Betro & Grima
[2022] FedCFamC1F 307
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Betro & Grima [2022] FedCFamC1F 307
File number(s): SYC 1826 of 2021 Judgment of: HARPER J Date of judgment: 10 May 2022 Catchwords: FAMILY LAW – PROPERTY – Applicant Husband seeking variation or discharge of orders made previously – Respondent Wife opposes any change to existing orders – Where previous orders were made by consent requiring wife to provide consent for company expenditure – Where the husband is the sole director and shareholder of the business – Where the wife argues she was wrongfully removed as director in 2021 – Husband argues wife has been obstructive and unreasonably withheld consent in relation to payments – Where wife argues her refusal to pay remaining invoices is by reason of failure of husband to provide sufficient information concerning expenditure – Where court is satisfied it has jurisdiction under s 114(1)(e) of the Act to make orders of an injunctive nature – Where parties and their child rely upon the revenue streams created by business activities conducted by the husband – Where previous orders prove to be an ongoing source of friction between parties – Consent orders have become unworkable – Orders made for variation of consent orders – Husband obligated to provide the wife with 48 hours’ notice of proposed payment of expenses – Residual issue of disclosure – Order for disclosure made. Legislation: Corporations Act 2001 (Cth) ss 180, 181, 182
Family Law Act 1975 (Cth) s 114(1)(e)
Federal Circuit and Family Court of Australia Act2021 (Cth) ss 52 and 149
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) Pt 13
Cases cited: Nevins & Urwin [2022] FedCFamC1A 57 Division: Division 1 First Instance Number of paragraphs: 38 Date of hearing: 29 April 2022 Place: Sydney Counsel for the Applicant: Mr Gould Solicitor for the Applicant: Clinch Long Woodbridge The Respondent: Litigant in person ORDERS
SYC 1826 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MR BETRO
Applicant
AND: MS GRIMA
Respondent
ORDER MADE BY:
HARPER J
DATE OF ORDER:
10 MAY 2022
THE COURT ORDERS THAT:
Discharge of Orders
1.Orders 1, 3, and 4 of the Orders dated 6 April 2021 be discharged.
Operation of the Businesses
2.Within seven days of the date of these orders, the wife cause the funds held in the Commonwealth Bank Account held in the name of B Pty Ltd as the Trustee for the B Trust, of which Ms Grima is the sole account holder, to be transferred into an account in the name of B Pty Ltd as the Trustee for the B Trust, of which Mr Betro is the sole account holder to be nominated within 48 hours of the date of these orders.
3.The husband provide to the wife the following information regarding the operation of B Pty Ltd and C Pty Ltd:
(a)Within 48 hours of payment on behalf of B Pty Ltd or C Pty Ltd being due, the following:
(i)A detailed list of any and all debts, progress payments, or other payments required to be paid by B Pty Ltd or C Pty Ltd; and
(ii)For any invoice required to be paid, a copy of each invoice.
(b)Within 48 hours after payment, a copy of each of the transaction receipts for each payment made by B Pty Ltd or C Pty Ltd;
(c)Within 48 hours after receipt of a monthly or quarterly bank statement by the Husband in the name of B Pty Ltd, C Pty Ltd or the B Trust, that bank statement;
(d)Within seven days of lodging or filing, each of the following:
(i)The annual Tax Return for B Pty Ltd, C Pty Ltd, B Trust, and C Pty Ltd Unit Trust;
(ii)The annual Financial Statement for B Pty Ltd, C Pty Ltd, B Pty Ltd Unit Trust, and C Trust;
(iii)The quarterly BAS Statements for B Pty Ltd, C Pty Ltd, B Trust, and C Trust.
(e)Within seven days of any further property purchase or refinance in the name of B Pty Ltd, a copy of all relevant information including but not limited to the sale contract, mortgage documents, and loan documents.
