Upson and Upson
[2017] FCCA 2395
•3 October 2017
FEDERAL CIRCUIT COURT OF AUSTRALIA
| UPSON & UPSON | [2017] FCCA 2395 |
| Catchwords: FAMILY LAW – Property division – wife’s superior initial financial contribution and superior financial and homemaking and parenting contribution post separation and into the future – father has abandoned care of child to mother and pays minimal child support – matter listed for a one day hearing took 4 days to complete due entirely to husband’s failure to file material in a accordance with Court’s direction and provide full and frank disclosure of his financial dealings – indemnity costs order made – small pool. |
| Legislation: Family Law Act 1975 |
| Cases cited: Colgate-Palmolive & Cussons Proprietary Limited (1993) 118 ALR 248; (1993) 46 FCR 225 Stephens & Stephens [2010] FamCA 184 |
| Applicant: | MS UPSON |
| Respondent: | MR UPSON |
| File Number: | SYC 1712 of 2014 |
| Judgment of: | Judge Henderson |
| Hearing dates: | 26 August 2016, 10 - 11, 15 August 2017 |
| Date of Last Submission: | 15 August 2017 |
| Delivered at: | Sydney |
| Delivered on: | 3 October 2017 |
REPRESENTATION
| Counsel for the Applicant: | Mr Fowler |
| Solicitors for the Applicant: | Cominos Family Lawyers |
| Counsel for the Respondent: | Mr Killalea |
| Solicitors for the Respondent: | Kazi & Associates |
ORDERS
Within 56 days of the date of these Orders:
(a)The parties sign all documents and give all consents required to effect a discharge of the mortgage to (omitted) Bank (“the mortgage”) which is secured over the property located at Property A, being the whole of land comprised in the title reference (omitted) (“the Property A property”) and to cause the certificate of title for the Property A property to be given to the wife or as she may direct.
(b)The wife pays all monies necessary to discharge the mortgage.
(c)Simultaneously with compliance by the wife with Order 3 the husband sign all documents and do all other acts and things as are required to transfer his right, title and interest in the Property A property to the wife including signing a transfer document as directed by the wife.
The husband is to pay to the wife the sum of $31,000 by way of her costs on an indemnity basis.
Within 14 days the parties do all acts and things and sign all documents required to distribute the money held in the (omitted) Bank account in the following manner:
(a)$58,600 to the husband less $31,000 to be paid to the wife in compliance with Order 2 herein;
(b)The balance of monies payable to the husband in compliance with Order 3(a) is to be paid by the wife to the ATO in reduction of the outstanding penalty tax notice in the amount of $41,000 in relation to the Company known as (business omitted).
The husband be solely responsible for, and indemnify and keep indemnified the wife from and against all claims that may be made against her in relation to:
(a)All liabilities that arise at any time in relation to all companies, partnerships and any businesses howsoever conducted which were established and/or conducted at any time after the parties married, whether before or after the date of separation, including but not limited to liabilities to the ATO;
(b)The wife to be responsible for payment of the tax debt in relation to (business omitted) which the wife has been paying since separation.
The husband forthwith at his expense do all acts and things required to dissolve the partnership previously carried on under the name (business omitted) ((business omitted)) so as to remove the wife from any interest she may have in that business and that the husband be solely responsible for, and shall indemnify the wife from and against, all liabilities that may arise at any time in relation to (business omitted) whether before or after the date of this Order.
The wife, subject to these Orders, be declared the sole legal and beneficial owner of her right, title and interest in and to:
(a)All cash in banks and money invested in the wife’s sole name;
(b)All furniture and personal effects in the wife’s possession;
(c)All superannuation entitlements of the wife; and
(d)The property at Property A.
The husband, subject to these Orders, be declared the sole legal and beneficial owner of her right, title and interest in and to:
(a)All cash in banks and money invested in the husband’s sole name;
(b)All furniture and personal effects in the husband’s possession;
(c)All superannuation entitlements of the husband; and
(d)All companies and businesses of which he is a director or shareholder in.
Subject to these Orders, each party shall remain liable for any debt in their own name as at the date of these Orders and in this respect shall indemnify and hold harmless the other from any liability in relation thereto.
In the event that either party refuses or neglects to sign any document required to be signed to comply with these Orders, the Registrar of the Federal Circuit Court of Australia is hereby appointed to execute all Deeds and documents in the name of the husband or wife and do all acts and things necessary to give validity and operation to these Orders pursuant to s106A of the Family Law Act 1975.
IT IS NOTED that publication of this judgment under the pseudonym Upson & Upson is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYC 1712 of 2014
| MS UPSON |
Applicant
And
| MR UPSON |
Respondent
REASONS FOR JUDGMENT
The matter of Upson is a property application listed for a final hearing for one day on the 26 August 2016. The matter could not be finalised on that occasion for three reasons.
The first was that the husband arrived late to court. So late that I had considered finalising the proceedings on an undefended basis.
Secondly, the husband had not filed any material and merely served on the solicitors for the wife, his documents, being an affidavit and financial statement, the very morning of the trial.
Thirdly, after the hearing commenced and the husband was under cross examination, I became most concerned that there was perhaps some illegality in the manner by which the husband conducted his business, being assisting people to obtain qualifications through tertiary institutions and the like. This concern arose due to the failure of the husband in any coherent way to disclose the manner by which his various businesses were conducted and evidence was coming out piece meal under cross examination.
Given the husband had instructed his lawyers virtually at the door of the court and neither they or the wife’s lawyer had had time to fully digest and comprehend the myriad of business and business arrangements the husband had entered into, I determined it was prudent to adjourn the proceedings.
I granted leave to the husband’s lawyers to speak to their client despite the fact he was under cross-examination so that they could understand, the nature of his business and how he conducted those many businesses and let the Court and wife know on the adjourned hearing.
