Mr T (affidavit filed 6 November 2013) No corresponding withdrawal. 26/9/2009 3,000.00 Cash from home including gambling winnings No corresponding withdrawal. 28/10/2009 9,130.00 Sale of furniture and whitegoods to sister Ms L Combined cheque and cash deposit – no recollection of the funds (solicitors letter dated 15 July 2013)
Sale of furniture to sister (affidavit 6 November 2013) During cross-examination said that the $9,000.00 was from her sister and she was unsure of where the $130.00 came fromThe deposit is $130.00 cheque and $9,000.00 cash.
28/10/2009 Cash cheque written by (omitted business) for $9,000.00
29/10/2009 9,000.00 From husband allegedly from a bank account he had closed and he did not want to keep in cash Uncertain – may have resulted from sale of a motor vehicle (solicitor’s letter dated 15 July 2013) Money from the husband’s bank account that he closed (affidavit 6 November 2013) 29/10/2009 Cash Cheque written by (omitted business) for $9,000.00 account active and ongoing
(omitted) Bank Account records show amount deposited in cash
No bank account closed by the husband at the time
3/11/2009 4,500.00 Cash from home including gambling winnings Uncertain – may have resulted from sale of motor vehicle (solicitor’s letter dated 5 July 2013) Cash from home including gambling winnings (affidavit 16 November 2013) 3/11/2009 Cash cheque written (business omitted) for $4,850.00 (not an exact match)
(omitted) Bank Account says that the $4,500.00 was deposited in cash
10/11/2009 6,000.00 Final payment from Mr T for Holden Commodore Uncertain – may have resulted from sale of motor vehicle (solicitors letter 5 July 2013) Final payment from Mr T for Holden Commodore (affidavit 16 November 2013) 10/11/2009 cash cheque written by (business omitted) for $6,000.00
(omitted) Bank Account records show amount deposited in cash
24/11/2009 47,500.00 Repayment of loan of $40,000.00 to (omitted business) $7,500.00 cash from home Repayment of loan of $40,000.00 to (omitted business) $7,500.00 unknown (solicitor’s letter dated 15 July 2013)
Repayment of loan of $40,000.00 to (omitted business) $7,500.00 from cash at home (affidavit 16 November 2013)$40,000.00 transferred from (omitted business)
$7,500.00 deposited in cash.
$7,000.00 withdrawn by husband from account Mr Kershaw trading as (business omitted) on 24 November 2009
15/1/2010 Account Closed 100,723.52
The husband was asked about the transfer of the $34,000.00 on 8 September 2009. He alleged that the $34,000.00 had come from “(omitted business)" and that the deposit came in on 24 August 2009 and was held until Ms Kershaw opened an account and then transferred to her. However the deposit of $34,000.00 into the husband’s company account on 24 August 2009 is marked “(omitted) Bank Transfer Tax Payments”.
When the husband was asked in re-examination why the words “Mr B Kershaw” appeared against the transfer out of the $34,000.00 he said that there were “Gremlins in the system.”
The husband brought a case in reply in which he sought to explain some of the coincidences between cash cheques drawn by his companies and cash deposits into Ms Kershaw’s account on the same day.
He produced an invoice from (business omitted) addressed to (business omitted) for $4,757.00.
He produced an invoice from (business omitted) addressed to (business omitted) for $8,000.00 for the purchase of components and under it are the words “Cheque 17 15/9/09.” He did not explain why the payment was made by way of “cash” cheque and not a cheque made payable to (business omitted).
He produced an invoice from (business omitted) t/as (omitted business) dated 21 September 2009 for $6,000.00 for an (omitted). He alleged that the cash cheque written on 22 September 2009 was in payment of this account. Again he did not explain why he paid this invoice by cash cheque rather than a cheque made payable to the supplier.
He alleged that the cash cheque for $6,000.00 on 10 November 2009 was to obtain funds to pay (omitted business) for an invoice dated 11 February 2009 and that the additional amount was due to the currency exchange rate between Australia and the (country omitted).
He produced an invoice dated 25 October 2009 for $9,000.00 from (omitted business) presumably to account for the payment of $9,000.00 into Ms Kershaw’s account on 28 October 2009.
He alleged that the cheque for $4,850.00 written on 3 November 2009 was to pay an invoice dated 30 October 2009 from (business omitted) and he produced a copy of the invoice
He alleged that the $9,000.00 withdrawn on 29 October 2009 had been to settle petty cash payments and he had been entitled to the money and had given it to Ms Kershaw. This conflicted with Ms Kershaw’s evidence that the husband told her that he had closed an account and had nowhere else to put the money.
I do not accept that any of these explanations by the husband have merit.
The husband did not provide any of this evidence in his trial affidavit or produce the documents allegedly relating to any of these transactions until he re-opened his case after the wife’s case and Ms Kershaw’s case had concluded. This meant that there was no opportunity for the wife’s solicitors to investigate the claims by means of issuing subpoenas to suppliers for example.
The husband was well aware before the commencement of the hearing that the deposit of these amounts into Ms Kershaw’s account was an issue. In a letter to his solicitors dated 28 November 2013 for example a paragraph from an earlier affidavit of Ms Kershaw’s which contained the same evidence as in her trial affidavit about why the husband gave her $9,000.00 is quoted and the letter goes on to say:
Would you please provide disclosure of the bank account your client closed and the $9,000.00 given to Ms Kershaw to hold on behalf of your client.
