Zegna & Zegna (No 2)
[2022] FedCFamC1F 558
Federal Circuit and Family Court of Australia
(DIVISION 1)
Zegna & Zegna (No 2) [2022] FedCFamC1F 558
File number(s): SYC 3648 of 2011 Judgment of: HARPER J Date of judgment: 4 August 2022 Catchwords: FAMILY LAW – PROPERTY – Final property settlement orders between husband and wife – Where husband’s parents and an associated company are also respondents (“the parents”) – Where husband was initially self-represented at trial, however obtained representation for latter part of final hearing – Allegations of collusion by the wife and her solicitors not pressed – Where the parents seek payment against husband and wife for interest on funds paid for construction costs in respect of former matrimonial home – Wife owns number of assets in Country U – Where spouse parties were in a partnership which owned a property at Suburb AJ – Previous orders made for wife to receive distributions from this partnership, however no distributions paid after 2015 – Allegations of non-disclosure by both spouse parties – No non-disclosure by wife of assets in Country U – Alleged agreement between husband and parents for payment of interest on funds loaned for construction costs – Where agreement was alleged to be contained in a handwritten note – Authenticity of note disputed – Where the note was inconsistent with husband’s evidence of funds available to him at the relevant time – Finding that no agreement to pay interest was made – Where husband previously owned preference shares in family company – Wife argued that the husband should be held to enjoy valuable personal property in the form of a chose in action as true owner of shares – Where the parents are registered as legal and beneficial owners of all shares in ASIC search, transferred to the parents in 2011 – Where transfer was said to be in accordance with declaration of trust in 1991 – Wife argued declaration of trust was a sham – Preference shares excluded from balance sheet as having no secure basis upon which to attribute value – Where husband and his parents made overwhelming financial contributions to the marriage – Where wife was employed by husband and parents’ business – Where wife made majority of parenting contributions – Contributions assessed 57 percent to husband and 43 percent to wife – Adjustments made as husband retains access to funds from parents and new wife – Where husband failed to make adequate disclosure of future financial support from new wife – 13 percent adjustment in favour of wife – Orders made for transfer of funds from husband to wife – Orders for payment secured by a charge.
FAMILY LAW – EVIDENCE – Where husband’s credibility as witness was impugned by inconsistencies and argumentative attitude – Where affidavit evidence between husband and his father was starkly similar – High degree of similarity shows direct or indirect collaboration, and may render evidence worthless – Evidence by husband and the parents devalued generally.
Legislation: Corporations Act2001 (Cth) s 176
Family Law Act 1975 (Cth) ss 75(2), 79
Cases cited: Barnell & Barnell (2020) FLC 93-961; [2020] FamCAFC 102
Barrett & Winnie [2022] FedCFamC1A 99
Benson & Drury (2020) FLC 93-998; [2020] FamCAFC 303
Bevan & Bevan (2013) FLC 93-545; [2013] FamCAFC 116
Burke and Burke (1981) FLC 91-055; [2019] FamCAFC 78
Camden & Anor v McKenzie & Ors [2008] 1 Qd R 39; [2007] QCA 136
Candle & Falkner (2021) FLC 94-069; [2021] FedCFamC1A 102
Celermajer Holdings Pty Ltd v Kopas (2011) 16 BPR 30,735; [2011] NSWSC 40
Chorn and Hopkins (2004) FLC 93-204; [2004] FamCA 633
Crapp and Crapp (1979) FLC 90-615; [1979] FamCA 17
Dentown Pty Ltd v PWI Group Pty Ltd (as trustee of the Australia No. 1 Group Trust) (2019) 141 ACSR 330; [2019] NSWSC 1032
Dickons v Dickons (2012) 50 Fam LR 244; [2012] FamCAFC 154
Fielding and Nichol [2014] FCWA 77
G and G (2000) FLC 93-043; [2000] FamCA 1075
Hickey and Hickey and Attorney General for the Commonwealth of Australia (Intervener) (2003) FLC 93-143; [2003] FamCA 395
Hicks & Trustee of the Bankrupt Estate of Hicks (2021) FLC 94-006; [2021] FamCAFC 19
Horrigan & Horrigan [2020] FamCAFC 25
Jabour & Jabour (2019) FLC 93-898; (2019) 59 Fam LR 475
JEL and DDF (2001) FLC 93-075; [2000] FamCA 1353
Kowalski and Kowalski (1993) FLC 92-342; [1992] FamCA 54
Macquarie Developments Pty Ltd v Forrester [2005] NSWSC 674
Manolis & Manolis (No 2) [2011] FamCAFC 105
Norbis v Norbis (1986) 161 CLR 513; [1986] HCA 17
Norman & Norman [2010] FamCAFC 66
Re Colorado Products Pty Ltd (in prov liq) (2014) 101 ACSR 233; [2014] NSWSC 789
Seamez (Australia) Pty Ltd v McLaughlin [1999] NSWSC 9
Stanford & Stanford (2012) 247 CLR 108; [2012] HCA 52
Zegna & Zegna (2015) 55 Fam LR 134; [2015] FamCA 340
Zegna & Zegna [2021] FamCA 538
Zegna & Zegna [2022] FedCFamC1F 391
Division: Division 1 First Instance Number of paragraphs: 238 Date of hearing: 2–9 August 2021, 30 May–1 June 2022 Place: Sydney Counsel for the Applicant: Mr North SC Solicitor for the Applicant: Taperell Rutledge Lawyers Counsel for the First Respondent: Mr Richardson SC with Mr Roberts Solicitor for the First Respondent: Barkus Doolan Winning Counsel for the Second, Third and Fourth Respondents: Mr Gould Solicitor for the Second, Third and Fourth Respondents: Buckley Lawyers ORDERS
SYC 3648 of 2011 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MR ZEGNA
Applicant
AND: MS ZEGNA
First Respondent
MR F ZEGNA
Second Respondent
MS N ZEGNA
Third Respondent
L PTY LTD
Fourth Respondent
order made by:
HARPER J
DATE OF ORDER:
4 August 2022
THE COURT NOTES THAT
A.“The partnership” is Q Pty Ltd, Mr and Ms Y, and the Applicant Husband (“the husband”) and Respondent Wife (“the wife”).
THE COURT ORDERS THAT:
1.Within 14 days of the date of these orders, the husband and wife shall do all acts and things and sign all documents necessary to instruct AK Lawyers to close the controlled monies held on their behalf and pay the balance of the funds to a bank account nominated by the wife.
2.In the event the husband refuses or neglects to instruct AK Lawyers in accordance with Order 1 within 14 days of the date of these Orders, the wife shall serve upon the Partners of AK Lawyers a certified copy of these orders and the Partners shall as soon as reasonably practicable, but no later than seven days after the date of service of these orders, do all acts and things and sign all documents to pay the monies held in trust for the husband and the wife to a bank account nominated by the wife.
3.Within 42 days of the date of these orders, the husband shall pay to the wife the following amounts:
(a)$1,390,522;
(b)$37,225;
(c)$7,863.34 plus interest calculated on this sum from 31 May 2022 at the rate of $1.17 per day to the date of payment; and
(d)$2,200.
4.Payment of the amounts required by Order 3(b) and (c) will constitute satisfaction of:
(a)the costs order made on 14 October 2015 in favour of the wife and assessed on 28 January 2020 at $37,225; and
(b)the costs order made on 3 April 2020.
5.Within 42 days of the date of these orders, the husband shall do all acts and things and sign all documents necessary to release the wife from any obligation to National Australia Bank arising in respect of mortgage registered number …95, and for the avoidance of doubt, the delivery of a letter to the lawyer for the wife from National Australia Bank expressed in unconditional terms as to such release shall be sufficient compliance with this obligation.
6.Subject to the husband having paid the amounts required by Order 3 and procured the said release, the wife shall then forthwith transfer to the husband all her right, title, and interest in:
(a)the property situated at and known as AL Street, Suburb AJ in the state of New South Wales, being the whole of the property comprised in certificate of title folio identifier … (“the Suburb AJ property”); and
(b)the partnership, including her interest in any capital account
provided that the husband shall prepare at his expense and provide to the wife within 28 days all documents that he contends ought reasonably be required to be signed by her to give effect to these orders.
7.The husband shall pay interest on any outstanding payment referred to in Order 3 of these orders at the rate prescribed in Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) calculated from the date the payment is due to be paid until such time as the payment, together with interest calculated on the payment, is paid.
8.The obligation of the husband to make the payments to the wife referred to in Order 3 shall be, and hereby are secured in favour of the wife by charge hereby declared over all of the husband's right title and interest in the Suburb AJ property, with such charge to confer upon the wife all of the rights of a chargee, adopting for that purpose the powers set out in s 109 of the Conveyancing Act 1919 (NSW), provided that the husband shall be at liberty to borrow funds against the said property for the exclusive purpose of satisfying any part of his obligations pursuant to Orders 3, 5, and 6 of these orders as they arise, with such security to remain in priority to the charge created herein, and in the event that the wife chooses to register a document recording the charge, then:
(a)she shall sign all documents and consents and withdrawals as may be required to enable the registration of any security permitted by the earlier provisions of these orders; and
(b)simultaneously with the making of the final payment of the sums to which the wife is entitled in accordance with Orders 3 and 7 of these orders, the wife shall furnish a form withdrawing such document in registerable form.
9.The husband shall indemnify and keep the wife indemnified against all or any manner of actions, suits, causes of action, arbitrations, debts, dues, costs, interest and demands whatsoever both at law and in equity which the husband, Mr F Zegna, Ms N Zegna, L Pty Ltd, and each of the companies in Schedule 1 to these orders or the partnership now have or may have at any time or times hereafter against the wife, or which may arise in respect of any act or thing done or omitted to be done by the wife, whether by reason of the wife having been a partner and/or an employee and/or any loan account in her name and/or the receipt by her of any monies or any benefit at any time from the partnership and/or by reason of the conduct of the wife alleged by the husband in his affidavit sworn on 29 June 2021 and filed in these proceedings on 9 July 2021 or by reason of the wife being allegedly indebted to any of Mr F Zegna, Ms N Zegna, L Pty Ltd or any of the companies listed in Schedule 1 pursuant to any loan or on any other account whatsoever.
10.Except as otherwise provided for in these orders to the contrary, the husband is declared the sole owner of, and the wife has no interest in all other property and financial resources, of whatsoever nature and kind, in the name or possession of the husband as at the date of the making of these orders and in the future.
11.Except as otherwise provided for in these orders to the contrary, the wife is declared the sole owner of, and the husband has no interest in all other property and financial resources, of whatsoever nature and kind, in the name or possession of the wife as at the date of the making of these orders and in the future.
12.Other than as provided for in these orders:
(a)the husband hereby indemnifies the wife from and in respect of all actions, claims, suits, and demands as may be made against the wife in relation to all liabilities in the name of the husband; and
(b)the wife hereby indemnifies the husband from and in respect of all actions, claims, suits, and demands as may be made against the husband in relation to all liabilities in the name of the wife.
13.Other than as provided for in these orders, the husband and the wife release each other from all debts owing from one to the other.
14.All outstanding applications filed by the husband and the wife be otherwise dismissed.
15.All outstanding applications by Mr F Zegna, Ms N Zegna, and L Pty Limited against the wife be dismissed.
16.In the event either party refuses or neglects to execute any deed, document, or instrument necessary to give effect to all or any of these orders then a judicial registrar of this court shall be appointed pursuant to s 106A of the Family Law Act 1975 (Cth) to execute such deed, document, or instrument in the name of the said party, and to do all acts and things necessary to give validity and operation to the deed, document or instrument upon the judicial registrar being provided with verification of such refusal or failure by way of affidavit.
17.In the event any party makes a claim for costs against another party, an application in the appropriate form is to be filed and served within 28 days of the date of these orders, and if no such application is filed within the time specified, there shall be no order as to costs.
