Batsman and Batsman

[2009] FamCA 1050

FAMILY COURT OF AUSTRALIA

BATSMAN & BATSMAN [2009] FamCA 1050

FAMILY LAW – PROPERTY AND FINANCIAL MATTERS – Case management – Not prepared for trial – Financial assets not disclosed or known – Taxation returns not filed – Sale of property – Costs order

Family Law Act 1975 (Cth)

APPLICANT: MS BATSMAN

RESPONDENT: MR BATSMAN

FILE NUMBER: MLC 13495 of 2007

DATE DELIVERED: 28 OCTOBER 2009

PLACE DELIVERED: MELBOURNE

PLACE HEARD: MELBOURNE

JUDGMENT OF: YOUNG J

HEARING DATE: 28 OCTOBER 2009

REPRESENTATION

COUNSEL FOR THE APPLICANT: MR FOOKES

SOLICITOR FOR THE APPLICANT: LANDER & ROGERS

COUNSEL FOR THE RESPONDENT: MS STOIKOVSKA

SOLICITOR FOR THE RESPONDENT: BERGER KORDOS LAWYERS

Orders

IT IS ORDERED:

1. THAT the matter be adjourned to 18 December 2009 at 11.00 a.m. for a mention on all case management issues.

2. THAT forthwith the Husband and the Wife both personally and in their capacity as Directors of M Pty Ltd, do all acts and things to cause taxation returns up to and including 30 June 2009 to be lodged with the Australian Taxation Office ("ATO") for the following:

   a)The husband;

   b)The wife, noting that the Wife asserts she has lodged all personal tax returns to date;

   c)M Pty Ltd; and

   d)Batsman Family Trust.

3. THAT the Husband and the Wife forthwith do all such acts and things necessary to obtain or cause to be obtained a Certificate of Occupancy ("the certificate") for the property situate at R ("the former matrimonial home") and that the costs required to complete these works be met by the parties, to be paid equally, and capped at a total cost of $7,500 to be paid directly to the tradesmen upon completion of their tasks.

4. THAT within fourteen (14) days the Husband and the Wife do all such acts and things to cause the matrimonial home to be placed on the market for sale as follows:

   e)selling agent to be RI ("the selling agent");

   f)the contract to be an unconditional cash contract and by public auction;

   g)the conveyancing solicitor to be Anthony's solicitors, Mill Park; and

   h)the reserve price to be as agreed between the parties and the selling agent.

5. THAT upon the sale of the former matrimonial home the proceeds of the sale of the former matrimonial home to be applied as follows:

   i)to pay all costs, expenses and commission of sale;

   j)to discharge any encumbrance secured by the property;

   k)the sum of $10,600 to be released to the Wife by priority by way of costs; and

   l)the balance to be held by the conveyancing solicitor in an interest bearing account in the names of the parties pending further order.

6. THAT until further order each of the Husband and the Wife both personally or in their capacity or as director be and are hereby restrained from further encumbering or increasing the indebtedness secured by the former matrimonial home.

IT IS CERTIFIED

1. THAT pursuant to Rule 19.50 of the Family Law Rules this matter reasonably required the attendance of Counsel for each of the husband and wife.

THE COURT NOTES

A.THAT at the further hearing the Husband will request that the excess proceeds held by Anthony's solicitors from the sale of the former matrimonial home be applied as follows:

(a)to pay any outstanding taxation liabilities including interest, costs and penalties due to the ATO for all outstanding taxation returns in respect of the following:

(i)       The husband;

(ii)      The wife;

(iii)     MPty Ltd; and

(iv)     Batsman Family Trust.

IT IS NOTED that publication of this judgment under the pseudonym Batsman & Batsman is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLC 13495 of 2007

MS BATSMAN

Applicant

And

MR BATSMAN

Respondent

REASONS FOR JUDGMENT

1. This matter is before me in a defended list and, ostensibly, it was listed on the basis that it was prepared and ready for trial.  That, unfortunately, was far from the case and the legal preparation of this case is disappointing, if not inappropriate.  I extend those comments to the financial advisors engaged in preparation of core documents for, and on behalf of, the husband or the entity and trust and/or generally the family but I do not intend those comments to include the expert witness from P Partners.

2. Mr Fookes, of counsel, is briefed for the wife.  Ms Stoikovska, of counsel, is briefed for the husband and their clients and solicitors have been in court over the two days of this hearing, or what I might more particularly identify as a level of preliminary investigation.  The matter was certified as being ready for trial and Registrar Sikiotis directed the matter be listed, as a reserve case, in my defended list for the week commencing Monday, 26 October.  As it transpired, the first matter resolved and this matter was able to commence as a 2-3 day defended hearing on Tuesday, 27 October 2009. 

