Nam & Truc
[2023] FedCFamC1F 709
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Nam & Truc [2023] FedCFamC1F 709
File number: SYC 2915 of 2019 Judgment of: REES J Date of judgment: 22 August 2023 Catchwords: FAMILY LAW – PROPERTY – Where the parties had a business and financial relationship during the relationship – Where there is a lack of documentary evidence to corroborate the parties’ respective contentions – Where the parties treated the business and their purchases of real estate as a joint endeavour – Where the applicant contributed significant amounts of money to the parties’ joint living expenses and to the business – Where the respondent contributed her time in working in the business – Contributions assessed as equal – Where funds from the business were diverted to the respondent’s use after separation – Adjustment in favour of the applicant of 10 per cent – Distribution of 60:40 in favour of the applicant. Legislation: Family Law Act 1975 (Cth) ss 90SF(3), 90SM(3) Division: Division 1 First Instance Number of paragraphs: 180 Date of hearing: 9 & 10 August 2023 Place: Sydney Counsel for the Applicant: Ms Murphy Solicitor for the Applicant: Integrity Legal Specialist Counsel for the Respondent: Mr Thomas Solicitor for the Respondent: Nazarian Lawyers ORDERS
SYC 2915 of 2019 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MR NAM
Applicant
AND: MS TRUC
Respondent
ORDER MADE BY:
REES J
DATE OF ORDER:
22 AUGUST 2023
THE COURT ORDERS:
1.That each of the applicant and the respondent do all things to effect the distribution of the funds held in controlled monies accounts on their behalf in the following manner and priority:
(a)The sum of $622,091 to the applicant.
(b)The sum of $647,763 to the respondent.
(c)The balance remaining, if any, to be paid as to 60 per cent to the applicant and 40 per cent to the respondent.
2.That within three months of the date of these orders, the respondent do all things necessary to discharge all mortgages secured over the property at C Street, Suburb B so as to release the applicant from any obligation pursuant to the existing mortgages.
3.That in the event that the respondent does not discharge the mortgages pursuant to order 2 by the due date, then the respondent shall do all acts and things required to effect the sale of the property at C Street, Suburb B and to discharge the mortgages secured thereon.
4.That pending compliance with Order 2 or Order 3, the respondent is restrained from further encumbering the property at C Street, Suburb B and the applicant shall be entitled to register a caveat over the title of that property to notify his interest pursuant to these orders.
5.That subject to these orders, each party is solely entitled to such assets as are in his or her possession.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under a pseudonym Nam & Truc has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
REES J:
Mr Nam (“the applicant”) and Ms Truc (“the respondent”) lived in a de facto relationship, either for six years and three months as the applicant contends or for three years and eight months as the respondent contends.
Nothing turns on this dispute because each concedes that, before they commenced their co‑habitation, they had a business and financial relationship from about the middle of 2008. They separated in September 2018. There were no children of their relationship.
Each party filed affidavit evidence. The applicant relied upon an affidavit sworn 28 April 2023 and a Financial Statement sworn the same date.
The respondent relied upon an affidavit sworn by her on 27 April 2023 and a Financial Statement sworn 8 August 2023.
In attempting to piece together the narrative of the financial dealings of the parties, I have been hampered by the lack of documentary evidence to corroborate their respective versions of events and, in the respondent’s case, a lack of detail and specificity. The following narrative has been compiled, doing the best I can with the evidence available. Although each asserts that third parties were involved in significant transactions, none of those third parties has given evidence. In relation to some transactions, because of the lack of documentation, and the diametrically opposing versions, I am simply unable to determine what happened. As an example, confusion and controversy about the shareholding in, and registration of, corporate entities could have been resolved by the relevant searches from ASIC but were not.
At the time their relationship started, they were each married to other spouses.
When they met in mid-2008, the applicant was employed in technology. He was an employee of a company and also had a consultancy business. The applicant was earning about $75,000 per annum from his employment and about $50,000 per annum from his consulting work.
The respondent was working in the beauty industry. The applicant was living with his then wife. The respondent’s husband was in jail.
In 2008, the respondent set up a business called D Business in Suburb E.
Throughout these reasons I refer to the “beauty businesses” because it is not clear how these businesses were structured or whether they were owned by a corporate entity. If they were owned by a corporate entity, there is little documentary evidence about how that entity or entities was structured or the identity of the shareholders and directors from time to time. All of those matters could have been resolved by providing relevant searches. They were not.
The applicant was working full time but the respondent acknowledges that he assisted her by dealing with the lease on the Suburb E premises, helping her open bank accounts and acting as manager of the fit out. The respondent contends that the funds used to set up the business came from her mother and from the proceeds of the sale of an earlier business. The applicant asserts that he paid $20,982 into a bank guarantee account; $55,000 for the fit out and a further $2,497 for software and insurance.
A second beauty business was opened at Suburb F. Again there is no dispute that the applicant was active in the setting up of the business. The dispute is as to the source of funds. The applicant asserts that he contributed a total of $104,500 of which all but $16,500 was borrowed from friends. The respondent asserts that she paid between $80,000 and $85,000 for the fit out and furniture, of which $40,000 was borrowed from friends and $17,000 that was “owed to my ex-husband by one of his friends”. The respondent’s former husband did not give evidence.
None of the friends who, it is asserted, advanced funds to either party has been called to give evidence and no documents have been tendered to corroborate the version given by either party.