Disclosure
4.That within 14 days of the date of these Orders, the Wife provide, by way of her obligation as to disclosure, the following documents for the period 1 January 2018 to date:
(a)A copy of all bank statements, credit card statements, or mortgage statements in the Wife’s name personally or with any other person or company;
(b)For each trust (discretionary and unit trust) in respect of which the Wife has been since 1 January 2018, the settlor, the appointor, trustee (or member of a corporate trustee), beneficiary, or unitholder (or in respect of which any SMSF is the unitholder), including in relation to the property located at E Street, Suburb D, the following:
(i)A copy of the Trust Deed and any documents amending the Trust Deed;
(ii)Financial Statements for the past 3 completed financial years;
(iii)Income Tax Returns for the past 3 financial years; and
(iv)Notices of Assessment for the past 3 financial years.
(c)The most recent member benefit statement available for any entitlement of your client in any public superannuation fund including but not limited to Super Fund 1 member number …
(d)The following documents in relation to the Wife’s business F Company:
(i)A copy of all bank statements, credit card statements in the name of F Company;
(ii)A copy of the Tax Portal for F Company;
(iii)A copy of any tax return, financial statements, GST payments, or other financial documents; and
(iv)A copy of the wage, stock ledgers for F Company.
(e)The following documents in relation to the Wife’s interest in the property located at E Street, Suburb D NSW (the “E Street Property”):
(i)Bank account statements in relation to the rental income received for the E Street Property;
(ii)A copy of the lease for each tenant for the E Street Property;
(iii)A copy of any tax return and financial return for the controlling entity or trust;
(iv)Details of the discharge of the mortgage registered against the E Street Property (mortgage number … and discharge of mortgage number …) discharged on 1 March 2021 including but not limited to:
A.A copy of the bank transfer discharging the mortgage; and
B.The source of the payment to discharge the mortgage.
5.The application in a proceeding filed on 27 January 2022 be otherwise dismissed.
THE COURT NOTES THAT:
A.It is the intention of these orders that the husband be entitled to operate B Pty Ltd and C Pty Ltd in his sole capacity as the sole Director and Secretary.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Betro & Grima has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
HARPER J:
These are property proceedings between the Applicant Husband, Mr Betro (“the husband”), and the Respondent Wife, Ms Grima (“the wife”).
The parties married and commenced cohabitation in late 2010. They have one child, X, born in 2016. On 12 March 2021, the parties separated on a final basis. Proceedings were commenced on 15 March 2021.
On 6 April 2021, consent orders were made by Henderson J as follows (“the 6 April orders”):
1. That the pending further return date, the parties:
a. shall do all such things so as to jointly cause the following to be paid:
i. $102,237.71 to be paid in discharge of the Husband’s bankruptcy notice;
ii. the required periodic payments of all mortgages secured over the assets (‘the mortgage debts’) of [B Pty Ltd] (‘[B Pty Ltd]’) being debts owed in its own capacity or in its capacity as trustee of the [B Trust];
iii. any arrears associated periodic payments of mortgage debts incurred since 15 March 2021;
iv. as to payment of any land tax associated with properties owned by [B Pty Ltd] in any of its capacities ;
v. as to payment of any council rates associated with properties owned by [B Pty Ltd] in any of its capacities;
vi. as to payment of any water rates associated with the owned by [B Pty Ltd] in any of its capacities;
vii. debts or progress payments to be prospectively incurred in the ordinary course of busines of [B Pty Ltd] to be paid as and when due and payable that are not as specified above, with:
1. the parties providing the other with the documents pertaining to the debt or progress payment no later than 4 days before the debt/progress payment is due and payable;
2. the other party shall respond no more than 3 days from the date of the request and not unreasonably withhold consent in relation to the payment of same
b. for the purposes of giving effect to the preceding sub-order the parties shall jointly sign all such documents and do all such things so as to permit the Commonwealth Bank of Australia to process transactions from the [account] styled in the name of [B Pty Ltd];
2. That with regards to the refinancing of the mortgages of B Pty Ltd and/or C Pty Ltd Pty Ltd, the Husband is to the Wife’s solicitor’s the relevant loan application, approval and loan documentation on or before 3 pm on 7 April 2021;
3. That pending further order and except for facilitating the preceding orders, each party shall be restrained unless otherwise agreed in writing from dealing with the assets and funds standing in the name of or under the control of [B Pty Ltd] and [C Pty Ltd];
4. That pending further order, each party shall be restrained unless otherwise agreed in writing from dealing with the any vaults maintained by [H Company] standing in the name of the parties and/or B Pty Ltd and C Pty Ltd Pty Ltd.