The wife’s cross examination and case had concluded within one and a half hours.
The matter was adjourned part-heard to continue on 10 August 2017. It was noted that the matter needed another half day in court, including submissions. The husband was to give the wife’s lawyers authority to speak to his accountant and inspect relevant documents if they wished. The parties were granted leave to issue as many subpoenas as they determined was appropriate.
The original trial directions were made on 25 September 2015. In part they provided that the parties were to file their primary affidavit, financial statements, minute of order, and case outline documents by 29 July 2016. If there was disagreement as to values a joint valuation was to be obtained and filed by 24 June 2016. Only the wife carried out her obligations pursuant to these directions.
On 10 August 2017, the adjourned part heard date, the husband repeated his behaviour 12 months earlier, on 26 August 2016. He attended court late, having just instructed fresh lawyers armed with an updating affidavit and financial statement. The matter, again, could not be concluded in the one day that I had allocated and was stood over to 11 August 2017 for completion.
On 10 August 2017 the husband made an application that he obtain a fresh valuation. That application was refused. On 11 August the hearing continued and the husband sought leave to obtain an updated valuation from the joint valuer as he was of the view that the parties’ property had increased in value since the last hearing. He confirmed through his lawyer that this could be achieved and that was able to obtain an updated valuation from the joint valuer by close of business Monday 14 August 2017. On this assurance I indicated I would putatively allocate another part heard date in November in the event additional time was required and listed the matter for a continuation of the hearing on Monday 14 August 2017 in the event the husband failed to comply with my directions and orders made 11 August 2017 in relation to obtaining the updated valuation.
I granted the husband leave to obtain an updated valuation on 11 August 2017 on the following conditions.
He was to pay an outstanding cost order from three years ago of $2400 made when the husband had failed in his contest of the parties’ divorce application. That was to be paid to the wife’s solicitors by close of business Monday 14 August.
He was to pay a further sum by way of security for costs of $12,465, to secure the wife’s cost for yet another day of hearing, which I had putatively allocated in November.
On Monday 14 August 2017, the only order that the husband had complied with, was payment of the outstanding costs order of $2400, and the matter concluded on 14 August 2017. No updated valuation was produced.
A one day matter listed for trial to commence on 26 August 2016 took four days to hear and 12 months for the evidence to be finalised from the first day of the hearing.
Unsurprisingly, costs for the wife who had been faultless in her compliance with directions for trial loomed large at the conclusion of the trial.
Going now to the trial.
Mr Fowler of Counsel represented the wife throughout the hearing.
Initially the husband had Ms Fisher of Counsel appear for him on 26 August 2016. At the resumed hearing on 10 August 2017 the husband had instructed a Mr Killalea, who did a valiant job presenting his client’s case under exceedingly difficult circumstances.
The material I read for the parties ultimately was voluminous, to say the least.
I read for the wife the following material:
a)Her affidavit and financial statement and orders sought, initially filed in accordance with my trial directions on 26 July 2017;
b)The wife additionally filed an updating affidavit updating the financial statement on 28 July 2017 and by consent those documents were read by me.
The wife’s exhibits were as follows:
a)Exhibit 1: additional evidence that the wife sought to rely upon in August 2016;
b)Exhibit 2: index to bank statements of the parties and the husband;
c)Exhibit 3: a bundle of documents relating to directors’ taxation liability;
d)Exhibit 4: documents relating to the (business omitted) document;
e)Exhibit 5: a tax calculator;
f)Exhibit 6: application for security for costs and the costs sought for the security for costs;
g)Exhibit 7: wife’s costs notice issued by her lawyers to her; wife’s minute of orders sought; list of cases relied upon; and submissions;
h)A tender bundle from the wife of various documents including company documents, tax returns, emails and correspondence between the parties’ lawyers was provided to the court at the conclusion of the trial and prior to submissions.
For the husband I read:
a)Affidavit which had been marked Exhibit 2 handed up to the Court on 26 August 2016;
b)His affidavit sworn 9 August 2017 and filed in court on the day of the resumed hearing on 10 August 2017;
c)An updated financial statement of 9 August 2017;
d)The initial outline of case document for the 2016 hearing;
e)Mr Killalea’s further submissions at the conclusion of this trial as to how I ought determine the division of the parties’ property. That was marked husband’s exhibit 8.
Husband’s exhibits:
a)Exhibit 1: various text messages tendered in the 2016 hearings;
b)Exhibit 2: his affidavit handed to court 26 August 2016;
c)Exhibit 3: (omitted) Bank statements 2014-2016 with transactions highlighted by the husband;
d)Exhibit 4: printout from the husband’s online banking payment of a thousand dollars to the Child Support Agency on 26 August 2016;
e)Exhibit 5: a record of his residential tenancy;
f)Exhibit 6: subpoena dated 11 August 2016 to the (omitted), Sydney;
g)Exhibit 7: notice to produce dated 19 August 2016;
h)Exhibit 8: his written submissions.
The Court exhibits were:
a)Court exhibit 1: the initial joint balance sheet which was subsumed by an updated balance sheet and marked Court exhibit 1.
b)Court exhibit 2: the joint valuation of the property conducted in 2016.
The husband’s conduct of these proceedings has resulted in the wife paying legal fees and being subjected to three days of Court proceedings which were necessitated entirely by the husband’s failure to:
a)Produce any meaningful documents in relation his financial position until the first day of the trial in 2016;
b)Comply with any directions as to filing of documents;
c)The serving of unfiled documents on the day of the second adjourned hearing on 10 August 2017; and
d)Failure to in any way advise or inform the Court how his businesses worked, provide fulsome taxation returns for himself and his various businesses, profit and loss accounts, or disclose matters relevant to the financial history of these parties.