At some time in 2009 the respondent’s husband was released from jail and she bought a property at G Street, Suburb H. The respondent deposed that the purchase price was $700,000 and she borrowed $560,000. The applicant deposed that the deposit was paid primarily from the cash flow of the beauty business and the balance was borrowed. This appears to be broadly agreed although the applicant deposed that his credit card was being used to pay for expenses of the business. The respondent asserts that she solely paid for the property by contributing from savings and raising a mortgage. It is conceded that, later in the relationship, the applicant did maintenance work on the Suburb H property and paid some expenses. In so far as the respondent paid mortgage instalments, she did so from the income of the business to which the applicant made significant contributions.
I accept the evidence of the applicant that, on 29 June 2009, he transferred $4,000 to the business. A bank document evidencing the transfer is annexed to his affidavit.
In 2010, the applicant added the respondent to his private health insurance cover as his partner.
In mid-2010 another beauty business was established at Suburb J. The respondent concedes that the applicant assisted with the negotiations and the arrangements for the fit out. It is agreed that the costs of the fit out, either $120,000 or $140,000, came from the Suburb F business.
Ms K paid $120,000 to buy into the Suburb J business. Thereafter, a fee was paid by Ms K for the use of the business name. The applicant asserts that the respondent received that fee.
The applicant paid the respondent’s gym fees which was a benefit received from his employer for employees’ families and he included the respondent as a secondary card holder on his American Express credit card.
In early 2012, another beauty business was set up in City L. The cost of the fit out was $150,000. The applicant deposed that he took leave for two months to supervise the fit out. Ms N paid $100,000 to buy into the business and thereafter paid $400 per week to the business account for an unspecified period.
In early 2012, another beauty business was set up in Suburb M, opening later that year. The applicant deposed that the cost of the fit out was $140,000. The respondent does not agree with that figure but offers no other evidence. She deposed that she did not know how much was spent because the applicant was “controlling the money”. Funds came from the business to pay for the fit out.
Thereafter, the respondent worked in the businesses at Suburb E, Suburb F and Suburb M. The applicant continued in his employment but he also helped out at the business at weekends.
In 2012, the applicant incorporated a company, “P Pty Ltd” to provide management services to the beauty businesses. P Pty Ltd also sponsored migrants to work in the beauty businesses. The applicant was the sole director and owned 98 per cent of the shares, the respondent owning the balance.
The lease on the Suburb E premises expired in 2012 and was not renewed. The applicant deposed that the guarantee deposit funds were paid to the business.
In late 2012, the respondent’s children were added to the applicant’s private health insurance.
In 2013, the respondent purchased a unit at C Street, Suburb B. The respondent deposed that the purchase price was $400,000. The applicant deposed the price was $450,000. The respondent asserts that funds were raised by way of mortgage in the sum of $360,000 and that she paid the stamp duty. The applicant asserts that $360,000 was borrowed using both the Suburb B property and the Suburb H property as security; $90,000 was drawn from the beauty business and a further $13,510 was drawn from P Pty Ltd to pay the stamp duty. Neither party has provided any documentary corroboration of their assertions. It is likely that the funding came from all their available sources and that they regarded this as a joint purchase, even though the property was registered in the respondent’s name. The Suburb B property was rented and, until they separated, the rent was applied to the mortgage payments.
In mid-2013, the respondent’s mother moved into the Suburb H property and worked in the beauty business. The respondent paid her mother $1,000 per week. The applicant asserts that the respondent used her mother’s bank account to bank the cash that she took in the business. The respondent’s mother is not a party and has not sworn an affidavit in these proceedings. The respondent asserts that the applicant opened the bank account for her mother. The respondent’s mother did not give evidence.
In 2014, the respondent became a director of P Pty Ltd.
In November 2014, the applicant paid $150,000 into the respondent’s bank account. The respondent deposed that he told her that he didn’t need the money at that time and that it would reduce the interest on the mortgage on Suburb H. She agreed that if he needed the funds, she would pay them back to him.
In late 2014, the applicant’s involvement with the beauty businesses increased and he reduced his employment by two days each week to accommodate his increased involvement with the beauty businesses.
In 2015, the applicant moved into the Suburb H property with the respondent.
In 2016 another beauty business was established at Suburb Q. The set up cost of $140,000 was paid from the businesses.
The applicant deposed that $996,000, being earnings generated by the businesses, was paid into the respondent’s offset account.
In 2016, the respondent became the owner of 99 per cent of the shares in P Pty Ltd.
In 2016, $59,900 was paid for renovations to Suburb H.
In 2016, a property at R Street, Suburb H was bought in the respondent’s name for $1,450,000. The applicant was a guarantor for the mortgage loan of $1,100,000. The applicant deposed that the stamp duty and the balance of the purchase money was drawn from the respondent’s offset account. That appears to be accepted by the respondent. The property was rented. For a time the rent was used to pay mortgage payments but, some time after the end of the relationship, mortgage payments ceased to be made and the respondent received the rent.
In 2017, the applicant incorporated S Pty Ltd to be the trustee of the T Trust. The applicant was the sole director of the trustee and the sole beneficiary of the trust. S Pty Ltd purchased a property at 2 U Street, Suburb V. It appears that the purchase price was $1,300,000 and a mortgage of $1,100,000 was raised. The balance of the purchase price came from the respondent’s offset account. The property was renovated and rented out. The applicant deposed that the weekly rent was paid as to $650 to the mortgage account and $150 to the respondent.
The City L beauty business was sold for $100,000.
