Border and Border (No. 3)

Case •

[2008] FamCA 830

•

13 October 2008

FAMILY COURT OF AUSTRALIA

BORDER & BORDER (NO. 3) [2008] FamCA 830
FAMILY LAW – FINANCIAL – INTERIM – Spousal and child maintenance – Review of Orders of Judicial Registrar – Proper needs of the Wife - Financial Position of the Husband and Capacity to Pay Maintenance – Departure from Child Support Assessment – Poletti Order
Family Law Act 1975 (Cth)
APPLICANT: Ms Border
RESPONDENT: Mr Border
FILE NUMBER: SYF 3823 of 2005
DATE DELIVERED: 13 October 2008
PLACE DELIVERED: Sydney
PLACE HEARD: Sydney
JUDGMENT OF: Watts J
HEARING DATE: 15 September 2008, 29 September 2008, 10 October 2008

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Lethbridge, senior counsel
SOLICITOR FOR THE APPLICANT: Coleman & Greig
COUNSEL FOR THE RESPONDENT: Mr Simpson, senior counsel
SOLICITOR FOR THE RESPONDENT: Newnhams

Orders

  1. Orders made by Judicial Registrar Johnston on 14 February 2008 be discharged. 

  2. Pending further order or determination of the substantive proceedings between the parties, whichever first occurs, the husband pay or cause to be paid to the wife spousal maintenance in the sum of $3,360 per week commencing 11 October 2007 and payable weekly in advance.

  3. The husband forthwith pay to the wife any arrears that currently exist arising from Order 2 after the credit referred to in Order 4 is given to the husband.

  4. In relation to Order 2, the husband receive credit in relation to any payments made to the wife or payments made on the wife’s behalf in respect of the following:-

    4.1.Home and contents insurance;

    4.2.Lawn mowing, gardening and reasonable maintenance of the property, including swimming pool and air conditioning;

    4.3.Maintenance of the home security system;

    4.4.Council rates;

    4.5.Leasing, insurance and running costs of the wife’s motor vehicle (registration and compulsory third party insurance are the responsibility of the wife);

    4.6.Hospital and health insurance maintained at a maximum cover for the wife and the child …;

    between 11 October 2007 and the current date.

  5. There be a departure from the administrative assessment of child support dated 11 September 2007 in relation to the child … born … November 1993 so that in the child support period from 11 September 2007 until 31 December 2009 the father shall cause to be paid child support at a weekly rate of $1,120 per week. 

  6. A sealed copy of these orders be served on the Child Support Registrar as soon as possible. 

  7. The husband pay to the wife’s solicitors, Coleman & Greig, the sum of $380,000 and for this purpose:-

    7.1.The husband forthwith do all things and sign all necessary documents to cause C Pty Ltd to repay to him from his loan accounts an amount totalling $300,000 and the husband pay that sum to Coleman & Greig; 

    7.2.The parties forthwith do all things and sign all necessary documents to cause a payment of $80,000 to Coleman & Greig from the Commonwealth Bank Controlled Monies Account (“CMA”) referred to in item 37 of the husband’s financial statement sworn 9 October 2008.

  8. Coleman & Greig or the wife’s solicitors from time to time hold the sum of $380,000 or the balance of that sum in a controlled monies account for the purposes of using those monies from time to time to pay the wife’s costs and disbursements in this case.

  9. The Trial Judge is to determine the character of the payment made by the husband pursuant to Order 7. 

  10. Until the husband complies with Order 7.1, the husband be restrained from permitting or further doing any other act or thing to cause C Pty Ltd to use its cash reserves other than for the purposes essential to the maintenance of the operation of the company and in any event not allow cash reserves to reduce to a figure below $300,000. 

  11. The balance of the CMA is charged with any outstanding arrears arising from Orders 2 to 5 and the sum in the CMA not be drawn upon unless there is the written consent of both parties or a further order (including an order to enforce Orders 2 and 5).  

  12. The husband is not to pay or cause any other entity or person to pay any monies to lawyers for his own legal costs associated with these proceedings if he is in default of the orders made today for the payment to the wife of spousal maintenance or is in default of any amount he is due to pay for child support for the child as a result of the orders made today. 

  13. Any outstanding interim application involving third parties be stood over for mention to the next occasion the matter is before Moore J or any other judge who is assigned to hear the final applications.

  14. The solicitor for the wife will inform any affected third party about Order 12. 

IT IS NOTED THAT:

  1. It is the court’s intention that any payments made by the husband to the Child Support Agency for the support of the child between 11 September 2007 and the current date will be credited against any arrears created by Order 5. 

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

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYF 3823 of 2005

MS BORDER

Applicant

And

MR BORDER

Respondent

REASONS FOR JUDGMENT

INTRODUCTION

  1. This matter is a review by the husband of orders made by Judicial Registrar Johnston on 14 February 2008.  The Judicial Registrar made orders relating to spousal maintenance, child support and interim costs. 

  2. The husband is 58 years of age; the wife is 41 years of age. 

  3. They have one child, a daughter, who was born in November 1993. 

  4. The parties lived together for fourteen and a half years between December 1990 and July 2005 (having been married in March 1993). 

  5. At the commencement of the matter before me, senior counsel for the husband conceded for the purposes of the interim applications, that the wife currently was unable to obtain paid employment and was unable to support herself adequately.

  6. In considering what level of spousal maintenance was proper and what level of child support was just and equitable and otherwise proper, the focus of the inquiry is on what amount the wife needed to expend and whether or not the husband had the capacity to pay those needs.

ORDERS MADE BY JUDICIAL REGISTRAR MADE 14 FEBRUARY 2008

  1. On 14 February 2008 Johnston JR made the following orders:

    (1)That pending further order or determination of the substantive proceedings between the parties, whichever first occurs, the husband pay or cause to be paid to the wife spousal maintenance in the sum of $1600 per week commencing on 11 October 2007 and payable monthly in advance.

    (2)That there be a departure from the administrative assessment of child support dated 11 September 2007 in relation to the child […] born […] November 1993 so that for the child support period from 11 September 2007 until 30 June 2009 the father shall cause to be paid child support at the monthly rate of $2 383 as well as the following expenditure that he has been paying for the child:-

    -   hospital and health insurance at the highest cover

    -   all school tuition fees and expenses

    -   part mobile telephone and home telephone

    -   part petrol

    -   part extra tuition fees

    -   part gas, electricity and water and

    -   1 stationery pack.

    (3)That a sealed copy of these orders be served on the child support registrar as soon as possible.

    (4)That within 42 days the husband pay to [I Finance] all monies owing thereto by the wife and the wife do all things necessary to bring to an end her contract with this financier.

    (5)That not later than 30 days after service on the husband’s solicitors of each Taxation Invoice / Memorandum of Fees by the wife’s solicitors in respect of the wife’s legal costs ongoing as from 14 February 2008, the husband pay or cause to be paid to the wife’s solicitors the sum claimed in each such Invoice / Memorandum.

    (6)That for the purposes of the above order the wife shall authorise and direct her solicitors to forward direct to the husband’s solicitors for payment by the husband, Taxation Invoices / Memoranda of Fees on a monthly basis for legal work performed on the wife’s behalf in these proceedings each month, such invoices to issue no later than the twenty-eighth day of each month until determination of the substantive proceedings between the parties.

