Perez & Molina
[2024] FedCFamC2F 711
•5 June 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Perez & Molina [2024] FedCFamC2F 711
File number(s): SYC 3213 of 2020 Judgment of: JUDGE OBRADOVIC Date of judgment: 5 June 2024 Catchwords: FAMILY LAW – PROPERTY – Movement of moneys through businesses and trust accounts – Intermingling of business, trust, and personal moneys – Non disclosure by parties – Unexplained discrepancies in evidence – Jones v Dunkel inference – Adjustment for future needs – Just and equitable Legislation: Evidence Act 1995 (Cth) s 91
Family Law Act 1975 (Cth) ss 75, 79
Cases cited: Bevan & Bevan [2013] FamCAFC 116
Blandford & Esmore [2022] FedCFamC1A 67
Chapman & Chapman [2014] FamCAFC 91
Dickons & Dickons [2012] FamCAFC 154
In the Marriage of Briese (1985) 10 Fam LR 642
In the Marriage of Weir (1992) 16 FamLR 154
Jones v Dunkel (1959) 101 CLR 298
Livesey v Jenkins [1985] 1 All ER 106
Oriolo v Oriolo (1985) 10 Fam LR 665; [1985] FLC 91-653
Russell & Russell [1999] FamCA 1875
Scott & Danton [2014] FamCAFC 203
Stanford & Stanford [2012] HCA 52
Teal & Teal [2010] FamCAFC 120
Trevi & Trevi [2018] FamCAFC 173
Division: Division 2 Family Law Number of paragraphs: 222 Date of hearing: 16 & 18 October 2023, 4-6 March 2024 Place: Parramatta Counsel for the Applicant: Mr Strik Solicitor for the Applicant: Windsor Law Group Counsel for the Respondent: Mr Guterres Solicitor for the Respondent: Matthews Folbigg Pty Ltd ORDERS
SYC 3213 of 2020 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: MS PEREZ
Applicant
AND: MR MOLINA
Respondent
ORDER MADE BY:
JUDGE OBRADOVIC
DATE OF ORDER:
5 JUNE 2024
THE COURT ORDERS THAT:
1.Within 14 days of the date of these orders, the parties must do all acts and things, and sign all documents and give all consents necessary to cause the distribution of the funds held on trust in the G Conveyancing trust account, being the net proceeds of sale of the property located at E Street, Suburb C, NSW, in the following manner:
(a)To the applicant wife (‘wife’) the amount of $678,865; and
(b)To the respondent husband (‘husband’) the amount of $438,925.
2.Within 28 days of the date of these orders, the parties shall do all acts and things and sign all documents necessary to vest to the husband the T Trust, and the husband indemnify and keep indemnified the wife in respect of any and all liabilities arising out of the parties’ operation of the trust.
3.Except as otherwise provided in these orders the parties be solely entitled to the exclusion of the other to:
(a)All items of property in their respective possession, custody and control;
(b)Any funds, shares, or other investments standing in any bank account in their name; and
(c)Any superannuation fund in an account in their name.
4.Each party be solely liable for and indemnify the other against any liability encumbering any item of property to which that party is entitled pursuant to these orders.
5.Within 14 days of the date of these orders, the parties shall do all acts and things and sign all documents necessary to cause the closure of the joint H Bank account, account number …40, with the balance (if any) be distributed such that the wife receive 60% and the husband 40%.
6.Pursuant to section 106A of the Family Law Act 1975 (Cth) a Registrar of the Federal Circuit and Family Court of Australia is authorised to execute any document or do any such thing as is required to give effect to these Orders in the event of a default of a party to execute such document or do such things as is necessary under these Orders.
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).
Part XIVB of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish an account of 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 has been approved pursuant to subsection 114Q(2) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
JUDGE OBRADOVIC:
INTRODUCTION
These are the Reasons for Judgment in respect of competing property adjustment applications as between the applicant wife, Ms Perez born in 1975 (‘wife’), and the respondent husband, Mr Molina born in 1972 (‘husband’).
The husband lives in Country A with the parties’ two children, aged 17 and 13 years. The wife lives in Australia. The main asset of the parties are funds currently held on trust from the sale of the former matrimonial home, the property situated at E Street, Suburb C, NSW (‘Suburb C Property’), which was sold in mid-2021.
The parties are bitterly in dispute as to how their assets are to be divided amongst them, with the wife displaying great mistrust towards the husband, and the husband displaying highly disguised contempt towards the wife. While the parties were together, the husband who was responsible for handling their finances, moved money and assets around and used money belonging to the family companies and trusts[1] as if it was the parties’ own. While these transactions were always done in a way so that they at least appeared to be legitimate on the books, they were done for the purpose of defeating creditors and for the purpose of the parties gaining financial advantage through use of money that was not theirs. This led to significant confusion in the wife’s understanding as to how much money the parties had during their relationship and at separation, and therefore a confused case at final hearing. The husband’s grandstanding did not help.
[1] Which involved members of the husband’s extended family.
At the conclusion of the proceedings, the Court was not persuaded on the evidence that the husband’s post separation handling of the parties’ assets[2] was such that it would result in such moneys being notionally added back into the pool.
[2] The phrase ‘parties’ assets’ is used very loosely here.
The Court was persuaded however, that an order adjusting the parties’ property interests was just and equitable, and that such an adjustment be 60% to the wife and 40% to the husband, for reasons which are explained below.
The Parties’ Cases and Documents Relied upon
At the commencement of the hearing, the wife sought orders in accordance with the Minute of Order contained in her Case Outline Document, that the remaining proceeds from the sale of the Suburb C Property be distributed such that the child support owed by the wife to the husband is paid, and the remainder be paid into the wife’s solicitor’s trust account.
The husband seeks orders in accordance with his Amended Response to Initiating Application filed on 29 July 2022, namely that the remaining proceeds from the sale of the Suburb C Property be distributed 15% to the wife and the balance to the husband.
Both parties seek orders closing the joint H Bank account (‘H Bank joint account’) with the funds to be distributed equally, and to otherwise retain their respective assets including superannuation entitlements.
The wife relied upon the following documents:
(a)Case Outline Document filed 14 March 2023;
(b)Affidavit of the wife filed 14 September 2022;
(c)Affidavit of the wife filed 18 September 2023;
(d)Affidavit of Single Expert Ms J filed 29 July 2022;
(e)Financial Statement filed 14 March 2023; and
(f)Balance Sheet filed 15 October 2023.
The husband relied upon the following documents:
(a)Case Outline Document filed 9 March 2023;
(b)Amended Response to Initiating Application filed 29 July 2023;
(c)Financial Statement filed 19 September 2023;
(d)Affidavit of the husband filed 29 July 2022;
(e)Affidavit of the husband filed 18 September 2023; and
(f)Affidavit of Single Expert Ms J filed 29 July 2022.
The following documents were exhibits in the proceedings:
·Exhibit 1 being Exhibit E to the wife’s affidavit filed 14 September 2022.
·Exhibit 2 being Exhibit F to the wife’s affidavit filed 14 September 2022.
·Exhibit 3 being the Settlement Adjustment Sheet for B Street, Suburb C, at Exhibit G to the wife’s affidavit filed 14 September 2022.
·Exhibit 4 being a letter from K Law Firm dated 16 July 2020 to the wife being Tax Invoice number …56 at pages 206 to 228 of the wife’s affidavit filed 14 September 2022.
·Exhibit 5 being the notification of acceptance dated 27 July 2022 for the application to register a court order in Australia located at Annexure A of the wife’s affidavit filed 18 September 2023.
·Exhibit 6 being Annexure B of the wife’s affidavit filed 18 September 2023.
·Exhibit 7 being Annexure C of the wife’s affidavit filed 18 September 2023.
·Exhibit 8 being Annexure D of the wife’s affidavit filed 18 September 2023.
·Exhibit 9 being Bank Statement for account ending in #...14 statement number …12 (being 2 pages), together with ANZ Account Statement for account ending in #...62 statement numbers 21 and 22 (being 6 pages).
·Exhibit 10 being the email with attached chain of emails from the husband to the wife dated late 2010.
·Exhibit 11 being the Deed of Mortgage between the wife and Mr Molina dated late 2010, being pages numbered 355 to 369.
·Exhibit 12 being Defence filed in Court F in proceedings number … filed on 23 June 2017.
·Exhibit 13 being Bank Account statement 37 for account ending in #...62 in the name of the wife (being 2 pages).