The applicant deposed that, in 2017, they jointly entered into a contract to purchase a unit at Suburb X for over $1,300,000. The respondent deposed that she does not know who was the named purchaser or if the purchase was joint. It appears, however, to be agreed that the purchase was on behalf of Ms W who was a relation of the respondent’s aunt. Ms W was not an Australian resident and therefore not eligible to purchase the property. The applicant deposed that Ms W paid the deposit of $133,000 into various accounts and the respondent withdrew $133,000 from a joint line of credit to pay the deposit to the vendor. The applicant deposed that the stamp duty of $59,664 was also paid from the line of credit. The respondent deposed that Ms W paid both the deposit and the stamp duty or, in the alternate, that the applicant did all the financial dealings and that she took no part.
It is agreed that the purchase did not proceed. The respondent asserts that the applicant received the refund of the stamp duty and has not accounted for it. The applicant asserts that the deposit and the stamp duty have not been accounted for. Ms W did not give evidence. The respondent claims that she has a debt to Ms W for $193,000.
Later in 2017, they jointly purchased a property at 1 U Street, Suburb V for around $1,000,000 as tenants in common in equal shares. I infer that the whole of the purchase money was borrowed.
Shortly after, they purchased a property at Y Street, Suburb V for $1,000,000, again as tenants in common in equal shares. Again I infer that the whole of the purchase money was borrowed.
Both properties were rented and the rents paid into the mortgage accounts.
They separated in March 2018 but resumed their relationship in July.
They finally separated in September 2018.
At the time of separation, they owned the following assets, jointly, severally or through entities:
·G Street, Suburb H (Respondent)
·R Street, Suburb H (Respondent)
·C Street, Suburb B (Respondent)
·Y Street, Suburb V (Jointly owned)
·1 U Street, Suburb V (Jointly owned)
·2 U Street, Suburb V (T Trust)
·The beauty businesses.
In relation to the beauty businesses, the applicant refers to the leases on the Suburb E and Suburb M businesses having not been renewed. The City L business and the Suburb J business had been sold. The respondent gave evidence that, at the time of separation, she was operating the businesses at Suburb F and Suburb Q. The applicant was excluded from the businesses.
The properties at G Street, Suburb H; R Street, Suburb H; Y Street, Suburb V and 1 U Street, Suburb V have all been sold and the balance of the sale funds is held in controlled monies accounts.
In 2018, the respondent commenced proceedings in the Supreme Court of New South Wales (“the Supreme Court”). There is little evidence before me about those proceedings but I infer that the respondent asserted that the applicant had wrongly altered the shareholding of a company, I infer, D1 Pty Ltd so that he or an entity he controlled acquired shares. Those proceedings were ultimately withdrawn by the respondent but substantial legal costs were incurred by both sides.
Also that month, the respondent paid $100,000 to acquire a 49 per cent shareholding in Z Pty Ltd. This interest is now asserted to be of no value. There is no evidence to the contrary.
In late 2018, the respondent incorporated a company, D2 Pty Ltd of which she was the sole shareholder and director.
In 2019, the respondent transferred her interest in the beauty businesses to her niece. The applicant asserts that the respondent continued to operate the accounts of the businesses as if she still owned them. The respondent’s niece did not give evidence.
It is accepted that the business failed during the pandemic and has no value.
At the commencement of the trial, it was agreed that the amount held in controlled monies is $1,269,854. Of that amount, $969,123.06 came from the sale of R Street. Neither party submitted that I should attempt to distinguish between the contributions made by each of them to the proceeds of each individual sale but each submitted that I should deal with the lump sum.
Each party has received from the controlled monies accounts a partial property settlement of $220,000. Each agreed that those funds not be brought into account further in these proceedings.
The applicant seeks the payment of specified debts from the controlled monies account and the payment to him of the whole of the balance remaining. The respondent concedes that there should be an adjustment in favour of the applicant but of no more than five or ten per cent.
From this history, it emerges that the following factual issues need to be determined:
·What was the source of funds used to set up the Suburb E business?
·What was the source of funds used to set up the Suburb F business?
·What funds were received by the respondent after separation from the Suburb J business?
·How was the purchase of C Street financed?
·Were funds from the business banked into the bank account of the respondent’s mother?
·Were funds from the business banked into the bank account of the respondent's aunt?
·How was the proposed purchase of the Suburb X unit by Ms W financed and how were the deposit and stamp duty accounted for when the purchase did not proceed?
·Did the respondent continue to be the beneficial owner of the businesses after she transferred her shares in D2 Pty Ltd to her niece?
·What rent was received by the respondent after separation for R Street and were those funds applied to the mortgage payments?
·What rent was received by the respondent after separation for C Street and were those funds applied to the mortgage payments?
·What funds were used by the respondent to acquire her interest in Z Pty Ltd and how should those funds be treated?
What was the source of funds used to set up the Suburb E business?
The applicant provided no documents to support his contention that he paid significant amounts of money for the fit out of the Suburb E business.
The respondent deposed that she had sold a beauty business in 2006 and received $40,000. She provided no documentary evidence to show that she had either received those funds or that she still had them in 2008. Her husband was in jail and she was not in well paid employment. It is unlikely that she had any significant funds. In cross-examination, when it was put to her that her husband was in jail and she didn’t have any money, she said words to the effect of, “I had money, my mother sent the money from [Country AA] to help me when my husband was in jail”.
