Cappola & Cappola
[2022] FedCFamC1F 838
Federal Circuit and Family Court of Australia
(DIVISION 1)
Cappola & Cappola [2022] FedCFamC1F 838
File number(s): SYC 3032 of 2021 Judgment of: STRUM J Date of judgment: 1 November 2022 Catchwords: FAMILY LAW – PROPERTY – INTERIM PROCEEDINGS – Competing applications for interim property orders – Where the husband sought an order for spousal maintenance pursuant to s 74 of the Family Law Act (1975) (Cth) – Where the wife sought an order for the sale of the former matrimonial home and for the proceeds of sale to be distributed as a partial property settlement pursuant to s 79 of the Act – Where there is insufficient evidence from either party to support their applications – Where both applications are dismissed. Legislation: Family Law Act 1975 (Cth) ss 72(1), 74, 79
Federal Circuit and Family Court of Australia Act 2021 s 67
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 r 5.08
Federal Circuit and Family Court of Australia, Central Practice Direction: Family Law Case Management, 1 September 2021, para 3
Federal Circuit and Family Court of Australia, Family Law Practice Direction: Major Complex Financial Proceedings List, 30 September 2022, para 2
Cases cited: Kennon v Spry (2008) 238 CLR 366; [2008] HCA 56
Stanford v Stanford (2012) 247 CLR 108; [2012] HCA 52
Strahan & Strahan (Interim Property Orders) (2011) FLC 93-466; [2011] FamCAFC 126
Sully & Sully (No 2) [2016] FamCA 706
Division: Division 1 First Instance Number of paragraphs: 57 Date of hearing: 12 August 2022 Place: Heard in Melbourne, via Microsoft Teams; delivered in Brisbane Counsel for the Applicant: Mr Hill Solicitor for the Applicant: Greg Alfonzetti Solicitor Counsel for the First Respondent: Mr Hodgson Solicitor for the First Respondent: U Lawyers Counsel for the Proposed Respondent Company: Mr Rayment ORDERS
SYC 3032 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS CAPPOLA
Applicant
AND: MR CAPPOLA
Respondent
order made by:
STRUM J
DATE OF ORDER:
1 November 2022
THE COURT ORDERS THAT:
1.The Respondent Husband’s Application in a Proceeding filed 1 June 2022 and the Applicant Wife’s Response thereto filed 21 June 2022 be dismissed.
2.All extant applications be listed for a Case Management Hearing before the Honourable Justice Strum at 11:30 am on 18 November 2022.
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 Cappola & Cappola has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
STRUM J:
These proceedings are in the Major Complex Financial Proceedings List. However, in part, they have been made unduly complex by the parties and their lawyers who have conducted what can fairly be described as paper warfare. For the purposes of the interim hearing before me, they prepared a court book of 2,311 pages which included, inter alia:
(a)An affidavit of the husband filed on 1 June 2022, comprising 5 pages and further annexing 15 pages of exhibits;
(b)An affidavit of the husband filed on 21 July 2022, comprising 58 pages and further annexing 79 exhibits of 1147 pages;
(c)An affidavit of the husband filed on 3 August 2022, comprising 42 pages and further annexing 149 pages of exhibits;
(d)An affidavit sworn by Mr B, the solicitor for C Pty Ltd, filed on 11 July 2022, comprising 6 pages and further annexing 34 pages of exhibits;
(e)An affidavit of the wife filed on 21 July 2022, comprising 17 pages and further annexing a total of 58 pages of exhibits;
(f)An affidavit of the wife filed on 29 July 2022, comprising 25 pages and further annexing 65 exhibits of 675 pages.
Further, during the hearing I was also referred to an affidavit of the wife filed on 3 June 2022, comprising 743, of which 727 pages are exhibits.
Such conduct of the litigation entirely disregards the provisions of s 67 of the Federal Circuit and Family Court of Australia Act 2021, r 5.08 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021, the core principles in para 3 of the Family Law Case Management Central Practice Direction and the purpose of the Major Complex Financial Proceedings List as set out in para 2 of Practice Direction for that list. Hereafter, I will ensure the parties adhere thereto or they will risk being removed from the list.