Mr Fowler was required throughout these proceedings to draw from the husband matters that he ought to have disclosed.
I was handed an aide memoire in relation to the various companies the parties had an interest in at the commencement of their relationship, and at separation and presently. There have been various changes to company structures and names all changes effected by the husband.
Included in the tender bundle provided by the wife are the following:
a)The husband’s individual tax return for 2016;
b)(business omitted) tax return 2016;
c)(business omitted) financial statements 2016;
d)(business omitted) financial statements 1 July 2014 to 1 January 2015;
e)(business omitted) financial statement to the end of June 2014;
f)(business omitted) financial statements end June 2015;
g)(business omitted) financial statements end June 2015;
h)The husband’s individual tax returns 2015;
i)The wife’s superannuation statement of 2013;
The company material was produced by the wife and not the husband despite him being pre and post separation the controller of these various companies an entities.
The short relevant facts are as follows.
The husband is 37, the wife 31.
The parties married in (country omitted) on (omitted) 2006.
The wife came to Australia to live with the husband and the parties commenced cohabitation in (omitted) 2006.
The wife commenced working in (omitted) 2007 as an (occupation omitted).
In (omitted) 2008 the wife worked with the husband in his business then known as (business omitted).
The wife commenced studying in 2008 for a (qualifications omitted) degree in (omitted) Sydney.
The husband commenced full-time study in 2009. The wife was supporting the parties from her income.
In February 2011, shortly after the husband finished his studies, the parties purchased the matrimonial home for $420,000. They had saved a deposit of $96,000. This is an extraordinary feat; given that the husband had only been working for two years from 2009 to 2011 due to studying and the wife was studying from 2008 to January 2009 as well.
The wife recommenced her study in 2011 and obtained her (omitted) degree shortly after the home was purchased.
The wife worked until (omitted) 2012 when she became pregnant.
The parties’ daughter [X], is born on (omitted) 2012.
The wife takes out an AVO against the husband for 12 months in August 2013.
The parties separate, cease cohabitation, the wife leaves the matrimonial home in August 2013.
The wife returns to the home in November 2013 when the husband left the home.
The husband has not made any contribution to the mortgage or maintenance of the home since November 2013.
As at 30 November 2014, the mortgage offset account had a balance of $70,237.93.
Not only did this young couple manage to save $96,000 in two years from the husband’s various businesses and the wife’s work for the deposit on the home, they had also managed to save $70,237 by November 2014, some three years after they purchased their home to place in an off -set account.
This indicates industrious, hardworking people who are careful with money and their various businesses must have been profitable.
The husband contested the divorce application the wife filed. He withdrew that application, but the wife had had obtained legal advice to answer his response. I granted the wife’s divorce on 23 December 2014 and made a costs order against the husband.
During the marriage, the wife worked as an (occupation omitted), then as a (occupation omitted) and assisted the husband in his various companies.
There is no doubt and each agreed the various businesses conducted by the husband during the marriage were a joint endeavour.
Husband’s dealing with assets post separation and generally
(business omitted) trades under many guises. One of them is the (business omitted), (business omitted). (business omitted) was the company that the parties created when they first commenced their series of companies.
Upon separation, (business omitted) became a trading name under (business omitted) umbrella.
Going to the wife’s affidavit of 25 July 2016. The wife is currently employed part-time and works as a (occupation omitted). Her parents assist her doing (employment omitted) work as each separately travel from (country omitted) stay with her as long as they can to care for their granddaughter having regard to the onerous visa requirements of this country.
The wife’s sister also helps her to work, however, has her own family and also works.
The husband has no interest in or relationship with the child. He has spent no time with [X] since separation. As the evidence flowed, it was apparent to me he will never spent time with his child.
He made no application in any court to spend time with his daughter. He imposed upon the wife to sign a parenting plan, which she did in 2014, and the husband has taken no steps to see the child in accordance with that parenting plan. For reasons best known to him, he has nothing to do with his daughter and has not since separation. The child’s total emotional, psychological, physical and day-to-day care has been left to the wife.
The wife says at paragraph 9 of her affidavit:
It has been difficult for me to remain up to date with Mr Upson’s directorships and businesses because he often winds up companies and re-establishes with different name.
That is a theme throughout the evidence.
The husband is a qualified (occupation omitted) and has degrees in (omitted). His current directorships are with (business omitted), also known as (business omitted); (omitted) and (business omitted), formally known as (business omitted) and (omitted); (business omitted), a company that the parties established; (business omitted); (business omitted), (business omitted); and (business omitted).
The wife says at paragraph 10 of her affidavit:
The company (business omitted) and (business omitted) was established whilst we were together. After separation, Mr Upson wound it up.
This winding up left a tax liability which was in the wife’s name. The wife has been paying that tax liability off by arrangement with the ATO since 2015 at the rate of $500 per week and has reduced the debt from $15,000 to $7000 and will continue to pay that liability.
After winding up (business omitted) and (business omitted) the husband established (business omitted), using the same contacts and addresses details and transferring the same client base as for (business omitted). This is how the husband operates his businesses. He creates companies, winds them up, transfers shares, directorships and has done so clearly on many occasions, as will become apparent, without the knowledge of the wife even when she was a shareholder and or director of a particular Company.
The wife sensibly did not seek to value any of these various businesses of the husband because it is simply impossible for her to determine their value by obtaining company accounts and other necessary financial information and documents. As the balance sheet will reveal, the wife accepted values that the husband gave of his various companies which is nil.
The husband’s conduct in 2013 is of grave concern to this Court for it is clear that at separation the husband took over total control of all businesses that were at that time or had been established by him and his wife and/or were conducted by him and the wife.
However, the husband has dealt with the income and assets of those businesses solely since separation. Dealt with or not the liabilities of those businesses solely since separation and has acted in a manner indicative that he and not he and the wife was the sole and only owner, director, shareholder or in control of those companies.