She deposed that a bank account was opened and $21,000 was deposited in that account, the money having come from her mother in Country AA. She did not provide any document to support her claims, either that the funds came from her mother or that they existed at all.
The respondent deposed that she paid about $80,000 for the fit out of the Suburb E premises. Other than $21,000 from her mother, the respondent did not depose to the source of funds. In cross-examination, the respondent said that her mother had sent money from Country AA although she did not specify an amount or provide any documents. Her mother would, presumably, have been in a position to corroborate her evidence but did not.
The respondent was in default of a debt to BB Finance in the sum of $20,136. The credit report was in evidence. I accept that the applicant paid this amount so that the respondent’s credit rating could be cleared. I also accept that he paid a security deposit of $20,982 to be used as a guarantee for the business.
The applicant deposed that he paid a total of $57,496.60 for the fit out from his own funds but provided no document to substantiate his claim which is curious when the figure is so precise. In cross-examination, he said that all the money was paid in cash.
The respondent has not demonstrated that the money to pay for the fit out came from her. It is more likely that the applicant paid for the fit out as he asserts. He, at least, has some documents which support his assertions.
What was the source of funds used to set up the Suburb F business?
The respondent gave evidence that the Suburb F fit out cost between $80,000 and $120,000. She could not be more precise. She borrowed $27,000. The landlord provided $33,000 which was used to repay the funds the respondent had borrowed, leaving a net contribution from the landlord of $6,000. I accept that the applicant must have paid the balance. I also accept that the applicant paid $16,500 for chairs because there is no other available source of funds.
What funds were received by the respondent after separation from the Suburb J business?
The respondent deposed in her trial affidavit,
129.I paid the bank guarantee of $25,000 and [Ms K] paid this back to me after three years. The bank guarantee was in addition to the fees to buy the franchise. [Ms K] was also paying $400 per week to use the franchise name. She is now paying $300 per week into my personal account with the Commonwealth Bank.
In cross-examination, the respondent sought to resile from that evidence but she provided no evidence of the amount paid, or when sums were paid. She said, but did not prove, that Ms K stopped paying the fee in 2019. That is contrary to her sworn evidence in her affidavit that she is still, at April 2023, receiving the payment. Ms K was not called to give evidence in her case. I accept that the respondent received initially $400 per week from Ms K and, from an unspecified time, $300 per week. The applicant deposed that the sale to Ms K took place in 2010. Doing the best I can with the evidence, the respondent has received those payments for five years after separation. If the payments averaged $350 per week over that period, she has received about $90,000.
How was the purchase of C Street financed?
It does not appear to be disputed that the applicant was a guarantor of the mortgage over C Street of $360,000.
There is insufficient evidence to make a finding about how the balance was financed or whether the applicant contributed funds.
Were funds from the business banked into the bank account of the respondent’s mother?
This issue falls to be determined in the absence of the respondent’s mother who did not give evidence, although the respondent conceded that she lives with her mother. The respondent was asked why her mother had not provided an affidavit in the proceedings and she said that her mother was old and did not speak English. I do not accept that to be a reasonable explanation of the failure to call her as a witness in relation to a significant issue.
The respondent deposed that her mother came to live with her in 2012 and that she commenced to pay her mother a wage of $1,000 per week “as the bookkeeper for the [three] shops”. The respondent deposed that her mother also did tasks in the shop and cooked food for the staff.
The respondent said in cross-examination that she had access to her mother’s bank accounts.
Bank statements for the accounts of the respondent’s mother are in evidence.
In September 2014 an account numbered #...55 was opened in the name of the respondent’s mother with a deposit of $25,317. There is no evidence of the source of the funds. A further $12,000 was deposited in January 2015. There was only one withdrawal of the whole of the funds of $37,488 in February 2015.
Statements for an account with Westpac, number ending #...23 between February 2015 and October 2018 show that the account was opened with a deposit of $37,400, transferred from an account at Suburb B, presumably the #...55 account. Thereafter, there are weekly deposits of $1,000 from P Pty Ltd. There are also a number of deposits labelled “[Mr CC] rent” each in the sum of $1,400. There is no evidence about the source of those deposits but there is also no evidence that the respondent’s mother owned property in Australia that was tenanted. From about October 2017, those payments of rent were deposited monthly. It is likely that the deposits were the rent from R Street.
In November 2017, there was a withdrawal to pay for a bank cheque in the sum of $107,000, leaving a balance of $124,398. This is the first withdrawal from the account. It may be a co‑incidence that this withdrawal appears to be at about the time that the parties purchased 1 U Street, Suburb V for over $1,000,000 but it is likely that the deposit for the purchase came from that account.
The next withdrawal, in June 2018, was a total of $160,000.
On 3 September 2018, the balance was $48,077 and the account was closed in October 2018. A total of $355,003 was paid into and then withdrawn from that account. Absent any evidence from the respondent’s mother to establish that the funds deposited were her funds, it is likely that the deposits were from the business.
In October 2017, an account numbered #...64 was opened in the name of the respondent’s mother. Funds were regularly deposited into that account but there are no withdrawals until April 2018 when $20,000 was transferred to “loan”, leaving a balance of $135,546. There is no evidence that the respondent’s mother had any loans and I infer that this was a loan repayment in relation to a loan of the respondent. In April 2018, $20,000 was transferred to “[D Business]”. There are other transfers to “loan”. There are numerous transfers into the account from named sources but there is no evidence of who those sources are. A total of $316,706 was deposited into the account.
