Quoc and Tang

[2018] FCCA 1190

FEDERAL CIRCUIT COURT OF AUSTRALIA

QUOC & TANG [2018] FCCA 1190

Catchwords:
FAMILY LAW – Property – lack of full and frank disclosure by husband – deliberate understatement of income by husband.

Legislation:

Family Law Act 1975 (Cth), s.75(2)

Evidence Act 1995 (Cth), s.128

Cases cited:

Marriage of Black and Keller (1992) 15 Fam LR 343

Marriage of Weir (1992) 16 Fam LR 154
Chang and Su (2002) FLC 93-117

Applicant: MS QUOC

Respondent: MR TANG

File Number: DNC 79 of 2016

Judgment of: Judge Young

Hearing date: 11 August 2017

Date of Last Submission: 11 August 2017

Delivered at: Darwin

Delivered on: 11 May 2018

REPRESENTATION

Counsel for the Applicant: Mr Dostizada

Solicitors for the Applicant: Jude Lawyers

Counsel for the Respondent: Mr McQueen

Solicitors for the Respondent: McQueen’s Solicitors

THE COURT ORDERS THAT:

1. The husband is to do all things necessary to transfer his right, title and interest in the property at Property A in the Northern Territory to the wife within 30 days.

2. The wife is to be responsible for  payment of all outstanding Power and Water bills and outstanding rates in respect of Property A, and she is to indemnify the husband against any liability for the same. 

3. The husband is to do all things necessary to transfer the Mazda (model omitted) vehicle to the wife within 30 days.

4. Each party do all things reasonably required by the other to give effect to the provisions of Orders 1 and 3 within 14 days of being requested to do so:

   (a)If either party refuses or neglects to sign, execute or return a document within 14 days of a written request to do so, the Registrar of the Darwin Registry of the Federal Circuit Court is hereby appointed under section 106A of the Family Law Act 1975 (Cth) to sign or execute the document on that party’s behalf, provided a solicitor on behalf of the requesting party lodges the document and files an affidavit detailing the said neglect or refusal.

   (b)The defaulting party shall pay the other party’s costs incidental to the request and production of documents to the Registrar.

5. Unless otherwise provided for by these Orders, each party will retain any property in his or her possession and control at the date of these Orders. This includes:

   (a)Funds in bank accounts which are not jointly held;

   (b)Vehicles; and

   (c)Furniture and personal effects.

6. Each party shall retain for their own sole use and benefit any interest held in any superannuation fund in that party’s name.

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

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT DARWIN

DNC 79 of 2016

MS QUOC

Applicant

And

MR TANG

Respondent

REASONS FOR JUDGMENT

1. This is an application for alteration of property interests. The applicant wife is 48 years old. The respondent husband is 50 years old. The parties married in 1994 and separated in 2008. There are two children of the marriage, both sons, Mr A who is 19 years old and [X] who is 16 years old. Mr A is attending university and [X] is at high school. Both live with their mother in the former matrimonial home.

2. Neither party owned any assets of significance at the beginning of the relationship. In 2000 the parties jointly purchased the former matrimonial home at Property A. The wife said the property was purchased with a home loan of $123,800 although she did not mention the purchase price. The husband gave no evidence on the matter. The parties agreed that the present value of the home is $400,000.

3. In 2004 the parties refinanced the home loan and borrowed a further $61,398 and the husband used this money to purchase a one third interest in a commercial property at Property B, near Darwin, for $70,000. The other purchasers were his brother and his brother’s business partner.

4. In 2008 the husband forged the wife’s signature on bank documents to increase the indebtedness on the home loan by a further $22,000. In 2008, using the same method, the husband extended the indebtedness on the home loan by a further $48,856. The husband admitted his fraudulent and criminal conduct for the first time during cross-examination after he was granted a certificate pursuant to section 128 of the Evidence Act.

5. The husband’s trial affidavit made no mention of his criminal conduct and he asserted that he borrowed the initial $22,000 “in order to commence verandah extensions on the house”. He then went on to say, again without mentioning his fraudulent and criminal conduct, that he “borrowed a further $48,856 to pay debts and meet general living expenses incurred …since separation”.