Difficulties have arisen in the operation of the 6 April orders.
On 27 January 2022, the husband filed an application in a proceeding seeking a variation or discharge of the 6 April orders, together with detailed orders for disclosure. In support, he relies upon an affidavit sworn 14 March 2022. The husband relied on the following documents:
(a)Case Outline filed on 16 March 2022;
(b)Application in a proceeding filed on 27 January 2022;
(c)Husband’s affidavit filed on 14 March 2022; and
(d)Affidavit of Mr G filed on 14 March 2022.
The wife, who is self-represented, opposes any change to the existing orders. She relies on the following documents:
(a)Case Outline filed on 22 April 2022;
(b)Wife’s affidavit filed on 3 June 2021;
(c)Wife’s affidavit filed on 28 February 2022; and
(d)Wife’s affidavit filed on 22 April 2022.
During the hearing, the wife submitted four emails between herself and the husband’s previous solicitors, which were marked as Exhibit 1.
By way of further background, the following should be noted.
The 6 April orders restrain debts or progress payments prospectively incurred in the ordinary course of business by B Pty Ltd. There was no dispute that the business of B Pty Ltd relates to property. The husband described B Pty Ltd as the “asset holding” entity, while two other entities, J Company and K Company, conducted operations.
The evidence disclosed that B Pty Ltd has been involved in a number of property sites in the Sydney Metropolitan area, including sites at Suburb M, upon which it is proposed B Pty Ltd will carry out, broadly speaking, a project.
There was also no dispute that the sole shareholder and director of B Pty Ltd is currently the husband. He gave evidence that he works about 60 to 65 hours, or six or seven days, per week, for B Pty Ltd. The wife also agreed that the husband is the controlling mind and the primary decision-maker of B Pty Ltd and conducts its business operations, making the necessary business decisions on a day to day and strategic basis. She also agreed that it was in her interests, as well as the husband’s and those of their child, that the business of B Pty Ltd continue to operate and, hopefully, thrive since it was the primary source of income for the entire family.
As the sole director and controlling mind of B Pty Ltd, the husband has imposed upon him a range of common law and statutory duties, such as those set forth in ss 180–182 of the Corporations Act 2001 (Cth). Quite apart from legal duties imposed upon the husband as director, as a matter of sensible business practice, payment of creditors and reimbursement of expenses incurred for the benefit of the company should take place in a regular and orderly fashion.
The wife contended that in 2014, she was the sole director and shareholder, and that she had been wrongfully removed as a director at some point in 2021. She contends, and it appeared to be common ground, that she has previously been involved in the administration of the company, including approving the payment of invoices in the past. Where it is not common ground, I am unable to make any finding in relation to those matters, for the purposes of the present judgment.
According to the husband’s evidence, there have been numerous instances between late 2021 and early 2022, where the wife has been obstructive in organising or agreeing to the payment of necessary expenses for B Pty Ltd. As I understood it, his contention is that the wife has unreasonably withheld consent in relation to these payments, in breach of Order 1(a)(vii)(2) of the 6 April orders. He says he has set up a separate B Pty Ltd account to make some necessary payments such as GST and his credit card.
The wife disputes this, contending she has agreed to the payment of various invoices which she is satisfied are proper expenses of the company, but by reason of the failure of the husband to provide sufficient information, she has refused to pay a number of invoices, such as his credit card, because he has not informed her of the nature of the expenses charged.
