BARKAS & BARKAS

[2020] FamCA 382

FAMILY COURT OF AUSTRALIA

BARKAS & BARKAS [2020] FamCA 382

FAMILY LAW – PROPERTY – interim orders – marriage of 27 years – where the husband controls the parties’ assets and corporate entities – where husband made withdrawal of significant funds from bank account – wife seeks injunctive orders –  undertaking as to damages – variation of orders previously made – matter listed for trial.

Family Law Act 1975 (Cth)

APPLICANT: Ms Barkas

RESPONDENT: Mr Barkas

FILE NUMBER: MLC 12952 of 2019

DATE DELIVERED: 21 May 2020

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: Hartnett J

HEARING DATE: 13 May 2020

REPRESENTATION

COUNSEL FOR THE APPLICANT: Dr Ingleby

SOLICITOR FOR THE APPLICANT: Berger Kordos Lawyers

COUNSEL FOR THE RESPONDENT: Mr Thompson

SOLICITOR FOR THE RESPONDENT: Lennon Lawyers

Orders

1. All extant children’s orders applications be listed before Senior Registrar Field on 1 July 2020 at 10.00am.

2. The husband comply with order 5 of the orders made 30 April 2020 within five days hereof.

3. Order 7 of the orders made 30 April 2020 be varied such that the husband be permitted to withdraw a sum of up to $10,000 without the written consent of the wife.

4. Order 5 of the orders made 30 April 2020 be varied to include words ‘exceeding $10,000’ after the words “for all re-draws or withdrawals”.

5. By no later than 4.00pm on 26 May 2020 the Applicant file and serve a written Undertaking that she will meet and be responsible for any damages assessed by the Court to flow that would be, if thought appropriate by the Court, payable by her arising from the injunctions imposed by the Court by this Order of 21 May 2020.

6. The husband’s applications for an advance of property settlement and litigation funding of $2,000,000 and for a sale of V Street Suburb B be adjourned for interim hearing to 18 June 2020 at 10.00am before Justice Hartnett with each of the parties to file and serve any affidavit material on which they seek to rely within 21 days hereof.

7. All extant applications for final property orders be adjourned for hearing as a reserve before Justice Hartnett on 8 September 2020 at 10.00am (as a 3 day matter).

8. By 4.00pm on 4 August 2020 the Applicant file and serve upon all other parties:-

   (a)       an amended application setting out with precision the orders to be sought;

   (b)       the affidavits of evidence in chief of all witnesses relied upon (noting that affidavits relied upon for previous hearings cannot be relied upon as evidence in chief without leave); and

   (c) a financial statement that complies with Chapter 13 of the Family Law Rules 2004 (Cth).

9. By 4.00pm on 25 August 2020 the Respondent file and serve upon all other parties:-

   (a)       an amended response setting out with precision the orders to be sought;

   (b)       the affidavits of evidence in chief of all witnesses relied upon (noting that affidavits relied upon for previous hearings cannot be relied upon as evidence in chief without leave); and

   (c) a financial statement that complies with Chapter 13 of the Family Law Rules 2004 (Cth).

10. By 4.00pm on 1 September 2020 the Applicant file and serve any affidavit in reply to the affidavits of the Respondent.

11. No party file any further material other than as provided by these orders without leave of the Court.

12. If either party takes objection to any evidence of the other party:-

    (a)       any objection be taken no later than 14 days prior to the trial by service of written notice on the solicitor for the other party;

    (b)       the party so served shall notify the objecting party in writing no later than 7 days prior to the trial of which objections so taken are the subject of agreement and which require determination.

13. All parties have leave to issue subpoenae for the production of documents by arrangement with the registrar docketed with the management of the file.

14. All parties have liberty to approach the registrar responsible for the management of the court file to vary the obligations under these orders to ensure readiness for trial.

15. Should any party fail to comply with these orders or the ensuing amending directions of the docketed registrar, the party who has complied may immediately thereafter file an application in a case supported by an affidavit seeking for the matter to proceed on an undefended basis.

16. The Applicant pay all setting down and trial fees by 4.00pm on 4 September 2020 or obtain the requisite waiver thereof.

17. The practitioners and/or the parties in the event that they are not legally represented file and serve electronically and send a copy to … by 4.00pm on 1 September 2020 the following:-

    (a)       a concise set of orders to be sought if different from those already filed;

    (b)       a list of the applications and affidavits filed pursuant to these orders to be read and, if not the whole affidavit, the relevant paragraphs relied upon;

    (c)       a list of the parties’ respective legal and equitable interests in property and liabilities;

    (d)       a list of objections to evidence upon which rulings are required, if any; and

    (e)       a bullet-point summary of argument in relation to the legal and factual issues in dispute.

18. Each party provide to the Court at the commencement of the hearing, a statement setting out the costs incurred to that date and from what source those costs have been paid and what costs are expected to be incurred until the completion of the hearing.

19. The practitioners and/or the parties in the event that they are not legally represented be at liberty to approach Justice Hartnett’s Associate via email for an urgent listing of the matter if required.

AND THE COURT NOTES THAT:

A.If in any proceedings there are allegations of family violence and the provisions of section 102NA of the Family Law Act 1975 apply (see attached Family Violence Information Sheet), any unrepresented party will not be permitted to personally cross-examine the other party/parties.

B.Affected unrepresented parties may apply to the Commonwealth Family Violence and Cross-Examination of Parties Scheme (“the Scheme”) for representation but any such application must be made at least 12 weeks prior to the final hearing.

C.Further information about the legislation and the Scheme can be found at Part 4 of the attached Family Violence Information Sheet.

D.If section 102NA applies and a party becomes unrepresented after trial directions have been made, that party is required to promptly advise the Court.

