Weng and Wah and Ors
[2019] FamCA 562
•16 August 2019
FAMILY COURT OF AUSTRALIA
| WENG & WAH AND ORS | [2019] FamCA 562 |
| FAMILY LAW – PROPERTY – Where the husband is seeking property Orders in respect of his former wife, his adult son and numerous other entities including companies and family trusts – Where a number of properties were purchased and sold by or on behalf of the family trust by the son before and after the separation of the wife and the husband – Where there are also a number of other properties in the name of the son and the discretionary trusts which he solely controls and businesses in which the husband has an interest himself – Where none of the parties complied with their obligations of full and frank disclosure – Where nevertheless, given the history of the relationship between the husband and wife and the contributions of the parties, a 55/45 split of the property in favour of the wife is appropriate in the circumstances. |
| Family Law Act 1975 (Cth) Justices Act 1886 (Qld) |
| Baumgartner v Baumgartner (1987) 164 CLR 137; [1987] HCA 59 Megarry, Robert and Baker, Paul Vivian, Snell’s Principles of Equity (Sweet & Maxwell, 24th ed, 1954) |
| APPLICANT: | Mr B Weng |
| FIRST RESPONDENT: | Ms Wah |
| SECOND RESPONDENT: | Mr C Weng |
| THIRD RESPONDENT: | D Pty Ltd |
| FOURTH RESPONDENT: | E Pty Ltd |
| FIFTH RESPONDENT: | F Pty Ltd |
| SIXTH RESPONDENT: | G Pty Ltd Pty Ltd |
| SEVENTH RESPONDENT: | The Mr C Weng Family Trust |
| EIGHTH RESPONDENT: | The H Trust |
| NINTH RESPONDENT: | The J Family Trust |
| TENTH RESPONDENT: | K Pty Ltd |
| ELEVENTH RESPONDENT: | L Pty Ltd |
| FILE NUMBER: | MLC | 9718 | of | 2014 |
| DATE DELIVERED: | 16 August 2019 |
| PLACE DELIVERED: | Brisbane |
| PLACE HEARD: | Brisbane |
| JUDGMENT OF: | Forrest J |
| HEARING DATE: | 10, 11, 12, 13 & 14 September 2018 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Geddes QC with Mr Glezakos (10, 11, 12 & 13 September 2018 only) |
| SOLICITOR FOR THE APPLICANT: | Herald Legal |
| SOLICITOR FOR THE APPLICANT: | Mr Sukari (14 September 2018 only) |
| COUNSEL FOR THE FIRST RESPONDENT: | Mr Alexander |
| SOLICITOR FOR THE FIRST RESPONDENT: | Crouch & Lyndon |
| COUNSEL FOR THE SECOND AND THIRD RESPONDENTS: | Mr Drysdale |
| SOLICITOR FOR THE SECOND AND THIRD RESPONDENTS: | HopgoodGanim Lawyers |
Orders
That the husband shall retain as his sole property the following:
(i)the property registered in his name situated in City R, China; and
(ii)all of his interests, legal and/or beneficial, in K Pty Ltd, L Pty Ltd and the real property in which he lives with his current wife in Suburb S, Victoria.
That the husband shall retain as his absolutely, all of his superannuation interest in MLC and the wife and the son shall do all things required of them to enable the husband to access this superannuation interest as he desires and directs.
That the husband and the wife shall do all things necessary to authorise T Lawyers to pay to the husband or at the husband’s direction all of the funds standing to the credit of the husband and the wife in the trust account of T Lawyers, including any interest that has been earned by those funds to this date.
That the husband by these Orders assigns all and any debt owed to him by the Mr C Weng Family Trust to the wife.
That the wife shall retain as her sole property the following:
(i)all and any debt owed to her and/or the husband by the Mr C Weng Family Trust or any other of the discretionary family trusts controlled by the son, as well as any other debt owed to her and/or the husband by the son or any company he controls;
(ii)all of her interests, legal and/or beneficial, in G Pty Ltd and/or the business, Q Business, and any other company in which she has interests.
That all previous undertakings given by the son in these proceedings are discharged.
That upon receipt of the funds currently held in the trust account of T Lawyers the husband shall forthwith, at his sole expense, do all things necessary to cause all and any caveats registered over the title of any property held in the name of the son or any company or trust controlled by the son to be removed from the relevant Land Titles Register.
That the husband’s application for orders directed at the son, his companies and his discretionary family trusts is dismissed.
That any application of the wife and the son for orders directed at K Pty Ltd and/or L Pty Ltd is dismissed.
That the wife’s Application in a Case filed 17 June 2019 seeking orders for caveats to be reinstated, is dismissed.
That the directions hearing before Registrar Brooks on 20 August 2019 be vacated.
That the Principal Registrar of the Family Court of Australia shall forward to the Commissioner of the Australian Taxation Office, for his consideration with a view to determining if any further action should be taken in respect to the recovery of unpaid tax debts by any of the parties or any of their related entities, a copy of these Reasons for Judgment and copies of the following affidavits relied upon by the parties in these proceedings:
(i)Affidavit of Mr B Weng filed 18 June 2018;
(ii)Affidavit of Ms Wah filed 26 August 2018;
(iii)Affidavit of Mr C Weng filed 24 August 2018.
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 Weng & Wah and Ors 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: MLC 9718 of 2014
| Mr B Weng |
Applicant
And
| Ms Wah |
First Respondent
And
| Mr C Weng |
Second Respondent
And
| D Pty Ltd |
Third Respondent
And
| E Pty Ltd |
Fourth Respondent
And
| F Pty Ltd |
Fifth Respondent
And
| G Pty Ltd Pty Ltd |
Sixth Respondent
And
| The Mr C Weng Family Trust |
Seventh Respondent
And
| The H Trust |
Eighth Respondent
And
| The J Family Trust |
Ninth Respondent
And
| K Pty Ltd |
Tenth Respondent
And
| L Pty Ltd |
Eleventh Respondent
REASONS FOR JUDGMENT
This is the determination of an application for property adjustment Orders brought by a husband against his former wife in proceedings in which he also seeks property Orders in respect of property owned by their adult son, who is the Second Respondent, and numerous other entities, including companies and discretionary family trusts.
There is a long list of Respondents. In addition to the wife and their adult son (who is their only child), there are four companies in which the wife and/or the adult son have interests, three discretionary family trusts which are controlled by the adult son, and two companies in which the applicant husband has interests.
All of these other entities were joined either during the course of the matter being readied for trial, or on the morning of the commencement of the trial, on the application of the husband or the wife and their son. Each of the parties foreshadowed possible applications for orders directed at one or more of those entities, depending on how the evidence came out. At the time I ordered the joinder of each of the entities, I did not know whether or not there was likely to be merit in the proposition that orders might be sought against any, some or all of them, so I took a cautious approach and just made the joinder orders sought, so as to get on with hearing the trial.
The trial and the entire proceedings in this matter since it commenced were extremely problematic. The husband commenced the proceedings in the Melbourne Registry of the Federal Circuit Court in October 2014. They were soon transferred to this Court and to this Registry. After the matter arrived in Brisbane, there were five appearances before a Registrar. On each occasion, orders were made, many going to disclosure, valuation, and preparation for trial. Neither the husband nor the wife speak English. Although the adult son speaks reasonably good English, interpreters were required each time the parties appeared before the Court.
The matter was listed before me in a Duty List on 14 February 2017. I then determined that it needed to be Judge managed to trial. There were another five appearances before me before I determined to just list the matter for trial regardless of the state of readiness. It became clear to me that the matter would never be completely ready for trial if the Court was to be satisfied that each of the parties had properly complied with their duty to fully and frankly disclose their financial situation.
Apart from the first time the matter came before me, when each of the husband, the wife and the adult son were legally represented and sensible orders were made by consent at the request of the legal representatives for the parties, the wife and the adult son appeared without legal representation on all of the subsequent occasions they appeared before me, until the actual trial. Additionally, I say respectfully, the husband, though represented on those interim appearances, was not very competently represented. Even with the assistance of the interpreters, dealing with the parties was very challenging and time consuming. I never gained a sense that I could actually accept as true much of what I was being told by any of the parties.
One thing I was plainly satisfied of, was that none of the parties had any intention of complying fully with disclosure Orders and Orders for the provision of valuations, or particularising the final Orders sought, so that the matter could be made ready for trial. Accordingly, to save judicial time and Court resources, I simply listed the matter for final trial, considering that would have to be sufficient to cause the parties to make the best case that they could against the other party or parties.
When the trial commenced, the Applicant husband was represented by a fresh firm of solicitors and a very experienced Queen’s Counsel and a junior barrister, both of whom had travelled from Melbourne. The wife was also represented by a fresh firm of solicitors and an experienced junior barrister from Brisbane. The adult son was also represented by a new and different firm of experienced family law solicitors and a very experienced junior barrister, also from Brisbane. The Court and the parties were again assisted by qualified interpreters.
The trial took some very unexpected turns. Those included the Court being told on the second day that the husband had served the wife and the adult son that morning, in the precincts of this Court, with Complaints Sworn and Summons that he had caused to be filed in the Magistrates Court that morning or the afternoon before. By those documents, he had commenced private criminal prosecutions against the wife and the son pursuant to the Justices Act 1886 (Qld), alleging that they had committed fraud against him. The particulars of the alleged fraud identified the very same factual matters that were included in the factual substance of the proceedings the husband was prosecuting in the trial that was underway before me.
On the oral application of the wife and the adult son, I made an Order restraining the husband from taking any steps in those proceedings pending the final determination of the proceedings in this Court, other than discontinuing them or causing them to be adjourned. I did that because I was satisfied that it was an abuse of process for the husband to commence those private prosecutions against the wife and the adult son during the course of the five day trial in this matter and before either of them had given their oral evidence and been cross-examined. I was satisfied that the step was taken by him to intimidate them during the course of the trial and I was very troubled about the fact that it might make the trial even more difficult to complete in a just manner, giving rise to the possibility that each of the wife and the son might be more inclined to claim privilege against self-incrimination when being cross-examined. I considered it entirely appropriate to restrain the husband from progressing those private prosecutions in any way whilst this matter was being heard and determined.
Additionally, at the end of the third day of the trial, Queen’s Counsel who was appearing for the husband informed the Court that he and his junior may not be continuing to appear for the husband for the rest of the trial. Having informed the Court of that, they nevertheless did appear at the commencement of the fourth day and throughout that day. Then, at the end of the fourth day, Queen’s Counsel told the Court that neither he nor his junior would be appearing for the husband in the trial any further. They sought leave to withdraw. I gave them that leave.