3. Notwithstanding the filing of affidavits and certain practice direction documents and a balance sheet, it was immediately apparent that there were significant issues in this case as to its state of preparedness for trial.  Whilst the fact is counsel made a valiant effort to resolve, out of court, property and financial issues, they could not agree upon the pool of assets, net of liabilities, which is the first stage in any approach to an appropriate determination of property interests.  Immediately, the issue of potential income tax liability for the husband and/or the family company or family trust were identified as issues and it was purportedly said that there was an estimated $80,000 in tax owing and unpaid. 

4. What ultimately transpired was a disclosure to the court that the husband’s personal taxation returns for the entity and family trust had not been filed for the 2006 financial year or thereafter. Accordingly, there is no basis of determination that is possible to estimate tax, or interest costs or penalties thereon that may now be owing, by or on behalf the parties and/or their corporate entities, to the Australian Taxation Office.

5. It is disappointing that both solicitors seemingly certified that this matter was ready for trial.  An earlier order of the court was made on 3 July 2008, directing the husband to provide financial records of the business, known as M Pty Ltd, including; financial statements, BAS statements, profit and loss and depreciation schedules and taxation returns for the past four years and, additionally, the husband was required to produce his personal taxation returns for the three years prior to 30 June 2008. Clearly, that order has not been complied with or has not been able for solicitors to comply with.

6. I have had produced to the court letters and correspondence which are now marked exhibit “W1” and exhibit “W2” which certainly identify that the family accountant, Mr S, had communicated in writing to the single expert that the 2006 trust tax return had been completed and forwarded and inherent, in that letter, is that it was able to be relied upon.  Those documents, as exhibits, can remain upon the court file and copies can be made available to both practitioners if they do not have copies currently available to them. 

7. I have heard various submissions that there are reasons such as; a lost or misplaced trust deed, or further extensions of time to file tax returns, or that there has been a lax code of conduct by the wife’s practitioners in following up or making investigations of available documents, or properly ascertaining the financial circumstances for themselves. I well understand that the independent expert, in annexure “1” to her report, qualified the source of information before her and identified the trust tax return for the year 2006 as in summary form only.  I indeed pointed that out to counsel yesterday as, likewise, I pointed out the orders of the court made 3 July 2008 to counsel, just recently.

8. On any view, the care and preparation and identification of assets, in this case, has been disappointing.  There is no way this matter should ever have been identified as being ready for trial.  The pool of assets cannot be ascertained whilst the liabilities are unknown.  I have raised this matter in earnest discussion with counsel, both yesterday and today, and I have now been presented with orders requiring both parties, but clearly and more particularly they are directed to the husband who has the knowledge and carriage of the business to do all acts and things to cause all taxation returns, personal and for the entity and trust, to be lodged as soon as practicable, up to 30 June 2009. 

9. It is appropriate that I qualify those observations by the fact that Mr Fookes has informed the court his client has filed her personal taxation returns for all years post-separation.  In the wider context of this case, there are various properties which have been sold or are soon to settle and there remains the former matrimonial home property at R, which is now to be sold.  The requirement for a successful settlement of sale is for a certificate of occupancy to issue and that requires certain repair, maintenance and electrical works to the property at a cost of approximately $7,500. 

10. There are, before the court, two quotations for that work identified in annexure “10” to the wife’s affidavit.  They were obtained in May of this year and presumably remain current.  I will require that work to be undertaken as a matter of urgency, and by or at the direction of the husband, but on the basis of costs identified in those quotations.

11. The issue before the court, for determination, was who should pay, at this time or hereafter, those accounts when rendered.  The all up cost is approximately $7,500.  Neither party say they can afford to pay.  The reality is they need to be paid to progress the case and to try and preserve assets for the parties and sell into a very active property market.  I am going to order the parties pay half.  I understand that might cause financial inconvenience, for one or both, but the reality of the matter is that I do not have sufficient confidence that there will be any available monies from the settlement of the sale, if it occurs, of the property at L Street, which is currently under offer. 

12. I will have counsel add to the orders before me that the repairs, and at the cost identified in the wife’s material, are to be undertaken and that cost paid equally by the parties. In the minutes now before me, there was an issue arising out of the settlement of the sale of the matrimonial home, if and when that occurs, and whether monies should be set aside to pay or whether payment should be made to the Australian Taxation Office of all taxation liabilities including interest costs and penalties thereon for the husband, wife and all entities and trusts. 