    (7)That the trial judge determine the character of all payments made by the husband pursuant to orders 4 and 5 above.

APPLICATIONS

  1. It was the husband’s application that he pay spousal maintenance in the sum of $1,250 per week.  In addition, the husband offered a fully funded motor vehicle.  The husband also indicated the wife could have income from the R unit.  The R unit was currently occupied by a person who was not paying any rent.  Senior Counsel for the husband indicated that that person could be required to vacate and a tenant could be obtained for the R unit. 

  2. In respect of child support, the husband offered to pay the amount of $396 per week, being the sum that had been determined by the Judicial Registrar in the amount of $549 per week (which is the current assessment) less an amount of $153 per week, which the husband claims is the weekly amount for school fees.

  3. Overall therefore the husband’s application was to pay to the wife a cash amount of $1,646 per week ($1250 + $396), provide her with a fully serviced motor vehicle, provide her with the rent from the R unit once it became vacant and pay the child’s school fees.  I have no evidence as to the amount of rent the R unit would fetch.

  4. The payments proposed by the husband were to be serviced in part by drawings on his loan account with C Pty Ltd.

  5. The wife for her part (given that this was a hearing de novo of the application before the Judicial Registrar) sought the orders that she sought before the Judicial Registrar, namely that she be paid spousal maintenance in the sum of  $8,877 per week and child support in the sum of $2,184 per week. 

  6. The wife also sought an interim cost orders.  Order 5 sought a payment of $27,440.56 in relation to fees previously incurred with a former solicitor. 

  7. Order 6 sought a payment of $459,590 OR in the alternative:-

    “That not later than 30 days after service on the husband’s solicitors, of each taxation invoice/memorandum of fees by the wife’s solicitors in respect of the wife’s legal costs ongoing as from 5 June 2008, the husband pay or cause to be paid to the wife’s solicitors the sum claimed in each such invoice/memorandum.”

  8. The form of the alternate order referred to in the preceding paragraph is similar to the order made by the Judicial Registrar which is the subject of this review. That order has been stayed pending the determination of this review.

  9. The wife’s claim of $8,877 per week for herself and $2,184 per week for the child is a total of $11,061 per week or when annualised, an amount of $575,172 per annum from the husband’s after tax income.

RECENT ORDERS

  1. His Honour Justice Fowler made orders in this matter on 15 August 2008.  Those orders, inter alia, required the husband to transfer to the wife shares in G Pty Ltd (a publicly listed company), being shares which the husband in sworn material and in submissions before His Honour said were 1,220,000 in number which he owned unrestricted in his own right.  It was an agreed fact that the husband had failed to comply with the order. The explanation given by the husband was that he had mistakenly sworn a financial statement and had represented to Justice Fowler that he was the owner of these shares when in fact he was not.  It is asserted that the 2006 financial statements for the parties’ superannuation fund indicates that the superannuation fund is the beneficial owner of these shares and that the husband holds these shares on trust for the superannuation fund.

  2. The other order that Justice Fowler made was an order directed to Mr M, a senior officer of G Pty Ltd.  The husband was ordered to give Mr M notice to repay a loan that the husband asserted to Justice Fowler that Mr M owed him.  Justice Fowler in his order indicated that the amount of that loan was in the sum of $390,000.  The husband now says he had previously sworn an incorrect amount and says the amount outstanding is $246,357, not $390,000.  In addition, Mr M apparently does not agree with the law as set out by Justice Fowler and asserts defences to the claim for payment of money given to him by the husband in compliance with Fowler J’s order. 

  3. The net effect was that no monies have become available to the wife as a result of orders made by Fowler J on 15 August 2008.

CREDIT AND THE FINANCIAL POSITION OF THE HUSBAND

  1. Senior Counsel for the wife submitted that I should have regard to a bundle of letters that was tendered before Fowler J and the judgment of Fowler J dated 15 August 2008 which is critical of the husband’s credibility.  Senior Counsel for the wife submitted that this material was relevant because, unusually for an interim application, it was material that is said to have clearly cast doubt upon the Court’s ability to accept at face, even on an interim basis, statements made by the husband about his current financial position. 

  2. Senior Counsel for the husband submits that it would be dangerous to rely upon the letters in these proceedings as material that goes to the husband’s credit.  Senior Counsel for the husband then submitted that the husband was not present when they were presented to Fowler J and the husband has not sought subsequently to deal with them because they were unaware that the wife would intend to rely upon them in these proceedings.   The husband was aware that he may have to deal with this as an issue in the future.  The letters involve the conduct of prior solicitors and the husband says that in due course the husband will need to put on evidence as to his version of what is otherwise damaging material contained in the letters.

  3. Senior Counsel for the wife said that this issue was connected into the current proceedings because at paragraph 37(g) of the husband’s affidavit sworn 28 September 2007.  Although that paragraph was originally sought to be read by the husband, senior counsel for the husband withdrew relying upon that part of the husband’s evidence.

  4. Senior Counsel for the husband urged that this evidence would not be relevant on an interim basis and would otherwise be excluded by a proper application of the provisions of s 135 of the Evidence Act 1995 (Cth). I accept that within the very limited confines of the inquiry I have undertaken, it is inappropriate to embark upon a wider exploration of the husband’s credit.

Credibility of the Husband’s Financial Information

  1. Senior Counsel for the Wife criticised differences in financial statements sworn by the Husband in July 2008 when compared with financial information in his financial statements sworn in September 2008.  Senior Counsel for the wife submitted that these statements were sworn by a very intelligent man and I accept that is so.  The two form 13 are sworn two months apart.  In one the husband asserts that his assets are $2,000,070, and his liabilities are $1,030,000.  In the second, he asserts that his assets are $10,849,843 and his liabilities are $758,338. 

  2. The discrepancies in these totals in the two financial statements are primarily explained by the fact that the husband in the first of these two financial statements said that the value of his shares in G Ltd were not known.

  3. There are however some differences which are not so easily explained.  I accept there is some evidence before me that the husband, who I accept at face is a highly intelligent man, has sworn a financial statement on 11 July 2008 which contains at least two pieces of inaccurate information.  The husband in that document has misrepresented the number of shares that he personally held in G Ltd.  He also misrepresented the amount of money that he now says was owed to him by Mr M.  There is no adequate explanation as to why he would have done both of those things. Those representations were continued by those representing him before Fowler J.  Fowler J made orders based on those misrepresentations which meant that part of the orders Fowler J made became nugatory.  The husband has also now sought to reopen the interim hearing to correct misrepresentations made to me, through his senior counsel on 15 September 2008.

  4. On that day the following exchange took place between Mr Simpson and myself:-

    His Honour:  How much cash is currently in this company?

    Mr Simpson:  Your Honour the only figures we’ve got in relation to that are the figures, the 30 June figures, which seem to be generally consistent in each of the preceding years.  That looks to be the ---

    His Honour:  So it’s about $560,000 cash in the company?

    Mr Simpson:  Approximately, approximately.

    His Honour:  As of today?

    Mr Simpson:  One would assume so.

  5. The husband sat behind his senior counsel when this representation was made.  The representation was made shortly after 10am and there were a number of breaks during the day.  At the end of the day after discussion I made an injunctive order freezing $500,000 cash in the company pending my determination in this application.  Based on the evidence led by the husband on the reopening of his case, it was clear that as at 15 September 2008 the amount of cash in the company was approximately $460,000. 