·Exhibit 14 being transfer from Mr L to the husband for half interest in property, stamp duty mid-2007, at page 71 of the wife’s affidavit filed 14 September 2022.
·Exhibit 15 being transfer from Mr L to the husband dated late 2008, at page 73 of the wife’s affidavit filed 14 September 2022.
·Exhibit 16 being transfer from the husband to the wife dated late 2010, at page 75 of the wife’s affidavit filed 14 September 2022.
·Exhibit 17 being Financial Statements for financial year ending 30 June 2012 for M Pty Ltd, at pages 42 to 54 of the husband’s affidavit filed 18 September 2023.
·Exhibit 18 being Financial Statements for financial year ending 30 June 2013 to M Pty Ltd, at pages 55 to 65 of the husband’s affidavit filed 18 September 2023.
·Exhibit 19 being Financial Statements for financial year ending 30 June 2014 to M Pty Ltd, at pages 82 to 94 of the husband’s affidavit filed 18 September 2023.
·Exhibit 20 being Financial Statements for financial year ending 30 June 2015 to M Pty Ltd, at pages 100 to 110 of the husband’s affidavit filed 18 September 2023.
·Exhibit 21 being Financial Statements for financial year ending 30 June 2016 to M Pty Ltd, at pages 114 to 120 of the husband’s affidavit filed 18 September 2023.
·Exhibit 22 being the wife’s Tax Return for 2007, at pages 31 to 32 of the husband’s affidavit filed 29 July 2022.
·Exhibit 23 being Centrelink Statement addressed to the wife dated mid-2005 headed ‘Your Newstart Allowance’, at page 29 of the husband’s affidavit filed 29 July 2022.
·Exhibit 24 being letter from N Company dated mid-2012 regarding redundancy, at pages 36 to 37 of the husband’s affidavit filed 29 July 2022.
·Exhibit 25 being Annual Superannuation Statement for 2005, at page 63 of the husband’s affidavit filed 29 July 2022.
These property proceedings were heard on 16 and 18 October 2023, going over part heard to 4, 5, and 6 March 2024.
RELEVANT LEGAL PRINCIPLES
The overall approach to the determination of an application for property adjustment orders pursuant to s.79 of the Family Law Act 1975 (Cth) was set out by the High Court in Stanford & Stanford.[3] Such approach was subsequently considered by the Full Court of the then Family Court in Bevan & Bevan,[4] Chapman & Chapman,[5] and Scott & Danton.[6]
[3] [2012] HCA 52 (‘Stanford’).
[4] [2013] FamCAFC 116 (‘Bevan’).
[5] [2014] FamCAFC 91 (‘Chapman’).
[6] [2014] FamCAFC 203 (‘Scott’).
In many matters which come before this Court, the requirement of whether it is just and equitable to make any orders is readily satisfied by the fact of the parties’ separation; as there is not, and will not thereafter, be the joint use of property by the parties. It is so in these proceedings.
Once the issue of whether it is just and equitable to make any order is resolved, the Court is to then consider the contributions made by the parties as defined in ss.79(4)(a) to (c), the matters set out in ss.79(4)(d) to (g) and, in particular, the subjective considerations as to the parties by having regard to the provisions of s.75(2) in so far as they are relevant.
The Court is then to consider the justice and equity of the actual orders to be made, in the context of the Court’s obligations to make appropriate orders as provided for in s.79(1) of the Act.[7]
[7] Russell & Russell [1999] FamCA 1875; Teal & Teal [2010] FamCAFC 120.
In Trevi & Trevi[8] the Full Court of the then Family Court of Australia held as follows:[9]
[27]The Full Court held in Omacini and Omacini that addbacks fall into “three clear categories”: where the parties have expended money on legal fees; where there has been a premature distribution of matrimonial assets; and “waste” or wanton, negligent, or reckless dissipation of assets.
[28]However, the Full Court also made it clear that an addback does not necessarily occur whenever “a party has expended money realised from the disposition of assets that existed as at the date of separation”, the Full Court describing such a proposition as “unduly simplistic”. An earlier Full Court made the same point, saying that adding back is “the exception rather than the rule”.
[29]The fundamental precept that addbacks are exceptional, reflected in the decisions just referred to, also mirrors what has been said in earlier decisions of the Full Court that, for example, “the Family Court must take the property of a party to the marriage as it finds it” at trial. An important parallel proposition is that the parties do not “go into a state of suspended economic animation” after separation. Thus, reasonably incurred expenditure does not usually come within accepted categories of addback.
[30]Two fundamental premises emerge from Omacini and the authorities preceding it. First, “adding back” is a discretionary exercise. When the discretion is exercised in favour of adding back, it reflects a decision that, exceptionally, in the particular circumstances of a case, justice and equity requires it. The second premise is its corollary: in cases that are not “exceptional” justice and equity can be achieved, not by adding back, but by the exercise of a different discretion – usually by taking up the same as a relevant s 75(2) factor. Indeed, it has been said that the latter is “a course which is, perhaps, technically more correct” than adding back to the list of existing interests in property.
(citations omitted)
[8] [2018] FamCAFC 173 (‘Trevi’).
[9] Trevi at [27]-[30].
It is necessary to make a holistic assessment of the relevant matters and the parties’ contributions, and not to undertake an accounting of scoring exercise.[10] ‘The essential task is to assess the nature, form and extent of the contributions of all types made by each of the parties within the context of an analysis of their particular relationship’.[11]
[10] Blandford & Esmore [2022] FedCFamC1A 67 (Aldridge, Harper & Riethmuller JJ) at [14].
[11] Dickons & Dickons [2012] FamCAFC 154 at [24].
In financial proceedings, each party must make a full and frank disclosure of all material facts.[12] The mere compliance with rules of the Court or practice directions does not alter the basic principle of the need for full and frank disclosure. The purpose of full and frank disclosure must be ‘the need for each party to understand the financial position of the other party, which is at the very heart of cases concerning property’.[13]
[12] See for example: Livesey v Jenkins [1985] 1 All ER 106; Inthe Marriage of Briese (1985) 10 Fam LR 642; [1986] FLC 91-713 (‘Briese’); and Oriolo v Oriolo (1985) 10 Fam LR 665; [1985] FLC 91-653 (‘Oriolo’).
[13] See Briese, approved by the Full Court in the case of Oriolo.
Where there is clear evidence of non-disclosure, the Court should not be unduly cautious about making findings in favour of the innocent party.[14]
[14] In the Marriage of Weir (1992) 16 FamLR 154.
The just and equitable requirement is ‘one permeating the entire process’.[15]
FINDINGS
[15] Bevan at [86].
Background and Chronology
The husband was born in 1972, in Country A. He is 52 years old.
The wife was born in 1975, in Country O. She is 49 years old.
The wife migrated to Australia in 1997, and she became an Australian citizen in 2003.
In 2022, The husband obtained qualifications having completed his studies at university in Country A.
The husband migrated to Australia in 2022. He became an Australian citizen in 2006.
In early 2003, the husband incorporated M Pty Ltd.
In 2004, the wife was awarded completed her studies.
In 2005, the wife started working for N Company.
The parties met in 2005 and commenced cohabitation in early 2006.
Starting in 2006, the wife worked for M Pty Ltd as a contractor around her regular employment with N Company.
In 2006, the parties; first child, Mr P, was born. Mr P will be 18 this year.
In 2007, the parties married.
In 2007, the parties moved into the Suburb C Property, where they rented. The property was owned by the husband’s friend Mr L.
In 2007, the husband purchased a 50% share in the Suburb C Property for $310,000 from Mr L.[16]
[16] Exhibit 14.
In mid-2008, the husband created Q Unit Trust along with his brother, Mr R, and his sister, Ms S, with the division of units being 10% to the husband and 45% each to Mr R and Ms S.
In mid-2008, the husband incorporated Q Unit Trust.
The husband purchased the remaining 50% share in the Suburb C Property in late 2008 for $315,000.[17]
[17] Exhibit 15.
In early 2009, the parties rented out the other half of the Suburb C Property to tenants.
In 2010, the parties second child, X, was born. X will turn 14 years old this year.
The wife was on maternity leave in 2010.
In late 2010, the husband transferred a 50% share of the Suburb C Property to the wife, as a tenant in common.
In late 2010, the parties established T Trust.
The wife’s position at N Company was made redundant and she ceased working with N Company as of mid-2012.[18]
[18] Exhibit 24.
In mid-2012, the wife received a termination payment of $24,990 from N Company.
