Read and Fry & Anor
[2019] FamCA 201
•5 April 2019
FAMILY COURT OF AUSTRALIA
| READ & FRY AND ANOR | [2019] FamCA 201 |
| FAMILY LAW – PROPERTY – Where the parties have interests in companies, property and personal assets both in Australia and the United States of America – Where the matter has been complicated by the involvement of an Intervener who asserts an interest in an Australian property of the Applicant and Respondent – Where the matter is further complicated by the existence of unfinished proceedings in the Supreme Court of Queensland – Where the Intervener seeks that the Respondent deliver possession of an Australian property to him and for the property to be sold – Where the action is statute barred – Where after considering the history and circumstances of the case and the parties and the current and future needs and earning capacity of the parties, an appropriate split of the property pool is 75/25 in favour of the Applicant – Where the Respondent is to provide the Applicant with vacant possession of the property in the United States of America and a further sum and the Applicant is to provide the Respondent with vacant possession of the properties in Australia. |
| Corporations Act 2001 (Cth) Judiciary Act 1903 (Cth) Property Law Act 1974 (Qld) |
| ASIC v Edensor Nominees Pty Ltd (2001) 204 CLR 559; [2001] HCA 1 Australia & New Zealand Banking Group v Karam and others (2005) 64 NSWLR 149; [2005] NSWCA 344 Bahr v Nicolay [No. 2] (1988) 164 CLR 604; [1988] HCA 16 Black and Kellner (1992) FLC 92-287; [1992] FamCA 2 Bourseguin v Stannard Bros Holdings Pty Ltd [1994] 1 Qd R 231; [1991] QSCFC 57 Bucknell v Commercial Banking Co of Sydney Ltd (1937) 58 CLR 155; [1937] HCA 35 Campbell v District Land Registrar of Auckland (1910) 29 NZLR 332 Giunti and Giunti (1986) FLC 91-759; [1986] FamCA 15 Gordon v Macgregor (1909) 8 CLR 316; [1909] HCA 26 Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; [2007] HCA 22 Fencott v Muller (1983) 152 CLR 570; [1983] HCA 12 Friedman v Barrett; ex parte Friedman [1962] Qd R 498 Hepburn v McDonnell (1918) 25 CLR 199; [1918] HCA 43 Lewis v Plunkett [1937] 1 All ER 530 Mezzacappa and Mezzacappa (1987) FLC 91-853; [1987] FamCA 20 Rizeq v Western Australia (2017) 262 CLR 1; [2017] HCA 23 Royal Botanic Gardens and Domain Trust v South Sydney City Council (2002) 240 CLR 45; [2002] HCA 5 Smart and Smart [2014] FamCA 262 Stage Club Ltd v Millers Hotels Pty Ltd (1981) 150 CLR 535; [1981] HCA 71 Sucrogen Australia Pty Ltd v Westpac Banking Corporation [2012] 2 Qd R 175; [2011] QSC 393 Tara Shire Council v Garner [2003] 1 Qd R 55; [2002] QCA 232 Thorne v Kennedy (2017) FLC 93-807; [2017] HCA 49 Valceski v Valceski (2007) 70 NSWLR 36; [2007] NSWSC 440 Weir and Weir (1993) FLC 92-338; [1992] FamCA 69 |
| APPLICANT: | Ms Read |
| RESPONDENT: | Mr Fry |
| INTERVENER | Mr C |
| FILE NUMBER: | BRC | 2772 | of | 2011 |
| DATE DELIVERED: | 5 April 2019 |
| PLACE DELIVERED: | Brisbane |
| PLACE HEARD: | Brisbane |
| JUDGMENT OF: | Forrest J |
| HEARING DATE: | 22, 23 & 24 June 2015; 4 & 5 October 2016; and 9 & 10 November 2016 |
REPRESENTATION
| THE APPLICANT: | In Person |
| THE RESPONDENT: | In Person |
| COUNSEL FOR THE INTERVENER: | Mr Guest Mr Hartwell (On 4 & 5 October 2016 and 9 & 10 November 2016 only) |
| SOLICITOR FOR THE INTERVENER: | C Firm (On 24 June 2015, 4 & 5 October 2016 and 9 & 10 November 2016 only) |
Orders
That all applications by the Intervener are dismissed.
That all necessary steps be taken by the Intervener, the Respondent Husband, the Australian Securities and Investments Commission and/or the Registrar of Titles, Queensland, to cause the details entered in the Queensland freehold land register in respect of the following three real property lots:
(i)Lot 1 on RP … County of …, Parish of …, Queensland, Title Reference number …;
(ii)Lot 2 on RP … County of …, Parish of …, Queensland, Title Reference number …; and
(iii)Lot 3 on RP … County of …, Parish of …, Queensland, Title Reference number …;
to be corrected so that Mortgage Document No. …81 and Mortgage Document No. …84, which are hereby declared unenforceable, are removed from the title to those lots forthwith.
That within one calendar month of the date hereof, the Respondent Husband shall pay to the Applicant Wife the sum of AUD107,110, in default of which the three real property lots listed in paragraph (2) hereof shall be sold and the Applicant Wife paid that sum plus interest in accordance with the Family Law Act 1975 (Cth) and Family Law Rules 2004 (Cth) from the sale proceeds, with the balance of any sale proceeds to be retained by the Respondent Husband.
That in return for payment of the sum of AUD107,110, plus any interest owing, the Applicant Wife shall sign, if necessary, and deliver to the Respondent Husband all documents necessary to cause the removal of caveat number …58 from the details contained in the Queensland freehold land register in relation to the three real property lots listed in paragraph (2) hereof.
That upon payment to the Applicant Wife of AUD107,110 plus any interest owing, in circumstances where the three real property lots listed in paragraph (2) hereof are not sold, the husband shall retain all right, title and interest in those three lots, or any one of them that is not sold, as his sole property absolutely.
That within one calendar month of the date hereof, the Respondent Husband shall do all things necessary, including signing all documents as may be required to transfer all of his right, title and interest in the real property situation at Q Street, R Town, State K, United States of America, … (“the State K property”) to the Applicant Wife.
That the Applicant Wife shall upon receipt of the transfer of the Respondent Husband’s right, title and interest in the State K property, indemnify the Respondent Husband against any and all liability owing to Citibank for the Home Equity Loan secured by lien or mortgage over the State K property and she shall immediately upon receipt of the payment of the sum of AUD107,110 plus any interest owing in respect of that amount pursuant to these Orders, the Family Law Act 1975 (Cth) and the Family Law Rules 2004 (Cth), cause that lien or mortgage pursuant to which the Respondent Husband may be jointly or severally liable, to be repaid and discharged or refinanced and discharged.
That upon transfer of the Respondent Husband’s right, title and interest in the State K property to the Applicant Wife, the Respondent Husband shall give the Applicant Wife vacant possession of the State K property.
That upon receipt of the transfer of the Respondent Husband’s right, title and interest in the State K property to the Applicant Wife and the delivery of vacant possession of that property to the Applicant Wife, the Applicant Wife shall deliver vacant possession of the three real property lots at Tara in the State of Queensland listed in paragraph (2) hereof to the Respondent Husband.
That the Applicant Wife shall retain as her sole property absolutely, the following:
(i)The Motor vehicle 1;
(ii)The Motor vehicle 2;
(iii)Her personal possessions and the furniture located at Lot 3, T Street, Town B, Queensland; and
(iv)All money in bank accounts in her own name.
The Applicant Wife shall retain as hers absolutely all her interests in various superannuation and retirement benefit funds whether in Australia or the United States of America.
That the Respondent Husband shall retain as his sole property absolutely, the following:
(i)The motor vehicles 3 & 4 in his possession;
(ii)His personal possessions, tools and furniture located at the State K property;
(iii)All money in bank accounts in his name; and
(iv)All shares he owns or controls in any company and any business he owns or controls.
That the Respondent Husband shall indemnify the Applicant Wife and keep her indemnified against any and all liability that may be owed by him and/or her in respect to a debt owed in relation to the acquisition by the company, N LLC, of a real property in State P, United States of America and against any and all liability that may be owed by him in respect of credit card liability or personal loan liability or any other liability for credit or debt incurred in his own name or in the name of any company in which he owns shares or which he controls.
That should either the Applicant Wife or Respondent Husband refuse or neglect to sign any instrument required to be signed by her or him to comply with these Orders or refuse or neglect to do anything directed by these Orders, the Senior Registrar of the Brisbane Registry of this Court is hereby appointed pursuant to s 106A(1) of the Family Law Act 1975 (Cth) to execute the document or instrument in the name of the person who refuses to sign it and to do all acts and things necessary to give validity and operation to any such document or instrument.
That should any or all of the three real property lots listed in paragraph (2) hereof have to be sold pursuant to paragraph (3) hereof, the Applicant Wife may apply, on the giving of written notice to the Respondent Husband, to the Court for further directions and/or Orders in respect to the process by which the properties are to be sold.
Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Read & Fry and Anor has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).
| FAMILY COURT OF AUSTRALIA AT BRISBANE |
FILE NUMBER: BRC 2772 of 2011
| Ms Read |
Applicant
And
| Mr Fry |
Respondent
And
Mr C
Intervener
REASONS FOR JUDGMENT
This difficult property adjustment dispute has been complicated by the involvement of a third party who asserts he is a creditor to whom the Respondent husband became indebted before he married the Applicant wife. The determination of appropriate property adjustment orders that are just and equitable firstly requires the determination of the intervening third party’s claims that the husband is indebted to him for millions of dollars; that certain real property in south-western Queensland is mortgage security for that debt; and that he, the Intervener, is entitled to enter into possession of that property and to sell it to realise some of the debt owing to him.
There is no controversy between the three parties that this Court has the jurisdiction (the authority to adjudicate)[1] to determine the dispute about the alleged debt owed to the Intervener and the validity of the said mortgage security, in the same proceedings as it is determining property adjustment orders that are just and equitable as between the former husband and wife.
[1] As discussed in ASIC v Edensor Nominees Pty Ltd (2001) 204 CLR 559; [2001] HCA 1 at [2].
In this particular case, determination of the dispute about the debt and the mortgage security is critical to the determination of the interests of the husband and wife, or either of them, in property, that is, of course, one of the very first steps that must be undertaken in determining whether or not property adjustment orders as between parties to a former marriage should be made at all.
I am quite satisfied that the parties’ agreement that the Court has the jurisdiction to determine the matters in controversy is correct, even if Queensland state law is “picked up” and “federalised” as part of the determination of those matters.[2]
[2] See Family Law Act 1975 (Cth) ss 31 and 33; Judiciary Act 1903 (Cth) ss 79 and 80; Fencott v Muller (1983) 152 CLR 570; [1983] HCA 12; Valceski v Valceski (2007) 70 NSWLR 36; [2007] NSWSC 440; Rizeq v Western Australia (2017) 262 CLR 1; [2017] HCA 49. See also Chief Justice James Allsop, ‘“Accrued” Federal Jurisdiction and the Family Court’ (Speech, Family Court Conference, 8 November 2013).