6. In cross-examination he then conceded that some, at least, of the money was used for gambling. His counsel did not seek leave to adduce further evidence-in-chief to explain how those monies were expended by the husband. In the circumstances I am entitled to infer that the evidence would not have assisted the husband. I am satisfied that the husband used most, if not all, of that money to gamble. I am satisfied that the husband has had and, probably, continues to have a problem with gambling. I do not accept any of his evidence as truthful unless it was not in dispute and corroborated independently.

7. In 2009 the husband sold his interest in the Property B property to his co-owners for, according to him, $250,000. Somewhat curiously, the unimproved capital value of the property is noted on the transfer record as $896,000 more than a year earlier. The land had a building or buildings on it and the sale of a one third interest might have been expected to realise at least one third of the UCV. This was not pursued. Perhaps the husband was under pressure to sell at the time of separation and could not realise the full value of the land. He used $235,428 of the proceeds to discharge the mortgage on the former matrimonial home. He appears to have kept the balance of the sale proceeds, about $15,000, for his own purposes.

8. The husband also gave evidence about his income from his work as a (occupation omitted). It appears he is employed by his brother and his brother’s business partner, the same men with whom he co-owned the Property B property. According to the husband’s financial statement he earns $551 a week before tax or $28,652 a year as a (occupation omitted). He said he also receives a carer’s benefit of $275 a week from the Commonwealth in respect of his mother, with whom he resides, a total of $42,952 a year.

9. The husband was cross-examined about relatively frequent travel interstate and to (country omitted). The husband said he could afford this travel due to gambling winnings. No income from gambling was disclosed in his financial statement. In his trial affidavit the husband referred to his gambling and said that, overall, he was probably slightly a loser. The husband also referred to his extensive credit card debt. In his financial statement he referred to $31,000 of credit card debt on his (omitted) Bank credit cards. He also said in his financial statement that he had obtained credit cards from the (omitted Banks) in order to lend a $39,200 to a friend who lives in (country omitted), and who also pays interest on the debt. This is total of $69,200 in credit card debt. None of this was further explained. I am not satisfied these borrowings were for any legitimate purpose. I suspect that the husband’s credit card debt reflects his taste for gambling. The indebtedness entered into on behalf of the “friend who lives in (country omitted)” was unexplained.

10. It is also surprising that the various lending institutions have extended such significant credit to a man on such an income. The wife suggested that the information the husband gave these institutions must have indicated a higher income. There was evidence to suggest this may be true. Annexure Q to the wife’s trial affidavit is a payroll advice from his then and still current employer (employer omitted) for the week 28 February 2010 to 6 March 2010. It showed the husband earned gross pay of $1,250 and that his year-to-date wages were $45,000 gross. Consistently with this there was a handwritten note attached to the payslip saying “$65,000 gross pa = $50,675.30 net pa (as per tax calc)”. This document was obtained by subpoena to (omitted) Bank where the husband had an account. The husband’s notice of assessment from the Australian Taxation Office for the year ended 30 June 2010 showed a taxable income of $22,222. Unfortunately, the husband’s tax return for the 2010 year was not in evidence. However, the husband’s tax returns for the years from 1 July 2005 to 30 June 2009 were in evidence. In each of those years his gross income was recorded as about $28,000 with modest deductions of around $3,000. There was nothing in that material to explain such a discrepancy. However, a number of possibilities spring to mind. The first is that the husband’s income as recorded in the notices of assessment for the years 1 July 2009 to 30 June 2015 showing a taxable income from $22,222 for the 2010 year to $23,547 for the year ended 30 June 2015 is accurate and the payslip produced by his employer for the purpose of obtaining a loan was inaccurate or fraudulent. It should be noted that the applicant has had a long-time association with this employer and his brother is associated with it. Another possibility is that the taxation returns filed by the husband in these years did not disclose his full income. I raised this with the husband’s counsel and said that this issue required explanation. Counsel’s submission was that the payroll advice was merely one from the year and may not have been representative. The problem with that explanation is that the payroll advice said that the husband’s income for the year to date was $45,000, indicating earnings of $1,250 a week for the previous 36 weeks. I have no hesitation in rejecting the explanation offered by the husband’s counsel.

