Menotti and Lamb and Ors
[2017] FamCA 918
•14 November 2017
FAMILY COURT OF AUSTRALIA
| MENOTTI & LAMB AND ORS | [2017] FamCA 918 |
| FAMILY LAW – PROPERTY – contentious issues about what happened to funds from sale of assets during marriage – arguments about whether discovery had been provided – where dispute is complicated by wife’s state of health which requires vigilance as to her knowledge of events – where wife issued proceedings in a State Court under the State Trust Act for control of trust but judge transfers to this court – husband then seeks costs – justice and equity requires orders but some adjustment in wife’s favour. |
| Family Law Act 1975 (Cth) Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth) |
Trustee Act 1936 (SA)
| Kavan & Mallery and Anor (2015) FLC 93-651 |
| APPLICANT: | Ms Menotti |
| RESPONDENT: | Mr Lamb |
| INTERVENOR: | B Pty Ltd, C Pty Ltd, D Pty Ltd |
| FILE NUMBER: | ADC | 465 | of | 2008 |
| DATE DELIVERED: | 14 November 2017 |
| PLACE DELIVERED: | Melbourne |
| PLACE HEARD: | Adelaide |
| JUDGMENT OF: | Cronin J |
| HEARING DATE: | 15, 16, 20, 21 June; 23, 24, 25 August 2017 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Lindsay |
| SOLICITOR FOR THE APPLICANT: | Starke Lawyers |
| COUNSEL FOR THE RESPONDENT: | Mr Jackson |
| SOLICITOR FOR THE RESPONDENT: | Jordan & Fowler |
| SOLICITOR FOR THE INTERVENOR: | Jordan & Fowler |
Orders
The husband and the wife in their capacities as directors of B Pty Limited forthwith sell the B business and upon the sale, the proceeds be applied:
(a)first, to pay all commissions and expenses directly associated with the sale;
(b)secondly, to pay all legal expenses arising from the sale;
(c)thirdly, to pay all creditors of the business (other than the husband and the wife) but specifically the Australian Taxation Office obligations of the business;
(d)fourthly, to pay all staff obligations (other than the husband and the wife) of the business; and
(e)fifthly, to place the balance into a trust account operated by the solicitor for the husband, in the joint names of the parties, to be divided as set out in paragraph 12.
For the purposes of implementing the sale of the business, the husband forthwith nominate three business brokers and no later than 14 days after being so provided with those names, the wife choose one broker.
For the purposes of implementing all necessary conveyancing work required for the sale of the business, the husband nominate three solicitors and no later than 14 days after being so provided with those names, the wife choose one solicitor from those nominated.
Each of the husband and the wife do all things required to give proper instructions to those professionals engaged for the purposes of the conduct of the sale of the business.
For the purposes of assessing the price to be sought for the sale of the business, in default of agreement, the broker nominated by the wife as appointed by paragraph (2) of these orders, shall nominate the relevant price at or above which, the business shall be sold.
If the parties do not agree upon the relevant price determined by the nominated broker, provisions of paragraph (7) shall apply.
Liberty is granted to both parties to apply for orders arising from any disagreement as to:
(a)the terms and conditions of the sale of the business referred to in paragraph (1) including any dispute as to the determination of the sale price;
(b)the correctness or otherwise of the creditors in paragraph (1)(c); and
(c)the entitlements of staff to be paid according to paragraph (1)(c).
That until 4.00pm on 16 December 2017, the wife may elect by writing to the solicitor for the husband, to retain E Street, Suburb E at a fixed value of $1.4 million, but with an encumbering mortgage of $513,842. If she so elects, the husband forthwith transfer to her any interest he has in Suburb E within 30 days thereafter but simultaneously with such transfer, the wife provide to the husband evidence of the mortgagee’s discharge of the husband’s obligations under any mortgage encumbering Suburb E. Thereafter, the sum of $886,158 shall be notionally added to the amount held in trust under paragraph 1(e) of these orders.
That upon the settlement of the sale of the business and the completion of the requirements of paragraph (1), the wife’s taxation liability fixed at a maximum of $216,915 be paid from the joint trust funds.
Upon the payment of the wife’s taxation liability referred to in paragraph (9), the balance of the trust account, to which shall be notionally added the sum referred to in paragraph (8) if the wife has so elected, and completed the requirements of paragraph (8), be distributed in accordance with paragraph (12).
If the wife has not completed the requirements of paragraph (8) by the date there set out, or by such extended time as the parties agree, the husband and the wife forthwith place E Street, Suburb E on the market for sale, and upon the sale, the proceeds be applied:
(a)first, to pay all commissions and expenses directly associated with the sale;
(b)secondly, to pay all legal expenses arising from the sale;
(c)thirdly, to discharge the mortgage encumbering the Suburb E property to a maximum sum of $513,842 (with the wife being responsible for any sum greater than that amount); and
(d)fourthly, to place the balance thereafter into the trust account referred to in paragraph (1)(d) hereof.
After the settlement of the sale of the Suburb E property and the business, and the completion of the requirements of paragraph (9), the net balance shall be divided as to:
(a) 65 per cent to the wife, less the costs referred to in paragraph (13); and
(b) 35 per cent to the husband, plus the costs referred to in paragraph (13).
The wife pay the husband’s costs of the … Court proceedings in an amount to be agreed, and failing agreement, as assessed by a registrar of this court.
Save as to costs, all applications are otherwise dismissed.
Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Menotti & Lamb and Ors has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).
| FAMILY COURT OF AUSTRALIA AT |
FILE NUMBER: ADC 465 of 2008
| Ms Menotti |
Applicant
And
| Mr Lamb |
Respondent
REASONS FOR JUDGMENT
Mr Lamb (“the husband”) married Ms Menotti (“the wife”) in 1994 after they had lived together for about eight months. Two children were born during the marriage; they are now 23 and 21 years respectively.
The parties separated in 2005 but resumed living together the following year. During their resumed cohabitation, the wife obtained a divorce (according to the husband, without his knowledge) but the parties remained together until their final separation in February 2014.
Arising out of that final separation is the parties’ property and spousal maintenance dispute which was conducted over a number of days even though their property interests are modest. The slowness of the hearing was predominantly as a result of two things. First, the wife has a disability which affects both her speech and her memory. Secondly, she made a number of sweeping allegations which had to be traversed sequentially. The complications in this dispute only arose by the way the litigation was conducted.
The wife’s injury
The wife was seriously injured in January 2005. Initially, she was the subject of a state guardianship order but that was later discharged and, for a while, the husband had a joint power of attorney with a solicitor to care for her interests. Whilst the husband said that the wife “insinuated” that he was responsible for her injuries, he was not cross-examined along those lines. The wife led evidence in the most vague and general ways (see [27] and [29] of her trial affidavit) but the insinuation or inference ultimately does not justify a finding of wrong-doing on the part of the husband.
Background to the ending of the relationship
There had been problems in the relationship but their relevance remained obscure. Indeed, at [33], the wife said that although she and the husband separated “again” in 2005, she began the divorce proceeding in 2008. As best I can discern, they had resumed living together in 2006 and were still together at the time the divorce application was filed in 2008. That situation continued until February 2014.
The discontinuance of proceedings
The wife issued financial proceedings in May 2014 and at paragraph [41] of her affidavit in the present proceeding, she said:
Whilst I was of the belief that matters had been progressing, in 2015 I became aware that solicitors acting on my behalf had received an email sent from my email address advising that they were to discontinue proceedings. Therefore on 2 July 2015 a Notice of Discontinuance was filed on my behalf. I deny sending any correspondence to my solicitors asking that those proceedings be discontinued. The husband and I had not reconciled.
There was no evidence about whether her own solicitor made any inquiries of her as to the nature of the reasoning behind the discontinuance. She said she was not aware of the email until her solicitor told her and it was only when she saw the email that she told him that she disputed she had sent it. It was not put to the husband that he was the author of the email but the inference is that he was. I do not accept that because of the wife’s limited memory recall.
The email was mystifying but on 1 July 2015, the wife’s solicitor and the husband’s counsel appeared before McClelland J. His Honour ordered:
The matter is stood over generally pending the parties filing Notices of Discontinuance in their respective applications.
On the following day, 2 July 2015, the wife’s solicitor signed a Notice of Discontinuance and filed it.
There was no doubt that the wife was of the view that her proceedings had been discontinued by mistake, but curiously thereafter, she did nothing further for twelve months. At no stage did she revive the proceedings. She said she told her solicitor that she wanted to proceed but she “got overwhelmed and confused”. She said she was under pressure in “putting the jigsaw puzzle” together. At the same period of time that all of this was happening, the wife had the assistance of a Mr F acting as her attorney under power. Why he took no action, is equally perplexing.
Initially as the trial began, the wife’s solicitor was a deponent in an affidavit the wife wanted to rely upon at trial. It was soon obvious from cross-examination of the wife that there were to be significant criticisms of the wife’s solicitor’s role in the preparation of her case. At the close of her case, her counsel said that she no longer relied upon that affidavit. Apart from anything else, that left the issue of just why these proceedings were withdrawn in 2015, unresolved. In many cases, that may not necessarily be relevant but here, the wife makes serious allegations against the husband many of which, as will be seen below, were of no substance. The withdrawal of the proceedings in 2015 and the subsequent delay, only adds to the intrigue but did not assist in the ultimate determination.