I am abundantly satisfied on the balance of probabilities indeed am satisfied beyond reasonable doubt that the money in Ms Kershaw’s first (omitted) Bank Account came from the husband. The evidence Ms Kershaw gave about the source of the funds was not believable, and the coincidence of the withdrawals from the husband’s companies which exactly match the amounts deposited into Ms Kershaw’s account on the same day seal my certainty that the husband provided the funds. The husband’s attempts to explain the transactions with pieces of paper which he could have created himself and at a stage in the hearing which made it impossible for the wife to issue subpoena arouses rather than allays suspicion.
I am satisfied that the $100,735.52 which was in the (omitted) Bank Account in January 2010 was all money covertly transferred from the husband’s companies to Ms Kershaw.
The purchase of Property F and events following
Ms Kershaw entered into a contract to purchase Property F for $415,000.00 in or about January 2010. The purchase price (and presumably costs) were paid as to $2,000.00 by the husband, $99,500.00 by Ms Kershaw via a second (omitted) Bank Account which she opened in January 2010 and a loan for $332,000.00.
The purchase was settled on 29 March 2010 and on 2 April 2010 the husband commenced residing in the property and paying what he and Ms Kershaw described as rent. The “rent” varied in amount and was used to pay the mortgage. The husband continued to reside in the property and pay the mortgage until 25 November 2012 when he went overseas. Upon his return from overseas on 3 December 2012 he moved into Property J2.
Ms Kershaw agreed that the husband did some work at Property F and helped her son Mr T renovate a bathroom.
The second (omitted) Bank Account
Ms Kershaw closed her first (omitted) Bank Account on 15 January 2010 when she had $100,723.52 in it and opened a second (omitted) Bank Account (omitted).
In her affidavit filed on 6 November 2013 Ms Kershaw said that upon closure of the first account she paid $9,000.00 to the husband in repayment of the amount of $9,000.00 he had given her on 29 October 2009 and deposited three separate amounts totalling $99,849.43 into the new account. She said that the balance deposited into the second (omitted) Bank Account was made up of “some accumulated funds from home.”
I only have Ms Kershaw’s word for what happened to the $9,000.00 and $99,849.43 was not deposited into the (omitted) Bank Account. The transactions on this account and the evidence about them were as follows:
Date
Amount
Ms Kershaw’s account of source
Evidence about source
Withdrawal
15/1/2010 70,000.00 From (omitted) Bank From (omitted) Bank 8/2/2010 19,249.43 From (omitted) Bank 2 cheques from Mr Kershaw (omitted) Bank account for $5,886.37 and $13,062.06 written on 15/1/2010 deposited into account; balance of $327.00 cash 10/2/2010 Pest Inspection Pest Inspection 220.00 10/2/2010 Deposit Property F Deposit Property F 39,500.00 10/2/2010 10,600.00 From (omitted) Bank From (omitted) Bank 19/2/2010 21,000.00 First instalment sale of (omitted) to Mr S (6/11/2013 affidavit and trial affidavit ) or Mr G (oral evidence) Cheque for $21,000.00 from Mr G. The records of (omitted business) shows the sale of a Nissan Navara on 19/2/2010 to customer Mr G – receipt issued by (omitted business) –cheque made payable by Mr G to Ms Kershaw 9/3/2010 18,000.00 Balance of sale of (omitted) to Mr S (16/11/2013 and trial affidavit)
Corrected to Mr G during the trialThe cheque deposited was written by (omitted) of (omitted) who were customers of (omitted business) according to its sales register and invoices 23/3/2010 (omitted) Trust Account for Property F (omitted) Trust Account for Property F 60,000.00 24/3/2010 to 5/5/2010 40,844.00 Withdrawal – deposited into new (omitted) bank account (affidavit 6/11/2013) $25,000.00 applied to the Property F loan and remaining funds used to buy other goods OR
$25,000.00 deposited to Property F loan and $15,000.00 used to buy a (omitted) and $844.00 used for other goods and everyday expenses (trial affidavit)(omitted) bank account not opened until 8/10/2010 and only $5,500.00 deposited into it 40,844.00[10] [10] One minor interest credit is not included.
The best the husband could say in answer to a question about the transaction involving Mr G was:
I don’t believe Mr S would have written a cheque to Ms Kershaw
The husband agreed that he knew (omitted) and said that they were good friends with whom he had had ongoing dealings.
I do not believe Ms Kershaw’s evidence that she sold a (omitted) to Mr G or Mr S.
I have no reason to believe Ms Kershaw either when she says that she paid $9,000.00 back to the husband when she closed the first (omitted) Bank Account and only $80,000.00 of the money from the first (omitted) Bank Account was deposited into the (omitted) Bank Account leaving $19,400.00 unaccounted for.
The evidence establishes that between August 2009 and March 2010 the husband covertly transferred to Ms Kershaw a total of $158,683.95 ($100,735.52 plus $18,948.43 plus $39,000.00). He also paid $2,000.00 of the Property F deposit.
Of the $158,683.95, $99,500.00 plus a further $25,000.00 later in 2010 went into the purchase of Property F and it is impossible for me to be sure where the balance of $34,683.95 went.
In February 2011 Ms Kershaw purchased Property L for $300,000.00. The purchase price was wholly borrowed using the Property L property and the Property F property as security. Property L was sold in January 2012 at which time the loan had been reduced to $182,000.00 and as a result Ms Kershaw received $133,387.31 upon settlement of the sale.
It is unclear where all of the $133,387.31 went.
In November 2012 Ms Kershaw purchased Property J1 for $585,000.00. She borrowed $459,850.00 and claimed that the difference of $125,150.00 was paid using some of the proceeds of sale of Property L and the proceeds of sale of other goods.
The goods Ms Kershaw allegedly sold were:
i)A caravan to Mr E for $34,000.00 in June 2012;
ii)A caravan to Mr M in September 2012 for $60,000.00;
iii)A motorcycle to Mr C for $18,000.00 February 2013, although she alleged that she had to refund the money to Mr C.
