Davids and Davids
[2017] FamCA 662
•30 August 2017
FAMILY COURT OF AUSTRALIA
| DAVIDS & DAVIDS | [2017] FamCA 662 |
| FAMILY LAW – PROPERTY – Interim orders – Partial property settlement – Where husband seeks partial property settlement of $411,500 – Where husband fails to establish compelling circumstances for $411,500 partial property settlement – Where husband seeks litigation funding of $100,000 – Where husband alleges wife has not made full and frank disclosure – Where disclosure by wife is adequate – Where both parties seek that the husband receive $100,000 – Where husband disputes wife should receive partial property settlement of $50,000 – Where there are appropriate circumstances for wife to receive partial property settlement – Application granted. |
| Family Law Act 1975 (Cth) ss 79, 80 |
| Felice & Felice [2011] FamCA 162 | ||
| APPLICANT: | Mr Davids | |
| RESPONDENT: | Ms Davids |
| FILE NUMBER: | ADC | 2298 | of | 2016 |
| DATE DELIVERED: | 30 August 2017 |
| PLACE DELIVERED: | Adelaide |
| PLACE HEARD: | Adelaide |
| JUDGMENT OF: | Berman J |
| HEARING DATE: | 23 August 2017 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Ms Cocks |
| SOLICITOR FOR THE APPLICANT: | Lempriere Abbott McLeod |
| COUNSEL FOR THE RESPONDENT: | Ms Lewis |
| SOLICITOR FOR THE RESPONDENT: | Jacqui Ion Lawyers Pty Ltd |
Orders
That the husband’s Application in a Case filed 20 January 2017 be dismissed.
That the husband obtain by way of interim property settlement the sum of ONE HUNDRED THOUSAND DOLLARS ($100,000) and that the husband and wife do all things required for the said sum to be withdrawn from the joint ANZ Account (…57) and be paid to the trust account of Lempriere Abbott McLeod for and on behalf of the husband.
That the wife obtain by way of interim property settlement the sum of FIFTY THOUSAND DOLLARS ($50,000) and that the husband and wife do all things required for the said sum to be withdrawn from the said joint ANZ Account and paid to the trust account of Jacqui Ion Lawyers for and on behalf of the wife.
Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Davids & Davids has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).
| FAMILY COURT OF AUSTRALIA AT ADELAIDE |
FILE NUMBER: ADC 2298 of 2016
| Mr Davids |
Applicant
And
| Ms Davids |
Respondent
REASONS FOR JUDGMENT
INTRODUCTION
By Initiating Application filed 23 June 2016, Mr Davids (“the husband”) seeks final orders for settlement of property in the following terms:-
(1)That the whole of the funds held in ANZ Bank BSB … A/c …57 (being the net proceeds of the sale of the B Town property) to be paid to the husband;
(2)The wife do pay the husband such additional sum as the Court deems just;
(3)Further or otherwise as the Court deems just.
By Response filed 22 August 2016, Ms Davids (“the wife”) opposes the orders sought by the husband and seeks that by way of settlement of property the assets of the parties be divided as to 65 per cent to the wife and 35 per cent to the husband.
On 14 February 2017 the proceedings were transferred to the Family Court of Australia noting the complexity of the issues involved and that the parties were keen to explore a resolution at mediation.
The parties were not able to resolve their difference and by Application in a Case filed 20 January 2017 the husband seeks orders by way of partial settlement of property that the parties do all things necessary to cause the balance of monies held in the ANZ account to be withdrawn and paid to the husband. In addition, the husband seeks that the wife pay to his solicitors trust account the sum of $100,000 by way of litigation funding and such sum to be applied solely to the husband’s past and future costs and out of pocket expenses in respect of the ongoing litigation.
The husband no longer pursues an order by way of interim spousal maintenance.
The wife filed a Response to the Application on 21 August 2017 and whilst conceding that it was appropriate for there to be an order made by way of partial settlement of property in favour of the husband, she considered that the quantum should not exceed $100,000 and in addition that she be paid $50,000.
INTERIM PROPERTY DISTRIBUTION
There are essentially two stages for the consideration of an application for interim property orders. The first stage is a “procedural step” which requires an analysis of whether the circumstances of the case trigger the Court’s power to invoke s 80(1)(h) of the Family Law Act 1975 (Cth) (“the Act”) to make an order for interim property settlement before a final hearing. At this stage, the “overarching consideration” is the interests of justice. The second stage is the “substantive step” where the provisions of s 79 must be considered and applied but with limitations given that it is not a final hearing.
In Medlow & Medlow (2016) FLC 93-692 at 81,088 the Full Court confirmed the starting point in respect to any property application, including an application for interim property orders is “the identification of the parties’ property and of their interests in it”.
At page 81,090 the Full Court said the following:-
[86]The onus was clearly upon the [applicant] to establish that there were sufficient assets available for the interim distribution and that the effect of any interim order was capable of being reversed as part of the final hearing or at least would not defeat the respondent’s property claim. The onus was not on the [respondent] to adduce such evidence.