The respondent said in cross-examination that she had access to all her mother’s accounts. Although her evidence was confusing, I understood her to say that she withdrew funds from her mother’s account to pay employee wages which she paid in cash. She also said that the employees at the beauty business deposited money into her mother’s account.
Asked about the sum of $37,488 withdrawn to close the #...55 account, she said that she drew the money out for her mother and also that she had to pay back her employees and “one of those people was my first cousin”.
The most likely explanation of those transactions is that the respondent used her mother’s bank account as her own and that funds from the business were deposited into the mother’s account.
However, whether those funds were then diverted for purposes other than the business, their real estate investments or the upkeep of the parties and their children cannot be ascertained.
Were funds from the business banked into the bank account of the respondent's aunt?
The respondent’s aunt was not a witness in the proceedings.
The respondent’s aunt came to Australia from Country AA in 2018 and lived with the respondent.
The respondent did not suggest that her aunt worked in the business but whether she worked elsewhere and in what capacity was not explored.
There are numerous deposits into the aunt’s account from “[…] salary” in the sum of $700. The respondent said those deposits were not made by her.
There is no evidence that the funds in the aunt’s account came from the business.
How was the proposed purchase of the Suburb X unit by Ms W financed and how were the deposit and stamp duty accounted for when the purchase did not proceed?
The applicant deposed that, in 2017, he and the respondent signed a contract to purchase a unit in Suburb X on behalf of Ms W. He deposed,
203.[Ms W] paid [the respondent] the 10% deposit by putting $30,000 into [the respondent’s] and my joint CBA account, $55,000 into [the respondent’s] relative’s account in [Country AA] and $63,000 into [the respondent’s aunt’s] bank account.
The applicant deposed that the respondent paid the deposit of $133,000 and the stamp duty of $60,000 from her line of credit. In cross-examination, the respondent conceded that the funds were actually paid from the line of credit.
I do not accept the evidence of the respondent that Ms W paid the deposit of $133,000 directly to the vendor’s agent or that Ms W paid the stamp duty of $60,000.
The statements for the Westpac account of the respondent’s aunt numbered #...01 are in evidence. In March 2018, Ms W deposited a total of $68,000 into the account. There is a further deposit from an unnamed source in March 2018 of $10,000.
It is likely that those deposits are the funds which the applicant asserts were deposited to pay, in part, the deposit on the Suburb X purchase.
I prefer the evidence of the applicant who has, at least some documentary evidence, to that of the respondent who has none.
Further, the applicant tendered excerpts from a Facebook account with a conversation which appears to be between Ms W and the respondent, and perhaps others, about the transfer of funds. On 24 May 2018, Ms W asked, “But to whom should I pay the money?” and the respondent replied,
You withdraw money then deposit it into [Ms Truc’s] bank account.
(As per the original)
At a later date messages between the respondent and Ms W continued. The respondent messaged Ms W,
This is one of the amounts of $193,000 that was used to pay for the house. So I will tell the court not to return the money for you if the house ownership cannot be transferred.
(As per the original)
Ms W replied,
[Ms Truc] takes responsibility for everything. She is my family member. She will handle it by herself.
(As per the original)
This exchange is entirely inconsistent with the respondent’s evidence that the applicant handled the entire transaction and consistent with the applicant’s evidence that the transfers of funds were arranged by the respondent.
The respondent has had the benefit of funds totalling $193,000 from Ms W. Whether she paid those funds back to Ms W is not known. However, I accept that funds from the respondent’s line of credit were not repaid into the line of credit after the transaction was terminated.
I do not accept the respondent’s assertion that she owes Ms W $193,000.
Did the respondent continue to be the beneficial owner of the businesses after she transferred her shares in D2 Pty Ltd to her niece?
The shares were transferred in December 2018, about three months after the parties separated. The respondent conceded that her niece paid no consideration for the transfer. D2 Pty Ltd was operating the two businesses at Suburb F and Suburb Q. The respondent continued to be a director of the company until mid-2019 when she resigned.
On 1 January 2019, a bank account in the name of D3 Pty Ltd ending #...18 with the Commonwealth Bank had a balance of $53,216. As has already be chronicled, significant funds had been deposited into accounts in the name of the respondent’s mother from the business although those funds had all been withdrawn by the time of the transfer of the shares.
The respondent gave no explanation for transferring a business, that was obviously profitable and had substantial funds, to her niece for no consideration. The most likely explanation for the transfer of the shares was that the respondent wanted to appear to divest herself of a valuable asset.
The respondent was cross-examined about an entry on her Facebook account in 2019 when her niece sent messages asking for payment of her wages. For example, the respondent’s niece messaged words to effect of “Transfer payment. I worked 2 days. Overpaid $50” and “Week of 28 August to 1 September I worked 2 days and you paid $350 into a bank account without any cash.” The respondent in cross-examination, denied that those entries were consistent with her being the person who arranged and controlled the payment of the wages of the employees of the business but there is no other reasonable explanation for that communication. Nothing in that communication suggests that the respondent’s niece controlled or beneficially owned the business.
Statements for the account numbered #...12 in the name of D2 Pty Ltd with the Commonwealth Bank show a transfer of $10,000 to the respondent in August 2019.