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 Barkas & Barkas 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 MELBOURNE

FILE NUMBER: MLC 12952 of 2019

Ms Barkas

Applicant

And

Mr Barkas

Respondent

REASONS FOR JUDGMENT

Background

1. The Applicant wife (‘the wife’) was born in 1972 and is aged 48 years. The Respondent husband (‘the husband’) was born in 1972 and is aged 47 years.

2. The parties commenced cohabitation in September 1992 and were married in 1998. They separated on 5 August 2019 after 27 years of cohabitation. It is now approximately nine months since the parties separated.

3. There are three children of the marriage, they are Ms X born in 2002 who is now an adult child aged 18 years; Y born in 2003 who is now 17 years of age; and Z born in 2006 who is now aged 14 years. The children attend the private D School.

4. During cohabitation and the marriage, the husband was the primary income earner and the wife primarily cared for the children and ran the household. Almost all of the parties’ assets and that of their corporate entities have been acquired during the period of the parties’ cohabitation. The wife gave up her full time job working for F Company in 1999 to work full time in the husband’s  business. She performed administrative tasks and continued to do so to varying extent until approximately 2016. She thereafter continued to provide some assistance to the parties’ accountant who was employed by the parties to attend to their personal and business accounting matters.

5. Upon separation in August 2019, the wife and children left the former matrimonial home and resided with the wife’s parents (the maternal grandparents) for a short time, the wife alleging she felt threatened and intimidated by the husband.

6. About six weeks after separation the parties met to discuss children’s issues and property settlement. The wife had obtained no legal advice and did not agree with the valuation of assets as presented to her by the husband for the purposes of their property discussions. There was no resolution of matters between them at this meeting.

7. On 10 October 2019, and after the wife retaining solicitors, the wife and children, by agreement with the husband, moved back into the former matrimonial home with the husband vacating same.

Court Proceedings 

1. On 15 November 2019, the wife filed an Initiating Application seeking final ‘unparticularised’ property settlement and maintenance orders. The wife also sought various interim orders going to property and maintenance which included injunctive orders in respect of the husband’s business entities, and a litigation funding order. The wife sought disclosure by the husband and the appointment of a single expert witness. The wife’s Initiating Application had time abridged for hearing as a result of those matters deposed to by her in her supporting affidavit affirmed on 14 November 2019, from paragraph 26 onward. They included that:-

   a)on 6 November 2019, the wife had gone to a Coles supermarket with the children to purchase groceries. The credit card which she used was in the name of the husband, with her being a secondary card holder. When the wife went to pay for the groceries the credit card was declined. The wife subsequently discovered that she had been removed by the husband as a secondary card holder. On that same day the wife discovered the husband had changed the login details for the National Australia Bank accounts relating to the accounts for the family trust which she had previously had access to;

   b)on 8 November 2019, the wife discovered, when attempting to pay for petrol for her car, that the fuel card, which had been given to her by the husband for use during the marriage and after separation, was declined;

   c)on 10 November 2019, the wife transferred a sum of $200,000 from a bank account in the name of JJ Pty Ltd (the trustee of the Barkas Family Trust) held with the National Australia Bank into a bank account held in her name with Westpac. The balance of funds remaining after this withdrawal in the bank account of JJ Pty Ltd was approximately $260,000. The wife deposed that she took such action as a consequence of the husband’s earlier actions. She proposed to apply the funds withdrawn by her in payment of the children’s school fees of approximately $28,000 plus additional school expenses, the children’s and her monthly living expenses, and other expenses relating to the children together with the costs of insurances and legal fees;

   d)on 11 November 2019, the husband’s solicitor sought for the wife to vacate the former matrimonial home on 12 November 2019 and enable the husband to resume occupation. The wife changed the locks, the alarm pin code and reactivated the cameras in the former matrimonial home. She claimed to be fearful of the husband’s possible actions in regaining entry to the home;

   e)on 12 November 2019, the wife discovered her Westpac bank account had been suspended and that she was not permitted to log in on internet banking. The wife was informed by a representative at the bank that someone had raised a dispute over a transaction made by her and had made an allegation of fraud and requested a police report be made. In correspondence of 13 November 2019, received by the solicitors for the wife from the husband’s solicitor, the wife was advised as to this matter, relevantly, as follows:-

   We have also now been instructed that your client has purloined $200,000 from monies held by JJ Pty Ltd as trustee for the Barkas Family Trust without authorisation. We understand our client (and his co-directors) are treating the misappropriation of those funds as theft and will refer the matter to Victoria Police.

   In the circumstances, please confirm by 4 pm today that those monies will be returned to that account, failing which our client will have no option but to make a police report. This would be extremely regrettable and entirely unnecessary.

   f)as a result of the husband’s reference to “co-directors” in the email above, the wife instructed her solicitors to do a company search.  She discovered that there had been a change to the company details of JJ Pty Ltd with the appointment of new directors and shareholders being Mr M and Mr N, on 25 June 2019. This was not long before the parties’ separation and the wife had no knowledge that such changes had occurred. Mr M and Mr N are good friends of the husband.

2. In support of her application the wife relied upon the above referred to affidavit of evidence affirmed by her on 14 November 2019 and an affidavit of Mr P, solicitor for the wife, affirmed 14 November 2019. Mr P’s affidavit went solely to the issue of the seeking of a litigation funding order. The wife also relied upon a statement of financial circumstances affirmed by her on 14 November 2019. In that document the wife deposed to being in receipt of income of $250 gross per week (equating to $13,000 per annum gross) in her part-time self-employment as a travel agent together with interest and dividends of $50 per week. She received no payment of child support. Her deposed weekly expenditure of $2,778 was exclusive of any mortgage or rental expense in respect of the property in which she and the parties’ three children were residing, it being the former matrimonial home in Suburb Q . The wife’s weekly expenses included $100 for holidays for herself and the children; $100 for gifts; $180 for mostly clothing and shoes for the children; and $724 of education expenses for the children.

3. The wife deposed further that she had a shareholding of “PP Company”; $33,000 in a QQ Bank account and $23,000 in a Westpac bank account. She also had superannuation of $50,000.