Ms Kershaw allegedly obtained money from sales of other assets she acquired including $45,000.00 from Mr I and Ms J for the sale of a caravan allegedly given to her by (business omitted) as a contra for a loan and $15,000.00 from Ms J for the sale of a motor vehicle.
The general dishonesty of the husband and Ms Kershaw about their financial dealings, the highly suspect story about (hobby omitted) sold in 2009 and the unlikely transformation of Ms Kershaw from someone without significant assets to someone selling expensive (hobby omitted) means that I have grave reservations about whether the story Ms Kershaw told about allegedly legitimate (hobby omitted) sales to Mr E, Mr M and Mr I and Ms J or the sale of a motor vehicle to Ms J have a grain of truth in them.
Further examples of payments made to Ms Kershaw or direct onto mortgages are:
Amount paid Description Amount Corresponding withdrawal from husband’s companies 18/10/2010 (omitted) Bank Property F 10,527.50 $1,864.50 and $8,663.00 drawn on (business omitted) 26/10/2010 (omitted) Bank Account 2,100.00 Cash cheque drawn by (omitted business) 26/10/2010 14/11/2011 (omitted) bank mortgage Property L 10,200.00 Cash cheque (omitted business) 14/11/11 23/3/2012 (omitted) Bank Account 4,290.00 Cash cheque drawn by (omitted business) 23/3/2012 20/4/2012 (omitted) Bank Property F 19,000.00 Cash cheque (omitted business) 20/4/2012 15/2/2013 (omitted) bank mortgage Property J 9,000.00 Husband’s savings 7/2/2013 (omitted) bank mortgage Property J 8,000.00 Husband’s savings 14/2/2013 (omitted) bank mortgage Property J 8,000.00 Husband’s savings 18/2/2013 (omitted) bank mortgage Property J 4,000.00 Husband’s savings 18/2/2013 (omitted) bank mortgage Property J 6,000.00 Husband’s savings 25/2/2013 (omitted) bank mortgage Property J 6,000.00 Husband’s savings 28/2/2013 (omitted) bank mortgage Property J 7,000.00 Husband’s savings
When the husband was asked about the two cheques drawn on 18 October 2010 and paid against the Property F mortgage he said he could not explain them.
The husband maintained to the end that he had not engaged in money laundering or covert transfer of funds. Insofar as he admitted that cash flowed back and forth between the businesses and Ms Kershaw he sought to explain it as an ordinary incident of the operation of his businesses. He asserted that his businesses had always had cash flow problems and that Ms Kershaw helped him out when he was short and he then paid her back when he was able. Ms Kershaw said that the loans she made to the companies were to help the husband out when he had cash flow problems and that in due course the companies either paid her back or gave her goods which she sold for a profit.
Prior to separation however there were real properties in the wife’s name and there was no evidence of such transfers being necessary then.
I am satisfied that the reason cash flowed from the husband or his businesses to Ms Kershaw was to try to put money beyond the reach of the wife or hide it from the wife and that the reason cash flowed from Ms Kershaw back to the businesses was either because the husband found that transferring large amounts to Ms Kershaw had created a cash flow problem or because the husband hoped that washing money back and forth like this would make it difficult for anyone to discover what he had done or the extent of what he had done.
I have enormous sympathy with Mr G. It is impossible to make complete sense of the transactions between Ms Kershaw, the husband and the husband’s companies and impossible, as the husband no doubt hoped it would be, to come to a firm conclusion about what has gone missing from the companies since separation.
In submissions the wife’s counsel referred to a passage of cross-examination in which he put to Ms Kershaw that between 9 October 2009 and 31 December 2011 she “loaned” the businesses $147,000.00 and that they repaid her $243,000.00. He asked her if she had any explanation for this to which she replied no.
The obvious suspect transactions are the $158,683.95 referred to in paragraph 171 and the $94,000.00 from two (omitted) sales in 2012 but there is a real possibility that masked somewhere in the money flowing back and forth between Ms Kershaw’s bank accounts and mortgages and the businesses money was transferred far in excess of the equity which now exists in Property J2.[11]
[11] The equity in Property J2 should be more. On 8 November 2013 the court noted when making orders about Ms Kershaw’s property that she had extended the mortgage over Property J2 by $20,000.00 to pay her own legal fees. No reference was made to this in submissions but it does mean that at the time of its sale the equity in Property J2 was $282,173.00 not $262,173.00
Conclusion about Ms Kershaw’s assets
The wife’s counsel submitted that the equity in Property J2 and the loan owed to Ms Kershaw by the husband’s businesses were not in reality hers but belonged to the husband and that they should be included in the pool of assets available for division between the parties.
I do not intend to include the loans allegedly owed by the husband’s companies to Ms Kershaw as assets in which the husband has an interest. This follows logically from the conclusion that Ms Kershaw had nothing of significance at the start of the relationship. If she acquired cash from the businesses and then returned it to the businesses by way of an alleged “loan” then the businesses do not in reality owe her any money and it may be double counting to assign a value to the businesses (if I can) and also treat the loans as an asset of Ms Kershaw’s.
I also with some misgivings intend to leave the Holden (omitted) to one side indeed the wife’s counsel did not ask me to include it. Ms Kershaw had two motor vehicles at the start of the relationship. I do not accept that she legitimately sold the Commodore to her son-in-law and the transaction whereby she obtained the Holden (omitted) is suspect but I intend to err on the side of caution and leave the motor vehicle she currently owns out of contention. If the husband assisted Ms Kershaw to acquire a motor vehicle during the relationship or even gave her one this is likely to have been an ordinary incident of the relationship.