The Applicant wife is Ms Cappola, born 1974. The First Respondent Husband is Mr Cappola, born 1959. There are already four other respondents, who are not germane to this decision, and there is an application by the husband to join a further respondent, C Pty Ltd (“C Pty Ltd”), which awaits a hearing, as do applications for a multitude of other interlocutory orders.
The husband and the wife commenced cohabitation in or about mid-2007; they were married in late 2017; and they separated finally in December 2018. There is one child of the marriage, X (“X”), born 2007 and aged 14 years. She lives approximately equally with each of her parents.
These proceedings were instituted by the wife, who filed an Initiating Application on 28 April 2021 for financial orders (subsequently amended on 10 February 2022). The husband filed a Response to Initiating Application on 3 August 2021.
By Application in a Proceeding filed 1 June 2022, the husband seeks (inter alia) that, until further order, the wife pay 50 per cent of the mortgage payments (including any arrears), council and water rates, home insurance premiums and of any necessary structural or major maintenance work undertaken in respect of the property situate at D Street, E Town in the State of New South Wales (“D Street”).
By Response to an Application in a Proceeding filed 21 June 2022 , the wife seeks (inter alia) orders that D Street be sold and that the net proceeds of sale (after payment of the selling agent’s commission and expenses and the legal costs and disbursements associated with the sale and discharge of the mortgage over the property) be paid, as to 15 per cent to her (to be characterised at trial) and that the balance be held on trust for the husband and her pending further order or their written agreement.
At the hearing before me, those orders (together with a host of others) were sought in consolidated minutes of orders provided by each of the husband and the wife. Over the course of the day, the parties’ legal representatives were only able to address the application and Response referred to in the preceding two paragraphs.
Notwithstanding the form of the orders sought by the wife and the husband, the hearing before me was conducted on the basis that she seeks a payment by way of partial property settlement pursuant to s 79 of the Family Law Act 1975 (Cth) (“Act”) and he seeks payments by way of spousal maintenance pursuant to s 74 of the Act.
For the reasons which follow, both of those applications will be dismissed.
Wife’s application: sale of D Street
D Street is registered in the names of the husband and the wife. It is the former matrimonial home in which X and they lived. The wife vacated the property in early 2022. The husband continues to live there, as does X when she spends time with him. Its value is estimated by the husband at $2.9 million and by the wife at $4 million and secures a mortgage in the order of $1.06 - $1.1 million (“D Street mortgage”). It is unclear why the property has not been valued by a jointly appointed single expert (or, apparently, at all). In the husband’s Response to Initiating Application filed 3 August 2021, he seeks final orders to retain D Street. Whether he might do so cannot presently be determined.
There is no agreement in relation to the net value of the asset pool. Both the husband’s and the wife’s Financial Statements are defective and do not adequately or properly disclose their financial circumstances. The husband, in his Financial Statement filed 8 August 2022, disclosed assets of $1,467,224 (to which must be added the wife’s half share of D Street, which then total $2,917,224) and liabilities of $3,099,900 (which includes the wife’s share of the D Street mortgage). The wife, in her updated Financial Statement filed 21 July 2022, disclosed assets of $2,040,492 and liabilities of $569,986 (to which must be added the husband’s half share of the D Street mortgage, which then total $1,098,171). I shall address the deficiencies in their Financial Statements below. On 15 August 2022, after the hearing the subject of these reasons for judgment, the husband filed an amended Financial Statement. However, in the absence of any application to reopen the case, I have had no regard to it.
Further, each of the parties included balance sheets in the court book. They are unsworn documents and assert values in respect of which I was not referred to any supporting evidence. However, they add to the confusion in this case. In the husband’s undated balance sheet (but said to be as at 9 August 2022), he asserts there to be non-superannuation assets totalling $6,120,020 in value (excluding add-backs he seeks against the wife) and liabilities totalling $3,174,900. In the wife’s balance sheet filed 21 July 2022, she asserts there to be non-superannuation assets totalling $11,500,000 in value and liabilities totalling $2,265,000.