The assertion of the wife about the discontinuance appears not to have been the subject of police investigation. The parties were not living together in 2015 and there was no plausible evidence to indicate how the husband could have accessed the wife’s email address. There is no logical reason why, if the husband did take the step that the wife seems to infer he did, she took no steps to rectify the problem. What occurred was that the husband then had to issue an application for property settlement.
Because of the 2008 divorce, the husband’s application for property division was well out of time and required leave under s 44(3) of the Family Law Act 1975 (Cth) (“the Act”). Even there, the wife’s position was confusing.
Leave out of time
On 28 July 2016, at a management hearing, Austin J noted the consent of the parties for the matter to be set down for trial. It seems that the proceedings had come so far along the litigation pathway without the issue of s 44(3) of the Act being contemplated. It is unclear how, but it was raised at that management hearing. There is a notation to the July 2016 order that the parties consented to the continuation of the proceedings notwithstanding their divorce on 25 March 2008.
At the July hearing, a Mr G appeared on behalf of the wife and told Austin J there was agreement to proceed out of time. The wife had no recollection of speaking to Mr G although she said she was aware of both the hearing before Austin J and Mr G, having met him twice. The transcript of the July hearing shows that there was a consent by the wife under s 44(3) of the Act for the application to proceed out of time. That also makes sense because the wife needed a resolution of the unresolved property dispute.
For reasons that also remain unclear, the s 44(3) order was not made on 28 July 2016. Rather, Austin J made an order for the parties and their legal representatives to appear four days later by telephone. Four days later, a Mr H appeared for the wife. Notwithstanding what his Honour was told four days before, Mr H opposed the s 44(3) application. His Honour granted the husband’s application. In the final trial, when the wife was asked why she had opposed the extension of time, she said that Mr H ignored her instructions. This was an example of either the wife’s medical problem creating confusion about her instructions or poor management by her lawyers who knew of her health.
Intriguing and unsatisfactory is that on the same day that the case was before Austin J, the wife issued proceedings in another Court to attempt to gain control of the business which was a major asset of the parties. Ultimately, those proceedings were transferred back to this court by Hinton J. When cross-examined, the wife was not able to explain why that action was taken. The sequence of events is such that I am satisfied that the state Court was not aware that there was a simultaneous hearing in this court. All of this added to the complexity and cost of these proceedings particularly for the husband.
That cost becomes an issue because the husband seeks costs for what was an unnecessary, if not futile, exercise save that the wife had limited success in relation to one discovery matter.
One significant witness in these proceedings was Mr F. He was an acquaintance of the wife because she had known his wife. He held a power of attorney for the wife although the circumstances of that were troubling because the wife’s solicitor encouraged it and drew the document yet, I find Mr F’s role was blurred between agent and attorney.
Counsel for the husband focussed on Mr F’s role. By background and profession, Mr F had been a chartered accountant but stressed that he had not been involved in that profession for some time. The executed power placed him in a position where he was responsible as the wife’s attorney to make decisions yet he distanced himself from that role to indicate that its purpose was to enable him to negotiate and obtain information to assist the wife. Indeed, the invoices he delivered to the wife and which are now the subject of a civil claim he has made against the wife in the Magistrates’ Court, relate to “consultations”.
When the wife was cross-examined about the invoices that were not produced until she was asked to bring them to the court, she was perplexed because she knew that an attorney acting on her power, did not have the right to charge fees unless there was a specific provision in the document. Her knowledge arose from previous employment. She knew that Mr F could not bill her except as to out of pocket expenses. To make the matter more concerning, the invoices were not from Mr F as an individual but rather from his company J Pty Ltd. The wife had not noticed that distinction and was adamant that Mr F was billing her as her attorney. She was charged by J Pty Ltd $400 per hour calculated according to Mr F’s time. That dispute remained outstanding in the Magistrates’ Court but she was unable to say what her defence to the action was.
For his part, Mr F seemed perplexed as to what the problem was but explained that the idea of the power of attorney was that of the wife’s solicitor. He said its purpose was to enable him to have access to banks, institutions and authorities such that he would be able to get information. He saw himself as advising the wife and assisting her particularly as to the problems that she was having associated with access to information about the business. When Mr F was asked why a general authority rather than a power of attorney might not have been sufficient, he was unable to assist. The absence of the wife’s solicitor as a witness added to the intrigue because he presumably would have been able to say why the idea of the power of attorney was so important particularly in circumstances where he must have known that Mr F was going to charge significant hourly rates for fees. It is equally important because Mr F was adamant that despite the wife had health problems, she was able to make decisions and indeed had done so. One might well wonder why she needed to execute a power of attorney.
In respect of proceedings in the Supreme Court of South Australia, Mr F was at pains to point out that he was not a lawyer and had relied on legal advice. That advice had encouraged the proceedings including the swearing and filing of an affidavit in which he was the deponent. The proceedings were for the appointment of an inspector and trustee for the business. Mr F was also at pains to point out that the wife was at all times aware of what was happening and that she made the final decision.
Whilst that may be so, there are two significant features of the Supreme Court litigation. First, Mr F (and presumably the wife’s solicitor and counsel) was aware of this court’s proceedings as well as its jurisdiction to deal with the same matter. Secondly, Hinton J considered this court was the appropriate forum for the determination of the issue, a fact which was indeed, the husband’s position in the Supreme Court.
When the wife was cross-examined about the Supreme Court proceeding, she acknowledged that it had cost her about $100,000 (leaving aside any cost to the husband). In the light of the ultimate determination by Hinton J that the proceeding was more appropriately dealt with in the Family Court by virtue of it being a matrimonial cause, the question must arise as to the sense in the action which could have otherwise been brought before this Court at time when there were extant proceedings and the matter was also before Austin J in relation to setting the matter down. Mr F was at pains to point out that one of the benefits of the Supreme Court proceedings was that he was able to get documents from the business which he might not have otherwise got from the husband. That explanation is without merit because the proceedings were extant in this court and discovery could have been sought there.
Austin J was not told of the Supreme Court proceedings and no explanation was given to this court why that occurred where the wife’s solicitor seems to have been involved in both matters even if it was on counsel’s advice. The issue might remain mysterious but the question is what the wife knew. When she was challenged about what she knew, the wife was unable to assist. I find she had poor memory throughout this trial but I accept the unequivocal view of Mr F that she knew what she was doing when the Supreme Court proceedings were instituted. That is significant in respect of the husband’s application for costs because, when the proceedings were transferred by Hinton J, they were thereafter discontinued by the wife.
The parties as witnesses
On any view, the wife struggled as a witness. Her capacity to concentrate was limited and her recall of events, including those from her own affidavit, was poor. Cross-examination was slow and she appeared more alert in the mornings and very tired in the afternoons. Breaks in sitting times were a feature of the hearing but the very nature of the disputed facts meant that the husband’s counsel had to slowly take her through facts with corroborating documents. Even with those documents in front of her, she struggled to process the information.
The slowness of the cross-examination arose because of the assertions she made. Many were not forensically sound. The wife was not an aggressive or difficult person to deal with. Were it not for the strident and confident evidence of Mr F, I would have found the wife gullible. I accept his evidence that despite unequivocal evidence of her information-processing problems, she followed advice, signed documents and pursued remedies in respect of the control of the business. However, as the various examples below show, her due diligence was lacking or lacking on the part of those advising her.
The husband on the other hand was a gregarious man who in recent years has been a businessman. He prepared his case well. He was closely cross-examined about a lack of adequate discovery but nothing bore out that accusation. Nothing I heard (save perhaps one issue relating to his having signed the wife’s name on an occasion) indicated that he was untruthful or had set out to mislead the court. He responded to accusations with plausible explanations. Suggestions of impropriety against him by the wife turned out to be examples where she doggedly stood by her view that he was not truthful yet those allegations showed her as being less than frank (for example, in relation to an issue about her jewellery). Those same allegations showed she was content to assert dishonest conduct where she was the person who caused the problem (for example, the European motor vehicle disposal). The two examples just given are highlighted below.
In final address, counsel for the wife submitted that the court could rely on the wife’s affidavit of evidence in chief where she had deposed to being “in the dark” in relation to the husband’s purchase of various real properties. At [56] of her affidavit, the wife said that she was “aware” that in December 2007, properties at 1 and 2 K Street, Suburb L were sold resulting in the net proceeds of the sale of $1.9 million. She then said:
I say however that I never received any of the benefit from the sale.
The final address was drawn upon the wife’s evidence which I consider to be unreliable. As an example, 1 and 2 K Street had been purchased and registered in the name of the wife. They were purchased from a company belonging to the wife’s mother. Whilst the wife maintained in her evidence that she did not receive any benefit from their sale, she ignored the husband’s evidence that the proceeds were utilised to purchase vacant land in Queensland for $1.6 million upon which a substantial three storey home was built and into which the parties moved, in February 2008. That was well before separation. The husband deposed to the total cost of that property being $2.8 million. For the wife to say that she received no benefit was perplexing. Whilst her memory might have been poor, proper discovery must have uncovered that issue. Importantly, the conveyancing in respect of this transaction was said to have been undertaken by the wife’s business partner and that is where the paperwork was undertaken. When the husband was cross-examined by counsel for the wife in June 2017, he provided the details in response to an open ended question of what had happened to the $1.9 million proceeds. Significantly, counsel asked the husband whose name the property title had been purchased in in Queensland. He responded that it was that of the wife. It is perplexing that these facts were said to be contentious.