By the end of 2012, the wife was a full-time employee for M Pty Ltd and was paid a salary which was paid into the H Bank joint account.
In 2013, the parties set up a self-managed superannuation fund called Super Fund 1, with the corporate trustee called Super Fund 2.
In 2014, the parties and the children travelled to Country A.
While the parties and the children were living in Country A, the husband suffered an injury which had him on bedrest for several months during 2014.
In late 2014, the husband commenced parenting proceedings in Country A to prevent the children from being removed to Australia.
In mid-2015, the parties closed their Super Fund 1 and transferred the entitlements to Super Fund 3. At some later point, the wife transferred her superannuation entitlements to Super Fund 4.
In 2015, the husband travelled to Australia without the wife and the children, who stayed behind in Country A.[19]
[19] Affidavit of wife, filed 14 September 2022 at [105]-[106]; T:224.7-8.
In 2017, M Pty Ltd was deregistered.[20]
[20] Exhibit 1.
In 2017, Mr R filed proceedings in Court F as against the wife seeking her interest in the Suburb C Property.
On 24 May 2017, the parties separated and the wife returned to Australia, leaving the husband and children in Country A.
On 19 February 2018, the then Federal Circuit Court of Australia ordered the wife to pay the husband $5,000 as costs thrown away after the wife withdrew her application for parenting orders the wife had filed whilst parenting proceedings were underway in Country A.
In late 2019, the Court F proceedings as between Mr R and the wife were dismissed. The wife was successful in obtaining a costs order against Mr R.[21]
[21] Mr R v Ms Perez.
In early 2020, the wife was unsuccessful in an application to Court F to vary the costs order made in late 2019, such that the husband as a third party, be liable for her costs.[22]
[22] Mr R v Ms Perez.
The parties were divorced after the wife was served with the Country A court divorce order made in 2020.
On 22 May 2020, the wife filed an Application for Final Orders for property adjustment commencing these proceedings.
On 25 March 2021, orders were made by consent for the sale of the Suburb C Property, and for the balance of the proceeds be paid into the trust account of G Conveyancing after payment of any fees, rates, and mortgages.
In mid-2021, the Suburb C Property was sold for $1,595,000.[23] After payment of the mortgage and fees, the net proceeds of sale were paid to the trust account of G Conveyancing.
[23] Exhibit 3.
On 12 October 2021, orders were made by consent for payment of costs of the accountant Ms J who was assessing the parties’ Capital Gains Tax Liabilities and a sum of $22,780.51 to be paid to the husband from the moneys held on trust.
In mid-2022, a Country A court made orders for the wife to pay the husband child support from mid-2022. This court order was registered in Australia on 27 July 2022.[24]
[24] Exhibit 5.
In 2022, the husband received an inheritance of 16% of his father’s deceased estate, estimated at $35,000.
In late 2022, a Country A court varied orders for the wife to pay the husband child support until late 2023. This varied court order was registered in Australia on 11 January 2023.[25]
[25] Exhibit 7.
At the time of hearing, the husband had full care of the two children of the relationship and earned an income from ad hoc work and a small amount of child support. The husband and the children reside in Country A.
At the time of hearing, the wife was employed and earning an income.
Suburb C Property
The Suburb C Property, at the time the parties commenced living there in 2007, was owned by Mr L although subject to a mortgage.
In about mid-2007, the husband and Mr L entered into a contract for the sale of land, with respect to the Suburb C Property. They agreed that the husband would purchase a 50% interest in the property as a tenant in common. There was a ‘put and call’ option for the husband to purchase the remaining 50% interest within 4 years.
In mid-2007, the husband and Mr L entered into a joint loan secured by a mortgage to fund the purchase of the Suburb C Property by the husband. The mortgage was for $488,000 with a 50/50 split between the husband and Mr L, each being liable for $244,000.
The remainder of the husband’s purchase price was said by the husband to have been funded by the husband taking out a loan for $12,000 from M Pty Ltd and from his savings. He says that M Pty Ltd held over $100,000 in its bank account. While there may have been money in M Pty Ltd’s account, there is no probative evidence as to where the balance of the deposit actually came from.
The parties had by that stage been in a committed relationship and living together for over 1 year. They had a child together, and the wife had already been working in M Pty Ltd since early 2006. The husband’s assertions that the money used as a deposit was ‘his’ in those circumstances is not accepted, while it may have come from an account which he controlled and from a business which he had been running since 2003, the Court does not accept at face value his assertion that the moneys came only from his endeavours.
At that time, the wife had approximately $23,000 in her savings account(s). While her evidence-in-chief where she asserts she had $30,000 in savings and which she contributed to the purchase of the Suburb C Property in 2007 was shown to be wrong, even at that early stage of the parties’ relationship, there were already transfers coming in and out of her account which have not been explained by either party in their evidence. For example, there are two transfers totalling $3,300 in early 2007 to the husband.
In mid-2007, the Suburb C Property was sectioned into two, with the parties living in one part and Mr L in the other.
The husband exercised the put and call option and purchased the remaining 50% share in the Suburb C property in late 2008 for $310,000.[26]
[26] Exhibit 15.
At the time of purchase of the remaining 50%, the husband refinanced and consolidated the loan and mortgage over the property, bringing his liability to $550,000.
Therefore, at the time of the husband acquiring a 100% interest in the Suburb C Property, the parties had spent $620,000 (plus stamp duty and legal and associated costs) acquiring the Suburb C Property, and had borrowings of $550,000 in the husband’s name against the property. As such, at the end of 2008, there was about $70,000 equity in the Suburb C Property, which was held in the husband’s name.
After acquiring the entirety of the Suburb C Property, the parties rented out half the property to tenants, and the rent was used towards the mortgage and outgoings on the property. The average rental income was approximately $400 per week. The balance of the mortgage repayments were made by the parties. The Court accepts the wife’s evidence that her earnings did contribute to household expenses, including the mortgage.
The parties were both involved in ensuring that the property was in good condition, including dealing with tenants and cleaning that part of the house which was tenanted. The parties redid the gardens, with the husband doing most of the manual labour associated with that.
In late 2010, the husband transferred a 50% share of the Suburb C property to the wife. The parties thereafter held a 50% interest each in the Suburb C Property as tenants in common.
At or around the same time as the wife’s 50% legal interest in the Suburb C Property was registered, the parties jointly borrowed $512,000 from H Bank (‘H Bank mortgage’) and paid out the husband’s loan.[27]
[27] Affidavit of husband, filed 29 July 2022 at [79]; T:317.
The transfer of the 50% interest in the Suburb C Property from the husband to the wife was apparently for consideration of $375,000.[28] The Court says ‘apparently’ because this was part of the husband’s plan to ‘protect’ the parties’ assets from creditors and because there is no evidence of any consideration passing between the parties at the time of the transfer of the half interest in the property to the wife, except in so far as the wife took on liability through the H Bank mortgage.
[28] Exhibit 16.
In late 2010, the husband sent to his lawyer, Mr U[29] an email representing his ‘plan’. That email was forwarded to the wife when she, at his request, printed out the documents attached to the email. The wife did not read the email outlining the ‘plan’. She trusted the husband in his dealings, but she did understand that his proposal for the transfer of half the Suburb C Property into her name was to protect the family home.
[29] T:307.31-35; Exhibit 10.
The husband’s ‘plan’ as set out in the email to his lawyer was as follows:
Dear [Mr U],
The following plan is what I had in mind however feel free to correct my mistakes or ill advised ideas.
The current Situation:
-I own 100% of “[B Street, Suburb C]” on title, with a mortgage from Westpac. The current balance on the loan is 527K
-The above mentioned house was purchased in two distant transactions. The first 50% was purchased in [mid]-2007 with 2 mortgages of 244K each. Both mortgages were in both names ([Mr L]“my friend”, and my names). [Mr L] used his ½ of the property to live there, and I used by ½ also to live there. The house has 2 separate entrances and living spaces however it is 1 house in title. I purchased the other 50% in [late] 2008. I occupied both sides of the house for about 50 days until I decided to start renting ½ of the house as it became too big to clean. When I purchased the second 50% of the house, I cancelled both existing 244K loans with a new loan of 548K. The first half was purchased at 305K + stamp duty. The second half was purchased at 315K + stamp duty.
-Currently I live in half and rent the other half, and claim interest as tax deduction for 315K as I purchased the second halt [sic] at that price.
