ALVA & ALVA

[2020] FamCA 376

FAMILY COURT OF AUSTRALIA

ALVA & ALVA [2020] FamCA 376

FAMILY LAW – PROPERTY – Where application for interim property orders – Where consideration of applicable principles – Where appropriate to make order for capital funds to be made available to the wife with categorisation of that sum reserved to final hearing – Where appropriate that the husband pay the mortgage and outgoings of one of the parties’ properties from the income that the property derives – Where not appropriate to make the other interim orders sought by the parties.

Family Law Act 1975 (Cth) ss 75, 79, 114

Harris & Harris (1993) FLC 92-378
Strahan & Strahan [2009] FamCAFC 166

APPLICANT: Ms Alva

RESPONDENT: Mr Alva

FILE NUMBER: PAC 2778 of 2018

DATE DELIVERED: 19 May 2020

PLACE DELIVERED: Parramatta

PLACE HEARD: Parramatta

JUDGMENT OF: Foster J

HEARING DATE: 14 April 2020

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Gardiner

SOLICITOR FOR THE APPLICANT: Coleman Greig Lawyers

COUNSEL FOR THE RESPONDENT: Mr Campton SC

SOLICITOR FOR THE RESPONDENT: Frank Law

Orders

1. That within 14 days from this date the husband pay to the wife the sum of $150,000 with the categorisation of that sum reserved to final trial.

2. That pending further order the husband shall as and from this date be entitled to receive the whole of the rental income from the parties’ property at Suburb B and shall pay as they fall due and payable all outgoings including council and water rates, insurances, strata fees, land tax if any and mortgage payments and shall indemnify the wife from any liability in regard thereto as and from the date to which they stand paid as at the date of these orders. 

3. That costs of the present application be reserved.

4. That otherwise the wife’s Application in a Case filed 10 February 2020 and the husband’s Response thereto filed 3 April 2020 be dismissed.

5. Leave is granted to the parties to apply as to implementation or enforcement of these Orders.

Note: The form of the order is subject to the entry of the order in the Court’s records.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Alva & Alva has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).

FAMILY COURT OF AUSTRALIA AT PARRAMATTA

FILE NUMBER: PAC 2778  of 2018

Ms Alva

Applicant

And

Mr Alva

Respondent

REASONS FOR JUDGMENT

1. In June 2018 the primary applicant wife commenced proceedings for property adjustment orders. The respondent husband filed his Response in July 2018.

2. Since the inception of proceedings the parties have progressed the proceedings little towards final hearing. The matter has been before a registrar of this Court on a number of occasions with the parties at odds in relation to disclosure, discovery and single expert valuations.

3. On 22 October 2018 an order was made appointing a Single Expert to value various corporate entities and trusts.

4. Further directions for disclosure were made in April 2019 with a draft single expert report noted as being available in late May 2019. The parties requested a lengthy adjournment to mediate issues as to property adjustment and the matter did not return to the registrar until September 2019 at which time the Single Expert Report had not been finalised and the parties’ agreement as to a mediator was noted. A mediation in November 2019 was cancelled due to an outstanding subpoena objection that was determined on 21 November 2019.

5. The Single Expert Report was filed on 26 February 2020.  On 27 February 2020, nearly two years after proceedings commenced, the registrar noted the wife had appointed her own forensic accountant.

6. Ultimately, final trial directions were able to be made on 14 April 2020 with a prospective final hearing later in the year.

Context

1. The parties commenced cohabitation and married in 1993. They separated in October 2017.

2. There are three children of the parties’ relationship A. aged 25, K. aged 17 and E. aged 16. All live with the wife. It appears at present that they have no relationship with their father by reason of family violence perpetrated by him during the relationship.

3. In the wife’s Amended Initiating Application filed 9 April 2020, in summary, she seeks property orders to the effect:

   a)That the husband transfer to her the home at Suburb C unencumbered;

   b)That the husband transfer to the wife the property at Suburb B unencumbered;

   c)That within 42 days the husband pay to the wife the sum of three million dollars;

   d)That the husband cause D Pty Ltd to transfer to the wife a Motor Vehicle 1;

   e)That, otherwise, the husband retain his corporate and trust assets; and

   f)That the husband pay to the wife spouse maintenance in the sum of $750 per week until 11 January 2022.  