11. The husband did not seek to adduce any further evidence on this issue. I consider that the most likely explanation is that in the financial year ending 2010 the husband earned about $65,000 gross. No group certificates were produced by the husband but I consider that the taxation assessment for that year was likely to have been obtained as a result of a deliberate understatement by the husband of his income. How he achieved this I cannot say but the inconsistency between the statement of earnings in the payroll advice and the husband’s tax return for the year is unreconciled and, in my view, irreconcilable on the evidence before me other than by understatement of income or other fraud. I consider that each of the taxation assessments in evidence is likely to be inaccurate because of the husband’s deliberate understatement of his income. I do not accept that the husband earns $28,652 a year as claimed in his latest financial statement. If he was earning $65,000 a year gross in 2010 I am satisfied, given that his employment has remained much the same, he was likely to be earning considerably more than this in in 2017 when he made his financial statement.

12. There were other indications that the husband has understated his income. The wife pointed to deposits into the husband’s bank account of $41,368 between 5 October 2015 and 5 April 2016, a period of 6 months. There were also deposits totalling $57,438 between 5 October 2010 and 5 April 2011. The husband said much of this was a result of him withdrawing money from his superannuation but that accounts for only about $32,000. Between 5 April 2011 and 5 October 2011 there were additional deposits totalling $11,598. The husband said these were gambling winnings. This money does not appear to have been declared for tax purposes. The interest paid by the friend in (country omitted) does not appear to have been declared either. I am not satisfied that the husband has declared all his income to the tax authorities. This resulted in a further section 128 certificate in relation to the husband’s tax affairs. I am satisfied that the husband has not made full and frank disclosure about his income to the tax authorities or the court.

13. Understatement of income has a variety of consequences. For the wife it means the current child support assessment which sees the husband pay her $7.50 a week or $390 a year does not reflect the husband’s true liability. His true liability is a matter of speculation but, by way of example, if it was $14,000 a year over the 10 years since separation he has evaded payment of something in the order of $140,000. Given the husband’s lack of frank disclosure it is not possible to arrive at any exact figures but I am satisfied that the husband’s evasion of payment is in this order of magnitude.

14. The husband also gave evidence that in 2010 he “commuted” his (omitted) Bank superannuation account of $32,485. As this is not a concept usually applicable to superannuation and the husband was well below the preservation age the withdrawal is more likely to have been on compassionate or financial hardship grounds. However, consistently with the husband’s general lack of frankness the basis of the withdrawal was not explained. At the time of trial the husband said his superannuation was worth $20,300. The wife complained that the husband had not produced any evidence to substantiate this. No superannuation statement was annexed to his trial affidavit or tendered in evidence. I am unable to make any finding about the exact amount of the husband’s current superannuation interests.

15. The capital amounts appropriated by the husband after separation, on his own evidence, include $68,856 obtained by forging the wife’s signature in 2008 and increasing the joint mortgage indebtedness by a similar amount, about $14,572 (the difference between the sale proceeds of the Property B property of $250,000 and the pay out on the joint mortgage in the sum of $235,428, although the husband’s case outline claimed he retained $15,570) and $32,495 withdrawn from his superannuation. These amounts total $115,923.

16. As against this, the husband points to financial contributions made by him since separation in 2008 in respect of the former matrimonial home occupied by the wife and his children. These include payment of City Council rates in the sum of $9,821, water rates in the sum of $33,272 and electricity in the sum of $28,736. These amounts total $71,829. The husband also made hire purchase payments in respect of the wife’s car over this period totalling about $30,000. These amounts were not challenged. Counsel for the father said in assessing contributions these should be set in the scales against the amounts appropriated by the husband. I accept that submission. However, after taking into account the husband’s evasion of his child support obligations I am satisfied that the contributions overwhelmingly favour the wife. The husband also said that he provided a generous amount of pocket money to the children and provided food from the (omitted business) from time to time. However, given my conclusion that the husband generally lacks credibility I do not propose to give any weight to those claims.