The partner from the firm of solicitors instructing those barristers sought an adjournment of the trial at that point. He told the Court that he was not in a position to advocate for the husband. I refused the adjournment and told the solicitor that if he could not represent the husband then the husband would be required to represent himself. He nevertheless told the Court that he could not advocate for his client. Then, the young employed solicitor who was assisting the partner, indicated that he would take up the advocacy for the husband. However, counsel for the wife raised the question as to whether the young solicitor was on the High Court roll of practitioners entitled to appear before a federal court. The young solicitor told the Court that he was not. Counsel for the wife informed the Court that the process of registering on the High Court roll was a relatively simple administrative process and that it could be done by the young solicitor overnight. At the commencement of the fifth and final day of the trial, the young solicitor informed the Court that he had been entered on the High Court roll overnight and the trial concluded with him advocating for the husband.
The orders sought by the husband
In his Initiating Application the husband did not set out with any particularity the final orders he sought in the proceedings. He sought leave to particularise those at a later date.
On 21 September 2017, I ordered the husband to file and serve a Minute of the Final Orders he sought, along with a schedule of the property he contended was the property of the husband and the wife that was to be subject to property adjustment orders. He was to do that by 20 October 2017.
On 24 November 2017, the time within which the husband was to file those documents was extended to 24 February 2018. He did not file and serve such documents by that date either.
On 24 August 2018, just a little over two weeks before the commencement of the trial, the husband caused a document to be filed in which he set out a list of the property that he asserted was “available for distribution between him and the First Respondent Wife”. That list included the equity in three properties registered as owned by the Mr C Weng Family Trust. It also included the “balance of sale proceeds” of two properties previously owned by that Trust. It included a real property registered in the husband’s name in China, a share portfolio in the wife’s name “as of 2011”, equity in property owned by the H Trust and “business interests” in three named businesses.
That document also set out the husband’s claim to 80% of the assets he had identified, with orders it said he was seeking. Those included a declaration that the property registered in the name of D Pty Ltd as trustee for the H Trust is held on trust for the husband and the wife and an order that the parties cause the real properties held by the Mr C Weng Family Trust and the H Trust to be sold with the husband to be paid an amount that gives him 80% of the total value of the assets after having regard to his retention of the property in China. He also sought a winding up of the Mr C Weng Family Trust.
Notwithstanding the existence of that document, at the commencement of the trial, Queen’s Counsel for the husband handed to the Court a Case Outline which included in it a document called a Minute of Proposed Order. The first order proposed in that document was as follows:
The Respondents, whether by themselves or through such entity or entities in which they have an interest, do all such acts and things, and sign all documents necessary, to pay or caused [sic] to be paid to the Applicant a sum equivalent to 60% of the assets available for distribution as between the parties within 60 days of the making of the Orders (“the date”).
The second of the proposed orders provided that contemporaneously with that payment the Applicant would remove any caveat lodged by him over any real property owned by the Respondents or in which they have any legal or equitable interest, would forgo any claim in respect of any asset or financial resource of the Respondents, and forgive any loan account standing to his credit in the Mr C Weng Family Trust.
The third of the proposed orders provided for such of five separate real properties to be transferred to the Applicant as may be required to satisfy the payment, in the event of default of payment, to be held by him on trust for sale, so that the amount owing to him might be realised and any balance paid to the Respondents.
The balance of the proposed orders were provisions dealing with the rights and obligations pertaining to those properties in the meantime, as well as the provision of indemnities and other machinery provisions.
The Court was told by both counsel for the wife and the adult son that they still did not know the case that they had to meet. I accept that there was some merit in that submission. The husband had never particularised, before that first day of the trial, the case he was making such that entitled him to orders against the wife, the adult son or any of the other entities. The Minute of Proposed Order that was handed to the Court at the commencement of the trial set out the orders the husband was asking the Court to make. That the husband was seeking relief as against the adult son and not just the wife, plainly took the matter beyond the reach of s 79 of the Family Law Act 1975 (Cth) (“Family Law Act”), the provision by which this Court is given the power to make orders adjusting the interests of parties to a marriage in the property of those parties or either of them. The husband had, not long before the trial, filed a document in which he was clearly asserting that property of the Mr C Weng Family Trust and property of the H Trust was property of the husband and the wife.
However, the husband had never caused a document to be filed in which he set out the propositions of law and/or the statutory provisions upon which he asserted his right to the relief he sought were founded. In this respect, neither the wife nor the adult son could be expected to completely understand the case they were required to meet, although it is not unreasonable to assume that some reliance was being had on equitable principles. Respectfully though, along with the wife and the adult son, this Court could not be expected to completely understand the case that the husband was seeking to make out, either.
I will return to matters of law later in these reasons.
The relevant background history
The wife was born in China in 1948, just over a year before the founding of the People’s Republic of China by forces led by Mao Zedong. She is now 71 years of age. The husband was born just under two years later in 1950 and is now 69 years of age.
The former couple married in China in 1976, just over a month after Mao Zedong’s death, several months after they had first met.
In 1978, their only child, Mr C, a boy, was born. He is now 41 years of age.
Both the husband and the wife were working in the first couple of years of their marriage and the wife continued to work during her pregnancy with their son. The husband was working with a Chinese government department. After Mr C’s birth, the wife began to study Chinese medicine at a medical college and she graduated from there in 1981. She worked in medicine for some years and then was appointed to a senior position at a local hospital. In 1993, she was employed by a company in City R where they were living and in 1994 she began earning a salary equivalent to approximately AUD40,000. The wife’s evidence, which was not challenged or disputed by the husband, was that her income increased to AUD80,000 in 1996 and then to AUD150,000 in 2000.
The husband moved into different employment in 1988. His evidence is that he was earning about AUD38,400 per year in that employment. In 1998, he says, whilst continuing to be employed, he commenced his own advertising business which began making a profit of about AUD11,000 per year. His evidence is that from 2000, that business generated about AUD30,000 per year in profits. In contrast, the wife says that the husband “had several businesses from 1998 to 2003” and that all of them “had to close down because the [husband] was unable to pay the debts”. The wife said when his last business closed down, she paid out some relatively small debts to some business partners of the husband.
I accept the unchallenged evidence of the wife that she earned a lot more money than the husband in China, particularly in the latter years of their time in China. I accept her evidence that she paid for the education expenses of their son whilst he attended university in China.
During their marriage in China, the former couple acquired an apartment in City R and it was registered in their joint names. The wife said that the local Government gave the property to them. I have no reason to doubt that evidence. They sold it in or about 2000.
The wife says that in 1999 she purchased another apartment in City R in her own name for the equivalent of about AUD166,000 and that she and the husband lived in that property for a while. She bought it with money she had saved and using shares that had been allocated to her as bonuses by her employer. She sold that property in 2011 and used the proceeds of sale of that property to repay a car loan that had been borrowed in Australia.
During their marriage in China, the husband had also purchased an apartment in City R that he registered in his sole name. He still owns that property. He was ordered to obtain a valuation of that property during the preparation of this matter for trial. He did not. He simply says that it is worth the equivalent of AUD274,950. It is not said to secure any debt.
In or around the beginning of 2002, the former couple’s son, Mr C, came to study towards post-graduate qualifications in Sydney. In 2003, after obtaining a Master’s Degree, he obtained permanent residency visa status in this country.
The parents are in dispute as to who paid for Mr C’s university tuition fees and for his living expenses here in Australia. The wife says she paid about $20,000 per year for his tuition fees for the duration of his studies, as well as about $2,000 per month in living expenses. The husband says that he paid the fees which he says were about $40,000 per year as well as sending over about $5,000 per month to him in the two years he was studying here. The husband says he also paid for a car for Mr C which cost $22,000.
On the husband’s evidence, that is a total of $222,000 over two years. I do not accept the husband’s evidence on that. On his own evidence, he was just not earning enough each year to do that. I prefer the wife’s evidence. She says she was earning the equivalent of $150,000 per annum from 2000 and she says she sent about $44,000 to their son in Australia. That is far more credible evidence, in my mind. The son’s evidence is totally supportive of the mother’s evidence on this aspect, too. That is unsurprising in the circumstances of the case, but nevertheless, I accept it as truthful evidence in respect of this matter.
Soon after their son obtained permanent residency in Australia, the husband and wife decided they, too, would like to move to and live in Australia. The son then sponsored his parents to join him in Australia under a parent migration scheme. The husband had resigned his employment. He has been receiving a Chinese Government pension ever since. That was initially equal to about $800 per month but he says it is now about $1,800 per month.
The son became an Australian citizen in 2004.
Suburb M property
In 2004, a property was purchased in Suburb M, a south-western suburb of Brisbane. It was purchased for $492,000. It was registered in the son’s sole name. There is no dispute that all of the funds used to buy this property were transferred to Australia. No money was borrowed from an Australian bank to fund its purchase. The money clearly had been saved by the husband and the wife in China.
There is dispute between the parties about who provided the money and on what basis it was provided. The wife says that she and the husband “decided to buy [their son] a house in Australia in consideration for his sponsoring [them]”. She said that she and her husband already owned their own properties in China; Mr C is their only child and passing assets to their children is part of “Chinese culture”; and that as she and the husband could not speak English and intended to live in Australia, giving such a gift to their son would create an obligation on their son to look after them in their old age if they were unable to look after themselves.
The son says that all three of them agreed that if he sponsored their immigration, in exchange his mother would use some of her savings to purchase a home for him in Australia. He asserts that is was a gift to him, though it was intended that he and his parents would live in that home. He says that he searched for and found the property, inspected it and then showed it to his parents who approved of it. He says he negotiated the purchase of the property.
The husband simply says that he and the wife decided to “settle in Queensland and therefore we purchased our first Australian home”. He says it was:
…registered in the son’s name because at the time of purchase, the wife and I did not have permanent residency and as a result of the foreign investment rules, it prohibited us from purchasing the property in our names…
The husband said that it was purchased using “savings of ours”. Relevantly, under cross-examination at the trial, the husband agreed that he had never asked the son to transfer the property back to him or to him and the wife at any time in the years after it was purchased.
The wife said that another $100,000 was transferred to Australia at the same time as the money used to pay for the Suburb M property. It was used to buy a car and to buy some furniture and appliances for the house.
N Pty Ltd
There is no dispute between the parties that a business was started in Australia in or around 2004. It was decided to import stock manufactured in China and to sell it at auctions in Australia. A company, N Pty Ltd, was registered in May 2004. It was named as it was, utilising the initials from the family names of the husband and the wife. ASIC records were adduced into evidence. There were 100 shares issued in the company, where 70 were issued to the son and the wife held the other 30. Though the husband said in his trial affidavit that he was also a shareholder and a director, he was neither of those when the company was first registered. The wife and the son were the only two directors of the company when it was established. The son had also said in his trial affidavit that all three of them were directors initially. He, too, was wrong about that.