The law in relation to partial property settlements at an interim stage of proceedings is well settled. In Strahan & Strahan (Interim Property Orders) (2011) FLC 93-466, Boland and O’Ryan JJ agreed that there is a two-stage approach to applications for partial property settlement: first, the procedural or adjectival step (namely, whether the Court should exercise its discretion to entertain or embark on hearing and determining an interim property settlement application), and secondly, the substantive step (namely, the nature of the order to be made once it has been decided it is appropriate or just to hear and determine the application).
In relation to the first step, their Honours said at [132]:
… in our view, when considering whether to exercise the power under s 79 and s 80(1)(h) of the Act to make an interim property order the “overarching consideration” is the interests of justice. It is not necessary to establish compelling circumstances. All that is required is that in the circumstances it is appropriate to exercise the power. In exercising the wide and unfettered discretion conferred by the power to make such an order, regard should be had to the fact that the usual order pursuant to s 79 is a once and for all order made after a final hearing.
At [133], their Honours considered some examples of circumstances where it may be appropriate to exercise the power at an interim stage, including where one party requires funds to assist in defraying the costs of litigation without which funds an injustice may be caused.
In relation to the second step, their Honours said at [135] that “as the jurisdiction under s 79 of the Act is being exercised the provisions of that section must be considered and applied but with limitations given that it is not the final hearing”. They continued at [137]:
Once a court proceeds to exercise the power in s 79 of the Act, being in the substantive phase, a court is required to undertake consideration of the matters in s 79(4) including by reference to s 79(4)(e) the matters in s 75(2) so far as they are relevant. However consideration of such matters may be brief and if it is established that “it seems likely to the Court that ... the applicant ... will be likely receive by way of property settlement a sum sufficient to cover the advance, that would seem to be sufficient to enable the order sought to be made”: Zschokke; Polletti and Polletti per Nygh J and Wenz v Archer. As senior counsel for the Wife submitted, “provided scope can be found within the assets of the parties for an order of the size sought ... then that should be the end of the matter”. In other words, in such circumstances the applicant would only be receiving what he or she was entitled to receive when the power was exhausted.
However, their Honours emphasised at [139] that “in order to establish an appropriate case for an interim property settlement order more is required than the mere fact that upon a final hearing the applicant would receive the property being sought (or an amount in excess of the funds being sought) from the other party”.
The statements of the Full Court in Strahan in relation to s 79 of the Act must be read in the light of the decision of the High Court in Stanford v Stanford (2012) 247 CLR 108, where the plurality (French CJ, Hayne, Kiefel and Bell JJ) said:
35.It will be recalled that s 79(2) provides that “[t]he court shall not make an order under this section unless it is satisfied that, in all the circumstances, it is just and equitable to make the order”. Section 79(4) prescribes matters that must be taken into account in considering what order (if any) should be made under the section. The requirements of the two sub-sections are not to be conflated. In every case in which a property settlement order under s 79 is sought, it is necessary to satisfy the court that, in all the circumstances, it is just and equitable to make the order.
36.The expression “just and equitable” is a qualitative description of a conclusion reached after examination of a range of potentially competing considerations. It does not admit of exhaustive definition. It is not possible to chart its metes and bounds. And while the power given by s 79 is not “to be exercised in accordance with fixed rules”, nevertheless, three fundamental propositions must not be obscured.
37.First, it is necessary to begin consideration of whether it is just and equitable to make a property settlement order by identifying, according to ordinary common law and equitable principles, the existing legal and equitable interests of the parties in the property. So much follows from the text of s 79(1)(a) itself, which refers to “altering the interests of the parties to the marriage in the property” (emphasis added). The question posed by s 79(2) is thus whether, having regard to those existing interests, the court is satisfied that it is just and equitable to make a property settlement order.