In 2013, there were three businesses that the husband and wife each had a shareholder interest in namely (business omitted) which ran a (business omitted) called (omitted) at (omitted); (business omitted) which owned another (business omitted) in (omitted); and (business omitted).
(business omitted) owned a business called (business omitted). That business closed down and I accept that no money changed hand.
The husband sold, although he would not admit this under cross examination, (business omitted) trading as (business omitted) and (business omitted) trading as (business omitted) to individuals, transferring not only his share in those companies to those people but, unbeknownst to the wife, her share as well.
His evidence on this issue was disingenuous. He would not admit to having transferred the wife’s share but agreed that now the persons he transferred his share to owned 100 per cent of those companies.
His only answer was:
I told the accountant they were not making money. I could not run them anymore. I transferred my share.
I am satisfied as the wife said in her evidence in cross-examination and in her affidavit she had no knowledge that her shareholding in these companies had been transferred by the husband to other people.
Was the husband trying to convince me his accountant signed the wife’s share transfer by this evidence? If so he has failed. It is clear the husband signed over or caused the wife shareholding in these companies to be transferred their ultimate purchasers at the same time as he signed over his shareholding for the following.
The husband is the only person who could have caused the shares to be transferred or who actually transferred the shares on the evidence. He is the only person that could provide evidence of these matters and failed to do so. The wife uncovered these series of transactions via subpoena he provided nothing.
Additionally he was evasive in his answers, did not call the purchasers of these businesses or his accountant to verify his story. In light of this evidence I make a finding that the husband transferred the wife shares in those 2 entities without her knowledge or consent to so doing.
When he transferred these shares and sold the businesses he received money. He has never disclosed this fact in any written material and this evidence came out under cross examination.
He thought he received between $3,000 to $7,000 for (business omitted), and from (business omitted) maybe $1,000 to $3,000.
At no time did he advise the wife of these transactions or the money he received. His evidence was that he got rid of the businesses because they had huge tax liabilities.
However, despite having transferred shares in the Companies that ran (business omitted) and (business omitted) to third parties and all the equipment that is required to run a (business omitted), the husband says he still has tax liabilities for these companies and has paid some of the tax liabilities.
That evidence makes no sense. When a company is sold usually assets and liabilities go with the Company. However, given the husband’s lack of transparency on his financial dealings the Court has no way of resolving this conundrum.
As a consequence of the transfer of those shares and the non-payment by the husband of liabilities such as superannuation and other taxes in existence at the time of selling his and the wife’s shares, the husband has incurred a tax penalty in the vicinity of $41,000 which the wife only discovered in July 2017 when the Tax Office wrote to her. The Tax Office wrote to her as she had been a shareholder at the relevant time, yet the husband says he sold the businesses to a third party.
The penalty issued by the Tax Office is clearly the husband’s debt. The wife had no knowledge of any transactions, any moneys earnt, no benefit from the moneys earnt and no benefit from the sale. This will be a liability in his hands for which he will indemnify the wife. Or if there is to be any money paid to him by the wife pursuant to orders, I make an order he pay that debt to the Tax Office so that the wife’s risk is minimised.
In 2013 just after separation, the husband took about $28,000 from (business omitted) and put the money into his own account. He actually accessed about $41,000 of joint money during this period of time of which $28,000 he cannot account for. The wife seeks those monies be added back.
I do not see that this sum is an add back, however, it will be a matter that I will take into account namely that the husband has had the benefit of $41,000 of funds that were the parties’ funds in June 2013 just after separation and cannot account for expenditure of $28,000 of that $41,000.
The husband said in cross-examination on August 26, 2016:
The $96,000 deposit was derived from the business earnings primarily, wasn’t it?‑‑‑Correct.
And the business earnings came from (business omitted)?‑‑‑Yes. Mainly (business omitted).
Clearly (business omitted) was doing well in 2009 as not only was this impressive deposit to have saved the parties purchased two (omitted) businesses and a (business omitted) known as (omitted) at (omitted).
I accept the husband’s evidence that in the long run the (businesses omitted) were not profitable for him and that profits must therefore have come from (business omitted). The husband agreed that (business omitted) had been conducted as a partnership, not as a business and as a partnership between him and his wife.
The husband would not concede that (business omitted) was profitable. However, there is no other explanation for how this young couple saved $96,000 from 2009 to 2011 when each had been variously studying and not working full time.
There is no other explanation as to how the parties managed to have $70,000 in an offset account at separation other than that their businesses were profitable. (business omitted) clearly was a profitable business.
The husband explained how the business conducted by (business omitted) worked in his affidavit filed on the day of the resumed hearing. (business omitted) recruits foreign students onshore in Australia for (businesses omitted).
The husband explained:
“(details of businesses omitted).”
Prior to 2011, the (details of businesses omitted).
Since 2011 husband collects from (details of businesses omitted).
Thus there was a change in practice, but the process is the same. The (details of businesses omitted) for his services. In light of this evidence I accept that there are large deposits and large withdrawals and that this is not to be taken turnover as such.
When one looks at the wife’s aide-mémoire of moneys going into the husband’s various bank accounts, they large sums. For example $786,000 in the financial year 2014, $656,000 in the 2014-15 financial year. Over a million in 2017. Additionally that there are large sums being paid out to (omitted) and smaller sums being paid out to many individuals.
I accept the husband’s business did not have a turnover of $786,000 for example in 2014 as this money was actually fees paid to the husband to on forward to various (businesses omitted). His income is the commission he is ultimately left with for (details of businesses omitted).
The husband says he has worked out he might get about a 28 per cent return on the gross fee paid, or put another way that there is 28 per cent left over after the money goes back to the (business omitted).