The business owned by the company began to trade under the name “[O Business]”. The son said he came up with the name of the business. The wife said the son was primarily responsible for the business operations as she and the husband could not speak English. The son said he was the “face of the business” and “undertook 90% of the day to day operational tasks”. He said that he would liaise with customers, go to the auctions, negotiate prices and do all the business deals. He said he was the primary point of contact with the accountant and, because he was the only one of the three who could speak English, he was the point of all external non-Chinese communication for the business. He set up the business bank account. He managed that bank account. He paid supplier accounts. He paid staff wages. He hired staff. He paid tax and other bills. He says that his father’s role was one of placing the orders for products with the Chinese manufacturers.
That is consistent with the husband’s evidence. He said that he used to travel frequently to China to buy stock and negotiate new deals with manufacturers. He said that he even arranged for the co-employment by one of the preferred manufacturers and the N Pty Ltd business of a quality control officer to be based at the Chinese factory to ensure the product coming to Australia was of the requisite standard. I accept that evidence.
It does not appear to be disputed that the wife also worked in the business doing the bookkeeping and some administrative work.
The son gave evidence that the wife contributed about AUD100,000 start-up capital to the business from her Chinese savings. The husband says that more money than that from their savings in China was used to pay Chinese suppliers directly for the products. I do not consider that it is necessary to make a finding about who was telling the truth on this issue.
The husband gives evidence that the son did not spend much time at or show much interest in the business. I do not accept that as true. I consider the husband is being untruthful about that to try to prejudice his son.
The Mr C Weng Family Trust
In the middle of 2005, a decision was taken to purchase a warehouse in Suburb Y, to the south of Brisbane. In his trial affidavit, the husband says little about the detail of the purchase of this property. I am satisfied that this is because he did not know much of the detail, as the son did most of the work around this purchase. The son says in his affidavit that the property was purchased in July 2005 for $765,000, but goes on to say that he “cannot recall” the precise details of how he funded the purchase “through the trust”. He goes on to say that he took advice as to the appropriate structure through which to purchase the warehouse. He says that he got advice from solicitors to establish a discretionary family trust and to purchase the property in the name of the trust.
The trust was established with the assistance of these solicitors who could speak Chinese language spoken by the parties. They spoke to the husband, the wife and the son, and the trust was settled just prior to the purchase of the Suburb Y property by way of a Deed executed between the solicitor as settlor and the son as trustee. The son was also named as the appointor of the trust and he and the husband and wife were all expressly named as beneficiaries. Included in the list of beneficiaries was “any child, grandchild, further lineal issue or relation by blood or marriage of the said Mr C Weng”. The Deed gave all of the discretionary power as to the disposition of capital or income of the trust to the trustee. All of the power to remove the trustee and appoint a replacement or additional trustees was given to the trustee and to the appointor – therefore, to the son alone. He was, thereby, given total control of the trust.
The husband says in his trial affidavit that the Suburb Y property was purchased by the trust “using accumulated funds held by N Pty Ltd for me and the wife”. He says “[t]he son made no contribution to the acquisition of the warehouse”. He goes on to say that “[t]rust income was used to pay back the loan, rates and taxes and property maintenance”. Although he has not expressly said so, I understand by that, he is saying that the trust borrowed some money from a bank to pay for the purchase of the Suburb Y property. His case must therefore be that the deposit was contributed from funds “accumulated” by the business that was being run by N Pty Ltd.
The son, however, in his trial affidavit said:
…Over the years I have arranged to borrow sums of money from my maternal uncle, Mr Z, his wife my maternal aunt Ms AA Wah and my paternal Uncle Mr BB Wah. My mother and I have a very close relationship with our Chinese relatives and they have regularly lent sums of money to me without those arrangements being reduced in writing.
However, of relevance are the financial statements, including balance sheets for the Mr C Weng family trust, that are in evidence. The earliest balance sheet in evidence is for the 2009 financial year. The Suburb Y property is one of three real properties owned by the trust by that time. It is listed at $790,000, which was presumably cost price. Under “current liabilities” is listed an NAB loan with a debit balance of $44,059. There is also another Westpac loan listed at a debit balance of $772,904. It is unclear what these debts relate to. In addition, under “unsecured liabilities” is listed “loans from trustees” and the sum of $1,450,458 appears. Income was recorded as $147,000 in rent, though it is unclear how much rent was received by the trust in respect to each of the properties it owned at that time.
The balance sheet of N Pty Ltd for the 2004 financial year is in evidence. An unsecured loan from “other persons” is recorded at a debit balance of $65,850. I am satisfied, on the balance of probabilities, that represents capital advanced to the business by the husband and the wife. In the 2005 balance sheet the unsecured loan, now called “loans from directors”, has reached $193,046 and in 2006 it has reached $204,437. That, I am satisfied, is further capital advanced to the business by the husband, the wife and, by this time, perhaps also the son. In the 2006 balance sheet there is no recorded asset in the form of a loan to the Mr C Weng Family Trust, though the rent the company is paying for the Suburb Y premises (to the trust) is recorded as an expense. The company’s trading income (gross income less costs of goods sold) was $356,102 and profit after expenses was $45,283.
On the strength of that 2006 balance sheet it does not appear as if N Pty Ltd actually advanced any amount to the Mr C Weng Family Trust to pay for the deposit on the purchase of the Suburb Y property.
In the N Pty Ltd balance sheet for the 2007 financial year, the debt to “other persons” (as it is called again) has reduced to $124,376 and in the 2008 financial year balance sheet it has reduced to $8,442. Clearly, the company has repaid the husband, the wife and perhaps even the son, almost all of the money advanced to the company by them in those first few years of the business’ operation. Still, there is no recording of any asset in the form of money owed to the company by the Mr C Weng Family Trust.
Trading profit had increased to $1,181,573 by end of the 2008 financial year and profit after expenses and before tax was $135,524. Rent on land and buildings had increased from $72,000 to $224,410. Clearly the business had expanded into other premises between July 2007 and June 2008.
Accordingly, having regard to this evidence, I am not prepared to find that in 2005 when the Suburb Y property was bought, that N Pty Ltd advanced funds directly to the Mr C Weng Family Trust to assist it to pay the deposit. Furthermore, I am satisfied that N Pty Ltd did not repay capital that was owed in the relevant year to any of the husband, the wife or the son so that they could loan it to the trust to be used for the deposit on the Suburb Y property. I am not able to make a conclusive finding as to the source of funds that were used to pay the deposit on the property, nor am I able to make a finding as to the amount of any such deposit. Whatever amount was paid by deposit on the property, I consider it did come from further savings of the wife and the husband from China and not relatives.
The son said that the husband has “never made any contribution to any property owned by the Mr C Weng Family Trust”. It follows that I do not accept that assertion, at least in respect of the purchase of the Suburb Y property in 2005.
In April 2007, a Deed of Variation of the Mr C Weng Family Trust was executed by the son, the husband and the wife. By that Deed of Variation, the son appointed the husband and the wife also as appointors and trustees of the Mr C Weng Family Trust. The husband said in his trial affidavit that he had learnt more about the meaning of a trust and was concerned that he had given the son too much control. The son said that his father insisted on the variation and that he simply went along with it to keep the peace and avoid incurring his father’s anger. The original Deed was also varied by deleting the clauses that provided for a wider class of beneficiaries than just the husband, the wife and the son.
In June 2007, another Deed revoking the Deed of Variation was executed by the husband, the wife and the son. It was very brief and simply declared that the April Deed of Variation was revoked.
In his trial affidavit, the husband said that this Deed of Revocation was signed by him at the request of the son and the wife but that he did not understand the meaning of the document. The document was in English. However, the son gives evidence that the reason why this Deed was signed was because they received advice that the April Deed of Variation would require stamping as a resettlement of the trust and would cost them about $20,000 to $30,000 in stamp duty. He said that when he told his father that, his father did not want to pay that amount and agreed to revoke the Deed of Variation and signed the document that did that so that this stamp duty would not be incurred. I accept that is the truthful version of events explaining the execution of this Deed of Variation.
In October 2007, another Deed of Variation was executed by the three parties. By this Deed, the original Deed was varied again to once more include the husband and the wife as additional trustees along with the son. Otherwise, the original was said to be unaltered. The husband does not say that he did not know what he was signing that day. Otherwise unaltered, the original Deed still conferred ultimate control of the trust solely on the son as the only appointor. Presumably, that did not amount to a resettlement of the trust that incurred significant extra costs in stamp duty.
I shall return to matters pertaining to the trust deed later in these reasons.
W Street, Suburb M
In March 2007, another property was purchased and registered in the name of the Mr C Weng Family Trust. The son says it was purchased for $1,131,615. He says that to the best of his recollection he “used $300,000 from the N Pty Ltd business account to pay a deposit by cheque on 5 March 2007” and then borrowed the balance from a bank, which to the best of his recollection was the NAB. The evidence suggests that it was actually the Westpac Bank, as it was owed $772,904 by the trust as at 30 June 2009, according to the trust’s 2009 balance sheet.
However, as I have already observed, the 2007 balance sheets for the company do not reflect a loan to the trust as an asset of the company. The 2006 and 2007 balance sheets for the company do reflect an $80,000 reduction in the company’s liabilities to “other persons” or “directors”. That repayment of money owed to the husband and wife and, perhaps, the son, might very well have been then loaned to the Mr C Weng Family Trust to be used as the deposit for the Suburb M property. It is to be remembered that the 2009 balance sheet of the trust records “loans from trustees” at $1,450,458. That amount of $80,000 could very well be reflected in that, and, if $220,000 more was contributed to the deposit, it could very well have come from the husband and the wife. If it did come out of the company’s bank accounts then it was not properly recorded in the financial statements of the company.
CC Street, Suburb DD
In January 2008, a vacant block of land was purchased at Suburb DD for the sum of $690,000. The son says the deposit on the property was paid “using some funds from N Pty Ltd and a withdrawal of [his] mother’s MLC superannuation”. The sum of $100,000 was withdrawn from the mother’s superannuation (from money that had been contributed to that fund during the previous few years).
The N Pty Ltd balance sheets for the 2007 and 2008 financial years reflect a repayment by N Pty Ltd of the “loans from other persons” of $116,000 between 2007 and 2008. I accept that this repayment is probably money N Pty Ltd owed the wife and the husband from start-up capital advanced by them in the early years. That is consistent with the son’s evidence that some funds from N Pty Ltd were used to pay the deposit on this property.
The son says that the balance of the purchase price, however much that was, was borrowed from Westpac and secured by mortgage granted over the property.
The son says that his father was the person who insisted on buying this land, asserting it would be a good investment. It was registered in the name of the husband and the wife. It was their land.
EE Street, Suburb FF
In October 2008, the son caused an apartment at Suburb FF to be purchased and registered in the name of the Mr C Weng Family Trust. He says it cost $395,000 and that he borrowed the entire purchase price from his uncle, Mr V Weng, and none from any bank. No evidence was put before me that directly corroborated the assertion that all of that money was sourced from the third person, Mr V Weng.
