Keeping Fraud In The Family

A family law case decided in the Federal Circuit Court of Australia last year, and overturned in part on appeal to the Family Court of Australia this year, contains what we think is a fairly valiant attempt at deception by two of the parties to the proceedings.

The appeal decision was reported as Bircher & Bircher & Anor [2016] FamCAFC 123.

The case involved a property division after separation. It focused on a net asset pool of about $250,000 – being $165,500 of superannuation to which the parties would not have had access for many years, $64,500 of net proceeds of sale of the former matrimonial home held in a trust account and $20,000 of other unspecified assets.

Clearly, all parties would have had their eyes on the money in trust.

The parties to the proceedings were the wife, the husband and the husband’s father.

The husband made the argument that the money in trust isn’t really an asset which should be divided between himself and the wife.  He argued that it was actually a debt payable to his father for two loans which the father had made to the husband during the marriage. These two loans were secured by way of separate mortgages.

The wife argued that this whole theory was a concoction and a sham. She said that the two debts never existed and that the husband and the father had made the whole thing up to get the money in trust.

The wife, as it turned out, was right. She identified that the husband’s evidence and his father’s evidence about the loans contained too many inconsistencies. Here are some examples:

(a)   the husband couldn’t say whether there was one or two loans. He first said that he owed his father “solely owned liabilities”, but a few paragraphs later referred only to a “solely owned liability”, and then finally to “a home loan of $20,000 pursuant to a mortgage loan document dated 31 January 2002 for the purpose of a land purchase” and “a further $20,000 home loan pursuant to a mortgage loan document dated 20 May 2002 for the purpose of construction cost variations”. His father always said that there were two;

(b)   the husband said that the interest rate for both loans was 6% and that it was later reduced to 4%. His father said, firstly, that it was a flat rate of 6% but, later, that it was a compound rate of 6%. His father never said anything about it being 4%;

(c)   there were two loan documents. The documents said that the interest for both loans was 6% per annum compound. The documents didn’t say anything about the interest rate changing; and

(d)   the husband’s father kept a personal log of repayments and other matters apparently related to the mortgages. He included this log in his evidence. The first entry in the log said that the loans were interest free. There was a later entry saying that there interest was being charged at 6% per annum compound.  There were also numerous entries for expenses to be added to the principle sum to be repaid (for example, ‘travel to Brisbane’, ‘meeting’ and ‘appraisal fee’). However, the husband never referred to expenses forming part of the mortgage.

The husband and his father did a reasonable job. They were able to convince a trial judge in the Federal Circuit Court that the loans were legitimate and that the father should receive the money in trust. It was only on appeal that the wife’s arguments were successful.

The devil, as always in litigation, was in the detail. The husband and the father ultimately failed because of the fraud revealed in their own evidence.

The above is not intended as legal advice. You should obtain legal advice in relation to your own specific circumstances.



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