Bellus and Bellus and Anor

[2017] FamCA 817

FAMILY COURT OF AUSTRALIA

BELLUS & BELLUS AND ANOR [2017] FamCA 817

FAMILY LAW – PROPERTY – Interim orders – Interim distribution of property – Where wife seeks an interim distribution of property – Consideration of ‘procedural’ and ‘substantive’ steps prior to an interim distribution – Where it is appropriate to make an interim distribution of property in favour of the wife – Where the parties are otherwise restrained from disposing or assigning assets of the company – Application allowed.

Family Law Act 1975 (Cth) ss 79, 80, 117

Medlow & Medlow (2016) FLC 93-692 Stanford v Stanford [2012] HCA 52 Strahan & Strahan (interim property orders) (2011) FLC 93-466
APPLICANT:	Ms Bellus

1st RESPONDENT: Mr Bellus

2nd RESPONDENT: B Pty Ltd

FILE NUMBER: ADC 2283 of 2016

DATE DELIVERED: 13 October 2017

PLACE DELIVERED: Adelaide

PLACE HEARD: Adelaide

JUDGMENT OF: Berman J

HEARING DATE: 4 October 2017

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Jordan

SOLICITOR FOR THE APPLICANT: Jordan & Fowler Barristers & Solicitors

COUNSEL FOR THE 1ST RESPONDENT:	Litigant in Person
SOLICITOR FOR THE 1ST RESPONDENT:
COUNSEL FOR THE 2ND RESPONDENT:	Mr Stokes

SOLICITOR FOR THE 2ND RESPONDENT: Stokes Legal

Orders

1. That the husband do all things necessary and provide all such authority to his previous solicitors C Lawyers such that any sum remaining in their trust account be paid to the trust account of the wife’s solicitor for the purpose of meeting the costs and disbursements of valuations as may be ordered or as agreed between the parties, with the balance then remaining held pending agreement or further order.

2. That within seven (7) days the husband and the wife do jointly instruct Mr D of E Valuers to value all items of plant and equipment in which the husband and/or the company F Pty Ltd have an interest being items not the subject of the valuation report dated 20 March 2017.

3. That if required, the second respondent do all things necessary to facilitate Mr D valuing the plant and equipment in which the husband and/or the company F Pty Ltd have an interest to the extent that such plant and equipment may be physically situated on the premises of B Pty Ltd.

4. That unless the husband provides to the wife an indemnity in written form acknowledging that he will indemnify the wife in respect of any future rental charge as may be incurred by the husband or F Pty Ltd in respect of the continued storage of the plant and equipment currently on the premises of B Pty Ltd within fourteen (14) days, THEN within a further seven (7) days the husband will do all things necessary to cause plant and equipment to be removed from the premises of B Pty Ltd to the premises of F Pty Ltd.

5. That within seven (7) days the husband and the wife do all things necessary to cause the “Small Boat” to be placed on the market for sale upon such terms and conditions as the parties may agree noting that there shall be no obligation on the parties or either of them to effect any maintenance, repairs or carry out a marine survey on the boat in preparation for sale with the proceeds of sale to be placed in the joint ING Account.

6. That within fourteen (14) days the husband do provide a copy of any sales contract and the transfer documents in respect of the sale of his interest in the “Large Boat”.

7. That until further order the parties be restrained and an injunction granted restraining each of them from selling, transferring, giving possession of, disposing of, assigning or in any way dealing with any plant and equipment in which the husband and/or the company F Pty Ltd have an interest.

8. That within twenty eight (28) days of the order each of the parties do provide to the other copies of statements for all bank accounts in which they have an interest for the period 1 February 2017 to the date of the order.

9. That the husband do forthwith instruct the accountant for the parties to complete financial documents and taxation returns for the 2017 financial year for all entities in which the husband and the wife have an interest.

10. That within seven (7) days of the date of this order the husband and the wife do all things necessary to cause to be paid from ING Bank account number 31457608 in the joint names of the husband and the wife the following:-

    (a)To the Australian Taxation Office the sum of TWENTY THREE THOUSAND FOUR HUNDRED AND SIXTY EIGHT DOLLARS FORTY TWO CENTS ($23,468.42) in payment of the outstanding taxation liability of F Pty Ltd;

    (b)To the trust account of Jordan & Fowler Solicitors for and on behalf of the wife the sum of THIRTY THOUSAND DOLLARS ($30,000) with such sum to be categorised as by way of partial property settlement.