SCHEDULE 1
Q Pty Limited ACN …
Q1 Pty Limited ACN …
AO Pty Limited ACN …
AP Pty Limited ACN …
AQ Pty Limited ACN …
VV Pty Limited ACN …
VV1 Pty Limited ACN …
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Zegna & Zegna has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
HARPER J:
INTRODUCTION
These are long-running proceedings between Mr Zegna (“the husband”) and Ms Zegna (“the wife”) concerning competing applications for the alteration of interests in property pursuant to s 79 of the Family Law Act 1975 (Cth).
The parties’ detailed proposal are set out as annexures to these reasons. In summary, by the end of the trial the wife claimed there should be a property adjustment in her favour of up to 65 percent of the property pool. She proposed this be achieved by a release to her of the entire balance of a controlled monies account, being $1,202,928, the payment to her of four specific sums totalling $2,791,520.34, and a transfer to the husband of her share in partnership property with a release of her liability for partnership borrowings.
The husband was self-represented for the first half of the final hearing, by choice, because he claimed representation was pointless. Initially, he made a raft of allegations that the wife, her family, and her solicitors had entered into a collusive arrangement during the proceedings to damage him through delay, renege on settlement agreements, and to obfuscate and conceal vast assets in Country U, meaning he should receive 100 percent of the parties’ Australian assets plus a substantial cash payment. His perception of fraud and collusion in part led to him propounding numerous irrelevant propositions, and burdening the court with literally thousands of pages of evidentiary material, a good deal of which ultimately played little or no part in his case. The length of the trial was extended as a result. He retained experienced representation for the last four days of the trial, and most of his allegations were not pressed. By the end of the trial, he proposed the release of $869,183 from a controlled monies account to the wife with the balance to be released to him, and the same transfer to him by the wife of her share in partnership property with a release of her liability for partnership borrowings. He did, however, maintain that there was sufficient evidence to warrant the conclusion that the wife has failed to disclose assets or financial resources in Country U.
The most material differences between the proposals is that the wife claims the entirety of the balance in the controlled monies account, and a substantial cash payment.
I note here that at the conclusion of the trial, the wife made an oral application for a partial property settlement order. Without objection from the husband, I ordered that $802,214 be released to the wife from the controlled monies account.
Mr F Zegna, the husband’s father, is the Second Respondent, and his mother, Ms N Zegna, is the Third Respondent. The Fourth Respondent is a corporation known as L Pty Ltd (“L Company”), which is owned and managed by the Second and Third Respondents. I will refer to these respondents collectively as “the parents”.
The parents, themselves and as controlling minds of L Company, make a separate claim against the wife and the husband for interest on funds paid for construction costs in respect of a building project at R Street, Suburb S (“R Street”), which is discussed in more detail later in these reasons. For his part, the husband accedes to this claim. The wife does not. As explained later in these reasons, the legal basis and quantum of this claim for interest went through a number of changes and evolutions during the proceedings.
BRIEF BACKGROUND
The husband was born in 1970 and is presently 52 years old.
The wife was born in 1970 and is presently 51 years old. She was born in Country U.
The parties met in 1999 while the husband was on holidays in Europe. The wife was living and working there at the time. The husband and wife began a relationship and continued the relationship after the husband returned to Australia.
The wife moved to Sydney, Australia in or around March 2000. The parties were married shortly thereafter in 2000.
In November 2001, a property at AL Street, Suburb AJ (“the Suburb AJ property”), was purchased for $1.7 million by Q Pty Ltd as to a one third share, Mr and Ms Y via the AA Partnership as joint tenants as to a one third share, and husband and wife (Mr and Ms Zegna) as joint tenants as to a one-third share. This property was valued by a single expert in October 2015 at $12 million. A commercial and residential development was carried out at this property which provided revenue for the owners and was conducted as a partnership (“the partnership”). I return to this later in these reasons.
There are two children of the marriage. B was born in 2002 and is currently 19 years old. C was born in 2004 and is presently 18 years old (together referred to as “the children”).
In October 2002, the parties purchased a property at CC Street, Suburb EE, for $700,000 (“CC Street”). The husband undertook a redevelopment of this property as the matrimonial home.
In December 2007, the husband and wife purchased R Street for $2.25 million.
In 2010, CC Street was sold for $2.7 million and the husband commenced a building project at R Street to build a new family home.
The husband and wife separated on or about 11 February 2011. A divorce order was made on 8 September 2015.
In April 2011, the husband voluntarily admitted himself to the X Clinic for treatment for … connected to an alcohol addiction. He was subsequently taken to the AZ Clinic.
The wife returned to Country U with the children in 2011. She remains living in Country U, however the children returned to Australia in 2017.
The building project at R Street (mentioned above at [7]) was ultimately finished by the parents, in particular Mr F Zegna, and the property sold for $3.38 million in November 2013, with the proceeds of sale being held by AK Lawyers in a controlled monies account. The balance of this account forms part of the balance sheet between the spouse parties, discussed later in these reasons.
The proceedings previously also involved parenting issues, concerning primarily whether the children should reside in Country U or Australia. Consent orders were made in June 2011 for the children to reside in Country U with the wife. The mother and the children then relocated to Country U. The husband commenced proceedings in March 2014 seeking the return of the children to Australia. Final judgment in those proceedings was delivered on 11 May 2015 by Watts J, who dismissed the husband’s application on the grounds that Australia was not the appropriate forum for the parenting application: Zegna & Zegna (2015) 55 Fam LR 134. The husband relocated to Country U briefly between 2015 and June 2016. When the children visited Australia in late 2017, the husband retained the children. They remain in Australia and have since reached their majority. This judgment does not deal with any parenting issues.
SOME PROCEDURAL HISTORY
It is necessary to set out the procedural history in some detail. Although this matter bears a 2011 file number, the relevant property dispute did not commence until 2015. The reason for this is that after the consent orders for parenting were made in June 2011, the husband filed an Initiating Application on 21 March 2014 in the Federal Circuit Court of Australia (as it then was) seeking fresh parenting orders. Although that application was, as explained above, dismissed in May 2015 after transfer to the Family Court of Australia (as it then was), the husband amended his application numerous times to include property adjustment orders.
On 6 November 2014, the parents filed a notice to intervene. They filed their response on 2 February 2015, seeking declarations that the husband and wife were indebted to them, and repayment of alleged debts.
The wife filed an Application in a Case in February 2015 seeking orders for the husband to account to her for all partnership distributions from the Suburb AJ property, and to pay her share of the distributions. Consent orders were made on 17 February 2015 for her to receive 1/6 of the distributions, whenever paid. However, since those orders, no distributions were actually paid, notwithstanding that the partnership accounts continued to record a distribution to the wife each financial year.
On 20 June 2017, the husband filed an Application in a Proceeding seeking that the wife’s brother, Mr H, be joined as a respondent. The husband also sought from the wife the sum of $250,000 as security for his costs, and a series of disclosure orders. His application was later amended on 29 September 2017 to seek disclosure only, and for the wife to sign authorities to enable the husband to obtain information about her financial position. In her response filed on 19 July 2017, the wife sought orders for the distribution of income from the partnership, valuation of the Suburb AJ property, and disclosure. The parents sought for some of the wife’s orders to be dismissed, disclosure from the wife, and payment of $206,525 by the parties.
Consent orders were made on 12 March 2018 dealing with these applications. These consent orders provided for disclosure, an updated valuation of the Suburb AJ property, and extension of the time for a forensic accounting report. Orders 15 and 17 of those orders were in the form of Notations, in the following terms:
15. The Court notes the agreement of the second, third and fourth respondents to accept $999,436.70 in settlement of their claim for the principal sum of $1,212,055.72 that they assert was paid by them towards the construction of the dwelling on the Suburb S property.
…
17. The Court notes that the second, third and fourth respondents’ claim for interest on the sum of $999,436.70 paid by them towards the construction of the dwelling on the Suburb S property will be determined at the final hearing, along with the question of legal costs.
There was no dispute that “the Suburb S property” referred to the property at R Street.
On 2 August 2018, the husband filed a third Further Amended Initiating Application seeking parenting orders.
The matter was listed for case management on 17 August 2018, where it was noted that the parties were to attend mediation later that month. This was unsuccessful, and the matter was transferred to my docket on 21 March 2019.
On 18 April 2019, the matter was listed before me for First Day LAT, where I made a series of case management orders.
On 13 August 2019, I made directions for the wife to file a foreshadowed Application in a Proceeding seeking to strike out the parenting orders sought by the husband. The husband ultimately discontinued his application for parenting orders on 5 November 2019.
The husband filed an Application in a Case on 21 August 2019 seeking disclosure from the wife, valuation of a company called “BD Company” and a property at City O, Country U, to be paid for by the wife, and permission to tender audio recordings and transcripts for two conversations with the wife. He also sought orders for the wife to produce testamentary documents of her parents. This application was amended on 26 August 2019 to seek further documents, as well as the sum of $300,000 to be paid to the husband for his legal costs. In her response filed on 14 October 2019, the wife sought, among other orders, dismissal of this application and $300,000 be paid to her in interim property settlement.
The parents filed an Application in a Case on 25 September 2019 seeking that they be excused from further hearing of the matter, and for the husband and wife to be restrained from accessing any controlled monies until the question of their costs and claim for interest was determined. By her response filed on 20 December 2019, the wife sought for the application to be dismissed, as well as Orders 2 and 3 of the Final Orders sought by the parents in their Amended Response be struck out.
The parents filed an Amended Application in a Case on 16 January 2020 seeking the wife’s response of 20 December 2019 be struck out, as well as orders for the preparation of a Remedial Report for the Suburb AJ property.
On 28 January 2020, a registrar assessed the costs payable by the husband to the wife in respect of the parenting proceedings before Watts J as $37,225.22.
The matter was listed for mention on 30 January 2020 and 26 February 2020, where I made procedural directions. I made it clear that the parties were expected to resolve these interim applications without judicial determination.
On 11 March 2020, both the parents and the husband filed further Amended Applications in a Case. The parents sought the appointment of a single expert to undertake a rectification report of the Suburb AJ property, whilst the husband sought disclosure and for the wife to execute letters of authority to enable access to records held by various financial institutions. He also abandoned any orders seeking the testamentary documents of the wife’s parents.
On 23 March 2020, the husband became self-represented. He remained self-represented until April 2022.
On 3 April 2020, I ordered the husband to pay the wife’s costs in respect of his 2018 application for parenting orders, fixed in the sum of $6,975.25.
On 7 April 2020, I made procedural directions concerning the various interim applications as between the parties. The matter was first adjourned to 14 May 2020, then 20 May 2020.
The wife filed two Amended Responses to an Application in a Case on 20 May 2020. The first sought that the husband’s Application in a Case, filed 12 August 2019 (and amended on 11 March 2020) be dismissed. It sought $300,000 in interim partial property settlement, distribution of the partnership income, and a range of disclosure orders. The second sought that the parents’ Application in a Case filed on 25 September 2019 (and amended on 11 March 2020) be dismissed, and a range of disclosure orders.
The matter came before me for mention on 20 May 2020. I made further procedural directions.
On 31 July 2020, the husband filed a Second Further Amended Application in a Case, initially filed on 12 August 2019 and first amended on 11 March 2020, seeking an extensive list of orders, including that the wife’s solicitors be restrained from acting for her, summary dismissal of all the wife’s applications and responses as being frivolous, vexatious, or an abuse of process, and there being no reasonable likelihood of success. The wife sought, as part of her Further Amended Response to an Application in a Case filed on 19 August 2020, additional orders for dismissal of the husband’s summary dismissal application.
On 14 September 2020, the matter was listed for a case management hearing before me. I formed the view that in light of the numerous interim applications, the most expeditious way of bringing the proceedings to finality would be to allocate the matter a final hearing date as soon as possible. The matter was adjourned to 18 December 2020 for callover, with a view to allocating final hearing dates in 2021. It was also noted that the parents did not wish to participate in the proceedings, and would submit to final orders except in relation to costs and a claim for interest.
The wife filed an Application in a Case on 25 November 2020 seeking leave, in the event the husband pressed for a valuation of a property located at FF Street, City O in Country U, for the husband and wife to appoint adversarial experts to value said property, noting that she did not concede that she had an interest in this property.