4. On 6 April 2020, the husband filed a Financial Statement sworn by him on 6 April 2020. He deposed to having a weekly wage income of $545 ($28,340 gross per annum) from his occupation as a tradesperson. Additionally, the husband deposed to receiving income by way of dividends each week and by way of monies received from the Barkas Family Trust which he did not quantify merely putting “PP Company’’. I note in respect of the husband’s salary income, the wife had deposed in her material filed 14 November 2019 that his income was $75,000 gross per annum. Additionally, the wife quantified the income receipt of the husband’s  business, operated through the Barkas Family Trust by deposing to the business generating a gross income of approximately $2,400,000 per annum. She also deposed to receipt by the husband of “other sources of income.”[1] The husband deposed to a total personal weekly expenditure of $2,430. These expenses included weekly sums of $770 in rental payments for accommodation in a hotel; $840 for entertainment/hobbies; $150 for holidays; and $100 for gifts. Whilst the husband’s child support assessed amount was as stated by him to be $1,139 per week, he deposed to making no payment in that regard.

   [1] Affidavit of Ms Barkas affirmed 14 November 2019, [3].

5. The husband deposed further that he had $3,300 in a Westpac bank account; a LL Company shareholding in relation to which he provided no evidence of value and superannuation entitlements of approximately $754,000.

6. On 19 November 2019, the wife’s Initiating Application filed 15 November 2019 was heard by the Court. The husband had been given notice of the hearing but had not filed any material save for a Notice of Address for Service. He was however represented by his solicitor at the hearing on 19 November 2019. Interim consent orders were entered into between the parties with the matter otherwise being adjourned to 20 March 2020. The orders that were made by consent on that day are important to the particular application with which these reasons deal, and were relevantly as follows:-

   (1)The husband pay to the wife the sum of $200,000 (“the payment”) by 4.00pm on 19 November 2019 as follows:-

   (a)with $50,000 being characterised at the discretion of the Trial Judge; and

   (b)$150,000 as a part property payment such payment to be made from account …72 (“the H Pty Ltd account”).

   (2)The husband be paid $100,000 forthwith from the H Pty Ltd account such payment to be as a part property payment.

   (3)Until further order, the husband whether in his personal capacity or in his capacity as an officeholder, shareholder or agent of any company/corporate entity, a partner of any partnership, or in his capacity as a Trustee or Appointor of any trust is hereby restrained from withdrawing funds from any bank account or any other account held with any other financial institution save:-

   (a)to make the payment; and

   (b)to meet the reasonable business expenses of H Pty Ltd  trading as  Barkas Company and JJ Pty Ltd the business known as “Barkas Services” from the bank accounts currently held in the names of these companies and businesses.

   (4)The husband forthwith authorise and direct the offices of the Westpac Bank and National Australia Bank to restore the wife’s log-in access to all bank accounts held by him personally or companies where he is a director or where he is a signatory to any accounts.

   (5)Pursuant to s 114 of the Family Law Act 1975 (Cth) until further order the husband, personally and in his capacity as an officeholder, shareholder or agent of any company/corporate entity, a partner of any partnership, or Trustee or Appointor of any trust be and is hereby restrained, by injunction from:-

   (a)selling, pledging, transferring, encumbering, further encumbering, assigning, alienating or in any way dealing with any interest that partnership, Trust or company or he personally has in any real or personal property;

   (b)directing, authorizing or causing any other person to sell, pledge, transfer, encumber, further encumber or assign or alienate any interest that partnership, Trust or company or he personally has in any real or personal property;

   (c)resigning as an officeholder of any company/corporate entity or of any Trust;

   (d)signing any document or doing anything to alter the shareholding in any company or office-holding in any Trust;

   (e)incorporating any further company in which he, his servants or agents are shareholders or directors;

   (f)voting in favour of any resolution of a company that in any way affects or diminishes or dilutes the interest of the wife or himself in any company or the assets of any company, including issuing any further shares in those companies;

   (g)voting in favour of any resolution to borrow more funds for or on behalf of:

   (i)the company or companies of which he is a director or shareholder; or

   (ii)any Trust of which he is the Trustee either personally or of which he is a director of the Trustee company.

   (h)alter any constitution of any company;

   (i)alter or amend any Trust Deed or as an Appointor to replace any Trustee;

   (j)distribute funds from any Trust prior to giving the wife at least 14 days prior written notice.

   (6)The husband sign all documents and do all acts and things necessary to withdraw his dispute with the National Australia Bank or Westpac Bank with the fraud investigations department or other relevant departments and take all steps necessary to assist the wife to lift the suspension on the wife’s Westpac Bank accounts to enable her access.

   (7)Until further order the wife have sole use and occupation of the property situate at W Street, Suburb Q.

   (8)The husband forthwith serve Mr N and Mr M with a sealed copy of these orders.

   (9)A sealed copy of these orders be served on the fraud investigations department of the named banks and the managers of the branches of those banks with a request that they forthwith remove any prohibition on the wife accessing or withdrawing funds from the accounts held in her personal name.

   (10)That R Services be appointed as the single expert valuer to value real estate referred to in the joint letter of appointment dated 21 October 2019 with the cost of same being met equally.

   (11)The parties do all acts and things and sign all documents within 7 days to appoint a valuer/accountant to value the contents of:-

   (a)H Pty Ltd trading as Barkas Company;

   (b)G Pty Ltd;

   (c)JJ Pty Ltd as Trustee of the Barkas Family Trust;

   (d)L Pty Ltd;

   (e)Barkas Group Pty Ltd;

   (f)Barkas Investment Trust; and

   (g)the Barkas Superannuation Fund (if not held wholly in cash)

   (“the Barkas Group”)

   …

   (14)The parties attend a mediation on a date agreed with Mr T or other agreed mediator within 30 days of the receipt of the valuation under paragraph 11 herein.