4. In the husband’s Response filed 8 April 2020, in summary, he seeks property orders to the effect:

   a)That the husband transfer to the wife the home at Suburb C and that the wife concurrently pay him $300,000 and that in default the property be sold to realise his $300,000;

   b)That the property at Suburb B be sold and the proceeds be divided equally;

   c)That the husband cause D Pty Ltd to transfer to the wife a Motor Vehicle 1; and

   d)That, otherwise, the husband retain his corporate and trust assets.

The present application

1. On 10 February 2020 the wife filed an Application in a Case seeking various interim orders. Relevantly, in summary, she sought orders:

   a)That pending further order the husband pay mortgage payments and outgoings in relation to the Suburb B property;

   b)That the husband pay outgoings including telephone, internet and building and contents insurance in respect to the Suburb C property;

   c)That within 28 days the husband pay to the wife the sum of $150,000 with that sum to be categorised at final trial;

   d)That in the alternative to (c) there be a “dollar for dollar” costs order that   the husband pay to the wife’s solicitors double any sum he pays to his solicitors or barristers in these proceedings;

   e)That in the alternative to (d) the parties borrow the sum of $150,000 as against the Suburb C home with such sum to be paid to the wife and that the husband pay all payments as they fall due and payable in relation to the loan facility;

   f)That the husband be restrained from removing or causing the removal of the Motor Vehicle 1 in the possession of the wife and that he caused to be paid loan payments in relating to that vehicle;

   g)That the husband meet the costs of bathroom repairs at the Suburb C property; and

   h)Costs.

2. The wife relied on her affidavit filed 10 February 2020 and her Financial Statement filed the same day.

3. The husband in his Response filed 3 April 2020 to the wife’s Application in a Case, in summary, relevantly sought orders:

   a)That the Suburb C property be transferred by him to the wife by way of interim property order;

   b)That the wife be restrained from encumbering the property other than for a sum not more than $200,000 with $150,000 to be paid to the wife and $50,000 to be retained to meet the cost of the loan and repayments;

   c)That the Suburb B property be sold and that the net proceeds be paid as to $50,000 to each party and the balance to be held in a controlled money account in trust for the parties.

4. The husband relied on his affidavit filed 3 April 2020 and his Financial Statement filed the same day.

The wife’s case

1. The wife, an educator who works full time, asserts a difficulty in paying her ongoing legal fees notwithstanding income of about $2,824 per week. She asserts weekly expenses of $2,858. The wife’s expenses seem high and are not the subject of any detailed evidence. Yet she maintains the household with three older children.

2. The wife has paid legal fees and other fees to date of about $118,500 funded in part by savings retained by her at separation, family loans and an ANZ loan.

3. She, otherwise, asserts that the husband has used funds from his corporate and trust interests assets to meet his ongoing legal fees identifying transfers totalling over $47,000 to his solicitors. Indeed, he has paid more significant sums as set out below.

4. The wife refers to the husband’s various entities that are now the subject of the Single Expert Report referred to below. She, otherwise, contends that he may hold an indirect interest in F Pty Ltd, the F Trust, G Pty Ltd and the G Trust. 

5. At cohabitation the wife had a share in four home units at Suburb H. These were sold and the wife asserts that funds received by her paid off the mortgage on the parties’ home at Suburb J.

6. The Suburb J home was purchased in 2000 for $243,500 and it was sold in 2009 for $361,500.

7. In 2003 the parties purchased the Suburb B investment property for $306,000. The property is presently tenanted with the parties receiving the rental equally in the sum of $380 per week each.