On 18 December 2020, the matter was listed for final hearing commencing on 2 August 2021, with an estimate of seven days. I also made trial directions, including for the valuation of properties in Country U.
On 11 May 2021, a registrar refused leave to the husband to issue subpoenas to two of the wife’s former solicitors. This led the husband to file an Application in a Case on 2 June 2021 seeking leave to appeal this decision, as well as leave to issue a subpoena to give evidence to both of these former solicitors.
The husband had also issued a subpoena to produce to the wife’s current solicitors. Documents were produced, although the wife objected to inspection. On 1 July 2021, a registrar struck out the subpoena.
The final hearing commenced on 2 August 2021. The proceedings were originally listed to be heard in person, but, due to the Covid-19 pandemic, proceeded via Microsoft Teams. This meant the parties and the court had to manage the large volume of material electronically. This happened with varying degrees of success. The wife had to give evidence from Country U, at late night hours local time. There were constant problems with internet connections, screen freezes and garbled audio sound. The husband was self-represented. These factors conspired to cause the matter to be part heard. It was relisted to resume on 28 September 2021 for four days.
However, due to the COVID-19 pandemic which resulted in a sudden closure of the … Registry, and the court’s inability to make arrangements at short notice in a matter where the husband was, at the time, self-represented, the matter was adjourned again. The matter was listed again for four days commencing 30 May 2022 and concluded as planned. All parties were represented during this tranche of hearing dates.
MATERIAL RELIED UPON
According to his case outline filed on 30 July 2021, the husband relied upon:
(a)Wife’s Affidavit sworn 16 August 2018;
(b)Affidavit of Mr H filed 27 July 2021;
(c)His Affidavit filed 30 July 2021;
(d)Second Further Amended Application in a Case dated 31 July 2020 and filed 31 July 2020;
(e)His Financial Statement sworn 14 July 2021;
(f)His Affidavit filed 9 July 2021
(g)Affidavit of Ms GG filed 9 July 2021
(h)Affidavit of Mr P filed 9 July 2021;
(i)Affidavit of Mr F Zegna filed on 9 July 2021;
(j)Affidavit of Mr LL filed on 11 March 2020; and
(k)Notice to Admit Facts and Documents dated 19 December 2019 and served the same day to JJ Lawyers (the wife’s previous solicitors).
The husband was cross examined. I note that although the husband’s solicitors (who were engaged after the first tranche of hearing dates in August 2021, but prior to the second tranche in May 2022) filed a case outline, they did not provide an updated list of documents sought to be relied upon.
As set out in her case outline, the wife relied upon:
(a)Further Amended Response to Second Initiating Application filed 3 February 2021;
(b)Amended Response to the Husband’s Application in a Case filed 20 May 2020;
(c)Amended Response to the Intervener’s Application in a Case filed 20 May 2020;
(d)Further Amended Response to an Application in a Case filed 19 August 2020;
(e)Financial Statement filed 12 July 2021;
(f)Affidavit filed 9 July 2021 together with Exhibit W2;
(g)Affidavit of Ms I (the wife’s mother) filed 8 August 2014;
(h)Affidavit of Mr K (translator in Country U) filed 6 November 2014;
(i)Affidavit of Mr K re: Deed of Partition of Father’s Estate filed 6 November 2014;
(j)Notice Disputing Facts 19 August 2015;
(k)Notice Dispute Facts dated 15 June 2020; and
(l)Section 50 Notice to the Husband served 5 July 2021.
The wife was cross examined.
The parents filed their Amended Case Outline on 3 August 2021, relying upon:
(a)Minute of Order;
(b)Affidavit of Mr F Zegna sworn 24 June 2021;
(c)Affidavit of Mr P sworn 22 June 2021 (filed on behalf of the husband).
(d)Affidavit of Mr P sworn 3 August 2021 (filed on behalf of the Second and Third Respondent); and
(e)Affidavit of Mr F Zegna sworn 10 February 2015 – paragraphs 31, 33, 50, 61, and 99.
When the matter resumed on 30 May 2022, the parents made a further application to the court to receive an affidavit of Mr Zegna senior, sworn 9 May 2022, and an affidavit of Mr P (the parents’ accountant), sworn on 21 September 2021. I made orders which accepted some parts of these affidavits into evidence: Zegna & Zegna [2022] FedCFamC1F 391.
Mr Zegna senior was cross examined.
The following documents were tendered and placed into evidence:
Exhibit Label
Document
Tendered by
A
Final Bundle of Documents (2717 pages)
H
B
Email from Ms Zegna on 23 March 2011 and email from Mr Zegna to Ms Zegna on 23 March 2011 (email only)
H
C
Husband’s costs notice
H
D
Joint Balance Sheet emailed 1 June 2022
H
E
Husband’s proposed minute of order
H
F
Revised Outline on Behalf of the Husband
H
1
Objections on behalf of Respondent Wife
W
2
Minute of Orders proposed from Tender Bundle 2 and letter from Barkus Doolan to AK Lawyers from Tender Bundle 2
W
3
Minute of Order sought dated 1 June 2022 – replacing the previous minute
2-4R
4
Wife’s Tender Bundle (734 pages)
W
5
Paragraphs 20, 25, 34, 35, and 36 of Mr Zegna’s affidavit filed 1 October 2014.
W
6
Email from Mr Zegna to Ms Zegna dated 15 February 2011.
W
7
Email from Mr P to Mr MM, Mr F Zegna, Subject: M Company & L Company
2-4R
8
Wife’s Tender Bundle 3
W
9
Notice to Produce (9 pages) (limited under s 136 Evidence Act, documents not received as truth of any representations contained by either the book keeper or lawyer)
2-4R
10
Tender Bundle emailed on 8 August 2021
2-4R
11
Exhibits of Mr F Zegna to his affidavit sworn 24 June 2020
2-4R
12
Hand written document p. 102 in Second to Fourth Respondent exhibits
2-4R
13
Affidavit of Ms Zegna sworn 8 July 2021 and filed 9 July 2021 together with Exhibit W2
W
14
Affidavit of Mr NN (translator) sworn/affirmed 19 October 2020 and filed 30 October 2020 together with Exhibit filed 30 October 2010
W
15
Affidavit of Mr OO (translator) filed 21 July 2021 together with Exhibit filed 21 July 2021
W
16
Affidavit of Mr PP (Country U valuer) sworn 21 July 2021 and filed 22 July 2021 together with Exhibit filed 22 July 2021
W
17
Affidavit of Mr H (wife’s brother) sworn 26 July 2021 and filed 27 July 2021 together with Exhibit filed 27 July 2021
W
18
Affidavit of Mr KK sworn and filed 29 July 2021 together with Exhibit filed 29 July 2021 + letter of 10 August 2021 and valuation report addendum
W
19
Two affidavits signed by wife, but not sworn – 1 August 2021 and 5 August 2021
W
20
Decisions and reasons for decision of AAT concerning child support – dated 3 May 2022
W
21
Wife’s costs notice
W
22
Second to Fourth Respondents costs notice
2-4R
23
Exhibit to affidavit of Ms QQ 28 April 2022, Schedule 1 – Q Company, Zegna, AA Partnership, with handwritten notations.
Joint
24
Letter from JJ Lawyers dated 26 February 2015
W
25
Wife’s minute of order 1 June 2022
W
Expert evidence
Two single experts were appointed in this matter.
Mr KK was appointed to value the Suburb AJ property. He swore three affidavits, dated 27 July 2016, 10 August 2016, and 29 July 2021. Mr KK produced two reports – a Full Valuation Report dated 13 March 2016 and a Valuation Report Update dated 26 July 2021. Mr KK was also cross examined during the final hearing dates in May 2022.
Ms QQ is a forensic accountant who was appointed to value the interest held by the husband and wife in the partnership. This included the current value of the partnership, taking into account the valuation of the Suburb AJ property by Mr KK, and any dealings with the capital and drawings account for Mr and Ms Zegna from 1 July 2010 onwards. Ms QQ prepared a report dated 30 July 2021, and swore an additional affidavit which was filed on 28 April 2022, which was an updated valuation based on 2021 financial information. Ms QQ was not required for cross examination.
COMPETING PROPOSALS
I summarised the parties’ competing proposals at the start of these reasons. It is not necessary to set out the extremely extensive, and often misconceived, list of property settlement orders that the husband initially sought. His proposal, together with the issues for determination, narrowed significantly by the end of trial. The husband’s final proposed minute of order is detailed in “Annexure A,” set out at the conclusion of this judgment.
The wife sought orders as set out in Annexure “B,” whilst the parents sought orders as set out in Annexure “C”.
THE LAW
Part VIII of the Act sets out the legislative provisions relating to property orders that may be sought when parties are or were married. The central provision is s 79 of the Act, which gives the court power to make such orders for alteration of property interests as it considers appropriate.
Section 79(2) of the Act provides that:
The court must not make an order under this section unless it is satisfied that, in all the circumstances, it is just and equitable to make the order.
Section 79(4) of the Act set outs the factors to be taken into account in considering what order, if any, should be made. These will be discussed in detail below.
Section 80 grants specific powers to make a range of different orders to adjust property interests.
Section 81 is also relevant, although the Full Court has held it is neither a “head of power” nor an absolute requirement; it reflects a policy of making orders which finally determine the financial relationship between the parties and avoid further proceedings, but this is only to be taken “as far as (is) practicable”: Crapp and Crapp (1979) FLC 90-615.
APPROACH TO BE TAKEN
In property proceedings under the Act, parties generally rely upon the “four step process” set forth in Hickey and Hickey and Attorney General for the Commonwealth of Australia (Intervener) (2003) FLC 93-143 in the determination of an application under s 79, as follows:
1.Identify and value, the parties' property, liabilities and financial resources at the date of the hearing;
2.Identify and assess the contributions of the parties as referred to in s.79 of the Act and determine the contribution based entitlements of the parties expressed as a percentage of the net value of the property of the parties, whether examined on a global approach or an asset by asset approach;
3.Identify and assess the other factors relevant including, the matters referred to in s.75 of the Act and determine the adjustment (if any) to be made to the contribution entitlements at step two; and
4. Consider the effect of the above and resolve what order is just and equitable in all the circumstances of the case.
In Stanford & Stanford (2012) 247 CLR 108 (“Stanford”) the High Court made clear at [37] it is necessary to begin consideration of whether it is just and equitable to make a property settlement order by identifying, according to ordinary common law and equitable principles, the existing legal and equitable interests of the parties in the property. The Full Court in Bevan & Bevan (2013) FLC 93-545 (“Bevan”) at [72]–[73] has held that the decision in Stanford has not overruled the four step approach.
Stanford also made clear that the requirement pursuant to s 79(2) that it would be just and equitable to make orders altering property should not be conflated with the requirements of s 79(4). The High Court further stated at [39] that the question of whether it is just and equitable to make an order “is not to be answered by assuming that the parties’ rights or interests in marital property are or should be different from those that then exist”, ie, at the time when the discretion may be exercised.
In relation to the just and equitable requirement, the Full Court in Bevan emphasised that although the pre-condition to making any order for property adjustment is a finding that it is just and equitable to do so in accordance with s 79(2) of the Act, such a finding does not form a threshold issue, nor must the requirements of s 79 be followed in a particular order.
The Full Court in Bevan at [73] also summarised three “fundamental propositions” laid down by the High Court in Stanford to provide “useful guidance to trial judges in approaching the task under s 79” as follows:
1.Determination of a just and equitable outcome of an application for property settlement begins with the identification of existing property interests (as determined by common law and equity);
2.The discretion conferred by the statute must be exercised in accordance with legal principles and must not proceed on an assumption that the parties' interests in the property are or should be different from those determined by common law and equity;
3.A determination that a party has a right to a division of property fixed by reference only to the matters in s 79(4) and without separate consideration of s 79(2), would erroneously conflate what are distinct statutory requirements.