In my view however for the following reasons it is open to me to find that Property J2 is beneficially owned by the husband by way of a resulting trust and should be included in the pool.
Almost immediately after separation the husband with the assistance of Ms Kershaw embarked on a deliberate scheme to remove money from the businesses and acquire properties which he hoped could be put beyond the reach of the wife in the property settlement proceedings.
All of the cash for the purchase of Property F was provided by the husband and immediately following its purchase he began “renting” it[12] and his rental payments paid the mortgage.[13] He lived at Property F and continued paying this “rent” until 25 November 2012. He treated it as his own property.
[12] Ms Kershaw’s trial affidavit paragraph 62.
[13] Ms Kershaw’s trial affidavit paragraph 132
The husband did not make any financial contribution to the purchase of Property L but Ms Kershaw used the equity in Property F, which I am satisfied was beneficially owned by the husband, to enable her to obtain the loan to purchase it. The Property L property loan repayments were made from the rent paid by the tenants. Ms Kershaw did not provide evidence of any financial contributions she made to the payment of the mortgage or otherwise to the property.
The Property L property mortgage was reduced by $87,850.00 in the 12 months between its purchase and sale in circumstances where the husband continued to channel money out of the businesses onto mortgages or directly to Ms Kershaw and where the only conclusion open is that the reduction in the mortgage was the result of lump sums provided by the husband.
Property J2 was purchased using funds from the sale of Property L and suspect sales by Ms Kershaw, and the mortgage was reduced by a lump sum from the sale of Property F. Ms Kershaw is lucky that sight has been lost of the $20,000.00 she withdrew from the mortgage immediately prior to its sale to pay her legal fees. By rights this should probably be considered a notional asset Ms Kershaw should account for.
The mortgage on Property J2 at the time of trial was $320,605.00 in other words it had reduced by $139,245.00 in 16 months. This is partly because the proceeds of sale of Property F in the sum of $98,000.00 were paid into this mortgage by court order but money also washed in and out of this mortgage to and from the husband and his companies.
I am satisfied that the husband in reality provided the funds for the purchase of Property J2. Given the general dishonesty of the husband and Ms Kershaw about how real estate was purchased post separation the court should not be deterred from declaring that the husband is the beneficial owner of Property J2 simply because he and Ms Kershaw have made it extremely difficult to follow the trail of money back and forth between the husband, Ms Kershaw and the businesses.
Ms Kershaw’s counsel submitted that even if the court found that the husband had provided money for the purchase of Property F and that this had flowed into Property J2, Ms Kershaw must be deemed to have also made a contribution to the acquisition of those properties because she signed up for the mortgages and thus incurred a personal liability to the bank. He also submitted that Ms Kershaw alone had made a contribution to Property L because those funds were solely borrowed.
He submitted that at its highest the court could find that the husband was entitled to an interest in Property J2 in the amount of $23,000.00 being 23% of the sale proceeds of Property F.
In some cases this might be a valid argument but Ms Kershaw would not have been able to obtain the mortgages had the husband not supplied the initial cash in the 2009-2010 period, and she allowed herself to be used as the husband’s tool to hide money from the wife.
I am also satisfied that it was the husband and not Ms Kershaw who made the mortgage payments for Property F and has made them for Property J2 and I am not satisfied that Ms Kershaw should be deemed to have made any financial contribution to Property J2. She has at all times been a straw person behind which the husband has hidden to make purchases of property post separation. In those circumstances and in the context of proceedings between the husband and the wife Mrs. Kershaw should not be able to claim any share of the equitable ownership in Property J2 by reason of accepting liability for indebtedness to the bank.
Ms Kershaw’s counsel further submitted that the court could not exclude the possibility that the presumption of advancement applied in other words that the husband was presumed to have gifted the money to someone who ultimately became his wife.
The problem with this submission is that the husband and Ms Kershaw were parties to the covert transfers of money from the husband’s businesses to Mrs. Kershaw and they made strenuous efforts to hide what they had done, indeed the husband’s refusal to assist with the valuation of the businesses may well have arisen from the fact that he knew that even a small amount of investigation would uncover the transfers of money.
The fact that the husband and Ms Kershaw went to such lengths to try and hide the transfer of the funds is fatal to any claim that the husband is presumed to have intended to benefit Ms Kershaw by transferring the money. He did not intend to benefit Ms Kershaw; he intended to benefit only himself.
Finally I note here that both the husband’s counsel and Ms Kershaw’s counsel suggested that the court might be guilty of double counting if it included the value of Ms Kershaw’s unit as an asset and failed to take account of the possible effect on the value of the businesses of the money for purchase of the unit being removed from the businesses.
I do not accept this argument. While removing large sums from the business may have affected its cash flow, in 2014 the businesses were thriving and were in no trouble with creditors and the husband and Ms Kershaw were drawing $125,000.00 per annum in wages between them. The fact that such large sums could be removed without affecting the continued operation of the businesses is indicative of the businesses being of considerable value.
It is in any event fatal to this claim that I do not have a valuation of the businesses.
I am satisfied that the husband should be declared the beneficial owner of Property J2 and that the equity of $262,173.00 in Property J2 should be included in the pool of assets because it is beneficially the husband’s property. I am not persuaded that the court should be deterred from doing this because the husband and Ms Kershaw have created a muddied pool in which it is impossible to trace every dollar removed from the businesses directly from point A to point B.
In her amended response the wife sought a declaration that Ms Kershaw held the unit on trust for the husband and the wife. However for the purposes of considering the issue of the equitable ownership of Property J2 by way of resulting trust I must have regard to the fact that legally the businesses were solely owned by the husband. The husband alone diverted the money which was used to purchase the Property F property, he alone made the mortgage payments on that property and he alone diverted other money to Ms Kershaw which has found its way into the equity in Property J2. The only appropriate declaration is that the husband is the beneficial owner of the unit; the wife’s contribution to the funds used to acquire it is another issue.