38.Second, although s 79 confers a broad power on a court exercising jurisdiction under the Act to make a property settlement order, it is not a power that is to be exercised according to an unguided judicial discretion. In Wirth v Wirth, Dixon CJ observed that a power to make such order with respect to property and costs “as [the judge] thinks fit”, in any question between husband and wife as to the title to or possession of property, is a power which “rests upon the law and not upon judicial discretion”. And as four members of this Court observed about proceedings for maintenance and property settlement orders in R v Watson; Ex parte Armstrong:
“The judge called upon to decide proceedings of that kind is not entitled to do what has been described as ‘palm tree justice’. No doubt he is given a wide discretion, but he must exercise it in accordance with legal principles, including the principles which the Act itself lays down”.
39.Because the power to make a property settlement order is not to be exercised in an unprincipled fashion, whether it is “just and equitable” to make the order is not to be answered by assuming that the parties’ rights to or interests in marital property are or should be different from those that then exist. All the more is that so when it is recognised that s 79 of the Act must be applied keeping in mind that “[c]ommunity of ownership arising from marriage has no place in the common law”. Questions between husband and wife about the ownership of property that may be then, or may have been in the past, enjoyed in common are to be “decided according to the same scheme of legal titles and equitable principles as govern the rights of any two persons who are not spouses”. The question presented by s 79 is whether those rights and interests should be altered.
40.Third, whether making a property settlement order is “just and equitable” is not to be answered by beginning from the assumption that one or other party has the right to have the property of the parties divided between them or has the right to an interest in marital property which is fixed by reference to the various matters (including financial and other contributions) set out in s 79(4). The power to make a property settlement order must be exercised “in accordance with legal principles, including the principles which the Act itself lays down”. To conclude that making an order is “just and equitable” only because of and by reference to various matters in s 79(4), without a separate consideration of s 79(2), would be to conflate the statutory requirements and ignore the principles laid down by the Act.
(Footnotes omitted)
In Sully & Sully (No 2) [2016] FamCA 706, in dismissing an application for a partial property settlement, Stevenson J said that it was “a matter of concern that there [was] no evidence as to the net value of the assets held by the X Group, other than the husband’s “indicative” assessment” (at [33]).
Her Honour further said (at [34]):
The wife made clear that she does not wish to deprive the husband of occupation of the former matrimonial home and, in my opinion, it would be a most undesirable outcome for the children of the parties to be forced to relocate at this time. As noted above, a sale of the former matrimonial home is the only means by which a sum of $10,000,000 could be extracted from the matrimonial assets outside the X Group. I am not satisfied that a sale of the former matrimonial home would be just and equitable at this stage of the proceedings.
Her Honour held that she was “not satisfied that it is just and equitable, at this stage of the proceedings, that there be an order that the husband cause payment to the wife of a sum of $10,000,000 by way of interim or partial property settlement” (emphasis added).
Whilst both parties, by their competing final applications for property settlement, implicitly concede it is just and equitable to make an order under s 79 at trial, like Stevenson J, for the reasons which follow, I am not satisfied that it is just and equitable, at this interlocutory stage of the proceedings, to make an order for a partial property settlement.
The wife, in her outline of submissions at [10], points to, and relies upon, the statement in Strahan at [138] that a party’s “need for funds to defray the costs of litigation to meet his or her litigation costs, without which funds an injustice may be caused”, is a matter relevant to the first or “procedural” question, namely, whether or not it is “appropriate or just” to exercise discretion to hear and determine an interim application for a partial property settlement.
Her case is that she is significantly indebted and requires funds in order to pay for her past and anticipated legal fees (outline of submissions at [14]). She refers to her affidavit filed 21 July 2022 at [45] and to her updated Financial Statement. Turning first to that latter document, other than the D Street mortgage, the only other liabilities she discloses are two Visa card liabilities totalling $27,500, a loan from one Ms G of $7,443 and a liability to H Pty Ltd of $6,858 (a company through which she now conducts business) - a total of $41,801, which I do not consider to be a “significant indebtedness” in the context of the net assets disclosed by her.
