Cirillo & Cirillo (No 3)
[2022] FedCFamC1F 207
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Cirillo & Cirillo (No 3) [2022] FedCFamC1F 207
File number(s): SYC 4192 of 2020 Judgment of: ALDRIDGE J Date of judgment: 1 April 2022 Catchwords: FAMILY LAW – INTERIM – Partial property settlement – Litigation funding – Disclosure – Where the parties agreed that there should be partial property settlement to each of them – Where the source of funds is in a controlled monies account – Where the primary asset needs repairs –Orders made for partial property settlement – No orders as to disclosure made. Legislation: Family Law Act 1975 (Cth) s 79
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)
Cases cited: Cirillo & Cirillo [2021] FedCFamC1F 118
Salvage & Fosse (2020) FLC 93-966
Strahan & Strahan (Interim property orders) (2011) FLC 93-466
Zschokke and Zschokke (1996) FLC 92‑693
Division: Division 1 First Instance Number of paragraphs: 38 Date of hearing: 18 February 2022
10 March 2022Place: Sydney (via video link) Counsel for the Applicant: Ms Vohra SC on 18 February 2022
Mr North SC on 10 March 2022Solicitor for the Applicant: Lander & Rogers Counsel for the Respondents: Mr Williams SC with Mr Todd on 18 February 2022
Mr Richardson SC with Mr Todd on 10 March 2022Solicitor for the Respondents: Boyce Family Law & Mediation ORDERS
SYC 4192 of 2020 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS CIRILLO
Applicant
AND: MR CIRILLO
First Respondent
B PTY LTD
Second Respondent
ORDER MADE BY:
ALDRIDGE J
DATE OF ORDER:
1 APRIL 2022
THE COURT ORDERS THAT:
1.The applicant and first respondent will each be paid $2.75 million and $2.5 million respectively from the controlled monies account operated by TT Lawyers by way of interim partial property settlement.
2.Pending further order, the first respondent shall do all acts and things necessary to cause repayments to be made for the mortgage over the property situated at RR Street, Suburb P, as and when they fall due.
NOTATION:
A.It is agreed that Ms WW of AB Company will value the relevant companies and trusts, Mr XX of ZZ Company will value F Property and QQ Property and Mr AD of AC Company will value the MM Property and PP Property.
B.It would be expected that the parties would cooperate and send joint letters of instructions within 48 hours of these orders.
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 Cirillo & Cirillo has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
ALDRIDGE J:
INTRODUCTION
This is yet another interim application for a number of orders in this long running saga. The applicant, Ms Cirillo (“the wife”) sought a suite of orders, but the submissions of the parties focused mainly on the partial property settlement that was sought by her and on the similar orders sought by the first respondent, Mr Cirillo (“the husband”). It is convenient to deal with those aspects of the matter first. The second respondent, B Pty Ltd (“the second respondent”) did not wish to be heard on the applications.
PARTIAL PROPERTY SETTLEMENT
In her Amended Application in a Proceeding filed on 9 March 2022, the wife sought the payment to her of:
·$1,269,396.35 for the payment of outstanding legal fees in this matter;
·$500,000 on the legal fees to be incurred in these proceedings; and
·$3 million generally.
This is a total of $4,769,396.35.
At the conclusion of oral submissions, senior counsel for the wife modified the application so as to seek $2.5 million be paid to each party by way of partial property settlement, together with a further payment of $250,000 to the wife for urgent repairs to the property situated at RR Street, Suburb P (“the Suburb P property”).
For his part, the husband seeks orders that there be a partial property settlement by payment of:
·$2.5 million to the wife;
·$2.5 million to the husband and the second respondent; and
·$2,404,070.51 to the second respondent for the purpose of paying the expenses of that company.
Thus, it appeared, at the end of oral submissions, at least, to be common ground between the parties that there should be a partial property settlement to each of them, but they could not agree on orders being made due to the differences that remained between them.
It is also common ground that the only source of funds to make these payments is the controlled monies account that was set up pursuant to orders made on 8 October 2021 (see Cirillo & Cirillo [2021] FedCFamC1F 118). The second respondent was the owner of a commercial property, “LL Property”, which was sold and the net proceeds of sale were paid into the account. A mechanism for the payment of expenses was put in place under the orders, but that has not been entirely successful in that the wife has refused to agree to, in effect, any further payments being made from it.
The principles that apply to partial property settlements under s 79 of the Family Law Act 1975 (Cth) (“the Act”) are well known. See for example Salvage & Fosse (2020) FLC 93-966 (“Salvage”); Strahan & Strahan (Interim property orders) (2011) FLC 93-466; Zschokke and Zschokke (1996) FLC 92‑693.