    (c)That the second respondent be restrained and an injunction granted restraining B Pty Ltd from selling, transferring or disposing of its’ interest in an Aldi motor vehicle registration number S961BLL.

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 Bellus & Bellus and Anor 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 ADELAIDE

FILE NUMBER: ADC 2283 of 2016

Ms Bellus

Applicant

And

Mr Bellus

First Respondent

And

B Pty Ltd 
Second Respondent

REASONS FOR JUDGMENT

INTRODUCTION

1. By Amended Initiating Application filed 4 August 2017 Ms Bellus (“the wife”) seeks orders by way of property settlement that there be a division of the assets of the parties as to 60 per cent to the wife and 40 per cent to the husband with the superannuation entitlements of each of them divided to equality.

2. The wife also seeks orders by way of a declaration in respect of an Audi motor vehicle which is subject to a claim by B Pty Ltd (“the second respondent”).

3. By Response filed 9 September 2017 Mr Bellus (“the husband”) seeks that the assets of the parties be divided on a 60:40 per cent basis in his favour.

4. The wife seeks orders as set out in two applications both filed on 4 August 2017 being documents 19 and 21 on the Court file. The combined orders sought by the wife can be summarised as follows:-

   (1)That the balance of money currently remaining in the trust account of the husband’s former solicitors C Lawyers be paid to the trust account of the wife’s solicitors for the purpose of meeting the costs of valuations as ordered with the balance held pending agreement and/or further order;

   (2)That the husband and wife do jointly instruct Mr D of E Valuers to value items of plant and equipment not previously included in his valuation dated 20 March 2017;

   (3)That the husband provide a copy of any sales contract and transfer documents in respect of the sale of his interest in the large boat;

   (4)That the husband and the second respondent be restrained and an injunction granted restraining them from selling, transferring or in any way dealing with plant and equipment in which the husband and/or the company F Pty Ltd (“FPL”) have an interest;

   (5)That the husband do all things necessary to be caused to be paid from the ING bank account number …08 (“the ING account”) the sum of $30,000 to the wife by way of partial settlement of property and the sum of $20,000 to the wife by way of litigation funding;

   (6)That the “Small boat” be placed on the market for sale upon such terms and conditions as the parties may agree;

   (7)That the net proceeds of sale of the boat be paid into the ING account;

   (8)That the husband do produce for inspection, copies of bank statements for all accounts held and credit card  accounts in which he has an interest for the period 1 February 2017 to date;

   (9)That the husband forthwith instruct the accountant for the husband and the wife to complete tax returns and financial statements for the 2017 financial year for all entities in which the husband and wife have an interest and their individual tax returns for the same period;

5. The husband seeks the following orders:-

   (1)That money currently in the ING account be available to pay the ATO taxation debt;

   (2)That monies remaining in the ING account be available to pay the emergency services levy;

   (3)That the wife do all things necessary to cause an extension for a period of two years of the current ING interest only loan;

   (4)That the wife respond to questions asked by the husband;

6. At the commencement of the proceedings counsel for the wife tendered a joint balance sheet which whilst not purporting to be with the husband’s consent was tendered as either an aide memoire or a reasonable indication of the underlying legal and equitable interests of each of the party’s in property.

7. The second respondent was also represented. Whilst it is difficult to understand with clarity the parameters of the claim in respect of the second respondent, by reference to a response filed 3 October 2017 the following orders are sought:-

   (1)A declaration that the sum of $205,554.80 is due owing and payable by FPL to the second named respondent;

   (2)A declaration that the Audi motor vehicle registration number S961BLL is owned by the second named respondent.