17. The values of the items in the pool described below were agreed, although it should be noted that the wife did not accept that the husband made full and frank disclosure of his assets. In particular, the wife asserted that the husband held an undisclosed beneficial interest in a range of companies owning (businesses omitted) and other property in Darwin pursuant to a partnership between him, his brother and a Mr H, the former co-owners of the Property B property with the husband.

18. The basis of this claim was that the wife, through a subpoena to the (omitted) Bank, obtained evidence that a bank account in the applicant’s name, his brother’s name and the name of Mr H was still open and being operated. The wife’s counsel said that this, along with the unexplained cash payments into the husband’s bank account (not, it should be noted, from the (omitted) Bank account) and the husband’s interstate and international travel permitted an inference that he had an interest in the extensive interests of his brother and Mr H. There was no evidence that the husband had operated this account since 2009 or evidence that he had received payments from it. Counsel also pointed to evidence that the husband has said to the wife in 2015 that he was considering entering into an agreement with his brother and Mr H to open a (business omitted). There was no evidence about what became of that proposal.

19. The husband said, and this was not challenged in cross-examination, that he had no interest in the (omitted) Bank account and it was simply left over from 2009 when he had been in business with his brother and Mr H. He said that he had not thought to remove his name from the account and he denied he was able to operate it. I asked the solicitor advocate for the wife if he had made any inquiries of, for example, the husband’s brother or Mr H or, indeed, any other inquiries about this claim, such as who were the authorised signatories. He said he had not. If this assertion was correct it would mean the husband had very extensive undisclosed assets. Notwithstanding, my findings about the husband’s credibility I would, if this claim were true, expect there would be some evidence to support it. Further, it would merit serious forensic examination and there was no sign of this by the wife. The assertion appeared to me to me no more than that, an assertion unsupported by any current or cogent evidence, although I acknowledge that there are sound reasons for suspicion of the husband.  

20. Given my finding the husband has deliberately and very substantially understated his income and my conclusion that the husband lacks credibility generally, I do not feel able to make a positive finding about whether or not the husband has revealed all of his assets. However, there was no evidence of other assets and the only assets and liabilities and interests identified are set out below. Values were agreed with the exception of the amounts outstanding for Power and Water and rates. There was only a slight difference between the parties about these but I accept the values given by the wife as accurate.  The husband’s superannuation balance (apparently an accumulation account) was not the subject of any proof beyond assertion.

    The pool

Description	Wife	Husband	Total
Assets
1	Property A	$200,000	$200,000	$400,000
2	Wife’s savings	$10,000
3	Husband’s savings	$400
4	Husband’s (vehicle omitted)	$25,000
5	Wife’s Mazda (used by the wife but registered to husband)	$10,000
6	Debt owed to husband by “friend in (country omitted)”	$39,200
Total assets	$220,000	$264,600	$484,600
Liabilities
6	Husband (vehicle omitted) Finance	$30,000
7	Husband’s Bank's Visa	$21,000
8	Husband’s Bank a/c	$10,000
9	Husband’s credit card debt for “friend in (country omitted)”	$39,200
10	Property A and Water bill	$4,572	$4,572
11	Property A Rates	$1,657	$1,657
Total liabilities	$6,229	$106,429	$112,658
Total net	$213,771	$158,171	$371,942
Superannuation
12	Husband’s superannuation	$20,300	$20,300
Total	$213,771	$178,471	$392,242

Contributions

1. A glance at the table reveals that apart from his interest in the former matrimonial home the husband has accumulated significant debt. The evidence is that this has been accumulated since separation and, in my view, probably reflects the husband’s gambling although I cannot discount the possibility that he has used some of that borrowing, such as that in respect of the “friend in (country omitted)”, for another purpose such as acquiring an interest in a business. However, there is no evidence of that. As a matter of justice I do not believe the husband’s profligacy, waste or lack of contribution, however characterised, since separation should be visited on the wife.