Further, the husband set out in his affidavit that the property was initially rented out after the parties returned from Queensland and was eventually sold in early 2011 for approximately $2.1 million. I am very conscious that there was considerable contention about the question of whether or not the husband had adequately disclosed documents relating to B Pty Ltd and its trust but these documents presumably would also have been readily accessible through accountants in the same way that the K Street documents were through the wife’s former business partner and/or title searches. Bank records relating to the conveyancing transactions should have been easily obtained.
At [29] of his submissions, counsel for the wife submitted that the wife’s lack of knowledge relating to purchases of the parties’ Suburb E properties was about them having been registered in the husband’s sole name. She had asserted at [52] of her trial affidavit that “unbeknown” to her, the properties were registered in the husband’s name. The husband’s evidence was that he purchased office premises at Suburb E although he thought through M Pty Ltd and that they had been bought and sold in a relatively short period of time. This is another example of a transaction that could easily have been checked. Because the wife was the one making the assertion, to the extent that it was intended for the court to draw an inference that the husband had done something unilaterally and inappropriately, she should have been in a position to prove that. Counsel for the wife in cross-examination took the matter no further. Accordingly, this particular assertion about the wife being “in the dark” has no merit.
At [30] of his submission, counsel for the wife submitted that the wife’s evidence at [53] of her affidavit complained that the husband had purchased a property at N Street, Suburb O in his sole name. What she said was that she was aware that in June 2004 the husband purchased that property and corroborated that with an historical search. The husband agreed that he had purchased the property but it was resold 18 months later. This too was during a period of time prior to her injury but certainly subsequent to separation the first time in July 2003. It was the husband’s evidence that he had purchased the property because he thought he might need to live there. The intrigue surrounding this accusation was of no assistance at all and again, the reference to the wife relying upon historical searches, indicated that she had not done anything further to work out what actually happened. The husband’s evidence therefore was not the subject of challenge and I am perplexed as to the substance of the submission.
The examples shown above were put forward by the wife if not for the purposes of showing that the husband had money hidden somewhere (and if that was the case she had failed to do so) or alternatively, that she intended the court should not trust the husband with respect to the sale of the business and consequently, a trustee should be appointed. She relied upon three examples which were set out in paragraphs [52], [53] and [56] of her affidavit all of which were comprehensively answered by the husband and not the subject of serious challenge.
To the extent that these examples showed that the husband ignored the interests of the wife or that he might now prejudice her entitlement in respect of the sale of the business, they could hardly be examples that justify such an assertion.
Thus, if there is a disputed fact, it is not so much that I have had to make a finding based on credit but rather that the husband proved convincingly that his version was correct.
The sale of the business
It is not contentious that the business is to be sold but it was submitted on behalf of the wife that
for the purposes of the court assessing the parties’ respective contributions and their respective future needs and resources, the court needs to at least consider an estimate of its likely sales price.
Thus it can be seen that the parties wanted an assessment of an award prior to the sale being concluded.
It was submitted by the wife that the husband’s evidence about value should not be given weight. The evidence of the wife was no better. By a process of reconstruction, it was submitted that as the business premises was bought for $1.75 million 4½ years ago, and money had subsequently been spent on it, the value could not be what the husband said which was around $550,000. It was submitted that no weight should be given to the husband’s opinion that the market had collapsed. But, what was the alternative where the wife did not provide any such evidence of substance either?
The wife’s position was that profits were identified but that gives no indication of value. In a bold submission, it was said that for the purposes of assessing contributions and the factors under s 75 of the Act, the wife’s deposed figure of $2 million is “a more realistic version” than that of the husband. That had no merit where there was no admissible evidence to support it. A reconstruction of value in the way the wife presented her case, does not assist. The husband may be correct because the market will ultimately determine the value.
The wife’s case
The wife sought orders that, after the sale of the parties’ business interests and the payment of debt, she retain 80 per cent of the proceeds. She was also seeking to retain the property in which she was living. Not only was that ambitious, it was unrealistic.
When cross-examined about her position as outlined in a minute of proposed order tendered on 21 June 2017, it was clear that the wife was of the view that the husband had significantly more assets than had been disclosed. As the evidence closed, counsel for the wife tendered a “balance sheet” that could not have justified the orders sought in the 21 June proposal. The assets were just not there for division. Counsel properly indicated a written address would clarify the wife’s position.
In the original outline or summary of argument drawn by the wife’s solicitor and dated 14 June 2017, the following encapsulated how the wife was to conduct her case:
·[3] [The business] is conducted by [B] Pty Ltd as trustee for the [B] Trust;
·[4] The sources of finance are uncertain but appear to include:
a. shareholder equity
b.borrowings from Westpac supported by security including mortgage over [Suburb E] home and personal guarantee;
·[9] The husband has refused to produce property accounting records despite the fact they are maintained using MYOB;
·[10] As a result of a Supreme Court action the husband disclosed and produced 990 pages of financial records. The husband did not produce MYOB accounts and general ledgers. It was an act of obfuscation;
·[11] The second affidavit of (the wife’s attorney under power) disclosed that in 2015 husband took drawings of $287,717 compared with $20,213 for the wife. In addition there is an ATO debt which was the subject of a creditors statutory demand for Payment of Debt in the sum of $244,941.16 dated 18 November 2016. The husband did not advise the wife of the debt.
·[14] The financial information provided by the husband in his affidavit 20 to (sic) (presumably 22) March 2017 is inadequate however it appears to disclose a trading profit of about $59,000 during the period November 2016 to March 2017.
·[16] The figures in (various paragraphs of the husband’s affidavit) are unreliable and the reports referred to are an insult and not in the usual MYOB format.
The emphasis in the underlining is mine. It is the obligation of lawyers in an outline of argument to put matters before the court in a summary way to indicate what the case is about. Having regard to the evidence of the husband about discovery and more importantly, his answers in cross-examination, there was no foundation for an assertion that the material he provided was inadequate. To suggest that his affidavit figures were “unreliable” and the reports referred to as “an insult” was unhelpful and pointless. The evidence shows the assertions were incorrect. The court was not helped by the outline.
The outline included a list of assets and liabilities showing the Suburb E home at $1.4 million with a Westpac debt of $500,000 and the business valued at $1.2 million. The only liability referred to was a tax debt of $215,000 belonging to the wife.
There was also said to be minimal superannuation in the husband’s control.
The wife’s evidence
The wife began her evidence by indicating that the material upon which she relied included a financial statement only sworn on 2 June 2017. That was inadequate as it made no reference to such liabilities as her tax debt nor other obligations she had. Things did not get better during the adjourned period of the trial albeit she filed another financial statement. This new one included a list of her liabilities which totalled $191,000. It is concerning however that her debt to her lawyers was shown as “unknown”. Why that could not be calculated remained unsaid but of all of her creditors, that should have been known to her (see Rule 19.04 Family Law Rules 2004). It transpired in cross-examination that of what she did owe, almost $100,000 related to the discontinued Supreme Court proceedings. However, amongst that, she disclosed a claim for $40,000 made against her by Mr F but that was the debt she disputed. I remain unclear of her defence but so too was Mr F.
The whole financial position of the wife was very unsatisfactory because in addition to the liability issue, she made no reference to a pending car insurance claim (she showed motor vehicle as “nil”, other property as “nil”) nor reference to jewellery she had, or had sold, or which had been stolen from her. That was not just an oversight because before the hearing adjourned in June 2017, she acknowledged in cross-examination that she needed to rectify her financial statement. Originally she had said when her evidence commenced, the financial statement was true and correct. No explanation was given for the lack of detail. To accuse the husband of inadequacy only highlighted her own poor preparation.
The evidence of the husband
The husband’s evidence was set out in his affidavit filed 8 June 2017. Much of it was not seriously challenged.
It was the husband’s evidence that at the time the parties commenced living together, the wife had a unit in P Street, some items of furniture, savings of about $25,000 and jewellery. He had a share in a company which was of no value and otherwise nothing else.
In 1994, the husband obtained approval from Company Q to operate his own franchise and a company M Pty Ltd was incorporated with both husband and wife as directors and shareholders.
Also in 1994, the parties’ first child was born and the wife cared for him.
In 1995, M Pty Ltd purchased the first Company Q franchise and the wife sold her P Street unit and contributed $80,000 towards borrowings of $60,000 for the set up cost of the business. Company Q had a formula under which the balance of the purchase price was paid over a number of years and after the first 12 months of trading, that sum was paid out using borrowings from the Westpac Bank.
In 1995, the husband and wife registered D Pty Ltd which became the trustee of a family trust. The parties purchased a property in R Street in the name of the wife. The deposit came from the Company Q franchise and the balance was borrowed by way of mortgage.
In 1996, D Pty Ltd acquired a second franchise for $1.2 million all of which was borrowed.
In 1999, the R Street property was sold and the parties purchased K Street. I have already mentioned that this property was registered in the sole name of the wife. Again, funds were borrowed.
An adjoining block of land to the K Street property was acquired presumably from a company controlled by the wife’s late mother.
In 2001, the wife’s father died and she inherited approximately $2 million which included a property at Suburb S. In the same year, the husband purchased a business in partnership with another man and that was sold for approximately $200,000 three years later.