The parties’ final property hearing is fixed for 9 May 2022. The parties estimate that there will be net property available for division of between $90 million and $120 million. One of the significant assets is the Suburb P property, the former matrimonial home, which has been variously valued but, according to the wife, is worth approximately $40 million. The wife wishes to retain the Suburb P property as part of the property settlement.
The nature and extent of the other assets is not fully known as yet, but consists of ownership of commercial properties in Australia, in some cases including the land on which they stand, together with real property and a Y Business in Country H.
The remaining potential asset, although the funds are presently held by the second respondent, is the controlled monies account which has a current balance of $14,980,345.59. Of that amount, $9,216,734 is marked for payment of the capital gains tax payable on the sale of LL Property, which is due in 2023. Further, a sum of just in excess of $1.7 million was said to be required for building works on the MM Property, however, I am informed by senior counsel for the second respondent that this building work is not pressing.
It is prudent to maintain sufficient funds in the controlled monies account to ensure payment of the capital gains tax. Neither senior counsel for the wife nor senior counsel for the husband and second respondent cavilled with this proposition. There is no evidence that trading profits from the other commercial properties will be sufficient to pay it in the short-term. If the tax cannot be paid from trading profits or the controlled monies account, another asset will be required to be sold to raise the funds required. The effect is therefore, that only $5,763,611 is available for distribution from that account. Although owned by the second respondent, it is effectively under the control of the husband.
Returning then to the application of the wife, I note that she does not give any evidence as to any particular need for the sum of $3 million. Although I accept that is not an essential step in the making of a partial property settlement order, need is a relevant consideration to be taken into account.
The unchallenged evidence is that the Suburb P property was significantly damaged in the recent severe Sydney weather and needs urgent repairs in the sum of approximately $245,000 and overall needs repairs and renovations that will cost between $1.4–$1.6 million. The wife has no cash resources to meet these repairs or renovations. The need for urgent repairs, in particular, points persuasively to making an order for those sums if possible.
The wife also seeks just under $1.8 million for the payment of past legal fees and those to be incurred. As discussed in Salvage, where one party to matrimonial proceedings has control of all the assets to be divided between the parties, orders can be made so as to provide the other party with the means of prosecuting the proceedings. Such orders can be made by way of costs orders, partial property settlement orders or maintenance orders.
The wife received $1.5 million as partial property settlement pursuant to the orders made on 1 October 2021. It is clear from the reasons given at the time that of that sum, $500,000 was provided to enable the wife to fund the final hearing of the property application (Cirillo & Cirillo [2021] FedCFamC1F 118). In fact, the wife has not used the funds for that purpose but has imprudently given away in excess of that sum, by providing cash gifts to her children and son in law and buying an expensive motor vehicle for another. This consideration points against the making of further provision.
The husband also received $1.5 million as partial property settlement pursuant to the orders of 8 October 2021. The husband says he spent $175,350 in repaying a loan and meeting and rent and outgoings, paid $95,900.24 to reimburse the second respondent for payment of personal expenses in Country H and applied $1,230,240.22 towards the purchase of shares. The husband has sold some of those shares for $100,084.96, which he transferred to his personal account for living expenses. Unfortunately, the husband’s share portfolio is now worth $823,485.84 which he says he does not want to sell until the market returns so as to avoid making a loss on them. That was the course the husband chose to take and it carries in my opinion little weight in determining what orders are appropriate. He has a relatively liquid asset in whatever value the shares may have from time to time.
In his affidavit filed on 15 February 2022, the husband gives evidence of debts of his that have been paid by the second respondent, which he now seeks to reimburse. That will obviously have the effect of improving the second respondent’s cash flow and enable its debts to be paid from its own resources more readily. In that light, in closing submissions the husband did press for the final tranche of payments that were initially sought by him, namely those which were to be used to pay current trade creditors of the various commercial properties.
Turning then to the provisions of s 79 of the Act, it is quite clear that there is an abundance of property to be divided, and speaking in very general terms, there will be something approaching an equal division of property. That being so, the amount to be received pursuant to the applications is but a fraction of the property that each of the parties will actually receive in due course. There is also no difficulty whatsoever of adjusting the final orders to take into account the present orders, should that become necessary.
As I have said, a significant concern has been to ensure that the funds in the controlled monies account are used for appropriate business expenses, but in light of the various concessions made by the second respondent, the main requirement is to preserve a sum sufficient to pay the capital gains tax owed.