In his evidence, the husband claims that he uses his personal credit card at times for company expenses and that it has been the practice in the past for those expenses to be reimbursed to him.
Stated summarily, the husband’s proposal is for the 6 April orders to be discharged, and that in substitution, there be a regime imposed upon him to give 48 hours’ notification to the wife of the payment of proposed expenses, rather than the current regime, which requires him to obtain the wife’s consent before any payments are made.
It was common ground that it was the nature of the business of B Pty Ltd that decisions often have to be made quickly, and business conditions change quickly.
The resistance of the wife to any change to the 6 April orders was said to be based upon her assertions that, unless she retained control over the company’s expenditure, the husband would engage in conduct which ran down the business of B Pty Ltd and otherwise allowed him to dissipate the matrimonial assets.
I note here that it was common ground that the wife lives in a property at L Street, Suburb N, of which she is the sole registered proprietor, and which she contends should be valued at $3.2 million. There are borrowings of B Pty Ltd secured against L Street, but the company pays that mortgage. The husband gave evidence, which was not disputed, that the wife received a total of $194,000 in cash payments from B Pty Ltd between May and September 2021. The total amount included a payment of $150,000 in September 2021. The husband claims he paid this amount in circumstances where the failure of the wife to co-operate in a refinance threatened to cause B Pty Ltd to fail.
It appeared to be the wife’s primary motivation for resisting the fresh orders proposed by the husband that she would feel anxious and suffer a level of vulnerability, which was unacceptable, unless she remained involved in the running of the business of B Pty Ltd pursuant to the 6 April orders. She points in her evidence to a history of erratic behaviour by the husband, including allegations of drug use, and contends that the current position of B Pty Ltd is financially destabilised or parlous because of his poor decision-making in the past.
B Pty Ltd is also the trustee of the B Trust. The 6 April orders referred to another company C Pty Ltd. The husband is the sole director and shareholder of this company and it is the trustee of the C Trust. As I understood the evidence, C Pty Ltd holds 100% of the units in the B Trust, as trustee for the C Trust. There was no dispute that the business activities conducted by the husband take place primarily through B Pty Ltd but also involve C Pty Ltd.
The husband relies upon s 114(1)(e) of the Family Law Act 1975 (Cth) (“the Act”) as a source of jurisdiction for the orders that he proposes. I also note that on 4 April 2022, orders for transfer between Divisions 1 and 2 of this court were made pursuant to ss 52 and 149 of the Federal Circuit and Family Court of Australia Act2021 (Cth). I am satisfied that the court has jurisdiction to make orders of an injunctive nature that it considers proper in the circumstances of the case, and that these proceedings constitute a matrimonial cause as defined in s 4 of the Act (see also Nevins & Urwin [2022] FedCFamC1A 57).
There was no dispute that the husband was required to establish a prima facie case to discharge the 6 April orders and make his substituted orders, and that the balance of convenience favoured the making of those orders.
As noted, there were some ancillary questions regarding disclosure and a safety deposit box, which I will come to shortly.
The evidence reveals very clearly that there has been consistent dispute between the husband and the wife since the 6 April orders were made. Those orders provided a regime for the ongoing payment of debts and other invoices by B Pty Ltd in the ordinary course of business. For their effective operation, they require cooperation between the parties. Taken together, the evidence of both the husband and wife shows this has not happened. The 6 April orders were formulated so that both parties had obligations imposed upon them. It is clear that the orders have regrettably proved to be an ongoing source of friction.
The requirement that neither party could unreasonably withhold consent in relation to a proposed payment, whilst clearly included to protect the smooth operation of B Pty Ltd’s business, is inherently difficult to enforce. However, even reasonable minds may differ on the question of when consent may be reasonably withheld. I am satisfied that, contrary to their intention, the 6 April orders, because they require agreement between the parties about payments, have been, and are likely to continue to be, productive of disagreements and impasses, resulting in or risking some disruption of the smooth operation of the business of B Pty Ltd. This risks detriment to both parties.