The case was made much more difficult by the fact that by the time the proceedings first came to trial before me, both the husband and the wife were without legal representation and without any real comprehension as to the importance of determining the dispute about the debt and the mortgage security before just and equitable property adjustment orders as between them could be determined.
The trial, which finally came before me in this Court in mid-2015 had been going for two days when it first became clear to me that the property adjustment proceedings could not be determined without first determining the issues surrounding the third party creditor’s claims. The matter was then adjourned, part-heard, so that the third party could be given notice that the proceedings were under way and asked whether he wanted to intervene in the proceedings. The process of notifying the third party, hearing from him, determining his application to intervene and setting the matter down for continuation of the trial with the third party participating as an intervening party took more than a year.
The trial recommenced in October 2016 for two days and was concluded in November 2016 with a further two days hearing. The parties were then given time within which to file written submissions. The last of those written submissions were received at the end of March 2017. It is now over two years since then. The complexity of the matters to be considered, the demands of hearing and determining so many other complex and difficult parenting and property matters in the meantime, including keeping up with an increasingly demanding list of matters requiring hearing, and the need to take suitably recuperative leave from time to time during that period explains the delay in delivering this judgment. I regret the length of time it has taken and express my appreciation of the additional burden, both emotionally and practically, the delay would have imposed upon the parties. It is hoped that delivery of this judgment will now provide the parties with the certainty to move on with their lives, if not the entire satisfaction of their grievances.
Some relevant historical background
The husband is an Australian, born here in 1951. He is nearly 68 years of age. At the time the trial concluded, he had also acquired citizenship of the United States of America (“USA”), but was then living in Country D in a new relationship with a partner and their young child.
The wife is an American by origin, born in that country in 1956. She is nearly 63 years of age. At the time the trial concluded, she had acquired Australian citizenship, and was living on the property in south-western Queensland that the Intervener seeks to sell to recover some of the money he says he is owed by the husband.
The parties first met through the medium of the internet in the latter part of 1998. At that time, the wife was living and working in rural E State, USA. She had been married before as a younger woman and had two children of that marriage. She had raised those children to adulthood as a single parent after her former husband had left her and the children when those children were only little. The husband was living in Suburb L of Brisbane in a property he had inherited from his late father. He had been married a couple of times before. He also had eight children by a number of different women. Some of those children were already adults. Some of them were still little children.
The husband was a businessman. Despite having commenced university as a young man, he never completed and obtained an undergraduate degree. He had, with varying degrees of success, been involved in the operation of numerous companies over the years, many of which had been deregistered before he met the wife.
By the middle of 1998, before he met the wife, the husband owned the property at Suburb L and also three lots of real property at Town B in south western Queensland. He also owned another real property in the suburbs of Brisbane on which was situated a healthcare business that he owned and operated. All of these properties were registered in his name. The precise structural arrangements through which the healthcare business was conducted are not clear to me, as there appears to have been dispute about that between the husband and external company administrators at the time. It seems as though a company, F Pty Ltd, either owned or managed the business for the husband or a discretionary family trust controlled by the husband. At the same time, the husband ran another business through a company he owned and controlled, G Pty Ltd, which developed and marketed business products. That company owned the business and the commercial unit property out of which it operated, also in a suburb of Brisbane.
I am satisfied that by the middle of 1998, the husband and his business interests were in severe financial difficulty. In excess of AUD2.1 million was owed to H Bank by the corporate entities the husband owned and controlled. The debt to H Bank was secured by personal guarantee given by the husband supported by mortgages registered over all of the real properties owned by him or the companies he owned, including the Suburb L and Town B properties registered in his sole name, as well as the healthcare business property.
In 1998, F Pty Ltd was put into external administration with two administrators from the insolvency practitioners, O Group, appointed to manage its affairs. Rather than a Court enforced liquidation of F Pty Ltd taking place, a Deed of Company Arrangement (“DOCA”) was recommended and approved. It provided for the orderly sale of the healthcare business and the payment to the administrators of a cash sum of AUD250,000. That process was put in train. The Suburb L and Town B properties of the husband and the property of G Pty Ltd were also provided as security for the payment of the money to the administrators, with that security interest of the administrators ranking behind H Bank’s registered mortgages.
The husband and his companies were using the legal services of the Intervener, the solicitor, Mr C, to advise and represent them during this period of time. The husband and Mr C had what I am satisfied was a close working relationship.
Shortly after the DOCA was entered into, because of default in repayment obligations or because of the entry into the DOCA, default clauses in the loan and mortgage contracts with H Bank were cited by the Bank, and payment of the debt was called in.
During this same period of time, the husband was busily working, through G Pty Ltd, trying to establish business links and opportunities for the sales in the USA. I am satisfied that there was a potential contract of significant value under negotiation in that country. This necessitated travel by the husband to the USA from time to time. At the same time, the husband had entered his personal details on an American based internet dating website. The wife, living in State U, found his profile on that site and began email communication with him. The husband’s profile included plainly false information that he had provided about his personal circumstances. There was no dispute about that. The husband and wife began communicating more and more frequently and, as sometimes happens, a relationship of trust and friendship apparently began to build via this electronic communication.
Here in Brisbane, by around the end of 1998, H Bank was insisting that the debt owed to the bank be reduced by at least $500,000 as quickly as possible. The husband determined to raise that money, after taking advice, by what can only be described as a “non-arm’s length” sale of his Suburb L property and his Town B properties to a company in which the shares were ostensibly owned by his sister who lived in the United Kingdom. I am satisfied that the husband wanted to meet the immediate demands of H Bank and to hold on to his own property interests if he could, but at the same time put them beyond the reach of creditors in the event that he was to go bankrupt himself in the then foreseeable future. He clearly decided to do this by “selling” his registered interests in some of his real properties to a company under the de jure control of his sister, but controlled, I am satisfied, as a matter of fact, by him.
Another Brisbane based acquaintance of the husband was appointed as the director of the company, J Pty Ltd. A valuation of the Suburb L property was obtained from a property valuer. It was valued at $580,000. The Westpac Bank agreed to provide finance of $500,000 to J Pty Ltd to facilitate the “purchase” of the property by J Pty Ltd. There is no dispute that the husband arranged that. Despite the apparent high debt to equity ratio, Westpac was apparently content to advance that amount of money on the security of a first mortgage over the Suburb L property alone, supported by a personal guarantee provided by the husband’s sister. Westpac Bank apparently took no registered security elsewhere and, it is apparent, did not require a mortgage to be given in respect of the Town B properties.
Another firm of solicitors acted for J Pty Ltd on the sale transaction. Mr C had, according to the husband, given him the other firm’s name for him to contact to have them act for J Pty Ltd.
A standard REIQ contract for the sale of real property was drawn up by the other firm. It provided for the sale of the Suburb L property and the Town B properties to J Pty Ltd, free of encumbrances, for a total sale price of just over $700,000. Of that, $500,000 was to come from the Westpac loan and that sum was going to be paid by the husband to H Bank to meet its demand for an immediate $500,000 reduction in the amount of debt owing to it on the G Pty Ltd/F Pty Ltd/husband debt. The balance of the consideration for the “purchase” was to be met by the husband’s sister and the husband entering into a Deed of Release of Debt by which the husband’s sister ostensibly forgave the husband approximately $200,000 in debt that he allegedly owed her. Notwithstanding that part of the arrangement, I am satisfied that J Pty Ltd was really the husband’s “puppet” or “alter ego” at that point in time and that the husband did not truly consider that he was “disposing” of the property through that company. The husband provided the deposit that was held by C Firm, the husband’s solicitors, as stakeholders and he was the one who always ensured the Westpac mortgage debt was paid in the years after the transaction was completed, not his sister.
A transfer was drawn up by the other solicitors, and it was assessed by the Office of State Revenue and impressed with a stamp evidencing stamp duty was paid on the sale transaction.
An employee of Mr C’s legal firm went to the settlement that had been arranged in early February 1999 in a Brisbane office of solicitors for H Bank. She went on the husband’s behalf. On that day, it became clear that H Bank were not prepared to release their security over the Town B properties in addition to the security over the Suburb L property in exchange for the payment of only $500,000 of the total debt owed. The transfer document was apparently hastily amended by deleting the Town B properties and settlement of the transfer of the Suburb L property to J Pty Ltd took place with H Bank releasing its mortgage security over that property and Westpac subsequently registering its mortgage security over that property in place of H Bank. Significantly, on the evidence, a Deed of Variation of the Contract was apparently also executed on that date. No copy of that was adduced into evidence before me, and no evidence was adduced as to how it varied the original contract, so, critically, it is not clear to me in exactly what way the original contract was varied that day.
Subsequently, J Pty Ltd became the registered proprietor of the Suburb L property with liability for a debt of around $500,000 to Westpac secured by first mortgage registered on the title to the property. There was no immediate change to the registration details pertaining to the Town B properties. There is evidence that the solicitors who were acting for J Pty Ltd drew up another transfer form to actually effect the transfer of the Town B properties to J Pty Ltd and the husband signed it on 5 February 1999, but the copy adduced into evidence is not signed by or for the transferee company.
A sale of the healthcare business premises and business was achieved a little later that year and a settlement of the sale was, it seems, scheduled to take place on Friday 25 June 1999. A few working days before the settlement was due, the husband received advice from his solicitors, Mr C’s firm, that H Bank had informed them that there would be no funds, or, at least, insufficient funds, left from the amount being paid by the incoming purchasers for the acquisition of the healthcare business property and business after H Bank took what was owed to it, for there to be enough to pay the F Pty Ltd administrators what they were owed and to pay the husband sufficient for C Firm to be paid what they were owed in legal fees, let alone any remaining for the husband.
Another settlement of the sale of property owned by G Pty Ltd to another company owned and controlled by the husband, L Pty Ltd, that the husband and Mr C had arranged, was also scheduled to take place a few days after the healthcare business settlement.
On Friday 25 June 1999, Mr C sent a letter to the husband by facsimile transmission. By that letter, he was purporting to confirm instructions received from the husband in respect to the settlements scheduled for that day and a few days later. He referred to letters received from three different firms of solicitors that same day and said the following:
The settlement embodies the following:-
1.Payment in full of monies owing by yourself, G Pty Ltd and F Pty Ltd to H Bank and the subrogation of the remaining securities to yourself and F Pty Ltd;
2.Settlement of the G Pty Ltd property to L Pty Ltd on the basis that the secured creditors, the administrators of F Pty Ltd (Subject to a Deed of Company Arrangement (“DOCA”)) and the subrogated security holder, yourself Mr Fry and F Pty Ltd will receive the settlement monies in an amount of $200,000.00 (less any settlement adjustments), less an amount of $10,000.00 in full and final settlement of the claim by the K Pty Ltd against G Pty Ltd and the release of a Warrant of Execution presently registered on the real property held by G Pty Ltd.