  6. At the reopening on 10 October 2008, the husband filed an updated financial statement to correct further misstatements made by him in his previous financial statement.  He did this in the following circumstances:-

    29.1.On 3 September 2008 the Child Support Agency served upon Westpac Banking Corporation a notice pursuant to s 72A of the Child Support (Registration and Collection) Act 1988;

    29.2.In response, Westpac wrote to the husband in a letter dated 16 September 2008 informing him that on 11 September 2008 they withdrew an amount of $39,573.43 from an account in the husband’s name (account ending 7397) and paid it to the Child Support Agency;

    29.3.The husband had sworn a financial statement on 10 September 2008 in which he had failed to disclose this account with Westpac.

  7. Senior Counsel for the Wife makes the point that the Court is being asked in the context of the interim hearing to except prime facie that the material the husband has presented.  There is no ability to test it. 

  8. I accept senior counsel for the wife submits even though unusual on an interim basis, there is material before the Court that would cause the Court to tread warily in relation to the husband’s statements in respect of his financial position or the financial position of any entity with which he is associated.

  9. At the end of submissions, senior counsel for the wife handed up a document that calculated the current arrears in relation to spousal maintenance and child support.  The Husband in his most recent financial statement included a reference to $30,000 to arrears in spousal maintenance.  He also indicated that $18,000 amount of arrears in child support.  On the Husband’s own submissions there was $48,000 of arrears in respect of court orders.  It is my understanding (and this was not disputed by senior counsel for the husband) that a stay application was made in respect of these orders and that stay application was refused.  Nonetheless the husband, of his own volition, decided not to comply with the orders.  This was in circumstances where it is the husband’s evidence that he had $80,000 sitting in his own account and in addition of course he has other loan accounts exceeding $800,000 in a company which has cash reserves exceeding $460,000 at the date of hearing before me.  Senior Counsel for the wife provided a document during submissions which calculated that current arrears and spousal maintenance in the amount of $50,472 and child support arrears were at $47,944.I accept the submission that it would have been very easy for the husband to simply pull out the company cheque book and write a cheque.  He chose instead not to comply with the Court orders.  No explanation or apology has been offered for adopting that course.  In addition it seems that in recent times the husband has paid his new solicitors sums totalling $90,000 by drawing on C Pty Ltd to the extent of $60,000 and using $30,000 of the monies that have in these proceedings been referred to as the “[R property] loan”. 

G Ltd

  1. G Pty Ltd has not yet found a partner to commercialise and market its intellectual property.  It is the husband’s case that the money that has been expended in attempting to commercialise and market the intellectual property in G Pty Ltd may well be lost and that the speculative venture that was G Pty Ltd does not look like being a successful one. 

  2. In his most recent financial statement, the husband deposes that his 49,400,000 shares in G Ltd have at their current market value (13 cents a share) a market value in the sum of $6,422,000.  The husband is a 67.21 percent shareholder in G Ltd.  A director of that company, Mr N, filed an affidavit on 11 September 2008 which sets out the history of the company and says that the company may soon go into liquidation as a result of not being able to find a partner to move forward to commercialise patents and other intellectual property owned by the company. The original source of that intellectual property was the husband and in his most recent affidavit the husband indicates that he would wish to have $250,000 in reserve in C Pty Ltd to buy back his intellectual property back from the liquidator of G Pty Ltd should the worst happen.  At the time of the hearing there was still one potential partner and it was known as to whether or not there would be an extension of time requested in relation to a possible future arrangement with that potential partner. 

  3. At the current time, as result of an arrangement with the current potential partner, the husband’s shares in G Ltd would not be able to be accessed by him for a period of two years. 

  4. This interim hearing fundamentally proceeded on the basis that the husband’s $6,422,000 worth of shares in G Pty Ltd could be worth nothing and even if G Ltd did not go into liquidation, the husband would make an application for a single expert to give some opinion as to whether or not par market value of the shares the husband holds in G Ltd should be discounted as a result of the effect of the husband holding 67.21 percent of the company’s shares.

  5. If G Ltd goes into liquidation the assets of the parties reduce.  Senior Counsel for the husband indicated that those assets would reduce to an amount of $3,400,000 (see below).

THE OTHER ASSETS AND LIABILITIES

  1. Apart from any value that is in the G Ltd shares, the parties jointly own a property at H (the H property) with an agreed value of $2,500,000.  It is subject to a mortgage in the sum of $700,000 (the H property loan).  This is remnant of an original borrowing of $1.2 million in which the Husband used to relocate and refit the operations of C Pty Ltd.  The monies that were borrowed that created the encumbrance on the H property were then lent to C Pty Ltd.  As part of that loan arrangement the company took on the responsibility of paying the interest payments on the H property loan.  The amount of $700,000 secured over the matrimonial home is the balance of a borrowing which was the subject of some considerable controversy.  The borrowing was ultimately used by the husband for primarily the purposes of relocating the company’s premises.  Those interest payments on the current borrowing are in the sum of $1,119 per week (see item 18 on husband’s financial statement sworn 10 September 2008).  Those payments are currently tax deductible in the hands of the company.  Senior Counsel for the husband submitted that if that part of the husband’s loan account was drawn upon without repayment of the mortgage on the H property then the loan repayments on the mortgage on the H property would cease to be tax deductible in the hands of the company.  Given the tax losses in the company and the timing of tax payments this is not a significant matter for consideration in this application.  The monies the company would have paid on the loan would become available to the husband to make the payment. 

  2. Mr W has valued C Pty Ltd at $524,000 on the 2006 financial statement.  The husband is 100 percent owner of the interest in that company.  At that time the company owed the husband $1,576,000.00.  So the value of the Company to the husband in June 2006 exceeded $2 million dollars.  The current level of profit of C Pty Ltd in the last two financial years has been in the order of approximately $600,000 per annum.  The significant involvement of the company in research and development means that expenditure on research and development generates tax losses at the rate of 125 percent.  Senior Counsel for the wife submitted that carried forward tax losses currently are $600,000.  It seems agreed that as a consequence the profit of nearly $600,000 that was made by C Pty Ltd attracted little company tax.  Senior Counsel are not able to inform me as to whether or not the whole of the profit could be distributed to the husband as a fully franked dividend. 

  3. In addition to the husband being owed $700,000 by C Pty Ltd as a result of the H property loan, the husband has other accounts with the company, in the sum of $48,177.  The total amount C Pty Ltd owes the husband as at the date of hearing before me is therefore in the sum of $748,177. 

  4. The R unit is worth about $420,000.  The husband borrowed $330,000 against the R unit for the purpose of paying legal fees. That borrowing was done without prior notice to the wife and was the subject of a complaint by the wife.  The whole of the amount of $330,000 was on lent to the company and the company paid out to the husband’s previous solicitors an amount of about $130,000.  There is a further amount of $80,435 in controlled monies account with the husband’s current solicitors.  Given the controversy over the borrowing of $330,000 as senior counsel for the husband submitted that the funds invested from that source are being quarantined by the husband because he apprehends that any use of those funds by him in the future will be criticised by the wife.  The remaining amount of $119,739 remains to the husband’s credit in his loan account as mentioned in the previous paragraph.  I assume a similar position in respect of tax advantage applies in relation to the $119,740 as applies to the $700,000 (discussed above) and that the company is currently receiving a tax deduction for interest payments made in respect of that borrowing from the husband (although that amount does not appear in Part F of the husband’s most recent financial statement).