8. The present home at Suburb C was purchased in 2005 for $830,000. At separation the property was mortgaged for about $450,000 with that sum paid off by the husband after separation. It appears that funds to discharge the mortgage were paid to the husband from the Alva Trust in May 2018. It is not clear on what basis the funds were paid. Yet as at 30 June 2018 the husband was still owed $505,974 in unpaid beneficiary distributions with no funds owed by him to the trust. As at 1 July 2017 the husband’s beneficiary account stood at $810,193 and as 30 June 2018 it has reduced to $740,876.

9. The wife worked throughout the marriage save for periods around the birth of the parties’ children. The husband worked throughout the marriage through various entities.

10. The wife asserts that she was the primary caregiver for the children and primarily was the homemaker during the relationship, a contention not in contest by the husband.

11. Since separation she has paid outgoings on the Suburb C property, outgoings and mortgage shortfall on the Suburb B property. She, otherwise, has paid school fees for the children until the husband commenced paying half.   Otherwise, the husband pays child support presently assessed at $2,856 per month on an income of $314,741.

12. Two bathrooms in the Suburb C home are in need of repairs. An insurance claim for the repairs was denied.

13. The wife complains as to the husband’s delay in the proceedings and non-disclosure of various property transactions post separation through the K Trust and the N Superannuation. The wife complains that the husband has failed to make full disclosure as to matters pertaining to the purchase and holding of the properties.

14. The wife asserts that the pool of assets for division comprises:

    Assets:

    Joint   Home at Suburb C   $1,600,000E

    Joint   Property at Suburb B  $   480,000E

    Husband                    Interest in the various entities

    referred to above   $8,600,000E

    Wife   L Company Shares  $      5,847

    $10,680,000

    Liabilities:

    Joint   Mortgage Suburb B   $     350,000

    Wife   ANZ Loan   $      47,886

    Superannuation:

    Wife   M Super   $    218,156

    Husband                    N Superannuation      $          NK

The Single Expert Report: Exh “D” as at June 2018

1. The Single Expert Report is dated 6 September 2019 and was undertaken by Ms P, Chartered Accountant.

2. D Pty Ltd was acquired by the Alva family in February1992. The original shareholders after acquisition were the husband and his brother Mr Q equally with one ordinary share each. The business designs and manufactures products and distributes internationally.

3. In December 2014 they transferred their shareholding to Alva Pty Ltd (established August 2013) as Trustee of the Alva Trust for a recorded consideration of $1.2 million. There is no application at present to set aside that disposition of shares.   

4. The husband was formerly a director of the trustee company but resigned in July 2014 leaving his brother a director. The husband presently holds two shares and his brother 100 shares. The husband is the Appointor of the trust which allows him to remove and appoint trustees at will and thus has some indirect control of the Alva Trust.

5. The wife asserts she was unaware of these transactions until after separation and asserts that they occurred during a period of marital difficulties.

6. The F enterprise has been valued on a future maintainable earnings basis at $6.678 million. In the 2018 year the adjusted profit before interest and tax was $1.865 million.  A significant asset is funds owed to it by the Alva Trust of $2.559 million.

7. The wife expresses her concerns as to “consultancy fees” paid to various extended members of the husband’s family and friends.

8. Alva Pty Ltd as a trustee has no value. The Alva Trust is a discretionary trust with the husband as Appointor and the husband and his brother as designated income beneficiaries but classes of beneficiaries also include family members of both the husband and his brother and other entities.

9. The trust receives income from dividends from D Pty Ltd, the hiring of equipment to related parties, rent from commercial property investments and management fees.

10. The trust has its shareholding in D Pty Ltd listed at book value of $1.2 million. Otherwise, the trust has cash at bank of over one million. The Trust has an equity value of about $306,000 allowing for unpaid beneficiary loans of $505,974 owing to both the husband and his brother Mr Q.

11. FF Pty Ltd was incorporated after separation in 2018 and manufactures standard and custom products. The entity has a minimal value due to limited trading history. There are 1000 shares with:

    a)R Pty Ltd as Trustee of the K Trust (see below) holding 490 shares where the husband is a designated beneficiary;

    b)G Pty Ltd  (see below) holding 490 shares; and

    c)Mr S holding 20 shares.