An alternative way in which the diversion of funds into Ms Kershaw’s name could have been dealt with would have been by adding an amount equivalent to the equity in Property J2 to the pool as a notional asset.
If the rest of the pool had a fixed value and the court could be confident that the equity in the unit represented the full extent of the money prematurely distributed by the husband and if the court could be sure that the rest of the pool was of sufficient size to properly compensate the wife for the money removed then this would be an attractive option; the Full Court has made it clear that in an appropriate case add-backs are still a legitimate way of ensuring that one party is not disadvantaged by being required to share only a pool diminished by the actions of the other party.[14]
[14] Chapman & Chapman [2014] FamCAFC 91
The difficulty in this case however is that I am not satisfied that the equity in the unit represents all that the husband has removed from the businesses and I cannot fix the value of the pool because I do not know how much the husband’s businesses are worth. I am not prepared to consider including the equity in Property J2 in the pool by way of add-back. This could seriously disadvantage the wife. It would leave her in a position where the only option for enforcing an order for payment would be to enforce it against the husband personally which could lead to protracted, difficult and expensive enforcement proceedings involving such things as bankruptcy proceedings or an order appointing a receiver and manager to the companies.
Contributions
Basis of assessment
The wife’s counsel proceeded on the basis that contributions should be assessed globally to one pool of assets.
The husband’s counsel appeared to proceed on the basis that contributions to the pool consisting of the non-controversial assets and the husband’s businesses should be assessed globally until the very last page of his submissions where he proposed that given the “relatively small” difference in the amount in the parties superannuation funds (the wife has about $3,500.00 more than the husband) that there should be no adjustment in the parties superannuation entitlements and that contributions to the non-superannuation assets should be assessed in the husband’s favour.
I am satisfied that it is appropriate to assess contributions to the pool globally absent the asset in Ms Kershaw’s name. I can see no reason why contributions to superannuation need to be assessed differently or not assessed at all. Neither party sought a splitting order, neither party brought superannuation into the relationship and insofar as the husband’s superannuation has grown since separation this can be taken into account in an overall assessment of contributions.
This could also apply to the asset in Ms Kershaw’s name but I consider that it would be prudent to assess contributions to the asset in Ms Kershaw’s name separately.
Matrimonial pool – initial contributions
Neither the husband nor the wife had significant assets at the commencement of cohabitation. The wife had furniture and household items and a car subject to a loan. The husband had some furniture and household items.
The wife received $5,000.00 long service leave for 10 years’ service when she left (employer omitted) in (omitted) 2004. However she had commenced cohabitation with the husband about 9 years earlier so only a tiny amount of this would be regarded as something the wife brought into the relationship.
Matrimonial pool – contributions during the relationship
Both parties were either employed or were endeavouring to earn income through running businesses throughout the relationship.
The wife mostly worked for third parties but in July 2008 she commenced working full time in the husband’s businesses and that continued until separation.
The husband worked for (employer omitted) as a (occupation omitted) until (omitted) 2006. He then began work at (employer omitted) and while working there set up (omitted business). I note in passing that it is reasonable to suppose that (omitted) stood for Mr Kershaw and Ms Lynch. Later he became involved in the marketing, importation and sale of (business omitted).
It was the wife’s case and I accept that she was involved in and worked in the (omitted) businesses from the time they were established. It was her evidence that even while employed elsewhere:
On weekends and after I finished my employment I helped in the (business omitted), attending (omitted) shows on the weekends to market and sell the (products omitted), packing up supplies for the business and doing what Mr Kershaw told me to do.[15]
[15] Paragraph 32 of the wife’s trial affidavit.
I also accept that the wife’s wage was very important to the family as the husband moved from paid employment to running his own businesses because it took time for his businesses to start generating a reasonable income.
The husband denied this in cross-examination but the wife provided details of the parties taxable incomes between 1995 and 2013. Between 1996 and 2007 the husband’s income was mostly under $20,000.00 per annum while the wife’s ranged between about $30,000.00 and $40,000.00, and as the wife’s counsel pointed out in the 2007 tax year to take one example the husband’s declared income was zero and the wife’s $41,036.00.
The husband’s income in 2008 was $109,525.00 and while not as high in following years still greatly exceeded his income between 1996 and 2007.
No evidence was given about homemaker contributions. The parties employed a cleaner but each of them must have done something at home. However obviously neither felt that this was an issue which had a bearing on an overall assessment of contributions.
The husband’s mother died in (omitted) 2006 and the husband received an inheritance of $92,500.00. The wife said that the money was used to reduce the loan secured by mortgage over Property B. The husband said that the money was placed in an offset account and later used to purchase the Property J1 property. It does not matter which is correct; it was an inheritance received by the husband late in the marriage and it must be given weight when assessing contributions.
Matrimonial pool - post separation matters
The wife’s counsel submitted that as at the date of trial the wife had paid the mortgage payments on Property J1 ahead by $10,000.00 and she should receive credit for that.
It is unclear to me if this is independently established by evidence but even if it is I do not intend to take it into account. The mortgage stood at $395,000.00 at separation. After separation it increased to $403,000.00 because the wife chose to refinance it and it now stands at $390,000.00. The mortgage has not significantly reduced in the four plus years the wife has been in sole occupation of the unit so she has had some very modestly priced accommodation and it would be unjust to the husband to allow her to claim credit for being $10,000.00 in advance on her repayments.