As to [45] of her affidavit, she deposes there that, without recourse to an interim property settlement, she does not have “any capacity” to establish and afford residential accommodation; meet her ongoing legal fees and disbursements associated with these proceedings; or otherwise meet other ongoing living expenses of X and herself pending the resolution of the substantive proceedings (emphasis added). That was not necessarily so, as at the date of the hearing.
In her outline of submissions at [16], it is submitted that:
Unless the Court grants the wife advanced access to funds in the modest form she seeks, the wife will not be able to prosecute the proceedings. She will be compelled to live in difficult financial circumstances. Failure to order litigation funding will result in a grave injustice to the wife, and indirectly, to the child.
However, the wife’s case entirely ignores the fact that she is the sole director and shareholder of C Pty Ltd and, accordingly, solely controls that company, subject only to a recent development that I address below. C Pty Ltd is the trustee of the J Family Trust (“Family Trust”), of which she is currently the sole appointor and within the class of eligible objects. One of the pending interim applications of the husband is for the joinder of C Pty Ltd to the proceedings. That application, which is yet to be heard, is opposed by the wife and that company. For reasons that are not readily apparent, she has seen fit to instruct, on behalf of the company, a separate firm of solicitors to those acting on her behalf in these proceedings and, at the mention before me on 22 July 2022, as well as at the hearing before me on 12 August 2022, counsel appeared on its behalf. No adequate reason was proffered for the apparent duplication of legal fees and no conflict or divergence of interests, actual or potential, between the wife and C Pty Ltd could be identified for me at the hearing. As the sole appointor and an eligible object of the Family Trust, C Pty Ltd, in its outline of case at [5], points to the husband’s concession to the wife that, in respect of the Family Trust, she “would exercise complete control and all profits from it” and that she is “completely in control. It is [her] asset …”. It is settled law that the combination of the wife’s two positions within the Family Trust, as appointor and as an eligible object, enable the Court to treat the Family Trust as property of the wife. It is not to the point that, as is submitted on behalf of C Pty Ltd at [7], “[t]here is no evidence that the Wife has any intention in relation to the Company but to manage its assets in a measured way”.
In Kennon v Spry (2008) 238 CLR 366 at [56]-[57], French CJ said:
56.In Ashton a husband who had been the trustee of a family trust replaced himself as trustee with a company but continued as sole appointor. He was not a beneficiary but received income from the trust. It was conceded that he was “in full control of the assets of the trust”. The evidence made clear that he applied the assets and income from them as he wished and for his own benefit. The Full Court held that “[n]o person other than the husband has any real interest in the property or income of the trust except at the will of the husband”. Special leave to appeal from that decision was refused by the High Court on 5 December 1986 (Gibbs CJ, Wilson and Brennan JJ).
57.Where the husband was not entitled to be a trustee but was sole appointor and also a beneficiary, the Full Court of the Family Court in Goodwin upheld a finding that “the trust property was, in reality, the property of the husband” and in so doing applied as a statement of principle the perhaps unremarkable proposition that:
“[T]he question whether the property of the trust is, in reality, the property of the parties or one of them ... is a matter dependent upon the facts and circumstances of each particular case including the terms of the relevant trust deed.”
In that case the husband had the sole power of appointment of the trustee which was a creature under his control and he was a beneficiary to whom the trustee could make payments exclusive of other beneficiaries as the husband saw fit.
(Footnotes omitted)
During the course of the hearing, I was provided with a costs disclosure notice addressed to the wife, in her capacity as director of C Pty Ltd, dated that day, from which it appears that:
(a)the company had been billed legal costs of $69,244.95 (of which $39,244.95 remained unpaid);
(b)it had unbilled legal costs of $127,190.38;
(c)it had estimated future legal costs and disbursements up to and including that hearing of $13,500;
(d)it had paid expert witnesses’ expenses of $9,729.50, with further such expenses estimated to be $10,000.