1. The wife, as can be seen from her modest savings, has been frugal, no doubt of necessity considering her financial responsibility for two children. The husband’s appropriation of matrimonial assets has been balanced to an extent by his contributions to rates and other expenses associated with the former matrimonial home and the payments on the car used by the wife. However, I am satisfied that through deliberate understatement of his income over many years he has evaded a large child support liability. In such a case the Court should not be “unduly cautious” about making findings in favour of the other party: Marriage of Black and Kellner (1992) 15 Fam LR 343, Marriage of Weir (1992) 16 Fam LR 154, Chang and Su (2002) FLC 93 – 117. Taking these matters and the husband’s lack of disclosure and his deliberate untruthfulness into account I find the wife has contributed 80% and the husband 20%.

   Section 75(2) factors

2. The wife is not employed and is engaged in home duties only. Her income is from social welfare payments. She has responsibility for one child, aged 16, for whom she receives minimal child support from the husband in consequence of his understatement of income. This has been the situation with both children for many years since separation and until relatively recently. The older child, although a full-time university student, does not appear to have been the subject of any child support claim by the wife.

3. The wife’s English is poor or non-existent. There is no evidence that she has any skills or employment prospects. I accept the submission of the husband that she is fit and healthy and there is no strong reason she cannot do some kind of unskilled work. Nevertheless, even unskilled work may be hard to find without some English proficiency. I am satisfied that the wife’s employment prospects are only modest.

4. The husband works as a (occupation omitted). He had been employed by the same employer over many years. In view of the husband’s lack of frank disclosure about his income, I cannot make a finding about the level of his present income but I am satisfied it is likely to be well in excess of the $65,000 a year he was said to be earning in 2010.

5. These matters alone merit a significant adjustment in favour of the wife in the order of 15% to 20%.

6. The husband sought orders for the sale of the former matrimonial home and the equal division of proceeds between him and the wife, the transfer of the Mazda car to the wife and the retention by him of his superannuation interest. The wife sought the transfer of the husband’s interest in the home to her, retention by her of the Mazda car and retention by the husband of his superannuation interest. Implicit in the wife’s case was an assertion that she was not in a position to borrow money to pay the husband any significant sum of money. I accept that is the case. In my view it is just and equitable that that the wife be able to retain the former matrimonial home unencumbered, that she retain the Mazda car and that the husband retain his superannuation interest. The effect of the orders will be as follows.

Description	Wife	Husband	Total
Assets
1	Property A	$400,000	$400,000
2	Wife’s savings	$10,000
3	Husband’s savings	$400
4	Husband’s (vehicle omitted)	$25,000
5	Wife’s Mazda (used by the wife but registered to husband)	$10,000
6	Debt owed to husband by “friend in (country omitted)”	$39,200
Total assets	$420,000	$64,600	$484,600
Liabilities
7	Husband (vehicle omitted) Finance	$30,000
8	Husband’s Bank's Visa	$21,000
9	Husband’s Bank a/c	$10,000
10	Husband’s credit card debt for “friend in (country omitted)”	$39,200
11	Property A and Water bill	$9,144
12	Property A Rates	$3,314
Total liabilities	$12,458	$100,200	$112,658
Total net	$407,542	($35,600)	$371,942
Superannuation
12	Husband’s superannuation	$20,300	$20,300
Total	$407,542	($15,300)	$392,242

1. I am aware that the effect of these orders is to give the wife property worth more than the net value of the pool. However, in my view such result is just and equitable given my findings about contributions and s. 75(2) factors and, additionally, the husband’s deliberate understatement of his income and my lack of satisfaction that he has made full and frank disclosure generally.

I certify that the preceding twenty-eight (28) paragraphs are a true copy of the reasons for judgment of Judge Young

Date: 11 May 2018