  5. Senior Counsel for the husband added the assets to $3,400,000 (excluding the loan owed by Mr M and excluding the value of patents and any interest the husband has in other private companies).  I am unsure as to how he arrived at that figure.  My addition is $2,732,117.  The Husband was careful to exclude from the value of C Pty Ltd, the value of any intellectual property that the company might have as a result of expending at least one million dollars per year over the last two years.  I have no idea if the expenditure on research and development is matched or in part matched by the value of any intellectual property.  The husband currently relies on a valuation which is based on figures which are more than two years old.

  6. There are interests in superannuation (BF Superannuation Fund as at 30 June 2006 in the sum of $1,287,984).  The wife has an interest in superannuation in the approximate amount of $600,000. 

SPOUSAL MAINTENANCE

  1. As set out above, the wife’s application is that she be paid an amount of $8,877 per week by way of spousal maintenance and an amount of $2,184 by way of child support.

  2. Expenses claimed in her financial statement (whilst not bothering to total her weekly expenses for both herself and the child) add on my calculation to $6,330 for herself and $2,184.50 for the child.  The wife’s claim of $8,877 per week cannot be supported on her own material and I agree with the Judicial Registrar that a claim of $6,330 per week must be seen as excessive. 

  3. Senior Counsel for the husband points to the fact that the wife received $100,000 in September 2005 and $153,937 in April 2006 (a total of $253,937).  That money seems to have been used partly in respect of living expenses and partly in respect of the payment of legal fees.

  4. Senior counsel for the wife submitted that during the marriage the parties effectively had their day to day expenses paid by C Pty Ltd.

Need

  1. Senior Counsel for the wife, as a starting point, referred to orders made 15 September 2005.  In these orders, on a without prejudice basis, there is a notation at paragraph 13 that the husband would pay to the wife:-

    1.      private health insurance for the wife and the child;

    2.      $8,500 per month ($1,963 per week);

    3.      all outgoings of the property at H which included lawn mowing, the garden, electricity, telephone, fax, mobile, repairs and window cleaning;

    4.      payment of school fees for the child;

    5.      the provision to the wife of a motor vehicle in respect of which registration and all running costs were paid.

    Order 12 allowed for the wife to have occupancy of the H property. 

  2. Using the most recent financial statement to estimate the value of item 3 in the orders of 15 September 2005, the following calculations could be made:-

    House maintenance/repairs (item 3 of the wife’s financial statement) $415.50

    Home electronic maintenance (item 4)  75.00

    Fuel for the home (item 5)  239.00

    Telephone (item 6)   224.00

    Water and Council rates (item 7)  64.00

    Gardening (item 15)  800.00

    $1,817.50

  3. If I were to adopt the wife’s figures in her most current financial statement and give her an amount equivalent to the 2005 arrangement, the calculation would be:-

    Private health insurance for the wife and the child   $38.00

    $8,500 per month (item 11.3)  1,963.00

    Outgoings on H property (as calculated in the preceding paragraph) 1,817.00

    Payment of school fees for the child (item 13)   176.00

    Provision to the wife of a motor vehicle in respect of which registration and running costs were paid (item 8)  522.00

    Per week  $4,516.00

    Or an annual figure of $234,832

THE EFFECT OF THE JUDICIAL REGISTRAR’S ORDER

  1. The Judicial Registrar ordered that the husband pay to the wife by way of spousal maintenance an amount of $1,600 per week together with a further amount in relation to child support of $549 per week.  That total amount was $2,149. 

  2. Senior Counsel for the wife pointed out that there was a problem with the orders engrossed by the Judicial Registrar. At page 7, paragraph 27 of his reasons of judgment dated 14/2/08, the Judicial Registrar says:

    27     The husband will be required by order to pay for the following in relation to the former matrimonial home:

    ·Home and contents insurance

    ·Lawn mowing, gardening and reasonable maintenance of the property, including swimming pool and air conditioning;

    ·Maintenance of the home security system;

    ·Council rates;

    ·Leasing, insurance and running costs of the Wife’s motor vehicle (registration and compulsory third party insurance are the responsibility of the Wife);

    ·Hospital and health insurance maintained at maximum cover for the Wife and the child […].

  3. Adopting the figures set out in the wife’s most recent financial statement, the cost of these items are as follows:-

    Home and contents insurance (items 3.10 and 3.11)  $78.50

    Lawn mowing, gardening and reasonable maintenance of the property, including swimming pool and air conditioning (items 3.1 to 3.9 and item 15) $1,137.00

    Maintenance of the home security system (item 4.2)  $25.00

    Council rates (item 7.2)   $26.00

    Leasing, insurance and running costs of the Wife’s motor vehicle (registration and compulsory third party insurance are the responsibility of the Wife) (items 8.1 to 8.3 and 8.5)  $377.00

    Hospital and health insurance maintained at maximum cover for the Wife and the child (item 11.3)  $38.00

    $1,681.50

  4. Using the wife’s figures therefore, the value of what the Judicial Registrar has ordered is in effect $3,830.50 per week ($1,600 + $549 + $1,681.50). 

  5. The difference between what in effect the Judicial Registrar has ordered and what the 2005 orders were (based on the wife’s current figures) is in the sum of $686 per week ($4,516 - $3,830).

  6. Paragraph 126 of the wife’s July 2007 affidavit sets out details about the parties having a full time gardener for the property at H. 

  7. It would be useful, to eliminate any niggling between the parties to provide the wife with a dollar figure for the maintenance of the H property and to allow her to attend to that maintenance and similarly with her own motor vehicle.

  8. The husband has conceded that the wife does not currently have an earning capacity.  There is considerable evidence before me as to the current poor state of the wife’s health.  Paragraph 79 of the wife’s affidavit of July 2007 is relevant to her medical expenses.  The wife at page 13, paragraph 11 of her most recent financial statement sets out her updated medical expenses. 

    Medical expenses                  $600.00

    Dental   5.00

    Medical insurance   19.00

    $624.00 per week

  9. In addition the wife claims that she has used a personal trainer at $225 per week. 

  10. In relation to medications, paragraph 94 of the July 2007 affidavit estimated these at $205 per week.  The actual current figure provided by the wife in her most current financial statement at page 19 is the sum of $220 per week. 

  11. It seems the parties had a full time housekeeper when the parties lived together (See paragraph 73 and 122 of the wife’s affidavit of 10 July 2007).  There is evidence before me as to the wife’s current need to have a full time housekeeper and no submission was made by senior counsel for the husband that that evidence should be discounted in the context of this interim hearing.  That basic cost is $650 per week without additional cost of food, beverages and household supplies.  I find that it is reasonable, based on the material I have about the wife’s health, for the wife to have a full time housekeeper.  I assume however that this claim was originally subsumed in the payment to the wife of the sum of $1,963 per week pursuant to the orders made 15 September 2005. 

  12. Senior Counsel for the husband said that the wife’s submissions in relation to the use of limousines had been used in an evocative manner to indicate the level of the parties’ expenditure during the marriage and that it had been overstated.  Senior Counsel for the husband referred to paragraph 78 and Exhibit V to the wife’s affidavit filed on 17 July 2007.  Senior Counsel for the husband had done a calculation and estimated that the cost of the limousines were only $118 per week to the parties.  The husband submitted that the wife had overstated the use of the limousines.