The letter went on to say, amongst other things:
The settlement of the G Pty Ltd property in terms of the letter from [a firm] will be on the basis that the administrators sign off on the DOCA and accordingly F Pty Ltd will no longer be subject to a Deed of Company Arrangement and the claims of creditors who existed as at the date of the voluntary administration will have been satisfied notwithstanding that no dividend is paid whatsoever to creditors paid by the administrators.
The administrators at the G Pty Ltd settlement will release the mortgage they hold over the G Pty Ltd property and over the Town B property.
That will leave the subrogated mortgage in the names of both yourself personally and F Pty Ltd previously held by [H Bank].
Accordingly, and whilst we have not perused the contract in relation to the sale of that property J Pty Ltd [sic] prima facie that transfer once stamped ought to be capable of being finalised.
It follows that once the transactions in relation to the real property held by G Pty Ltd and the Town B property have been completed the only securities left will be registered Debenture Charges over F Pty Ltd and G Pty Ltd. There will be a need to complete an accounting exercise to determine what is the respective value that each of those joint and several charge holders, yourself and F Pty Ltd are entitled to hold.
In our view the most important issue relates to G Pty Ltd and in that regard both you personally and F Pty Ltd will be the secured creditors over G Pty Ltd and ought to have all the rights that accrue pursuant to the H Bank documentation as if you were H Bank. In other words, you stand in the shoes of H Bank and would have all the rights H Bank have in respect of exercising security over that company.
Likewise the position would be the same in relation to F Pty Ltd although there is the added complication that as the holder of the F Pty Ltd security is both you personally and F Pty Ltd the accounting exercise becomes important in determining the relative value of that security.
(My emphasis)
The husband signed off on a copy of the letter confirming to C Firm, both personally and as director of F Pty Ltd and G Pty Ltd, that he accepted the “instructions” sought to be confirmed by C Firm in that letter. His signature to that response bears the date 25 June 1999.
At the settlement of the sale of the healthcare business that took place on 25 June 1999, H Bank was paid $2,284,842 in full discharge of the debt owed to them. They were also given a Deed of Release signed by the husband releasing them from any further claims by the husband or any of his companies relating to the circumstances of H Bank having called in the debt.
Additionally, it seems that H Bank, rather than giving a Release of Mortgage in registerable form, were directed by the husband’s solicitors, C Firm, to give a signed transfer of their interest in the mortgage encumbering the title of each of the three Town B properties to the husband and the company, F Pty Ltd, as joint tenants. Seemingly, that direction was given on behalf of the husband and followed by H Bank pursuant to s 94 of the Property Law Act 1974 (Qld) (“Property Law Act”) that permits such transfers in certain circumstances. The transfer is signed for the transferees by Mr C and dated 25 June 1999. I am satisfied that was done by Mr C and the husband as part of the husband’s plan to minimise risk of personal loss by him in the event that he experienced further financial difficulties, even, potentially, in respect of matters pertaining to the Suburb L property, the arrangements around which his sister was now also potentially exposed financially. The husband and F Pty Ltd were now (at least the husband and Mr C appeared to believe) holders of security over the Town B properties that would, normally, take priority over any other calls by third parties on the property, even if a transfer of the property to J Pty Ltd became registered.
The settlement of the sale of the other property of G Pty Ltd to L Pty Ltd took place, I am satisfied, on or around Monday, 28 June 1999. It is unclear to me on the evidence where the money came from that changed hands, but nevertheless the evidence satisfies me that G Pty Ltd’s interest in the property was sold for an amount of slightly in excess of $200,000. The husband, both personally and as director of F Pty Ltd, asserting that he and F Pty Ltd were secured creditors of G Pty Ltd, authorised (in a signed but undated Trust Account Authority) C Firm to ensure that the administrators of F Pty Ltd were paid $95,000 from the settlement proceeds in full and final payment of all demands for payment that they were making. In return, the Administrators released their mortgages over that subject property and the Town B properties, and their role was complete.
Additionally, a further $10,000 was paid to another smaller creditor of G Pty Ltd to effect a release of a Warrant of Execution that had been registered by that creditor on the title to the G Pty Ltd property. The Body Corporate for the community title scheme that the commercial unit property was part of was paid the small amount of $474.97. Two further dispositions of funds from the monies held by C Firm in their trust account were authorised by the husband and F Pty Ltd. Those were a payment of $50,680.95 to C Firm, as part-payment of outstanding fees owed by the husband and his companies to C Firm for legal work done for them, and a final amount of $44,525.03 to the husband through F Pty Ltd.
A few days later, the husband flew to the USA for the weekend that included the USA’s Independence Day, 4 July. He had asked the wife to meet him in person for the first time since they had been communicating. She agreed. He stayed at a hotel not far from her home and they went on day outings over a few days. During that visit, the husband asked the wife to marry him, but she refused at that time. He left State U after those few days, but they remained in close, friendly communication by phone and email.
On 9 August 1999, C Firm caused a couple of documents to be registered at the Titles Office on the titles of the three Town B properties. The first one they lodged at 1.58 pm was the transfer of the H Bank mortgage to the husband and F Pty Ltd as joint tenants. The next one, lodged at 2.00 pm that same day, was a mortgage given by the husband over all three Town B properties in favour of Mr C. It was signed by the husband as mortgagor and by Mr C as mortgagee and each signature bore the date “29/6/99” beside it, each in different handwriting. No transfer of the property to J Pty Ltd was lodged, so that company did not become the registered proprietor of the Town B properties, despite the contract for sale that had been signed in early February that had been varied by a Deed of Variation soon after. I am satisfied that the husband was not concerned about that fact, otherwise he would have provided instructions to ensure that happened.
The Form 2 mortgage document as between the husband and Mr C said:
The Mortgagor covenants with the Mortgagee in terms of the attached schedule and document no …79 and charges the estate or interest in the land with the repayment/payment to the Mortgagee of all sums of money referred to in item 5.
Item 5 headed “Description of debt or liability secured” said “Refer to Schedule attached”. There was a two page schedule attached. It referred to a mortgage dated 29 June 1999. It defined the “debtor” to mean the husband, F Pty Ltd, and G Pty Ltd. It referred to a principal sum of $170,854.64 and a Deed of Loan between the debtor and Mr C. It defined “secured money” by reference to a number of different categories but, most relevantly, as “[a]ll moneys owed pursuant to any agreement entered into between the Mortgagee and the Debtor for the provision of financial accommodation to the Debtor, including but not limited to deed of loan for the provision to the Debtor of the Principal Sum”.
It went on to provide as follows:
2. GRANT OF MORTGAGE
(a) The Mortgagor hereby acknowledges that this Mortgage is given to the Mortgagee in consideration of the Mortgagee providing financial accommodation to the Debtor and/or the Mortgagor at the request of the Mortgagor.
(b) The Mortgagor acknowledges that the Mortgagor has guaranteed the obligations of the Debtor under a Deed of Loan and gives this Mortgage to secure the obligations under the guarantee.
3. ADDITIONAL EVENTS OF DEFAULT
Without limiting the provisions of Memorandum No. …79 the following events constitute an Event of Default:-
(a) A default under any of the Agreements from time to time; and
(b) The occurrence of any event whereby any power of sale contained in the Agreements become exercisable.
Relevantly, the terms of Mortgage Document No. …79 (a copy of which had been lodged with the Titles Office by C Firm around the same time) referred to in the executed Form 2 included in Clause 16 a list of events of default. One of those was said to be:
… in the case of a Mortgagor which is a natural person, he… commits an act of bankruptcy within the meaning of section 40 of the Bankruptcy Act, 1966, (as amended) or has issued against him… a bankruptcy petition…
Clause 18 of that mortgage document sets out the mortgagee’s powers “[u]pon the occurrence of an Event of Default”. Those powers include the right to demand payment of the whole or any part of the secured money, to enter upon and take possession of the mortgaged property and to sell or concur in selling the mortgaged property or any part thereof, “without giving any notice to the Mortgagor”. (My emphasis)
Adduced into evidence in the proceedings is a Deed of Loan bearing the date 29 June 1999. The parties to the Deed of Loan are Mr C, described as “the Lender”, and the husband, F Pty Ltd, G Pty Ltd and L Pty Ltd, described collectively as “the Debtor”.
In the Definitions section of the Deed of Loan, “Collateral Security” is defined to include “any legal… mortgage… which secures an obligation or liability of the Debtor… under any agreement between the Debtor… with the Lender”.
Clause 2 of the Deed of Loan provides:
The Debtor acknowledges that the Lender has advanced to the Debtor the sum specified in Item 11 of the Schedule, the receipt of which is hereby acknowledged and for the consideration aforesaid the Debtor hereby covenants with the Lender to:
…
Pay to the Lender the Principal Sum, or so much as remains unpaid, on the Repayment Date. …
Clause 2 then goes on to set out terms with respect to the interest rate payable. Relevantly, for these proceedings, the ordinary rate set in the Schedule is 22% per annum.
The Principal Sum set out in Item 11 of the Schedule is $170,854.64 and the Repayment Date is set at 31 December 2000. Mr C’s evidence is that the sum of money specified was the amount of legal fees that the husband, F Pty Ltd, G Pty Ltd and L Pty Ltd owed his firm at that time. More will be said about this later in these reasons.
The copy of the Deed of Loan adduced into evidence bears the signatures of Mr C, the husband and the husband under the common seals of F Pty Ltd and G Pty Ltd and the signature of the husband’s former wife said to be under the common seal of L Pty Ltd, but actually there was no such common seal affixed.
There is no dispute between the parties that the sum of $50,680.95 that C Firm received from the second settlement that took place at around this time, must be regarded as part payment of any money that was owed by the husband, F Pty Ltd, G Pty Ltd and L Pty Ltd to C Firm.
I shall also return to discuss the parties’ evidence and arguments about the execution of the Deed of Loan and the mortgage and the issue of their validity and relevance further on in these reasons.
In the second half of 1999, the husband travelled to the USA on a number of occasions in connection with the business. Throughout that period, he remained in contact with the wife. In December 1999, during one of their telephone conversations, the wife agreed to marry the husband. He told her they could live in Australia for half of each year and in the USA for the other half of each year. She told him that she would marry him in June 2000 when her youngest child would be entering university in the USA. She applied for a USA passport which she did not have already and she completed and filed the paperwork necessary to obtain Queensland recognition of her healthcare qualifications based on her American training and experience. She intended seeking healthcare employment in Australia.
The husband made all the arrangements for the wedding to take place at the Suburb L property on … 2000 and the wife travelled out to Australia just weeks before that date. The husband paid for most of the wedding expenses with credit cards. The wife did not know many of the guests at the wedding, but Mr C and his partner were there, apparently invited by the husband. Mr C had continued to advise and represent the husband and his companies in various matters after June 1999. I accept that receipt by Mr C of an invitation to the wedding is indicative of the nature of the relationship between Mr C and the husband at that time. It was plainly a good one.