What I want to do:
-Refinance with [H Bank] at 6.75% fix for 3 years. They are willing to lend about 500K. While refinancing I want to pass 50% of the property into [the wife’s] name. I do understand that is stamp duty free as she is my wife. I understand there are 2 different ways to own joint property, I want to use the one that means she owns 50% and I own 50%, not 100% owned together, for asset protection reasons. Perhaps your advice is required here.
-As mentioned above I purchased 2 x 50%, the first 50% has a current debt of 212K, and the second 50% has a current debt of 315K. As when I buy shared the ATO forces me to sell first what I bought first (first in first out), I want to apply 1st in 1st out to sell to [the wife] the 1st 50%, meaning I keep the 2nd 50% that currently has 315K tax deductible debt. As [the wife] will need 375K to be able to buy 50%, and she will fun it with debt, our new combined total debt will be: 315K + 375K = 690K fully tax deductible. Is this correct? Also as the first 50% of the property was always Principle Place of Residence and owner occupied, there is no Capital gain on it at the moment, correct?
Finally, the current numbers:
[Mr R] (my brother) has an account in Australia, with about 125K cash (he actually lent that money to our trust [Q Unit Trust], but I am going to transfer back to money to [Mr R]’s account once you confirm that is the first step. [The wife] (My wife) has 140K in stocks in a broker’s account. We intend to leave that where it is as [the wife] will be funding the purchase with debt.
I currently have 140K in cash in my offset account for the mortgage; however I currently have a debt with [M Pty Ltd] (as a director loan) of 65k. I also currently have a debt with [Q Unit Trust] for 107K. After paying both debts I am actually in negative -32K.
[Q Unit Trust]’s current cash position is about 140K.
FYI, [Q Unit Trust] is owned 45% by my sister [Ms S], 45% by my brother [Mr R], and 10% by me. It is governed by a company trustee called [Q Unit Trust], I own 100% of shares and it is NOT a trading company, it is just a trustee company. I am the sole director.
[M Pty Ltd] is the trading company, I am the sole director, and I own 80% of shares, and my dad and brother own the 20%.
Finally, [H Bank]’s mortgage is approved as Both [the wife] and I as borrowers and [the wfe’s] income does not allow her to be guarantor.
If all of the above is correct, the outcome should be:
[The wife] purchased 50% of house at 375K fully funded by [Mr R] 125K + [Q Unit Trust]’s 125K + [H Bank]’s balance. I don’t know (for assets protection reasons) if there is a need to register the 2nd mortgage with [Mr R] and [Q Unit Trust] or a private document would be strong enough. I leave that with you.
Finally, one of the issues is that [the wife] will “give me” 375K, I will use part of that to pay off the current Westpac debt (527K), however it will be about 300K left. I don’t like the idea of having 300K in my hands, how can we solve that?
I think it might be productive for us to have a meeting at your office to go thru [sc] this draft and ensure my expectations and plans are realistic and achievable. What do you think?
Regards
[The husband]
Both the husband’s and wife’s signatures on the Transfer dated late 2010 were witnessed by a Ms V, Solicitor at W Law Firm.[30] Although not the subject of any specific evidence, the Court infers from the evidence that Mr U, the husband’s lawyer, was also a solicitor at W Law Firm[31] at the time. It is not apparent on the evidence when the transfer was registered.
[30] Exhibit 16.
[31] See Exhibit 10, together with Exhibit 11, where the website for W Law Firm is noted as [W Law Firm.com.au], and Exhibit 16.
The husband’s evidence-in-chief about the ‘sale’ of his half interest in the Suburb C Property to the wife is as follows:[32]
In or around [late] 2010, I sold a 50% share of the [Suburb C] property to [Ms Perez] for $375,000. [Ms Perez] funded this purchase through a loan in the sum of $107,500 from [Mr R], the sum of $130,500 borrowed from [Q Unit Trust], and the remainder of the purchase was funded from joint savings.
[32] Affidavit of husband filed 29 July 2022 at [77].
The husband does not explain how the sale took place after the date of transfer.
Mr R is not a witness in these proceedings.
The husband in his evidence says ‘we obtained from Mr R the sum of $107,500 in 2010 which was transferred as to $20,000 into the joint account and $87,500 into an e-trade account’.[33]
[33] Affidavit of husband, filed 18 September 2023 at [71].
The evidence establishes a number of transfers into the wife’s account between late 2010, totalling $378,736.73, and then a withdrawal of $375,050 in late 2010 from that account.
The deposits making up $378,736.73 are as follows:
•[late 2010] from [Q Unit Trust] Trust Loan [Q Unit Trust] $130,500;
•[late 2010] eTrade Withdrawal $87,500;
•[late 2010] eTrade Withdrawal $47,903.69
•[late 2010] eTrade Withdrawal $112,833.04.
The deposits into the wife’s account are not from ‘joint savings’ as deposed to by the husband, they are from e-trade accounts. It is inferred that the e-trade accounts were in the wife’s name and linked to her savings account. It is not explained otherwise in the evidence. Except in respect of the sum of $87,500, where these moneys came from is not explained at all; for example, whether they were savings accrued by the wife and then invested on her behalf by the husband, or whether the money came via some other pathway into an e-trade account invested by the husband and then paid to the wife.
The wife was asked about these transfers in cross-examination. But the questions and answers did not elucidate the matter any further.
The Deed of Mortgage,[34] which was the subject of the Court F proceedings between Mr R and the wife, is dated late 2010. It was prepared by W Law Firm, and the wife’s signature on that document was again witnessed by Ms V. The Recitals provide as follows:
AThe Borrower wished to borrow from the Lender monies in the amount of $107,500.00 which are to be used for the part payment of the purchase of a fifty per cent (50%) interest in the property, [B Street, Suburb C], NSW (“Property”).
BThe Lender has agreed to loan $107,500.00 in accordance with and subject to the terms of this Deed.
CThe Borrower agrees to repay the loan facility in accordance with and subject to the terms of this Deed.
DTo secure the Lenders loan, the Client has agreed to provide a mortgage over the Property up to a limit of $107,500.00. The parties acknowledge that this mortgage will rank third behind the mortgage held by [H Bank] and the second mortgage held by the [Q Unit Trust] Pty Ltd as trustee of the [Q Unit Trust] .
EThe purpose of this Deed is to document the loan and to provide a mortgage as security.
[34] Exhibit 11.
Clause 3.2 of the Deed of Mortgage provides as follows:
3.2 Limited mortgage
The mortgage over the Property will be limited by the following:
(a)The mortgage held by the Lender will be limited to the interest in the Property of [the wife].
(b) The mortgage will be limited to an amount of $107,500.00.
(c)The mortgage will rank third behind the first mortgage held by [H Bank] in the amount of $138,000.00 and the second mortgage held by [Q Unit Trust] Pty Ltd as trustee of the [Q Unit Trust] in the amount of $130,500.00
The Statement of Claim filed in the Court F proceedings by Mr R is not before the Court. The only document before the Court related to the Court F proceedings is a defence which had been filed by the wife when she was unrepresented, but which had been superseded by an amended defence.[35]
[35] Exhibit 12.
The reasons for judgment in Mr R v Ms Perez are a matter of public record. While s.91 Evidence Act 1995 (Cth) excludes evidence of judgments, that is evidence of a decision or of a finding of fact in an Australian proceeding is not admissible to prove the existence of a fact that was in issue in that proceeding, the parties throughout these proceedings readily referred to those proceedings and what occurred in those proceedings. The reasons for judgment were not tendered. The Court is aware as a result of the evidence and submissions in these proceedings, that the Court F found that the moneys which had been paid by Mr R had been paid back and that the wife was successful in a costs application against Mr R. The Court is also aware that the wife was unsuccessful in her costs application against the husband.
In the Court F proceedings between the wife and Mr R, the husband who was a witness in Mr R’s case, gave evidence that the wife owed money to Mr R pursuant to the loan. As noted earlier, Court F found that the loan had been repaid. In these proceedings, the husband’s evidence is that the loan has was repaid in late 2014, in the amount of $110,000.[36]
[36] Affidavit of husband, filed 18 September 2023 at [72].
The husband has not explained why his evidence in Court F was different to the evidence before this Court.
To make matters worse, the husband’s oral evidence in these proceedings was confusing, the Court finds intentionally so. The husband said:[37]
As you give evidence today, do you accept or disagree that the money was repaid to your brother that he was suing the ex-wife in [Court F]. Do you accept it or do you reject that it was repaid? - - -I think the accounts need to be made, need to be calculated, to know. Somebody needs to calculate and say if it was or not, it’s not up to me.