8. The response was supported by an affidavit.

ISSUES RAISED BY THE SECOND RESPONDENT

1. The second respondent alleges that FPL occupied a portion of the B Pty Ltd premises to store and operate equipment for the purposes of the construction and manufacture of various products. It is further alleged that the agreement was for FPL to pay reasonable rent based upon a schedule comprised in annexure “MA2” to the affidavit of Mr G filed 3 October 2017. The outstanding rental is purported to be $163,500 plus GST. In addition agreement was reached that a bookkeeper who was an employee of BPL would render services to FPL now totalling $24,660 plus GST.

2. The claim by BPL in respect of the motor vehicle arises from its purchase by BPL on 27 June 2016 and its subsequent sale to FPL on 26 August 2016 for $27,359.20. Whilst it is acknowledge that there was a payment of $27,359.20 for the vehicle it was not formally transferred to FPL and remained registered to BPL. At some point following the sale the motor vehicle had a serious mechanical problem and agreement was apparently reached such that BPL would purchase the motor vehicle from FPL for $5,000. Accordingly BPL assert that it has clear title to the motor vehicle and that neither party nor FPL have any legal or equitable interest. The husband’s position in respect of the status of the motor vehicle is uncertain. Presumably the husband may allege that if the motor vehicle was not fit for purpose then he should receive either a refund of his original purchase price (less the sum of $5,000 apparently paid) or the motor vehicle.

MONEY HELD IN THE TRUST ACCOUNT OF THE HUSBAND’S PREVIOUS SOLICITORS

1. Funds in the sum of $6,150 remain in the trust account of C Lawyers. The parties are agreed that the proceeds will be transferred to the trust account of the wife’s solicitors for the purposes of meeting the costs of valuations as may be ordered.

2. I propose to make orders in those terms.

INTERIM PROPERTY SETTLEMENT

1. There are essentially two stages to the consideration of an application for interim property orders:-

   (1)The first step is “procedural step” which requires an analysis of whether the circumstances of the case triggers the Court’s power to invoke s 80(1)(h) of the Family Law Act 1975 (Cth) (“the Act”) to make an order for interim property settlement before a final hearing. At this stage, “overarching consideration” is the interest of justice.

   (2)The second stage is the “substantive step” where the provisions of s 79 must be considered and applied with limitations given that it is not a final hearing.

2. In Medlow & Medlow (2016) FLC 93-692 at 81,088 the Full Court confirmed that the starting point in respect of any property application, including an application for interim property orders is “the identification of the parties’ property and of their interests in it”.

3. In circumstances where a party seeks interim property order, the Full Court said at 81,090:-

   [86]The onus was clearly upon [the applicant] to establish that there were sufficient assets available for the interim distribution and that the effect of any interim order was capable of being reversed as party of the final hearing or at least would not defeat [the respondent’s] property claim. The onus was not on [the respondent] to adduce such evidence.

4. In that context the Full Court in Medlow (supra) referred to Strahan & Strahan (interim property orders) (2011) FLC 93-466 at 85,646 and the authorities referred to therein, in confirming that an interim order for the distribution of property must be “amenable to adjustment on a final hearing”.

5. The very nature of an interim hearing is such that the Court is not in a position to properly evaluate the evidence and, accordingly, the Court should take a conservative approach, including in respect to determining whether there is likely to be sufficient resources of the parties available at final hearing to accommodate any “adjustment issues”.

6. In terms of the second consideration in respect to an application for interim property orders, in Stanford v Stanford [2012] HCA 52 at 112 the High Court stated:-

   Under s 79(2) of the Act, a court shall not make a property settlement order unless satisfied that it is "just and equitable" to do so.

7. As the Full Court said in Medlow (supra):-

   [72]This is not be determined “by beginning from the assumption that one or other party has the right to have the parties’ property divided between them” (Stanford at [40]).

8. The following principles are relevant to the Court’s consideration:-

   (1)Together s 79 and s 80(1)(h) confer a power on the court to make orders for interim property settlement;

   (2)Section 79 confers a discreet power to make orders for property settlement and the court may exercise the power conferred by s 79 through “a succession of orders until the power…is exhausted” or until a final order dealing with all the known property is made.

9. The first stage in a hearing for interim property settlement is to determine the procedural step namely whether the circumstances of the case triggers the Court’s power to invoke s 80(1)(h) to make an order for partial settlement of property with the second stage being the substantive step where the provisions of s 79 are considered and applied but with limitation given that it is not a final hearing.