The wife’s counsel further submitted that it was relevant that the wife had to leave the businesses and the home at separation and obtain another job and alternative accommodation, and that her post-separation situation was a little more arduous than the husband’s. However the wife obtained a new job quite readily and commenced living with a new partner shortly after separation and I do not consider that these matters are relevant.
The wife’s counsel also referred to the fact that in the three months prior to separation the husband withdrew $23,500.00 from the parties’ accounts. However I intend to bring into account the money which was covertly transferred to Ms Kershaw and I have to be careful not to double count; I cannot discount the possibility that this money found its way to Ms Kershaw and I do not intend to take it into account in assessing contributions.
The husband’s superannuation stood at $29,827.04 at separation and he now has $48,515.00. The husband did not provide any evidence about payments he had made into his superannuation post separation but a considerable part of the $18,688.00 increase must have come from the businesses. However the husband’s counsel did not mention this as an issue in his submissions about contributions.
Matrimonial pool - conclusion about contributions
The wife’s counsel submitted that contributions should be assessed 55% in the wife’s favour because of post-separation matters. However as noted above I do not accept that there are any post-separation matters which justify an adjustment in the wife’s favour.
The husband’s counsel submitted (implicitly) that contributions by the parties from their own efforts during the relationship should be assessed as equal but submitted that a 5% adjustment should be made in the husband’s favour for contributions because of his inheritance and his contribution to the care of the wife’s son Mr N.
Contributions by one party to the care of the other party’s child are usually taken into account pursuant to s.75 (2)(o) and not as something relevant to contributions.
The inheritance is relevant but because I cannot determine the pool as a result of the husband’s conduct I cannot apply a percentage to a pool and determine if this is an appropriate adjustment after weighing up the size of the inheritance with all other matters which occurred during the 14 year relationship. It represents 25% of the non-contentious pool but anywhere between 6% and 12% of the pool the parties contended for.
Absent being able to fix a value for the businesses I am unable to make a finding about percentage contributions to the pool overall.
Contribution to the equity in Property J2
The equity in Property J2 derives partly from money brazenly removed by the husband from the matrimonial pool in the 6 months after separation and partly from other money which I am satisfied was covertly transferred to Ms Kershaw or directly onto mortgages.
Much of the money covertly transferred came from the businesses and the husband operated the businesses to the exclusion of the wife post-separation. His counsel submitted that the husband was entitled to “remuneration” for this work and one way of reading this is that the husband’s counsel was submitting that the husband was entitled to any money he removed from the businesses as “remuneration” and that therefore he alone should be treated as having made a contribution to the equity in Property J2.
If that was the intention of this submission I do not accept it. The businesses were built up over a period of 13 years and the wife made a contribution to the businesses both directly and indirectly during the relationship. The husband paid himself a wage and commissions after separation, so he was remunerated for his efforts. He did not give evidence of any particular contribution he made after separation in the conduct of the businesses. He just kept on operating them.
$100,000.00 of the money which the husband covertly transferred to Ms Kershaw was removed in the first seven months after separation and the wife must be deemed to have made an equal contribution to that, and the profits the businesses continued to earn after that had their foundation in the contributions of both parties. The husband’s failure to cooperate in the valuations means that I have absolutely no means of judging how much if any of the other money the husband removed was genuine post-separation profit and how much was attributable to the value of the businesses at separation. The husband maintained that sales declined after separation leading to a possible conclusion that the money the husband removed was significant profit sitting there at separation.
I am satisfied that the husband and wife should be treated as having contributed equally to the amount of $262,173.00 which is effectively the equity in Property J2 less a small amount which remains outstanding on the Property L loan.
s.79 (4)(d) (e) (f) & (g) matters
Ss.79(4) (f) & (g) have no relevance in this matter.
S.79(4)(d) requires the court to consider the effect of any proposed order upon the earning capacity of either party to the marriage. In some cases where a business is a significant asset in the pool this subsection can be relevant as an order for payment of money which might require the sale of a business might impact on a parties earning capacity. However because of the way the husband ran his case it is impossible for me to have regard to this sub-section.
The only relevant subsection is (e) which requires me to consider the matters in s.75(2).
s.75 (2) matters
The wife is 47. She is employed by (employer omitted) as a (occupation omitted) and earns $50,000.00 per annum. She has a solid employment history and does not have any health issues which might impact on her capacity to earn an income in the future.
The marriage has not affected the wife’s ability to earn income.
The wife has re-partnered with Mr P who is a (occupation omitted) and earns about $82,500.00 per annum.
Mr N is an adult and the wife does not have the responsibility to support any other person.
The wife is living in Property J1 and even on the husband’s case (not his preferred option but the one he ultimately recognised as inevitable) will be entitled to sufficient from the pool to retain it subject to a mortgage. The wife will also retain her jewellery and the Holden motor vehicle and her superannuation. It is impossible at this stage for me to otherwise determine the wife’s entitlement to property.
The wife did not provide any information about her paid and unpaid legal fees and neither did the husband.
The husband is 63 and gave his occupation as business operator. He alleged that he had some heart problems but he provided no evidence about the way if any in which this might impact on his capacity to earn an income. He also alleged that he had depression and had been diagnosed with Bipolar but again provided no evidence that these conditions had or were likely to have any impact on his capacity to run the businesses.
At the time of trial the husband was continuing to operate the businesses. In his financial statement he said that his income was $1,500.00 per week gross or $75,000.00 per annum. Ms Kershaw was employed as a (occupation omitted) in one of the businesses on a salary of $52,000.00 per annum.
The husband will retain his furniture and (omitted) motor vehicle and superannuation but it is impossible for me to otherwise determine at this stage his entitlement to property.