[…]
Sir, about the [Suburb C] property loan; has that money, to your knowledge and belief today been repaid, or something else? - - - Money is fungible, meaning if there is different lots of money – and you’re asking me if there was money owing to him, there was. Now, if you say, “In this little square, was it a debt?”, how can I say? To me, my brother is one entity. There is no little areas, one money for this, one money for the other. In general, there was money owing to him in the add-up of everything. That’s my evidence. In the add-up of the whole thing, there was money owing to him. But I don’t have power to say which money for which of the little squares was paid and which were not. Only a judge can say it.
[37] T:158.20-4; T:159.20-8.
The husband’s evidence discloses the complex nature of his dealings with the parties’ finances and of a laissez-faire attitude to evidence in these proceedings. The husband has not produced any records nor provided evidence of the details of his and Mr R’s financial dealings, matters which were within his knowledge. In those circumstances, the Court will not be unduly cautious about making findings in favour of the wife.
Registered, at some point in time after the transfer of the husband’s 50% legal interest to the wife, against the title of the Suburb C Property was a mortgage to Mr R and a mortgage to Q Unit Trust.
The husband described the transaction in his oral evidence as follows:[38]
In 2010 after one year of a big dispute with a customer, we grabbed all the assets we had and we put it in [T Trust] with intention of being protected against a potential claim from a customer. So every single dollar we had went in the family trust. So the value of the house was $750,000. Due to the size of the mortgage I had, we refinanced with [H Bank] and we sold half of the house to [Ms Perez], so 750 or 780 – I don’t remember, I think it’s 750 – we sold half for 375. So my half was fully leveraged, single ownership, 100 per cent debt, plus her half was fully leveraged, single ownership, and all the money we got from that sale went into the family trust, and by doing that we were 100 per cent protected at the time if a customer wants to sue me ... If that happens, I needed to protect the family. So what I did was organise this. There is an email I sent to [Ms Perez] explaining the whole plan. She was copied. Everything was explained. And this is why we did what we did. So when you tell me the company had enough money to pay the home loan, that’s not the case because what we did is we grabbed a lot of debt from everywhere to be able to put the 400,000 in total, including debt, 222,000 free of debt with a document I supplied my accountants … that says deed of gift. I made a deed of gift for $222,000 in 2010 and that document proves that after I did 100 per cent leverage on everything I had 222,000 that were attributed to the family. Everything else was debt – from my brother, from [Q Unit Trust], from [M Pty Ltd], from everywhere – and at some stage I had to return the debt and also from the bank, the [H Bank]. So we had as much debt as possible, so if one day somebody sues me at least I protect the family. Some money is protected.
[38] T:104.5-29.
The wife said in her evidence that there was no discussion between the parties for her to pay any money for her interest in the Suburb C Property.[39] She also stated that she signed documents in late 2010 but was not aware at the time that the documents were mortgages.[40] During cross-examination, the wife conceded that a document called ‘Deed of Mortgage’ had both her and Mr R’s signatures,[41] and that the document was dated late 2010.[42] Such concessions of course come after protracted Court F proceedings and certain findings by the judge hearing that case. The Court is unable to determine whether there were specific discussions between the parties about the actual transactions that took place. However, it is more likely than not, that the husband did have some discussions with the wife about his plan to ‘protect’ the family home from creditors and that she went along with his plan without taking the time and effort to actually and properly enquire as to what the proposal entailed.
[39] Affidavit of wife, filed 14 September 2022 at [59].
[40] Affidavit of wife, filed 14 September 2022 at [73]-[75].
[41] Exhibit 11; T:327.5-15.
[42] T:239.15-20.
The husband states that, of the $375,000 ‘paid’ by the wife for the purchase of the Suburb C Property, he paid $222,000 into the T Trust which was ‘held as equity in the trust.’[43] The husband said that the balance of the $375,000, being the sum of $153,062, was reflected as a loan on the T Trust profit.[44]
[43] Affidavit of husband, filed 18 September 2023 at [83].
[44] Affidavit of husband, filed 18 September 2023 at [83].
In any event, the evidence before the Court is that the ‘loans’ by Mr R and Q Trust to the wife were repaid before the property was sold (in 2014 and 2015 respectively). The balance of the ‘purchase’ price came from ‘her’ e-share trading accounts.
On that view of the evidence, the wife had an unencumbered half interest in the Suburb C Property at the time it was sold. As such, had she received her legal interest at the time of sale, she would have received 50% of $1,598,000, being the gross sale price. That is, at the time of sale, her legal interest was valued at $799,000 while the husband’s legal interest was valued at $372,741 (with the H Bank mortgage counted against the husband’s interest only).[45]
[45] Exhibit 3 (settlement adjustment sheet).
This view of course, is complicated by the fact that the wife was jointly liable with the husband for the H Bank mortgage. The husband cannot disregard the wife taking the debt on jointly with him.
On another view, if the Court was to accept the husband’s evidence about the sale of his half interest to the wife in the Suburb C Property, it appears that the wife then ‘paid’ $375,000 twice for her half share interest. The first time when she became a co-borrower on the H Bank mortgage with the husband by taking on the debt jointly with the husband (and inferentially and arguably ‘paying’ $375,000 of the husband’s $550,000 loan during the re-finance), and then later by ‘paying’ $375,000 in the way that the husband asserts.
These transactions, resulting firstly in the wife being transferred a 50% legal interest in the property, taking on the loan jointly with the husband, and then afterwards ‘paying’ $375,000 to the husband (although she was already a legal owner of the property at the time, noting the date of the transfer) are typical of the husband’s handing of the parties’ overall finances during their relationship and indeed post separation. It is clear that the husband orchestrated the whole scenario.[46]
[46] Not his lawyer or accountant as he insinuated during his oral evidence.
Between 2014 and 2017, the Suburb C Property was rented to tenants through a real estate agent, with the rent being used to pay the H Bank mortgage. This was while the parties were in Country A.
In mid-2017, the wife ended the rental contract over the Suburb C Property and moved into the property.
From mid-2017 until early 2020, while residing at the Suburb C Property, the wife rented some of the rooms. During cross-examination, the wife stated that some of the money was paid to her in cash and some by way of brank transfers.[47] From early 2020 until the sale of the property, the wife was living at the property alone.
[47] T:376.18-23.
The husband claimed he became aware in mid-2018 that the mortgage payment had been deferred until mid-2018.[48] The husband states that he made a one-off payment in mid-2018, and subsequent payments between mid and late 2018 inclusive.[49] The mortgage repayments were deferred at the husband’s request for early 2019. Then, between mid-2019 and mid-2021 inclusive, the wife made the mortgage repayments.
[48] Affidavit of husband, filed 29 July 2024 at [143].
[49] Affidavit of husband, filed 29 July 2022 at [150]-[151].
Holidays and Lifestyle
In around mid-2007, the parties went on a holiday with Mr P to Country Y, Country A, Country Z, and Country O for around 6 weeks. The husband returned to Australia early, leaving the wife to travel with Mr P for one to two weeks.
In early 2014, the parties and the children travelled to Country A. The wife claimed the plan was to only stay for 12 months, and the husband claimed they migrated. It was not in dispute at hearing that return flights were booked.
In mid-2014, the wife took the children to Country O and Country Z to visit the wife’s family. During cross-examination, the wife stated that the trip was for three or four weeks around mid-2014 to see her family, that the husband stayed in Country A, and that the husband had planned and paid for the holiday with family money.[50] When asked whether the husband prevented the wife from leaving Country A with the children the wife claimed that ‘it was all planned.’[51]
[50] T:362.21-363.26.
[51] T:363.39.
On 24 May 2017, the parties separated and the wife returned to Australia leaving the husband and children in Country A. The wife said she left after believing the husband was planning to harm her. The husband denies this and stated that she left after a court meeting in relation to the children’s living arrangements, saying she was going only for 6 weeks to organise paperwork. Since leaving, the wife has not returned to Country A and has not seen her children, though she communicates regularly with the children via messages and calls on social media.[52]
[52] Affidavit of wife, filed 14 September 2022 at [112].
Other financial and non-financial contributions
The husband says in his evidence that at the start of the parties’ relationship, he paid the wife’s HECS debt of approximately $10,000 in late 2006. He conceded in cross-examination that this amount was inflated. The wife’s bank statements show a payment to the Australian Taxation Office (‘ATO’) of $9,765.45 in mid-2007.