10. Sufficient particulars must nonetheless be provided to enable the Court to determine:-

    (1)That the application is “genuine”;

    (2)To “identify the circumstances that make it appropriate to give consideration to exercising its power”; and

    (3)To sufficiently weigh the identified need “against the benefit of having only one exercise of a s 79 power”.

11. An applicant needs to show more than “the mere fact 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.  The proceedings are being conducted by way of an interim hearing and as such whilst regard must be had to the relevant s 79 considerations, a detailed analysis is not required.

12. In Strahan, the Court considered at [223] that:-

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

13. The Court must be satisfied that it is just and equitable to make the order in the circumstances before the Court.  There is no dispute between the parties that each of them seek orders by way of settlement property and that it is just and equitable to do so.  Whilst the question of jurisdiction is not inevitably determined by the parties consent, taking into account matters raised by the High Court in Stanford consent is likely to reflect upon closer analysis the evidence will support the contention that it is just and equitable to do so taking into account the legal and equitable interests of the parties.

14. The wife also seeks an order for “litigation funding”.

15. The power to make an order for costs on an interim or final basis is informed by reference to s 117 of the Act rather than s 79. The wife’s application has not been crafted in a manner that would easily assist in the application of the provisions of s 117.

16. Whilst some assistance has been provided in terms of a balance sheet setting out the assets and liabilities of each of the parties both jointly and severally, there is nothing to assist as to the manner in which the wife’s costs have either been incurred or are likely to accrue.  It is conceded by the wife’s counsel that the sum as sought by way of litigation funding is in reality to discharge outstanding costs rather than to place the wife’s solicitors in funds for the future.  The concern of the Court is that notwithstanding the order being made, the wife will find herself in the position of not being able to meet her legal fees in a relatively short time.

17. It is however permissible for the wife to seek litigation funding as one of the circumstances that would justify the Court making interim property orders (see Strahan at 85,631).

18. It seems therefore uncontroversial that the wife’s application is genuine and in the current circumstances it would be important for the wife to retain the assistance of legal advice.

19. The husband seeks that an ATO liability incurred by FPL in the sum of $23,468.42 be paid.  The husband asserts that it is in respect of the 2016 financial year and a copy of the “payment plan” dated 12 September 2017 confirms that the company has a taxation liability in respect of outstanding company tax and related penalties.  The evidence presented by the husband is scant, but the parties agree that the money remaining in the ING account can be traced directly back to the company.

20. No evidence has been presented as to how previous distributions to the parties have been accounted for, but the point made by the husband is reasonable namely, that company money that was set aside in the ING account should have as its primary focus to discharge genuine liabilities of the company in priority to those of the parties.

21. Whilst not clearly enunciated, the consequence of money being distributed to the parties in contemplation of an outstanding debt to the ATO could render any distribution the focus of a “claw back” if a company was the subject of a statutory demand by the ATO.

22. I propose to order that the parties do all things necessary to cause the current balance of ING account number 31457608 to be distributed as follows:-

    (1)To the ATO in respect of FPL the sum of $23,468.42;

    (2)By way of partial settlement of property to the trust account of Jordan & Fowler for and on behalf of the wife the sum of THIRTY THOUSAND DOLLARS ($30,000).

THE SMALL BOAT

1. The husband holds an interest in a boat.  It has been valued at $65,000.  The wife seeks an order that the boat be forthwith marketed for sale and sold upon such terms and conditions as the parties may agree.  She further seeks that upon a successful sale the net proceeds be paid into the ING Bank account number …01.  There is some suggestion that the value of the boat is dependent upon some maintenance works being undertaken and the current certification being either updated or renewed.   The parties are not able to agree on the relevant process. 

2. In the absence of agreement I consider that the boat should be sold in its current state of repair.  The wife’s order is not opposed by the husband.  The proceeds of sale are to be placed in the ING account of the parties.