   (15)Each party file and serve any further documents or affidavits on which they seek to rely in any further interim proceedings by 4.00pm 16 December 2019.

   AND THE COURT NOTES THAT:

   A.    In the event of a failure to provide evidence as to the reason for the recent alteration of the company register for JJ Pty Ltd  the wife proposes to amend her application to join Mr N and Mr M to these proceedings and, if necessary seek costs against them at the next Court event in the event that the company record disclosing their directorships and shareholdings in JJ Pty Ltd is not amended to return those office-holdings to the husband prior to that date.

1. The hearing listed on 20 March 2020 was administratively re-listed by the Court to 18 March 2020. The husband failed to comply with order 15 of the orders made on 19 November 2019 in that he filed no material prior to the adjourned Court hearing date of 18 March 2020.

2. On 18 March 2020, the Court made an order adjourning the proceeding to 15 June 2020 for mention. Otherwise the Court made orders by consent going to disclosure, in particular, disclosure by the husband. It was noted that the parties would be attending a private mediation (earlier ordered by consent) in April or May of 2020.

3. On 29 April 2020, the wife filed an Application in a Case again seeking an abridgment of time for the hearing of the matter. In support of that application the wife filed an affidavit affirmed by her on 29 April 2020. The necessity for time being abridged in respect of the Application in a Case was the wife’s allegation that the husband had made significant withdrawals, in the order of $1,470,902 from bank accounts that were subject to (injunctive) order number 3 of the orders made by consent on 19 November 2019. These withdrawals occurred not long after the matter had failed to resolve at a private mediation which was held on 9 April 2020. The explanation provided by the husband’s solicitor, the wife asserted, did not accord with the reasonable business expenses of the husband’s  business or of JJ Pty Ltd as trustee of the Barkas Family Trust. The husband had withdrawn a total sum of $1,000,000 from the Westpac H Pty Ltd Cash Reserve account which, prior to the husband’s withdrawal, had a balance of funds in the sum of $1,912,359.50. Additionally, the husband had withdrawn the sum of $470,902 from the trading cheque account of JJ Pty Ltd with the description of the transaction being “miscellaneous debit.”[2] There was also a credit in the account of L Pty Ltd account in the sum of $470,867 to which the wife referred. The wife instructed her solicitors to write to the husband regarding the transactions and to request that the withdrawn funds be returned to the relevant accounts. That did not occur. The husband further indicated he would not be returning funds as requested by her.

   [2] Affidavit of Ms Barkas affirmed 29 April 2020, [12].

4. Further, in an email from the husband’s solicitor received by the wife’s solicitors on 28 April 2020, the husband set out his intent to sell a property by placing it on the market for sale in 14 days in breach, as alleged by the wife, of a further injunctive order made by consent on 19 November 2019. I set out the relevant contents of that email below as it formed a part of the background to the orders made 30 April 2020:-

   …In short compass, and subject to reserving our right to provide a more fulsome response, we are instructed that the payments about which you complain, being transactions numbered 1 to 4 in your letter of 27 April 2020 were, from our client’s perspective, made in accordance with 3(b) of the orders made in the Family Court on 19 November 2019. More specifically, and using the numbering in your letter of 27 April 2020, we are instructed as follows:

   1. Our client did withdraw $1,000,000 from the Westpac H Pty Ltd Interest Account.

   2. The first transaction was from Suburb GG but it was not in cash. We understand that our client is taking a director’s drawing/bonus from the business given the significant and substantial work he has had to undertake since separation from your client and due to the pressure on the business arising from the COVID-19 pandemic. We also note in this regard that your client resisted our client procuring any assistance from anyone outside of the business and he has been obliged to assume a huge burden. This is a reasonable business expense, given the previous profitability of the business and the fact that, as our clients have now separated, it would be unreasonable for your client to expect that our client would not remunerate himself for the significant personal exertion. We are instructed that our client has committed the monies from the drawing to an investment so that he earns income on those monies.

   3. These monies were transferred to the cheque account to pay miscellaneous business expenses. Our client is required to pay month end commitments including but not limited to:

   a. Wages;

   b. BAS;

   c. Suppliers; and

   d. Contractors.

   4. We understand this is simply a loan repayment to unwind some of the complexities occasioned by the business valuation report from AA Company.

   Notwithstanding the consternation on the part of your client, all of the aforementioned do not prejudice your client nor are they unable to be reconciled and/or accounted for as between our respective clients.

   …

   For the purposes of clarity, our client is also now proposing selling the Eucumbene property and it will be placed on the market for sale in 14 days. The proceeds will be used to pay out the NAB loan and all relevant expenses will be paid out. Any cross entity loans will be repaid in full which will simply, once again, tidy up some of the complexities raised by the recent AA Company business valuation report.

   We trust that, save for some of the qualifications about the provision of further information, this satisfies the concerns expressed by your client.

5. Other allegations of withdrawal of funds by the husband were made which the wife alleged were not reasonable business expenses and the wife was further concerned by the husband not amending the company register for JJ Pty Ltd to return the director office holding to the husband solely.

6. The wife described the husband’s conduct as financially abusive and coercive and expressed her concern,[3] that the husband would dissipate the funds in his possession and further dissipate those funds in the H Pty Ltd cheque account.

   [3] Affidavit of Ms Barkas affirmed 29 April 2020, [42].

7. On 30 April 2020, the husband filed a Response to the wife’s Application in a Case and an affidavit affirmed by him on 30 April 2020. In that Response the husband sought an adjournment of the hearing for at least a week. He had been served with a copy of the wife’s Application in a Case at 10.46am on 29 April 2020 with the matter being listed for the following day at 12.30pm. The return date of the application had been so abridged as a Registrar had determined the matter was sufficiently urgent to require an immediate listing. On the hearing of the matter, the Court determined it was necessary to make some further injunctive orders on the evidence available to it and to that end, the urgent listing of the matter was appropriate. The husband’s affidavit of evidence filed 30 April 2020 contained, relevantly, the following evidence:-

   9. I am a director and shareholder of the following entities:

   a) H Pty Ltd trading as Barkas Services;

   b) G Pty Ltd;

   c) JJ Pty Ltd as Trustee for the Barkas Family Trust;

   d) L Pty Ltd;

   e) Barkas Group Pty Ltd;

   f) Barkas lnvestment Trust; and

   g) Barkas Superannuation Fund.