In 2002, another unit in the same block at Suburb S was purchased and registered in the name of a company of which the wife was sole director and shareholder. It was used as a rental property but the parties also used it themselves.
It was not long later that the wife was seriously injured leading to the order for her guardianship.
One of the Company Q franchise stores was then sold with the settlement of the sale occurring in August 2005 and the net proceeds were almost $1.3 million. Approximately $900,000 of that was repaid to the mortgagee. It was the husband’s evidence which I accept, that the balance went towards mortgage reduction in relation to the parties’ other property. With the sale of the first of the two franchises, the parties’ income was obviously reduced.
In September 2005, the parties separated and the two children remained living with the husband. At that time, whether individually, collectively or through corporate entities, the parties had an interest in one franchise, a house at K Street, the two units at Suburb S and various other peripheral items.
After the parties separated, the wife purchased an apartment, a motor vehicle and undertook renovations to the K Street home which the husband thought had been funded by her inheritance. In the following year, the parties reconciled.
In December 2006, one of the Suburb S properties was sold and the husband was unable to say what happened to the proceeds whilst the other unit remained as a beach house for the parties as well as being rented.
In 2007, the parties moved to Queensland to live. A company Menotti Holdings Pty Ltd was incorporated there and the wife was the sole director and shareholder. A variety of commercial ventures occurred there including shoe retail premises that required acquisitions of the franchise as well as establishment costs. These were conducted by the wife. This period gave rise to a significant dispute about how the wife’s taxation liability arose and why the husband had not managed somehow to deal with it. The business activities of the wife were not successful and the unchallenged evidence of the husband is that the business in Queensland was propped up with payments to meet “huge cash shortfalls” from D Pty Ltd. He asserted, and the wife did not deny, loans were made of approximately $300,000. Eventually, the enterprise was closed down and the losses were substantial.
In July 2008, the husband and the children returned to South Australia and the wife remained in Queensland. Whilst there were problems in the marriage, the husband did not consider the marriage at an end. A property that the wife had purchased in Queensland was sold in December 2008 and it incurred a loss of $500,000 taking into account purchase costs and alterations. Ultimately in 2009, the wife returned to South Australia. That left a property remaining in Queensland which was rented out and not sold by the wife until 2011.
In July 2009, the parties jointly purchased vacant land at E Street upon which a townhouse was constructed at a cost of approximately $1.3 million. That was funded by mortgage. It was occupied by the parties from April 2010.
In December 2012, the second franchise was sold for $4.478 million of which, after payment of liabilities, $2.7 million was left over and those funds went into the account of D Pty Ltd. That enabled the parties to clear two commercial bills which totalled over $500,000.
In February 2013, B Pty Ltd was incorporated with both husband and wife as directors and shareholders. The idea was to purchase the leasehold of the business. That was undertaken for $1.75 million plus stock of $230,000 but another $350,000 was spent on fit out of the business premises. This is the business which still remains and over which the parties are in significant dispute.
In 2013, a company T Pty Ltd was incorporated for the purposes of starting an ice cream parlour but that was unsuccessful and resulted in losses of approximately $60,000. In the meantime, D Pty Ltd had the balance of the proceeds of the sale of the franchise and that money was earning significant interest. The purchase of the business required a payment at settlement of just under $2 million and that came from D Pty Ltd. Thereafter, substantial upgrades were made to the business at a cost of something in the vicinity of $200,000 and that money too came from D Pty Ltd.
From the husband’s perspective, when the parties finally ended their relationship, they had the property at E Street, the unit at Suburb S and the business. There were also motor vehicles, jewellery, watches and furniture and effects. There was a small amount of superannuation. By this time, the parties had lent to a common friend, Ms U, the sum of $90,000 to assist her in relation to her family law proceedings and that money appears to be conceded by all parties as having been lost. Ms U features again below in these reasons.
Cross-examination of the husband
Having regard to the wife’s outline, it was clear that the husband was accused of not just wrongdoing but also misleading the court. It is therefore convenient to look at how the wife’s counsel cross-examined him.
In a broad brush way, it was put to the husband that he had failed to disclose documents and he disagreed. It was suggested to him that he controlled the business trust but he indicated that whilst it was jointly conducted, the accountant had sent letters to the wife to attend meetings but she had not attended. Decisions were then made in her absence.
The husband confirmed that up until October 2016 when the proceedings in the Supreme Court were held, he had not provided documents about the trust to the wife. It was not entirely clear to me why, as a director of the trustee company, the wife had not been able to obtain them nor what applications were made in this court for discovery. It was put to the husband that the Supreme Court had ordered that he provide documents concerning the trust and he agreed that that had occurred and that he had then complied.
Sequentially, the husband was asked about various documents such as receipts and bank account details and he indicated that he had produced them all. At one point, when accused of not providing documents, he pointed to a bundle of papers that were sitting on the bar table in front of the wife’s counsel.
He said that when he was requested to produce documents concerning the B Trust, he did. Nothing that was then put to him indicated otherwise.
The husband was also challenged about the completion and provision of BAS statements and he again said that all had been provided. Nothing was produced to show that was incorrect and I infer that these questions were all going to the husband’s credit. If the wife was not aware of these documents provided by the husband, it was perplexing why she had not looked at them.
It was suggested to the husband that in his capacity as a shareholder of one of the companies conducted by the parties, he had not “consulted” the other “shareholder” about decisions that had been made. Again, his response was that he had. He said that documents were prepared but the wife did not sign them.
A significant part of the wife’s case revolved around tax documents that were said to have been sent to a post office box. It was asserted to the husband that this post office box address was given by him to the Tax Office as the wife’s address. He denied that constantly indicating that it was a jointly owned box and the wife had access to it. As the issue was not comprehensively explored by production of documents, and combined with the wife’s poor memory, I can only conclude that if the husband did access the post office box, he did not steal the wife’s mail. What happened to it remains a mystery.
It was then put to the husband that the wife did not receive any “actual income or money” from the companies but he denied that too. He pointed to the fact that the wife had access to a credit card and after April 2017, a debit card. He was questioned about the income splitting arrangement from 2007 to 2013 and he indicated that it was all done by accounting on a “needs basis”. In response to a suggestion by counsel for the wife that the wife had received “no actual money” between 2007 to 2013, the husband’s response was that such a suggestion was “ridiculous”. I agree.
This probing of the husband was perplexing because to the extent that it was suggesting that his obligation relating to discovery had been incomplete, the evidence did not support such a conclusion. To the extent that it was being suggested that he had manipulated the accounting in some way, no evidence was presented to indicate that was the case. To the extent that it was suggested that the husband had manipulated the income stream of the business or the capital flows and proceeds of previously owned assets to his own advantage, the evidence to support such an allegation was not presented and the figures as to what the parties ultimately ended up with in their respective “balance sheets” does not support such a contention.
It was put to the husband that in relation to the purchase of the E Street property, the wife was not even given notice about its purchase and that the husband had been secretive. The husband denied that indicating that he sat at the business with the agent and they discussed it. I have no reason to believe that the wife was not there and involved. No evidence was called by the wife to suggest the agent acted on the husband’s instructions alone.
The parties owned two Company Q franchise businesses and there was a methodical cross-examination of where the proceeds went upon their sales. Nothing I have seen indicates that the husband had not adequately explained the disposal of proceeds. It was suggested that the husband “exclusively” retained the Company Q proceeds and that the wife was not aware of what he was doing. He denied that was the case. Keeping in mind the medical condition of the wife, her evidence on what actually occurred at the time is unreliable.
Various documents had to be signed for the purposes of disposal of assets. Some of those assets were in the wife’s name. It was not suggested by the wife that the husband signed her signature on the disposal of the Company Q franchises. It was put to the husband that there was an offer made by Company Q (the head company) in 2005. That offer was $2.6 million. By inference, the cross-examination suggested that the husband had done something wrong but the property was not sold until 2013. In a very confusing piece of evidence, the husband indicated that one franchise was terminated in 2005 and he was asked by counsel whether that was because of a breach of the franchise arrangement. He indicated that it was not. All of this cross-examination must have been probing for a purpose. At the conclusion of the cross-examination, I was perplexed as to what it achieved. To the extent that this was old fashioned interrogation, it was concerning why this had not occurred over the years since separation and more particularly, in the latter part of 2016.
Having established by cross-examination that the wife did sign various documents, her counsel put to the husband that at times she was “forced” to sign and threatened if she did not. Again in respect of both of those matters, the husband denied that happened. Apart from the wife’s evidence of vague assertion without particularisation, I was unable to see how the assertion had any foundation. In relation to the wife’s evidence, she said:
[19]After the first two years of marriage our relationship was characterised by domestic violence. The husband was extremely abusive, both physically and mentally. The husband would push me, punch me, kick me and pull my hair. I can recall that on one occasion the husband fractured my jaw.
No objection was taken to that paragraph but the wife then went on to say that despite all of those problems which led up to a separation in May 2000, she reconciled. It is hard to see from the cross-examination how that particular period of the parties’ life relates to the financial matters in any event.
The wife again referred to “domestic violence” up until July 2004 but this time, despite similar assertions, no details were given.
As much of this evidence was drawn by a legal practitioner, the court is entitled to expect better.
The wife asserts forgeries
Consistent with the theme of the cross-examination by counsel for the wife, the wife said:
[91]I believe the husband forged my signature on many documents in order to gain access or control over assets in my name and in order to obtain credit for his personal use.