Just over two weeks after the wedding (… July 2000), the husband was declared bankrupt on a creditor’s petition. The wife said, and I accept, that the husband’s credit card debts, including in respect of the expenses of their wedding, were included in the bankruptcy and never paid by him. Relevantly, I observe, the husband’s bankruptcy was also an event of default under the mortgage given to Mr C in June 1999, even though the date for payment of the balance of the amount said to be owed under the Deed of Loan had not been reached at that time. I am, therefore, satisfied that is the date that Mr C’s rights pursuant to the mortgage accrued.
I am also satisfied that the husband’s bankruptcy was an event of default under the Deed of Loan. However, the Deed set out in clause 6 the lender’s powers following an event of default. That clause commences with the words:
Whether or not the Lender has demanded payment of the Principal Sum…
and then goes on to set out some particular things the Lender might do that are not of relevance in the circumstances of this case. I consider that carries the implication that an Event of Default entitles the Lender to call in payment of the Principal Sum even if the Event of Default happened before the date on which the Deed provided for the Principal Sum to be repaid (just as was the case in respect of the husband’s bankruptcy). I am, therefore, satisfied that the day Mr C’s right of action pursuant to the Deed of Loan accrued was also … July 2000, even though he did not actually make a written demand for payment until sometime later that.
Shortly after the husband’s bankruptcy, the wife learned also that the husband had not just three children, but eight, and that he owed substantial amounts of child support to different women for four of them who were still only small. None of those children spent any time with the husband and the wife never met any of them. These events caused difficulties in the new marriage, but it seems as if the newly married couple were able to work through them at that time.
In about August 2000, the husband told the wife that he could not find work in Australia and he suggested to her that some companies be started up in the USA, for which he could work, so that he could pay his child support liabilities and contribute to his bankruptcy. The wife agreed that was a good idea. In early 2001, the husband travelled to the USA without the wife. A number of companies were subsequently established there.
A company was created in the state of State K with the initial members being the husband and his other business acquaintance/partner, Mr V, who was already in the US. The company was called W LLC. Soon thereafter, the wife became the listed agent and manager/member for that company. She said, and I accept, that the company was actually owned as to a 50% share by another company they set up, called Y Inc, and as to the other 50% by another company owned solely by Mr V, called W Inc.
The wife’s American savings bonds
The wife asserts that on her departure from the USA in mid-2000, although she had no real property or other physical assets of note, she nevertheless had a large bundle of government savings bonds that had been gifted to her over the years as a child and as a young woman by her grandparents. She said that she kept them in a safety deposit box in a bank in State U where she lived and that she intended keeping them and to cash them in to fund her retirement. She said that she also had the American equivalent of an Australian’s superannuation interest, accumulated during her years of employment in that country. She said that she agreed to let the husband access those bonds and funds to cash them in to provide funds to support the start-up of the business in the USA and his cost of living there. Though she was not certain as to the precise amount, she believed that she had somewhere around USD700,000 worth of Savings Bonds and “retirement funds” when the interest they had accrued was taken into account. She said that the husband accessed all those Bonds and cashed them all, with her approval, using the funds for business and living expenses after he moved to the USA. The husband denied all of that.
The husband submitted that as the wife had produced no documentary evidence corroborating her assertions about this, she simply should not be believed. He also said that she had been bankrupt herself in her twenties after her first husband had left her, so she could not have retained savings bonds she received since her birth. In reply to that, the wife said that savings bonds are protected from bankruptcy in the USA so she was able to retain them and she said that she could not provide any such documentary evidence as she had allowed the husband to handle their joint finances right from the time of their marriage and that included giving him full access to her American assets and financial resources.
Neither party adduced any expert evidence about the effect of bankruptcy on the ownership of the savings bonds, but, in the circumstances, I prefer the wife’s evidence about this. Principally, this is because I considered her an honest witness whereas I was not impressed with the husband’s credibility at all. It was extremely difficult to determine at any time and on any issue whether the husband was telling the truth or just concocting evidence as he went along. I say respectfully, that the husband did not impress me as a person whose word could be trusted on anything he said. Indeed, without wanting to add further burden to the emotional impact all of the circumstances have had on the wife in this case over the years, I consider it more probable than not that the husband sought out and married an American woman principally to gain the right to live and work in the USA at the time when he saw some promising signs in respect of the business in that country and his business interests in Australia had failed. He certainly demonstrated little ongoing commitment to the wife once he left for the USA in early 2001.
In the USA, W LLC sold and supported the product that the husband had been developing and selling in Australia through G Pty Ltd and then L Pty Ltd. Y Inc was the company that owned the rights to this product in the USA and continued to develop it and provide it to W LLC for sale. In or about 2002, Y Inc purchased W Inc’s half share of W LLC for $40,000, according to the husband. The husband and the wife then owned it outright through their ownership of Y Inc and the business relationship with Mr V ended.
The husband put some documents before the Court in the proceedings in asserted support of his position that the wife had no assets in the USA at the time he went there. These documents included some financial documents said to be documents of Y Inc and W LLC showing that Mr V, through his company, W Inc, financed the establishment of the business and that Y Inc and W LLC had to repay him from their share of earnings of the business. I am not persuaded by the documents or the assertions of the husband.
From 2001, the husband remained in the USA running the product development, sales and support business there. A relatively lucrative contract had been acquired with the large company, X Company. It appears to have delivered a reasonable flow of income to W LLC over a number of years after the husband and wife married – at least through to 2010, if not longer.
Initially, the wife spent a few months in the USA and did some healthcare work during that time but she then returned to Australia, living in the Suburb L property that was registered in the name of J Pty Ltd. She did not even know of the husband’s ownership of the Town B properties for some years. The husband caused regular transfers of money from the W LLC’s bank accounts in the USA to be sent to Australia so that the mortgage debt to Westpac secured over the Suburb L property could be paid, so the wife would have money for her own needs, so that his young adult son could be supported and so that Australian staff of their companies could be paid. On occasions, the wife would travel to the USA to be with the husband.
The parties had the need for a lot of money in these early years. In particular, they needed a lot of money to be sent to Australia on a regular basis, as I have mentioned, to meet significant recurrent expenses here. I do not accept that these transfers, plus the expenses incurred by the husband in establishing the business in the USA and in establishing his living base there, as well as supporting himself, were all met in the early years of the 2000s just out of the income of W LLC and Y Inc. I am quite satisfied that the wife’s evidence of her initial contributions of savings in the USA is honest and correct. To reject it, I would have to be satisfied that she is blatantly lying about a very large amount of money and that the husband is truthfully denying it. I am not so satisfied. As I have already observed, I considered the wife to be generally an honest witness, doing her best to give the Court the truthful history, whilst I considered the husband to be generally unreliable and dishonest, selectively putting evidence before the Court that simply could not be relied upon as accurately presenting the facts.
Going on, the parties, ostensibly through one of the companies established in the US, actually conducted business operations in Australia at the same time, apparently doing the same sort of work – developing, selling and supporting a product. For some time, an office was maintained in Town FF, west of Brisbane, and staff were employed or contracted, managed and remunerated. I accept that the wife was busily involved in the management and running of the Australian part of the business. She was also caring for the Suburb L property that she continued to live in.
Soon after the husband went to the US, he contacted the wife and asked her if she could retain Mr C’s legal firm to act for him in seeking an early release from his bankruptcy. The husband’s creditors, who had proven debts totalling somewhere around $800,000 in his bankruptcy, did not agree to his early release. Mr C sent the wife a Memorandum of Fees in March 2002 charging her a sum of about $1,000 for work connected with that matter, but also adding a “previous outstanding balance” of $15,614.52. The wife said she had not agreed to pay any previous outstanding amount and that the husband must have told Mr C that she would. She did not pay that amount and, later, in March 2002, Mr C commenced debt recovery proceedings against the wife in the Magistrates Court at Brisbane. The wife successfully defended those. Mr C appealed against the decision to the District Court but was also unsuccessful in that. Clearly, by that time, relations between Mr C and the husband and wife had broken down.
In or about March 2003, Mr C, apparently concerned about the waning prospects of being repaid that which he was still owed by the husband, F Pty Ltd and G Pty Ltd, wrote to them making demand for payment. Soon thereafter he issued a Notice of Exercise of Power of Sale pursuant to s 84 of the Property Law Act in respect of the three Town B properties and served it on the husband. Mr C also caused F Pty Ltd and G Pty Ltd to be put into liquidation at around this time in an effort to recover money said to be owed to him. Of interest though, Mr C asserted in the Notice of Exercise of Power of Sale that the debt owed to him included the full amount of around $170,000 plus interest at 22% per annum on that amount. He did not appear, at that time, to acknowledge the payment of $50,680 that he had already received at around the time the Deed of Loan was executed.
It is around this time, that the wife first learned of the Town B properties. With the apparent consent or acquiescence of the husband and the husband’s sister who was living in the UK, the wife then retained solicitors and had them commence proceedings on behalf of J Pty Ltd in the Supreme Court against Mr C. She had been made a director of J Pty Ltd. The husband and the wife apparently then caused F Pty Ltd’s interest in the H Bank mortgage that was still registered over the Town B properties, but in the names of the husband and F Pty Ltd, to be transferred to the husband and J Pty Ltd as tenants in common in equal shares and that transfer was registered on the title on 23 April 2003. It still sits on the title in apparent priority to the C mortgage of 1999. Just a few days thereafter, J Pty Ltd lodged a caveat on the titles to the Town B properties as well. I have not seen a copy of that caveat, but I presume that it claimed an equitable interest pursuant to a contract of February 1999.
The Supreme Court litigation that J Pty Ltd commenced had two prongs to it. First, that Mr C’s mortgage had been fraudulently registered on the title to the Town B properties in the face of knowledge that J Pty Ltd had already acquired an equitable interest in the properties through the contract of sale signed earlier in 1999. Secondly, it was asserted that the husband, F Pty Ltd, G Pty Ltd and L Pty Ltd did not owe as much as Mr C was asserting, in any event.
That litigation somehow managed to prevent Mr C from proceeding to sell the Town B properties and to recover any further money from the husband. It went on for many years, ultimately being dismissed by the Supreme Court in April 2010 after the Plaintiff, J Pty Ltd, ran out of funds and was unable to satisfy Court Orders to provide security for costs for the defendants (who included Mr C and the firm of solicitors that had acted for J Pty Ltd in 1999 on the contract for the sale of the Suburb L property and the Town B properties). Costs were also ordered against J Pty Ltd.
In the meantime, the husband had been discharged from bankruptcy (25 August 2003) and was still living and working in the US. Towards the end of 2004, he was able to purchase a residential property in a town called R Town in State K on the mid-eastern side of the US. It had been sold by a bank as mortgagee in possession and the husband was able to pick it up for a good price, all of the funds for the purchase being advanced by the bank who again took a mortgage over it. The property was registered in the joint names of the husband and the wife. Shortly afterwards, they established another company, called N LLC. It bought some land in a housing development area in State P, again borrowing all the funds to do so.