Those costs were incurred and / or paid by the company at the direction of the wife.
The husband deposes that, since 1 September 2018, the wife has withdrawn at least $269,212.61 from the banks accounts of C Pty Ltd (of which approximately $172,000 was removed from September 2020 onwards), for which she has not accounted satisfactorily, save that he asserts she has apparently applied part of those funds towards the company’s and her legal costs. These allegations are disputed by her and determination thereof must await trial.
The wife, in her Financial Statement sworn and filed 21 July 2022, deposes at [8] to being self-employed, inter alia, by C Pty Ltd; at [15] to having no income therefrom; at [41] to having a 50 per cent interest in that company, the value of which was “not known”; at [50] to having “director / shareholder loans” owing to the company, the extent of which was not known; and at [59] to having drawn $50,000 from the company on 2 July 2021 which was deposited into her Commonwealth Bank account ending …08 which was applied to “legal fees, mortgage repayments and other living expenses including child related expenses”.
The extent of the assets and liabilities of C Pty Ltd is opaque, both at the date of the hearing and in the last completed financial year. The husband, in his affidavit filed 21 July 2022 at [44], deposes that the debtors of C Pty Ltd are a “major asset of the relationship” which is in the “exclusive possession and control” of the wife.
The husband deposes at [15] of his affidavit filed 3 August 2022 that C Pty Ltd has current debtors of about $3.47 million, of which he estimates between about $2.2 million - $2.5 million should be recoverable. Further, he deposes at [16] that the company has or should have approximately $264,000 in its K Bank and Commonwealth Bank accounts.
Exhibit N-12 to the husband’s affidavit filed 3 August 2022 is an aged debtors report as at 30 June 2021, which disclosed total debtors of $3,591,423.50.
Exhibit O-11 to the husband’s affidavit filed 21 July 2022 is an aged debtors report as at 21 February 2022 which disclosed total debtors of $3,686,764.83.
I was referred to the wife’s affidavit filed 3 June 2022 on behalf of C Pty Ltd, which was not included in the court book. Exhibit P-65 to that affidavit is an aged work-in-progress report of C Pty Ltd as at 27 May 2022, which discloses an amount of $393,228.25 in excess of 90 days as at that date. More importantly, exhibit P-58 to that affidavit, is an aged debtors report as at 2 June 2022, which discloses that the company then had debtors totalling $2,790,860.38, a reduction of nearly $900,000 in some three months.
The reduction in debtors was said to be referable to the wife unilaterally writing-off a matter of Q Company (which appears in Exhibit O-11), in which work appears to have been undertaken between 2004 - 2008, totalling some $711,000. Although there was no submission to this effect, that debt was likely statute-barred.That still leaves some $185,000 unaccounted for, although the wife asserts the husband has wrongfully collected and retained some of the fees owing to C Pty Ltd.
In the wife’s affidavit filed 1 August 2022 on behalf of C Pty Ltd, she deposes that, on 11 January 2022, she was provided by the husband with a list of the company’s debtors and she reviewed the monies received by it for the period 1 July 2021 - 31 December 2021, which totalled $54,618.44, “being 1.5% of the total outstanding”.
Further, I note that in the wife’s affidavit filed 1 August 2022 at [105]-[106], she deposes that, in the period between 18 February 2022 - 2 July 2022, the company has collected a total of $63,787.51.
I was referred by counsel for the wife to the affidavit of the husband filed 21 July 2022 at [298], wherein he deposes that he has been telephoned by various clients of C Pty Ltd who have received letters in respect of outstanding fees. Whilst it appears that the seven clients named in that paragraph are disgruntled by his departure from the firm and do not wish to deal with the wife, it is not at all clear from that evidence that they refuse to pay their debts. Even if they did so refuse, the debts are choses-in-action in respect of which the company presumably could sue. However, the debts owing to the company, solely controlled by her, and which, on their face, were available to her by reason of such control, do not feature in her updated Financial Statement filed only some three weeks prior to the hearing.