The High Court has held that the very fact of separation may lead to the ready satisfaction of just and equitable requirement: Stanford at [41]–[42]. In most cases, the court will not need to discuss the s 79(2) issue, because the cases will be conducted on the basis of acceptance by the parties that it is just and equitable to make some form of adjustment: Fielding and Nichol [2014] FCWA 77 at [43]. Here, the parties accept it would be just and equitable to make some form of adjustment. The just and equitable requirement has been satisfied by the issues joined and the way the case was conducted. The court must also be satisfied that its proposed final orders are themselves just and equitable. I will return to this question later in these reasons.
I will therefore approach the determination of this matter by first identifying the assets and liabilities of the parties, then by dealing with s 79(4) factors, including s 75(2). However, before making findings and expressing conclusions about the composition of the balance sheet, it is necessary to express my views about the credibility of witnesses and the allegations of non-disclosure made throughout these proceedings.
Credibility of witnesses
In these proceedings, the husband made stringent and continuous assertions that the wife and her lawyers had engaged, over many years, in conduct which was deliberately intended to run up legal fees and delay a final resolution of the proceedings. He continuously accused the wife of deliberate obfuscation and a malicious intention to cause him pain and suffering. The wife, for her part, directly challenged the credibility of the husband as a witness of truth, and the authenticity of a document authored by the husband. She also challenged the evidence relied upon by the parents in support of their claim for interest. As will appear later in these reasons, the identification of the parties’ assets and liabilities requires forming a view about the credibility of witnesses. Accordingly, I will express some general conclusions about the credibility of the witnesses, other than experts.
The wife was cross examined at length by the husband. I found her to be an impressive and reliable witness. I generally accept her evidence unless otherwise stated in these reasons. Her brother Mr H was also cross examined. I also found him to be an impressive witness and I generally accept his evidence.
Overall, I was not impressed by the husband as a witness. His evidence was characterised by numerous problems which impugned his credibility. Several examples will suffice to demonstrate this.
He was argumentative in giving answers. I was compelled to direct him to answer questions on numerous occasions. Rather than focussing on giving careful answers, he used his time in the witness box to expound continually his theory of conspiracy and malign conduct by the wife and her family. I formed the view that the husband had convinced himself so firmly over the course of the proceedings that the wife and her family had perpetrated a vast conspiracy upon him to hide assets in Country U, that he was able to see evidence supporting this belief in material which was objectively quite innocuous or easily explained. I do not accept the husband as a reliable witness.
As discussed later, the husband complained vociferously about the wife’s disclosure. But his own disclosure about his current employment was inadequate. In cross examination, he maintained that he had not engaged in employment in the period 2014–2021, except for providing some consulting in 2020. Nonetheless, in hospital records produced in connection with the parties’ daughter, C, a number of notes were made in which the husband told hospital staff that he had been working as a consultant. In a hospital parent questionnaire dated 14 August 2020 completed by the husband in his handwriting, in answer to question about his employment, he claimed he worked full-time in consulting. When cross examined about this entry, he claimed it was completely false, but when pressed, confirmed this characterisation to the description of his job as “full-time”. When questioned as to why he would complete a parenting questionnaire with false entries for hospital staff in connection with his own daughter, he claimed that it was none of their business what his work was and he did not give much thought as to how the form was completed because he was worried about his daughter (Exhibit 4, p.681). In progress notes dated 31 January 2021, it is recorded that the husband told hospital staff that he had been spending a lot of time with C over the previous eight months and “scaled back work as a [professional] to support her as she has been home a lot” (Exhibit 4, p.685). These evidentiary fragments raised clear questions about his employment. But the husband, despite relying on thousands of pages in support of other parts of his case, failed to include any clear detail in his affidavits about his current employment.
The husband had a tendency to make inaccurate assertions to the court when appearing for himself. One glaring example was his assertion that his application seeking orders for the wife to produce testamentary documents of her parents had never been determined, because the wife had continuously obfuscated and delayed, and she had failed to disclose the testamentary documents. But as pointed out earlier in these reasons, on 11 March 2020, the husband abandoned any orders concerning testamentary documents of the wife’s parents (above at [32] and [37]).
The Suburb AJ property comprises ten two-bedroom apartments, one three-bedroom apartment, and two commercial premises. Throughout the relationship and after separation, the Suburb AJ property was operated by the owners as a partnership, which received revenue from the apartments and commercial suites, and which made distributions to the partners up to 2015. Between 2008 and 2014, distributions were made jointly to the husband and the wife in the sum of $545,000, but the funds were received by the husband to the exclusion of the wife. There was no dispute, and Mr Zegna senior gave affidavit evidence concerning this, that the partnership from 2015 accumulated approximately $1.73 million in undistributed income. An order had been made by consent by Watts J on 17 February 2015 requiring the partners to take all necessary steps to distribute to the wife 1/6 of any distribution made. Despite the fact that in the years prior to 2015, regular distributions were made to the partners, these ceased after the consent order was made. It is noteworthy that the husband contended that in the period after the consent orders, he was in straitened financial circumstances because of the conduct of the wife, to the extent, for example, that he was unable to meet the children's school fees. He maintained this position in cross examination, even when confronted with the undisputed fact that between 2017 and 2021, the partnership accumulated $1.73 million in undistributed income. It was put to the husband that he disingenuously entered into the consent orders whilst fully intending to collude with the other members of his family to cease any further distributions, in the belief that the order only required payment to the wife if a partnership distribution was actually made. The husband denied this. I do not accept his denial. I am satisfied that, probably in conjunction with the other partners, apart from the wife, the husband deliberately connived to prevent any further distributions of partnership profits with the intention of denying income to the wife. I find the husband had access to substantial funds from the partnership, but chose not to receive those funds for this reason. I also find that the husband’s assertions of financial difficulty caused by the wife to be entirely unconvincing.
The husband also gave evidence during his cross examination which was inconsistent with prior affidavit evidence he had sworn earlier in the proceedings, specifically prior to 2017. For example, in his trial affidavit the husband disputed that the wife had funds of $25,000 when she moved to Australia, asserting instead that she had no funds at all. However, in an affidavit he had filed on 30 September 2014 (parts of which became Exhibit 5), he stated that “I recall the wife had limited funds of approximately $25,000.” In cross examination, he stated that he could not recall the wife having any money upon her arrival in Australia. He also withdrew assertions that he had made in affidavits sworn prior to 2017, including a statement in Exhibit 5 that “In or around 2011, the wife and I commenced the construction of a home on the Suburb S property using our joint funds.” The husband also wished to withdraw the following statement made in an affidavit filed on 3 February 2015:
21. While the construction was being undertaken I had attempted to stop the construction as I believe [Ms Zegna] and I did not have the financial capacity to borrow money to fund the construction cost nor did we have the money to pay for the construction cost. Additionally, given I was not speaking to my father at the time I thought it was inappropriate to continue to borrow money from him to fund the construction of [R Street].
Both these statements in the husband’s earlier affidavits were inconsistent with his contention, and the parents’ case, that he entered into an agreement with his father in July 2010 to borrow money from his parents to fund the construction at R Street and pay interest on the borrowings. When questioned about these inconsistencies, the husband stated the following in answer to senior counsel for the wife:
I’m being as honest and – I’m being as honest and sincere as possible. I had my children stolen from me. I was travelling to [Country U] four to six times a year. I was trying to improve my mental health so, with all due respect, I rely on those affidavits with respect to your client not providing disclosure. That’s what I’m saying.
(Transcript 4 August 2021, p.40 lines 13–17)
I then asked the husband the following:
[HIS HONOUR]: [Mr Zegna], does that mean that I should ignore your evidence prior to 2017?
[THE HUSBAND:] Well, look, your Honour, what I’m trying
[HIS HONOUR]: No, no. Just tell me should I ignore it or not?
[THE HUSBAND]: Look, I think it’s – it’s a case by case basis in terms of looking at things because there are some things I can remember and – and there are some things I can’t. And I’m just saying from 2017 that’s when I really started looking at things, you know, a – a little bit more seriously and facing things, your Honour, and that’s the utmost truth.
(Transcript 4 August 2021, p.152 line 45–p.153 line 5)
The husband’s answer was not satisfactory. Overall, I am satisfied that the husband had a general tendency to try to depart from any previously sworn evidence which may have damaged his case, or his parents’ case. I accept the wife’s submission that what the husband had to say about his affidavits from 2014–2017 demeans his credibility.
I did not find Mr Zegna senior to be reliable witness either. At times, he was argumentative and resistant to answering questions in cross examination.
Stark similarities between the affidavit evidence of both Messrs Zegna also undermined the credibility of both. As cross examination by senior counsel for the wife ably demonstrated, there were numerous paragraphs of the husband’s affidavit and those of his father which were in identical, or almost identical, terms.
In Seamez (Australia) Pty Ltd v McLaughlin [1999] NSWSC 9 at [36] and [40], Sperling J pointed out that a high degree of “similarity in content, detail, terminology and sequence” between the affidavits of three witnesses shows direct or indirect collaboration, and means one of two similar accounts cannot be a genuine recollection and may be worthless. In Macquarie Developments Pty Ltd v Forrester [2005] NSWSC 674, Palmer J expressed the view that such identity of language between the affidavits of separate witnesses devalues the evidence of the witnesses involved, even if it may not render it worthless (at [89]–[91]). In Celermajer Holdings Pty Ltd v Kopas (2011) 16 BPR 30,735 at [186], Ward J (as she then was) expressed the same view, pointing out it is unlikely that two deponents would have a precisely identical recollection, uninfluenced by the recollections of others, of shared experiences.
In Re Colorado Products Pty Ltd (in prov liq) (2014) 101 ACSR 233, Black J considered these authorities and at [16] expressed the view that it did not matter whether the identical passages in affidavit evidence was the result of collusion between the witnesses personally, or was the result of adopting evidence that had been copied from the affidavit of another, or a witness adopting evidence that had been copied from another's affidavit. Ultimately, “each substantially devalues both witnesses’ affidavit evidence where no explanation has been given of what occurred.” Black J stated that it is not possible for the Court to be satisfied in such a situation, that the witness’ evidence reflects a genuine recollection of events: see also Dentown Pty Ltd v PWI Group Pty Ltd (as trustee of the Australia No. 1 Group Trust) (2019) 141 ACSR 330 at [16].
It was put to Mr Zegna senior that he colluded with the husband in preparing his affidavit. He denied this, but said his affidavit was prepared with the help of his son Mr HH, who did not give evidence. Mr Zegna senior was asked about the similarities between his affidavits and those of the husband. There was no satisfactory explanation of the similarities between the affidavits of the Messrs Zegna. In accordance with the authorities discussed above, their evidence is devalued generally.
This is a situation ripe for the application of the statement by Keane JA (as he then was) in Camden & Anor v McKenzie & Ors [2008] 1 Qd R 39 at [34], where he said:
Usually, the rational resolution of an issue involving the credibility of witnesses will require reference to, and analysis of, any evidence independent of the parties which is apt to cast light on the probabilities of the situation.
I approach the evidence of the Messrs Zegna with caution. Where the evidence of the wife or other witnesses conflicts with the evidence of the husband or his father, I prefer that evidence of the wife, and those other witnesses.
NON-DISCLOSURE
Both spouse parties made allegations of non-disclosure by the other party.
In Hicks & Trustee of the Bankrupt Estate of Hicks (2021) FLC 94-006, the Full Court recently stated the principles concerning non-disclosure and its consequences as follows:
86. It is trite that the integrity of the s 79 process heavily depends upon the absolute duty of parties to meet their obligations of full and frank disclosure of all information relevant to the case, including disclosure of their financial position both as to assets and liabilities.
87. Whilst at one time this Court appeared to adopt the approach in non-disclosure cases that the jurisdiction under s 79 of the Act was limited to making orders with respect to identified, identifiable or quantified assets (see, for example, Monte and Monte [1986] FamCA 1; (1986) FLC 91-757), more recent Full Court authority supports the principle that a party should not be able to take advantage of his or her own non-disclosure such that it may be appropriate to make an order beyond the ascertained property, provided that any order made on this basis can be seen to achieve substantial justice relative to the subject non-disclosure (Weir at 79,593).