12. DD Pty Ltd has previously designed and manufactured products. It has not traded as such for some years and has primarily received trust distributions from the K Trust and interest. Shareholders are the husband as to 100 and R Pty Ltd as to 1000.

13. Dividends have been paid to the husband and to the K Trust.

14. The enterprise has a value of $1.086 million with the husband’s share valued at $123,100 and R Pty Ltd share at $1.23 million.  The company has advanced loans to the husband ($93,453), D Pty Ltd and the K Trust. It, otherwise, owes $647,170 to the Alva Trust.

15. F Pty Ltd is the trustee of the F Unit Trust. Both were established in November 2016. The Trustee Company has no value. The Trust has limited trading history.

16. The Trust is a Unit trust with 90 Ordinary Units held by G Pty Ltd as trustee for the G Unit Trust, 90 Units held by R Pty Ltd as trustee of the K Trust and 90 Units held by Mr S. The Trust has no equity value and hence the units are valued at nil.

17. R Pty Ltd is Trustee of the K Trust. The entities were established in May 2015. The trustee company had no value. The Trust receives income from dividends/distributions and foreign exchange trading. Dividends are received from DD Pty Ltd and distributions from the Alva Trust.

18. The Trust has minimal equity value. The balance sheet reveals inter entity loans and liabilities including $755,339 owed to it by the husband. The husband is a designated beneficiary in the Trust and beneficiaries include the husband’s family and other entities.

19. The trust purchased a property at T Street, Suburb V in March 2018 for $415,000, the property at HH Street, Suburb X in June 2018 for $1.2 million and the property at W Street, Suburb X in August 2018 for $1.2 million. The wife has no knowledge as to these transactions until enquiry. Subsequently, the Trust purchased Y Street, Suburb Z in August 2019 for $2.27 million.

20. Otherwise, the N Superannuation (Trustee: N Pty Ltd), the husband’s self-managed fund, purchased the property at AA Street, Suburb BB in September 2019 for $528,000.

The husband’s case

1. For his part, the husband asserts the perpetration of family violence at the hands of the wife. The parties’ allegations will be tested at final hearing.

2. The husband and his brother Mr Q commenced their business in 1989, some years before cohabitation. The company D Pty Ltd was incorporated in 1989. The husband is the sole director of the company.

3. There are associated entities in the Country CC, Europe and Asia.

4. The husband concedes that the various entities as a whole evidence a quasi and equal partnership between him and his brother Mr Q. The entities provide liability protection and tax minimisation opportunities for the husband and his brother.

5. He asserts that in the present social circumstances of the world wide Covid 19 Virus the business has suffered financially.

6. The husband asserts that primarily (omitting minor bank balances)  the pool of assets comprises:

   Assets:

   Joint   Home at Suburb C   $2,000,000E

   Joint   Property at Suburb B  $   500,000E

   Husband                    Interest in the various entities

   referred to above   $          NK

   Wife   L Company Shares  $       4,767

   Liabilities:

   Joint   Mortgage Suburb B             $     350,000E

   Wife   ANZ Loan   $      47,886E

   Husband                    Debt to K Trust  $    755,339

   Husband                    Debt to DD Pty Ltd             $     93,453

   Superannuation:

   Wife   M Super   $    218,156

   Husband                    N Superannuation               $     83,137

7. His assertions are based on the 2018 Financial Statements for the various entities, yet he makes no reference to his beneficiary loan account in the Alva Trust nor to the subsequent property dealings by the various entities referred to by the wife. He adduced no objective evidence to suggest that the circumstances of the entities are much different from that set out in the Single Expert Report.

8. He has used funds from the entities to pay a total of about $165,000 in legal fees to date.

9. He, otherwise, asserts that he has paid ongoing sums to the wife to assist her financially.

10. The husband’s Financial Statement reveals total income and benefits from employment of about $6,900 per week. He rents his present home from his own entity asserting rent of $1,500 per week.  After tax, child support and other asserted outgoings his weekly living expenses total $3,128 and payments for the children of $219 leaving a notional surplus of about $3,530 per week.