Statements for the account in the name of D3 Pty Ltd number #...18 with the Commonwealth Bank show numerous transfers in amounts up to $20,000 to “theraby”; payments to DD School which the respondent admitted were payments of her son’s school fees; transfer to the account for 1 U Street; transfer to pay land tax; payments for the respondent’s mobile phone and transfers to “lawyers fees” totalling some $82,000. In cross-examination, the respondent agreed that those fees were paid in relation to the Supreme Court proceedings. It is highly unlikely that those payments would have been made by the respondent’s niece on the respondent’s behalf. It is more probable that those payments are evidence of the respondent dealing with the funds in the account as her own because she knew they were hers.
The statements for the #...18 account for 2019 show the following amounts deposited:
1 January 2019 to 31 March 2019 $327,727
1 April 2019 to 30 June 2019 $265,629
1 July 2019 to 30 September 2019 $ 89,084
1 October 2019 to 31 December 2019 $ 6,024
Total $688,464
That is but one of the relevant bank accounts. All of those funds were used by the respondent who gave no evidence about how the funds were used. Since it is not possible to identify the destination of transferred funds or the identities to whom payments were made, I cannot say what portion of the funds were used for business expenses and what funds were used by the respondent for her own purposes.
However, it was conceded on behalf of the respondent that none of those funds was paid to or withdrawn by the applicant.
The respondent, who was the only person who could have identified the manner in which the funds were spent, chose not to do so.
In addition to the funds drawn from the various accounts as has been set out above, in 2023, the respondent deposed that she was receiving $300 per week from the purchaser of the Suburb J business for the use of the franchise name. This suggests that the respondent remained the beneficial owner of the franchise.
What rent was received by the respondent after separation for R Street and were those funds applied to the mortgage payments?
The respondent in her affidavit, deposed,
241.My mother sometimes collected rent in cash from [R Street, Suburb H]. The tenant also sometimes paid rent directly into my mother’s bank account at the direction of the Applicant.
In cross-examination, the respondent, contrary to her affidavit evidence, said that the tenant of R Street paid $750 per week directly to the agent who deducted the management fee and paid the balance into the R Street mortgage account.
The statements for the R Street mortgage account were in evidence. The statements show that between 3 September 2018 and 16 December 2022, the respondent paid a total of $37,400 into the mortgage account. In the same period she received rent of $160,500.
On 10 September 2018, the balance owed pursuant to the mortgage on R Street was $1,241,611. The closing balance in December 2022 was 1,376,935.
Thus not only did the respondent have the benefit of a net amount of about $122,000 in rent received but the balance owed pursuant to the mortgage increased by $135,324.
What rent was received by the respondent after separation for C Street and were those funds applied to the mortgage payments?
The respondent deposed, on 27 April 2023:
174.[C Street] was always been rented out to tenants. The rent was $450 per week which was paid to me in cash. When [G Street] was sold in [late] 2022, I moved into this property.
In cross-examination, the respondent gave a different version. She said that, during the pandemic, the C Street tenant left and her “aunty”, unnamed, moved into the property and paid $250 per week. She was unable to say when any of these events occurred and her “aunty” did not give evidence.
I do not accept her evidence. If the respondent received $450 per week between separation and December 2022, then she received a total of about $100,000.
The statements for the mortgage accounts for C Street were in evidence. The respondent, in the corresponding period, paid a total of $26,814 into the mortgage account.
There are two mortgages over C Street. On 10 September 2018, the balance owed pursuant to the mortgage for the #...20 account was $219,478 and for the #...91 account $334,175. In December 2021, the balance owed on the #...20 mortgage was $246,588 (an increase of $27,110) and the balance owed on the #...91 account was $366,765 (an increase of $32,590). There is no evidence of the balances in late 2022 when the respondent commenced occupation.
Thus not only did the respondent have the benefit of a net amount of about $73,000 in rent received but the balances owed pursuant to the mortgage increased to an unknown amount.
What funds were used by the respondent to acquire her interest in Z Pty Ltd and how should those funds be treated?
The respondent deposed,
285.I have a 49% shareholding in [Z Pty Ltd] which is a company manufacturing […] products with a value of $600,000. I paid $100,000 in […] 2018 to acquire an interest in the property to the company director of [Z Pty Ltd]. My interest was secured by way of mortgage. The mortgage was $500,000. The business venture this company was to engage in did not eventuate and therefore my shares are worthless now.
The respondent was cross-examined about numerous transfers to Z Pty Ltd from the accounts of D2 Pty Ltd. She denied that those transfers represented funds used by her to purchase her shares in Z Pty Ltd and said that the transfers were in payment for goods bought by the beauty business including hand sanitisers which were sold by the business.
No financial statements or other evidence about Z Pty Ltd were in evidence.
The respondent gave no evidence about which property was used to provide security for the mortgage and provided no documents in relation to the mortgage.
The applicant did not seek to assert that the shares in Z Pty Ltd currently have any value.
However, I accept the respondent has used $100,000 to purchase the shares and those funds have been lost.
This money will be treated as a premature distribution of funds by the respondent to herself.
THE BALANCE SHEET
At the beginning of submissions, the parties tendered a joint balance sheet which is reproduced below. I will deal with the disputes arising from the balance sheet using the item numbers on the document.