  13. I am satisfied that the use of limousines were used for legitimate business purposes some of the time, but the parties also used them for their own private use and that this use feeds into the overall picture of the type of lifestyle that the parties were use to living when they were together.

  14. Paragraph 160 of the wife’s affidavit of July 2007 sets out matters going to lifestyle and the use by the wife and the child of a beautician. 

  15. Senior Counsel for the wife submitted that although the husband is now critical of some of these expenses, he was not critical of them during the period of cohabitation.  Senior Counsel for the husband sought to cavil with that submission.  Whether or not the husband was critical of them then as he is now, it seems that these expenses were paid for by him during the marriage.  Senior Counsel for the husband says that the husband does in fact dispute items that the wife says that she expended and he does so in his affidavit of 2 October 2007. 

  16. How parties conducted themselves during the marriage is a factor I have to take into account under s 75(2)(g) of the Family Law Act 1975 (Cth). It is of course however only one of a range of matters that I have to take into account. Authority points in the direction of saying that parties cannot assume that they can continue to live as they did during the marriage once a marriage ends. Matters have to be looked at on a case by case basis. There is a relationship between the continuation of a lifestyle and the capacity of two parties to continue a lifestyle while they are separated that they enjoyed while they were together. Senior Counsel for the wife submits that if the husband has a capacity to maintain for the wife the lifestyle the wife enjoyed during the marriage then at least on a “pro tem” basis the court should do that. It was submitted that I should be comfortably satisfied that the wife’s lifestyle enjoyed before them at separation can be comfortably accommodated pending the hearing.

  17. Senior Counsel for the husband submitted that little weight could be placed on the agreement which was reached between the parties on 15 September 2005 because at that time it should be inferred that the husband had a high expectation in respect of the success of G Ltd and that the husband would have scrutinised the arrangements more closely had he known that G Ltd was not going to be as successful as he had hoped.  I was not taken to any specific material that would support this submission but I accept in a general sense that people reach arrangements given their circumstances at the time and that circumstances can change.  It is now 3 years later.

  18. Senior Counsel for the husband adopted the statements used by the Judicial Registrar in his judgment about the excessive nature of the claim by the wife.  As particular examples of excessive expenditure, senior counsel for the husband pointed to the wife’s expenditure on:

    b.Restaurants and take aways  $200

    c.Replacement of dinner sets, glass and kitchen utensils                   $44

    d.Replacement of whitegoods and kitchen appliances  $170

    e.Floral arrangements   $150

    f.Carpet cleaning   twice a year

    g.Personal trainer  $225

  19. I enquired of senior counsel for the husband as to whether or not there was any science in his proposed figure of $1,250 per week as being an amount to meet the wife’s proper needs.  He said there was not.  He had not done a list of what his client considered to be proper expenses for the wife.

  20. Given that the fact that the wife’s estimates of her expenses have not been tested and are on their face excessive, it becomes somewhat of an arbitrary exercise to attempt to make some judgment as to what is a reasonable level of expenditure by the wife.

  21. In exercising my own discretion I find myself in agreement with the Judicial Registrar’s overall approach except that I would provide that the husband pay to the wife a dollar amount for those items which the Judicial Registrar had otherwise indicated at paragraph 27 of his judgment should be paid by the husband on behalf of the wife.  In doing so I would adopt the wife’s figures in respect of those items.  The wife should also have an amount to cover the direct costs of the full time house keeper.

  22. This means that the overall amount the wife will need to receive from the husband on a weekly basis is in the sum of $4,480, which sum is calculated as follows:-

    Spousal maintenance as ordered by the Judicial Registrar               $1,600.00

    Child support as assessed by the Judicial Registrar  549.00

    Value of additional amounts the Judicial Registrar intended that the husband pay (see paragraph 53 above)  1,681.00

    Basic cost of housekeeper  650.00

    $4,480.00

  23. That is what I find on an interim basis to be the wife’s need for herself and the child. 

  24. That amount needs to be apportioned between spousal maintenance and child support.

  25. Based on the figures in the wife’s financial statement, she apportions her expenses as a total of the overall expenses of herself and the child to about 75 percent for herself and 25 percent for the child.  That calculation then equates to a need for spousal maintenance in the sum of $3,360 per week and a need for child support in the sum of $1,120 per week. 

HUSBAND’S CAPACITY TO PAY

The husband’s earning capacity as a professional

  1. The husband works as a practising professional on a day to day basis. 

  2. Mr W’s report at paragraphs 23 to 25 is in the following terms:-

    23.    Further, [C Pty Ltd] receives a share of the […] fees. Accordingly, [C Pty Ltd] derives a minor income from [the services of other professionals] which based on total revenue for the six months to 30 June 2006 is less than 20 percent.

    24.    The charges for [professionals] who utilise the company’s premises is 30 percent ([for one type of professional]) to 15 percent (Mr [T]) of their fees which I am instructed by the husband does not cover cost of usage of the premises […].

    25.    Thus, [C Pty Ltd] derives most of its income from the personal exertion of the husband. [The husband] works some 68 hours per week in the [profession].  My discussions with [the husband] indicate that his market salary would be in the range of $1.5 million to $2.0 million4.

    4 In support of this assertion, I am instructed that [Mr T] earns in excess of $1.5 million per year.

  3. Note 41 to the husband’s most recent financial statement seems to suggest that the husband disputes that he indicated to Mr W that his market salary would command in the range of $1,500,000 - $2,000,000.  What the husband says was that he suggested that Mr T would be likely to be able to generate gross fees in excess of $1,500,000 per year.  Whether or not it is Mr W or the husband who is being accurate in their recollection is not something I can determine in the context of this hearing (although the 68 hours a week figure seems a strange one for Mr W to have made up).  It is relevant however that the husband has not in note 41 gone on to say how much he is generating himself in fees as a result of him involving himself in the provision of professional services.

  4. Paragraph 57 of the W Report is in the following terms:

    “I am instructed [the husband] currently receives a salary which represents some 10 per cent of his market salary of $1.5 to 2 million (i.e. in the range of $150,000 to $200,000).” 

  5. The last part of that statement is roughly consistent with the evidence of the husband that accommodation of wages and drawdown on his loan account means that he is taking on average $3,873 per week from the company, which is $201,396 per annum.  The company pays $110 per week for the private use by the husband of the company’s motor vehicle.  There has been no other analysis of any other indirect benefits the husband receives from what can properly be claimed as business expenses.  It may be that when those benefits are taken into account the current benefit the husband is receiving from the company is more than $201,000 per year.  The $201,000 per annum of course is largely tax free in the way that the husband is currently taking that money.  The amount that the husband is taking does not in anyway reflect his market salary or his earning capacity. 

  6. It was not however part of the husband’s submissions that I should assume that the husband isn’t generating significant fees from services that he personally carries out.  Senior Counsel for the Husband conceded that the significant portion of the professional fees in C Pty Ltd are generated by the husband.

  7. There is nothing in C Pty Ltd’s financial statements to indicate as to how the figure of over $6,000,000 for professional fees per annum is broken down but there was an indication that the only two professionals employed by the company, namely Mr T and the husband.