11. Clearly, he is in a better financial position than the wife.

The wife’s contentions

1. The wife contends that her income is mostly expended on day-to-day living and expenses. She has no funds for the payment of ongoing legal fees estimated at over $100,000. The wife has dissipated savings and borrowed funds to meet legal fees whilst the husband has been able to meet same from funds drawn from the various entities.

2. The husband controls with his brother entities earning significant income that is distributed across various entities to minimise tax.  

3. There is clearly not a level playing field. It is submitted that it is in the interests of justice that there be an order for interim property provision in favour of the wife.

The husband’s contentions

1. The husband takes issue with some aspects of the Single Expert Report and the valuations derived therein. Such issue will be ventilated at a final hearing.  

2. The husband asserts that the business has suffered financially as a consequence of current financial conditions with its future trading circumstances uncertain.

3. Yet the husband does not assert that his debt to the K Trust is being pressed and he omits to refer to the undistributed income owing to him from the Alva Trust as at June 2018 with significant drawings by him against those funds in the years 2017 and 2018.

4. He is clearly aware of the Single Expert Report as to his beneficiary loan account but, it seems, elects to give no evidence about it.

Discussion

1. The beneficiary loan account owing to the husband is clearly property. The wife does not assert any other source of funds from which a sum can be sourced.  

2. The husband suggests that the parties borrow against the equity of the home.

3. The principles as to applications for interim property provision are well settled, (Strahan & Strahan [2009] FamCAFC 166) and require a two-step process.

4. In Strahan, the Full Court said:

   132.In relation to the first stage, in our view, when considering whether to exercise the power under s 79 and s 80(1)(h) of the Act to make an interim property order the “overarching consideration” is the interests of justice. It is not necessary to establish compelling circumstances. All that is required is that in the circumstances it is appropriate to exercise the power. In exercising the wide and unfettered discretion conferred by the power to make such an order, regard should be had to the fact that the usual order pursuant to s 79 is a once and for all order made after a final hearing.

5. Firstly, there must be circumstances enlivening the power to make an interim order. The test is not limited to “compelling circumstances” but whether it would be “appropriate” to make an interim order, with the “overarching consideration” being the interests of justice.

6. Secondly, the Court is to have regard to relevant matters in s 79 of the Family Law Act 1975 (Cth) (“the Act”). It needs to be kept in mind that the final outcome of property settlement should not be compromised by an interim property order. Either the remaining property needs to be adequate to meet the legitimate expectations of both parties at the final hearing or the order that is contemplated needs to be capable of being reversed or adjusted if it is subsequently considered necessary to do so.

7. A detailed inquiry is not required, but there must be some assessment of s 79 factors.

8. In Strahan the Full Court went on to say:

   137.Once a court proceeds to exercise the power in s 79 of the Act, being in the substantive phase, a court is required to undertake consideration of the matters in s 79(4) including by reference to s 79(4)(e) the matters in s 75(2) so far as they are relevant. However consideration of such matters may be brief and if it is established that “it seems likely to the Court that ... the applicant ... will be likely receive by way of property settlement a sum sufficient to cover the advance, that would seem to be sufficient to enable the order sought to be made”: Zschokke; Polletti and Polletti per Nygh J and Wenz v Archer. As senior counsel for the Wife submitted, “provided scope can be found within the assets of the parties for an order of the size sought ... then that should be the end of the matter”. In other words, in such circumstances the applicant would only be receiving what he or she was entitled to receive when the power was exhausted.

   138.The legislation does not prescribe what the Full Court in Zschokke at 83,218 described as “preconditions” and nor would we seek to exhaustively prescribe matters that may be relevant to take into account in the exercise of the discretion under s 80(1)(h) of the Act. As to the three “criteria” identified by the Full Court in Zschokke, we accept that an inability on the part of an applicant for an interim property order to defray the costs of litigation to meet his or her litigation costs would be a relevant matter to take into account at the procedural or first stage. Senior counsel for the Wife submitted that it may be relevant at the substantive or second phase in reviewing the “necessarily limited and impressionistic budget for costs” to ensure that the application is bona fide. We are of the view that it may be that any issue about the bona fides of an application is relevant at the procedural phase in the context of considering if in the interests of justice it is appropriate to make an order before the final hearing.