She then produced a bundle of documents but it was not suggested to the husband that they were signed by him. Whilst there may be an inference to be drawn from assertions of that nature, they are serious allegations and need to be proved properly. But matters worsened when the wife gave evidence and it became clear that people with whom she was mixing had taken her money, stolen her jewellery and forged her signature to sell the husband’s motor car and then retained the proceeds. Why the wife had not disclosed that can only be explained on the basis of her medical condition. I accept she was unable to see that she was gullible, but the documents showed the version of events she wanted the court to believe was different. It was disconcerting that the wife acknowledged she had had a problem with a Ms U who had taken her jewellery. There was no reference to that in her affidavit. That did her little credit. I do not know whether these pieces of jewellery were of significant value. No police involvement or insurance claim appears to have been considered. The absence of this evidence compounds the confusion as to what property there is to divide. One must rhetorically ask why this evidence was not provided.
The Westpac Bank money
At [90] of her affidavit, the wife deposed to the following:
On 4 February 2014 a Westpac bank account was opened and frozen in my sole name and the total sum of $300,000 (three separate transactions of $100,000) was deposited into that account. Over the next two days the husband (or his bookkeeper) transferred funds from that account into the joint mortgage of Hyphen Set account.
On any reading of the wife’s evidence, it is not clear who was said to have opened the account nor what she meant by “frozen” but the inference is that the husband had done something untoward. The facts elicited from the wife in cross-examination resulted in an entirely different picture and one that is very concerning having regard to both the wife’s disability but also the forensic investigations that should have been undertaken.
The husband said that it was the wife who opened a new account using the address of Ms U. He said it was the wife who transferred $300,000 out of the Suburb E mortgage offset account which was in their joint names. When the husband ascertained what had happened, he apparently transferred the money back to the mortgage offset account.
When the wife was cross-examined, she was adamant that she simply “froze” the $300,000 because she thought she had to protect it. In reality, that is not what happened. As the husband indicated, the wife opened a bank account and at that time, was in company with Ms U. It transpired that the husband was in Thailand with the parties’ daughter. It was unilateral action by the wife.
The wife went on to say in cross-examination that when she went back to the bank two days later, the funds were “unfrozen”.
Indicative of her memory and processing problems, when it was put to her that she opened the account, she denied it saying that all she had done was frozen “the money”. Because there was a reference to internet banking, the husband had access to all of the accounts of either of the parties with Westpac and he was able therefore to transfer the money back again.
Whilst the reference in the affidavit was to $300,000, there was indeed $310,000 taken and she used the $10,000 for her own expenses. But when she was questioned about whether she opened another account for the purposes of depositing the $10,000, she said she did not know. Her mantra was that she had “frozen” the money for the purposes of protecting it.
The name “Ms U” suddenly began to feature in these proceedings. The wife confirmed that Ms U had been with her at the time this freezing of money occurred. What was not made apparent by the wife and was very concerning was that a further $59,000 was taken on 7 February 2014 by the wife and put into the name of Ms U. The wife was unable to explain how all this came about. She confirmed that Ms U and she were living together because she had been offered a room and when tested as to what happened to the $59,000, all she could say was that she spent the money on “rental”, “groceries” and “petrol”. She confirmed the money was spent with Ms U. This evidence was not just unsatisfactory, I find it unreliable.
That position is compounded by the fact that in May 2014, the wife using a different firm of solicitors, filed an application for exclusive occupancy of the parties’ Suburb E home. In a supporting affidavit she claimed that she had no money. No reference had been made to the $59,000. The wife’s application for that order was unsuccessful.
The V Bank account
It was the husband’s evidence that he gave the wife a card to access for the purposes of her needs. The wife’s response was that she had never had a V Bank card. The account however shows regular deposits and withdrawals. The wife denied that she was responsible for those drawings. There is a string of retail outlets nearby where the wife lived but at best, she said that her daughter used one of the retailers and others she was uncertain about. When it was put to her that perhaps she was of the view that someone else had used it, she responded “perhaps”.
There is no logic in suggesting that the husband kept putting money in this account knowing that someone else other than the wife might use it or in fact make various transactions on the account for the purposes of confusing the wife or making her evidence look incorrect. There is no other plausible explanation than that the husband provided the card whatever it was called and the wife used it. All of this goes to the question of whether or not the wife had funds to support herself in and around the time that she said she had to sell jewellery to provide food.
Other bank accounts
In and around 2015, the wife opened a variety of bank accounts all in her name and all of which had small balances. But in 2014, there was $30,000 in one account. That was there until she went to the W Bank with a “red headed girl” whom she could not name to do some banking and the next day when she checked with on that bank account, the money was gone. She did not know who took it. However, she made an allegation through her solicitors that the bookkeeper of the husband had taken the money on the basis that this person (Ms X) had her password. This was unashamedly an allegation of theft and made against the husband’s bookkeeper, but also by inference, the husband because of his relationship with the bookkeeper. The allegation became serious when the wife made the allegation publicly. At [106] and [107] of her affidavit, the wife confirmed she had raised the missing money with the Office of Liquor and Gambling Commissioner. This had something to do with the transfer of the business liquor and gaming licences and Ms X’s connection with the business. Ms X took exception to the suggestion that she had taken the money and instituted defamation proceedings against the wife. The wife has filed a defence to that action. The wife said that notwithstanding she was present in the Magistrates’ Court in Adelaide when the matter was raised, she had not been told that her own solicitor was also being sued but had apparently not then been joined. Most of this came to light in cross-examination of the wife.
She said she did not know about an apparent suggestion by the magistrate that she was being represented in the defamation proceedings by the solicitor who, although not joined as a party at the stage, was apparently to be joined as a publisher of the statement. The wife had no recollection that the magistrate said he or she thought that if the solicitor was joined, there was a potential conflict of interest. Attached to the affidavit in this court as an annexure was a copy of the impugned email. Curiously, the completion of the affidavit was well after the discussion was said to have taken place in the Magistrates’ Court. It remains unclear what relevance this has to the property proceedings but it was highlighted to show the propensity of the wife to make allegations and for the issue not to be well thought out.
The European motor vehicle
The parties each had a European motor vehicle. Of the two, one was a four wheel drive and that was driven by the husband. In May 2014, the wife was asserting that the husband had forged her signature. It transpired that the wife was acting unilaterally in relation to the husband’s car in an incident that did her no credit and which reduced the parties’ assets. A series of documents were shown to the wife.
Whilst the husband was in Asia in February 2014, his four wheel drive was parked outside the Suburb E property. The wife said that Ms U asked her to sign a form so that she could put the vehicle “in storage”. She remarked that she recalled not having her spectacles on when she signed the form but it was her view that the vehicle was subsequently stolen from the storage facility. She said she was told that by Ms U. The documents produced however showed that she signed a transfer of the vehicle to a friend of Ms U who in turn sold it for $32,700. The wife maintained she received no benefit from that money and her response in the witness box when shown these documents indicated that she had been duped.
It is unfortunate that those documents had to be shown to her that way because she otherwise would have had the court infer that it was the husband who was involved in some impropriety particularly in relation to the forging of her signature.
When I asked her whether she needed to see the police, she said she did. When the court resumed in August, the wife had taken no such steps. That is perplexing when the assessment has to be made of what assets the parties had for alteration. The wife has had control of assets which she has given away, lost or ignored.
The hearing on 7 December 2016
Another example of the dilemma as to whether the court can rely upon the wife’s evidence can be found in the orders of 7 December 2016. At that time, there was almost half a million dollars held in a Commonwealth Bank account. By consent, the parties agreed to distribute that money. Paragraph 1 of the orders had a sub-clause that said that $28,245.50 was to be given to the wife as either an interim property settlement or interim spousal maintenance, the detail of which was to be determined at trial. Paragraph 5 of the order said that the wife had to pay the Westpac Group from her funds enough to discharge what seems to have been some form of lease. When the wife was cross-examined about not having done so, she said that she had not known what to do with the money when she received it so she kept it in her account. That was quite remarkable because she received it from her solicitors who had represented her and negotiated the consent orders. The debt related to the motor car in her possession.
One might then query what happened to the lease. Without any further indication or correspondence between solicitors, the wife volunteered that the amount had been paid out by cash given to her by her uncle. She was challenged about what that was all about and she indicated that it was not a loan so I have concluded that it was a gift.
What then happened to the money from the hearing in December 2016? The wife volunteered that it remained in her bank account. Cross examination then led to the question of what documents about these issues she had produced in discovery. It transpires that documents were not produced until the hearing. The whole situation was unsatisfactory in circumstances where it was the husband who was accused of failing to discover documents. Indeed, it was the wife who was caught out. Had the husband’s counsel not stumbled on the answer, the court would not have known that the car was unencumbered.
A car accident
It transpired that the wife had a car accident earlier this year and when the damage was assessed, the insurer decided that the car was of no value. At the time of trial, the proceeds of that claim had not been paid but the wife only then volunteered that the wreck of the car was still parked out in the street near her home. The lack of disclosure was perplexing. All of this had to be elicited from cross-examination. The husband seemed content in the end for this money to be ignored.