As I have observed, the trust’s balance sheet for the 2009 financial year (the earliest year in evidence) records the Suburb Y, Suburb M and Suburb FF properties as assets of the trust. It also records liabilities of the trust being “loans from trustees” as $1,450,458. If $300,000 was advanced/loaned to the trust to put towards the purchase of the Suburb M property and $395,000 was borrowed from a relative by the trust, or the son and then loaned by him to the trust, and put towards the Suburb FF property, that accounts for $695,000. That is nearly half of the total debt to “trustees” recorded. Of course, some of the purchase price of the Suburb Y property may also be included in the balance of that debt owed by the trust.
The fact that the other debt of the trust to the NAB was recorded as being as low as $44,059 at the end of the 2009 financial year supports a finding that the loan taken out to buy the Suburb Y property in 2005 was not very large and that the deposit contributed from the funds of the husband and the wife was large. It also supports the alternative finding that funds were contributed by the husband and the wife and, perhaps, the son, or by borrowings from third party family members, as the son says, and used to pay down bank debt on the Suburb Y property since its purchase only a few short years before.
An informal separation settlement agreement
The husband says that his relationship with the wife began to deteriorate in or around 2006. The son and the wife both gave evidence that the relationship between the husband and the wife was always very poor, characterised by violence and abuse from the husband to the wife. The son’s evidence is that his father was very hard on him as well. I accept the evidence of the son and the wife about this. The wife’s evidence about the first time she suffered severe physical violence at the hands of the husband in or about 1993/1994 in China is very particular. I accept she remembers it quite clearly. I accept it is truthful evidence.
The husband says that in 2009 the son and the wife asked him to stay out of the business affairs. He says he refused and things progressively worsened in their relationships.
The husband says that in April 2009, he and the wife signed “a divorce agreement”. A copy of it is in evidence, as is an English translation of it. It lists the properties in Australia at X Street, Suburb M (the one registered in the son’s name), the Suburb DD land (the one registered in the husband and wife’s names), W Street, Suburb M (registered in the name of the Mr C Weng Family Trust), and the Suburb Y property (also registered in the Mr C Weng Family Trust). It lists them under an introduction that says “Family assets as follows”. It also lists the properties each of the husband and wife owned in China. It then goes on to say “Company loans shall be based on the actual amount” and also “Loans shall be based on the actual loan amounts”.
The document then states:
Total asset shall be split into three equal shares after deduction of the loans and one share for each family member. After completing the divorce formalities, the share belong to Mr B Weng shall be given to him.
…Mr B Weng and Ms Wah shall each has thirty percent of the company shares in [N Pty Ltd].
(As per the original as translated)
The wife said the husband made her sign that document. It was never acted upon. The couple did not separate at that time, though the wife alleges a second serious incident of physical violence being directed at her by the husband occurred in November that same year. She says that they argued about business matters and the husband punched her repeatedly in the face. I accept that evidence.
The son said he had never seen the document before it was produced in these proceedings. He said he had no involvement in its drafting or execution. He said its contents were not discussed with him before it was drawn up or before it was signed. He was not challenged on that. I accept his evidence.
The document may very well reflect what the husband thought and expected and what the wife agreed to sign, but it does not in any way bind the wife, nor does it in any way bind the son, who was not privy to it. Nor is it determinative of any of the matters before me.
GG Street, Suburb HH
In August 2009, the son purchased another property in Suburb HH. He purchased it for $445,000 and had it registered in his sole name. He says he paid $80,000 deposit for it from his “own savings” and borrowed the balance of the purchase price. His savings could only have come from income he was earning working in the business run by N Pty Ltd.
There is no other evidence that supports or contradicts any of the son’s evidence on this.
Sale of W Street, Suburb M
In October 2009, the son says that he caused the Mr C Weng Family Trust to sell the Suburb M property that it owned. The property was sold for $1,600,000. The mortgage debt to the Westpac bank was repaid. In the solicitor’s settlement letter that is in evidence the payout to Westpac was recorded as $900,999. The balance recorded as paid to the trust’s bank account was $653,236.76.
The son says in his trial affidavit that he set aside $164,000 to pay Capital Gains Tax, leaving “around $300,000”. I do not accept that assertion. There should have been something close to $500,000 left.
The son says that the funds realised on the sale of the Suburb M property (he says $300,000) were used to pay the deposit on the purchase of a property in Suburb KK.
JJ Street, Suburb KK
Around the same time as the sale of the Suburb M property by the trust, a property was purchased in Suburb KK for the sum of $1,277,000. It was registered in the names of the husband and the wife as joint tenants.
The son says:
It is my understanding that we funded payment of a deposit of $300,000 from N Pty Ltd funds and borrowed the balance of the purchase price. There was a significant mortgage obtained for this purpose. I used N Pty Ltd funds to service the mortgage payments. My parents has [sic] no other source of income from which to meet the holding costs of the property.
The son goes on to give evidence that this property was eventually sold in June 2015 and that a sum of $1,117,841 was paid to Westpac to discharge the mortgage at that time. That gives support, without evidence to the contrary, to a finding that an initial deposit of substantially less than $300,000 was contributed towards the $1,277,000 purchase.
Additionally, the 2010 balance sheet of N Pty Ltd only reflects a reduction in the amount of money owed by the company to “other persons” of $11,000 compared to the end of the previous financial year. If money was sourced from N Pty Ltd to pay towards the deposit, I consider it was no more than around that amount.
However, there was also evidence that in October 2010 an amount of $250,000 was borrowed from the Westpac bank by the husband and the wife, though the husband asserted, without any corroborative evidence, that he did not know about this at the time and that his signature was forged. The wife denied that. I do not consider that I need to determine the truth of the husband’s assertion. I do not consider that it matters to the determination of this case.
I am satisfied therefore, that it is likely that $300,000, perhaps even more than that, was paid from the proceeds of the W Street property as the deposit on the Suburb KK property and that, initially, somewhere around $970,000 or less was borrowed from the Westpac bank to complete the purchase of the Suburb KK property. I am satisfied that a year later a further $250,000 was borrowed from Westpac, thus increasing the total debt to Westpac that was eventually paid out at the sum of $1,117,841.
Indeed, the 2010 balance sheet of the Mr C Weng Family Trust records that there was a significant reduction in the liabilities owed by the trust in respect of “loans from trustees” of just under $1,000,000 during that 2010 financial year. I am satisfied that most of the money realised on the sale of the W Street Suburb M property (likely around $500,000 after provision for capital gains tax) was effectively recorded as repaid to the “trustees”. Some of it was, I am satisfied, used to pay the deposit on the purchase of the Suburb KK property. The balance remained available for use.
All three of the husband, the wife and the son moved into the Suburb KK property on purchase, but the son says he moved back to his X Street, Suburb M property after a while, as he and the father were constantly in conflict.
LL Street, Suburb MM
In August 2010, a commercial property at Suburb MM on the Gold Coast was purchased for the sum of $2,180,000. It was also purchased by, and registered in the name of the Mr C Weng Family Trust. The son says that he “arranged to borrow” $1,200,000 from the NAB, refinancing that loan a year or so later with the CBA. He says that “to complete the purchase [he] borrowed $900,000 from [his] maternal aunt Ms AA Wah”. He says that she held money in a Hong Kong bank account and transferred that to him to enable the property to be purchased. The son asserts that neither his mother nor his father contributed anything to the purchase of that property.
He goes on to say that he has repaid approximately $250,000 of that to his aunt and presently owes her $650,000, having saved up money and sent it to her in $50,000 amounts by “telegraphic transfer”.
I consider it is more likely that the $250,000 that was borrowed in the name of his parents in October 2010 was repaid to his aunt. The 2011 balance sheet of the Mr C Weng trust records that the amount owed by the trust as “loans from trustees” had dramatically increased again by the amount of $1,152,686. I consider $250,000 of that increase would have been attributable to the additional money that his parents borrowed from Westpac. The balance of around $900,000 probably mostly reflects the balance of the money the son borrowed from his aunt with it being unclear where the other $250,000 came from. It certainly is not reflected in the balance sheets of 2010 and 2011 of N Pty Ltd. Only a further $11,000 of money owed to “other persons” was repaid in the 2011 financial year by the company. Once borrowed from his aunt, the son “loaned” that money to the trust and it is likely recorded in the “loan from trustees” liabilities part of the trust’s balance sheet.
Events leading up to the separation of the husband and wife
The wife says that the husband pressured her to sell her Chinese apartment many times. She says that she finally agreed to do so in 2011. She says she sold it for the equivalent of $164,000 and that the proceeds were used by N Pty Ltd. The company had borrowed money to buy a luxury motor car that the husband drove and the proceeds of sale were used to repay that car loan. That appears to be corroborated by the 2010, the 2011 and the 2012 balance sheets of N Pty Ltd which reflect the repayment of $166,000 in hire purchase debt over that two year period. This is despite there being no corresponding reflection of the money being borrowed from the wife by way of an increase in the liabilities owed to “other persons”.
In April 2011, another company, OO Pty Ltd, was registered in Queensland. The husband’s niece was issued with 90 shares out of the 100 issued and the wife was issued with the other 10. Their addresses were given as U Street, Suburb FF. The husband’s niece, Ms Weng, was the only director.
I am satisfied the son was responsible for registering this company with the co-operation and knowledge of the wife and the niece. I am also satisfied that the husband did not have any knowledge of it. The others kept that knowledge from him.
A bank account was opened in July 2011 for OO Pty Ltd with the NAB giving the Suburb FF address as the address of the company. Bank statements for the account were adduced into evidence by the husband. The first substantial deposit recorded in October 2011 was of $9,000 transferred in by the son. Then regular deposits start to happen. They are clearly from customers purchasing products.
Another bank account with NAB was also opened in OO Pty Ltd’s name trading as “Q Business”. As at 17 January 2012, there was $60,000 in that account. Quite a lot of money was being transferred in and out of that account.
I am quite satisfied that the son had secretly begun to cause business of O Business, the business run by N Pty Ltd, to be banked through OO Pty Ltd’s accounts. I do not accept that a separate and distinct business had been established. I am satisfied that it was the same business being run for several months through two separately named accounts.
The wife knew very little about this, though I am satisfied she had approved of it, knowing that her marriage to the husband was ending.
In late February 2012, there was a serious incident that took place between the husband and the son and the wife at the workplace. The husband assaulted the son and when the wife ran to intervene and assist the son, the husband assaulted the wife also. He denies it and says he was assaulted, but I reject that and find that he assaulted the son and the wife that day. The police were called and a family violence Protection Order was applied for by the police with the wife as the aggrieved and the husband as the respondent. An order was granted in the Magistrates Court.
The husband was consequently excluded from the Suburb KK home. On 2 April 2012, the husband drew down $20,000 on a credit card that was in the son’s name that he had held an additional card for. A few days later he also withdrew the total sum of $92,653 from the bank account of N Pty Ltd being all of the funds in that account at that time. For a very short time, the husband attempted to establish another similar business very close to N Pty Ltd’s South East Queensland showroom. He quickly ceased that effort and left Queensland and moved to Melbourne. He bought a car with $23,000 of the funds he withdrew. He never gave any of the money he withdrew back to N Pty Ltd.