The wife disputes that some of the debts owing to the company are recoverable, although I was not pointed to any evidence suggesting that may be so. Further, she does not give any estimate of how much, in her opinion, may be recoverable. In her affidavit filed 21 July 2022, she deposes:
69.[C Pty Ltd] has no activity left other than the collection of unpaid legal fees in respect of past clients and administrative matters. There are also a number of creditors that must be paid that relate to the liabilities of [C Pty Ltd].
70.I have been engaged, without remuneration, in the debt recovery and administrative work of [C Pty Ltd]. This has been very time consuming.
71.Court orders currently in place prevent any fees received (pending the outcome of the company proceedings) from being used other than for the payment of [C Pty Ltd] debts.
72.To the extent that any fees are eventually received by [C Pty Ltd], I could draw funds to be able to meet my family law legal fees and other expenses. However, this appears increasingly unlikely and long term, if at all. At this stage the fees that have been recovered to date are not sufficient to meet outstanding liabilities.
Insofar as the wife asserts that any fees recovered by C Pty Ltd may not be used other than for payment of the company’s liabilities, I note that on 23 February 2022, a Senior Judicial Registrar ordered at [3]:
That pending further order or until 4pm on 15 March 2022, the Husband and the Wife, be restrained from removing, transferring, or otherwise dealing with any funds from the company, banking and trust accounts of [C Pty Ltd] other than for current direct debits, current and future Trust authorities provided by clients of the company and payments to [R Insurance] and [S Software].
It does not appear that any order was made extending that injunction after 15 March 2022, so that the wife is no longer restrained thereby. Indeed, it is the husband’s case that no order for a partial property settlement should be made given the funds owing to and / or recovered by C Pty Ltd, which are solely controlled by the wife as sole director and shareholder of the company and sole appointor of the Family Trust.
Further, insofar as the liabilities of C Pty Ltd are concerned, although it was correctly submitted on behalf of the wife that regard should be had not only to the assets of the company, but also to the liabilities, I enquired on a few occasions during the course of the hearing as to the extent thereof but was not provided with any answer or taken to any evidence.
In circumstances where I can have no confidence in the composition or value of the net asset pool; the husband seeks to retain D Street; C Pty Ltd and the Family Trust have been solely controlled by the wife; there are assets, in the form of debts owing to C Pty Ltd, well in excess of $2,000,000; and the wife has, in my view, unnecessarily retained separate legal representation for that company which has incurred billed and unbilled legal fees totalling nearly $200,000 (notwithstanding that it is not presently even a party to these proceedings), I am of the view it would not be in the interests of justice, and therefore just and equitable, to make a partial property settlement in the wife’s favour at this juncture in the proceedings.
Whilst judgment was reserved, on 17 October 2022, M Lawyers, the solicitors for C Pty Ltd, sent an email to my chambers. Relevantly for present purposes, they advised that “a resolution was passed this afternoon appointing Mr L and Mr T of F Company as the joint and several liquidators of the Company”.
Accordingly, the matter was listed for mention before me on 21 October 2022. On that occasion, the wife was represented by different counsel, there was no appearance on behalf of C Pty Ltd and Mr L, one of the liquidators of that company appeared in person. By agreement, the email from M Lawyers was tendered into evidence. Otherwise, neither the husband nor the wife sought to reopen their case by reason of C Pty Ltd being placed into liquidation.
In relation to the resolution passed on 17 October 2022, it is important to recall that the company was solely controlled by the wife and, accordingly, it was placed into liquidation solely by her. No further evidence was sought to be adduced explaining why the company was put into liquidation and the timing thereof. As I have noted above, I was not taken to any evidence at the hearing before me on 12 August 2022 as to the extent of the company’s debts. On one view, it may be that C Pty Ltd was placed into liquidation in a misguided attempt by the wife to prevent the Court from dismissing her partial property settlement application by reason of the debts owing to the company. However, I can take that issue no further. Nevertheless, in the absence of any evidence other than that of the mere fact of the liquidation, I remain of the view that it would not be just and equitable to make a partial property settlement in the wife’s favour at this juncture in the proceedings. There is no evidence that there will not be a surplus in the liquidation.