The husband’s income tax return for the years post-separation show a vastly different picture to that pre-separation, as best the wife was able to discern given the piecemeal disclosure made by the husband. Annexure B to the husband’s affidavit says this:
(business omitted) partnership tax returns in 2010, the income in Australia was $76,000, 2011, $77,000, 2012, $40,000, 2013, a negative $7511.
The husband’s personal income tax for 2016 was declared as $55,000. The income of $55,000 was made up from (omitted) fees, $18,787 and (omitted) sales, $36,088.
The company tax in 2016 for (business omitted) was $99,000.
(business omitted) expenses included salary of $30,000, payment to associated persons of $25,000 and it is asserted that this Company sustained a loss.
However, the husband also operates a (business omitted) business through (business omitted) which sells (details of business omitted). Commission is generated from those sales and that Company as well. The husband says the commissions and sales from (business omitted) form part of the income for (business omitted).
One of the expenses in (business omitted) 2015 financials was air flights of some $30,000. It was put to the husband that he had spent personally $30,000 on air travel via his company.
His explanation was that this cost represented the air flight component of (details of business omitted) as part of the (omitted) business of (business omitted) which is conducted under the umbrella of (business omitted).
I accept that evidence, however, it should not have been for the wife’s counsel to draw this out from him piecemeal but for the husband to have explained his businesses and their operation in an affidavit at minimum.
The income declared by the husband in his taxation returns and the alleged net Australian income loss for his businesses in 2009 is simply inconsistent with the parties’ capacity to save $96,000 in two years, from 2009 to 2011. The husband’s own figures in annexure B to his affidavit assert that in 2009 he had a net income loss of $63 and a net income of $76,000 in 2010.
The parties purchased their home in (omitted) 2011. The wife says at paragraph 256 of her affidavit of 25 July 2016:
From 2009 until 2011, I started to work with Mr Upson in (business omitted). My role was to assist him. We established (business omitted), which is still a business under what is now called (business omitted), but the same business, selling (business omitted). We bought three (omitted) businesses and a (business omitted). The businesses did well. We were able to save enough money for a 20 per cent deposit to purchase our home at Property A, of $96,000.
The parties are paying their day to day living, buying and establishing businesses and still saved $96,000 between 2009 and 2011.
The net income for those two years is $153,000. Taking $96,000 savings off that figures leaves an amount of $60,000. That equates to living expenses for 2 people, the buying of 2 (businesses omitted) and a (business omitted) to be funded on $30,000 per annum. That cannot be correct.
I accept the wife’s evidence that these businesses were doing very well. I also accept these parties were good savers and frugal with their money. However, the parties purchased the former matrimonial home in (omitted) 2011 thus the money saved was actually saved in an 18 month period not over 2 years making the wife’s case that the businesses were doing well even more certain.
The wife had stopped working by 2009 and was working with her husband and these businesses were their only source of income. They could not possibly have saved $96,000 on the income disclosed by the husband.
I accept post-separation, things may well have changed, but at separation, the businesses were doing very well, and by November 2014, which is nearly two years after purchasing the former matrimonial home, they had a mortgage offset account of $70,000. This is a commendable feat.
The wife was working as a (occupation omitted) and was bringing additional income into the home. However, going again to annexure B to the husband’s affidavit, he would have me believe that all the businesses earnt in 2012 was $40,000 and in 2013, a loss of $7,000.
These figures do not make sense. The husband is not a witness of truth. He was questioned whether any expenses are paid for the car from his businesses. He said no. He is perfectly entitled to claim car expenses from his businesses and he should.
When one goes to the financials, of course car costs are claimed as an expense in his profit and loss statements.
For example in 2015, the (omitted) financials disclose claims for car expenses of $1248, (business omitted) is $470, (business omitted) $440.
The husband properly claims for electricity costs, insurances, telephones being paid by his various companies and businesses some of which may well be personal given the husband’s life is centred around his companies and no issue would be taken in if the husband so conceded. He would not make any concession that some of his personal expenses are paid for by his various companies and businesses when, clearly on the evidence he obtains a benefit from his company.
He simply was untruthful with the Court about how his former wife’s shares in two of companies were transferred to other people when he sold the (businesses omitted). Clearly he caused that to happen, or did it himself. He would not be truthful with the Court.
He did not tell the wife he had sold these companies. He did not tell the wife he received money from the sale of these companies. He did not tell the wife he had incurred a penalty debt tax debt with the Tax Office for which she was liable and for which she had no knowledge of or any responsibility in creating.
The penalty tax debt is a wastage argument and that debt lies solely and squarely at his feet. It is a tax debt of a company he sold both his and the wife’s shares in some time ago without her knowledge, and has accrued due to him not paying superannuation and other employee entitlements on time. In the normal course that debt should reside with the company. In any event it is not a matrimonial debt.
The wife did not receive any of the fruits of the income the husband received from his various businesses since separation. I accept that the wife has resided in the matrimonial home post separation however she has paid the mortgage by way of interest payments, all rates and taxes and has solely maintained and conserved that property and increased the offset account by $2000 since separation.
The husband has not been paying back his HECS debt as he manages to keep his income at such a low threshold that repayments are minimal. If his income increases to a level where the debt is being repaid, that is due to his qualifications increasing his income earning capacity and as such the HECS debt will be his debt.
He has failed to support his wife and his child since separation. He made no payments of child support until May 2017 when he paid arrears of $3,000. This equates to $23 a week over the period. He then paid another $1,000 on 28 August 2017. He pays when and if it suits him, not regularly and the amount paid is modest.
He said he was able to pay this lump sum from funds held (business omitted) and that the business still had a credit balance after he paid child support.
He was not truthful with the Court that he wants to spend time with his daughter. He has not taken one step or any action or made one effort to spend time with his child. His evidence on this issue caused the wife some real distress at the trial.