The son says in his trial affidavit that this withdrawal “left no funds in the bank account from which the company could pay its liabilities”. As at 10 April 2012, there was $10,000 in one of the OO Pty Ltd bank accounts and by 19 April it had $21,000 in it. As at 10 April 2012, there was $10,000 in the other account and a few weeks later another $20,000 was transferred from the first account to this second account and there was $30,000 in this second account and $16,000 in the first account. The bank account statements for the OO Pty Ltd accounts clearly prove that the business just kept trading, but through OO Pty Ltd’s accounts.
OO Pty Ltd financial statements for the 2012 financial year were adduced into evidence. Gross sales were recorded as $613,807. Trading profit was recorded as $447,823 and after expenses, taxable income was $24,098. One of the expenses claimed was rent on land and buildings and that was $142,061.
The profit and loss statement of the Mr C Weng Family Trust showed income in the form of rent received for the 2012 financial year as $203,092, only $14,000 less than the year before.
The N Pty Ltd financial statements for the 2012 financial year reflect gross sales of $1,101,996 – down $1,000,000 from the 2011 year. By this, it is easily seen that the business of N Pty Ltd’s O Business was simply being conducted under the name of OO Pty Ltd.
ASIC records show that the wife was appointed a director of OO Pty Ltd on 16 April 2012 but only stayed in that position until 15 May 2012, before being appointed again as a director in May 2013.
The son says that in August 2012 he resigned as a director of N Pty Ltd and transferred his shareholding to his father. The ASIC records do not reflect that is correct. He asserts that he then had nothing to do with the operation of that company. The ASIC records show that he was appointed a director of OO Pty Ltd on 22 November 2012 but that he only stayed in that position until 17 May 2013, just after his mother was reappointed a director. The records reflect that he acquired 80 of the 100 issued shares in OO Pty Ltd at the same time as he became a director and retained those for several years before another maternal relative, Mr Z, who lives in China, took over as sole director and sole shareholder.
The ASIC records for N Pty Ltd reflect that the son resigned as a director of that company, as he says he did, in August 2012. His mother, who had also been one of the original directors alongside him, had ceased to be a director in August 2011. However, when the son resigned as a director in August 2012, the wife was appointed again, and was the only director after that. As for the shareholdings, the ASIC records reflect that a form registering a change to members’ shareholdings was registered on 2 September 2011 and another on 29 August 2012. The records show that the wife once had 30 shares and the son once had 70 shares. They then show that the wife had 70 shares and the husband had 30 shares.
In the light of these records, it appears to me that the son probably transferred 30 of his shares to the husband and the other 40 of his shares to the wife in the August, but I cannot be certain as to exactly when that was done. I expect the son did transfer shares to his father at the time he resigned as a director in August 2012. The records also reflect that an application for voluntary deregistration of the company was registered on 1 May 2012.
The son says in his evidence that he began receiving communications from the Australian Taxation Office (“ATO”) and other creditors seeking payments of debts owed by N Pty Ltd. He says he would refer them to his father, but that did not satisfy them. In September 2013, an application to wind up the company was made and was granted. A liquidator was appointed and the company was wound up and eventually deregistered. Significant debt owed to the ATO went unpaid by the son’s own admission.
Further variations to the Mr C Weng Family Trust Deed
On 11 April 2012, the son executed another Deed of Variation of Trust solely as the appointor of the Mr C Weng Family Trust. By this Deed of Variation, exercising the powers conferred him as appointor by the original Deed of Trust, the son purported to remove his father and his mother as trustees of the trust, leaving just himself as the sole trustee once more. He says he did this because of his father’s actions in taking the money from N Pty Ltd’s accounts and his concerns about what his father might try to do with the trust’s property.
The son said that he then became very worried about the validity of that April 2012 Deed of Variation. In October 2012, he executed three more Deeds in rapid succession, before executing one final one on 11 November 2012.
A Deed of Confirmation and Ratification was executed by him and the wife on 10 October 2012. The two of them purported to confirm and ratify the first Deed of Variation that was executed on 4 April 2007 that had appointed the husband and the wife as appointers and trustees. The two of them purported to revoke the Deeds of Variation that were executed on 30 October 2007 and on 11 April 2012. They believed this then put them in a position where the son, the wife and the husband were all appointors and trustees again and that the son and the wife could act as a majority, pursuant to a provision of the original Deed that conferred power on a majority of trustees.
On 12 October 2012, the wife and the son executed another Deed of Variation. By this Deed of Variation they purported to vary the trust again by removing the husband and the wife as appointors of the trust, relying on a provision of the original trust Deed that conferred power on the trustees to amend the provisions of the Deed in any manner considered desirable.
On 15 October 2012, the son executed another Deed of Variation of Trust in which the son, purporting to act as sole appointor, removed the husband and the wife from the role as trustees.
On 8 November 2012, the son executed another and final Deed of Variation of Trust by which he determined to delete from the Original Deed of Trust the express listing of the husband as a beneficiary under the trust.
By the end of all that, the son was again the sole appointor and trustee of the Mr C Weng Family Trust as he had been at its inception, and the husband was no longer a beneficiary.
The husband’s life after separation
On 22 November 2012, the husband transferred almost all of what was left of the money he had withdrawn from the N Pty Ltd account earlier that year and deposited it into an account in the name of another company, PP Pty Ltd. He denied that in the witness box and boldly challenged counsel for the wife to prove it. He asserted that he had not put a cent into PP Pty Ltd. However, I am satisfied that the money that went from his bank account into the PP Pty Ltd account was some of the money he had taken from N Pty Ltd earlier in the year. I do not accept the husband’s denial.
That company, PP Pty Ltd, was registered in early November 2012 with its address given as the Suburb KK property in Queensland. Its address was changed to an address in QQ Town, Victoria, in May 2014. That same year it changed its name to K Pty Ltd (“K”).
ASIC records are in evidence, but it is a little difficult to totally understand the changes in shareholding in the company since 2012. It appears the husband initially held 50 of the 100 shares issued and Mr RR held the others. At some later time, the shares of Mr RR appear to have been transferred to Mr SS. Those shares appear to have been transferred again later to Ms TT. She is the woman that the husband married after divorcing the wife.
The husband asserts that his new wife was an independently wealthy woman and invested money into K. There is evidence of a large sum of money, slightly less than $300,000, being transferred through an account in the husband’s name, but the husband just told the Court that was “someone else’s money”, not identifying whose it was, in particular. However, on a PP Pty Ltd bank statement that was adduced into evidence by the wife, the deposit into the account is made under the name of the husband’s current wife.
All of the shares in K were then transferred to Mr BB Wah before ultimately being transferred back to the husband’s current wife as to 99 shares and to the husband himself as to the other one share. At the time of the trial last year, the husband and his current wife were the directors of this company, with Mr BB Wah and Mr SS also having been directors at same time during the period since its registration.
I am satisfied that K has been carrying on a business in and around Melbourne that is very similar to the business that N Pty Ltd was operating in the lead up to the separation of the husband and the wife. K has, on the evidence, been quite successful.
Another company, L Pty Ltd, was also registered in August 2014, initially under the name UU Pty Ltd. The husband and his current wife have always been the directors and shareholders of this company. The husband is registered as holding one of the 100 shares and his current wife is registered as holding 99 of those shares.
The husband told the Court in his oral evidence that he believed he held the 1 share in each of the companies on trust for his current wife, as she had put all the money into the businesses they run. He also told the Court that he thought a company registered in Australia had to have at least one shareholder who is an Australian citizen and his wife is not one, whilst he is.
I do not accept the husband’s evidence about this. Whilst he tried to give the Court the impression that the businesses run by these companies were not his businesses, he later quite proudly boasted in an answer he gave in cross-examination:
It’s my company [K]. I’m running it myself. Yes, I have the confidence to run it well.
(As interpreted)
Prior to the days just before the commencement of the trial, the husband had failed to provide full and frank disclosure to the other parties about the businesses operating in Victoria. In his Financial Statement filed 18 June 2018, he did not mention his shareholdings in the companies. He did not include any income earned from the business. He had failed to do this despite being the Applicant, despite many times complaining himself to the Court of lack of disclosure on the part of the wife and the son, and despite being ordered by the Court to disclose himself.
During the trial, the husband maintained a defiant and arrogant attitude to this issue of disclosure. When being asked questions about the companies, the business, the source of funds that went into the business, and the source of funds that he paid his legal expenses with, he said he would not answer the questions as they were “irrelevant” to the proceedings. He continued to refuse to provide answers to questions when I directed him to.
The husband had been represented by a number of different firms of solicitors throughout the time that the matter had been working its way up the list towards trial. At trial he was represented by Queen’s Counsel and a junior barrister. Yet, despite this, he appeared to hold firmly to the view that whatever he had done in his life since the day he and the wife separated, whatever he was doing now, and whatever interests in property he had acquired since that separation in 2012 and however he might have acquired that property were of no relevance to the determination of this matter and that he did not have to reveal anything about any of that. Of course, in that firmly expressed conviction, he was plainly wrong.
However, evidence in the form of some financial statements for K Pty Ltd trading under the business name “VV Business” did get adduced in the trial, having been disclosed by the husband just before the commencement of the trial.
A loss before income tax was recorded in 2014 to be $845,642 after expenses of $930,000. Wages were recorded as $363,000 and rent was recorded as $282,809.
A loss before income tax was recorded in 2015 to be $878,824 after expenses of $1,713,821. Wages were recorded as $782,363, rent was recorded as $420,428 and superannuation contributions were $72,557.
A loss before income tax was recorded in 2016 to be $762,433 after expenses of $1,814,049. Wages were recorded as $512,719 and rent was recorded as $395,495. Consultants’ fees were recorded as $133,712. In that year’s balance sheet total assets were $2,300,186 but “loans from related companies” were recorded at $4,000,000 producing net assets of negative $2,500,000.
A loss before income tax was recorded in 2017 to be $516,428 after expenses of $1,683,593. Wages were recorded as only $91,759 and rent was recorded as $239,226. Superannuation was recorded as $136,494 and management fees were recorded as $507,000. That year’s balance sheet had total assets at $3,912,779, a $4,000,000 debt to related companies and a $1,483,206 debt to “director”, leaving net assets of negative $3,049,787.
Under cross-examination, the husband, who had proudly said the words I have quoted in paragraph 132 above, continually said he did not know anything about the accounts and the matters revealed by the financial statements. Evidence was adduced that the commercial/industrial premises the business pays rent for are owned by a family trust controlled by his current wife, but there was nothing to prove whether the rent paid to that trust was a commercial arms-length amount or not. In addition, the husband could not, or would not tell the Court what the large management fee of $500,000 in the 2017 year was all about.