The husband’s counsel submitted that the husband should receive credit for his contributions to the care of Mr N who was 3 when the husband and wife commenced cohabitation
The case which supports such an outcome is Robb & Robb.[16] In that case the wife had two children at the commencement of the parties 13 year relationship. The children lived with the parties and the husband made financial and non-financial contributions in respect of them. The trial judge took the husband’s contributions to these children into account under s.75(2)(o) and the Full Court said that he was entitled to do so.
[16] Robb & Robb (1995) FLC 92-555
However whether this is done in any particular case is a matter of discretion.
Each party to a relationship takes the other as they find them at the start of the relationship, whether that is as to earning capacity or state of health or having a dependent child or some other matter. In my view unless there is some issue in the case such as the legal parent wilfully refusing to pursue child support thus casting a burden on the non-parent or the legal parent misleading the non-parent about their entitlement to child support there is no compelling reason why the non-parent should be given an adjustment for s.75(2) matters at the end of a relationship for having made a contribution to the support of a child they willingly took into his home years before.
There was a dispute in this case about whether the wife sought and obtained child support but even if none was ever obtained the husband willingly accepted Mr N into his home as part of the package with the wife and I do not consider that the husband’s care of Mr N is a factor which supports an adjustment in his favour for s.75 (2) matters.
The husband’s counsel also asked the court to take into account as a s.75 (2) (o) matter that in or about August 2014 the husband received recall notices from the ACCC in respect of defects in certain (products omitted). He asserted that he might need to repair the (products omitted) at a cost of $4,100.00 per (product omitted) resulting in a potential liability for the companies of $192,700.00.
It is apparent from the proof of evidence the husband provided about this matter that he was made aware of this as a potential issue in October 2013 yet he failed to mention it until he was allowed to reopen his case on the last day of the trial. He said that he had not mentioned it earlier because he had initially believed that the work he would be required to do would cost about $300.00 per (product omitted) but he now believed it would cost $4,100.00 per trailer.
The difficulty for the husband is that he was not a witness of credit and I can place no weight on his estimate of the rectification costs and in any event my inability to fix the value of the businesses leaves me with no yardstick against which to assess the seriousness of this issue.
I am not prepared in these circumstances to take the husband’s evidence about this potential liability into account.
The husband’s counsel finally submitted that there should be an adjustment the husband’s favour for s.75(2) matters because of the 16 year age difference between the parties and thus the husband’s likely retirement from the workforce earlier than the wife. There is some merit in this submission save that there was no evidence about when the husband’s might wish to retire. The husband is not dependent on others for employment and his age is therefore not the limitation it might otherwise be to his capacity to earn an income.
One difficulty for the husband is that even if I was persuaded that a small s.75(2) adjustment should be made in his favour I do not have the yardstick of a settled pool against which to assess an appropriate adjustment, because the court needs to consider not just percentages but what they mean in dollar terms.
An even greater difficulty for the husband however is that there is a s.75(2)(o) matter which favours the wife, namely the possibility not only that the businesses are worth more than either the husband or the wife estimate but that there are other hidden assets, and the best way to take those matters into account is in a general consideration of how I am to arrive at a just and equitable outcome in this matter.
Conclusion
There is a settled pool of $715,757.00 made up of $453,584.00 non-contentious assets and $262,173.00 of traceable money removed from the companies which has created the equity in Property J2.
However it is impossible for me to be sure that the equity in Property J2 is a fair representation of the money diverted by the husband from the businesses. There is such a tangled web of transactions between the business and the bank accounts and mortgages in Ms Kershaw’s name that I cannot get any proper sense of what might be missing besides the equity in Property J2.
Then there are the businesses. The wife’s counsel asked me to assign a value of $645,425.00 to them based on assumptions about the inventory but this fails to take into account operating expenses. The husband’s counsel asked me to assign a value of $310,000.00 to them but this would involve relying on the word of a man who was relentlessly untruthful at trial.
Neither figure can safely be used and it would be irrational for me to consider placing a value on the businesses which is part way between these figures when there is simply no legitimate basis for finding that the figures proposed by either the husband or the wife are in any way correct.
I cannot make a finding about the value of the husband’s businesses, and I cannot do so because the husband has made it impossible, and I also cannot be sure about whether there are additional hidden assets. I therefore cannot ascertain the pool.
This places the court in a really difficult position but in Weir & Weir[17] the Full Court said as follows:
It seems to us that once it has been established that there has been a deliberate non-disclosure, which follows from his Honour's findings in this case, then the Court should not be unduly cautious about making findings in favour of the innocent party. To do otherwise might be thought to provide a charter for fraud in proceedings of this nature.
It is true that in the case of Monte and Monte [1986] FamCA 1; (1986) FLC 91-757, the Full Court said that to found jurisdiction under s. 79 in relation to property other than that which had been identified, the trial judge was obliged to make a finding as to the existence and value of other undisclosed property, even though the unsatisfactory nature of the evidence made it necessary to express that finding in the most general terms both as to identify and value.
We confess to some difficulty with this proposition. We should have thought that the Court's jurisdiction to make an order going beyond the identified property arises once there is sufficient evidence to support a finding that the party has not made a full disclosure of his or her assets.
The difficulty then arises as to what order should be made. However, we are troubled by the proposition which seems to arise from Monte and Monte that if a party is either cunning enough or vague enough to cover his or her tracks sufficiently to prevent a Court making a finding as to the amount that has not been disclosed, then the other party fails. We do not believe this to be the law and in so far as the decision in Monte and Monte supports such a proposition, we do not believe that it should be followed.
[17] Weir & Weir (1992) 16 FamLR 154
It is almost impossible to come up with a rational solution but in the end what I intend to do is this.
The known pool if the equity in Property J2 is added is worth $715,757.00.