The wife said, and I accept, that she began having great difficulty contacting the husband from this time on and in early 2005 she began to suffer from depression. She sought medical assistance and was prescribed antidepressant medication which she began to take. She flew to the USA in August 2005 to “confront” the husband about their relationship. She said that meeting provided her with some clarity about the husband’s feelings towards her, but, nevertheless, she returned to Brisbane confused and not knowing what to do.
By this time, the couple’s financial position was deteriorating. J Pty Ltd’s Supreme Court proceedings were costing a lot of money. The debt to Westpac securing the Suburb L property was falling into arrears. In or about May 2006, the Suburb L property was sold by J Pty Ltd. The husband and wife had agreed to that and they had maintained actual control of that company with the acquiescence of the husband’s sister. After the Westpac debt was paid out, the net proceeds realised were in the order of $500,000. Almost all of that money was spent in paying legal fees of the Supreme Court action and on meeting some earlier security for costs orders. Some was sent to the USA to the husband for his use in the business. Just prior to moving out of the Suburb L property, the wife caused a shipping container load of furniture, some of which had belonged to the husband before they married and some of which had been purchased during the marriage, to be sent to the USA to the husband. The wife then moved to the house on the Town B property and she has lived there ever since.
Around the beginning of 2009, the wife told the husband, who was still living in the US, that she wanted a divorce and a settlement of their financial affairs and property. While “initially agreeable”, she said the husband became hostile and threatening towards her in response. Later that year, she arrived home at Town B to find one of the husband’s sons loading a motor vehicle with things he was taking from the shed situated on the property. The wife informed the husband’s son that he needed to call her before he attended. She said that he became angry and looked at her in a “frightening” way so she called the police and they attended. Police subsequently applied for and obtained a Protection Order for the wife against the husband’s son.
In October 2009, the husband came back from the USA and the wife let him attend at the Town B property to collect some possessions. Police attended by arrangement and the husband and his son attended with a truck. Police could not stay after dark that evening and when they left the wife went with them for her safety. When she returned home the next morning, she found damage had been done to the home and items that she had not approved the husband taking were missing.
In late 2010, the wife again wrote to the husband seeking a divorce. He agreed this time. In early 2011, the wife received a letter from Brisbane family lawyers acting for the husband and thus began a very difficult, protracted dispute about identifying and valuing the property of the parties or either of them. The wife’s proceedings that have brought the matter to this judgment were commenced in the Federal Magistrates Court (as it was then known) in October 2011.
After the Supreme Court proceedings commenced by J Pty Ltd against Mr C and others were dismissed in 2010, the wife applied to the Australian Securities and Investments Commission (“ASIC”) for the deregistration of J Pty Ltd. Mr C asserted in evidence that she did that and obtained deregistration without disclosing to ASIC the substantial liabilities of the company to him and to Law Claims (who had defended the claim against the other firm of solicitors) for their costs. The husband said in evidence that the wife did that without disclosing that J Pty Ltd also owed around $600,000 to their American company, W LLC, that had changed its name to Z Company by this time. The wife did not concede that and no copy of any document submitted to ASIC was adduced into evidence. I do not make a finding that she did not. I do not consider such a finding necessary to be made in the determination of this matter.
Mr C’s fresh Supreme Court proceedings
On 28 June 2011, Mr C commenced fresh proceedings in the Supreme Court of Queensland in Brisbane in which he was seeking to have the H Bank mortgage and transfers of that mortgage to the husband and J Pty Ltd, as well as the caveat lodged by J Pty Ltd in 2003, removed so that he again could set about exercising the mortgagee’s power of sale of the Town B properties to realise some of the debt owed to him.
Bearing in mind the “default” of the husband can be said to have taken place on … July 2000 when he became bankrupt, Mr C’s proceedings were commenced within the period of 12 years from that date. They were, thus, within the period prescribed in the Limitation of Actions Act 1974 (Qld) (“LAA”) in s 13 to avoid being statute barred. However, those Supreme Court proceedings were defended by the husband and Orders were made by Justice Ann Lyons of that Court in late 2012 requiring Mr C to file and serve any application for orders under r 24 or r 117 of the Uniform Civil Procedure Rules 1999 (Qld) (“UCPR”) in addition to affidavit evidence on which he intended to rely and for any such application to be returnable prior to 31 December 2012. Rule 24 of the UCPR relates to the duration and renewal of claims. Rule 117 relates to informal service and permits the Court to validate, by order, service that is informal and does not otherwise comply with the UCPR. The implication contained within those Orders is, I consider, that there was some issue surrounding the validity of the service of Mr C’s Claim on the husband that was required to be formally determined before the matter could go to trial in that Court. However, her Honour also ordered the matter to be listed for a one day trial on a date to be fixed, prior to 31 December 2012, after consultation between the parties. I consider it safe to accept that her Honour could not have considered the r 24 and r 117 matters would likely be fatal to Mr C’s Claim at that point in time.
Yet, no application pursuant to the UCPR was filed and the matter never went to trial in the Supreme Court. Mr C conceded that no further steps were taken in those proceedings by him after he made an application in October 2012, and before he was joined to these proceedings in the latter part of 2015. Mr C said that he had been advised that the husband was ill but also said that he, himself, has been involved in other proceedings in various courts in the meantime. The implication in that, I consider, is that he is saying he was too busy or was distracted from taking those steps in the Supreme Court proceedings, though he did not say that directly.
That inaction brings into focus r 389 of the UCPR which prohibits a fresh step being taken in proceedings in the Supreme Court without an order of the Court where no step has been taken for two years from the time the last step was taken. Those two years expired in October 2014. Further, pursuant to r 280, the husband has the right to apply to the Supreme Court, in the circumstances, for an order dismissing the proceedings that exist in that Court for want of prosecution. He had not done that before the trial in these proceedings and I am not aware whether he has done that since.
I do not consider it appropriate now to presuppose the outcome of any applications brought by Mr C or the husband in those Supreme Court proceedings. I am, however, conscious of the fact that none of the parties to the proceedings before this Court applied to the Supreme Court and obtained an Order for the transfer of the proceedings that exist in that Court to this Court pursuant to s 5 of the Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth) and the reality, consequent thereupon, is that it is not those proceedings that were commenced in the Supreme Court by Mr C that this Court is seized with.
It is also the case that Mr C did seek to join these proceedings in this Court rather than seeking to stay them pending the determination of his Supreme Court proceedings. Accordingly, whilst it is the case that determining the justiciable controversy that exists between the parties in these proceedings will involve determining the same rights and obligations as between Mr C and the husband on the same factual matters as would be determined in the Supreme Court proceedings if they were to proceed to hearing and determination, these are not those proceedings now being determined in this Court. These are proceedings pursuant to s 79 of the Family Law Act 1975 (Cth) (“Family Law Act”) that also involve a claim by a third party creditor, properly regarded, as the parties all agreed, as part of the same justiciable controversy and able to be determined within this Court’s federal jurisdiction.
Mr C’s claim in these proceedings is, in my judgment, properly treated as having been commenced by him when he filed his Application in a Case seeking leave to intervene and his affidavit that supported the application on 14 September 2015. In his affidavit, he made it absolutely clear that he claims the mortgage dated 29 June 1999 is valid at law and enforceable. Although he did not expressly particularise the orders he actually seeks from the Court until his counsel handed a draft of those orders to the Court on 4 October 2016, it was clear from September 2015 that he was seeking to enforce the mortgage.
The limitation period point
In his case, the husband raised the limitation period point. In essence, though there were no “pleadings” in this case in the technical sense of that word, he pleaded the limitation point as a bar to Mr C’s claim against him.
There are a number of relevant provisions. Firstly, ss 26(1) and 26(5) of the LAA provide:
An action shall not be brought to recover a principal sum of money secured by a mortgage… after the expiration of 12 years from the date on which the right to receive the money accrued.
…
An action to recover arrears of interest payable in respect of a sum of money secured by a mortgage… shall not be brought after the expiration of 6 years from the date on which the interest became due.
Similarly, s 10(3) of the LAA provides:
An action upon a specialty shall not be brought after the expiration of 12 years from the date on which the cause of action accrued.
An action to enforce a Deed is an action “on a specialty”.
Accordingly, an application of these LAA provisions would appear to be a bar to an action by Mr C to recover principal and interest said to be secured by the mortgage and a bar to an action to recover money owing under the Deed.
On the evidence before me, the right of action to recover the principal sum of money said to be owing under the mortgage first accrued at least on the date of the husband’s bankruptcy. That was … July 2000. That being so, pursuant to s 26 of the LAA, an action to recover the principal owing under the mortgage was barred from … July 2012 and an action to recover interest payable in respect of the money secured by the mortgage was barred from … July 2006.
In addressing this limitation point, counsel for Mr C, however, referred to s 35(3) of the LAA. That provides:
Where a right of action has accrued to recover a debt…and the person liable… therefor acknowledges the claim… the right shall be deemed to have accrued on and not before the date of the acknowledgement …
Counsel pointed out in his written submissions that the Queensland provision does not require the “acknowledgment” of the claim to recover a debt to have been made before the expiry of the limitation period for it to “start the clock again”. Unlike the Limitation Act 1969 (NSW), the LAA does not have a provision that actually extinguishes the right to recover once the limitation period has expired and it is the case that the day on which an “acknowledgment” of the claim is made, even if made after the limitation period has expired, is to be deemed as the day on which the right of action accrued.
Counsel for Mr C submitted that the husband did “acknowledge” the debt in an affidavit that he swore on 10 August 2012 and caused to be filed in the Supreme Court action. Relevantly, the husband said in that affidavit:
8. …
…
(f) The legal services were variously provided by [Mr C] to [G Pty Ltd], [F Pty Ltd] and me although I have never been provided with sufficient information to enable me to identify the amounts claimed to be due as between us. The services related to the financing and subsequent default of repayment under the [H Bank] facility. In turn, the legal services related to [Mr C] acting on my behalf and on behalf of [G Pty Ltd] and [F Pty Ltd] to provide insolvency advice and to act in relation to sale of various property and the discharge of the [H Bank] facility.
…
12. The circumstances relating to my execution of the Deed of Loan dated 29 June 2009 [sic] in favour of [Mr C] (“the Deed of Loan”)(pages 3 to 20 of [H]/1)which form the basis of [Mr C’s] claim, can be summarised as follows:-
…
(b)On the last business day before settlement of the sale of the healthcare business, [Mr C] contacted me to advise that he had received an updated redemption figure from [H Bank] and that the proceeds of sale would only discharge the debt due and accordingly there would not be sufficient money left over amongst other matters to settle [Mr C’s] legal costs.
(c)[Mr C] asked me to attend his office. When I attended [his] office, he produced a copy of the Deed of Loan and security documentation relating to the [Town B] land (among other properties). [Mr C] insisted that I execute the Deed of Loan and the mortgages over the [Town B] land in default of which he would refuse to attend on the settlement of the [healthcare business] sale. In that event he told me that [H Bank] would immediately appoint receivers and managers over all my property and I would lose control of their disposal.