No valuation of the shares in the company was adduced into evidence. I attribute responsibility of that to the husband. It was his duty to fully and frankly disclose his interests in the shares in those companies and to provide valuations of them.
I am quite satisfied that the balance sheets and profit and loss statements do not truly and accurately reflect the financial performance of the business. I totally reject the notion that the husband (and/or his current wife) would continue to run a business year after year if it was actually losing as much money as the financial statements, on their face, suggest. I reject the husband’s evidence that they are just going through an “investment period”. The company has been in existence now since 2012. I do not accept that the husband would proudly assert what he did assert in the Court as quoted above if the business was going as badly as presented in the financial statements. Further, I do not accept the husband’s assertion that he does not actually have a beneficial interest in that business. I am satisfied that he does. I cannot determine exactly how much beneficial interest he has in the shares of the companies that operates these businesses. I cannot put a figure on the value of the husband’s interests in this property. That I cannot do so, is the husband’s responsibility.
In his June 2018 Financial Statement, the only real property the husband said he owned was the apartment in China. He said it was worth about $286,406. He did not provide valuation evidence of it, despite having been ordered to do so by me earlier in the management of the matter towards trial.
The wife also adduced evidence about the house in Melbourne in which the husband lives with his current wife. The husband did not give any evidence about that in his trial affidavit. The evidence supports a finding that it is a luxury home estimated to be worth about $3,600,000. It was purchased from previous owners in March 2014 and registered in the joint names of the husband and his current wife. Titles records reveal that about a month later the husband transferred his interest in the property to his current wife and that she now is the sole registered proprietor of the property. As I have already mentioned, the husband’s current wife also indirectly owns the commercial property occupied by the business (through her own discretionary family trust) and it is said to be worth $4,000,000.
In his Financial Statement of June 2018, the husband said his income was $450 per week in the form of a pension from the Chinese Government and $50 per week rent from his Chinese property. He also said his current wife’s income is estimated to be $360 per week. I do not accept all of that evidence as true. Counsel for the wife, reading from bank statements he said were Westpac bank statements of an account in the husband’s current wife’s name, suggested to the husband that his wife had withdrawn $70,000 from that account in one withdrawal in January 2018 and two withdrawals of $60,000 and $100,000 in February 2018. The husband told the Court he knew nothing of those.
It is, quite simply, impossible to determine what the husband’s true financial circumstances were at the time of the trial. He did not even mention the fact that he still has superannuation invested in an MLC fund, though that was revealed by the wife’s legal representatives during the trial.
The positions of the wife and the son since separation
As I have observed already, the son and the wife simply began running the business that was run by N Pty Ltd through the entity, OO Pty Ltd, and it went on operating, though under the name Q Business, continuing to occupy and rent the same premises that N Pty Ltd did from the Mr C Weng Family Trust. However, its taxable profits were reported in its financial statements as follows:
2012 $24,098
2013 $10,179
2014 $36,581
2015 $8,835
2016 $392
Those profits were said to be made on gross sales of:
2012$613,807
2013$916,376
2014$1,137,242
2015$1,024,285
2016$991,769
WW Street, Suburb HH
In August 2012, despite the asserted financial turmoil in the son’s life at the time, he purchased another property in WW Street, Suburb HH. He paid the sum of $1,064,000 for this property. This is the property where he and his mother have been living for most of the time ever since. He did not say in his trial affidavit, but the property was registered in his sole name. He says he borrowed the further sum of $275,000 from “family members in China to pay the deposit” and he borrowed the balance of around $700,000 from the CBA. He asserts that neither of his parents has ever made a financial contribution towards this property.
The son sold the X Street, Suburb M property in February 2013 for $620,000. He deposited the net proceeds of $589,731 into his personal bank account in April that year. He said that he believes he withdrew $275,000 and repaid the family member who he had borrowed that amount from when he purchased the Suburb HH property a few months before.
XX Street, Suburb YY
The son then caused another discretionary family trust to be established, this time with a corporate trustee. The company, D Pty Ltd, owned and controlled solely by him, became the trustee of the H Trust, controlled solely by him. D Pty Ltd had been first registered in Queensland in October 2009. When it was first registered, the son and the wife were both directors and equal shareholders, but that changed in April 2012 when the wife ceased being a director and her 50 shares were transferred to the son. There is no evidence that the company did anything or owned anything before mid-2013.
That company then purchased a property in Suburb YY in June 2013 for $595,000. The son said that he borrowed all of that money for the purchase of the property from family members in China and that he paid them back that money later when he sold the property that he had bought at GG Street, Suburb HH. He sold that Suburb HH property in April 2014 for $599,000 (having bought it in 2009 for $445,000).
The son asserted that neither of his parents made any contribution of funds towards the purchase of this property. Again, there is no other evidence that supports or contradicts any of the son’s evidence on this issue.
Sale of Suburb DD property
After the separation of the husband and the wife, no one was paying the mortgage repayments in respect of the loan borrowed from Westpac to buy the Suburb DD vacant block of land. The husband and the wife were unable to agree to sell the property and the Westpac Bank ultimately sold the land as mortgagee in possession in November 2013.
The son said the bank sold it for $500,000 (it had been bought for $690,000). He said that an amount of $300,000, including the mother’s superannuation of $100,000, was lost by them as a consequence. The son has included in that, the loan repayments that were made, bank charges and legal costs involved.
ZZ Street, Suburb AAA (NSW)
The son then purchased another property in Sydney in March 2015, through another discretionary family trust that he has caused to be established. It is called J Family Trust and he is the sole appointor and trustee. He paid $975,000 for it. He said that he contributed $195,000 from his own savings towards the deposit and borrowed the balance of $780,000 from the ANZ Bank. There is no other evidence that supports or contradicts the son’s evidence on this issue.
This property is a commercial property.
The sale of the Suburb KK property
The Suburb KK property registered in the names of the husband and the wife was sold by them in June 2015 for $1,473,000. The sum of $1,117,841 was paid to Westpac Bank to discharge their mortgage. There was an amount of $41,000 paid to another company, but I do not know what that was for. The son said the balance of $232,305 was paid to the trust account of a Brisbane firm of solicitors and held for the husband and the wife. $50,000 was paid out of that to each of them pursuant to order by me for them to have some interim litigation costs funding. It was agreed that a further $8,020 was paid out for valuations and the balance of around $114,285 remains invested for them.
OO Pty Ltd and other companies
The son said that he worked for OO Pty Ltd as an employee before he was appointed as a director, a position he held until May 2013. He said in his trial affidavit that OO Pty Ltd “ultimately incurred liabilities that it was unable to meet”. He said that an application to wind up the company was lodged in June 2015 and that an ASIC search reveals that a strike off action was in progress in June 2018 with a notice of proposed de-registration being issued on 10 July 2018. The son said that the mother and her brother (who were the shareholders) decided to shut the company down and he did not know anything much about that.
OO Pty Ltd registered the business name, Q Business, in Queensland as early as April 2011 and the business name, Q Business Sydney was registered in June 2014 by the company, F Pty Ltd and cancelled in November 2017. The business name, Q Business Aus, was registered by the company, G Pty Ltd Pty Ltd, and was still current as at the time of the trial. Evidence showed the principal place of business of this business as the U Street, Suburb Y property owned by the Mr C Weng Family Trust.
Evidence shows F Pty Ltd was registered in New South Wales in April 2014 with the wife and her niece, Ms Weng, as the directors and shareholders. The company was still in existence at the time of the trial, though it is not clear if it was doing anything.
Evidence shows G Pty Ltd was registered in Queensland in June 2016. Its directors as at 4 September 2018 were the wife and Mr Z and its shareholders were the wife as to 10 shares of 100 issued and Mr Z as to 90 of them. Mr Z is the wife’s brother-in-law who lives in China and not Australia.
Evidence shows E Pty Ltd was registered in New South Wales in July, 2015. The company’s registered office and principal place of business was given as the ZZ Street, Suburb AAA property. The only director and shareholder has been the son.
The son gave oral evidence that E is a company that he uses to hold as its assets two motor cars – a work utility and a sedan that he drives and through which he financed the acquisition of those vehicles. Bank statements for a bank account in the company’s name certainly reflect motor vehicle financing repayments being made through this company, along with a few other small transactions unrelated to motor cars.
Bank statements for a bank account in the name of D Pty Ltd for the last few years leading up to the trial do reflect rental income being received for a property – probably the Suburb YY property – but they also reflect deposits of amounts of money that are clearly from retail customers, construction or supply business as well with a reference to D Pty Ltd Building being included. Plainly, business has been conducted and work has been invoiced to customers by D Pty Ltd and those customers have been asked to deposit payment for the work into D Pty Ltd’s bank account.
Evidence satisfies me that the business, Q Business, was still being carried on out of the Suburb Y, Suburb MM and Sydney Suburb AAA premises at the time of the trial. I am satisfied the business is now operated by G Pty Ltd Pty Ltd, the company whose shares are owned by the wife (as to 10%) and the wife’s brother-in-law in China (as to 90%).
I consider the business is the same business that was O Business that was owned and operated by N Pty Ltd and then OO Pty Ltd. There is no evidence of any consideration having been given by OO Pty Ltd to N Pty Ltd to acquire the business or by G Pty Ltd to OO Pty Ltd to acquire the business. There is evidence that both N Pty Ltd and OO Pty Ltd were wound up owing substantial amounts of money to the Australian Taxation Office. I do not accept the son’s evidence or the wife’s evidence that it is now a different business.
Very little, if anything, about G Pty Ltd Pty Ltd, Q Business, or D Pty Ltd was disclosed by the son and/or the wife until the son deposed to some things in his trial affidavit. The son said that since the beginning of 2018 he has worked as a manager for G Pty Ltd. He set out his duties and, clearly, they were consistent with him running the business. He said that the business is run from the showrooms at Suburb Y, Suburb MM and Sydney Suburb AAA. He also said that his mother works in the business, being responsible for double checking the contents of two containers that arrive from China every month and organising payment for the goods shipped. He said nothing about what, if anything, his uncle does for the business.
There was little other disclosure by them about the business. Certainly, no valuation of the Q Business or the shareholdings in G Pty Ltd was produced, despite order made by me early in the proceedings. What came out was only partial disclosure and it only came out through the efforts of the husband and his legal representatives by way of subpoenas and persistence in questioning. I am quite satisfied that the son and the mother wilfully failed to disclose as they were obliged to and as they knew they were obliged to.
The sale of the EE Street, Suburb FF property
During the course of this matter, I made an order that permitted the son to sell the Suburb FF unit. The husband had registered a caveat on the title to the property but the CBA was requiring the son to reduce the total of the debt that he had and was servicing as it was “outside their agreed parameters”. The husband refused to release the caveat. I ordered him to do so.