  8. At paragraph 23 (page 3 of the W report) it is recorded that the Husband is responsible for generating 80 percent of the gross income for C Pty Ltd.

Comparison with Mr T

  1. I note that Mr W said that Mr T worked two days a week.  This is not consistent with what Mr T says in Exhibit B.  There Mr T in material that has been subpoenaed from him, says:

    “In general I work all day on Monday and Friday every week and on Thursday I generally work half days and mostly a full day alternate weeks.”

  2. On that evidence Mr T works 2.75 days a week.

  3. Exhibit A, which is the material from Mr T, indicates that as at 30 June 2007 Mr T had earned from his time with C Pty Ltd an annual amount of $623,000 (although referred to as working two days a week, this is actually 2.7 days per week work).  The husband however concedes in his most recent financial statement that Mr T’s earning capacity is in excess of $1,500,000 as a professional.  We do not have current figures for what Mr T is earning in his operation with C Pty Ltd. 

  4. Senior Counsel for the husband however says that the husband is a bird of a totally different colour to Mr T in as much as the husband has a wider range of interests and activities of a entrepreneurial nature.  The husband obviously has a keen interest in research and development.  Whilst that might be so, I find on the basis of the material which I have (detailed in my conclusions), that the husband has an earning capacity of $1,500,000 to $2,000,000 per annum. 

C Pty Ltd

  1. Senior Counsel for the Husband sought to disabuse me of the notion that C Pty Ltd were a set of offices where professional services were carried out by the husband and others. 

  2. C Pty Ltd is the husband’s alto ego.  It is 100 percent owned and controlled by him.  He is the primary engine that drives the company. 

  3. Mr W valued the company on the 2006 financials.  He adopted a net asset backing approach to value the company.  The value he placed on the company was $524,000. At that time however the company owed the husband $1,576,000.  Mr W’s valuation therefore of the value of C Pty Ltd to the husband at the end of 2006 was $2,100,000 ($524,000 + $1,576,000).  Whilst the husband’s loan account has come down since that time, the current value of C Pty Ltd is higher than $524,000 because on the face of the 2007 financials, the company has reinvested its annual profit back into itself and I am told it has done that again in 2008. 

  4. On the most recent financial statement the net assets of C Pty Ltd are $1,600,000.

  5. The figure owed to the company by the husband is currently $748,000.

  6. Senior Counsel for the Husband asserted that the husband’s balance sheet may not fully reflect the financial position of the company.  He said for example that there would be no provision on the balance sheet for long service leave. That might be true, but on the other hand there is no recording on the balance sheet of any value for the current intellectual property that the company holds.  This only serves to underline the fact that the wife may yet have a job ahead of her to fully understanding the husband’s current worth.

  7. On the 2007 financial statement, C Pty Ltd had gross revenue of $6,300,000 ($6,115,687 in professional fees) and had deductible expenses of $5,700,000.  On the face of the financial statement the company made approximately $600,000 in profit.

  8. Originally senior counsel for the husband submitted that the $600,000 profit which has been generated by C Pty Ltd was a gross figure.  It became clear however that given the tax write-offs available to the company because of its research and development activities, that figure is a figure that does not attract tax.

  9. Senior Counsel for the husband submitted that it would be simplistic to simply assume that $600,000 tax free profit made by the company was available on an annual basis to the husband.  It seems that at least in the 2007 financial year based on the accounts the profits of the company have been reinvested in the company.  The net assets have increased from $1,021,000 (see Mr W’s report) to $1,596,326 (see the 2007 financial statements annexed to the husband’s affidavit). 

  10. However, senior counsel’s submission seemed to be that the Husband should be free to reinvest all the profit made by C Pty Ltd back into the company.  Senior Counsel for the husband conceded that if I was forced to choose between making an order which provided for the proper provision of the day to day expenses of the wife and the child of the marriage compared with allowing the husband to grow the company then I would choose the former.

  11. The drawing of $3,473 per week by way of reduction of loan indebtedness by the husband removes $180,596 per annum from the approximate $600,000 per annum “gross” profit.  This is a part of the reinvesting of the $600,000 back into the company because it is a payment by the company from profit for the reduction of debt.  The movement in the assets of the company is still $600,000 being partly reduction of debt to the husband and partly investment into other assets of the company.

  12. Senior Counsel for the husband attempts to have it a bit both ways.  On the one hand he says that it is important not to interfere with the structure of the business the Husband has established which sees over $1 million a year re-invested in research and development, and on the other hand, explains that the intellectual property in G Ltd may now be worth as little as $250,000.  Senior Counsel for the husband says that money for the expenditure by C Pty Ltd was altruistic in part.  In 2007 the company records that it received $135,000 by way of income generated by research and development.  The company pays out $1.235 million in salaries plus associated superannuation.  The husband has not given any information in this hearing about his views as to the value of the current research and development projects being undertaken by C Pty Ltd and I can only conclude that money is either being re-invested by C Pty Ltd in research and development are monies being invested speculatively or the husband is being coy about the value of the intellectual property which is being developed. 

  13. C Pty Ltd had $560,000 in the bank in June 2007.  As mentioned above, when the matter was before me on 15 September I was informed that the cash in the company was at a similar level.  The husband was given leave to reopen his case to correct those instructions that he had given his lawyers.  As at 15 September the cash in the company was $460,000.

  14. Senior Counsel for the husband also warned against the simplistic notion of drawing on loan accounts that were available to the husband in circumstances where there were cash reserves in the company which allowed that to happen.

  15. It is clear that for the financial years June 2006 and June 2007 the company in each of those years has had cash in excess of $500,000.  The company does not have an overdraft or any other external borrowings to support its activities. The husband, after the initial day before me, attempted to negotiate an overdraft facility with Westpac. 

  16. Exhibit AA is a letter dated 7 October 2008 from Westpac to the husband’s lawyers.  That letter confirms that although Westpac have a sector policy of providing an overdraft limit to the profession of $150,000 or two months of revenue (whichever is the lesser) they indicate that because of the fact that Macquarie Bank has a mortgage debenture over the assets of C Pty Ltd and that there are restrictions on Westpac security in respect of the matrimonial home they are not prepared to extend any borrowing to the husband. Westpac offer this suggestion:-

    “However, you may wish to have [the husband]/[C Pty Ltd] approach Macquarie Bank for funding utilising their mortgage debenture currently held.  However, given that Westpac Bank is [the husband’s] bankers, we would prefer to arrange this facility and can look to do so with acceptable security provided.”

  17. I raised with senior counsel for the husband on 29 September the question of whether or not the husband had spoken to Westpac about refinancing the leasing arrangements in respect of which Macquarie Bank holds security over the company’s assets.  There was no indication given as to whether or not the husband considered that option.  There is no indication as to whether or not the husband has taken up Westpac’s suggestion that he talk to Macquarie about overdraft facilities given that Macquarie currently have security over the company’s assets. 

  18. I am comfortable however that there is sufficient profit being generated by the company (and in circumstances where over $1,000,000 is being reinvested in R & D each year) to enable the husband to manage the company in a way that will allow it to continue to be viable. 