Although the parties did not explicitly concede that each was entitled to a partial property settlement in the sum of $2.5 million, that is the practical effect of the orders they propose. I do consider however, that particular weight should be given to the need for the urgent repairs to the Suburb P property and to the fact that the husband retains an already realised resource, that being his shares in the sum of $823,485.84.
Taking these things into account, I am satisfied that the appropriate order is that there be an interim partial property settlement by way of $2.75 million to the wife and $2.5 million to the husband from the controlled monies account. In my opinion these orders are just and equitable.
The husband’s order proposes that of the sum $2.5 million he would receive, $900,000 be paid directly to the solicitors for the first and second respondents and to be used by them for the purposes of these proceedings and no other purposes, with the balance to be paid to the husband to use as he sees fit.
I see no basis on which to proscribe the parties’ use of these funds.
DISCLOSURE
The wife seeks an order requiring the husband to give full and frank disclosure of documents in relation to:
·Those relating to the sale of the land and business known as LL Property;
·All outstanding disclosure including personal bank statements; and
·All ledgers and financial statements for the financial years ending 30 June 2019, 30 June 2020 and 30 June 2021 for the second respondent and the Mr Cirillo Family Trust.
The main complaint made by the wife in the course of submissions was that she has not yet received the settlement statements for the sale of LL Property despite several requests.
The response was that the sale comprised of both the land and the business, which were sold separately. It was that which was said to pass for the settlement sheet in relation to the land has already been provided and no such similar document exists in relation to the sale of the business, but it is said all relevant documents have been provided. No issue was taken with respect to that statement. There seems to be no basis then for a further order.
Orders obliging someone to disclose documents should, in general, not be made because there is already an existing obligation to do so under the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth). The wife was unable to identify any particular document which ought to have been disclosed and has not. A general order for disclosure will not be made.
It was conceded that the last category of documents sought would, in the absence of the final accounts, in effect oblige the disclosure of all the primary accounts of the various entities. Such a request is too broad and onerous. Aligned to that, the wife also seeks an order that the relevant financial statements, including tax returns, for all the entities for financial years ending 30 June 2019, 30 June 2020 and 30 June 2021, as well as the husband’s personal income tax returns and notices of assessments for those years, to be prepared, completed and provided to the wife within 14 days. The evidence was that that simply cannot be done. That is a perfectly valid response.
It is fair to say, as the wife does, that the preparation of these accounts has begun too late and is perhaps proceeding too slowly. However, that is no basis for making an order that simply cannot be complied with. If the relevant accounts are prepared too late for effective use at the hearing, that may have consequences that will bear on the nature of the final orders that may be made.
Accordingly, proposed Orders 2 and 8 will not be made.
The proposed Order 13 restrains the husband and the second respondent from entering into any agency agreement for the sale of their assets without providing the wife 21 days’ notice in writing of their intention to do so. There is no evidence that any sale or proposed sale of assets has not been disclosed to the wife in a timely manner or that any assets have been inappropriately sold by the husband or the second respondent. There is no basis for making this order.
The husband agrees that an order should be made in the terms of proposed Order 14, which requires him to continue to make the mortgage repayments over the Suburb P property as they fall due.
Proposed Order 15 would restrain the husband and the second respondent from causing funds or assets to be transferred out of Australia. In the absence of any evidence that such transfers have occurred, are likely to occur or are in reasonable contemplation, there is no basis for making this order.
Finally, it is agreed that Ms WW of AB Company will value the relevant companies and trusts, Mr XX of ZZ Company will value F Property and QQ Property and Mr AD of AC Company will value the MM Property and PP Property. It would be expected that the parties would cooperate and send joint letters of instructions within 48 hours of these orders.
CONCLUSION
The Amended Application in a Proceeding filed on 9 March 2022 and Amended Response to Application in a Proceeding filed on 8 March 2022 will otherwise be dismissed.
The orders will be pursuant to s 79 of the Act. The husband and wife will each be paid $2.5 million and $2.75 million respectively from the controlled monies account by way of interim partial property settlement.
Pending further order, the husband shall do all acts and things to cause repayments to be made for the mortgage over the Suburb P property as and when they fall due.
I note that the parties have agreed to the following valuers:
·Ms WW of AB Company to value the relevant companies and trusts;
·Mr XX of ZZ Company to value F Property and QQ Property; and
·Mr AD of AC Company to value the MM Property and PP Property.
The parties are to cooperate and send joint letters of instructions within 48 hours of these orders.
I certify that the preceding thirty-eight (38) numbered paragraph is a true copy of the Reasons for Judgment of the Honourable Justice Aldridge. Associate:
Dated: 1 April 2022