I find that the companies and businesses he runs are a far greater financial resource to him than the income he declares to the Tax Office.
The husband outright lied in his affidavit about what he had at the commencement of cohabitation both in cross-examination and in this material. He was adamant he had $10,000 in savings when he and the wife got together, and a fully furnished home.
He disputed the wife’s claim that she was the one who had $10,000 in savings. I will from his filed in Court on 28 August 2016:
I say prior to meeting Ms Upson, I had approximately $10,000 in the bank. When Ms Upson came to live with me after we married, I already had the home in (omitted), which included a bond on the rental apartment, furniture including white goods to the value of $15,000. It is not true that her father provided her with a dowry of $10,000.
In the financial questionnaire completed for the purposes of the Conciliation Conference dated 9 August 2014, the husband says his assets were:
At commencement of cohabitation, household assets $5000, motor vehicle three, cash $2000, credit card liabilities $15,000.
The husband asserts now that his businesses are not doing well as he would have asserted in 2009 /2010 and 2011 no doubt. The husband is not a witness of truth and I do not accept that his businesses are not providing him with income now as they have done in the past.
Husband behaviour during the marriage
The wife asserts the husband was coercive, violent and controlling of her during the marriage. The manner in which he has dealt with joint assets would support her claim.
The husband denied this behaviour.
I have formed the view that whenever there is a contest between the husband and wife, the wife’s evidence is to be preferred. The wife is a witness of truth. The husband does not remember, is careless, or simply makes it up.
This poor behaviour clearly made her role as parent and homemaker more arduous than it need to have been and will be a factor in my ultimate determination.
Assets
Going now to the balance sheet, Court Exhibit 1.
The assets and liabilities asserted by the parties are as follows:
Assets
Wife Value
Husband Value
Property A property $650,000 $800,000 (omitted) Bank $2,754 NK Toyota (omitted) $17,000 $7,000 Honda (omitted) $1,000 $1,000 (omitted) Bank $3,000 NK Mazda $6,500 $6,500 (business omitted) NK $0 (business omitted) NK $0 (business omitted) NK $0 (business omitted) and (business omitted) NK $0 (omitted) Bank Account $126 $215 (omitted) Bank Account ((business omitted)) NK $0 (omitted) Bank Account ((business omitted) trading as (omitted)) $3,600 $1,064 (omitted) Bank Account ((business omitted)) NK $0 (omitted) Bank Account NK $0 (omitted) Bank Cheque Account ((business omitted)) NK $0 (omitted) Bank Account $400.01 NK Offset Account $72,000 $72,000 Total $756,380 $887,779 Liabilities (business omitted) – ATO Liability $8,700 NK (business omitted) – ATO Liability $41,395 $41,395 (business omitted) ((business omitted)) ATO Tax liability now known as (omitted) To be confirmed $14,200 Mortgage on Property A property $336,000 $336,000 HECS $0 $40,000 Car Loan for Toyota (omitted) ((omitted) Finance) $E 1,000 $0 (omitted) Mastercard N/A $14,400 Total net $387,095 $445,995 Superannuation (omitted) Super $24,572 (omitted) Super $26,645 Total $26,645 $24,572
The property at Property A is valued at $650,000. That is the only valuation I have. I accept it is 12 months old. The attachment by the husband to his affidavit of various market appraisals and the fact, I accept, that the Sydney the property market is increasing does not assist me to in any way vary or change or have regard to anything other than the filed valuation. I gave the husband an opportunity to obtain an updated valuation at the resumed hearing and he failed to do it.
This is despite him having sought as late as 3 August 2017, seven days before the hearing that the wife agree to obtaining a fresh valuation not an update of the current valuation. The husband was always at liberty to obtain his own valuation well before the hearing commenced and he chose not to and the consequences have flowed.
There is an issue about the husband’s Toyota (omitted) motor vehicle. He agreed that if the car had not been damaged as it has been it would be worth about $17,000. It has been damaged. I accept he did not damage the car and that this occurred whilst the car was parked outside his home. I accept that he is in the process of obtaining either an insurance payout to repair or perhaps a write-off.
The point is, the Court does not know. The husband brought no documentation to the Court. He brought no details of who the witnesses to the accident were, who damaged his car, police incident number or any statement by him or letter etc. from any insurance company. He came to Court and said this is what has happened and expected to be believed. I find the car is worth $17,000 not the $800, he asserts it is worth.
The account in the child s name is not a matrimonial asset and money in each personal bank account is not a matrimonial asset either. I do not include money in any business account as a matrimonial asset given the length of time since separation.
Liabilities.
The wife will continue to pay the (business omitted) ATO tax debt and I will remove it from the balance sheet.
The husband’s has sole liability for the (business omitted) penalty tax notice due to failure to pay taxes on time. His evidence that he still has to pay this debt when he has sold the Company that incurred the debt made little sense. In the absence of any contract for sale or share transfer the penalty notice of $41,395 is the husband’s liability and will be removed from the balance sheet.
I do not take account of any other taxation liabilities that the husband asserts he has, (business omitted) or any other entity has of which he has an interest or control in. He has not provided any documentary evidence of these so called liabilities.
Husband’s HECS debt of $39,000. That is his debt.
There is no loan for in respect of the Toyota (omitted) and the husband’s (omitted) low-rate MasterCard of $14,400 is his debt.
The parties have similar superannuation. The husband’s is $24,572 and the wife $26,645.
The difference is this. At separation, the wife’s superannuation was $12,000. It has increased to $26,000 post-separation. The husband’s superannuation has only increased minimally since separation.
The husband’s superannuation is a matrimonial asset and only $12,000 of the wife’s superannuation is regarded by me as a matrimonial asset.
I will deal with the liquid assets and superannuation on a two pool approach basis given the young age of the parties.