  19. Senior counsel for the husband indicated that I could not assume that the income from professional services was even over the year (he said that on occasions the Husband went away for conferences for example).  Senior Counsel for the husband submitted that $109,000 per week is required to keep C Pty Ltd’s doors open.  Whilst that is true, the company also on average generates $117,000 per week from professional services alone.  It is also the case that a significant amount of the $109,000 per week is a reinvestment into research and development. 

  20. I have some evidence from an employee of C Pty Ltd that there is a downturn of cash flow at Christmas time.  The order that I intend to make for interim costs however will allow for a cash buffer to remain in the company as of today’s date.  In the last three years the cash in C Pty Ltd has not dropped below $300,000. 

  21. Senior Counsel for the husband asserts it would be an error not to take into account the way the company has been set up during the whole course of the marriage.  His submission in effect was that payment of maintenance and child support would be a partial denuding of the capital of the company and would reduce the available pool of assets from which the trial judge could make adjustments in the final hearing.  That is a novel submission.  There is nothing to say that necessary regular expenses cannot be paid out of capital if income is not otherwise available to do it.  In this case however, given the way the profits of the company are utilised, it is illusionary to pretend that there are not sufficient monies being generated through professional activities by the husband to meet the reasonable periodic needs of the wife and the child.

  22. Senior Counsel for the husband submitted that if the husband repaid the Loan Accounts the mortgage payments are no longer tax deductible. The point to make about this submission is the difference is the tax saving and the company is not paying tax at the moment.  The company does not currently need to generate larger tax losses.  There is in fact no immediate tax saved given the company is currently not paying tax anyway because of its research and development activities.  I place no weight on this submission.

CONCLUSION ABOUT THE HUSBAND’S CAPACITY TO PAY SPOUSAL MAINTENANCE AND CHILD SUPPORT

  1. It is difficult in my view for the Husband to submit in this case that he has a lack of capacity to make payments given the Husband’s capacity to generate professional fees on a gross basis.  I am comfortably satisfied based on:

    110.1.The information Mr W’s report (including paragraphs 19 - 25 and paragraph 57);

    110.2.The lack of specific denial in note 41;

    110.3.The gross fees of C Pty Ltd from professional services;

    that the husband has the ability on an interim basis to pay for the needs of the wife and the child as I have assessed them, even after his expenses as claimed are taken into account. 

  2. The combined figure of spousal maintenance and child support is in the sum of $4,480 per week or $232,960 per annum in after tax dollars.  I find that the husband has the capacity, given the current structure of his operations through C Pty Ltd, to pay that amount to the wife and the child.  His capacity to pay comes from the current receipt by the husband of $400 per week plus $600,000 per annum in C Pty Ltd profits which profits are in the short term increased if the husband choses to change some of the reinvestment of approximately $1,000,000 per annum back into the company’s R & D projects.  I find that the husband’s underlying earning capacity through the provision of professional services in his own right is somewhere in the range of $1,500,000 to $2,000,000 per annum. 

CHILD SUPPORT

  1. The court is required to adopt a three stepped process when considering child support (see Gyselman (1992) FLC 92-279). The court is to consider:-

    112.1.whether or not one or more of the grounds for departure set out in s.117(2) of the Child Support (Assessment) Act 1989 is established;

    112.2.whether or not it is just and equitable in the meaning of s.117(4) to make a particular order;

    112.3.whether or not it is “otherwise proper” within the meaning of s.117(5) to make a particular order.

  2. A ground for departure is clearly available in the special circumstances of this case.  The administrative assessment of child support would result in an unjust and inequitable determination of the level of financial support to be provided by the husband for the child because of the income, property and financial resources of the husband.  The current assessment is based on the husband’s taxable income.  As indicated above, that has no relationship at all to what the current earning capacity of the husband is, nor of the profit that is available to him through his alter ego C Pty Ltd.  The first threshold step, a ground for departure, is therefore established.

  3. Both parents have a duty to maintain the child as a priority over all other commitments other than that that is needed to enable a parent to support themselves. 

  4. In relation to the child’s needs, I was taken to some specific matters.  Page 18 of the wife’s financial statement says that school fees are not $2,000 a term but rather $12,000 per annum.  Assuming four school terms a year, that is $3,000 a term, but the wife’s figure include “text books and other educational expenses (excluding tuition)”.  Consequently the wife’s estimate for educational expenses is $257 per week, not $153 per week as estimated by senior counsel for the husband in his submissions.  The difference may well be that senior counsel for the husband is simply referring to basic school fees.  In relation to the child’s education, until there is a full testing, I will err on the side of ensuring the child’s educational expenses are properly covered.

  5. There is an issue in relation to what the payment of private school fees for the child is valued at.  See note above where I have estimated that educational expenses for the child according to the wife are $257 per week, not $153 as asserted by the husband.

  6. Paragraph 21 of the wife’s affidavit of 10 July 2007 deals with the child’s needs.

  7. The husband swore an affidavit on 28 September 2007, filed 2 October 2007, which is said to set out what he paid for the child and I was taken to paragraphs 13, 15, 16, 18 and 19 of that affidavit.

  8. I have already in discussing the wife’s overall needs, indicated that in my view it is appropriate to assess the child’s needs in the sum of $1,130 per week. 

  9. There is no evidence that the child has any income, property or financial resources from which she can meet her own needs.  They have to be provided by her parents.  The wife has no independent ability to support the child.  Accordingly the child’s needs at this stage are to be met by the husband. 

  10. I have already dealt above with the husband’s capacity to pay an amount of $4,520 per week which includes the child’s needs at $1,130 per week.

  11. I am satisfied that the order for child support is otherwise proper. It may have an effect upon the family tax benefit received by the wife each week but that is entirely consistent with the intention of s 117(5) of the Child Support (Assessment) Act.  I intend to make an order until 31 December 2009 given that at this point in time I have not been assured by either senior counsel as to when it is that the substantive hearing is likely to conclude. 

POLETTI ORDER

  1. The wife seeks the following orders in her amended Application filed 15 July 2008:-

    ....

    4.That within 42 days the husband pay to [I Finance] all monies owing thereto by the wife and the wife do all things necessary to bring to an end her contract with this financier.

    5.That within 42 days the husband pay to Ross Selvaggio & Associates the sum of $27,444.56, being $21,944.56 owed to that firm by the wife and $5,500 owed to Richard Schonell Barrister for work done on the wife’s behalf on the instructions of Ross Selvaggio & Associates.

    6.That within 42 days the husband pay to the trust account of Coleman &  Greig Solicitors the sum of $459,590.

    or in the alternative

    That not later than 30 days after service on the husband’s solicitors of each taxation invoice/memorandum of fees by the wife’s solicitors in respect of the wife’s legal costs ongoing as from 5 June 2008 the husband pay or cause to be paid to the wife’s solicitors the sum claimed in each such invoice/memorandum.

    7.That for the purposes of the above order the wife shall authorise and direct her solicitors to forward direct to the husband’s solicitors for payment by the husband taxation invoices/memoranda of fees on a monthly basis for legal work performed on the wife’s part in these proceedings each month, such invoices to issue no later than the 28th day of each month until determination of the substantive proceedings between the parties.

    8.That the Trial Judge determine the character of all payments made by the husband pursuant to orders 4, 5 and 6 above. 

  1. Senior counsel for the mother relied upon three affidavits in respect of the Poletti order.  Those affidavits were an affidavit by Danielle Poletti (no relation) sworn 11 October 2007; Susan Warda sworn 11 July 2008 and Amanda Parkin sworn 24 July 2008.  