   10. The principle purpose of these entities is to conduct a service. In addition to provide the foregoing trade services, these entities have also (with the full knowledge of Ms Barkas) engaged in investments which has played a significant part in growing our current wealth. Specifically, we have engaged in many investments/loans of anywhere between $150,000- $500,000 whereby funds are lent to private borrowers at high interest rates.

   11. For instance, on 27 February 2013, the Wife lent the sum of $145,000 via a mezzanine finance company. The borrowers put interest on the loan at an annual interest rate of 20%. Interest payments were made monthly, in arrears in the sum of $2,421.67. The loan amount accrued was repayable together with any accrued interest owing at the relevant time, being 12 months from the date of such loan or earlier by mutual agreement between the parties. The loan was an interest only loan. Similarly, on 24 April 2013, the Wife lent the sum of $105,000 on similar terms.

   12. I note that income/interest payments earned from such investments were deposited into the Wife’s QQ Bank personal account, which was previously a joint account.

   13. I refer to Order 3 of the Interim Orders. My understanding is that I was permitted to apply funds by me, H Pty Ltd, JJ Pty Ltd and their related entities in the ordinary course of business. I say that the “business” includes applying available cash for for [sic] investment purposes.

   …

   15. My business contracts are predominantly with FF City Council, BB City Council, CC Town Council and DD City Council. Due to COVID-19, all childcare centres, leisure centres, community centres, public meeting places (including toilets) have been temporarily shut down. Minor capital works for these Councils have been cancelled, fearing works would not have been completed on time for when COVID-19 restrictions are lifted. As a result, there has been a significant drop in my income (almost a 60% reduction) and my weekly income has now reduced to approximately $500. In order to provide an ongoing income stream, I invested the sum of $500,000 on a 12 month loan to a private borrower on terms similar to what the Wife and I, via our business entities have entered into in the past.

   16. As to paragraph 9, I state that the sum of $500,000 was transferred from the H Pty Ltd Interest Cash Reserve Account into the H Pty Ltd Cheque Account, which is the main operating business account. All business expenses are, and are continuing to be, paid from this account I state that this transfer was an intra-entity transfer and was for the ordinary course of business. The Wife has had in the past and continues to have full viewing access to all of the entities bank accounts.

   …

   19. I agree with the contents of paragraph 12 and state that JJ Pty Ltd owes L Pty Ltd the sum of approximately $1,380,000 as confirmed at paragraph 9.20 of page 19 of the AA Company report. On 24 April 2020, I transferred the sum of $470,867 from the trading cheque account for JJ Pty Ltd (which is the trustee for the Barkas Family Trust) into the L Pty Ltd Investment account in part-payment of these monies owed in order to streamline the functioning of the business in the current climate. Again, this was a intra-company transfer and remains an “asset” on the Barkas Group’s balance sheet.

8. With each party represented by counsel at the hearing on 30 April 2020, the Court made the following interim orders with agreement by the parties that the matter was required to be further agitated as soon as practicable:-

   (1)On or before 4.00pm Wednesday 6 May 2020 the husband file and serve an affidavit deposing to all relevant details as to:-

   (a)the reasons for the discrepancy between his solicitor’s letter dated 28 April 2020 sent 12.31pm and his affidavit filed 30 April 2020;

   (b)the investments referred to in paragraph 10 of his affidavit filed 30 April 2020;

   (c)the investment of $500,000 referred to in the final sentence of paragraph 15 of his affidavit filed 30 April 2020;

   (d)the documents signed and/or provided by the husband to the “private borrowers” as referred to by the husband in paragraph 10 of the affidavit filed 30 April 2020;

   (e)the application of the sum of approximately $450,000 in the H Pty Ltd Cheque Account #…97 as at the date of the hearing on 19 November 2019.

   (2)On or before 4.00pm Wednesday 6 May 2020 the husband provide to the wife’s solicitors PDF copies of any document evidencing any allegation in the affidavit prepared pursuant to order 1 above, including without being limited to all invoices for all alleged expenditure from the H Pty Ltd Cheque Account #…97.

   (3)Order 3 of the orders made on 19 November 2019 be discharged and the following order be made in substitution:-

   Until further order, the husband and/or his agents whether in his personal capacity or in his capacity as an officeholder, shareholder or agent of any company/corporate entity, a partner of any partnership, or trust or appointor of any trust be and is hereby restrained, by injunction from borrowing any monies, drawing or withdrawing funds from any account held in the name of the following entities without the written consent from the wife:-

   (i)JJ Pty Ltd ACN …;

   (ii)G Pty Ltd ACN …;

   (iii)L Pty Ltd ACN …;

   (iv)H Pty Ltd trading as Barkas Company ACN …;

   (v)Barkas Group Pty Ltd ACN …;

   (vi)KK Pty Ltd ACN …; and

   (vii)Barkas Family Super Fund Pty Ltd ACN ….

   (4)In relation to order 3 referred to above, the relevant entities have been identified by the ACN number and order 3 applies regardless of any name change to an entity.

   (5)The husband forthwith do all acts and things necessary to notify the National Australia Bank and Westpac Bank and the husband do all such acts and things necessary to ensure that the wife is a co-signatory for all re-draws or withdrawals for all bank accounts held in the name of the entities referred to order 3 (NOTING THAT the wife will respond by return to any written request for payments to be authorised).