Ownership Description Applicant’s Value Respondent’s Value ASSETS 1 W C Street, Suburb B $675,000.00 $675,000.00 2 H 2 U Street, Suburb V $1,550,000.00 $1,550,000.00 3 W Z Pty Ltd $0 $0 4 H S Pty Ltd account NAB …11 $1,500.00 Not known 5 H Motor Vehicle 1 $1,100.00 Not Known 6 W Motor Vehicle 2 $7,700.00 $ - 7 H Motor Vehicle 3, 400,000km, engine needs rework $10,000.00 Not Known 8 W Handbags $33,900.00 $8,000.00 9 Joint Monies held in trust for the sale of 1 U Street, Suburb V $60,000.00 $60,000.00 10 Joint Monies held in trust for the sale of Y Street, Suburb V $141,097.88 $141,097.00 11 Joint Monies held in trust for the sale of G Street, Suburb H $99,632.83 $99,632.83 12 Joint Monies held in trust for the sale of R Street, Suburb H $969,123.06 $969,123.06 13 W Diamonds $38,035.00 $15,000.00 Total $1,962,088.77 ADDBACKS 14 W Monies that were put in wife's mother's account, Ms EE's account $316,705.61 Not admitted 15 W Monies that were put in wife's mother's account, Ms EE's account $37,620.89 Not admitted 16 W Monies that were put in wife's mother's account, Ms EE’s account $355,002.81 Not admitted 17 W Monies that were put in wife's mother's account, Ms EE's account $305,266.38 Not admitted 18 W Monies that were put in wife's aunt's account, Ms FF's account $164,988.38 Not admitted 19 W Monies received from Ms GG that were put in Ms FF's account $193,000.00 Not admitted 20 W CBA Account: …12, monies taken out $77,397.48 Not admitted 21 W Suburb F CBA Account: …04, monies taken out $322,514.94 Not admitted 22 W D3 Pty Ltd CBA Account …18 bank account $407,344.03 Not admitted 23 W Rental monies for R Street, Suburb H at $750 pw that did not go into wife's or husband's bank
account from 2018 to 2022$120,405.47 Not admitted 24 W Rental monies for C Street, Suburb B at $450 pw that did not go into wife's or husband's bank
account from 2018 to 2021$53,290.00 Not admitted 25 W Monies for the Suburb J shop franchise fee at $400 per week from 2018-2023 That did not go into wife's or husband's bank account $105,600.00 Not admitted Total $2,142,430.38 $3,517,852.89 LIABILITIES 26 Joint CBA Loan on C Street, Suburb B $265,644.86 $202,896.93 27 Joint CBA Loan on C Street, Suburb B $395,469.68 $312,254.14 28 Joint NAB Loan on 2 U Street, Suburb V $1,045,129.11 Not admitted 29 H Amex credit card $8,179.11 Not admitted 30 H Visa card $8,083.74 Not admitted 31 H Loan from parents for legal fees to HH Lawyers $10,000.00 Not admitted 32 H Loan from parents for legal fees to HH Lawyers $ 26,000.00 Not admitted 33 H Loan from Mr JJ for legal fees to HH Lawyers $45,000.00 Not admitted 34 H Legal fees $60,000.00 Not admitted 35 H ATO debt $8,710.00 Not admitted 36 H ATO P Pty Ltd PAYGW, director penalty 003 $31,591.44 Not admitted 37 Joint KK Liquidator $8,165.58 Not admitted 38 H Loan from parents to fixed 2 U Street, Suburb V $20,000.00 Not admitted 39 H Accountant Fees for P Pty Ltd $4,895.00 Not admitted Total $1,936,868.62 $515,151.07 SUPERANNUATION Member Name of Fund Type of Interest Applicant’s Value Respondent’s Value 40 H Superannuation Fund 1 Accumulation Interest $119,000.00 Not admitted 41 W Superannuation Fund 2 $1,500.00 $8,400.00 Total $120,500.00 Item 4 – value of S Pty Ltd
This company is the trustee of a trust. There is no evidence that the trust now has any assets.
The value will be included at the figure conceded by the applicant.
Item 6 – the respondent’s Motor Vehicle 3
There was no evidence of value. This item will be removed from the balance sheet.
Items 5 and 7 – applicant’s vehicles
There is no evidence of the value.
The value will be included at the figure conceded by the applicant.
Item 6 – the respondent’s vehicle
There is no evidence of the value.
The value will be included at the figure conceded by the respondent.
Item 8 – respondent’s handbags
There is no evidence of the value.
The value will be included at the figure conceded by the respondent.
Item 13 - diamond
There is no evidence of the value.
The value will be included at the figure conceded by the respondent.
Items 14 – 25 – addbacks asserted by the applicant
In accordance with settled law, these items will be removed from the balance sheet and considered in the context of adjustments pursuant to s 90SF(3) of the Family Law Act 1975 (Cth) (“the Act”).
Items 29 and 30 – applicant’s credit cards
There is no evidence to establish when these debts were incurred or for what purpose. The item will be removed from the balance sheet.
Items 31 – 33 – applicant’s loans for legal fees
The legal fees relate to the proceedings in the Supreme Court which were discontinued by the respondent.
It will be recalled that the respondent used funds from the business totalling $82,000 to pay her legal fees.
The applicant’s evidence that he borrowed $81,000 to pay his fees in relation to those proceedings was not challenged.
In those circumstances, it is reasonable to include his borrowings as a liability.
Item 34 – applicant’s legal fees
I infer that these are the legal fees in relation to these proceedings.
In accordance with settled principles, this item will be removed from the balance sheet.
Item 35 – debt to ATO
There is no evidence that this debt is owed or how it was incurred. It will be removed from the balance sheet.
Item 36 – director’s penalty
The applicant’s evidence that this debt was incurred as a result of the trading activities of the business was not challenged.