  2. Exhibit C indicates that as at 15 September 2008 Newnham Solicitors had billed and had been paid $30,581 and Mr Simpson, SC had billed and had been paid $18,800 (a total of approximately $49,400.  Exhibit C also indicates that Newnhams had work in progress as at 15 September 2008 of $14,500.  The total amount of legal fees the husband had incurred since Newnhams commenced to act for him in August 2008 was in the sum of about $64,000.  On 10 October 2008 I was told from the bar table by senior counsel for the husband that the amount now expended exceeded $90,000.  Consequently the monies received from the Randwick loan ($30,000) and the $60,000 taken by the husband from C Pty Ltd by way of the draw down on his loan account had been expended.  The overall costs incurred by the husband to date would be in the order of at least $316,000.

  3. The Judicial Registrar in February 2008 commented that the wife’s legal costs have been very substantial even to that point of time.  There has been no explicit detail given as to how the legal costs have been incurred.  The Judicial Registrar records that Ms Poletti as of February had received about $250,000.  The Judicial Registrar at paragraph 66 of his reasons for judgment detailed other legal expenses that have been paid.  None of those details are particularly surprising in the context of the husband having spent about $316,000 on his own legal costs in circumstances where he is the person in control of the financial information.

  4. Ms Poletti’s affidavit of October 2007 estimates that the costs of future legal expenses and disbursements for the preparation of the final hearing would be in the sum of approximately $400,000. 

  5. Ms Parkin’s affidavit of July 2008 (annexure A) contains an estimate of fees and expenses in the sum of $500,000.

  6. Any order that is made would be on the basis that the categorisation of the payment made by the husband on account of the wife’s legal costs will ultimately be a matter for the trial judge.

  7. On the material that I have I conclude that it is important for the wife to be able to properly investigate the husband’s financial position.

  8. An analysis however of Ms Poletti’s original estimate includes a figure of $90,000 for valuation of G Ltd and for the valuation of C Pty Ltd and a further amount of $30,000 for expert valuations of patents, the details of which are currently far from clear.  The cost of future single experts are a matter that I will put to one side and reserve for any future application should they be made. 

  9. On the evidence, I have therefore before me the estimate of fees is $380,000 ($500,000 - $90,000 - $30,000).

  10. In relation to the Poletti order, senior counsel for the husband submitted that the a Poletti order should not be made because:-

    133.1.If G Ltd fails, the pool reduces to a size which does not allow the order that the wife seeks to be subsequently adjusted on a final hearing;

    133.2.There is a need to retain cash in C Pty Ltd to allow it to remain viable.

    I don’t accept either of those submissions. 

  11. Senior counsel for the Wife asserts that this is a complex case.  The child support issue has been referred to the Court by the child support agency directly because of the fact that the child support agency has reached the view that the Husband has financial circumstances which are to complex for them to form a view about his ability to pay child support.

  12. Senior counsel for the Husband submits that if G Ltd goes into liquidation then this case is a simple one.

  13. On what I have seen of the documents so far, I am not convinced that that is likely to be accurate.  The single expert has to value the assets of C Pty Ltd on an asset backing basis.  Significant amounts of money have been invested by C Pty Ltd in research and development.  The Husband is yet to indicate what he believes the substantial investment that C Pty Ltd has made (for example over $1 million in each of the last two years) has produced by way of intellectual property.

  14. I am comfortably satisfied that it is going to cost the wife a lot more than it is going to cost the husband to run the litigation given the difficulties to date that the wife has experienced in the husband providing accurate financial information. 

  15. I am satisfied that the Husband is a highly intelligent man who has a keen knowledge about his financial affairs.  He has already provided misleading information to Justice Fowler which caused Justice Fowler to make orders which were nugatory.  He provided information to me which led me to make an order which I subsequently had to vary.  The husband has deliberately not complied with Court orders when he has had the capacity to do so.  The husband failed to comply with an order I made although I accept he had given instructions to attempt to relist it to have it varied.  I do not accept the submission by senior counsel for the husband that this is likely to be enquiry which is a simple one from the wife’s point of view.

  16. The wife has a litigation lending loan with I Finance with a payout as at 11 July 2008 in the sum of $515,743.  That loan currently attracts 15 per cent interest.  It was for a fixed term (of 12 months).  At the date of the hearing that one year anniversary had just happened a penalty of $25,000 has been incurred.  There was no indication there would be any further penalty incurred between now and the final hearing happening.  Apart from the high rate of interest, there is no imperative that that litigation lending be repaid. 

  17. I shall make an order that the husband pay the amount of $380,000 to the wife’s solicitors forthwith for them to hold it in a controlled monies account for the purposes of drawing on it from time to time for their costs and disbursements associated with acting for the wife in this case.  This order does not prevent the wife from making a further application at a later date for further interim costs should she believe that that is appropriate and necessary. 

AGREED ORDERS

  1. The parties agree that the following orders should be made:

    1.      That any outstanding interim application involving third parties be stood over for mention to the next occasion the matter is before Moore J or any other judge who is assigned to hear the final applications.

    2.     The solicitor for the wife will inform any affected third party about order 1.

PROPOSED ORDERS

  1. Senior Counsel for the husband also objected to the Judicial Registrar backdating the requirement for the husband to pay child support to the date the Wife filed her application.  Apart form stating the objection, there was no argument as to why that was an inappropriate exercise of discretion.  Given that both parties are seeking that I review the orders made by the Judicial Registrar as a result of the hearing conducted by him in October 2007, I see no reason why the orders should not date from the date of that hearing. Of course, the orders should be structured in a way that gives the husband credit for any payments he has made or on behalf of the wife or for the child between October 2007 and now. 

  2. I intend to make an order that the $380,000 by way of interim costs be paid from funds which are currently frozen. In addition, the balance of the monies held in the cash management account will be charged against any arrears of spousal maintenance or child support which are created as a result of the orders I have made and the balance in that account will otherwise not be able to be accessed unless there is a written agreement between the parties or further court order (including an order for the enforcement orders). 

  3. The payment of spousal maintenance and child support by the husband in my view should rank as a higher priority than him making payments to his lawyers for the future costs in these proceedings.  Based on the findings I have made, he has ample capacity to do both.  The husband however has, on the evidence before me, demonstrated a capacity to prioritise the payment of legal fees over the payment of spousal maintenance and child support.  Whilst there were arrears of spousal maintenance and child support pursuant to orders which were not stayed, the husband found money to pay legal costs.  As mentioned above, it seems that since August 2008 he has taken $60,000 out of the company for the purpose of paying legal costs whilst at the same time not attending to his outstanding obligations under court orders for the payment of spousal maintenance and child support.  In those circumstances, on my own motion, I intend to make an order that the husband not pay or cause any entity or person to pay any monies to lawyers for his own legal costs associated with these proceedings if he is in default of the orders made today for the payment to the wife of spousal maintenance or he is in default of the amount he is due to pay for child support for the child. 

I certify that the preceding one hundred and forty-four (144) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Watts

Associate: 

Date:  13 October 2008.

Key Legal Topics

Areas of Law

  • Family Law

  • Civil Procedure

  • Equity & Trusts

Legal Concepts

  • Costs

  • Injunction

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