(d)At that time, I told [Mr C] that I disputed the amount owing as set out in the Deed of Loan, and insisted that [he] provide me with copies of the bills of costs which he believed were owing. [Mr C] told me not to worry about it and that the amounts actually owing to the extent there was a difference could be resolved in due course. He reassured me that he would produce bills of account for all of the outstanding matters. If there was a difference he agreed that the amount due under the Deed of Loan would be varied.
(e)I was very unhappy about the turn of events and did not want to execute the Deed of Loan. [Mr C] again insisted that if I refused to enter the Deed of Loan, he would not act for me on the settlement of the [healthcare business] and discharge of the [H Bank] debts. [Mr C] insisted that I arrange for the attendance of my ex-wife and my accountant who were directors of entities noted on the Deed of Loan. My ex-wife was particularly unhappy about being put upon, and initially refused to sign the Deed of Loan. I explained to her that [Mr C] had stated that if the Deed of Loan was not executed then all of the companies and their respective assets would be in peril. My ex-wife told me that in those circumstances she would reluctantly execute the agreement.
13. Throughout the period 1997 to 2000, [G Pty Ltd], [F Pty Ltd] and I paid significant legal costs to [Mr C]. I estimate the amounts paid to be in excess of $160,000.00 including an amount of more than $50,000 after my execution of the Deed of Loan.
…
15.Subsequent to discharge of the [H Bank] debt, I sought information from [Mr C] in relation to his claim to legal costs, and in particular the amount claimed in the Deed of Loan. In addition, the question of [Mr C’s] legal costs outstanding relative to the amount claimed in the Deed of Loan, was a matter of protracted litigation between [J Pty Ltd] and [Mr C] and others (including myself) in proceedings … in the Brisbane Supreme Court (again which I have dealt with in more detail below).
16.I have never been able to reconcile the amount said to be owed by me to [Mr C] and by the same token he has been unable to provide adequate information to allow that reconciliation to occur.
17. Furthermore, and not withstanding numerous requests by me, I was never provided with invoices contemporaneous to the work which was undertaken so that I could undertake an assessment in relation to these matters.
18. In short I deny that there is a debt owing on account of legal fees.
It is not necessary for a document relied upon as an acknowledgment to contain an express promise to repay. It need only, on a “fair construction”, amount to a recognition of the present existence of the debt.[3]
[3] Hepburn v McDonnell (1918) 25 CLR 199; [1918] HCA 43; Bucknell v Commercial Banking Co of Sydney Ltd (1937) 58 CLR 155; [1937] HCA 35; Stage Club Ltd v Millers Hotels Pty Ltd (1981) 150 CLR 535; [1981] HCA 71.
Counsel for Mr C asserted that whilst the husband denied there is a debt owing on account of legal fees he did not deny the existence of the Deed of Loan that Mr C says gives rise to the debt owed to him. With respect, I do not accept the submission. The husband raised issues around the circumstances of the execution of the deed from which it is plainly understood, though he did not say it expressly, that he denied the validity of the Deed. He makes it clear, expressly, that he denies there is a debt owing. I do not consider that amounts to a recognition, at that time, of the existence of the debt.
Accordingly, I consider Mr C’s right to sue on the Deed is barred by the LAA.
In any event, Mr C does not seek an order from this Court for the payment to him by the husband of a sum of money said to be owing to him pursuant to the Deed of Loan. Rather, he seeks a raft of orders, culminating in an order that the husband deliver possession of the Town B properties to him within 28 days of the order and an order that those three lots be sold pursuant to s 78(2)(c)(iii) of the Land Title Act 1994 (Qld) (“Land Title Act”). In other words, perhaps conscious of the LAA provision, he is relying solely on rights of action pursuant to the Mortgage.
That subsection of the Land Title Act that I just referred to provides:
…subject to the terms of the mortgage, if the mortgagor defaults under a registered mortgage, the mortgagee may—
…
by a proceeding in a court of competent jurisdiction—
(i)obtain possession of the mortgaged lot; or
(ii)foreclose the right of the mortgagor to redeem the mortgaged lot; or
(iii)obtain an order of the court for the sale of the mortgaged lot.
There are, though, more relevant provisions of the LAA in respect to actions to recover land. Section 13 provides:
An action shall not be brought by a person to recover land after the expiration of 12 years from the date on which the right of action accrued to the person…
Section 17 also provides:
A right of action to recover land by virtue of a forfeiture or breach of condition shall be deemed to have accrued on the date on which the forfeiture was incurred or the condition broken…
(My emphasis)
Again, as I have already observed, I am satisfied that the right of action to recover the land accrued to Mr C at least on the date of the husband’s bankruptcy – … July 2000. The bankruptcy, I consider, amounted to a “condition broken”.
Consequently, pursuant to these provisions of the LAA, Mr C’s right to recover the land became barred on … July 2012, unless, pursuant to s 35(1) of the LAA, there was an “acknowledgment” of Mr C’s title or a payment in respect of the mortgage debt sometime after … July 2000 that “started the clock” again in respect of that twelve year limitation period.
Section 35(1) provides:
Where there has accrued a right of action (including a foreclosure action) to recover land… and –
(a) the person in possession of the land… acknowledges the title of the person to whom the right of action has accrued; or
(b) in the case of a foreclosure or other action by a mortgagee–the person in possession referred to in paragraph (a) or the person liable for the mortgage debt makes any payment in respect thereof, whether of principal or interest;
the right shall be deemed to have accrued on and not before the date of the acknowledgment or payment.
Before turning back to the evidence to consider whether the husband “acknowledged” the title of Mr C or whether he made a payment in respect of the mortgage debt, there is another provision of the LAA that is relevant. Section 24 provides:
Subject to section 17, subsection (2) of this section and the Real Property Act 1861, where the period of limitation prescribed by this Act within which a person may bring an action to recover land (including a redemption action) has expired, the title of that person to the land shall be extinguished.
Where an action to recover land is brought before the expiration of the period of limitation prescribed by this Act, the expiration of that period does not affect the right or title of the plaintiff to the land–
(a) for the purposes of the action; and
(b) so far as the right or title is established in the action.
(My emphasis)
Accordingly, I consider that unless the acknowledgment or payment was made between … July 2000 and … July 2012, the expiration of those 12 years extinguishes Mr C’s “title” to the Town B properties – that is, his rights as a mortgagee to recover possession of and to sell the Town B properties. I do not accept that commencement by Mr C of the Supreme Court proceedings within time saves his claim in these proceedings. As I have said, those are different proceedings and Mr C has apparently given up on continuing them.
The affidavit signed by the husband on 10 August 2012, even if it could be held to have contained an “acknowledgment” of Mr C’s title, will not suffice unless there was an earlier “acknowledgment” or “payment” made post-… July 2000.
I have found no evidence of an earlier written “acknowledgment” of Mr C’s title by the husband himself. Section 36(2) of the LAA, though, provides:
Any acknowledgment or payment may be made by the agent of the person by whom it is required to be made under section 35 and shall be made to the person or to an agent of the person whose title or claim is being acknowledged or, as the case may be, in respect of whose claim the payment is being made.
Exhibited to the husband’s affidavit filed in these proceedings on 30 September 2016 is a letter from a firm of solicitors who were acting for the husband, dated 7 September 2010, written to Mr C. In that letter, the existence of the mortgage was referred to but Mr C was told that the husband asserted that it was executed by him “under duress” and that, in any event, there were no monies owing under the mortgage. Mr C was expressly told that the husband “does not accept that [Mr C has] any right to sell by power of sale pursuant to the mortgage”.
I do not accept that this letter contained an “acknowledgment” of Mr C’s “title” pursuant to the mortgage — that is, his right to recover possession and to sell the Town B properties — such that the limitation period should be started from the date of that letter. A fair construction of that letter could not be said to contain within it an implied promise to pay an amount owing pursuant to the mortgage or recognition of a right on the part of Mr C to recover possession of the Town B properties or to sell them.
As for the question of “payment” after … July 2000, I have seen no evidence that the husband made any payments towards meeting his obligations under the Deed of Loan and the mortgage after that date.
Accordingly, I am not persuaded that there was an acknowledgment of Mr C’s “title” or a payment made towards the mortgage debt between … July 2000 and … July 2012. In my judgment, that means the limitation period expired on … July 2012 and, at least as far as these proceedings in this Court are concerned, Mr C’s title to the Town B properties, pursuant to the registered mortgage, is extinguished.
For Mr C, it was submitted that even if his client’s claim was statute barred, he was still a registered proprietor of a mortgage and that gives him rights pursuant to the Land Title Act. He submitted that there was “a tension” between the provisions of the LAA and the Land Title Act, with the latter’s provisions granting indefeasibility of title effectively overriding the LAA’s provisions. He specifically cited, in his written submissions, a 1910 New Zealand Court of Appeal decision of Campbell v District Land Registrar of Auckland (1910) 29 NZLR 332. He submitted that case is authority for the principle that a registered mortgagee’s statutory power of sale is not affected by the statute of limitations.
With all due respect, I do not agree with the submission. That case turned on provisions in two statutes that were in force in New Zealand at that time, 109 years ago. One of those, the Statute of Limitations: 3 & 4 Will IV, c 27, was an imperial British statute that applied in New Zealand law at that time. The relevant clauses in that statute provided bars against certain actions in respect of land 20 years after the rights of action had accrued. The question was what impact did s 61 of the later Land Transfer Act 1908 (NZ) (“Land Transfer Act”) have on those limitation provisions of the other statute. Section 61 provided:
After land has become subject to this Act no title thereto, or any right, privilege, or easement in, upon, or over the same, shall be acquired by possession or user adversely to or in derogation of the title of the registered proprietor.
The facts of the case involved a man who had purchased land and mortgaged it to another man to borrow some money which he never repaid. He did not fence the land or go into occupation of it. He handed the title deeds to the mortgagee and he then went away and could not be found again. After many years, well more than the 20 years provided for in the limitations statute, the mortgagee who had not ever taken possession of the land purported to exercise the power of sale and bought the land himself. The District Land Registrar refused to register the transfer, citing the limitation period.
I have previously observed in Smart and Smart [2014] FamCA 262 as follows:
Although the Full Court observed in the post-Stanford decision of Bevan that “notional property” that is “added back” to a list of assets to account for the unilateral disposal of assets “is unlikely to constitute “property of the parties to the marriage of either of them” and thus is not amenable to alteration under s 79”, and also that “it is important to deal with such disposals carefully, recognising the assets no longer exist”, I do not consider that such observations altered the fact that the determination of the appropriate way to deal with unilateral pre-trial disposition of property is a matter within the discretion of the trial judge.
I am of the view that it is still appropriate to have regard to the Full Court’s previous decisions of Chorn & Hopkins, Omacini and Cerini when considering this aspect of the discretionary exercise. Of course, notionally adding an amount to a list of assets does not create property which is amenable to adjustment itself, but, in my view, amounts notionally added may certainly be considered along with actual property and superannuation interests that are amenable to adjustment by the Court’s orders when determining the orders that are appropriate and, ultimately, just and equitable.