I am satisfied that the husband has demonstrated a prima facie case that there should be a variation of the 6 April orders. I am satisfied that as sole director, the husband should have control of the operations of B Pty Ltd and C Pty Ltd, for the benefit of both parties and their child, and that the insecurity and other concerns expressed by the wife are not a satisfactory basis to hold the orderly functioning of B Pty Ltd hostage to the inability of the parties to agree about meeting creditors. I am not persuaded the wife has shown any convincing reason to conclude the husband would deliberately sabotage or damage the business of B Pty Ltd, contrary to his own interests and those indirectly of his child, either to spite the wife or otherwise. On the contrary, experience has shown that it is a continuation of the regime imposed by the 6 April orders that is more likely to have the type of damaging effect on the business of B Pty Ltd feared by the wife. I am satisfied that as the primary decision-maker for B Pty Ltd, the husband should be able to operate the business without constant oversight by the wife and subject to her agreement, and therefore it is preferable for his regime of notification to be substituted for the agreement in making payments required by the 6 April orders.
I am also satisfied, and for the same reasons, that the balance of convenience favours making the orders for notification proposed by the husband.
The position of the wife is sufficiently protected by the notification and disclosure regime proposed by the husband. Her arguments against this outcome seemed to conflate disclosure, and therefore knowledge, about the activities of B Pty Ltd, with control over those activities. I am not persuaded the wife should have control. To the extent the 6 April orders gave the wife such control, they conflict with the husband’s ability to carry out his duties as a director. In circumstances where it was common ground that the husband is the controlling mind and decision maker for B Pty Ltd, orders of this court should not impede his ability to make necessary decisions about the functioning of the company, such as restructuring finance facilities and paying necessary creditors, including reimbursement to himself for payments he has made on behalf of B Pty Ltd. This is particularly so where it is also common ground that the parties and their child rely upon the revenue streams created by the business activities of B Pty Ltd.
Three other matters require comment. The first is that the husband’s proposed Order 4 requires, in effect, the holder of a Commonwealth Bank account held in the name of B Pty Ltd as a trustee for the B Trust to be changed from the wife to the husband. The evidence satisfies me that this is necessary for the purpose of the continuing smooth conduct of the business of B Pty Ltd.
The second is that the husband seeks to have access to what is called a safe deposit box located at H Company, O Street, Sydney, in particular, vault number …. He gave evidence that in that safe deposit box there are located a number of valuable items, $90,000 in cash, and some diamonds.
He gave evidence that he wishes to have access to those as personal items with sentimental value. The wife strongly resists this taking place other than for the limited purpose of valuing the items in the safe deposit box. It seems to me that items such as diamonds and cash in the amount of $90,000 should remain held in the safe deposit box pending the final resolution of the proceedings, because they may have a material impact upon the divisible matrimonial pool available at final hearing. Accordingly, I do not propose to make any orders in relation to the safe deposit box at this time.
The third area of debate related to disclosure. The husband seeks detailed disclosure from the wife by way of court order, while in her proposed minute of order, the wife seeks full and frank disclosure of all accounts and business interests held in the name of the husband.
Since 1 September 2021, the parties have been subject to the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth). Part 13 of those Rules makes extensive provision for the duty of disclosure and the manner in which it can be enforced.
The husband gave evidence of ten separate pieces of correspondence from his solicitors to the wife, with no or an inadequate response. For her part, the wife was unclear about the specific deficits in disclosure she claimed against the husband. Rather she sought an order in general terms which would achieve no more than the duty already imposed by the Rules.
Accordingly, I will make the specific orders for disclosure sought by the husband.
Finally, I note that by his orders the husband sought an injunction in relation to dealings by the wife with E Street, Suburb D NSW. However, I make no order about this, as it was not the subject of any argument, nor pressed by the husband at hearing.
I certify that the preceding thirty-eight (38) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Harper. Associate:
Dated: 10 May 2022
0