   (6)The husband whether in his personal capacity or in his capacity as an officeholder, shareholder or agent of any company/corporate entity, a partner of any partnership, or trust or appointor of any trust be and is hereby restrained by injunction from directing, authorising or causing the co-directors of JJ Pty Ltd from borrowing, drawing or withdrawing funds from any bank account held in the name of JJ Pty Ltd without the written consent from the wife.

   (7)Until further order, the husband be and is hereby restrained, by injunction from drawing or withdrawing funds from any bank account held in his personal name in excess of $1,000 without the written consent from the wife.

   (8)The wife’s solicitors be at liberty to provide a copy of these orders to any bank which holds any account in the name of the husband or any entity listed in order 3 above.

   (9)The further hearing of all extant interim applications be adjourned to 8 May 2020 at 10.00am (subject to judicial availability).

   (10)The wife’s costs of this application are reserved.

9. On 13 May 2020, the proceeding returned before the Court for further interim hearing as to property matters only. The applications relied upon then included:-

   a)Amended Response to Initiating Application filed by the husband on 12 May 2020. That document sought the following interim orders:-

   1. That within 7 days, the parties do all acts and things and sign all documents necessary to place the property at V Street, Suburb B more particularly comprised and described of as certificate of title volume ... folio ... (“the Suburb B property”) on the market for sale.

   2. Upon the completion of the sale of the Suburb B property, the proceeds of sale shall be distributed in the following manner in order of priority:-

   (a) In payment of all costs, commissions and expenses associated with the sale including the conveyancing costs;

   (b) In payment of the NAB portfolio facility ending *…86: and

   (c) The balance be utilised to pay the L Pty Ltd loan in accordance with the Division 7A loan agreement signed by both parties on 27^th of April 2014.

   3. That within 7 days, the Wife forthwith do all such acts and things and sign all necessary documents to remove her caveat lodged on the property V Street, Suburb B and be restrained by injunction for lodging any further caveats on the said property.

   4. In the event that the Wife fails or neglects to execute a deed or instrument required to give effect to these orders within 7 days of the making of this Order the Registrar of the Family Court of Australia is appointed pursuant to Section 106A of the Family Law Act 1975 may execute such deed or instrument in the name of the Wife do all acts and things necessary to give validity to the operation of such deed or instrument

   b)Amended Response to the Application in a Case of the wife filed by the husband on 12 May 2020 wherein relevantly the husband sought the sum of $2,000,000 to be paid to him forthwith with such sum to be characterised as part property settlement.

10. The affidavit material further relied upon included:-

    a)an affidavit sworn on 12 May 2020 by Mr Patrick Lennon, solicitor for the husband, which went solely to the seeking of a litigation funding order;

    b)an affidavit of evidence of the husband affirmed 8 May 2020 together with his earlier statement of financial circumstances (which was re-filed);

    c)an affidavit of evidence of Ms C affirmed 12 May 2020. Ms C was the former personal and business accountant of the parties; and

    d)an affidavit of evidence of the wife affirmed 12 May 2020.

11. In respect of the evidence of the husband, I note in relation to that which had been previously asserted by the parties the following:-

    a)the husband agreed with the wife’s claim that he had been drawing a salary of approximately $75,000 per annum but claimed that due to the COVID-19 pandemic he was currently drawing a salary of approximately $25,000 per annum;

    b)the husband claimed the wife earns $54,589 per annum from her part-time employment; and

    c)the husband admitted that until December 2019 he made payment of all expenses associated with the children but, by implied admission, has failed to do so since that time.

Consideration

1. The husband’s evidence is that the asset pool of the parties has a current value of $12,873,820 and additionally, the corporate entity JJ Pty Ltd owns real property to a total value of $5,625,000 with Lots 1 and 2 V Street Suburb B forming part of the value of JJ Pty Ltd. Most of the total value of the parties’ asset pool is held in the  business and its associated entities. I note the husband has control of most of this wealth by virtue of his position as appointor and beneficiary of the Barkas Family Trust. Otherwise the former matrimonial home has a value of $1,325,000 and is included in the asset pool.

2. Whilst the wife continues to occupy the former matrimonial home, the husband is living in the home of co-director and good friend, Mr N, although he states that he has overstayed his welcome. The husband wishes, in the next “few months”, to purchase a home in the Suburb Q  area suitable for his and the children’s needs. He envisages a purchase price of $1,000,000 to $1,500,000.

3. The husband says as to the impact of the injunctions made on 30 April 2020:-

   54. The effect of the orders made by the court on 30 April 2020 and the consequential notification to the bank has caused all my business and personal accounts to be frozen. I have limited access to funds. When I went to buy fuel on 5 May 2020 to fill up a business vehicle, the fuel debit card was declined. When I rang the bank I was advised words to the effect of “the account is frozen and the card not operable”. I am not able to operate the business under the conditions imposed by the court orders of 30 April 2020.

   55. The business has 7 vehicles and a other machineries. Fuel is a daily recurrent expense. There are 9 employees including me and my secretary. The wages bill is approximately $7,500 a week. Recurring expenses include:

   a. Approximately $107,000 BAS per quarter

   b. Approximately $13,000 plant hire

   c. Approximately $70,000 HH Pty Ltd equipment

   d. Approximately $13,000 insurance

   e. Approximately $3,200 Waterboard

   f. Approximately $48,000 S Company supplies

   g. Approximately $4,000 motor vehicle repairs

   h. Approximately $3,000 machinery repairs.

   56. If an “emergency job” occurs, I may have to hire extra equipment at short notice and at a high cost (could be $50,000) and purchase material (could be $50,000). I am working 12 hours a day 6 days a week. I do not have the time to arrange for the Wife to co-sign withdrawals from the accounts as required by Orders 5 and 6 of court orders dated 30 April 2020.

   57. The current orders are “strangling” my operation of the business. Business and financial decisions have to be made in a prompt and efficient way which the current orders do not facilitate.