TAXATION RETURNS AND FINANCIAL STATEMENTS

1. The wife seeks that the husband instruct the parties’ accountant to complete financial statements and tax returns for the 2017 financial year in respect of all entities in which the parties have an interest.  Whilst the wife also seeks that the accountant undertake the personal tax returns for the parties, it is my position that the husband would not be able to instruct the accountant to undertake the wife’s personal income tax return.

2. Accordingly, I am prepared to order that the husband cause the accountant to complete financial statements for the 2017 financial year for all entities in which the husband and the wife have an interest, but will leave the preparation of the parties personal tax returns to be their own separate responsibility.

VALUATION OF OUTSTANDING PLANT AND EQUIPMENT

1. The wife seeks an order that a single expert valuer (Mr D of E Valuers) value all items of plant and equipment not previously the subject of valuation.  The wife alleges and the husband acknowledges that a substantial quantity of plant and equipment remains on the premises of BPL.

2. The following is an extract from a letter dated 5 May 2017 from the husband’s solicitors to the wife’s solicitors:-

   It is our client’s instructions that the list of assets on page 1 of your letter of 12 April 2017 which we note are indeed listed in the depreciation schedule of the company, are plant and equipment stored at the premises of [BPL] Works, and have been since their purchase.  On our instructions, the proprietor of [BPL] refused to allow access to the valuer to his premises to value those items as our client instructs that he holds the view that he has some interest in those assets by way of having contributed to their purchase.

3. There is now no opposition by BPL to the plant and equipment being the subject of valuation.

4. During the course of argument it became apparent that there was a connection between the storage of the plant and equipment and the alleged debt claimed by BPL in the sum of $163,500 plus GST.  It is alleged that by an agreed formula BPL were entitled to charge a rental for the storage of the plant and equipment and whilst the solicitor for the second respondent did not have clear instructions, it is likely that rental will be charged into the future if the plant and equipment is not removed.

5. The arrangement is at best nebulous and the Court was left with the impression that whilst the plant and equipment is not currently being used either by BPL or the husband, if possible he would wish to retain the equipment as part of the settlement of property.

6. The husband was not prepared to provide an indemnity in respect of any future rental liability that might be incurred in respect of the continued storage of the equipment and in the absence of BPL indicating their position as to the equipment and the husband refusing to indemnify the wife, it seems that the plant and equipment should either be sold or removed to the premises of FPL but that in any event should not remain on the premises of BPL.

7. I propose to make orders as sought by the wife for the valuation of the equipment, but subject to the husband providing an indemnity to the wife in respect of any future charge as may be rendered by the second respondent, the plant and equipment is to be removed from the premises of BPL.

GENERAL DISCOVERY

1. The wife alleges that the husband held a one third interest in a large boat with Mr G being the principal of BPL and an unknown third party.  The husband contends that shortly after the commencement of proceedings in June 2016 he sold his interest in the boat for $30,000 with the proceeds being deposited into a Westpac account.

2. She has sought discovery of the details and documents in respect of the contract for sale or transfer of interest.  Few details have been provided other than a copy of the boat registration.

3. The wife is clearly suspicious of the husband’s action in purported selling whatever the circumstances around the sale may be, at this stage there is a distinct lack of transparency.

4. The orders sought by the wife are reasonable and certainly no more than would be required of the parties to the litigation.

5. The wife also seeks that the husband provide copies of bank statements and credit card accounts for the period 1 February 2017.

6. There appears an issue between the parties as to the provision of documents that each of them have requested.  The period for which discovery is sought in relation to bank statements is narrow and accordingly the wife’s application is reasonable save and except her request for credit card accounts.  At this stage it is difficult to understand the forensic focus of the husband’s credit card statements and it must be a “fishing expedition”.  Of greater relevance however to the fate of that part of the wife’s application is a lack of any reference in the affidavit filed in support of the application directed to credit card statements.

GENERAL INJUNCTION

1. The parties are agreed that they each be restrained and an injunction granted restraining them from disposing of or in any way assigning or dealing with plant and equipment in which either of them have an interest or may be held by FPL.

2. Given earlier considerations, I do not propose to make an order of injunction directed to the second respondent.

I certify that the preceding fifty-three (53) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Berman delivered on 13 October 2017.

Associate: 

Date: 13 October 2017