The wife was the primary home-maker and parent while the parties lived together, even after moving to Country A in 2014.
The husband was also an involved parent, for the most part having flexible work arrangements through his own company, and being available to care for the children as and when needed.
Both parties were actively involved in the care and maintenance of the Suburb C Property, including the part of the house where tenants lived. The husband undertook most of the gardening and yard work, while the wife undertook most of the housekeeping and lighter cleaning.
The wife trusted the husband implicitly to deal with their finances and understood that he was doing so, at the time, for the benefit of the family. The husband’s evidence discloses to some degree the extent of the husband’s convoluted dealings with the family finances, with company finances, with e-trading and with the various trusts the parties had interests in. The evidence overall discloses that the husband involved Mr R in his financial dealings, but does not disclose why Mr R was so involved. Certainly, the family business borrowed money from Mr R, at times when it was earning over $350,000 gross per year and when its expenses were approximately half that. Why Mr R was lending money to the family business has not been explained either by the husband or by Mr R.
The husband’s oral evidence was that Mr R was paid dividends from the Q Unit Trust and/or M Pty Ltd.[53]
[53] T:161.21-34.
Such transactions give force to the wife’s evidence that the husband and Mr R were very close, and that money moved between them without explanation to her, or indeed now, to the Court.
Businesses and Trusts
M Pty Ltd
As noted earlier, M Pty Ltd was incorporated in 2003.
M Pty Ltd, was a company in which the husband worked as a consultant from 2003 until 2015. At the time M Pty Ltd was established, his former partner had a 20% share, and the husband the balance.
At the time of the commencement of the parties’ relationship, the husband owned an 80% share of M Pty Ltd, his brother Mr R 12% and his father Mr AA 8%, consequent upon the husband’s former partner selling her 20% share to them following separation from the husband. On the husband’s evidence, he was the director for M Pty Ltd, and together with Mr R and their father, the company employed staff (who it seems were based in Country A).[54]
[54] T:150.43-151.8; T:445.5-40.
From around 2007, the husband borrowed funds by way of director’s loans from the company he operated. The husband stated that the loans were placed into his personal bank accounts to offset the interest of the mortgage on the Suburb C Property and were repaid no later than June of each year.[55] The evidence, however, is that at times such moneys were paid as dividends to the husband. The husband’s evidence about such matters was very general.
[55] Affidavit of husband, filed 29 July 2022 at [82]-[85].
By the end of 2012, the wife was a full-time employee for M Pty Ltd and was paid a salary which was paid into the H Bank joint account.[56]
[56] Affidavit of wife, filed 14 September 2022 at [24].
By mid-2015, M Pty Ltd ceased trading.
Despite M Pty Ltd ceasing to trade by mid-2015, after the parties arrived in Country A, the company continued to pay superannuation during 2015 and salaries for 15 months.
The husband begun winding up M Pty Ltd in 2016, and in early 2017 the company was deregistered.[57]
[57] Exhibit 1.
Between the financial year ending 30 June 2011 and the financial year ending 30 June 2016, M Pty Ltd received $1,525,758 in income. From the financial year ending 30 June 2011 to the financial year ending 30 June 2014, the company was earning between $315,000 to $395,000 per year.[58]
[58] Figures rounded up to nearest $100.
The evidence in respect of the earnings and expenditure of M Pty Ltd is limited to only certain financial records of M Pty Ltd and the husband’s affidavits. While the wife worked in the company, received a salary and was paid superannuation, it is the husband who was not only the controlling mind of the company, but also the person who controlled its finances. The company and various entities described elsewhere were utilised by the husband, in ways which have not been fully explained in the evidence, to support borrowings, e-trade transactions, and moneys moving between various accounts and the husband’s extended family members.
For example, the husband would transfer the moneys which M Pty Ltd was paid into the parties’ offset account to reduce the interest on the home loan, have the money sitting there for months and then transfer it back into the M Pty Ltd account. The husband would also have the company lend him and Mr R money, for unexplained purposes. The husband would have the company lend money to Q Unit Trust. The husband would have the company invest the money in e-trading. M Pty Ltd paid the Q Unit Trust licensing fees for business products.
As noted earlier, only limited financial records of M Pty Ltd are before the Court. However, by way of example, the following is noted from the evidence in respect of the five years of earnings for M Pty Ltd for financial year ending June 2012 to financial year ending June 2016 (after the parties went to Country A).
Financial Year ending June 2012[59]
[59] Exhibit 17 and Affidavit of husband filed 18 September 2023 [39]-[43].
The company earnt $327,310 in consulting fees. It paid $62,000 in licensing fees (presumably to Q Unit Trust). It paid $40,900 in salaries to associated persons. It paid $33,300 to unnamed subcontractors. It made a gross profit of $145,130, and a net profit of $99,400. It had $283,950 in cash assets of which $275,500 was in an e-trade account, and it owed the husband $39,970 and Mr R $18,500.
The husband’s evidence is that during that financial year to offset interest on the Suburb C Property home loan, he transferred funds from M Pty Ltd to the joint account. He does not say how much.
The husband’s evidence is that during that financial year, to reduce director’s loan owing to M Pty Ltd (which is not noted on the financial statements either for the year ending June 2011 or the year ending June 2012), the husband ‘repaid’ $270,000 from the joint account to M Pty Ltd e-trade account.
What the Court understands the husband to be saying is that when M Pty Ltd received money he would deposit that money into the parties’ joint account (and on the company books attribute it to a director’s loan) and then pay the company back before the end of the financial year so that he does not become liable under Division 7A of the Income Tax Assessment Act 1997 (Cth).
As at June 2012, M Pty Ltd had assets of $309,708 and liabilities of $171,983. That is, it had net assets of $137,724.
Financial Year ending June 2013[60]
[60] Exhibit 18 and Affidavit of husband filed 18 September 2023 at [45]-[48].
The company earnt $392,900 in consulting fees. It paid $74,866 in licensing fees (presumably to Q Unit Trust). It paid $95,700 in salaries to associated persons. It paid $24,905 to unnamed subcontractors. It paid $89,525 in superannuation. It made a gross profit of $87,405 and a net profit of $67,663. It had $23,760 in cash assets and $291,415 invested in shares. It owed the husband $81,755 and it owed Mr R $18,500.
The husband’s evidence is that, like in 2012, to offset interest payable on the home loan, he transferred funds from M Pty Ltd to the joint account. He repaid the director’s loans of $362,870. The Court notes that this is almost the entirety of the consultancy fees received by the company for that year, that is, the husband appears to have utilised a sum equivalent to almost the entirety of the company’s earnings either for his benefit, or for the benefit of the parties, or for some other reason. The moneys were moved from the joint account to the husband’s e-trade account to his bank account. He does not explain what interest was saved on the home loan, nor does he explain how much profit or loss he made in e-trading using company funds.
As at June 2013, M Pty Ltd had assets of some $333,210 and liabilities of just under $147,775. That is, it had net assets of $185,435.
Financial Year ending June 2014
The company earnt $359,592 in consulting fees. It paid $3,500 in licensing fees (presumably to Q Unit Trust– it is not explained why the licensing fees were so much less than in previous years). It paid $119,380 in salaries to associated persons. It paid $65,025 to undisclosed subcontractors. It paid $40,000 in superannuation. It made a gross profit of $63,664 and a net profit of $44,565. It had $143,667 in cash assets and a loan to the husband of $106,760. It owed Mr R $103,300.
Like in 2012 and 2013, the husband used money belonging to M Pty Ltd to offset interest payable on the home loan. To reduce the director’s loans he paid money from the joint account and from his e-trade account (totalling $165,200). The director’s loan is not noted on the financial statements.
The husband does not explain at all why the company went from owing Mr R $18,500 to owing him $103,300, nor does he explain why the company lent him $106,760. This is all whilst the company received over $350,000 in consultancy fees and earnt a profit, and while he was using some $165,200 of the company’s money.
As at June 2014, M Pty Ltd had assets of $259,607 and liabilities of $114,604. That is, it had net assets of $145,002.
The husband does not explain why the company’s assets were reduced between 2013 and 2014, noting it was operating at a net profit.
It was halfway through this financial year that the parties went to Country A.
Noting the company earnings and the use of such moneys, it is unclear why the husband says he had to borrow money from his brother to support him, the wife and their children when they went to Country A at the beginning of 2014. The Court does not accept his explanation about restrictions on on bank accounts and transfers to Country A.