Jewellery
I have already mentioned the wife’s unsatisfactory disclosure about her jewellery. She had significant jewellery as a result of an inheritance. She conceded that Ms U had taken that jewellery; indeed she used the word “stole” in relation to it. None of this was set out in her affidavit. What she told the court at [127] was:
At times I have been unable to purchase bread and milk, and consider buying food and paying utility bills and loans a priority over private health insurance. I have had to resort to selling jewellery inherited from my mother in order to buy groceries for the family and pay for electricity and water..
No reference was made to her attempts to get the jewellery back nor to itemize or value that which was lost. That emerged in cross-examination but there was no indication in the financial statements that she hoped to recover any of her jewellery from Ms U.
There was jewellery that appears not to have been stolen and which the wife has recovered including “wedding rings and a sapphire ring”. That was placed in a vault. No reference was made to this asset in the wife’s material.
The wife well knew of this issue because she was able to recall how she pursued the jewellery. At a time prior to the breakdown of her relationship with Ms U, she took the jewellery to a specific property in Suburb Y where Ms U and then her husband had lived. She said that her attorney under power, Mr F, later made an appointment with the husband of Ms U to get the jewellery back but Mr U claimed that he did not know where the jewellery was. Curiously, when the wife was asked whether she had required Ms U to get the jewellery back, her response was that she and Ms U were not then (or now) talking and therefore, pursuit of its return had not taken place. It appears she did get some back. When asked whether or not she had sold any jewellery, she volunteered that she had. None of that money appeared in her financial statement as an asset having been disbursed. Whilst it may have been that she was referring to the jewellery sold above, I found her evidence very unsatisfactory and very confusing. The court relies upon financial statements being prepared accurately and even given an opportunity to rectify the problem, over a space of some weeks, that issue was not properly addressed.
This is another example of the wife’s poor memory but also lack of focus on the issues that were relevant.
Watches
It was the husband’s evidence that he had a number of watches and that the wife had control of them. The wife was not able to say what happened to them. When it was suggested to her that the husband had ten watches, she said she had not taken any notice. I am not in a position to say that those watches still exist because the wife’s response was that she had no idea what happened to them. That said, I am satisfied that these watches were under the wife’s control in a safety deposit box at some stage.
The wife’s directorship of companies
The final submission of the wife asserted that the husband made unilateral decisions. It was put to him in cross-examination that he had forged the wife’s signature and whilst he conceded that he had signed some documents on behalf of the wife, the matter was not pursued further. There is no evidence upon which I could make a finding that the husband was malevolent or that the wife was prejudiced. To the extent that the wife asserted at [74] that after her medical incident in 2005, the husband did not inform her of what he was doing, I could not be confident that her evidence about that was correct having regard to her poor recollection of events even as she was giving evidence. When assertions going back that far were put to the husband, he simply denied them and the wife was bereft of any evidence to show that the husband was untruthful.
At [78] of her affidavit, the wife said that she did not know whether she was a beneficiary of the various trusts that the parties or either of them conducted as she had not been provided with “all trust documents”. She went on to say that she feared the husband had complete control of the trusts and to that extent, a subpoena had been issued for production of the documents. Why the discovery issue had not been clarified prior to the hearing bearing in mind how long this case had been extant in the system, was unclear. It is apparent from the evidence that in the Supreme Court proceedings, the husband was required to produce documents and on what I can glean, he did so. There was the hearing before Austin J in 2016 and also before me in 2014. To the extent that the wife has issued a subpoena for the production of those documents, the subject was not raised again. Just how some of these trusts operated and their importance remains a mystery. Thus, just what prejudice there was to the wife from decisions said to be made by the husband and what inquiries she made of the husband’s accountant were all left unsaid. It is not the function of the court to guess. Those matters should have been pursued and in my view, there had been plenty of time for that to occur.
It was submitted by the wife that the husband had not produced minutes of meetings of the corporate entities and trusts but perplexingly, this was not the subject of any discovery application at least before me and only arose in cross-examination. It is odd that the wife went to the Supreme Court about corporate issues yet her complaint about the lack of discovery only arose in cross-examination in this court. It was not suggested that the wife was precluded from access to the banks and indeed, she had no difficulty navigating the banking system to set up accounts and indeed remove money. I therefore reject the suggestion that the onus lay with the husband to produce all of the documents at trial.
The point was taken up again at [38] of the wife’s final submission in saying that Mr F had received financial documents relating to the trusts which were different to those in the ultimate possession of the husband. The conflict in this evidence was disconcerting. Mr F had possession of a trust financial statement taken from an annexure to the husband’s affidavit whereas the financial ultimately signed for tax purposes by the trust was entirely different. As this became apparent at the conclusion of the trial, the parties were left to investigate the discrepancy. In final submission, counsel for the wife submitted that no explanation was provided to the wife or to the court for such an extraordinary difference. Indeed, an explanation has been given. Attached to the final submissions of the wife is an email dated 14 September 2017 together with an email from the solicitor for the husband addressed to the solicitor for the wife dated 15 September 2017 enclosing the accountant’s explanation for the discrepancy. The submission by counsel for the wife was dated 1 September 2017 and filed that same day. It was not filed by counsel but rather by his instructing solicitor. The explanation from the accountant arrived two weeks later but over a month went by and nothing further was heard from the wife. I presume therefore that the explanation has been accepted.
The accountant for the B Trust said that the amount put into the original draft which was annexed to the affidavit was put there “in error”. The entry was later “reversed”. A further explanation was given as to where the otherwise controversial entry amount was recorded but the absence of further submission from the wife has left me with no alternative other than to accept that she either accepts it or it is no longer controversial. The wife had every right to be a participant in the signing off of the financials associated with those entities.
This particular discrepancy had tended to show that the husband had received a benefit of something in the vicinity of $134,000 which, on the face of what I have just mentioned, was not correct. All of this added to the confusion and takes the matter no further.
Conclusion as to the allegations of the wife
The vague assertions of the wife in their broad brush way such as violence and forgery of documents along with obfuscation in discovery, are all without evidentiary foundation. It is the responsibility of the wife to establish those. The various actions in relation to the bank accounts, the jewellery, the motor vehicle and the husband’s watches, all leave me with the conclusion that the wife’s evidence is not accurate and that I cannot rely upon her assertions.
What assets do the parties have?
Much of this litigation focussed on what the parties did not have or what they did have but which seems to have vanished. Ultimately, the “balance sheet” of the wife attached to her counsel’s final address and the assets referred to in the final address of counsel for the husband are the best indication of what property interests the court can alter.
Reference to “add-backs” for legal costs were unhelpful as I have no clear understanding of how the costs were incurred and having regard in particular to the way the wife conducted this litigation, I would not be prepared to confidently say some of those costs were incurred reasonably. To the extent that costs have not been paid, both parties have that same problem. I accept that each party has incurred significant costs and will have to find a way to pay them.
In the balance sheet provided by the wife, there was reference to the husband’s watch, jewellery and his tax refund all of which amounted to about $23,000. But against that, no reference was made to the fact that the wife still has the damaged car from the accident, possibly the proceeds of the insurance claim and significantly, the uncollected money from Ms U. If I factor in missing jewellery and such other things as chattels, it would be unjust and unreasonable to add in things about which the husband has made adequate disclosure but the wife has not, having regard to the findings I have made about discovery above.
The only sensible approach in this case is to make orders altering the interests of the parties in the E Street property and the B business because I can confidently find they exist.
The parties agree that E Street is worth $1.4 million. It is encumbered by a mortgage which is now agreed at $513,842 to the Westpac Bank. Having regard to the fact that each party is going his and her own way, I see no reason why the wife should not commence being responsible for her own accommodation. There is no clear picture of when the business will sell and settle. As such, money may not be available for some months. As the wife has an entitlement to participate in the trust and decide what distributions should be made, she should be responsible for her own living expenses. In addition, she has the opportunity to pursue Ms U for what she is holding. Thus, the mortgage on Suburb E could be paid or arrangements made for its future payments. The equity in the assets does not justify the wife retaining Suburb E without encumbrance, at least at this stage. I shall make provision in the orders to give the wife an opportunity to elect to keep the property if she can discharge the mortgage obligation.
The wife should have a limited time to elect to retain the E Street property and to make arrangements with the Westpac Bank to take on sole responsibility for the mortgage and thereafter, the notional net equity can be added to the ultimate value of the net proceeds of the sale of the B business. If the wife chooses not to elect to purchase the property, it should be forthwith sold. That course of action would also obviate the necessity for the Australian Taxation Office to be further out of pocket in relation to the liability raised against the wife. It will also end the angst between the parties over who should be paying the Westpac Bank mortgage. Whilst the wife pursues the husband paying the mortgage commitments until the settlement of the sale of the business, I am not satisfied on the evidence that the income is such in 2017 that I could conclude it is appropriate for him to do so. Whilst such an order might be deemed to be the exercise of the power under s 72 and 74 of the Act, despite the extraordinary delays in getting this case to a conclusion, the wife will be in a position to approach the Westpac Bank and give some indication of what she will have as a result of the alteration of property interests and endeavour to convince them that she should be provided with some sort of mortgage entitlement. There is no application for permanent spousal maintenance.
The wife’s tax debt
At [50], the wife’s final submission was that her tax debt of $217,000 was a debt associated with the parties’ income splitting arrangement. It is difficult to find that is the case but there can be little doubt that the debt is long-standing and was not addressed comprehensively by either party. Curiously, the debt could presumably not have arisen unless returns were lodged. Those were not tendered in evidence to indicate when and how the debt arose.