88. Where there exists sufficient evidence of non-disclosure, Weir supports the approach that the Court should not be "unduly cautious" in making findings in favour of the other party (Weir at 79,593). The primary judge referred to that approach at [167] in assessing contributions.
89. Importantly, failure by parties to provide credible evidence relating to aspects of their financial affairs does not entitle the Court to dismiss applications or to relieve the Court of the responsibility of applying the provisions of the Act in the light of such findings as can be made.
(footnotes omitted)
I will deal with the specific contentions about non-disclosure in accordance with Full Court authority and as necessary in the course of these reasons.
However, as mentioned earlier, the husband was seized by a conviction during the proceedings that the wife had extensive undisclosed assets in Country U. It is convenient to deal with this assertion here. The basis for the husband’s belief lay in the existence of spreadsheets of assets which the wife’s brother sent to him in 2007. These spreadsheets set out assets of the wife and her family in Country U, deriving from the wife’s father’s estate, who died in 2005. The value of the wife’s family’s assets as at 30 June 2007 was said to be EUR10,735,081, with wife enjoying a 1/3 interest in a number of properties:
(a)BB Street, City O;
(b)RR Street, City W;
(c)TT Street, City O;
subject to the wife’s mother having the benefit of those properties during her lifetime; and
(d)The wife, her mother, and her two brothers were the joint legal owners of a property located at UU Street, City V, subject to the wife’s mother having the benefit of that property during her lifetime
According to the evidence of the brother, who was cross examined, the wife and her siblings held these assets for the benefit of their mother, until her death. The husband’s case was that the wife was owner of these assets at all times, while her brother gave evidence that under Country U law, the wife and her siblings were legal owners of the assets, but there was no entitlement to income and benefits from those assets. However, I do not think this difference requires resolution. The husband’s argument was that there was no explanation of why the assets of the wife’s family were reduced to $721,144 for real property and about EUR16,000 in cash and shares between 2007 and the final hearing. He spent considerable time in his affidavits, and whilst representing himself, propounding the theory by reference to the spreadsheets that the wife must continue to hold extensive assets in Country U.
I find this theory entirely unconvincing. The wife clearly disclosed a one third interest in four Country U properties with a total value of about $720,000. Her brother, under cross examination, explained that the wife’s family lost heavily in the years between 2007 and 2022, through the vicissitudes of the market, the Global Financial Crisis, and the collapse of Lehman Brothers. I accept this explanation. I do not think it matters whether the wife was part legal owner of any of those properties, as understood in Australian law, during the life of her mother. Her mother has since passed away in 2016. The wife has disclosed the properties in which she now has an interest, as well as their value. I do not accept there has been non-disclosure by the wife of assets in Country U.
CLAIM OF THE PARENTS
It is convenient to deal with the parent’s claim for interest at this point. My conclusions about this claim will affect the composition of the spouse parties’ balance sheet.
The background to this claim were partly described in an ex tempore judgment delivered during the first tranche of the proceedings: Zegna & Zegna [2021] FamCA 538:
3. … It is uncontentious that the parties purchased [R Street, Suburb S] on 18 June 2008. The purchase price was some $2,225,031. It appears that the funds for the purchase price were provided by the Second Respondent, [Mr F Zegna], and two other companies. At the end of 2009 or the beginning of 2010, the existing building at [R Street] was demolished and the construction of a new home commenced.
4. Construction was incomplete when the Husband and Wife separated in about February 2011. Thereafter, the Second Respondent, [Mr F Zegna], seems to have taken responsibility for progressing and completing the construction. The Second and Third Respondents argue that they, or perhaps one of their associated companies, paid for the completion of the construction at [R Street]. They have claimed during the proceedings that they paid approximately $1.2 million for this purpose. The Husband has agreed with this figure during proceedings, but the Wife has not.
The claim went through a number of evolutions during the course of the proceedings. Initially, when Mr Zegna senior represented the parents and their interests, the claim for interest appeared to be made by reference to the figure of $999,436.70 set out in the notations made on 12 March 2018 (above at [26]). It was suggested orally that the notation recorded, or at least made reference to an agreement to pay interest. In their pleadings, the parents initially based their claim for interest on statute. For example, in an Amended Response filed on 28 May 2019, they claimed an entitlement to interest calculated at the Division 7A benchmark interest rate as defined in the Income Tax Assessment Act 1936 (Cth). They later changed this to provisions of the Family Law Rules 2004 (Cth) in an Amended Case Outline filed after the trial commenced. However, by the end of the trial, the juristic basis of the claim was ultimately formulated as a claim for interest based upon a contract, said to be struck in 2010.
At the commencement of the trial, the claim was quantified at $490,467.60. Later, it was quantified at $582,176.03. In their minute of orders sought filed on 1 June 2022, the claim was reduced to $223,229.06, against both spouse parties jointly. The quantification of the claim was given through affidavits of an accountant, Mr P, who made calculations up to the date of the notations of 12 March 2018.
The initial question requiring determination, therefore, is whether the parents have proved that an agreement was made in 2010 between the wife and the husband on the one hand, and the parents on the other, for interest to be paid on the amount advanced to complete the construction of R Street. The wife argued that the parents had failed to prove any intention by the parties to enter into the alleged agreement, and that in any event, the terms of the alleged agreement are too uncertain to be enforced. For the following reasons, I am not persuaded the parents have proved any agreement to pay interest was entered into.
As the notations made on 12 March 2018 (above at [26]) show, there was no dispute that the parents or entities associated with them provided funds for the completion of the building project at R Street. There was a dispute about the total amount provided, but equally clearly, the principal amount was ultimately agreed to be $999,436.70. There was no dispute this has been repaid to the parents from the sale of R Street.
Mr Zegna senior gave evidence that he became involved in the R Street construction only in February 2011. The husband agreed with this. The wife’s case is that the parents did not take over construction of the property until March 2011. This difference is not material.
The agreement was said to be entered into in about July 2010, between Mr Zegna senior and the husband, on behalf of himself and the wife. The parents argued that the wife readily conceded in cross examination that she left all financial matters to the husband. Therefore, so the argument went, she was in no position to deny, and was bound by, the agreement struck between the Messrs Zegna. They gave affidavit evidence about the existence of the agreement, including conversations said to have taken place between Mr Zegna senior and the wife in March and June 2011, in which the wife acknowledged the liability for interest. In particular, the parents relied upon paragraphs of the affidavit of Mr Zegna senior sworn on 10 February 2015, in which he claimed the wife said such things as “I will guarantee you that you will get your money…interest and more” and “I don’t give a shit about [R Street]…I have a lot on my plate…Get a loan, pay yourself back, pay yourself the interest, pay yourself for looking after the job”.
The wife denied this evidence. She denied ever being a party to a loan agreement or an agreement to pay interest. Upon the parties’ separation in early 2011, the wife stated that she wished for the property to be sold in an incomplete state, believing it to be too stressful to manage the remainder of the construction. She asserts that when the husband’s father assumed responsibility, she did not argue with this, nor were any discussions had with either the parents, nor the husband, about the cost or who would be responsible. Further, she states there were no conversations between her and Mr Zegna senior about lending the parties’ money or about interest being charged on money loaned.
It was the wife’s evidence that there was no mention of repayment of any loan until July 2012, when the husband informed her about a loan. The parents, meanwhile, did not raise the question of repayment until October 2013. Had she been aware that there would be interest charged on the money for the construction of the property, she states she would have prevented the parents from taking over construction.
The only document to which the parents could point, which was said to record the alleged agreement, was Exhibit 12. In submissions, the parents acknowledged this handwritten document was the high point of the documentary evidence in support of their claim. It is in the following terms:
28 July 2010
Hi dad, thank you for lending me money for [R Street] construction cost.
As agreed, interest rate to be paid on the loan to be bank bill rate plus one and a half percent margin.
P.S. can you please pay the following:
[BC Company] invoice $8,850.00
Thanks a million.
[Husband’s signature].
The wife impugned the authenticity of this document. She put squarely to the husband in cross examination that Exhibit 12 was a recent fabrication created for the purposes of the proceedings. When it was first put to the husband, he said he could not remember it. The wife pointed out that it bore a date some seven months before Mr Zegna senior took control of the R Street building project.
The “BC Company invoice” refers to two invoices, which total $8,850, and are addressed to Q Company, the parents’ company, in relation to work at a job site at BF Street, Suburb BG. The husband explained in cross-examination that this is a commercial property with offices and storerooms, and L Company owns one office there. These invoices were in no way related to R Street.
The husband was clear in cross examination that as at July 2010, he had ample funds for the early stages of the construction at R Street, being, apart from what he spent on consultants, excavation and demolition, somewhere in the order of $900,000, although he could not clearly explain where this funding came from. He did not claim it came from his parents. This was also his evidence at the early stages of the property proceedings. Exhibit 5 is a copy of certain paragraphs of an affidavit filed by the husband on 1 October 2014. At paragraph 35, he said that “In around 2011, the Wife and I commenced the construction of a home on the [Suburb S] property using our joint funds.” There is no suggestion that he was using his father’s money.
In cross examination, it was put to the husband that he had stated the following in a previous affidavit of 3 February 2015, prepared when he was legally represented:
21. …I believe [Ms Zegna] and I did not have the financial capacity to borrow money to fund the construction cost nor did we have the money to pay for the construction cost. Additionally, given I was not speaking to my father at the time I thought it was inappropriate to continue to borrow money from him to fund the construction cost of [R Street].
The husband attempted to resile from this evidence on the basis that his affidavits prior to 2017 were unreliable due to his mental health issues (see above at [84]–[85]). Given my conclusions about the husband’s unreliability as a witness, in particular, my rejection of his assertions about the reliability of his pre-2017 evidence, and given the evidence in his affidavit of 3 February 2015 is consistent with the evidence of the wife, I accept it as accurate.
It should be emphasised that the parents contend an agreement to pay interest in respect of R Street was made in July 2010, not at any other time. There was no clear evidence in the affidavit material actually read and relied upon by Mr Zegna senior of any discussions with the husband in mid-2010 about money lent from the construction at R Street, let alone interest on any such loan. Nor was there such evidence in the affidavits read by the husband, including his trial affidavit, which ran to over 800 paragraphs. The point is that, even according to the evidence of the husband and his father, there was no plausible reason for such an agreement to be made in July 2010, because there was no necessity for the husband at that time, according to his own evidence, to borrow money from his parents for the purposes of R Street. As noted above at [83]–[86], he gave affidavit evidence before 2017 in these proceedings which was inconsistent with borrowing any money from the parents in 2010. There was no reason to mention a loan advance for R Street in a note to his father on 28 July 2010. The inclusion of the “BC Company invoices” on one view reinforces the inference that the note was not created on the date it bears. On the other hand, the inclusion may simply be entirely an afterthought, not, and not intended to be, connected to R Street. The husband gave no evidence explaining when the project at BF Street, Suburb BG took place or why “BC Company invoices”, which related to an entirely different property, should be included in a note about R Street in July 2010.
The mention of an interest rate calculated by reference to “bank bill rate plus one and a half percent margin” is also impossible to reconcile with the parents’ later pleaded claims to interest calculated by reference to Supreme Court of NSW or Family Court of Australia rates. There was no explanation of how such statutory rates could ever have been applicable if, in truth, there had been an agreement since July 2010 to pay interest calculated at the “bank bill rate plus one and a half percent margin”.
I prefer the wife’s evidence in respect of the parents’ claim. I reject the evidence of the husband and Mr Zegna senior that an agreement was struck for the spouse parties to pay interest on funds provided to complete the building project at R Street. I prefer the wife’s version of conversations in this regard, and her denials of the versions given by Mr Zegna senior. This includes paragraph 61 of Mr Zegna senior’s affidavit sworn 10 February 2015, which early in the trial I rejected, but have decided to admit as evidence when viewed in light of the manner in which the claim for interest was ultimately formulated. I reject Exhibit 12 as reliable evidence of any agreement to pay interest in respect of R Street. I do not accept any affidavit or oral evidence of either the husband or Mr Zegna senior that such an agreement to pay interest was ever made. There was no intention to create legal relations on the question of interest. Accordingly, the claim of the parents fails.