Financial Year ending June 2015
The company earnt $125,925 in consulting fees. It did not pay any licensing fees. It paid $73,295 in salaries to associated persons. It paid $15,088 to undisclosed subcontractors. It made a gross profit of $3,590 and a net profit of $2,513. It had $25,582 in cash assets and a loan to the husband of $193,347 and a loan to Q Unit Trust of $18,200. It owed Mr R $190,800.
The husband’s evidence is that in order to offset the interest payable on the home loan, he transferred $120,000 from M Pty Ltd to the joint account, but that he repaid director’s loan to M Pty Ltd of $202,282 from the joint account. The director’s loan is not noted on the financial statements.
The discrepancies in these figures is not explained: it is not explained how and why he ‘borrowed’ $202,282 from the company if there was only $120,000 used for the purposes of reducing interest in the offset account.
The husband does not explain at all why the company went from owing Mr R $103,300 to owing him $190,800, nor does he explain why the company lent him money.
The company was still paying salaries to ‘associated persons’.
Financial Year ending June 2016
In 2016, the company did not receive any earnings.
It was owed $30,734 by the husband and it had no other assets. It did not owe Mr R or the husband any more money.
The evidence is completely silent as to how the company that had significant assets and earnings went further and further into debt to the husband’s brother, and then within a short span of a year was wound down.
The wife’s suspicions about the husband’s handling of the company funds post separation are understandable.
Q Unit Trust
According to the husband, the Q Unit Trust was created as a vehicle to undertake share trading. The Q Unit Trust is said to have owned the intellectual property of the products the husband had created through M Pty Ltd,[61] resulting in M Pty Ltd paying licensing fees for the use of the products.[62]
[61] Affidavit of husband, filed 18 September 2023 at [26].
[62] T:100.34-40.
It was around the same time as M Pty Ltd ceased trading and was deregistered, that Q Unit Trust also ceased trading.[63]
[63] Affidavit of husband, filed 29 July 2022 at [97].
Q Unit Trust Properties
The husband was the sole director and shareholder of Q Unit Trust Properties. The husband gives confusing (and legally troubling) evidence about Q Unit Trust Properties. He asserts that it had two ABNs associated with it, one to act as a corporate trustee for the Q Unit Trust and the other was to take over the business of M Pty Ltd after it was deregistered in 2017.[64] The husband claimed that he was the sole director and shareholder of both the business Q Unit Trust Properties and the trustee Q Unit Trust Properties,[65] and that the business Q Unit Trust Properties was ‘distinct from the Corporate trustee of the Unit Trust known by the same name’.[66]
[64] A quick search in respect of publicly available information shows that the ABN which the husband says was for the corporate trustee, appears to have been registered as the trustee for the Q Unit Trust, but not a corporate trustee and is not an ABN which is registered against Q Unit Trust Properties.
[65] Affidavit of husband, filed 18 September 2023 at [25] and [28].
[66] Affidavit of husband, filed 18 September 2023 at [28].
In mid-2015, the husband said the Q Unit Trust Trust ceased trading along with M Pty Ltd.[67] During cross-examination, the husband stated that the Q Unit Trust and the trustee Q Unit Trust Properties ‘shut down’ in either 2015 or 2016.[68] After the end of the trust, in mid-2016, the husband operated a business under Q Unit Trust Properties.[69] During cross-examination, the husband referred to the company through which he sold products as the ‘Q Unit Trust’.[70]
[67] Affidavit of husband, filed 29 July 2022 at [97].
[68] T:85.25-29.
[69] Affidavit of husband, filed 29 July 2022 at [31].
[70] T:86.5-9.
In early 2017, when M Pty Ltd was deregistered, Q Unit Trust Properties undertook any remaining work which had previously been done by M Pty Ltd.
During its operation, Q Unit Trust had engaged in e-trading. No other details are provided in relation to the accounts or trades.[71]
[71] Affidavit of husband, filed 29 July 2022 at [88].
In the financial year ending June 2021, the husband begun the process of winding up Q Unit Trust Properties. He received $72,900 as a franked distribution, including $24,422 in franking credits, in his 2022 tax return.[72]
[72] T:86.18-19.
T Trust
In late 2010, the parties established the T Trust. The parties were both appointed trustees.
In late 2010, the parties opened T Trust and deposited $222,000. This was said to be a gift by the husband to the trust, and the origins of the moneys are the supposed purchase price paid by the wife for a half share of the Suburb C Property. The wife and the husband are joint trustees of the T Trust, with the beneficiaries being the Molina-Perez families, including children.
The husband, during cross-examination, deposed that in 2010 they had put all the assets they had into the T Trust ‘with the intention of being protected against a potential claims from a customer.’[73] The husband also stated that ‘I believe the trust has everybody in the planet as a beneficiary’ and that he and the wife chose who could be a beneficiary.[74]
[73] T:104.5-7.
[74] T:237.36-40.
The wife said that she knew that the T Trust had been set up with both herself and the husband as trustees, but that she was not aware of T Trust finances.[75] During cross-examination, the wife was asked about whether she had access to the bank account of T Trust and she said she had access to the bank statements and saw the bank accounts, but claimed that ‘I didn’t know the e-trading side.’[76] The Court accepts the wife’s evidence that while she may have had access to relevant information, she did not understand the dealings of the trust nor did she have any input into how the trust operated and/or traded. This was all the husband’s doing.
[75] Affidavit of wife, filed 14 September 2022 at [39].
[76] T:345.5-10.
Through the T Trust, the husband engaged in e-trading in both parties’ names. He set up the necessary accounts. The parties each had an e-trade account in their name with ANZ Bank and the husband had all the passwords for the e-trade accounts. The wife did not know anything about e-trading, and all the transactions for her e-trade account were done by the husband.
At the time of hearing, there was approximately $4,000 on trust with the T Trust.
Like for M Pty Ltd, the husband dealt with the T Trust money as if it was his own. He moved it around between various accounts, he liaised with the accountant to explain the movements for the purposes of the Trust’s financial records, and he was responsible for loans created by the Trust and to the Trust.
While the husband purports to explain in his evidence the financial records of T Trust, all that he really does is to give a snapshot of what there was at particular points in time.
None of the financial records of the T Trust are in evidence, the husband in his evidence simply refers to them.
The husband says, for example, that for the financial year ending June 2015, ‘to meet living expenses, pay tax and reduce the director’s loan owing to M Pty Ltd, I sold shares and repaid the sum of $318,675 to the joint account from T Trust’.[77]
[77] Affidavit of husband, filed 18 September 2023 at [107].
The husband’s evidence in respect of M Pty Ltd in respect of that same year is noted at [155] above. The husband’s evidence is that, in order to offset the interest payable on the home loan, he transferred $120,000 from M Pty Ltd to the joint account, but that he repaid director’s loan to M Pty Ltd of $202,282 from the joint account.
The apparent discrepancies in the evidence are not explained. The husband was not cross-examined about them either.
Super Fund 1
This was the parties’ self-managed superannuation fund. There is little to no evidence about it, except that moneys were rolled into the fund from the parties’ individual superannuation accounts and later rolled out. M Pty Ltd paid the parties’ superannuation contributions into Super Fund 1.
Child Support
The husband commenced proceedings in Country A for child support. He provided documents to Country A Court in support of that application which disclosed that the wife’s income was greater than what he in fact knew it to be; that is, he included as part of her income the capital gain in respect of the Suburb C Property without regard to the taxation liability and knowing that the moneys had not yet been received by the wife by virtue of these proceedings not yet being determined. Her salary for the relevant year was approximately half of what the husband declared was her income for the purposes of his child support application.
This has resulted in an assessment of the wife’s liability to pay child support being inflated. The Country A Court order has been registered in Australia and the wife’s wages are being garnisheed. She has a significant debt of approximately $44,000 as a result of the child support orders which the husband obtained in Country A.[78]
[78] Exhibit 8.
Assessment of Contributions
At the commencement of the parties’ relationship, both parties were working. The wife was employed and earning an income. The husband worked for his own business, M Pty Ltd, and he had an interest in that business.
During the relationship, the wife was the primary homemaker and parent, however, she also worked in paid employment, including for M Pty Ltd.
The husband also made some contributions as homemaker and parent, although his contributions in this respect were not as significant as those of the wife.
During the time the husband was bedridden in Country A, the wife cared for and looked after him.