I find the assets for division are as follows:
Assets
Value
Property A property $650,000 Honda (omitted) $1,000 Mazda $6,500 (business omitted) $0 (business omitted) $0 (business omitted) $0 (business omitted) and (business omitted) $0 Offset Account $72,000 Toyota (omitted) $17,000 Total $746,500 Liabilities Mortgage on Property A property $336,000 Total net $410,500 Superannuation Husband $24,572 Wife $12,000 Total $36,572
The net liquid assets are $410,500.
The husband conceded that the wife would be entitled to 75 per cent of the net matrimonial pool. The wife seeks 95 per cent.
I am satisfied that the wife has made a superior financial contribution even during the marriage in that the husband came into the marriage with a debt of $15,000, the wife a positive of $10,000. He and she then equally shared in the creation of and working in their businesses and the savings of money which they did, but for her initial contribution of that $10,000.
Additionally, I find his poor treatment of the wife made her role as parent and homemaker more arduous and I will give her an additional 10% for all her past contributions bringing her entitlement to 60%.
Post separation, the wife has made a superior financial contribution both as parent and homemaker and to the home. The wife has solely and financially, up until May 2017, provided for the child emotionally, psychologically and financially. She has maintained the home, paid all rates and taxes, maintained the mortgage and increased the mortgage offset account by $2,000.
The husband has done whatever the husband has done, which includes remarrying another (nationality omitted) woman who is currently in (country omitted) and whom he hopes will come to Australia next year. He has continued to run his business. The wife has received no benefit from any of the businesses that the parties had at separation. He has had the benefit of at least $28,000 of joint money he cannot account for. The wife has maintained, conserved and continued to ensure that the matrimonial property has been kept to an appropriate level. For that additional contribution post separation I allow the wife 5%. This brings her contribution based entitlement to 65%.
As to the future needs, the wife will continue into the future to have the sole emotional, psychological, day-to-day physical care of the child without any assistance from the husband. In the event her parents are no longer able to assist her to work nightshift, or her sister is also unable to do so, this will significantly decrease her income-earning capacity, because nightshift is far more profitable. The husband may pay child support on an ongoing basis. He may do what he has done in the past and wait three years to give her a lump sum.
I am unable to say, but he has a track record in not paying Court orders. He did not pay an outstanding costs order of $2,400 for three years, waited until May 2017 to make good his arrears of child support combined with his level of general untruthfulness and disingenuineness in relation to matters financial, his lack of interest in his child has caused me significant concern as to whether the wife will receive child support from the husband. This is a very young child only three. The wife will be caring for her on her own and the care of this child has an impact on her income-earning capacity.
However, there are other factors relevant to this parentage split, namely that the wife has taken over a tax debt which was half the husband’s and has reduced it by half and will continue to pay that debt.
I allow the wife 15% for those factors under section 75(2) of the Act[1]. This results in the wife receiving 80% of the matrimonial assets and 20% to the husband.
[1] Family Law Act 1975, s 75(2).
An 80/20 split of $410,500 is $328,400 to the wife and $82,100 to the husband.
I find such a division of assets even having regard to tax and HECS debt the husband is to repay to be just and equitable in all the circumstances.
I will not make any super splitting order.
Costs
The wife’s application for costs. The wife seeks costs thrown away on three additional days of the hearing. Those costs have been set out in a schedule. They come to $33,685.50.
My first task in any costs application is to determine whether I ought to exercise my discretion under section 117(2) of the Act[2] to order costs as the usual order or the usual process in this court is each party bears their own costs.
[2] Family Law Act 1975 (Cth) ss.117(1)-(2).
Going to the relevant matters under section 117(2), they are:
“(1) Subject to subsection (2)… each party to the proceedings under this Act shall bear his or her own costs.
(2) If, in proceedings under this Act, the court is of opinion that there are circumstances that justify it in doing so, the court may, subject to subsections (2A), (4), (4A) and (5) and the applicable Rules of Court, make such order as to costs and security for costs, whether by way of interlocutory order or otherwise, as the court considers just.
(2A) In considering what order, if any, should be made, the court shall have regard to:
(a) the financial circumstances of each of the parties to the proceedings;
(b) whether the parties are in receipt of legal aid …”
(c) the conduct of the parties to the proceedings in relation to the proceedings including, without limiting the generality of the foregoing, the conduct of the parties in relation to pleadings, particulars, discovery, inspection, directions to answer questions, admissions of facts, production of documents and similar matters;
(d) whether the proceedings were necessitated by the failure of a party to comply with previous orders
e) whether any party has been wholly unsuccessful in the proceedings
(f) whether any party has made an offer in writing”
“Such other matters as the court considers relevant.”
The matter took an additional three days of hearing due solely to the husband’s failure to comply with Court directions and provide full and frank disclosure. He arrived late on the first day, a day, unusually; I had no other matters before me but this hearing. The matter is a simple property matter between a husband and a wife with a joint valuation. No other witnesses were required.
The wife’s cross-examination was finished by lunchtime. The matter resumed at 2.43pm, having started late, and it was clear that we could not finish in the afternoon and I was concerned about the husband being at some risk. However, the risk I was concerned about was not borne out and only arose due to his failure to adequately explain how he operated his businesses and that he filed material on the day of the trial.
This is a matter that should have finished in a day. The reason the husband’s cross-examination was not finished in the time was due only to his failure to file his documents prior to the trial and in accordance with my directions so that the other side had time to digest his evidence.
There are ample reasons leading me to exercise my discretion to make a costs order in favour of the wife in this matter, the question is should that be an indemnity costs order.
In relation to the issue of indemnity costs decisions such as Prantage & Prantage[3], Stephens & Stephens[4], Penfold & Penfold[5] and Kohan & Kohan[6] are highly relevant.