The wife thought that the reason for not filing returns after 2005 until now was that the matters relating to the husband were a “mess”. The evidence however shows that the returns were lodged after Mr F as the wife’s attorney commenced to assist her.
The wife conceded that for the period from 2005 to 2008, property was sold including the relevant Queensland franchise. She confirmed she did not contact the accountants for the husband or those that the business used. The evidence (or its absence) was unsatisfactory but it at least enables me to find what came out of the Queensland venture was used by the parties thereafter in their business activities in South Australia. Obviously, the wife alone could sign returns in her name and there is no plausible evidence before the court to indicate why the returns were not lodged.
It was submitted at [57] of the wife’s submission that insofar as the real income was received by the wife, she was never challenged about it by the husband. This was a reference to what benefits the wife actually received as distinct from those that were recorded in some notional sense in various tax returns. Obviously, having lodged the returns, she gleaned the relevant information to be disclosed to the Australian Tax Office from somewhere. No suggestion was made to the court that she was challenging the distributions that had been made to her and it would seem that the returns were lodged at a time when she had the assistance of Mr F. I am not in the position to find that this debt arises wholly out of the husband’s activities. Doing the best I can however, there does not seem to be any other plausible explanation for the wife’s income since separation other than that she received it indirectly by her expenditure which was ultimately attributed by the accountants to a business income stream. If, as the only explanation seems to be, the money came from joint ventures and the husband did not deny that, this debt should be treated as a joint debt because there is little doubt that the husband had the benefit of his taxation obligations being met in that way.
Z Neuropsychology
There is also a bill for $1166 that the wife owes to her neuropsychologist. The wife should bear that responsibility now that the parties’ finances have been permanently separated. Why the debt should be seen as a joint responsibility was not argued. Even if it related to a medico legal question, the wife’s argument about her medical health was hardly controversial.
Thus, leaving superannuation aside, the assets of the parties for division amount to the net proceeds of the business and the net proceeds of the Suburb E home property.
The price of the business?
The parties do not agree on the value of the business nor, more importantly, what it would bring on a sale. There was a dispute at the commencement of the trial about figures arising from some type of conference of valuers or brokers and, on the objection of the wife, I struck out the husband’s evidence. There is no evidence from the husband as to what the business will bring. On the other hand, the wife made a guess at what it was worth and made no effort to produce evidence of an expert nature upon which the court could rely. In final submission, counsel for the wife suggested that the wife’s approach was better than that of the husband. I reject that.
The absence of a value gives rise to the problem of altering the interests in anticipation of a sale. I know the outer limit of the business because the wife says it is worth $2 million. I know the lower limit because the husband says it is worth $550,000. Having regard to the proposal of the husband which I intend to accept, the ultimate dispute in percentage terms is relatively modest. The parties have urged an alteration of property interests using percentages.
Of the two proposals, I find the husband’s is more realistic having regard to the assessment of entitlements to which I turn in a moment. He at least calculated his anticipated value on the income stream and had been involved in getting it on the market.
Should an alteration of interests occur?
It was common ground that an order should be made and I accept therefore that the parties agree that it is just and equitable to do so.
Assets
The equity in the two assets to which I have referred is between $1.436 million and $2.886 million. But against those figures, liabilities for tax have to be taken into account along with creditors and staff obligations. I have no evidence as to the latter but if the taxation debt is taken into account, the range of equity drops to between $1.2 million and $2.6 million. While that is a large gap, for the reasons that follow, there is not a big difficulty in assessing percentage entitlements and I find the husband’s concessions appropriate.
Contributions
Section 79(4) requires the court to assess the various contributions of the parties. It is unnecessary to (and inappropriate to) breakdown the various components in s 79(4) and give discrete percentages. Suffice to say, I am satisfied that the wife did make financial contributions through her inheritances but those funds were used in businesses some of which were successful and others not so over a long marriage. The problem becomes complicated because of the wife’s serious injury and the consequential role that the husband played not only in respect of her care but also that of the children. Albeit that his role in respect of the care of the children solely was limited to the period of 2008 and into 2009, it is another factor that makes it difficult to be precise about any form of mathematical assessment. Importantly, the inheritances occurred in 2001 and 2007 but the evidence is not at all clear as to the impact of the receipt of those amounts. Even if it were, much seems to have been lost and I could not find a waste by the husband. This is a long marriage and on the basis of the evidence presented by both parties but particularly that of the wife, it is impossible to be able to discern a clear picture such as to be able to give weight to the respective contributions in any precise sense. In my view, the best that can be said here is that the wife’s contribution was probably marginally greater than the husband. He conceded that there had been such contributions from outside of the parties’ hands. I am content to view that as the measure for the purposes of the ultimate determination which should be done holistically.
Section 79(4)(e) requires the court to consider the matters set out in s 75(2). The husband is 61 years of age and the wife 58 years. It is clear that each is getting close to the end of their respective working lives. It is unrealistic to expect that the wife would return to work having regard to her capacity to do much as a result of her apparent brain injury. At best, the opinion of Mr Z, which was not challenged, is that the wife could not do the tasks that she used to do as a conveyancer and I accept his view that the likelihood of her finding such a position would be remote. That said, notwithstanding all of the observations I earlier made about the difficulties that the wife had in remembering things and being more alert in the mornings than in the afternoons, she gave no indication of difficulties other than her capacity to process information and I suspect she will have that for the rest of her life. The husband conceded that a loading should be made in favour of the wife.
There is no evidence as to future employment prospects for the husband either. He has run a number of businesses over the years including Company Q. It would seem improbable that he could then obtain employment other than in a modest role. In the case of the wife, it was submitted that she had not worked for 12 years. That is incorrect. She ran a retail outlet in 2008/2009 and seemed to manage issues such as the disposal of the husband’s motor vehicle and other assets whilst at the same time dealing with a bank. It is significant in my view that Mr F stridently argued that any decision that was made was as a result of discussion between he and the wife and that ultimately, the wife had the final say. As such, I could not exclude the wife from being involved in some economic activity in the future.
With the concession of the husband albeit at 30 per cent of the net “asset pool” and factoring in a modest amount for a greater contribution by the wife from the husband, I accept that a just and equitable result in this case is 65 per cent to the wife and 35 per cent to the husband of the net equity in the two assets.
The parties’ submissions
The matters to which I have just referred have been determined after the receipt of the parties’ respective submissions. Counsel for the husband unfortunately fell ill and despite the fact that his submission was due by 14 September, it was received on 20 October. I have taken into account all of those matters that each party has raised in the following ways.
The husband’s submissions
I accept the husband’s submission that there is no basis in the evidence to order a trustee for sale in the sense of removing the husband from the process. I accept that the evidence of each party does not enable me to make a clear finding as to the value that will come from the sale of the business. I accept that the more recent figures of the business indicate that the husband’s position that there has been a decline in revenue because albeit that there has been an increase in earnings, the profit arose because of reduced expenditure.
I accept the husband’s submission that there is no foundation for the wife’s figure of $2 million.
I also accept the submission of the husband that there is no evidence of over-capitalisation or more importantly, who was responsible for certain expenditures associated with the business and any inference against the husband of wastage, inappropriate handling of profits or misappropriation of monies of the parties, cannot be sustained.
It was submitted on behalf of the husband that the contention of the wife that she receive no benefit from the sale of the properties at 1 and 2 K Street, Suburb L could not be sustained on the evidence. I have already dealt with that issue on the findings I have made. I do not entirely attribute the paucity of evidence from the wife nor indeed, the allegations of impropriety she made against the husband, to her. In my view, proper discovery would have uncovered what exactly happened. I accept the submission from the husband that the wife’s contention that she received no benefit from the sale of these properties, has no foundation.
At [64] of the wife’s submission and to which the husband’s submission responded, it was submitted that the husband should bear the liability for his own credit cards and to that, the husband agreed.
Trustee for the sale of the business
The realization of the business asset is still contentious. The wife sought that a trustee be appointed “at arm’s length from” the husband. The submission of the wife is premised on an argument that the husband cannot be trusted. It was submitted that the wife was “in the dark” in relation to the husband’s purchase of real properties. The evidence does not support such a submission. Sad as it may be, the wife was not able to give any cogent evidence about how various properties were purchased and sold but that does not mean that the husband’s evidence was not true. The wife’s evidence came from historical searches.
At [29] of the wife’s final submissions, it was said that the wife’s “lack of knowledge” gave rise to her assertions. But, that incapacity of knowledge is directly affected by her medical condition. She made no application for the appointment of a case guardian nor was any such application made on her behalf. Indeed, her counsel resisted that appointment when the husband sought such an appointment. It is helpful to remember that the wife’s former attorney under power eschewed the concept that the wife needed a case guardian. When prompted on some things, for example, the jewellery or the money taken by Ms U, her memory seemed to be revived. It was disconcerting that she made no attempt to provide information after the absence of evidence about these matters was drawn to her attention during the adjournment break. Those matters in particular indicate that the wife was adopting a scattergun approach through assertions about the husband and he simply rejected them. When he was tested in cross-examination, he had plausible explanations for most things.