   139.We also emphasise that in order to establish an appropriate case for an interim property settlement order more is required than the mere fact that upon a final hearing the applicant would receive the property being sought (or an amount in excess of the funds being sought) from the other party.

   140.As to the other matters being a position of relative financial strength on the part of the respondent to an application and the capacity of the respondent to meet his or her own litigation costs, there is no doubt that the financial circumstances of both parties are relevant at the substantive stage and may also be relevant at the procedural stage. Senior counsel for the Wife submitted that all of the matters discussed by the Full Court in Zschokke are self-evident and we accept that this is so in relation to at least two of the matters being the need for funds and the financial circumstances of both parties.

   141.As to the various matters discussed by Brereton J in Paris King Investments which we have discussed above, we do not propose to deal with all of what his Honour said, however we make the following observations about some of the matters. Obviously the applicant should have “at least an arguable case for substantive relief which deserves to be heard”. Further, in determining at the procedural stage whether to exercise the jurisdiction there may need to be evidence of the applicant’s “likely costs of the litigation” given that the need for funds to defray litigation costs and expenses is the circumstance propounded as to why it is appropriate that an order be made. We also accept that “it is not an essential precondition” that the applicant’s legal representatives will not continue to act unless the costs are paid or secured on an ongoing basis.

9. It is important to have regard to an overall caution. In Harris & Harris (1993) FLC 92-378, the Full Court said:

   As a generality, the interests of the parties and the Court are better served by there being one final hearing of s 79 proceedings.

10. In Strahan, the Full Court said at [132]:

    … regard should be had to the fact that the usual order pursuant to s 79 is a once and for all order made after a final hearing.

11. The history of the parties’ relationship is discussed above. Clearly, a preliminary assessment of s 79 considerations as to contributions reveal that the wife has a significant claim to property adjustment arising from the 25 year relationship and the disparity in the parties’ respective circumstances by reason of s 75(2) considerations.

12. On any view the asset pool and other financial resources for consideration are significant. The wife seeks a provision of $150,000 pending final trial later this year.   The husband has present resources especially income from which he can meet his legal and other expenses to hearing. The wife has had to expend savings and borrow to meet her expenses.

13. It is appropriate that the husband make available to the wife the capital funds as sought by her. The most apparent source of such funds is his beneficiary loan account referred to above. Otherwise, he has significant financial resources available to him. There will be an order that he pay to her the sum of $150,000 within 14 days.

14. Otherwise, the wife seeks an order for some periodic financial provision in that  pending further order the husband pay mortgage payments and outgoings in relation to the Suburb B property and that the husband pay outgoings including telephone, internet and building and contents insurance in respect to the Suburb C property.

15. The wife now resides in the parties’ now unencumbered home. She is in employment. Her needs as claimed are seen to be to an extent excessive. The outgoings and other expenses she seeks to be paid by him are related to her occupation of the property to the husband’s exclusion. Whilst the Court has wide powers under s 114 of the Act it is not appropriate that such an order be made.

16. Otherwise, the wife seeks an order that the husband pay the mortgage payments and outgoings on the Suburb B property. At present the rent is paid equally to the husband and wife. If he is to pay the mortgage and outgoings on the property he should be able to do in part or whole from the income that the property derives. There will be an order that the husband pay those payments but be entitled to receive the income by way of rent.

17. The husband seeks an order as to sale of the Suburb B property. The wife now seeks to retain it. In that circumstance it is not appropriate to order its sale on an interlocutory basis.

18. Orders will be made accordingly.  

I certify that the preceding eighty four (84) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Foster delivered on 19 May 2020.

Associate: 

Date:  19 May 2020