[3] Prantage & Prantage (2013) FamCAFC 105
[4] Stephens & Stephens [2010] FamCA 184
[5] Penfold v Penfold (1980) 144 CLR 311
[6] Kohan & Kohan (1993) FLC 92-340
There is voluminous case law in relation to this vexed issue and the starting point for this Court is the decision of Kohan & Kohan[7].
[7] Above, note 6.
In Kohan[8] the Full Court consisting of their Honours Strauss, Linden, Meyer and Bully JJ, found as follows:
“In an appropriate case the Court has discretion to order costs on an indemnity basis, and such costs may be ordered where they have been incurred under a cost agreement which departs from the usual scale of costs, and that is the case here.”
[8] Above, note 6.
In this matter the wife has entered into costs agreement which departs significant from the scale of cost.
Their Honours go on to say:
“it is fundamental to the exercise of that discretion in the Court that the judge should not only understand that such an order is a very great departure from the normal standard but also that the judge should know what the terms of the agreement are, to what extent it exceeds the parameters set by the scale and what its likely impact will be on the financial position of each party.”
The Court further held in Kohan & Kohan[9] that I should have regard to the degree to which a cost agreement departs from the established norm and that the financial significance of such a departure may itself be a reason for not ordering costs on an indemnity basis.
[9] Above, note 6.
That is not a concern on these facts. Although the wife’s costs depart from scale, they are not of such enormity or a significant departure that I would not consider ordering her costs be paid by the husband on an indemnity basis.
I accept ordering the husband to pay costs at all will cause him significant hardship, it would cause the wife significant financial hardship if only the scale is ordered. Her scale costs would approach $20,000 if I allowed Mr Fowler’s full fees on brief for each day and her indemnity bill is $33,000.
Their Honours set out in Kohan & Kohan[10] how I ought exercise this discretion to order indemnity cost orders:
“the intent of section 117(1) and (2) is that in this Court costs should not follow the event as a matter of course. However, where the justice of the matter requires, the Court may make such an order as it considers just. It may depart from the scale prescribed on the rules but should not depart lightly from the ordinary rules of the Court.”
[10] Above, note 6.
Indemnity costs are clearly a very significant and unusual departure from the usual costs that are ordered in this jurisdiction. The quantum of the order itself may be of such a huge impost that the Court would not order indemnity for that reason. These two principles are set out in Kohan & Kohan[11].
[11] Above, note 6.
The principles set out in the Colgate-Palmolive[12] principles are also relevant and are:
“Are there special or unusual features in a matter and in this case to justify my departure from the norm and order indemnity costs?”
[12] Colgate-Palmolive & Cussons Proprietary Limited (1993) 118 ALR 248; (1993) 46 FCR 225
The finding of special and unusual features is a significant factor in such matters.
I find there are special and unusual features in this matter to justify my departure from the norm and order indemnity costs, and they are these.
The conduct of the husband takes this matter out of the ordinary and usual and puts it in the extraordinary.
There are other exceptional circumstances that would cause me not only to exercise my discretion to make a costs order but to make an indemnity costs order.
There is a small matrimonial pool. The wife has been without child support for three years. When the support was made up half of it went to pay lawyer’s fees. The wife solely cared for the child when the husband was doing whatever he was doing with the various businesses without her knowledge including transferring her shares in two companies to a third party.
The wife has paid off his share of a tax debt that she says perhaps she did not have liability for, however accepts that that is a fair thing to do and she will pay that debt.
The husband has received money from the sale of joint businesses and income from their turnover. I have made an allowance to the wife for these matters, however, she has incurred significantly greater legal costs to pursue her claim than she would have had the husband cooperated with the Court and made proper disclosure and had his case prepared within time lines.
The husband’s position in his response and in his case outline initially, and confirmed at the initial hearing was the wife should receive 60% cent. She has received 80% and thus she has been entirely successful.
This matter was never a 60/40 split having regard to the husband’s behaviour, conduct, lack of disclosure and abandonment of the care of his child to the wife.
Therefore, I find an indemnity costs order is warranted for a least some of the trial time.
I accept that the matter may have taken a little longer than a day, perhaps a day and a half. It was certainly listed for another half day on 10 August 2017, and it has taken a further two and a half days to finish. The wife is entitled to her costs for two and a half days, not three days.
In relation to the resumed hearing on 10 August 2017, I will allow counsel’s fees as charged. In relation to preparation that was required to be done by lawyers it is the same for a half day or one day matter and I will allow the charges.
In relation to the charge for attendance, I will reduce the solicitors’ attendance fee by $1710, being for the morning of 10 August 2106 and not the afternoon.
That reduces the fee charged for the second day of the final hearing which is $18,450 by $1750, which is then a figure of $15,700 for costs from the adjournment until the resumed hearing.
I will allow the costs charged on 11 August 2017 and 15 August 2017. These additional days were either sought or caused by the husband and the wife incurred unnecessary costs in meeting his demands.
That is a total bill of on an indemnity costs basis of $30,935, rounded up to $31,000.
I will order that the husband is to pay those costs from his share of the matrimonial property.
I found the husband’s entitlement to be $82,100. He is seized of the following assets.
Toyota of $17,000, Mazda of $6,500 totalling $23,500. He is to receive the sum of $82,100 and this will result in a payment to him of $58,600.
From that sum he is to pay the wife’s indemnity costs of $31,000 and the balance in reduction of the ATO penalty debt of (business omitted).
I certify that the preceding one two hundred and six (206) paragraphs are a true copy of the reasons for judgment of Judge Henderson
Date: 3 October 2017
Key Legal Topics
Areas of Law
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Family Law
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Equity & Trusts
Legal Concepts
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Costs
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Damages
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Injunction
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Remedies
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Statutory Construction
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