The property was sold in April 2018 for the sum of $403,980 and after paying approximately $100,000 in “outstanding body corporate fees, penalties and legal fees” the son paid the balance of approximately $300,000 in reduction of the debt owing to the CBA that is secured over the Suburb MM property owned by the Mr C Weng Family Trust.
The property interests of the parties at the time of the trial
As to the interests of the husband and the wife in property and superannuation at the time of the trial, I am satisfied as to the following:
(i)The husband owns an apartment in City R, China that he said is worth $274,950. He did not produce a valuation of that property by a person with the appropriate expertise, although he had been ordered to do so. I consider that property is worth at least what the husband said it is worth and probably more;
(ii)The husband had superannuation said to be valued at $70,200;
(iii)The wife still had superannuation said to be valued at $5,000 (the balance of her superannuation having been withdrawn and used as part of the deposit on the purchase of the Suburb DD property that was bought in the names of the husband and the wife during their relationship and later sold at a loss);
(iv)The husband and wife had at least $114,285 (it should still be earning interest) still held for them in the trust account of a Brisbane solicitor;
(v)The husband and the wife, or the wife alone, are/is still owed some money by the Mr C Weng Family Trust. As at 30 June 2016, the husband was recorded as being owed $167,564 and the wife was recorded as being owed $209,179 through beneficiary loan accounts. There was no evidence that would support a finding that any of that has been repaid or that the amount owed to the wife has not actually increased since then. In addition, as at 30 June 2016, the balance sheet of the Mr C Weng Family Trust recorded liabilities in the form of “loans from trustees” as $1,637,527. Some of that liability, I consider is debt owed to the wife and/or the husband. I am satisfied that at least $250,000 is, and I simply cannot determine how much more it might be, due to the failure on the part of the son to fully and frankly disclose;
(vi)The wife legally owns 10% of the shareholdings in G Pty Ltd which owns the Q business. Indeed, she may very well own a greater beneficial interest in the business, but I am unable to determine to what extent due to the lack of disclosure and frankness on the part of the wife and the son. It is clearly a successful business, but I cannot determine its value or the value of the wife’s legal interest in it due to the failure of the wife and the son to have it valued;
(vii)The husband owns 1% of the shareholdings in K Pty Ltd. His current wife owns the other 99% of the shareholdings. Indeed, the husband probably owns a much greater beneficial interest in the company than his 1% legal shareholding, but I am unable to determine to what extent due to the lack of disclosure and frankness on his part. I am also satisfied that the business operated by K Pty Ltd is a successful business, but I clearly cannot determine its value or the value of his interest in it due to his failure to have it valued;
(viii)The husband also owns 1% of the shareholdings in L Pty Ltd, whilst his current wife owns the other 99% of the shareholdings. I am unable to determine the value of that company or his interest in it due to the husband’s lack of disclosure and his failure to have it valued;
(ix)I am also satisfied that the husband has a beneficial interest in the real property in which he lives that is registered in the sole name of his current wife. I am unable to determine the value of that beneficial interest due to his lack of frankness and his failure to disclose and to have that property valued.
As to the property and superannuation interests of the son, I am satisfied as follows:
(i)The son owns the real property at WW Street, Suburb HH. He said it is worth $1,150,000 and I accept it is worth at least that. He also said he owes the CBA the total of $672,502 that is secured by mortgage on this property;
(ii)At the time of the trial, the son said that he had about $1,200 in bank accounts;
(iii)The son said that he had superannuation with an estimated value of $37,000;
(iv)The son is the sole shareholder of E Pty Ltd. It owns two motor vehicles which it is paying off. I do not know the value of the son’s shareholding. He did not provide full and frank disclosure and he did not provide a valuation of his shareholding or the company’s assets;
(v)The son solely controls the Mr C Weng Family Trust and it owns the following properties:
a)U Street, Suburb Y – valued by the single expert at $750,000 – no debt owing;
b)LL Street, Suburb MM – valued by the single expert at $2,500,000 Liability secured by mortgage – $908,583. The equity is $1,591,417;
The trust also has other liabilities, including owing the husband $167,564 as a beneficiary loan, the wife $209,179 as a beneficiary loan and “loans from trustees” as $1,637,527 - $650,000 of which the son says is owed to his uncle and $250,000 of which I am satisfied is owed to the husband and the wife;
(vi)The son solely controls the H Trust and it owns the real property at XX Street, Suburb YY – valued by the single expert at $900,000 – no debt owing;
(vii) The son solely controls the J Family Trust and it owns the real property at ZZ Street, Suburb AAA in NSW – he said it is worth $975,000 and that it secures a liability to the ANZ Bank of $780,000. The equity is $195,000;
(viii) I am also of the view that the son has a beneficial interest in the business “[Q Business]” though it is impossible to quantify that or to put a value on it.
The husband’s case against the son
In the end it was very difficult to understand the case that the husband was trying to establish as against the son in so far as legal and equitable principle is concerned. In simple terms, I understood the husband’s case to be that the very first property purchased in the son’s sole name was actually beneficially the property of the husband and the wife and that the business and all of the properties purchased from that time on were beneficially owned by the three of them. As was succinctly put by counsel for the son:
As best as can be discerned the Husband claims an interest in all property owned by the Son and related entities of the Son, regardless of the circumstances of acquisition of those properties, the date of acquisition and the source of funds.
With all due respect to the courage of his effort, the young solicitor who ended up representing the husband after his two barristers withdrew on the afternoon of the second last day of the trial, was not appropriately able to encapsulate the husband’s case in terms of legal and equitable principles applied to the facts. He did refer to common intention constructive trusts and he did embrace my mention in a question put to him of the constructive trust that might be found to exist where it is considered unconscionable on the part of the owner of the legal title to property to deny an equitable interest to another party in all the circumstances of the case (such as was found in Baumgartner v Baumgartner (1987) 164 CLR 137; [1987] HCA 59), but he did not go on to submit how it was that reference to those equitable principles assisted his client.
Counsel for the son, in his written submissions, was better able to shed light on the approach the Court should take to determining the husband’s claim. He quite rightly pointed out:
...that the considerations that apply to the determination of any property adjustment orders as between the Husband and the Wife pursuant to s79 FLA, are quite different from and irrelevant to the legal principles which govern the Husband’s claims against the Son. For any of the property over which the Son or his associated entities enjoy legal title to be brought into the pool for division between the parties, the Husband must establish a legal basis and remedy which is quite separate and distinct from the provisions of the Family Law Act.
The Suburb M property purchased in 2004
Counsel for the son submitted that the factual circumstances surrounding the purchase in the son’s name of the property in Suburb M in 2004 give rise to the presumption of advancement. It is a presumption that applies to a range of relationships. The relationship of parent and child is one of them.
In Calverly v Green (1984) 155 CLR 242; [1984] HCA 81, Gibbs CJ identified three important principles in relation to the presumption of advancement. Those were:
(1)Where one party purchases property in the name of the other, it will be presumed that the first party did not intend the other to take a beneficial interest unless there is a special relationship between the parties as gives rise to a presumption of advancement;
(2)The sort of relationship where the presumption arises is where the relationship is such that it is more probable than not that the beneficial interest was intended to be conferred;
(3)A relationship between a parent and a child gives rise to a presumption of advancement.
Only if the presumption is rebutted will the husband be found to have retained a beneficial interest in the Suburb M property that could subsequently be traced into other property on the sale of the subject property. The presumption is rebuttable by evidence of the actual intention of the parent or parents who provide the money and who purchased the property in the child’s name, though it is not easily rebutted.[1] Counsel for the son submitted that to rebut the presumption in favour of the son in this case in respect of the 2004 purchase the husband bears the onus of establishing an intention to acquire the beneficial interest in the property and not to confer it on the son.
[1]Shephard v Cartwright [1955] AC 431, 445-446; [1954] UKHL 2 (Viscount Simonds).
Counsel for the son referred the Court to Snell’s Principles of Equity[2] in which the learned authors said:
The acts and declarations of the parties before or at the time of the purchase, or so immediately after it as to constitute a part of the transaction, are admissible in evidence either for or against the party who did the act or made the declaration … but subsequent acts and declarations are admissible as evidence only against the party who did or made them, and not in his favour.
[2] Megarry, Robert and Baker, Paul Vivian, Snell’s Principles of Equity (Sweet & Maxwell, 24th ed, 1954).
Counsel’s reference to this passage was in support of his submission that the husband could not rely upon the document that purported to set out an agreement as to property settlement between the husband and the wife in 2009 in support of his submission that he did not intend to convey all of the beneficial interest in the Suburb M property to the son in 2004. I accept the merit of the submission.
Evidence relevant to the determination was given by the wife. She said that she gave the son the money to buy the property and register it in his name as a gift – thereby intending him to have the legal and beneficial interest. The husband also confirmed that the money was advanced by him and the wife to the son to enable the son to purchase the property and cause it to be registered in his sole name. There was no written agreement between the son and his parents evidencing any commitment by the son to repay the purchase monies to his parents or to later transfer the property to them or even to hold the property on trust for them. The husband confirmed in evidence that at no time prior to the sale of the property by the son in 2013 did he ever make a demand on the son in respect of an asserted interest in the property.
Counsel for the son submitted that the fact that no such demand was made by the husband is particularly relevant given that in 2009 he and the wife moved out of the Suburb M property to live in their own property, registered in their own names and that the purchase of that property required the parents to obtain a significant mortgage. There was no evidence of any demand being made of the son to repay the purchase monies used to buy the Suburb M property.
Counsel made the same submission in respect to the purchase of the land at Suburb DD in 2008 by the husband and the wife. Even though the husband had a desire to build a house on that land, no demand was made of the son to pay back any amount of the purchase monies used to buy the Suburb M property.
The husband’s evidence that the property was put in the name of the son because the husband and wife were unable to acquire it as a consequence of foreign investment restrictions was also addressed by counsel for the son. He submitted that giving the money to the son at the time that they gave it to him, before the parents even knew that they would be permitted to live in Australia, is inconsistent with the action. So too, is the absence of any request for the son to rectify the title after the parents were granted permanent residency in Australia, counsel submitted.
I consider there is merit in all of those submissions. I am not satisfied that the husband has met the burden of proving that the presumption of advancement is rebutted.
N Pty Ltd
As I have already observed, the evidence establishes that the wife and the son were the two shareholders of N Pty Ltd when it was established and began operating the business. Counsel for the son points out that despite this fact, the husband appears to be asserting that all monies generated by N Pty Ltd and all assets acquired by the use of that money, form part of the property pool available for distribution between the husband and the wife. He also submits that as a proposition of law that is “simply wrong”.
Where shares are purchased with money provided by a parent but put in the name of a child, again the presumption of advancement arises, only to be rebutted by cogent evidence of definite intention to retain beneficial title taken from contemporaneous acts and declarations of the parent.
Again, I am not satisfied that the husband has met the burden of proving that the presumption of advancement is rebutted in respect of the son’s original shareholding in N Pty Ltd.