Those authorities just referred to establish that “notionally adding back” should be the exception rather than the rule, but that it is not inappropriate where:
(i)the parties have expended money that existed at separation on legal fees;
(ii)where there has been an unreasonable premature distribution or disposition of property of the parties or either of them; or
(iii)in the circumstances outlined by Baker J in his judgment in Kowaliw.
(Citations omitted)
I remain of the same judgment that I expressed in that 2014 case.
Two of the amounts the wife contends should be added back relate to motor vehicles. One of the amounts is for AUD32,294 and is said to be the sale proceeds of a Motor vehicle 5 previously owned by the husband and sold by him in February 2013. The second amount is for AUD3,500 and is said to be the sale proceeds of a Motor vehicle 6 sold by the husband. The wife’s case is, plainly, that the husband retained the proceeds and used them for his own needs.
There was no evidence adduced about any of this to persuade me that the wife is referring to a different Motor vehicle 5 to the one I have referred to earlier, which I said I would take into account in the consideration of contributions. Similarly, no evidence was adduced about the ownership and sale of a Motor vehicle 6. I will not add these amounts to the value of the property of the parties.
The wife contends for two amounts to be notionally added reflecting $30,243 she spent on legal fees and $50,000 the husband spent on legal fees when they were both legally represented in the proceedings. In his written submissions, unsurprisingly, the husband does not contend for such adding back. Again, there was little evidence adduced about these matters, including in cross-examination of each of the husband and wife.
In notes to the wife’s balance sheet handed to the Court on 2 November 2016, she asserts that she paid her own legal fees whilst she was working at a healthcare facility. She also asserts that the husband paid his from money earned by Z Company. He clearly continued to run the company in the USA right through to the time of the commencement of the trial before me, so I do not doubt that the wife’s assertion is correct.
However, I consider it not to be appropriate in this case to add these amounts notionally to the value of the property as contended for by the wife. All that I can make of the material before me is that both parties were trying to get on with their lives, well after separation. Both were working at times, using income that was being earned by them to pay their own legal fees. The wife was earning by her own personal exertion. The husband was earning by continuing to run the business that the couple had owned and run during their marriage. I consider that the unilateral use by the husband of the income generated by the business in years after separation, whether for the payment of his own legal fees or for his own support, is a matter that is, in this case, more appropriately to be taken into account when considering the respective contributions of the parties than through the notional adding of amounts to the value of the property.
The wife also contends for the sum of $51,092 to be notionally added as well. This is, she said, for legal fees the husband paid to his solicitors in the Supreme Court proceedings commenced by Mr C against him in 2011. The wife makes the same point in respect of this money as she did in respect of the legal fees the husband has paid in these proceedings. She asserts he used Z Company earnings to pay these fees. For the same reasons as I just gave, I will not notionally add this amount to the value of the property but rather will consider it when considering and assessing the parties’ contributions.
The wife then has made submissions in respect of the companies that were established over the years. She submits that in respect of the companies, Y Inc, Z Company, Z Company Ltd (UK), a figure of AUD3,105,204 should be determined to be a figure representing their value and added notionally to the value of the property. She refers to another company, DD LLC and says it should be determined to have a value of AUD62,236 and added to or included in the value of the property and she then refers to the husband’s family trust that he established and a few other companies such as AA LLC, BB LLC, CC LLC and an unnamed Australian company that she submits exists.
The great difficulty for the wife in respect of the issue as to how these companies are to be treated is the lack of definitive evidence that they were all still operating at the time of the trial and the lack of any expert valuation evidence about them. Of course, most of the responsibility for that deficiency is solely that of the husband’s. I am quite satisfied that he was not full and frank in his disclosure of relevant documents or information that would have enabled any qualified expert to present sound opinions as to the values of the parties’ interests in the businesses run by these companies.
Of significance though, the husband, in his written submissions, makes the following extraordinary statement which, in fairness to him, I understand was directed at what he said was the last company left operating, Z Company Ltd (UK):
In a wildly generous situation, if you assumed you could scrap together [sic] from some purchaser maybe $50,000, in a hopeful year $80,000, and then add that to the marital pool at best.
What can I make of all the evidence that was adduced about these companies and the business or businesses they have run?
Quite clearly, Y Inc and W LLC were established in early 2001 in the USA. As I have observed, W LLC appears to have been the company through which the business of selling the products was run. It was wholly acquired by the parties within a couple of years of its creation. It appears that they paid around USD40,000 for the other half share that was initially owned by a third party. The company had the benefit, I am satisfied, of a contract with the American giant, X Company, which provided it with the bulk of its income, though there is evidence that the company was doing business, selling product and generating income in other countries, such as Australia, India and the UK.
There is not a lot of evidence as to the actual income the company was earning over the years, but there is a document that I will refer to below, that suggests the business was grossing receipts of potentially around USD1,100,000 per year, at least, around 2011. Though the business clearly continued to operate up until around the time of the trial, I am not convinced that it did not lose the X Company business sometime around 2010–2011. The husband said it did, but he has produced not one skerrick of documentary evidence that it did and, as I have said, I have found it difficult to accept any of the husband’s assertions that are not supported by sound documentary evidence as credible. However, in this case, I have a sense that things did start going bad for the business at or around 2011–2012 and that was probably because of the loss of X Company’s business.
The husband unilaterally changed the name of W LLC to Z Company in early 2009 and I am satisfied that, without the wife’s knowledge, consent or authority, he changed the ownership details of the company to delete her. Sometime after that, the husband caused the business to be transferred to AA LLC, another company he had established in the US, that held the business as trustee for the Fry Family Trust, a discretionary family trust the husband has given little evidence about. The husband deposed to the business carrying debts of around $300,000 at this time and that a couple of his sons offered to take over the business and invest some money in it to try to keep it going. He said that was the basis of transferring it to the family trust. Despite that, I am quite satisfied that he maintained actual control sufficient to continue to regard it as a business in his ownership and control.
I do not accept that things were as bad for the business at that time as the husband asserts. A copy of an American Tax Return for this family trust for the period 31 January 2011 to 30 June 2011 was adduced into evidence. It listed gross receipts for that five month period alone to be USD565,107 and gross profit for the same period as USD348,029. It listed total expenses of USD474,153 which included travel expenses of USD70,247, vehicle expenses of USD16,387, depreciation of USD14,100, legal and professional services of USD30,035, repairs and maintenance of USD42,928 and rent or lease expenses on vehicles, machinery, equipment and other property as approximately USD50,000. It also included as an expense listed as “communications– voice, data” of USD54,472 and USD19,424 for expenses in connection with the company, N LLC, that has already been discussed.
Some American bank statements for an account in Z Company’s name were also adduced into evidence. They showed deposits of approximately USD42,639 in July 2012, USD77,958 in August 2012, USD57,706 in September 2012, USD30,658 in October 2012, USD86,870 in November 2012, USD31,764 in December 2012, USD42,116 in January 2013, USD74,128 in February 2013, USD43,418 in March 2013, USD37,963 in April 2013, and USD14,532 in May 2013 before deposits significantly reduce and then cease in the following months. That is a total of gross deposits into that particular bank account of approximately USD539,752 for that eleven month period. That evidence, on its face, does support the proposition that gross income had begun to drop when compared to the six months at the beginning of the 2011 calendar year, but this was a full year later than that period. Accepting that as a matter of actual fact also depends on accepting that all business takings were only banked into that one particular account. I cannot safely say that I do accept that.
Those same bank statements just referred to also show that the husband was using that account to draw funds to meet his everyday living expenses as well as business expenses.
At the time of the trial, the evidence established that the husband was still effectively running the business out of the home in State K, that it still had some employees (or at least one) who worked there, that it still had some employees/contractors in Australia and that it still had the subsidiary company operating in the UK. The wife adduced into evidence print outs of web pages from the internet that showed Z Company holding itself out as having a presence in Asia with an office in Country GG (and the husband did appear by telephone from Country GG at one point early in the proceedings). Other printouts from the internet showed Country GG holding itself out as a worldwide provider of solutions for “the office”.
Some Westpac Bank statements for an account in the name of Z Company held in this country were also adduced into evidence by the wife. These included statements for the period from February to April 2014 and also for the period August 2015 to November 2016. Those reflect payments being recorded as being international transfers from Z Company in the USA in regular amounts of several thousand dollars at a time (e.g. in March 2016 they totalled approximately AUD12,000 for the month). They reflect deposits from Australian businesses that I conclude are payments by customers for product and services provided by Z Company. One of those businesses deposited AUD10,526 on one occasion of the many occasions that it deposited funds, though the others were less than that amount. The statements show withdrawals of amounts being described as payment to the husband’s son for expenses, others being payments for sub-contractors, others being repayments towards a child support loan that the husband had borrowed from Westpac to pay an outstanding child support debt, others being payments for wages and superannuation, and other things. That evidence satisfies me that the business was still operating, both in the USA and in Australia right through 2014, 2015 and 2016 up to and including the time of the end of the trial, quite contrary to what the husband had earlier asserted about the business being defunct.
Furthermore, UK Tax Returns adduced into evidence for Z Company Ltd for the financial years 2012, 2013, 2014 and 2015 proved that the company was still operating in that country all through those years. The evidence was that in 2013 on gross takings of GBP240,035 the company reported a loss of GBP149,657. For 2014 it was GBP270,236 gross takings and a loss of GBP113,949 and in 2015 it was GBP336,618 gross takings and a reported loss of GBP161,636. The husband said, when asked about how such losses could be continually sustained, that the reported loss is “funded” each year by the UK company recording that it incurs expenses in the form of payment to the American parent company for product but not actually paying for it. He said the UK company is thus just accumulating debt to the American parent. He failed to explain how or why the American parent company permits or tolerates this and he did not give any evidence as to how much this is each year. He did say that he thought the company was going to have to be wound up and could not go on.
I am satisfied that the husband was still supporting himself from income generated by the business, even though he said he was living in Country D, being supported by his new wife, and that the income generated by the business was the source of funds that were still meeting mortgage payments in respect to the State K real property.
I also point out at this point that there was no evidence at all about what happened to the business and business premises that were transferred to L Pty Ltd in 1999. I can only presume that they were sold at some subsequent point in time.
It is truly impossible for me to put any accurate value to the business in the face of the husband’s lack of frankness in respect of disclosure and the complete uncertainty about the true position of the business at the time of trial. However, I acknowledge that authority permits me in such circumstances to take a “robust” approach to the issue and not to be “unduly cautious” in making orders that may even go beyond the identified assets.[10] I consider that I could deal with this by either settling on an amount as being the value I attribute to the business and notionally adding it to the value of the property that is available to be adjusted, or taking the matter into account pursuant to s 75(2)(o) at the adjustment stage of the proceedings. Given that it is clear that the husband has had the benefit of receiving the income of the business for all the years since separation from the wife, and the use of its income in meeting expenses, some of which I am satisfied have been claimed as business expenses for tax purposes, it is quite appropriate in my judgment to also consider this aspect at the contributions level as well, without there being a duplication of such consideration.