Item 37 – KK Liquidator
There is no evidence to substantiate the existence of this debt.
Item 38 – loan from applicant’s parents
There is no evidence to substantiate the existence of this debt.
Item 39 – accountancy fees
There is no evidence to substantiate the existence of this debt.
I therefore find that the assets and liabilities of the parties are:
ASSETS Value Respondent C Street, Suburb B $675,000 Applicant 2 U Street, Suburb V $1,550,000 Respondent Z Pty Ltd $0 Applicant S Pty Ltd account NAB …11 $1,500 Applicant Motor Vehicle 1 $1,100 Applicant Motor Vehicle 3, 400,000km, engine needs rework $10,000 Respondent Handbags $8,000 Joint Monies held in trust for the sale of 1 U Street, Suburb V $60,000 Joint Monies held in trust for the sale of Y Street, Suburb V $141,098 Joint Monies held in trust for the sale of G Street, Suburb H $99,633 Joint Monies held in trust for the sale of R Street, Suburb H $969,123 Respondent Diamonds $15,000 Total $3,530,454 LIABILITIES Joint CBA Loan on C Street, Suburb B $265,645 Joint CBA Loan on C Street, Suburb B $395,470 Joint NAB Loan on 2 U Street, Suburb V $1,045,129 Applicant Loan from parents for legal fees to HH Lawyers $36,000 Applicant Loan from Mr JJ for legal fees to HH Lawyers $45,000 Applicant ATO P Pty Ltd PAYGW, director penalty 003 $31,591 $1,818,835 SUPERANNUATION Name of Fund Type of Interest Value Applicant Superannuation Fund 1 Accumulation Interest $119,000.00 Respondent Superannuation Fund 2 $8,400 $127,400
The parties have gross assets of $3,530,454 and liabilities of $1,818,835 leaving net assets of $1,711,619.
Neither party seeks a superannuation splitting order.
It is agreed that the applicant will retain 2 U Street, Suburb V which has a net value of $504,871 and the respondent will retain C Street, Suburb B which has a net value of $13,855. Because the applicant is jointly liable for the mortgages on the C Street property, it will be necessary for the respondent to refinance the mortgage.
SECTION 90SM(3)
Both parties seek an adjustment of their interests.
The funds held in controlled monies total $1,269,854 and they must be apportioned between the parties.
CONTRIBUTION
The applicant earned from both his employment and his consultancy business and he contributed significant amounts of money both to their joint living expenses and to the business.
For reasons I have explained, I consider that the applicant’s evidence in relation to his contributions to the business, both financial and non-financial, are to be preferred to the evidence of the respondent.
The respondent contributed her time in working long hours in the business. I am unable to find that she made any significant direct financial contribution other than from borrowed funds which she does not assert were not repaid from the earnings of the business. The respondent does not assert that she has any debt arising from those asserted borrowings.
Until they separated, the parties treated the business and their purchases of real estate as a joint endeavour and they both contributed and benefited according to their abilities.
Until they separated in September 2018, I find that their contributions were equal.
SECTION 90SF(3)
The applicant’s disclosed income is $90,688 per annum and he has superannuation entitlements of $119,000. The applicant is 46 years old so he is not able to benefit from his superannuation for at least 14 years.
The respondent’s disclosed income is $67,600. She has superannuation entitlements of $8,400. She is 43 years old.
There are no children of the relationship. The applicant has responsibility to support a child from his earlier relationship who is 16 years old.
After separation, the respondent solely benefitted from the income from the business until its collapse. The respondent gave no evidence about when the business ceased trading but I infer that it was early 2021. Thus the respondent solely benefited from the income for about three years. There is also no evidence about what the income of the business actually was in 2018, 2019 and 2020.
The respondent was the only person in possession of that information and she chose not to put the financial statements or the bank records into evidence.
There are, however, a number of findings that can be made in relation to the funds withdrawn or received by the respondent for her own use from the business after the parties separated:
·She received the licence fee from Ms K of about $90,000.
·She received rent from R Street of some $160,500
·The R Street mortgage increased by about $125,000 as a result of the non-payment of mortgage instalments thus reducing the net proceeds of sale.
·She received about $100,000 rent from C Street and the mortgage debt on C Street increased although I cannot determine in what amount.
·She used $100,000 to acquire an interest in Z Pty Ltd.
About $450,500 was diverted to the respondent’s use and, as a consequence of her actions, mortgage debt was increased.
I accept that the respondent banked money from the business into her mother’s accounts but I cannot determine that she then used those funds other than for the expenses of the business, investment in real estate or her own proper living expenses.
During the same period, the applicant retained his income for his own use and he continued to pay the mortgage payments for the property at 2 U Street, Suburb V.
It is appropriate that there be an adjustment in favour of the applicant to recognise the funds which the respondent diverted to her own use and benefit. However, this is not a mathematical calculation and the evidence does not permit of precision.
I propose to make an adjustment in favour of the applicant of 10 per cent.
CONCLUSION
The applicant will receive 60 per cent of the net assets or $1,026,971 and the respondent will receive 40 per cent or $684,648.
In addition to the net value of the property at C Street of $13,885, the respondent has assets of $23,000. Therefore she will receive, from the controlled monies accounts, a further $647,763.
The respondent will be required to refinance the mortgage over the C Street property to release the applicant from any obligation pursuant to the existing mortgage.
I certify that the preceding one hundred and eighty (180) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Rees. Associate:
Dated: 22 August 2023
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