In the circumstances, the wife’s application for the sale of D Street and the payment to her of a partial property settlement from the net proceeds of sale thereof will be dismissed.
Husband’s application: payment of D STREET expenses
In respect of the husband’s application for the wife to pay one half of various payments in respect of D Street, his Financial Statement filed on 8 August 2022, filed only four days prior to the hearing before me, discloses income of $780 per week and expenses of $2,855 per week. Even allowing for the fact that $250 per week of his expenses are paid by U Lawyers, the company through which he has conducted his legal practice since separation, he still discloses a shortfall of $1,925 per week. When I queried how the husband had been meeting that shortfall, I was told by his counsel:
“From the director’s loan account of [U Lawyers] Proprietary Limited, your Honour. Which appears at item number 42 in the balance sheet. And which was, inadvertently, left out of the financial statement.”
U Lawyers Pty Ltd (“U Lawyers”) is a company incorporated by the husband through which he has conducted legal practice since separation. He is the sole director and shareholder thereof. The husband’s balance sheet, which is said to be as at 9 August 2022, does list, as a liability, a director’s loan to him of $75,000 from U Lawyers Pty Ltd. However, as I pointed out to his counsel, that document is not sworn by him. When I asked his counsel to show me where, in his Financial Statement, that loan was to be found, he responded: “It’s not there, your Honour”. Given that the husband’s Financial Statement was sworn and filed on 8 August 2022 and, unsurprisingly, it was not suggested that the loan accrued between then and the following day, being the date at which his balance sheet was said to be referable, it is a remarkable omission by a litigant. As I have mentioned above, after the hearing the subject of these reasons for judgment, the husband filed an amended Financial Statement but, there having been no application to reopen his case, I have had no regard to it.
I was not taken to any evidence as to the income, expenses, assets or liabilities of U Lawyers. All that I have been told by counsel for the husband, albeit as an admission against interests, is that he has been able to meet the shortfall between his income and his expenses by drawing funds from U Lawyers.
Given the unsatisfactory way in which he has seen fit to conduct his case, I cannot be satisfied that he is unable to continue to meet the other fifty per cent of the various payments he seeks in respect of D Street. Indeed, I had the following exchange with his counsel:
HIS HONOUR: But if I were to dismiss the wife’s application for the sale of the home, such that your client remained in the home. But, at the same time, was not satisfied that the wife, on the evidence, had the ability – or, indeed, that your client had the need for maintenance from his wife – what will your client do?
MR HODGSON: Continue to pay the mortgage, your Honour. There’s no mortgage arrears. The mortgage has been paid.
HIS HONOUR: So at the - - -
MR HODGSON: And to answer the - - -
HIS HONOUR: Yes. Thank you. So at the moment, he is paying 100 per cent?
MR HODGSON: Correct.
HIS HONOUR: And you say he will continue to.
MR HODGSON: Yes, your Honour.
In any event, the wife, in her Financial Statement filed 21 July 2022, discloses income of $700 per week (from H Pty Ltd, a company conducted by her) and expenses of $1,063.
Neither spouse’s income nor expenses were challenged by counsel for the other and, in particular, counsel for the husband could not point to any source from which the wife could make the payments sought by him, other than the monies owing to C Pty Ltd.
In the circumstances, I am unable to find, as required by s 72(1) of the Act, that husband is unable to support himself adequately, such that the wife is liable to maintain him, and his application for the payment by the wife of 50 per cent of various outgoings and expenses of D Street will be similarly be dismissed.
I certify that the preceding fifty-seven (57) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Strum. Associate:
Dated: 1 November 2022
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