This conclusion makes it unnecessary to express a view about the enforceability of the terms of any such agreement, on the assumption it was made. However, if I am wrong about the existence of the agreement, the evidence of the parents do not disclose any terms of the agreement which are sufficiently certain to be enforced. For example, the parents’ reliance on the purported term the “bank bill rate plus one and a half percent margin” highlights the problem. There was no evidence which would allow identification of which bank bill rate was meant.
ASSETS, LIABILITIES AND FINANCIAL RESOURCES AT THE DATE OF THE HEARING
I turn then, to the identification of parties’ property, liabilities, and financial resources at the date of the hearing, according to ordinary principles of law and equity.
A joint balance sheet was tendered by the parties, which became Exhibit D. A number of items of the balance sheet remained in dispute. In relation to these disputed items, I express my conclusions as follows, noting the reference to Item numbers is a reference to the item number on Exhibit D.
Husband’s shares in M Pty Ltd (“M Company”) – Item 12
The husband owns ten shares in this company, of which he is the director. He owned and operated M Company as a business as at cohabitation, and has continued to do so. He gives his interest a modest present value of $4,217 in the balance sheet. In submissions, the husband contended that financial accounts for M Company have not been prepared since approximately 2016, and that the figure provided from the balance sheet is derived from his own financial statement. The financial statement actually records a “[M Company] NAB Cash account” in the sum of $4,216.76, together with a $414,000 liability to the company at Item 41.
The wife contends that this interest could not be valued because of the husband’s non-disclosure. She submitted this should lead to adverse inferences being drawn against him. I accept these submissions. I draw the inference that M Company should be treated as a financial resource of the husband. I will take it into account under s 79(4)(e). The shares of the husband will not be included in the balance sheet because they cannot be given a value, and are not obviously a divisible asset. The husband gave evidence that M Company lent him $414,000, but as the wife submitted, there is no evidence to suggest, if the alleged loan was repaid, anyone but the husband would benefit. I do not accept the loan of $414,000 as a liability of the husband which is likely to be repayable.
Husband’s interest in VV Pty Ltd – Item 18
VV Company was incorporated in 1972. Its Memorandum and Articles of Association, now called its constitution, were in evidence. By cl 6 of the constitution, the share capital of the company is divided in 10,000 shares of $1.00 each. Those shares are divided into different classes from “A” to “H” with 3,990 remaining unclassified. There are only five each of “A” and “B” class shares, which are five percent cumulative preference shares. Mr Zegna senior holds the “A” class shares and Ms N Zegna senior holds the “B” class shares. The “A” class shares have attached the entitlement to complete management and control of the company. They entitle Mr Zegna senior to be “Governing Director”. The powers of the Governing Director are very broad and include the power to declare dividends. The “B” class shares entitle the holder to exercise the rights presently attached to the “A” class shares, except while Mr Zegna senior remains the holder of those shares.
Clause 6 of the constitution provides that “C” to “H” class shares are allotted in parcels of 1,000. “A” and “B” class shares have a right to a fixed preferential cumulative dividend at the rate of five percent per annum on paid up capital on the shares, but no other right to further dividends or to participate in profits. Otherwise, the terms of the constitution set up a cascading hierarchy of entitlement to dividends commencing with “A” and “B” class shares, then “C” class shares, followed by “D”, then “E”, and so forth: cl 122. “A” and “B” class preference shares have no entitlement to further dividends, nor to participate in profits or surplus assets upon a winding up beyond paid up capital, whereas the “C”, “D”, and “E” class shareholders do enjoy such entitlements.
According to the current search from the Australian Securities and Investments Commission in evidence (part of Exhibit 8), dated 2 August 2021, it appears only 400 each of “C”, “D”, and “E” class shares were issued. Mr and Ms N Zegna senior are now recorded as the registered owners of these classes of shares, in addition to the “A” and “B” class shares.
There was evidence that this entitlement, and thus the value of these preference shares, was prima facie substantial. This is because VV Company owns the shares in Q Company, which itself has a substantial asset backing with retained earnings and a number of valuable pieces of real estate. This was confirmed in cross examination by Mr Zegna senior, the controlling mind of Q Company. It is obvious that the asset backing of Q Company may have a material impact on the value of the chose in action enjoyed by each shareholder in VV Company.
The wife argued that the husband should be held to enjoy valuable personal property in the form of a chose in action as true owner of 400 “C” class shares in VV Company. She claimed there was no disclosure by the husband allowing this property to be valued. The husband argued that any such valuation was unnecessary because he did not own the shares beneficially, by reason of a declaration of trust made in 1991 in favour of his parents. There were similar declarations of trust by the husband’s siblings in favour of the parents. The wife put the authenticity of the declaration of trust in issue. She contended it was a sham. The basis for that conclusion was said to be that, contrary to the trust deed, in the signed annual returns of VV Company for the years 1992, 1993, and 1994, the husband is recorded as owning the “C” class shares beneficially. These returns were signed by Mr Zegna senior as a true statement of the position of the company at the time.
The ASIC search, tendered by her, shows that as at 2 August 2021 and thus the date of trial, the parents are registered as the legal and beneficial owners of all the shares in VV Company. The search shows that the husband and his siblings formerly owned “C”, “D”, and “E” class shares, but these shares were transferred to the parents in 2011. This was also the evidence of Mr Zegna senior. This transfer of shares was said to reflect the declarations of trust made in 1991, in the context of litigation against the husband’s brother. The transfer itself is not challenged by the wife. The search relied upon by the wife is kept by ASIC pursuant to s 1274 or 1274A of the Corporations Act2001 (Cth), and extracts the information, including the register of members, held in the ASIC database. In the absence of evidence to the contrary, the register of members kept under Chapter 2C of the Corporations Act 2001 (Cth) is proof of the matters shown in the register: s 176. The wife would need to adduce evidence to the contrary of the register, to demonstrate that the husband holds the beneficial interest in the “C” class shares, which I understood to be her argument.
The wife eventually sought the assistance of a nanny. At this point, both children were exhibiting behavioural challenges. B was said to have locked himself in a school locker, whilst C fought constantly with classmates and teachers. The hiring of the nanny ensured the wife was able to assist the husband in the middle of the night when required, and she also assisted with caring for the children. The mother gave evidence, which I accept, that the stress of caring for the children, together with providing emotional support for the husband, eventually compelled her to relocate to Country U in July 2011.
During their time in Country U, the wife and children resided with the maternal grandmother in a property she owned. The wife assumed primary care for the children, and obtained work as an educator. Although she paid for some of her and the children’s living expenses, her salary was insufficient to meet their needs. Accordingly, the majority of their living expenses were met by the maternal grandmother. At the time of her death in 2016, she had contributed approximately $84,000.
Between late 2013 and early 2014, the wife and children travelled to Australia. Although intended to be a two-week trip, the wife asserted that the husband had not recovered emotionally, and was placing pressure on her to allow the children to reside in Australia with him. During this period, the husband cared for the children on a week about basis with a nesting arrangement in the Suburb AJ property. The husband also cared for the children during the final three weeks.
The husband pointed out that he made frequent and sometimes prolonged visits to Country U between 2011 and 2017 which enabled him to share in the care of the children to some extent. The wife argued that her care of the children between 2011 and 2017 was made more arduous by the husband’s poor health, and his choices at times to cut himself off from contact. His conduct was also disruptive in that he consented to the move to Country U by the mother and the children, but then went to Country U and subjected the mother to court proceedings, whilst she was primary carer. The father left Country U, returned, and took the children to Country BO, compelling the mother to take further recovery proceedings. The father then pressured the mother to allow the children to come to Australia for the wedding to his second wife, but then refused to return them to Country U in 2017, contrary to court orders. I accept these arguments from the wife.
The children commenced residing in Australia in 2017. Following this, it appears that the husband assumed primary care of the children. I accept it is appropriate to treat this as a non-financial contribution as carer, but its weight is attenuated because the husband was only in a position to make this contribution because he contravened court orders.
In August 2020, the wife visited Australia, which was permitted during the Covid-19 pandemic on compassionate grounds. The relationship between the husband and B had broken down, and B had moved out of the husband’s home. B is transgender, and the husband had given him an ultimatum that unless he agreed to behave like a female and be called his birth name, he would not be permitted to reside with him. Both children resided with the wife during the period she was in Australia, and she paid for their medical expenses and medication, including $1,000 for B’s dental costs. She also assisted with obtaining accommodation for B.
In late 2020, the parties’ daughter, C, was admitted to hospital following …. She had previously made … in Jmid-2020 in similar circumstances, and the wife had not been informed by the husband. During C's September admission, the wife visited and cared for her each day, and she resided with the wife upon her discharge. Both children continued to suffer mental health difficulties throughout the period the wife spent in Australia. I accept the mother made a contribution to the family during this time.
(d) the effect of any proposed order upon the earning capacity of either party to the marriage; and
The proposed orders will not affect the earning capacity of either party.
(e) the matters referred to in subsection 75(2) so far as they are relevant; and
These matters are discussed separately below.
(f) any other order made under this Act affecting a party to the marriage or a child of the marriage; and
Both children have reached majority. This factor is not relevant.
(g) any child support under the Child Support (Assessment) Act 1989 that a party to the marriage has provided, is to provide, or might be liable to provide in the future, for a child of the marriage.
In 2015, the husband applied for an administrative assessment of child support. The wife expresses confusion as to why this was done, given the children were residing with her in Country U at the time, and had been doing so since July 2011. The husband deposited amounts pursuant to that assessment into a bank account held by the wife in Australia. These deposits commenced in July 2015 and concluded in March 2016, with a total of $2,074.70. The wife did not repay these funds.
In May 2019, the wife was assessed to pay child support to the husband in the sum of $36.25 per month. A new assessment was issued in June 2020, which effectively increased the amount of child support payable to $4,004.75 per month from 5 March 2020, to an annual amount of $48,057. This assessment was based purely on financial information provided by the husband, as previous correspondence had been sent to the wife’s previous address in Country U and was not received until months later. Upon lodging an objection, her rate of child support was set at $29,099 per annum. Prior to this objection being determined, the wife had paid a total of $35,349.65 to the child support agency.
The husband argues that a Country U Court had determined that each party was to contribute EUR300 per month in child support, and that he is presently owed the sum of $11,000 by the wife. This alleged debt was not the subject of dispute by the end of the proceedings.
As already noted, both children have since reached their majority.
ASSESSMENT OF CONTRIBUTIONS
I am satisfied that this is a case where the parties, despite an often fractious relationship, have adopted the attitude that their marriage constituted a practical union of both lives and property.
The husband argued that throughout their cohabitation, the parties lived a comfortable and affluent lifestyle, largely supported by the husband’s earnings and the generosity of his father. Therefore, his contributions have dwarfed those of the wife, and accordingly an assessment of 75 percent in his favour, and 25 percent in the wife’s favour, would be appropriate. The wife asserted that a finding of equal contributions was appropriate, but that if the parents had success in their orders sought, this would diminish the husband’s contribution by the dollar value awarded to the parents.
I do not fully accept the contentions of either party in this regard. I accept that the husband, through his own efforts and his family interests, made financial contributions described which were substantially greater than those of the wife and her family. On the basis of the discussion above, in summary, he brought two apartments into the relationship at cohabitation. Thereafter, the purchase of the Suburb AJ property, the construction of the building thereon, the purchase of CC Street and its redevelopment, and the purchase of R Street and its redevelopment were all funded through the husband or his family interests, apart from the $300,000 given towards CC Street by the wife’s father and third party funding for the purchase of the Suburb AJ property. These contributions were the basis of the parties’ wealth in Australia. However, the husband kept material parts of the wealth in M Company during the relationship, used it for share trading before and after separation, resulting in a loss, while substantial amounts from CC Street were paid to the corporate interests of the parents. I take account of the wife’s assets held in Country U, but they were less directly supportive of the parties’ life in Australia. I am satisfied the wife made a greater contribution as a homemaker and carer of the children. Her contributions in this regard were made substantially more difficult from about 2010 by reason of the mental health problems of the husband and her need to care for him. I assess the contributions holistically as 57 percent in favour of the husband and 43 percent as to the wife.