The Full Court in Medlow (supra) refers to Strahan & Strahan(interim property orders) (2011) FLC 93-466 at 85,645 and the authorities referred to therein, in confirming that an interim order for the distribution of property must be “amenable to adjustment on a final hearing”.
The very nature of an interim hearing is such that the Court is not in a position to properly evaluate the evidence and accordingly the Court should take a conservative approach, including in respect to determining whether there is likely to be sufficient resources of the parties available at final hearing to accommodate any “adjustment issues”.
In terms of the second consideration in respect to an application for interim property order, the High Court in Stanford & Stanford (2012) 247 CLR 108 at 112 stated:-
[2]Under 79(2) of the [Family Law] Act, a court shall not make a property settlement order unless satisfied that it is “just and equitable” to do so.
As the Full Court said in Medlow (supra) in the context of considering an appeal concerning interim property orders:-
[72]This is not to be determined “by beginning from the assumption that one or other party has the right to have the parties’ property divided between them” (Stanford at [40]).
The following principles are relevant to the Court’s consideration:-
(a)Together s 79 and s 80(1)(h) confer a power on the court to make orders for interim property settlement;
(b)Section 79 confers a discreet power to make orders for property settlement and the court may exercise the power conferred by s 79 through “a succession of orders until the power…is exhausted” or until a final order dealing with all the known property of the parties is made (see Gabel & Yardley (2008) FLC 93-386.
(c)Section 80 is not in itself a source of jurisdiction for such an order to be made. Rather, the section is an “enabling provision” that provides various ways in which the general power in s 79 may be exercised in individual cases.
Given that the applicant is seeking access to their own funds, it is unnecessary for a “detailed enquiry as to the purpose for which the funds are to be used” (see Felice & Felice [2011] FamCA 162 at [12]).
Sufficient particulars must nonetheless be provided to enable the Court to determine:-
(a)That the application is “genuine”;
(b)To “identify the circumstances that make it appropriate to give consideration to exercising its power”; and
(c)To sufficiently weigh the identified need “against the benefit of having only one exercise of a s 79 power”.
An applicant is required to show more than a request but rather, that it is just and equitable to make the order. It should not be considered that the purpose for which the funds are required is an irrelevant consideration.
THE HUSBAND’S APPLICATION
The husband’s application is supported by his affidavit filed 7 July 2017 together with his earlier affidavit of 14 March 2017 and his financial statement of the same date.
The husband argues that he is in urgent need of funds to assist in the litigation. He alleges that costs have arisen because of the non-disclosure by the wife.
His current financial position is that his 2017 financial accounts and tax returns have not yet been prepared and whilst his income from his business for 2016 was $61,728, he expects that his billings and therefore net profit will be about 15.5 per cent lower for the most recent financial year.
He has liabilities to the ATO, his overdraft stands at $61,260 and he has outstanding counsel fees of $5,610, solicitor’s accounts of $15,700 and work that has been undertaken but not yet billed of $23,955.
A significant issue raised by the husband is his assertion that the wife has not made full disclosure, in particular in respect of a corporate entity identified as C Pty Ltd. The issue is raised in a letter from the husband’s solicitors to the wife’s solicitors of 22 June 2017 and the assertion is that the company has a paid up share capital of $254,040. The narrative in the letter alleges:-
The writer cannot recall any mention of this company at the mediation which took place on 27 March 2017.
The purported basis for the husband’s application is that he would seek to purchase a home for himself and the children when they spend time with him.
The husband has not selected a home and it could not be said that his intention is anything more than an idea at this stage.
There is significant uncertainty as to the extent of the interests of the parties in property. It is not set out with clarity in the husband’s documents and it is only by reference to the wife’s affidavit of 21 August 2017 that some broad assessment of the property of the parties can be obtained.
The parties have retained the proceeds of the sale of the former matrimonial home at B Town in the sum of $461,925. In addition, by valuation as at 30 June 2016, the jointly appointed single expert valued the wife’s interest in D Pty Ltd and Davids Trust at $1,220,722.
Each of the parties have a superannuation entitlement, but for the purposes of this application neither party can be seen to have satisfied a condition of the lease and accordingly the value of their respective superannuation interests are not relevant.
The wife is also owed by way of a credit loan account $331,030 in the D Pty Ltd business.
Whilst the husband’s application provides little particularity as to the manner in which he considers an order for settlement of property should be made, the final orders promoted by the wife reflect an apportionment to the husband of 35 per cent. It could be considered that even on the wife’s case there may be merit in the husband’s application subject to the Court being satisfied that he has demonstrated a genuine purpose for the interim order.
The wife argues that her interest in the D Pty Ltd business should no longer be seen as the value determined by the single expert.
The single expert valued the company at $1,609,236. The methodology adopted was based on future maintainable earnings before interest and tax capitalised at 50 per cent to a value of $760,000. At the time of valuation the business held cash reserves of $619,707 and the single expert considered that this should be treated as a surplus asset and added to the capitalised value.