The son, and perhaps the wife, may very well both have breached fiduciary duties to the shareholders by the actions associated with shifting sales through OO Pty Ltd in the period leading up to separation of the husband and the wife. However, the son and the wife were the shareholders at that time and the husband certainly acted without lawful authority when he withdrew around $92,000 of the company’s funds and drew on $20,000 of credit on the son’s credit card shortly after that separation.
It is difficult to determine what is to be made of the transfer by the son of his shares in the company to his parents in late 2012 when the company was being wound up, after the business it operated was effectively simply transferred, without consideration changing hands, to OO Pty Ltd Pty Ltd. The transfer by the son was done in return for no consideration and done knowing that the company was then worthless and to be wound up. Transferring the shares to his father appears to have been a hollow, meaningless transaction and could not be considered as the transfer of a valuable interest.
The subsequent transfer of the business from OO Pty Ltd to G Pty Ltd appears to have followed a similar course. There is no evidence of any consideration changing hands between the two companies. OO Pty Ltd then was wound up and left owing money, whilst G Pty Ltd rose to continue operating the Q business.
In all these circumstances, I am not persuaded to make a finding that the husband ever acquired a beneficial interest in the Q business, though, as I have said, I am satisfied that the wife retains at least a 10% interest in it and, probably, a much larger beneficial interest in it, alongside the son and, possibly, her brother-in-law who lives in China. Frankly, I consider that the business is probably beneficially owned by the son and the wife, as it was when it was established. The husband, though not beneficially owning any of it at the time it was established, stood to enjoy the benefits associated with it as those might come to him through his relationship with the wife and his relationship with the son. When those relationships foundered, of course, he stood only to be able to rely on rights conferred on him by s 79 of the Family Law Act in so far as seeking any share of property owned by his wife was concerned and on rights that he might be able to establish through equity in so far as seeking any share of property owned by his son or entities controlled by his son was concerned.
The properties registered in the name of the son alone and in the name of the discretionary trusts he solely controls
It follows that I am not persuaded that the husband has discharged the burden that rests with him of proving that any of the real properties that are now registered in the sole name of the son or in the name of the Mr C Weng Family Trust, the H Trust and the J Family Trust are properties in which he has any legal or beneficial interest.
I do not consider that any of those real properties or any share of them are to be included in the property interests of the husband and the wife or either of them that are potentially subject to the discretionary property adjustment powers conferred on this Court pursuant to s 79 of the Family Law Act.
Accordingly, I will dismiss the husband’s application for orders as against the son and any or all of the three discretionary family trusts controlled by the son.
Property adjustment Orders as between the husband and the wife
Earlier, I set out my satisfaction as to the interests in property and superannuation of the husband and the wife. I set those out again in the following table:
Property interest Husband
Value
Property interest Wife
Value
Property interest Husband and Wife
Value
Apartment in City R, China
$274,950+
Superannuation interest
$5,000
Monies held in solicitor’s trust account
$114,285
Superannuation interest
$70,200
Money owed by Mr C Weng Family Trust
$209,179+
Money owed by Mr C Weng Family Trust
$250,000+
Money owed by Mr C Weng Family Trust
$167,564
Part ownership of Q Business through G Pty Ltd
Unknown
Part ownership of K business through K Pty Ltd
unknown
Part ownership of L business through L Pty Ltd
Unknown
Part beneficial ownership of real property in which he lives
Unknown
Total
$512,714 plus unknown value of interests
$214,179 plus unknown value of interests
$364,285 plus unknown
amount
It is to be remembered that the husband had the use of approximately $112,000 taken from business and credit card funds at separation, a part of which I am satisfied he invested into his new business.
Also, pursuant to an interim order, each of the husband and the wife were given $50,000 from jointly owned funds sourced from the post-separation sale of their jointly owned property. Those funds were directed towards litigation costs funding.
Notwithstanding the lack of full and frank disclosure on the part of all three of the husband, wife and son, and my consequential inability to be able to fix accurate values to much of their property, I am satisfied that property adjustment orders will need to be made to do justice and equity between the husband and the wife.
The money that is owned jointly by the husband and the wife and that is held in a solicitor’s trust account will need to be subject to an order for it to be paid out, most particularly if that is not to be in equal shares. The money that I am satisfied is owed to the husband and the wife jointly by the Mr C Weng Family Trust will need to be subject to an order as to how it is to be dealt with. Furthermore, I am not satisfied that it is simply appropriate to leave the husband and the wife to their own endeavours to recover money owed to them by the Mr C Weng Family Trust. Adjustment orders, including orders transferring or assigning debt owed to each of the husband and the wife would in my view be appropriate and just and equitable.
The total value of the property and superannuation interests that I have been able to put values on is $1,091,177. That does not include any amount for the husband’s current interests in K Pty Ltd, L Pty Ltd or his Melbourne property. Similarly, it does not include any amount for the wife’s current interest in G Pty Ltd and the business, Q Business. It does not include any amount notionally added back for the $50,000 that each received from their joint funds to help them meet interim litigation costs. If that was notionally added in the total would come to $1,191,177.
The legal authorities by which I am bound, permit me to take a “robust” approach in circumstances where there has been a wilful failure to comply with full and frank disclosure obligations.[3] It is, I must observe, rather unusual for such wilful failure to fully and frankly disclose to be attributable to all three of the human protagonists in the proceedings. Nevertheless, the approach may still be a robust one.
[3] In the Marriage of Weir (1993) FLC 92-338; (1992) 16 Fam LR 154; In the Marriage of Stay (1997) FLC 92-751; (1997 21 Fam LR 626.
Ultimately, I am reasonably satisfied that the husband and the wife made contributions across all spheres of their marital cohabitation of around 36 years that were relatively equal.
At separation the husband took around $112,000 that he was not entitled to from N Pty Ltd’s funds. I am satisfied that he used about $46,000 to invest in the establishment of his new venture in Victoria. In this way, the wife has made an indirect financial contribution to the establishment of that business. With the balance, she has made a small contribution to the maintenance and wellbeing of the husband after their separation.
On the other hand, although the husband did make some contributions to the running of the business still being run by the wife and, principally, I am satisfied, by the son, in its early years up to separation, I am satisfied that he has made no contribution to its ongoing operation since separation from the wife. Any success it has enjoyed (despite the son’s assertions to the contrary) has been the product principally of the son’s management efforts with the wife’s assistance.
I would therefore assess their post-separation contributions as slightly unequal with an adjustment in the order of 5% in favour of the wife to be merited to reflect that difference. Given that their joint and several interests in property and superannuation are known to be worth $1,091,000, and that notionally adding the amounts they each received for interim litigation costs funding would take that to $1,191,000, 5% is equal to $59,550. I consider that appropriate in the circumstances.
Dividing that known amount 55/45 in favour of the wife would result in the husband being entitled to $535,950. He already has $512,714 and has had $50,000 in litigation funding. That equals $562,714 in total.
However, that includes the asset of $167,564 owed to him by the Mr C Weng Family Trust. I do not consider it to be appropriate to leave the husband and the son financially connected by way of a liability still owing to the husband by the son’s trust. I will make orders that include an assignment of that debt to the wife. That would take the amount the husband keeps down to $395,150. Ordering the money held in the trust account of the solicitor to be paid to the husband would take that amount back up to $509,435. That would still be $26,515 short of what I have considered might be an appropriate contributions based division. However, there is likely to be a small amount of interest that has accrued since the trial, that could also be paid to the husband.
As I have observed already, the husband proudly told the Court about how he regards the business that he is running as his business and that he has the confidence to run it well. Given the large amount of rent it is paying for premises ultimately owned by his wife and given the very large amount of money it is paying for “management fees” that he said he could not explain (which I did not accept as honest), I am more than satisfied that the husband is doing well from this business. I reject his assertions that it is not making any money and that he earns nothing from it. In the circumstances, after considering the matters required to be considered by s 79(4)(e) and s 75(2) of the Family Law Act, I do consider a further adjustment in favour of the wife such as displaces that amount of $26,515 that would still be owing to the husband is appropriate, so that orders that I consider just and equitable as between the husband and wife can be made.
The orders I intend to make will provide for the husband to:
(i)Keep his City R property;
(ii)Keep his superannuation interest;
(iii)Keep his interests in K Pty Ltd, L Pty Ltd and the property he lives in in Melbourne;
(iv)Receive all of the money, plus any interest accretion, held in the trust account of T Lawyers;
(v)Assign all and any debt owed to him by the Mr C Weng Family Trust to the wife.
The orders will also provide for the wife to:
(i)Keep all and any debt owed to her and/or the husband by the Mr C Weng Family Trust or any other of the discretionary family trusts controlled by the son;
(ii)Keep all her interest in the Q Business and any shares she owns, legally and/or beneficially, in G Pty Ltd or any other companies.
The orders will discharge the son from any undertakings he has given the Court and will oblige the husband to cause any caveats he has registered over the title of properties registered in the name of the son or any of his companies or trusts to be removed upon receipt by the husband of the money currently held in T Lawyers trust account.
All other applications will be dismissed.
I am satisfied that such property adjustment orders as between the husband and the wife are, in all the circumstances, just and equitable.
One final issue
During the course of the hearing of this matter, I became very concerned about what appeared to me to be some serious issues in respect of the interaction between the son and the wife and the corporate entities through which the business has been owned and operated.
As I have said earlier in this judgment, I am satisfied that the business O Business is the very same business that became Q Business, that has been said to have been run through N Pty Ltd, OO Pty Ltd and now G Pty Ltd.
The evidence that N Pty Ltd was wound up and ultimately de-registered owing substantial money to the Australian Taxation Office and that subsequently OO Pty Ltd was similarly wound up and ultimately de-registered also owing substantial money to the Australian Taxation Office is extremely concerning to me, given my satisfaction that the same business has simply continued to be run by the son and the wife, though they assert that has been done through different business structures.
This evidence is all very concerning when, over the same period of time that substantial debts to the Australian Taxation Office have gone unpaid, the son appears to have acquired and accumulated substantial real property assets in which he now has equity, either in his own name or through discretionary trusts that he solely controls, that is worth a few million dollars.
The parties were put on notice that referral of the matter to the ATO was being considered and none put submissions to me that persuaded me that it should not happen.
In the circumstances, I intend to make orders causing the Principal Registrar of the Court to refer these reasons for judgment and the affidavits relied upon by the parties in the proceedings at the trial to the Commissioner of Taxation for his consideration with a view to the determination by him of whether any further action to recover unpaid taxation liabilities is appropriate.
I make the orders set out at the commencement of these reasons.
I certify that the preceding two hundred and twenty-three (223) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Forrest delivered on 16 August 2019.
Associate:
Date: 16 August 2019
Key Legal Topics
Areas of Law
-
Family Law
-
Equity & Trusts
Legal Concepts
-
Appeal
-
Costs
-
Remedies
-
Res Judicata
-
Standing
0
4
2