I now turn to s 79(4)(e) and the s 75(2) factors.
SECTION 75(2) ADJUSTMENT
The Act requires me to take into account the matters referred to in s 75(2) of the Act, so far as they are relevant, when considering what orders should be made in these proceedings. As disclosed in the arguments of the parties, the following matters are relevant.
(a) the age and state of health of each of the parties
Both parties are of an age where they have capacity to engage in employment for many years before retirement. Neither pointed to any ongoing health issues that would compromise their ability to work.
(b) the income, property and financial resources of each of the parties and the physical and mental capacity of each of them for appropriate gainful employment
The wife possesses professional qualifications. She was also employed as an educator for several years following the parties’ separation. At the time of her trial affidavit, she stated that she intended to sign a new contract for a position commencing in September 2021, which would lead to an income of $212 per week.
I have already mentioned the strident allegations of the husband to the effect that the wife has substantial undisclosed assets located in Country U. By the end of the trial, the submission became limited to the assertion that in 2008, the wife had a very substantial portfolio of investments in her name which she owned, and that she had, at all times, means to explain how that sum has been reduced and has simply chosen not to, and that the explanation is inadequate. Accordingly, it is open to make an adjustment under s 75(2) against the wife on the basis that “there is some unknown but, potentially, substantial sum unaccounted for” (Transcript 1 June 2022, p.626 line 28).
As already stated, I do not accept that argument. In my view, the wife’s explanation, given herself and through the evidence of her brother, is adequate. Between 2008 and now, the Country U assets disclosed on the spreadsheets have been subject to the vicissitudes of market forces, including the impact of the Global Financial Crisis. These financial losses mean that by the date of trial, the wife’s financial resources in Country U had become considerably less that they were during the relationship.
I take account here of the husband’s interest in and control of M Company as a financial resource. By reason of his failure to give adequate disclosure about M Company, its’ turnover and assets, I infer this resource is not inconsequential. It is impossible to be any more precise. Allied to this conclusion is the mystery about the husband’s recent sources of income. His employment activity in the last several years was not made clear. As mentioned above, there was some evidence that he has held himself out as working in finance or property. But the evidence did not extend any further than those general assertions. Again, I infer that the husband has the capacity to earn income which is not inconsequential. It was not clear whether he earned income solely through M Company or other avenues as well.
(d) commitments of each of the parties that are necessary to enable the party to support
(i) himself or herself; and
(ii) a child or another person that the party has a duty to maintain;
(e) the responsibilities of either party to support any other person; and
(m) if either party is cohabiting with another person--the financial circumstances relating to the cohabitation
There was no evidence that the wife has repartnered or will have ongoing responsibility for another person.
The husband remarried in 2017. He and his new wife, Ms AE, have three children, BM, born in 2019, and twins BK and BL, born in 2020. In his trial affidavit, the husband stated that the parties keep their finances separate and that he has no awareness of her financial circumstances. It is said that he has requested her to provide disclosure on a number of occasions, but she has refused to.
The husband gave evidence that he pays for the majority of the family’s expenses, including food, electricity, internet, rent, and child care. The family has the assistance of some form of domestic help, but the husband was inconsistent as to how much this cost. His estimates ranged from $660 to $960 per week (based on an estimate of $30 per hour, eight hours a day, four times per week). Ms AE is a professional, but at the time of the husband’s trial affidavit, was said to be on maternity leave. It is uncertain whether she has returned to work.
Based on his evidence, or rather, lack of it, I am unable to form a view about the husband’s commitments to support his new family or the financial circumstances relating to his cohabitation with his new wife. His non-disclosure in this regard permits an inference, and I do infer, that he likely to receive some help from his new wife in supporting their children and maintaining their household, and I am unable to determine the extent of any burden which may fall on him.
The husband also continues to support B, who is now an adult but remains a full-time student.
(o) any fact or circumstance which, in the opinion of the court, the justice of the case requires to be taken in to account
The wife contended that there was a close alignment between the husband and his parents, which lead to the conclusion that their substantial assets should be viewed as a financial resource of the husband. I accept this argument up to a point. Q Company received approximately $1.5 million from the sale of CC Street, which demonstrates the high degree between the spouse parties’ and parents’ affairs during the relationship. There was evidence that earlier in the proceedings, the husband treated the monies advanced for the construction of R Street by the parents as a debt owed to him. The wife argued that the court should take into account the ongoing financial support provided by the parents to the husband, which is likely to continue for many years to come. At present, the evidence is that he receives $10,000 per month from his parents, the use of office space for which he does not pay rent, and occupies a property in Suburb BN which is owned by the parents.
Furthermore, the wife argues that the husband will receive a significant inheritance in the future from his parents. Such an inference is certainly consistent with the significant financial support his parents already have been providing. The husband argued this should be ignored, as his parents are young and in good health, his father had previously lost his life savings and this could occur again, and their relationship had also previously broken down. The wife submitted that should the husband not be provided for in their wills, he will be entitled to bring a claim for provision under the Succession Act. There is some force in this argument. I accept it is likely the husband will receive some future provisions from the estates of his parents, but it is not possible to quantify this in any meaningful way
I take account here of the money available to fund the R Street construction and likely to have been expended by the husband after early 2011, which the wife unsuccessfully argued should be included as an add back on the balance sheet (see above at [133]–[139]). The precise amount cannot be quantified. I find it is likely the husband simply used this money in unspecified ways after 2011, for his own benefit.
Conclusion
The husband ultimately conceded a further five percent adjustment in the wife’s favour “given the disparity in the financial positions of the parties but noting the wife’s ongoing capacity to earn income.” The wife also argues in favour of a five percent adjustment, but that it should increase to no less than 15 percent if the court is satisfied of the husband’s non-disclosure.
I am satisfied that there should be an adjustment of 13 percent in the wife’s favour. While there is no doubt she has assets in Country U, they have been disclosed. The wife has a future earning capacity. She also has liabilities of $142,445. The husband also has liabilities, but in my view the husband has failed to make adequate disclosure in the ways already identified in the course of these reasons, such as the current position of M Company, his income, and the extent to which he may or may not receive support from his current wife. But as far as can be understood in the face of his inadequate disclosure, the husband’s capacity seems to have overcome his earlier mental health problems. The husband has been, and I infer still is, well-resourced through his family. Clearly, the husband has, and has access to, greater financial resources than the wife.
Accordingly, the assets of the parties will be divided 44 percent to the husband and 56 percent to the wife. Taking account of the partial property settlement order of $802,214 made to the wife on 1 June 2022, this can be achieved by the wife receiving the balance of the controlled monies account, $1,202,928 together with a cash payment of $1,390,522 with a transfer to the husband of her interest in the partnership, including monies in the capital account. Otherwise, the parties should retain the assets and liabilities in their names.
WHETHER THE PROPOSED ORDERS ARE JUST AND EQUITABLE
Section 79(2) of the Act provides that
The court must not make an order under this section unless it is satisfied that, in all the circumstances, it is just and equitable to make the order.
Although the parties agree that it would be just and equitable to make an order adjusting their property interests, s 79(2) requires the Court to be satisfied the proposed order itself is just and equitable. The Full Court in Manolis & Manolis (No 2) [2011] FamCAFC 105 made the following observations, in relation to the fourth step:
65. It can be seen that power to make orders in regard to property is not exhausted after the third step. It is not until orders are made that the power is exhausted. The exercise of power pursuant to s 79 of the Act remains subject to the overarching requirement of justice and equity imposed by s 79(2) until it is exhausted. …
66. … The section does however oblige the court to "stand back" from its preliminary determination, and consider its impact. So doing may inform the terms of the orders appropriate to produce a just and equitable outcome in those terms. It may result in a re-consideration of s 79(4) and or s 75(2) factors, and a different outcome. Whatever the scope of s 79(2), the court's determination with respect to it cannot be dependent upon findings or conclusions which are irreconcilable with those recorded in the context of a consideration of s 79(4) or s 75(2). …
The High Court in Stanford commented at [36] on the meaning of “just and equitable” as follows:
The expression "just and equitable" is a qualitative description of a conclusion reached after examination of a range of potentially competing considerations. It does not admit of exhaustive definition. It is not possible to chart its metes and bounds.
(footnotes omitted)
I also take account of the caution expressed in Stanford at [40] that to conclude that making an order is “just and equitable” only “because of and by reference to various matters in s 79(4), without a separate consideration of s 79(2), would be to conflate the statutory requirements and ignore the principles laid down by the Act”.
I take account of the fact that on the available evidence from the husband, he does not have ready access to a large capital sum to meet the proposed payment to the wife. However, as noted, there is no dispute that he is well supported by his parents, and I am satisfied he has failed to make adequate disclosure about his financial circumstances. This is a situation where it is appropriate to make an order for payment because of non-disclosure, especially where the husband will also receive the substantial benefit of a transfer to him of the wife’s interest in the partnership and its assets, including future revenue.
The wife sought an order securing her entitlements pending payment, by a charge upon the husband’s interest in the Suburb AJ property. The husband made no submissions in relation to this form of security. I consider this to be an appropriate protection for the wife in the circumstances and will make such an order.
I note here that two of the four payments sought by the wife from the husband are for costs ordered against the husband during the proceedings but unpaid: for a costs order made on 14 October 2015 and assessed on 28 January 2020 at $37,225, and for a costs order made by me on 3 April 2020 in the sum of $7,863.34, on which the wife claims interest calculated at the rate of $1.17 per day from 31 May 2022 until the date of payment. These amounts are already the subject of a court order which should have been complied with. The third amount of $2,200 is the husband’s share of the fees of a single expert for which he is liable to the wife after she paid the full amount pending determination of the proceedings. The husband made no submissions about these amounts. Rather than these liabilities being the subject of some separate enforcement process, they should be paid as part of the property adjustment orders between the parties, to be met by the husband from his entitlements.
Finally, I note that the wife sought an indemnification from the husband in respect of claims by the husband, the parents, the partnership and L Company. She also sought such indemnification against by a number of other companies, listed in a schedule, which seemed to be associated with the husband’s family interests. The husband made no submissions about this proposed order. I will make it in the circumstances.
On a 44/56 percentage division, the husband and wife will have the assets and liabilities as set out in the below table (figures rounded).
Assets and liabilities to be retained by the husband
Value ($)
1/3 interest in the partnership known as Q Company Pty Ltd, Mr & Ms Y and Mr & Ms Zegna
$4,344,000
Adjustment for 1/3 of funds accrued by the partnership from 01.07.21
$92,156
National Australia Bank account
$7,571
793,400 shares in AV Ltd
$46,017
Motor Vehicle 1
$18,000
Motor Vehicle 2
$22,000
Partial property settlement pursuant to orders made on 17.02.15
$300,000
Tax liability – see note
-$20,792
YY Finance
-$14,632
ZZ Finance Services
-$17,500
Payment to wife
-$1,390,522
Superannuation
Super Fund 1
$45,000.00
Unknown
$11,340.00
Total:
$3,442,638
Assets and liabilities to be retained by the wife
Value ($)
Controlled monies account held by AK Lawyers
$1,202,928
1/3 interest in UU Street, City V Country U
$547,229
1/3 interest in RR Street, City W Country U
$127,580
1/3 interest in BB Street, City O, Country U
$34,136
1/3 interest in TT Street, City O, Country U
$12,199
XX Bank account …36 €11,491.82
$18,154
National Australia Bank account …00
$195
1,564 shares in XX Bank €4,637.78
$7,327
Motor Vehicle 3
$1,500
Partial property settlement pursuant to agreement
$50,000
Partial property settlement pursuant to orders made on 17.02.15
$300,000
Partial property settlement pursuant to orders made on 1.06.22
$802,214
Payment from husband
$1,390,522
Tax liability as at 30.06.21
-$126,590
Estimated tax liability for the year ended 30.06.22
-$15,855
Superannuation
Super Fund 1 …32
$30,000
Total:
$4,381,539
COSTS
Although the husband and parents sought costs against the wife, and the wife sought her costs to be paid by the husband, costs were not the subject of final submissions.