The wife now argues that the business has experienced a substantial downturn in the 2017 financial year which she says is consistent with the observations of the single expert of a 12 per cent drop in turnover in the 2016 financial year as compared with 2015.
The cash reserves have been largely dissipated and now stand at $87,870 as compared with $619,707 as at 30 June 2016.
The wife contends that the gravamen of the proceedings really relates to the net proceeds of sale of the B Town property and the value of the wife’s interest in the D Pty Ltd business.
HUSBAND’S SUBMISSIONS
The husband’s counsel strongly argued that the Court should adopt a broad brush approach to the husband’s application on the basis that the wife has been reluctant to make full and frank disclosure and the discovery by the husband of what he considered to be a previously unknown company namely C Pty Ltd is corroborative of the wife’s reluctance to make disclosure.
It was a specific submission that the paid up capital of $254,040 may well in part be an explanation for the diminution of the cash reserves in the D Pty Ltd business.
Annexure “B” to the husband’s affidavit filed 7 July 2017 includes correspondence from the wife’s solicitors in respect of the husband’s enquiry as to C Pty Ltd and annexes a letter dated 28 June 2017 from the wife’s accountants.
The letter is self-explanatory and states that the company is a trustee of Davids Trust, which entity was the subject of valuation by the single expert.
By reference to the valuation reported dated 16 November 2016, the structure of the business and the valuation of the wife’s interest in same brings to account the Davids Trust. Paragraph 2.9 on page 4 states:-
The shares in the company transferred to the [Davids Trust] on 3 June 2013. The consideration for this transaction upon, which stamp duty was assessed, was $254,040.
Even the most cursory consideration of the report should have confirmed the wife’s position, namely, that there had not been any non-disclosure but rather, the entity that was of concern to the husband was the subject of disclosure by the wife, her solicitors and the wife’s accountant and importantly was the subject of consideration by the single expert and incorporated in the report. There is no room to suggest that any reduction in the surplus cash holdings of the D Pty Ltd business is in any way explained by the paid up capital of the holding company pertaining to Davids Trust.
The wife’s position is that the state of the business and the decrease in turnover may result in an enterprise value of the D Pty Ltd business as low as $260,000.
LITIGATION FUNDING
The husband seeks $100,000 by way of litigation funding on the basis of outstanding legal fees and an estimate from his solicitors that the costs of conducting the trial including disbursements, counsel and solicitor costs may well be in the order of $100,000.
Such an expenditure would seem difficult to sustain in circumstances where the assets of the parties are narrow in compass and the only area of uncertainty relates to the value of the wife’s interest in the D Pty Ltd business. It would seem logical that the next step should be to reassess the value of the wife’s business given her assertion that the business has suffered a substantial downturn in turnover.
WIFE’S CLAIM
The wife considers that there should be an order for partial settlement of property. She considers that the husband should receive $100,000 and she should receive $50,000.
Given that both parties seek an order by way of partial property settlement, but are not able to agree the quantum, there is at least consent that an order should be made.
I propose to make the order as promoted by the wife namely, that the husband is to receive by way of partial property settlement the sum of $100,000.
The husband opposes the wife’s application for $50,000.
Whilst she receives a substantial income, the wife is solely responsible for the payment of the children’s school fees and extra-curricular activities. She anticipates tuition fees payable as at January 2018 in the sum of $26,000. She has also incurred $32,000 with her accounts in order to provide information to the husband.
She currently owes her solicitors in excess of $20,000 with the anticipation of further accounts being rendered in next few weeks.
The wife’s position is qualitatively different to that of the husband. Whilst it may be argued that the retention by the wife of her business interests may not necessarily entitle her to any further sum, the husband’s application is limited to the balance of the proceeds from the sale of the B Town property and to the extent that the wife receives a further $50,000 then clearly she retains an asset (even on the husband’s case) which would enable that sum to be restored if required.
CONCLUSION
At best, the husband’s claim could be considered as ambit in nature. No attempt has been made to set out and establish an appropriate basis for the husband to receive $411,500 by way of partial property settlement and a further $100,000 by way of litigation in circumstances where there is no basis for the Court to find that the money could be clawed back if the husband’s assessment of his entitlement by way of final orders is overly generous.
To the extent that there is any justification in the husband’s claim by reason of an allegation that the wife has not made full and frank disclosure, the submissions would seem to be faintly pressed given the accountant’s letter of 28 June 2017 and the report of the single expert valuer.
I do not consider that there is merit in the husband’s application for partial settlement of property of $411,500 and an additional sum of $100,000 by way of litigation funding, but I propose to make orders in terms of the wife’s Response filed 21 August 2017.
I certify that the preceding fifty-three (53) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Berman delivered on 30 August 2017.
Associate:
Date: 28 August 2017
Key Legal Topics
Areas of Law
-
Family Law
-
Civil Procedure
Legal Concepts
-
Remedies
-
Costs
-
Injunction
0
2
1