[10] Black and Kellner (1992) FLC 92-287; [1992] FamCA 2; Giunti and Giunti (1986) FLC 91-759; [1986] FamCA 15; Mezzacappa and Mezzacappa (1987) FLC 91-853; [1987] FamCA 20 and Weir and Weir (1993) FLC 92-338; [1992] FamCA 69.
I have decided not to notionally add a nominated amount to the value of the property. I am satisfied that justice and equity can be done in this case by giving proper weight to the wife’s indirect contributions to the husband’s welfare through his exclusive use of the business’ income for all of the years after separation and by taking his lack of frankness in respect of disclosure that goes to the true value of the business into account at the adjustment stage of the process.
As for the other companies, such as DD LLC, EE Ltd, BB LLC and CC LLC, I am simply not able to say that I consider that these companies still exist or that they were ever worth anything to the parties or either of them. That they may have existed at some point and then were closed down some time later, is consistent with the evidence of the husband’s corporate behaviour from long before he married the wife. I will not add any amount to the value of the property for these companies.
Apart from the debt owing on the State K house, there is further disagreement between the husband and the wife in respect of liabilities and whether they should be taken into account in determining the property adjustment orders to be made. The husband asserted in his written submissions that he owed FF Bank AUD79,130 in respect of a “[p]ersonal loan for defunct business”. The husband adduced no evidence in respect of this alleged debt. He simply says it exists and asks the Court to accept that. If it does, how he obtained it without the provision of security is beyond my comprehension. I am quite satisfied that if it does exist it should be left with him and not used to reduce the value of the property to be adjusted between the husband and the wife. Without any detail as to when it was incurred, what it was actually used for, or how it was to be repaid, I consider it to be a post-separation liability for which the husband should remain solely, personally responsible.
The husband also includes in his list of liabilities an amount of AUD254,950 that he calls the “Fifth Third Loan for Town JJ property purchase”. As I have already said, I do not accept that exists and will not include it.
He also includes AUD9,700 owed to his former family law solicitor in Brisbane. I will not include that as his costs are, in the first instance, at least, his responsibility. He includes the loan to Westpac that he took out to pay for his child support debt and he lists it at AUD33,108. In the circumstances, I will not include that debt as it was clearly incurred post-separation from the wife in this case or during the time that he was living in the USA and she was living in Australia and he was using the income generated by the business to support himself and she was not benefitting at all from that income. I do not consider that it would be just and equitable to treat that debt as a debt that she should contribute towards.
The husband includes a debt of AUD15,000 that he says is owed to his son, Mr LL, who he said paid for the repair to the roof of the Suburb L house to ready it for sale. There was dispute about that. The wife did not accept that was owing. If that debt exists it would be over 12 years old. Why the husband has not paid it out in all of those intervening years when he had income from which he could have done so was not explained. The son gave no evidence in support of such a claim. I consider it most unlikely that such a debt actually exists, or, if it did, that the son would seek to enforce it against his father. I will not include it.
That leaves credit card liabilities claimed by the husband of AUD179,370 and a debt of AUD39,400 said to be owed to MM Company that was included in his written submissions but not in his balance sheet handed to the Court on 9 November 2016. He said that he has lived off the credit cards over the years and paid business expenses with them. That might be true, but I cannot say that I accept that evidence. No current credit card statements corroborating his assertions were adduced into evidence by him. No evidence corroborating the debt to MM Company was adduced into evidence by him. I also consider these alleged debts, if they indeed exist, to be post-separation debts for which the husband should be solely personally responsible as he retained the earnings of the business for all those years.
The wife includes some relatively minor amounts in her list of liabilities. They are amounts she said the husband owes her in respect of costs she paid for valuations in these proceedings. As such, they are matters relating to costs and I will not include them in liabilities that reduce the value of the property that is available to be adjusted.
Accordingly, I am satisfied that the value of the American real property, the Town B properties and the other items of personal property owned by the parties or either of them, less the mortgage debt on the American property is AUD548,540. In addition, the wife has approximately AUD25,000 in superannuation.
Both the husband and the wife seek property adjustment orders. Plainly, in such circumstances, each is contending that justice and equity requires an adjustment of their existing legal and beneficial interests in their property and the property of either of them. I accept that is correct.
Contributions assessment
I have already referred to the matters I am satisfied of in respect of the initial contributions of the husband and the wife. The wife had bonds and retirement savings in the USA that were worth around USD700,000, all of which was contributed to meeting the needs of the couple during the early years of their marriage. The husband effectively had the Suburb L property and the Town B properties but with a mortgage debt owing to Westpac of $500,000. There was another property that was transferred to L Pty Ltd in mid-1999, but as I have said, I cannot say, with any certainty what has happened with that as it was not addressed in evidence at all.
The Suburb L property provided a home for the couple and for the wife after the husband went to live and work in the USA until it was sold in or around 2006. It had grown in value in the years since their marriage, but when it was sold, apart from some money that was sent by the wife to the husband in the US, most of the net proceeds realised on its sale were expended meeting legal costs that had been incurred in the J Pty Ltd Supreme Court litigation against C and others.
I am satisfied that the net proceeds of sale of the Suburb L property that were contributed to the parties’ needs and the benefit that the wife obtained from living in that property in the early years of the marriage are reasonably regarded as balancing out the direct financial contribution made by the wife through the savings bonds she brought into the marriage.
The husband’s contribution of the Town B properties, that are now worth $227,000, was a direct contribution at the commencement of the parties’ relationship that satisfies me that the husband’s initial contributions ought to be treated as being slightly greater than the wife’s initial contributions. That is, of course, based on acceptance of the fact that the husband’s debt to Mr C is no longer enforceable against him or the land. If it had been, I would have considered the husband’s initial contributions to be no greater at all than the wife’s initial contributions.
I am also satisfied the husband and the wife contributed to the best of their capacities during the years of the marriage up to the time of separation at or around the time of the sale of the Suburb L property. The wife was living in Brisbane, working in the Australian side of the business and maintaining the Suburb L property and running the Supreme Court litigation for the parties. The husband was living in the US, running the business there and maintaining the home that the parties had purchased there. He was sending money over to Australia for the payment of the Westpac mortgage debt secured over the Suburb L property and the support of the wife and. I consider there is no reason not to treat their contributions during this period as balancing each other out.
Later though, for the many years between the separation and the trial, I find that the wife’s contributions to the husband’s welfare exceeded his contributions to her welfare, despite the fact that she was able to live at the Town B property for most of that time and despite the fact that she sold some of the items of personal property that the husband had owned and kept on that property since before the marriage, using the proceeds for her own support and for maintenance of the property itself. The husband had the distinct benefit of having unilateral access to all of the income generated by the business in that time, as well as the proceeds of sale of a motor car in the USA, to support himself and to pay a large amount of his own legal fees across the various court proceedings he has been involved in. Though he was the one still solely running the business, he contributed little, if any of that money to the welfare of the wife. He was also living in the State K property for most of that time. Photographs of that property adduced into evidence reveal it to be a comfortable looking home. Income the business was generating was being contributed towards repaying the mortgage debt utilised to purchase the property in the first instance.
I would translate my assessment of their respective contributions across all spheres of the marriage, from the commencement of their relationship, to separation and from separation to trial, from the qualitative to the quantitative by considering them on a percentage apportionment scale, assessed as at the time of the trial, to be 65-35 in favour of the wife.
Consideration of the s 75(2) matters, in so far as they are relevant, and assessment of any necessary adjustment
The husband is almost 68 years of age. He made assertions in his written submissions about his state of health, though he had adduced little, if any, evidence about this. He said he was living in Country D with a new partner who worked and supported him whilst he cared for their young baby. He asserted that he was, at the time the trial ended, trying to obtain an Australian Age Pension. I am not satisfied that he was not still receiving income from Z Company at the same time, though, if he was, I do not consider it would be much.
The wife is nearly 63 years of age. She has had emotional health problems over the years since her separation and 2011 divorce from the husband and has had difficulties holding and obtaining employment. She asserted that she required knee replacement surgery and some other surgery at the time of the trial, yet, she, too, did not adduce any evidence to prove that. At the end of the trial, she was in receipt of an Australian government benefit of $530 per week paid to her to support her whilst she tried to establish a new small craft enterprise. She also had about $25,000 in superannuation benefits across a number of funds that she could look forward to receiving.
She had given up a healthcare career in the USA to move to Australia and marry the husband and she was unsuccessful at re-establishing that career here.
Again, confronting the Court as a difficulty at this point, having said that the husband’s less than frank disclosure is most appropriately considered pursuant to s 75(2)(o), is the issue of how to deal with this issue in a just and equitable manner.
Having said that I am not satisfied that the husband was not still receiving income from Z Company, but that it would not be much if he was, I nevertheless consider that justice and equity requires a further adjustment in favour of the wife at this stage of the process of determining the appropriate property adjustment orders to make in this matter. As the value I ascribe to the property of the parties or either of them, including the wife’s superannuation interests, is just under $575,000 on a net basis, I consider that a further adjustment equal to 10% is appropriate to do justice and equity in the matter. The adjustment of 10% is equal to $57,500 in this matter, and given the ages, health and comparative financial positions of the parties, I consider that to be an appropriate adjustment. That would take the notional percentage division to 75/25 in the wife’s favour.
75% of $573,280 equals $429,960. The wife should be credited with already having property valued at $4,500 plus her superannuation interest of $24,740. Accordingly, she should have property valued at $400,720 adjusted in her favour to reach the 75% amount.
The wife does not want to retain the Town B properties. The State K property, using the figures put forward by the husband and accepted by the wife, has a net value of AUD293,610. As the husband is no longer living in the USA, and the wife is an American with children still living in that country, I consider it appropriate to order the husband to transfer his right, title and interest in the State K property to the wife and for the wife to refinance the mortgage debt on that property and indemnify the husband in respect of any liability pertaining thereto. At the same time, the husband should pay the wife a further AUD107,110 and retain the Town B properties as his own, being required to sell it and pay the wife that amount from the sale proceeds, if he is unable to pay her that amount without selling the property.
The husband will retain ownership of everything else and indemnify the wife in respect of all other liabilities including his credit card liabilities, any liability in respect of the N LLC property purchase, any other personal loans that he has taken out whether that be in Australia, the USA or any other country and any child support liability he may have.
I will order the wife to take all necessary steps to cause the caveat she has lodged over the title to the Town B property to be released in return for the payment to her of that amount that I have assessed the husband should pay her.
I am satisfied, in all of the circumstances of this case, including, in particular, the husband’s lack of frankness in his disclosure in the proceedings, that the orders I will make adjusting the property of the parties or either of them are just and equitable.
I make the orders set out at the commencement of these written reasons.
I certify that the preceding two hundred and thirty–one (231) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Forrest delivered on 5 April 2019.
Associate:
Date: 5 April 2019
[193]-[198], though the case itself was in respect of an equivalent provision in another State’s legislation.
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