If the parties’ superannuation is removed it is worth $562,596.00.
If the husband’s furniture and (omitted vehicle) are removed the pool is worth $562,596.00 and I intend to order that the wife receive the whole of this.
This means that the wife is entitled to:
| Description | Value |
| Equity in Property J1 | 189,817.00 |
| Property B Sale proceeds | 88,066.00 |
| Holden (omitted) | 20,000.00 |
| Jewellery | 8,895.00 |
| Equity in Property J2 | 262,173.00 |
| Less Capital Gains tax | -6355.00 |
| Total | 562,596.00 |
The husband will receive:
| Description | Value |
| Furniture | 11,000.00 |
| (omitted) Motorcycle | 11,000.00 |
| Superannuation | 63,921.00 |
| Total | 85,921.00 plus businesses of unknown value and anything else he has removed from the pool which I cannot trace. |
If the businesses are worth $310,000.00 as the husband asserts and nothing else is missing then he is receiving about 38% of the asset pool when an amount slightly over 50% might otherwise have been ordered in light of his inheritance and the age difference between himself and the wife.
If the businesses are worth $645,425.00 as the wife asserts and nothing else is missing then he is receiving 53.5% of the asset pool which is within a range of just and equitable outcomes.
If the businesses are worth far more and he has got away with removing far more than is represented by the equity in Property J2 then he will be beside himself with glee.
I acknowledge that this is to an extent an arbitrary approach but the husband has left the court with no choice but to proceed in such a way.
I am satisfied insofar as I can be that this outcome is just and equitable. If the husband feels aggrieved that he has been left with businesses and superannuation and the wife with real property and cash so be it; he has only himself to blame.
Orders
Whether the husband should be given the option to acquire Property J1
This question almost answers itself given the way I have worked out the property distribution but in theory the husband could be still given first option to retain Property J1 subject to making a cash payment to the wife so I will deal with the issue of whether the husband should be given first option to retain Property J1.
To give the husband first option to retain Property J1 would not be a reasonable outcome. The wife has lived at Property J1 since (omitted) 2010 when the husband vacated it and there is absolutely no merit in this proposal. As the wife wishes to retain Property J1 I intend to order that she do so.
How the wife is to receive the cash equivalent of the equity in Property J2
The husband and Ms Kershaw are living in Property J2 and it is reasonable to give the husband be given the option of raising the money to pay the wife rather than to order the immediate sale of the unit.
If the amount the wife is to receive had been larger I might have been concerned about whether needing to obtain this money might impact on the husband’s capacity to keep the businesses going, but the husband has been able to draw large cash amounts out of the business in the past and must have a borrowing capacity if he is earning $75,000.00 per annum. There is no reason to suppose that needing to find this money will cripple his business or deprive him of income.
If the husband takes up this option it will leave intact the assets in Ms Kershaw’s name.
The wife sought orders restraining the husband and the companies and Ms Kershaw from disposing of or further encumbering assets until the husband complied with the order for payment and an order for the sale of Property J2 if the husband failed to make the necessary payment.
Both of these proposals are reasonable.
I am satisfied that the husband is the owner in equity of Property J2 and there is no reason why the wife should not be able to have recourse to this readily realisable asset rather than face the uncertainty and difficulty of enforcing the order against the husband personally, with all that may entail in terms of either applying for bankruptcy or applying to have a receiver appointed to the companies so that his interest in the businesses can be realised.
I intend the wife to have the equivalent of the equity in Property J2 as fixed at the hearing; given the behaviour of the husband and Ms Kershaw and the real possibility that the equity in Property J2 does not represent the whole of the money the husband has been able to remove I do not intend that the wife’s entitlement be reduced by the selling costs should sale of Property J2 be required. There is a risk therefore that there may be a shortfall once the unit is sold if the market price has changed or there are substantial selling costs. In that event the wife may need to take enforcement proceedings against the husband but it will be for a greatly reduced amount.
I intend to make orders restraining the husband and Ms Kershaw from disposing of, selling or further encumbering the assets in their name pending payment to the wife. Given their behavior to date the wife needs that protection.
In her further amended application the wife proposed orders that she, the husband and Ms Kershaw have conduct of the sale but I intend to appoint the wife trustee for sale. It is inappropriate to order that the three parties co-operate in the sale when the husband and Ms Kershaw have shown contempt for the wife is their actions in covertly diverting funds. The most likely result of an order that the parties co-operate to sell the property is further proceedings either for enforcement and variation of the machinery orders.
The interests of the husband (and Ms Kershaw as the person legally responsible for the mortgage) will be protected by the fact that the wife will have a trustee’s obligations in connection with the sale.
I also intend to order that the husband and Ms Kershaw vacate the unit within 56 days of the orders should sale be necessary, again to ensure that the sale proceeds smoothly and without the wife possibly being subjected to offensive behaviour by the husband or obstruction by the husband and Ms Kershaw.
I intend to order that any amount owing by the husband to the wife bear interest at the rate prescribed in the Family Law Rules but I do not intend to make any specific orders for enforcement of any remaining asset. If the husband fails to meet his obligations then the wife can choose the most appropriate enforcement option and make an application to the court as necessary.
I do not intend to consider the costs applications made by each of the parties. If any party wishes to seek costs then they will need to file an application in a case together with an affidavit setting out the amount claimed and the basis of the claim within 28 days of the date of these orders, as prescribed by the Federal Circuit Court Rules.
For all of the above reasons the orders of the court shall be as set out at the beginning of this judgment.
I hereby certify that the preceding three hundred and five (305) paragraphs are a true copy of the reasons for judgment of Judge Terry
Associate:
Date: 14 October 2015
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