In such circumstances, I will order that any party who seeks costs to file the relevant application within 28 days of these orders.
CONCLUSION
For all the foregoing reasons I am satisfied the orders set out at the commencement of these reasons should be made.
I certify that the preceding two hundred and thirty-eight (238) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Harper. Associate:
Dated: 4 August 2022
ANNEXURE A – HUSBAND’S MINUTE OF ORDER
1.Within 14 days of the date of these Orders, the husband and the wife shall do all acts and things and sign all documents necessary to instruct AK Lawyers to close the controlled monies account held on their behalf and pay $869,183.00 of the funds to a bank account nominated by the wife and the balance remaining to a bank account nominated by the husband.
2.In the event that either party refuses or neglects to instruct AK Lawyers in accordance with Order 1 within 14 days of the date of these Orders then the other shall serve upon the partners of AK Lawyers a certified copy of these Orders and the partners shall as soon as reasonably practicable but no later than 7 days after the date of service of these orders do all acts and things and sign all documents to pay the monies held in trust for the husband and the wife in accordance with Order 1 hereof.
3.It is noted that "the partnership" is Q Company Pty Ltd, Mr and Ms Y and the husband and the wife.
4.That within 42 days of these orders:
4.1The husband shall do all acts and things and sign all documents necessary to release the wife from any obligation to the National Australia Bank arising in respect of mortgage registered number …95 and for the avoidance of doubt the delivery of a letter to the lawyer for the wife from National Australia Bank expressed in unconditional terms as to such release shall be sufficient compliance with this obligation;
4.2the wife shall transfer to the husband all her right, title and interest in:
4.2.1the property situated at and known as AL Street, Suburb AJ in the State of New South Wales being the whole of the property comprised in Certificate of Title Folio identifier … [Suburb AJ property];
4.2.2the partnership including her interest in any capital account;
4.2.3provided that the husband shall prepare at his expense and provide to the wife within 28 days all documents that he contends ought reasonably be required to be signed by her to give effect to these orders.
5.That henceforth and save for any liability arising as a result of any order or judgment of this court in favour of the second, third and fourth respondents herein whether that liability be a sole liability or joint liability with the husband, the husband shall indemnify and keep the wife indemnified against all or any manner of actions, suits, causes of action, arbitrations, debts, dues, costs, interest and demands whatsoever both at law and in equity which the husband, Mr F Zegna, Ms N Zegna, L Pty Ltd and each of the companies in schedule 1 to these orders or the partnership now have or may have at any time or times hereafter against the wife or which may arise in respect of any act or things done or remitted to be done by the wife whether by reason of the wife having been a partner and/or an employee and/or any loan account in her name and/or the receipt by her of any monies or any benefit at any time from the partnership and/or by reason of the conduct of the wife alleged by the husband in his affidavit sworn on 29 June 2021 and filed in these proceedings on 9 July 2021 or by reason of the wife being allegedly indebted to any of Mr F Zegna, Ms N Zegna, L Pty Ltd or any other the companies listed in schedule 1 pursuant to any loan or any other account whatsoever.
6.That except as otherwise provided for in these Orders to the contrary, the husband is declared the sole owner of, and the wife has no interest in all other property and financial resources, of whatever nature and kind, in the name or possession of the husband as at the date of making these orders and in the future.
7.That except as otherwise provided for in these Orders to the contrary, the wife is declared the sole owner of, and the husband shall have no interest in all other property and financial resources, of whatsoever nature and kind, in the name or possession of the wife as at the date of the making of these orders and in the future.
8.Other than as provided for in these orders:
8.1the husband hereby indemnifies the wife from and in respect of all actions, claims, suits, demands as may be made against the wife in relation to all liabilities in the name of the husband; and
8.2the wife hereby indemnifies the husband from and in respect of all actions, claims, suits and demands as may be made against the husband in relation to all liabilities in the name of the wife.
9.That except as any paragraphs of these orders provide to the contrary, each of the husband and the wife release each other from all the debts owing from one to the other.
10.In the event either party refuses or neglects to execute any deed, document or instrument necessary to give effect to all or any of these Orders then the registrar of this court shall be appointed pursuant to section 106A of the Family Law Act 1975 to execute such deed, document or instrument in the name of the said party and to do all acts and things necessary to give validity and operation to the deed, document or instrument upon the registrar being provided with verification of such refusal or failure by way of affidavit.
11.That the wife pay the husband's costs of and incidental to these proceedings.
ANNEXURE B – WIFE’S MINUTE OF ORDER
1.That within 14 days of the date of these orders, the husband and the wife shall do all acts and things and sign all documents necessary to instruct AK Lawyers to close the controlled monies held on their behalf and pay the funds to a bank account nominated by the wife.
2.In the event the husband refuses or neglects to instruct AK Lawyers in accordance with Order 1 within 14 days of the date of these Orders, then the wife shall serve upon the Partners of AK Lawyers a certified copy of these Orders and the Partners shall as soon as reasonably practicable but no later than 7 days after the date of service of these Orders do all acts and things and sign all documents to pay the monies held in trust for the husband and the Wife to a bank account nominated by the wife.
3.It is noted that "the partnership" is Q Company Pty Ltd, Mr and Ms Y and the husband and the wife.
4.That within 42 days of the date of these Orders and simultaneously:
4.1The husband shall pay to the wife the sum of $2,744,232;
4.2The husband shall pay to the wife the sum of $37,225;
4.3The husband shall pay to the wife the sum of $7,863.34 plus interest calculated on this sum from 31 May 2022 at the rate of $l.17 per day;
4.4The husband shall pay to the wife the sum of $2,200;
the aggregate amounts referred to in paragraphs 3.1 to 3.4 inclusive together with any interest that may accrue by operation of law shall hereinafter be called "the sums";
4.5The husband shall do all acts and things and sign all documents necessary to release the wife from any obligation to National Australia Bank arising in respect of mortgage registered number …95 and for the avoidance of doubt the delivery of a letter to the lawyer for the wife from National Australia Bank expressed in unconditional terms as to such release shall be sufficient compliance with this obligation.
5.Subject to the husband having paid the sums and procured the release the wife shall then forthwith transfer to the husband all her right title and interest in:
5.1the property situated at and known as AL Street, Suburb AJ in the state of New South Wales being the whole of the property comprised in certificate of title folio identifier … [Suburb AJ property];
5.2the partnership including her interest in any capital account;
provided that the husband shall prepare at his expense and provide to the wife within 28 days all documents that he contends ought reasonably be required to be signed by her to give effect to these Orders.
6.That the husband shall pay interest on any outstanding payment referred to in Order 4 of these Orders at the rate prescribed in Family Law Rules, 2004 calculated from the date the payment is due to be paid until such time as the payment together with interest calculated on the payment is paid.
7.That the obligation of the husband to make the payments to the wife referred to in Orders 4 and 6 of these Orders shall be and hereby are secured in favour of the wife by charge hereby declared over all of the husband's right title and interest in the Suburb AJ property such charge to confer upon the wife all of the rights of a chargee, adopting for that purpose the powers set out in s 109 Conveyancing Act 1919 (NSW) provided that the husband shall be at liberty to borrow funds against the said property for the exclusive purpose of satisfying any part of his obligations pursuant to Orders 4 and 6 of these Orders as they arise with such security to remain in priority to the charge created herein and in the event that the wife chooses to register a document recording the charge, then:
7.1she shall sign all documents and consents and withdrawals as may be required to enable the registration of any security permitted by the earlier provisions of this Order;
7.2simultaneously with the making of the final payment of the sums to which the wife is entitled in accordance with Orders 4 and 6 of these Orders, the wife shall furnish a form withdrawing such document in registerable form.
8.That henceforth the husband shall indemnify and keep the wife indemnified against all or any manner of actions, suits, causes of action, arbitrations, debts, dues, costs, interest and demands whatsoever both at law and in equity which the husband, Mr F Zegna, Ms N Zegna, L Pty Ltd and each of the companies in Schedule 1 to these Orders or the partnership now have or may have at any time or times hereafter against the wife or which may arise in respect of any act or thing done or omitted to be done by the wife whether by reason of the wife having been a partner and/or an employee and/or any loan account in her name and/or the receipt by her of any monies or any benefit at any time from the partnership and/or by reason of the conduct of the wife alleged by the husband in his affidavit sworn on 29 June 2021 and filed in these proceedings on 9 July 2021 or by reason of the wife being allegedly indebted to any of Mr F Zegna, Ms N Zegna, L Pty Ltd or any of the companies listed in Schedule 1 pursuant to any loan or on any other account whatsoever.
9.That except as otherwise provided for in these Orders to the contrary, the husband is declared the sole owner of, and the wife has no interest in all other property and financial resources, of whatsoever nature and kind, in the name or possession of the husband as at the date of the making of these orders and in the future.
10.That except as otherwise provided for in these Orders to the contrary, the wife is declared the sole owner of, and the wife has no interest in all other property and financial resources, of whatsoever nature and kind, in the name or possession of the husband as at the date of the making of these orders and in the future.
11.Other than as provided for in these Orders:
11.1the husband hereby indemnifies the wife from and in respect of all actions, claims, suits, and demands as may be made against the wife in relation to all liabilities in the name of the husband; and
11.2the wife hereby indemnifies the husband from and in respect of all actions, claims, suits, and demands as may be made against the husband in relation to all liabilities in the name of the wife.
12.That except as any paragraphs of these Orders provide to the contrary, each of the husband and the wife release each other from all debts owing from one to the other.
13.That all applications by Mr F Zegna, Ms N Zegna and L Pty Limited against the wife be dismissed.
14.In the event either party refuses or neglects to execute any deed, document or instrument necessary to give effect to all or any of these Orders then the Registrar of this Court shall be appointed pursuant to section 106A of the Family Law Act, 1975 to execute such deed, document or instrument in the name of the said party and to do all acts and things necessary to give validity and operation to the deed, document or instrument upon the Registrar being provided with verification of such refusal or failure by way of affidavit.
15.That the wife and the interveners each pay their own costs in respect of the interveners' claim up to and including 12 March 2018 and the interveners jointly and severally pay the wife's costs in respect of the interveners' claim from that date.
16.That the husband pay the wife's costs of and incidental to the proceedings.
SCHEDULE 1
Q Company Pty Limited ACN …
Q1 Pty Limited ACN …
AO Pty Limited ACN …
AP Pty Limited ACN …
AQ Pty Limited ACN …
VV Pty Limited ACN …
VV1 Pty Limited ACN …ANNEXURE C – SECOND TO FOURTH RESPONDENT’S MINUTE OF ORDER
1.That the Husband and the Wife forthwith do all acts and things to cause AK Lawyers to pay the following from the controlled monies account held by them on behalf of the Husband and the Wife: -
(a)The sum of $223,229.06 (as per Mr P's affidavit of 21 September 2021), being interest payable in respect of the sum of $998,972 which has been paid to the second and third respondents pursuant to the agreement between the parties referred to at Orders 15, 16 and 17 of the Orders of 12 March 2018
2.That the Wife pay the costs of the second and third respondents in respect of her opposition to their claim in respect of principal sums paid by them towards the construction of the dwelling at R Street, Suburb S ("the Suburb S property") being $242,793.20 or as otherwise assessed.
3.That pending the payment referred to in Order 2 of these Orders, the parties instruct AK Lawyers to retain in the controlled monies account an amount of no less than $242,793.20
SCHEDULE 1
Q Company Pty Limited ACN …
Q1 Pty Limited ACN …
AO Pty Limited ACN …
AP Pty Limited ACN …
AQ Pty Limited ACN …
VV Pty Limited ACN …
VV1 Pty Limited ACN …
11
0