   58. If the Wife wants the business, I agree to forthwith transfer it to her as a part property settlement for the value accorded to it by AA Company in the jointly appointed valuation. If the Wife wishes for me to continue to operate the business then I will do so on the following basis:

   a. That she can view as she presently does the online trading accounts of H Pty Ltd account.

   b. That I be able to personally authorise any one transaction to the value of $100,000 without requiring her authority or her co-sign. I would agree to transactions over and above $100,000 to be jointly authorised/co-signed.

   c. That she not contact staff or attend at the business.

   d. That paragraphs 3, 4, 5, 6 and 7 of the orders of 30 April 2020 be discharged.[4]

   [4] Affidavit of Mr Barkas affirmed 8 May 2020.

1. The husband’s evidence is further that it is “draconian and onerous and extremely disruptive to [him] and the business”[5] for him to require the consent of the wife to pay the wages bill.

   [5] Affidavit of Mr Barkas affirmed 8 May 2020, [82].

2. The husband seeks if any injunctions are to remain for the wife give usual undertaking as to damages and any injunctive orders be annotated by inclusion of the words “save in the ordinary course of business.”[6]

   [6] Affidavit of Mr Barkas affirmed 8 May 2020, [85].

3. In paragraph 64 of his affidavit affirmed 8 May 2020, the husband refers to order 3 of the interim orders made 19 November 2019, the Court noting that such orders were made by consent. His evidence is that his understanding of the orders was that he was permitted to apply funds from H Pty Ltd, JJ Pty Ltd and their related entities in the ordinary course of business and for any reasonable business opportunity presented to the business that had been done previously. He took this to include the applying of available cash within the business (and sitting in its accounts) for investment purposes. To support that claim he asserts the parties have engaged in a number of investments/loans of anywhere between $100,000 to $500,000 whereby the parties would lend funds to private borrowers at high interest rates. He claims the wife was always involved in such loan transactions as was Ms C. By way of example, the husband placed evidence before the Court that on both 27 February 2013 and 24 April 2013 the wife lent, from business accounts, the sums of $145,000 and $105,500 respectively to borrowers who paid interest on the loans at an annual interest rate of 20 per cent. Ms C’s evidence was that she can recall at least three occasions (with no specific details provided) wherein the parties made business loans to third parties using cash funds in accounts of various entities.[7] The husband provided no evidence of any such loan transaction occurring in the last seven years, and no evidence of any such transaction occurring without the wife’s knowledge and consent. It is farfetched for him to asset that his claimed advance, to a person known to him, of $500,000 (as described hereafter) was an activity undertaken in the ordinary course of business, and the Court does not accept it to be so. In particular:-

   [7] Affidavit of Ms C affirmed 12 May 2020, [14].

   a)order 3(b) of the orders made on 19 November 2019 allowed the husband to withdraw funds from any bank accounts of H Pty Ltd and JJ Pty Ltd ‘to meet the reasonable business expenses’ of those corporations;

   b)the husband admits his withdrawal of $1,000,000 from an account in relation to which he had been by order restrained from removing such funds unless they were to meet ‘the reasonable business expenses’ of the relevant corporations and their related entities;

   c)The husband claimed, via his solicitor, correspondence of 28 April 2020 that he had withdrawn $500,000 from the business “as a director’s drawing/bonus” because of the significant and substantial work he has had to undertake since separation from the wife and “due to the pressure on the business arising from the COVID-19 pandemic.” In his affidavit of 30 April 2020 he claimed that he had applied $500,000 to a loan advanced by him for “investment purposes”. He provided no details beyond that the loan was for a 12 month period and to “a private borrower”;

   d)the husband has not provided evidence as to the trail of monies, being the $500,000 withdrawn by him from the Westpac H Pty Ltd Interest account. There is no evidence of it being deposited anywhere. There is now evidence, not entirely satisfactory, of a loan agreement entered into by the husband with J Holdings Pty Ltd which is claimed to be secured by a registered charge; and

   e)On the state of the evidence before the Court, I accept the wife’s evidence that:-

   … (d) [t]here is no evidence of the advance or evidence that the funds have in fact been transferred to the alleged borrower;

   (e) There is no disclosure by the husband as to where the sum of $500,000 was held between 24 April 2020 to the time the funds are alleged to have been advanced to the alleged borrower, as the husband deposes that the withdrawal of $500,000 was “not a cash withdrawal but a bank transfer”;

   (f) The mortgage has not been registered on the title of the security property;

   (g) There is no evidence that the alleged borrower has the capacity to service the loan or how it derives an income;

   (h) There is no evidence that the husband has sought financial information from the alleged borrower; and

   (i) There is no evidence that the husband has conducted a valuation of the security property to show that there is equity of $500,000.

   (Emphasis omitted)

4. The husband has still not complied with order 1(a) of the orders made on 30 April 2020.

5. Order 8 of the orders made on 19 November 2019 required the husband to forthwith serve Mr N and Mr M with a sealed copy of those orders. There is no evidence before the Court of compliance with this order, nor is there any evidence from the husband as to the reason for his alteration of the company register of JJ Pty Ltd nor any evidence that Mr N and Mr M are not current directors and shareholder of JJ Pty Ltd. In those circumstances they will need to be joined to the proceeding and promptly. There is deficiency in the husband’s evidence as to this arrangement.

6. There is no evidence before the Court as to the husband’s application of the $100,000 part property payment received by him pursuant to the orders made on 19 November 2019.

7. The husband signalled an intent to, regardless of the orders of the Court, sell one of the properties owned to JJ Pty Ltd.

8. The husband’s explanation for the transfer of funds from JJ Pty Ltd to L Pty Ltd is as follows:-

   JJ Pty Ltd owes L Pty Ltd approximately $1,380,000, as confirmed at paragraph 9 .20 of page 19 of the AA Company report. On 24 April 2020, I transferred the sum of $470,867 from the trading cheque account for JJ Pty Ltd (which is the trustee for the Barkas Family Trust) into the L Pty Ltd Investment account in part-payment of these monies owed and to streamline the functioning of the business in the current climate. Again, this was an inter-company transfer and remains an “asset” on the Barkas Group’s balance sheet. I made this transaction under advice from the Accountant, Ms C, and refer to her affidavit.[8]

   [8] Affidavit of Mr Barkas filed 8 May 2020, [73].