At [33] of counsel’s submission, it was submitted that it was “critical” for “all relevant years of the marriage, the husband chose to retain her as a director and shareholder”. There may be some rhetorical flourishes in those statements because the evidence shows that the wife was running a shoe retailing franchise, going to banks and, on the evidence of Mr F, accepting advice and deciding about the issuing of court proceedings. The picture becomes more blurred by the wife’s explanation that, after the proceedings in this court were discontinued, she did nothing about reinstituting them because she was “overwhelmed and confused”. I find in the circumstances that she knew exactly what she was doing even if she was “confused”.
It was submitted that in her absence, the husband made unilateral decisions. I accept that for some corporate matters in which the wife was a director, the evidence of the husband was that she was notified of meetings but did not attend. The absence of the wife might be one thing but it remains unclear how she was prejudiced by the husband’s actions.
Counsel for the wife helpfully set out the duties of a trustee at law but in my view, the first issue is whether there is a necessity or basis for the court to exercise its power. In this case, jurisdiction is not an issue.
At [43] of the submission for the wife, it was said that the necessity in this case for such an order was the “unsatisfactory presentation” of the husband’s case. In my view, there is an element of the metaphorical pot calling the kettle black here. My concern about the wife’s evidence is heightened knowing of her disability. True it is that the husband’s evidence at times seemed vague but nothing was put to him to show that he was deliberately misleading the court or the wife or that, albeit slowly, he had not made disclosure of his financial positon by the presentation of documents.
I reject the submission that the evidence justifies exclusion or restriction of the husband concerning the sale of the business.
The Supreme Court proceedings
I have already mentioned the Supreme Court proceedings but they are now relevant only on the question of costs.
At [67] of the wife’s final submissions, it was submitted that the source of the power to make a costs order is not found in s 117 of the Act or indeed, any Commonwealth law because it was strictly based on proceedings in a court over which this court has no jurisdiction. Reference was made to Re Wakim [1999] HCA 27; 198 CLR 511. It is necessary to look at the approach that was taken by the Supreme Court.
The wife commenced the proceedings under the Trustee Act 1936 (SA) seeking that a new trustee be appointed for the parties’ trust in substitution for a company AA Pty Ltd. The husband and wife remain sole directors and shareholders of that company.
The matter came on before Hinton J in the Supreme Court and his Honour transferred the proceedings to this court pursuant to s 5(1) of the Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth). Before transferring the proceedings, Hinton J concluded that the wife’s application was a matrimonial cause within the definition in the Family Law Act. His Honour stated that whilst the Supreme Court had jurisdiction to hear the proceedings under the relevant cross-vesting act, he considered that the Family Court of Australia was the more appropriate forum to hear and determine that application.
The finding of his Honour was that the wife’s application with respect to the trust related to property of the parties to the marriage.
Hinton J observed that the property interests of the husband and the wife had long been intertwined and there remained a “very strong matrimonial character”. His Honour was aware that there were proceedings for the alteration of property interests in this court and found that he was not able to consider the question of alteration of interests without having regard to the history of the property of the parties during the course of their marriage and thereafter. His Honour made reference to paragraph (ca)(i) of the matrimonial cause definition in s 4 of the Family Law Act. His Honour found that the application by the wife could properly be said to arise out of the marital relationship because her beneficial interest, shareholding and status as a director were all traced to, and derive from, the marital relationship. As a consequence of that marital relationship and the activities of the parties, they had accrued property during their relationship. That enabled his Honour to make a finding that the wife’s application was a matrimonial cause.
Notwithstanding the finding of matrimonial cause, his Honour had an alternate view as well but as the wife took no steps to appeal against his Honour’s decision and simply withdrew the application when it arrived at this court, I do not need to consider the matter further.
The question is how the South Australian proceeding came before this court.
This court has jurisdiction in relation to matrimonial causes (s 39 Family Law Act). Section 39(1) provides that a matrimonial cause could be instituted in the State Supreme Court but that that power can be removed by proclamation by the Governor-General under s 40(3) of the Act. Proclamations were made in 1976 and later on 23 November 1983. The 1976 proclamation made clear that proceedings relating to matrimonial causes could not be instituted in the State Supreme Court. The 1983 proclamation reiterated the position relating to Supreme Courts. In my view, having established that the matter was a matrimonial cause, a judge of the Supreme Court would have been required to recognise the exclusive jurisdiction of this court once transferred, it being a matrimonial cause, the powers of the Family Law Act would apply in relation to costs.
The Commonwealth cross-vesting act invested the Supreme Courts with the jurisdiction of the Family Court notwithstanding the previous exclusivity of the jurisdiction of the Family Court. Thus, even though the proclamation indicates exclusive jurisdiction, the Commonwealth cross-vesting legislation would empower a State court to deal with such a matter. Counsel for the wife relied on Re Wakim (supra) but that decision related to state parliaments conferring jurisdiction on federal courts. It was not held that the cross-vesting legislation of the Commonwealth was invalid or beyond power.
Thus in the circumstances, Hinton J could have dealt with the matter albeit his Honour determined that it was a matrimonial cause but as it was ultimately transferred appropriate to this court on the basis of the exercise of discretion, the application then fell to be determined by this court. Having been found to be a matrimonial cause, the provisions of s 117 of the Family Law Act can be seen to apply because that provision refers to proceedings under the Family Law Act. I therefore reject the submission that this court does not have power to determine the matter as claimed by the husband. (see also Kavan & Mallery and Anor (2015) FLC 93-651).
To the extent that there might be argued there is a distinction between claims under the Family Law Act as distinct from proceedings under the Act, the fundamental question goes back to jurisdiction. Hinton J found that the proceeding albeit pursuing an order under the relevant State act, was a matrimonial cause. As such, rather than dismissing the application, the application was transferred under s 5 of the cross-vesting legislation. As I have said, it was not disputed that the matter was appropriately transferred but rather that this court had no jurisdiction over such a proceeding. For the reasons just outlined, I reject that submission.
Insofar as the provisions of s 117 of the Family Law Act apply, the evidence of Mr F is of assistance. He was aware of the existence of proceedings in this court and going to the Supreme Court in relation to the relevant trust to seek orders under the State act not only occurred when those proceedings in this court were extant but more importantly, at a time when a judge of this court was conducting a directions hearing for the purposes of listing the matter for trial. No adequate explanation was given as to why that occurred. Mr F was at pains to point out that he took the steps that he did on legal advice but insofar as the wife was involved, he said she clearly understood and made the decisions to proceed. It is apparent from reading the judgment of Hinton J that the husband at all times opposed the application of the wife. Regardless, the wife pressed on. The evidence shows that an enormous amount of money was spent by both parties but particularly by the husband, unnecessarily in circumstances where their assets were modest.
Section 117 of the Family Law Act provides that in proceedings under the Act (and I find this application was), each party shall bear their own costs unless there are circumstances that justify a departure from that principle. The absence of an adequate explanation is perplexing.
At [71] of the wife’s submission, it was submitted that the husband did not even seek a costs application in the Supreme Court. With respect, he did not have to. Another issue raised by the wife was that it was “noteworthy” that the husband did nothing to seek an anti-suit injunction in the Family Court of Australia. That too has little merit. The husband’s submission in reply (at page 12] submitted that an anti-suit injunction was inappropriate given the remedy available to apply for a transfer under the relevant State cross-vesting act. I accept that submission.
In the wife’s submission at [74] it was said that in many respects, the proceedings in the Supreme Court was simply an alternative forum “to the otherwise conventional Family Court”. The underlying principle in that submission was that the wife’s action had the effect of “progressing” her concerns about the husband’s then financial management and lack of disclosure. That submission too has no merit because whilst there were proceedings in this court, nothing was being pursued to my knowledge in relation to discovery at that time by application. Counsel for the wife valiantly described the proceedings in the Supreme Court as being useful because they had the effect of managing the parties’ dispute. I reject that submission too on the basis that what they did was distract attention from what should have been a dedicated approach to the conclusion of proceedings in this court including in relation to disclosure and the continuation of the proceedings in the Supreme Court had the effect of incurring substantial costs.
In my view whichever way one looks at what occurred, it should not have been commenced. The husband has been the person who was wholly successful in those proceedings and when they were transferred to this court, the wife discontinued them. On that basis, it is hard not to accept that the wife was wholly unsuccessful in her attempt to seek orders that she could have otherwise sought quickly in this court.
Section 117(1) requires that if the court is considering making an order for costs, before doing so it must contemplate the provisions of s 117(2A) of the Act. The financial circumstances of the parties here are modest, the wife’s conduct as a litigant must be seen to be questionable having regard to the alternate remedies that were more appropriately available in this court and she has been unsuccessful. I see no reason why the husband should bear the costs of those proceedings when it is clear that this court has the power to appoint and remove trustees (see Jamine and Jamine (No 2) [2012] FamCAFC 104).
The wife should compensate the husband for his costs incurred.
The husband relied upon an annexure to the affidavit of his solicitor filed 13 June 2017 in relation to those costs. I am not in a position to make an assessment and accordingly the appropriate order is to require that in default of agreement between the parties, the costs be assessed.
Miscellaneous matters
Counsel for the wife submitted the court should make an order under s 106A of the Act. Appreciating that it is often done by courts almost as a matter of course, I consider it should only be made where there is anticipation of a breach. That is not the case here.
Counsel for the wife also sought wide-ranging indemnities. The evidence does not indicate what the indebtedness is that should be the subject of such protection. I will not make those orders.
I certify that the preceding One Hundred and Seventy-Seven (177) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin delivered on 14 November 2017.
Associate:
Date: 14 November 2017
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