The wife’s case was a moving feast, unhelped by her lack of understanding of the husband’s actions throughout the relationship in respect of the parties’ finances and the way the husband moved moneys between the various entities he controlled and/or had an interest in.
The difficulty with the whole of the evidence is that there is a distinct lack of detailed and forensic analysis into the many transactions of the husband during the parties’ relationship, but more importantly towards the conclusion of the parties’ relationship and after separation. The applicant’s case started off with arguments as to over $1,000,000 being notionally added back to the pool, to a concession at the conclusion that the most they could point to was just over $200,000. Even this was on shaky grounds.
While the husband maintained in his evidence and in his case that the wife had access to all of the financial documents, all of the bank statements, and could easily have understood the financial transactions which he was undertaking, while she did have access to such information including during the relationship, she did not understand it. The Court accepts that she trusted the husband in all of his dealings.
The husband’s evidence is indicative of the complex and convoluted nature of his dealings, of treating company and trust resources as his own, of intermingling of funds and a general attitude of smugness.
The husband was the person who was primarily responsible for and involved in: various business transactions; share trading; handing the parties’ finances; moving money between various accounts of the different entities he controlled or had an interest in; and working together with his brother in moving money between them. It is difficult to conclude whether the husband’s financial dealings ultimately resulted in the parties benefiting, notwithstanding the concession by the wife’s counsel that interest over the home loan was reduced. Certainly, before the parties went to Country A and prior to separation, there were significant assets held by the various entities controlled by the husband.
The Court does not accept the husband’s evidence as to the need for borrowings from his brother upon the parties going to Country A, nor about the reasons why the assets which the parties had were essentially reduced to nothing, but the equity in the Suburb C Property, by separation.
As indicated to the parties numerous times during the hearing, it is not the role of the Court to conduct a forensic accounting examination of the parties’ finances. Such matters are the subject of expert evidence, which there was none of in these proceedings. As such, matters which could and should have been explained have not been explained.
The husband’s evidence as to the reason for the transfer of his 50% legal interest in the Suburb C Property to the wife, and her lack of involvement and understanding of the detail of the transactions, further enhance the Court’s views of the husband.
Had the husband wanted to simply transfer the asset across, along with its associated debt, the parties could have entered into a much simpler transaction. What the husband did, on his own admission, was to try to ensure that all of the parties’ assets were so heavily geared that if any creditor came after him, the creditor would get nothing. Whether he would ultimately have been successful is a different matter. The creditor never came after him and no-one sought to claw back the assets which were disposed of in this way, with the aim of defeating creditors.
The Court does not accept that the husband gave evidence in the Court F proceedings between his brother and the wife because he wanted to assist Court F to learn the truth. The reason he was a witness in his brother’s case against the wife was in order to assist his brother. The husband’s brother was not a witness in these proceedings. The Court draws a Jones v Dunkel[79] inference in that regard.
[79] (1959) 101 CLR 298.
The husband’s involvement in the Court F proceedings as a witness in his brother’s case, is a negative contribution by him in respect of the matters this Court needs to take into consideration.
Likewise, the wife defending the claim by Mr R in Court F is a significant post-separation contribution.
The Court understands that Mr R lives in Country A, that he has no assets in Australia and that it will be difficult if not impossible for the wife to recoup her costs from him, pursuant to the Court F costs order. The fees which the wife incurred in protecting the parties’ only asset from an order for possession by the husband’s brother, as to the wife’s half share, are a liability that is taken into consideration as part of the wife’s post-separation contributions. The wife’s legal fees are not a liability for the purposes of the net pool, and are otherwise excluded from the calculation of the pool.
The husband has paid $106,160 in legal fees to date. After taking into account the costs orders against the wife in his favour, the costs he has paid are $78,379. These costs have been paid post separation from earnings received by the husband post separation. However, the earnings came from an enterprise the husband was engaged in during the parties’ relationship. While the Court, in the exercise of its discretion, will not be notionally adding back this amount, it will be taken into consideration in the overall assessment of contributions.
Lastly, the wife withdrew $8,250 from the parties’ joint account in 2018. Such moneys have been expended by her on living expenses post separation. These funds are a refund from the ATO in respect of the husband’s income tax. It was not clear on the evidence which financial year this was a tax return for, and the Court infers from the date of payment it likely referred to the period of time prior to separation. As such, the moneys will not be notionally added back.
Having regard to the findings made and referred to earlier in these Reasons for Judgment, the Court assesses the parties’ contributions as 63% to the wife and 37% to the husband.
Future Needs
The parties are similar in age. There is no evidence of any ill health or an incapacity to earn an income. The parties are both working and earing an income.
The husband has the care of the parties’ two children, one of whom will be an adult soon. The younger child is 14.
The wife pays child support.
As noted earlier in these reasons, the husband received an inheritance from the estate of his late father of 16%. This is an interest in a property in Country A, and the husband is registered on title. He has estimated the value of his interest at $35,000. However, no expert evidence as to the husband’s interest is before the Court. The Court will therefore consider this to be a financial resource available to the husband for the purposes of assessing future needs.
It is appropriate that there is an adjustment of 3% in the husband’s favour in respect of future needs.
DETERMINATION
The overall property adjustment is assessed as 60% to the wife and 40% to the husband.
Two costs orders have been made against the wife. The wife has paid those costs from moneys released to the parties from the proceeds of sale of the Suburb C Property. Those costs will notionally be added back into the pool, but the liability remains the wife’s own and will not be considered as part of the net pool.
The parties each have a small number of bank accounts with relatively small amounts of money. Those moneys have been grouped together in respect of each of the parties, as have the husband’s shareholdings.
Reasons have already been provided at [201]-[202] above, as to why the wife’s costs in the Court F proceedings, and the husband’s costs in these proceedings have not been included in the pool. Likewise, reasons have already been provided as to why the amount of $8,250 which the wife withdrew in 2018 from the parties’ joint account will not be notionally added back.
The wife’s child support liability as registered is also excluded from the net pool. It is her liability. The Court has already considered the husband’s actions in obtaining that order and that matter has been taken into consideration in the assessment of contributions.
The parties agree on the issue of Capital Gains Tax and rely on the assessment of the Single Expert.[80]
[80] Affidavit of Single Expert Ms J filed 29 July 2022.
The Court assesses the net property pool to consist of:
Ownership Description Value Joint Proceeds of sale of Suburb C Property $1,117,790 Joint T Trust $4,000 Wife Bank accounts (NAB) $323 Wife Super Fund 4 $197,235 Wife CGT Liability – Suburb C Property ($18,371) Husband Bank Accounts (in Australia and Country A) $10,290 Husband Shares $63 Husband Motor Vehicles $8,900 Husband Super Fund 3 $109,358 Addback Costs paid by wife $22,781 Husband CGT Liability – Suburb C Property ($22,282) Total: $1,430,087
The Court has found the overall adjustment to be 60% to the wife and 40% to the husband. As such, the wife will receive $858,052 and the husband will receive $572,035 by way of property adjustment orders, to be made up as set out below.
To the wife:
Ownership Description Value Joint Proceeds of sale of Suburb C Property $678,865 Wife Bank accounts (NAB) $323 Wife Super Fund 4 $197,235 Wife CGT Liability – Suburb C Property ($18,371) Total: $858,052
To the husband:
Ownership Description Value Joint Proceeds of sale of Suburb C Property $438,925 Joint T Trust $4,000 Husband Bank Accounts (Australia and Country A) $10,290 Husband Shares $63 Husband Motor Vehicles $8,900 Husband Super Fund 3 $109,358 Addback Costs paid by wife $22,781 Husband CGT Liability – Suburb C Property ($22,282) Total: $572,035
Each party will retain the superannuation entitlements held in their name, which are almost at the same percentage as the Court orders the overall interests to be adjusted. Each party will retain the bank accounts, shares and other assets held in their name, which the husband has a slightly larger share of. Each party will receive a significant amount of cash, which they can then deal with in any manner they consider appropriate. Given the husband’s stated capacity to invest and manage money, a capital injection of almost $400,000 is significant. The Court notes that the husband will continue to reside in Country A. While the wife will receive $721,768, she still has to pay the costs of the Court F proceedings which she may or may not recover from Mr R, the child support owing to the husband, and her costs of these proceedings.
In all of the circumstances, the adjustment of property interests is just and equitable.
The Court so orders.
I certify that the preceding two hundred and twenty-two (222) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Obradovic. Associate:
Dated: 5 June 2024
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