9. Ms C’s evidence is that she advised the husband to make the above transfer of funds:-

   I am familiar with the accounts of the business and its various entities. The accounts show JJ Pty Ltd owed L Pty Ltd approximately $1,380,000. Ms Barkas was a party to this transaction. I refer to the loan agreement. I advised Mr Barkas to transfer $470,867 from the Cheque Account for JJ Pty Ltd which was surplus funds into L Pty Ltd’s investment account in part payment of the loan. The loan matures in approximately 2 years' time and has to be repaid. I advised Mr Barkas to do this to simplify the business. The repayment of the loan avoids Division 7A tax consequences. I say the payment of this sum has no effect on the value of the property pool. It has no disadvantage to Ms Barkas. Ms Barkas was fully aware of the need to make repayment of the loan. The agreement is witnessed by her signature. The transfer of $470,867 has been done in the ordinary course of business. It is a prudent and proper accounting transaction for Mr Barkas to have undertaken.[9]

   [9] Affidavit of Ms C affirmed 12 May 2020, [15].

10. The transfer of funds from JJ Pty Ltd to L Pty Ltd in the sum of $470,867 was said by the husband to be in part satisfaction of an intra-company loan of which the wife was aware. Whilst the wife is aware of the said loan, it is a long standing debt and to the wife’s knowledge, JJ Pty Ltd has not historically made any repayments to L Pty Ltd. This loan was not due for repayment for a further two years and it is a Division 7A of the Income Tax Assessment Act 1936 (Cth) loan. The taxation impact of the husband’s actions could be adverse and are a matter to be further canvassed at trial. Additionally, this transfer was in breach of orders of the Court. There was no necessity for the repayment of this loan at this time and in that manner.

11. The transfer of monies in the sum of $500,000 between the H Pty Ltd Interest Cash Reserve account into the H Pty Ltd Cheque account, the main operating business account, was said by the husband and his accountant to be in the ordinary course of business and to allow for the payment of necessary and incurred business expenses.

12. Further Ms C’s evidence is that she advised the husband to transfer $500,000 from the H Pty Ltd Interest Cash Reserve account into the H Pty Ltd Cheque account leaving approximately $912,000 in the reserve account for the purpose of paying recurring business expenses. She said as to this:-

    …There is no overdraft on the business account. There are recurring business expenses such as BAS of $107,000, rent of approximately $5,000, supplier costs, hire of equipment, usages, etc. The transfer was done from an accounting point of view in the ordinary course of business and in accord with sound accounting practice. It allows the business to trade in these difficult economic times. Again, this transfer has not diminished the value of the asset pool or adversely effected Ms Barkas’s interests.[10]

    [10] Affidavit of Ms C affirmed 12 May 2020, [16].

13. The wife denies any necessity for the transfer of funds as described in the previous paragraph. She states, relevantly, that:-

    4. I deny that there has been any downturn in the company named H Pty Ltd trading as  Barkas Company (“the  business”) for the following reasons:

    a) The Husband is working the same hours as he was during the marriage;

    b) The Husband is looking for new staff, as I have seen advertisements posted by the  business on seek, which was listed by the  business in May 2020; and

    c) Weekly Wages are being paid at the same level.

    5. On 28 April 2020 … I logged on to the Westpac internet banking and viewed the cheque account for H Pty Ltd account no. ending #…97 (“H Pty Ltd Cheque account”). I saw a transaction whereby the Husband had paid for the company’s GST and PAYG for the period between January 2020 to March 2020 in the amount of $107,074. This amount is the highest paid for any January to March quarter in the past 4 years for the  business and a comparison is set out below for the same period, in the years 2017, 2018, 2019 and 2020:

    Jan - Mar 2020         $107,074

    Jan - Mar 2019          $91,933

    Jan - Mar 2018          $87,503

    Jan - Mar 2017          $103,709

    6. From my review of the transaction listings of the income being deposited into the H Pty Ltd cheque account, the following amounts have been deposited by various councils and clients under contracts with the  business:

    DEC 2019      $158,000

    JAN 2020      $154,000

    FEB 2020      $115,000

    MAR 2020     $128,000

    APR 2020      210,000

    Total              $765,000

    7. Contrary to the assertion made by the Husband … I say that the Husband did not have to transfer the sum of $500,000 into the H Pty Ltd cheque account. Prior to the transfer of $500,000 on 24 April 2020, this account held a balance of funds in the amount of $165,405.55.

    …

    (Emphasis omitted)

14. It is difficult to find any necessity for the making of this transfer of funds by the husband.

15. As stated by the wife, the husband’s complaint about the operation of the orders made on 30 April 2020 omit reference to the fact that the blanket freeze on the accounts will be lifted after he attends upon the Westpac Bank at the Suburb Q Branch to sign the cosignatory forms.[11] The husband continues to refuse to do so, claiming he is “too busy”.

    [11] Affidavit of Ms Barkas affirmed 12 May 2020.

16. The Court shall require the wife to give the usual undertaking as to damages to which she is not adverse. There is a need, on the current state of the evidence, to restrict the husband’s movement and total control of funds to require the wife’s knowledge and consent. The husband comes to the Court having breached some of its orders. The protection of the asset pool is necessary. The husband shall have some further capacity to obtain funds for personal expenditure given the size of the asset pool but the matters of concern raised in these reasons must be addressed by him before orders removing/varying the restrictions can be made (as sought by him).

I certify that the preceding forty-three (43) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Hartnett delivered on 21 May 2020.

Associate: 

Date:  21 May 2020