13. I have directed that the matter return, for case management, before me on 18 December 2009 at 11.00 a.m.  I will not, at this stage, permit any payment of monies out until the court is informed of the actual tax and/or other payments required to be made and until the R property is sold.  It is simply too early to make such reasoned assessment.  What I require is any and all moneys arising from the sale of the R property, after the proper costs and expenses of and related to sale, and discharging of any necessary encumbrance upon title, to then be held in the trust account of the conveyancing solicitor, pending further order of the court. 

14. As part of the matters that I dealt with earlier in this judgment there is, before the court, the need to assess the financial conduct of the parties insofar as it touches upon any order for costs. Under section 117 of the Family Law Act 1975, each party is to pay his or her own costs unless, otherwise, there are reasons why it is just to make a different order. Those factors are recorded in section 117(2A) of the Act and I have particular regard to both the financial circumstances of the parties and of all conduct of, and related to, these proceedings and insofar as counsel has referred to and highlighted these matters in their respective submissions.

15. I do have an understanding that the financial circumstances of both husband and wife are very tight.  A lot of money has already been expended on legal and accounting professional services, some of which has been wholly wasted.  The primary focus of the court, within that context, is, however, to do justice to the parties and subsection (c) identifies that the court must have regard to the conduct of the parties to the proceedings including as to discovery, inspection, production of documents and like matters; and it is those matters that are fundamental to my conclusion, that there must be a costs order in this case.

16. I well understand that the husband has engaged legal and financial advisors who, in many ways, have not been assiduous, as they should have been, in the preparation or presentation of his case to the court.  However, the husband himself must know that he has not filed appropriate tax returns post-2006 and indeed for that year.  A fair level of responsibility rests on his shoulders because he cannot disown that fact particularly when, in his most recent financial statement, he made an estimate of tax which he swore to with no knowledge or information from professional advisors to justify the figure and, as best as I can adduce, it has simply been “plucked from thin air”.  If so, that is a very irresponsible way to conduct any litigation. 

17. The reality is that the wife’s solicitors should have requested a tax assessment.  However, the letters are voluminous as to requests and it is a primary matter of consideration that the husband’s solicitor was present at a court hearing and was ordered to produce documents and seemingly that has been ignored.  The reality was to advise the other side that the trust and corporate and personal taxation documents of the husband were never prepared in final form and lodged.  Mr Fookes was keen to present to me various draft documents of tax returns, on an escalating basis, but I declined to receive those documents as they were somewhat unnecessary to the ultimate determination of what is a just order.

18. I have no hesitation in making a costs order.  I make a specific finding that it is just.  The quantum is agreed at $10,600.  I make no costs order in favour of the husband.  The only costs order will be that the husband pay to the wife the sum of $10,600.  I now turn to the issue of the timetable for payment.  I propose to defer that payment pending the settlement of the sale of the R property and that sum of $10,600 will be a charge upon the property and will be paid to the wife prior to any other moneys being then invested in the conveyancing solicitor’s trust account.

19. Otherwise, the orders that are presented to me provide for certain other obligations of the husband and wife.  The real issue, in this case, is when and if the solicitors will ever prepare the case so it is in a position to be heard.  The parties had three hearing days.  This matter could have been concluded if they, their solicitors and financial advisors had have taken the trouble, time and effort to do their job.  As to any issues as between husband and his professional advisors, I make no direct comment.  I direct the order to the husband.

20. As I started this short ex tempore judgment, I repeat my disappointment in the preparation of the matter and the level of professional acumen that has been given to this case to date.  The matter is now before me on 18 December and I look forward to all tax returns being filed, an affidavit of the accountant then being filed, confirming the lodgement of all documents with the Australian Taxation Office and, hopefully, the R property will by then be sold at a very favourable price to the parties. 

21. I record, because counsel have both so indicated to me, that their clients understand that the best price for the R property must be obtained and primarily that focuses responsibility upon the husband because he has either the benefit, or at least the fact, of being in long term occupation of that home post-separation in April 2006.  Mr Fookes has foreshadowed other issues, hereafter, in the trial and financial add backs are one of those issues but I am sure there will be many, and other issues, before the court in due course. 

22. What the parties must do is endeavour to identify the asset pool and then have meaningful discussions and thereby save themselves money and any inherent risks of the court hearing.  I will ask solicitors to add to the proposed orders, the two orders that I have made; first, as to the equal payment of the upkeep costs and repairs required to obtain the certificate of occupancy, up to $7,500 in total, and to be paid at a timetable to suit the individual workers who are undertaking those works and, otherwise, the $10,600 costs order deferred for payment until the settlement of the sale of the R property and then to be a priority payment on settlement.

23. I will certify for counsel and I will otherwise adjourn the matter to the date specified in the order.   

I certify that the preceding paragraphs are
a true copy of the reasons for judgment herein
of The Honourable Justice Young

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Associate: