Dunn & Dunn (No 6)
[2022] FedCFamC1F 929
Federal Circuit and Family Court of Australia
(DIVISION 1)
Dunn & Dunn (No 6) [2022] FedCFamC1F 929
File number(s): ADC 5380 of 2020 Judgment of: BERMAN J Date of judgment: 28 November 2022 Catchwords: FAMILY LAW – SPOUSAL MAINTENANCE – INTERIM – Application to suspend or vary interim spousal maintenance order – Where the husband is currently in arrears – Consideration of s 75(3) and the parties’ financial circumstances – Orders.
FAMILY LAW – PROPERTY – Where the wife seeks Orders for the sale of livestock in accordance with Orders made in February 2022 – Where the livestock have not been disposed of as anticipated by the Order – where the husband’s position is that he no longer has an interest in the livestock – Where the previous Orders are varied to enable the wife to facilitate the sale of the livestock – Orders.
FAMILY LAW – PROPERTY – Where the husband concedes that his business is an asset of the relationship – Where the wife seeks Orders to appoint a receiver to the husband’s business –Where the husband opposes the appointment of a receiver – Where the husband has unilaterally appointed a liquidator on a voluntary basis – Where the wife contends that the liquidator is not independent – Consideration of s 80(1)(k) – Where the liquidator appeared before the primary judge in respect of his own family law matter – Where the husband was involved in the liquidator’s family law matter before the primary judge – Consideration of recusal – Orders.
Legislation: Corporations Act (2001) (Cth) s 420
Family Law Act 1975 (Cth) ss 75(3), s 80(1)(k)
Federal Court Act 1976 (Cth) s 57
Cases cited: Re Club Superstores Australia Pty Ltd (in liq) (1993) 10 ACSR 730
R v Ross-Jones & Anor;Ex Parte Beaumont (1979) 141 CLR 504
Division: Division 1 First Instance Number of paragraphs: 88 Date of hearing: 10 November 2022 Place: Adelaide Counsel for the Applicant: The Applicant appeared in person Counsel for the Respondent: The Respondent appeared in person ORDERS
ADC 5380 of 2020 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS DUNN
Wife
AND: MR DUNN
Husband
order made by:
BERMAN J
DATE OF ORDER:
28 november 2022
THE COURT ORDERS:
1.That the Application of the wife to appoint a receiver to M Pty Ltd (in Liquidation) (“the company”), be listed for hearing to determine whether the Honourable Justice Berman should recuse himself and if so, whether until determination, the husband should be required, by way of injunction, to instruct Mr HH and Mr JJ to suspend the winding up of the company.
2.That the spousal maintenance order made 17 March 2021, be varied such that the husband pay to the wife the sum of NINE HUNDRED AND THIRTY DOLLARS ($930) per week for a period of fifty two (52) weeks, payable by lump sum, of FORTY EIGHT THOUSAND THREE HUNDRED AND SIXTY DOLLARS $48,360.
3.That paragraph 7 of orders made 19 September 2022 be discharged.
4.That for the purpose of the sale of the livestock in accordance with Order 6 of orders made 19 September 2022, the following terms and conditions shall apply:
4.1that the wife shall be appointed as the husband’s agent to sell the livestock and is authorised to instruct Mr KK of LL Company. to sell them by auction or private contract within twenty eight (28) days of this order;
4.2that if the livestock are not able to be sold by Mr KK within the time as provided for herein, then they are able to be sold by the wife to any interested purchaser;
4.3that the husband shall forthwith provide to the wife all papers, documents, photos and authorities as may be necessary to advertise, market and then give effect to the sale and transfer of the livestock; and
4.4that the proceeds of sale shall be retained by the wife in part settlement of Orders 8 and 8.3 herein.
5.That the property situate at H Street, Suburb J (“the Suburb J property”) shall be sold.
6.That the wife be appointed to give effect to the sale of the Suburb J property and she shall be granted the power to sell the land and, in order to facilitate the sale, she is hereby invested with all rights, powers and indemnities to undertake the following:
6.1to take all reasonably necessary steps required (including but not limited to, appointing a real estate agent) to sell the Suburb J property by public auction or private treaty;
6.2to nominate and appoint a licenced real estate agent to undertake the sale of the property for a selling price or reserve at auction as may be recommended and advised by the said real estate agent; and
6.3to authorise and give notice to the current tenant.
7.That the husband is to do all things necessary and sign all such documents as may be required to facilitate the sale of the Suburb J property.
8.That upon sale of the Suburb J property, the wife shall disburse the proceeds of the sale in the following order:
8.1firstly, all outstanding amounts properly owing that are secured by mortgage noting the husband’s undertaking to cause the removal of any mortgage or encumbrance registered over the Suburb J property by Mr Q or any entity controlled by him;
8.2secondly, all costs and expenses incurred in relation to the sale of the Suburb J property;
8.3thirdly, that from the net proceeds of sale the wife is to receive the sum of $68,300 categorised by way of arrears of spousal maintenance and the further sum of $48,360 categorised by way of lump sum spousal maintenance; and
8.4fourthly, any net surplus, shall remain in the trust account of the real estate agent or conveyancer pending written agreement of the parties or further order of the Court.
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 Dunn & Dunn has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
BERMAN J
INTRODUCTION
Ms Dunn (“the wife”) and Mr Dunn (“the husband”) remain in dispute in respect of settlement of property and spousal maintenance.
The parenting arrangements for X born 2015 and Y born 2018 (collectively “the children”) were resolved by final parenting orders made 1 August 2022.
The financial proceedings have not yet been listed for final hearing. I have indicated to the parties that a trial date will not be set until and unless the Court can be satisfied that the matter will be ready. It is a telling observation that the parties remain highly mistrustful of each other and remain mired in litigation.
On 17 March 2021, the husband was ordered to pay by way of interim spousal maintenance, the sum of $1,500 per week to the wife. The husband has opposed the order for spousal maintenance and has sought that it be discharged or otherwise varied.
By Application in a Proceeding filed 19 September 2022, the husband seeks orders summarised as follows:-
(1)That the Order for spousal maintenance made on 17 March 2021, be discharged or otherwise varied;
(2)That the husband’s costs reserved in respect of the wife’s Amended Application in a Proceeding filed 28 April 2022 and her Application in a Proceeding filed 13 May 2022 and 7 June 2022 respectively, be heard and determined.
(3)That Orders for the sale of livestock made on 14 February 2022, be varied to assist in the prompt and efficient sale of the animals, with the net proceeds of sale to be available to the wife, by way of partial settlement of property.
(4)That within 28 days of any order made, the wife file an Amended Initiating Application directed to her assertion that the husband’s conduct has caused loss and wastage to the property of the parties.
(5)That the husband produce to the wife, all documents disclosed in his first amended list of documents.
By Amended Application in a Proceeding filed 28 October 2022, the wife seeks orders summarised as follows:-
(1)That pursuant to s 57 of the Federal Court Act 1976 (Cth), a nominated receiver be appointed to manage the sale and disposal of assets of M Pty Ltd (“the company”) in liquidation.
(2)That in lieu of spousal maintenance, the husband transfer the property at B Street, D Town (“the D Town property”) to the wife’s parents or in the alternative, the property at H Street, Suburb J (“the Suburb J property”) to the wife’s parents.
(3)That if the livestock are not sold by 10 November 2022, they be delivered to the D Town property at the husband’s expense for Mr MM to agist so that the wife may then cause them to be sold.
(4)That the Order of injunction made 16 March 2022 prohibiting the publication of any materials in respect of these proceedings, be discharged.
Livestock
The husband currently has the control and management of twelve livestock under agistment in Victoria.
The Orders of 14 February 2022, contemplated that the parties would jointly instruct Mr KK of LL Company to appraise the value of the animals and that thereafter, the husband would be able to sell the livestock upon condition that the sale price is above the valuation as determined by Mr KK. Mr KK lives in Victoria and within reasonable proximity of where the horses are currently agisted.
Whilst there is a high level of frustration that the livestock have not been disposed of as anticipated by the order, the reality may be that Mr KK has only recently advised of his preparedness to appraise the value of the livestock and if required, to cause their sale.
The husband’s position is that he no longer has an interest in the livestock and given what he considers to be cumulatively a modest sum likely to be received upon sale, it is not worth incurring the transport costs of the livestock being brought back to South Australia.
Of importance, is the husband’s advice that Mr KK has now formalised his preparedness to value and, if necessary, sell the livestock on behalf of the parties.
The husband now concedes that the livestock should be sold by Mr KK without the need for any formal appraisal and moreover, he has no objection to the wife providing the instructions to Mr KK and being in control of the sale process. To the extent that the husband may hold documents and photos pertaining to the provenance of each livestock and history of sale and acquisition, it is appropriate that those documents, if they exist, be provided to the wife.
Husband’s outstanding costs
I have indicated to the parties, that it would be premature to hear and determine the husband’s reserved costs application given that at present, the wife is impecunious and a costs order made at this stage would unlikely be capable of enforcement and would have no utility.
The wife’s reserved costs will be considered at the final hearing.
Appointment of receiver
The wife seeks to appoint Mr NN and Mr OO as joint and several receivers and managers of the assets of M Pty Ltd (in liquidation) (“the company”).
The husband opposes the appointment of a receiver. However, it is conceded that the assets of the company should be considered as property of the parties.
By joint instruction dated 27 May 2021, Mr V (“Mr V”) was appointed as a single expert witness to value the husband’s interest in the company. Mr V published his valuation report dated 2 February 2022 and at paragraph 111 of the valuation report, Mr V assessed the value of the husband’s interest as follows:-
Value of company as at 30 June 2021 $1,974,650 Loans owing by parties to company $383,008 Net value of company $1,591,642
Mr V determined that the company did not support a value for goodwill and accordingly, the methodology adopted was to value the company on the basis of its adjusted net tangible assets. Significantly, at paragraph 104 of the valuation report, Mr V sets out that the assets of the company which relate to working progress and debtors, noting the assessment by the husband on a tax allowance basis, as follows:-
WIP
Unimpaired $52,687 Impaired $203,212 Unrecoverable Not applicable Debtors
Unimpaired $196,237 Impaired $1,691,850 Unrecoverable Not applicable
The concern of the wife arises from the husband’s contention that before tax adjustment, $365,100 of WIP and $3,380,500 of debtors, are unrecoverable.
The parties were not able to agree a valuation of the husband’s interest in the company because of the uncertainty as to the recoverability of WIP and debtors. The husband decided to appoint Mr HH and Mr JJ trading as PP Company, as voluntary liquidators of the company on 5 August 2022. The wife was given notice of the proposed appointment of liquidators and it appears that although she conveyed her objection she did not take any formal application to prevent the appointment.
The appointment of liquidators was on a voluntary basis and there is no contention that the company was insolvent or ran the risk of insolvent trading.
The husband annexes the liquidators report to creditors dated 4 November 2022 to his affidavit filed 9 November 2022. At page 3 of the liquidators report to creditors, a broad summary of the assets and liabilities of the company as estimated by the husband in the Director’s 520 Form is as follows:-
Assets Amount Trade Debtors $210,000 Investments $890,000 Total $1,100,000
Liabilities Amount Unsecured creditors $600,000 Estimated costs of winding up $350,000 Total $950,000
At page 4 of the liquidators report to creditors, there are secured creditors as follows:-
Mr Q $890,000 QQ Pty Ltd $50,000
The secured creditors have indicated that they consider their liability to be satisfied from other security.
The Australian Taxation Office (“ATO”) is a statutory creditor of the company in the sum of $538,701.
What is immediately apparent, is that the figure of assets minus liabilities, is $150,000.
The wife contends that little or no effort has been undertaken by the liquidators, pursuant to their instruction from the husband, to actively pursue the significant level of WIP and debtors marked by the husband as “unrecoverable” and that the estimated costs of winding up the company are exorbitant.
The wife asserts that the husband was determined on liquidating the company in circumstances where she requested that the husband appoint an independent liquidator however, the husband determined to appoint the current liquidators trading under the business title of PP Company.
The wife considers that the liquidators are not independent and are accepting the husband’s instruction as to the recoverability of WIP and debtors without challenge.
The wife also has misgivings as to the lack of transparency in the company liquidation arising from correspondence forwarded to the liquidators by the wife on 26 September 2022, seeking clarification as to inconsistencies between the ASIC report and the report of Mr V. The request for information from the liquidators was opposed by the husband by letter from the husband’s business dated 27 September 2022, on a basis that the wife had no standing to make requests of the liquidator given that she was not an “actual, contingent, creditor of the company”.
The husband denies any assertion that the liquidators are acting other than independently and that given the proper appointment of liquidators, there is no utility in the appointment of a receiver.
The power to appoint a receiver arises from s 80(1)(k) of the Family Law Act 1975 (Cth) (“the Act”). The Court is able to make “whatever orders it regards as appropriate” (see RV Ross-Jones & Anor; Ex Parte Beaumont (1979) 141 CLR 504 at 509 per Gibbs J).
Section 80(1)(k) of the Act, together with the Rules, are silent as to the powers that may be exercised by a receiver however, the Court is able to give a receiver some, or all of the powers, as referred to in s 420 of the Corporations Act (2001) (Cth) (“the Corporations Act”).
Section 532(2) of the Corporations Act provides some assistance in identifying where a lack of independence might disqualify a person from being appointed as a liquidator.
Accordingly, “the guiding principle in the appointment by the court of a liquidator is that he or she must be independent and must be seen to be independent”.[1]
[1] Andrew R Keay, McPherson: The law of company liquidation (fourth edition 1999).
The test was further refined by Thomas J in Re Club Superstores Australia Pty Ltd (in liq) (1993) 10 ACSR 730 at 735, which required that before a liquidator could be removed or an appointment refused, there must be “some realistic prospect of embarrassment or a serious possibility of conflict”.
The wife asserts that the liquidators appointed by the husband are not impartial nor would they be able to act independently in circumstances where they have a close personal and business relationship with the husband.
As discussed, the wife considers that the estimate of fees and charges likely to be incurred by the liquidators in purpose of the liquidation, is excessive and without any justification.
As matters have now transpired, it has come to my attention that one of the nominated liquidators namely, Mr JJ, appeared before me in respect of his own family law matter, the outcome of which was the subject of a judgment.
As part of subsequent search of the matters filed in Court, it appears that the husband was involved in Mr JJ’s matter in his capacity as a trustee with judgment delivered in 2020.
I have determined that it would not be appropriate for me to further consider the application to appoint a receiver. If the liquidation of the company remains a significant area of contention between the parties, consideration will be given as to whether I should recuse myself.
Arrangements will be made for this aspect of the interim proceedings to be listed before another judicial officer for determination.
Spousal Maintenance
Arrears of spousal maintenance
By Order made 17 March 2021, the husband was ordered to pay $1,500 per week by way of spousal maintenance and child support. The order was complied with until approximately 11 December 2021.
The husband’s application is to have the spousal maintenance order discharged or varied.
It is not contentious that as at 11 November 2022, the husband is in arrears of spousal maintenance to the sum of $68,350. Whilst the husband seeks to discharge the order for spousal maintenance, he does not cavil with the arrears of spousal maintenance.
The wife’s Application in a Proceeding of 10 November 2022, seeks Orders that the husband transfer the property at B Street, D Town (“the D Town property”) or the property at H Street, Suburb J (“the Suburb J property”) to her parents in lieu of spousal maintenance.
The reason why the wife seeks for one or other of the properties to be transferred to her parents is not made clear.
In any event, the husband now concedes that the Suburb J property can be placed on the market for sale upon such terms and conditions as may be agreed but in default of agreement, as may be determined by the husband with the arrears of spousal maintenance being paid from the net proceeds of sale and the balance held on account of the parties pending further agreement or determination.
The proposal to sell the Suburb J property had previously been made by the husband however, the difficulty for the wife was that she wanted to have control of the sale and Mr Q (“Mr Q”) held security over the Suburb J property as part of security for monies provided by him.
The husband now relinquishes control of the sale of the Suburb J property, providing it is sold for fair value, and confirms that Mr Q now agrees in writing to withdraw his security over the property to enable it to be sold.
It is not in dispute that the husband has not complied with the Order for the payment of spousal maintenance nor the amount accrued as at 11 November 2022. Whilst there is not yet an order for settlement of property in place, by the wife receiving the first $68,350 of the net proceeds of the anticipated sale of the Suburb J property, she may well be contributing to her own spousal maintenance, whereas the obligation should remain squarely with the husband.
At this stage, the parlous financial position of the wife is acknowledged by the husband and how this payment will ultimately be adjusted is a matter for the final hearing.
I will fall in with the husband’s proposal that the wife have authority to conduct the sale of the Suburb J property.
It is likely that there will be surplus net proceeds of sale over and above that which is required to discharge the current arrears of spousal maintenance.
The husband is a professional and is able to utilise the resources of his business for his ongoing legal costs. The wife remains at a significant disadvantage in respect of proceedings that are complex and made more so by the involvement of the husband’s father as the second respondent. Until the property is sold, it is difficult to consider the extent of any net proceeds of sale but consideration will be given to an order in favour of the wife that might enable her to have legal representation.
Application to set aside or vary spousal maintenance order
By Amended Response filed 7 December 2021, the husband seeks to discharge or otherwise vary the Order for spousal maintenance made 17 March 2021. The wife resists the husband’s application.
The primary consideration for the husband was that the wife had secured part-time employment as a manager on a pro-rata annual salary of $45,000 resulting in a net weekly pay of about $750.
On 10 January 2022, the wife gave written notice of her resignation for the reasons as summarised at paragraphs 22 and 23 of her affidavit filed 28 January 2022.
The wife considered that she was best suited to the role of homemaker and her time was best utilised in looking after the children.
In determining the husband’s application to discharge or vary the order for spousal maintenance I found that the wife’s part N expenses were in the sum of $1,381 however, given that at that time the wife was not being charged rent, a recalculation of the fixed expenses including a notional sum for rent, totalled $2,279. I accepted the husband’s argument that the wife had demonstrated an ability for employment and I deducted the sum of $750 as the net amount that would be brought to account were the wife to have remained employed. I assessed the wife’s reasonable financial needs in the sum of $1,529 noting that $720 represented the expenses for the children.
The wife relies upon her Financial Statement filed 9 November 2022. At part D of the Financial Statement, the wife sets out that her income is solely derived from a government benefit pension or allowance, in the total sum of $680 per week.
The wife acknowledges that there is a current Child Support Assessment of $127.41 based upon the husband’s taxable income of $74,721. There is some contention between the parties as to whether the assessment was properly based on “shared care”. The husband intends to lodge an objection and seeks there be a reassessment of the husband’s child support obligations.
A consideration of part N of the Financial Statement, the wife sets out that her average weekly expenditure totals $1,346 comprising $651 for her and $695 for the children.
In addition, at Part G of the Financial Statement, the wife sets out that her fixed expenditure per week is $461.
The total of the wife’s expenses, including the children, is $1,807 less the child support paid by the husband in the sum of $127, leaving $1,680 as a balance of net expenses.
On an interim basis, it is difficult to consider the appropriateness of expenditure for a party or children. In the current circumstance, the only income received by the wife over and above the Child Support Assessment, is the sum of $680 by way of government paid pension, benefit or allowance.
It is obvious that a significant component of the wife’s expenditure is notional rather than actual expenditure. In that regard, I note that the wife pays rent to her parents in the sum of $250 per week which would not be in any way representative of the expenses likely to be incurred by her were she to seek rental accommodation in a level not dissimilar to that of the husband.
The wife emphasises in her affidavit filed 9 November 2022, that of relatively recent date, her health has suffered to the point where she would not be able to manage even part-time employment. She contends that she has developed depression, severe anxiety and panic attacks as confirmed in a medical certificate prepared by Dr RR, as a basis for a Centrelink payment.
Whilst I do not doubt the wife’s specific diagnosis of anxiety disorder and panic attack nor that it results in an inability to concentrate with a risk of panic attacks when under pressure, I do not consider that the medical report is sufficient to explain the current ability of the wife to find employment.
As discussed, the obligation is clearly upon the wife to establish that she is unable to support herself adequately having regard to the matters as set out in s 75(2) of the Act. I note the content of various health related documents concerning the wife’s relatively recent admission to hospital with an intermittent heart condition.
On balance, I do not consider that the wife’s circumstances have significantly altered from that which was under consideration as at the date of judgment on 22 March 2022, dismissing the husband’s application to discharge the order for spousal maintenance.
I remain satisfied that on the evidence as presented, the wife has a capacity for employment on a part-time basis and in the absence of any evidence to the contrary, I propose to bring to account a notional earning capacity of $750 per week.[2]
[2] Dunn & Dunn (No 3) [2022] FedCFamC1F 172 at [51]
I also note that in 2023, Y will have commenced kindergarten and the children will spend four nights a fortnight with the husband during school term, to be extended by an additional two nights in each fortnight during school holidays.
Accordingly, I assess the shortfall of the wife’s expenditure, (taking into account a notional income of $750 per week), in the sum of $930.
For the purposes of assessing the wife’s entitlement to spousal maintenance, I bring to account s 75(3) of the Act and disregard the wife’s entitlement to an income tested pension allowance or benefit.
Irrespective of any spousal maintenance entitlement that the Court considers is appropriate, the husband contends in his Financial Statement filed 9 November 2022, that his average weekly income of $2,140 is significantly exceeded by his total personal expenditure of $3,208.
The husband’s income is comprised of salary of $1,600 (or $83,200 per annum), a benefit from his employment as to the payment of vehicle expenses, petrol and maintenance of $280 and rental income of $260.
The husband has significant fixed expenses of $2,354 which includes mortgage payments for the D Town and Suburb J properties, his rent of $550, expenses for the purchase of a motor vehicle, property rates and child support.
At part N of the husband’s Financial Statement, his average weekly expenses appear relatively modest at $855 including a component for the children of $265.
The wife contends that the compromised financial position of the husband is not a true reflection of his current circumstance but rather a confected situation designed to thwart the wife’s proceedings for property settlement and spousal maintenance.
Mr V, in his valuation report, adopted a notional salary for the husband of $200,000 in determining the value of his interest in the company.
The total salary before tax as recorded in the husband’s Financial Statement of 9 November 2022, is $1,600 per week, a figure not dissimilar to his previous Financial Statement filed 11 February 2022.
The significant difference is that in addition to total salary, the husband received $2,631 by way of benefits from his business. That component appears to be significantly reduced to $280 per week which appears to relate to the payment of the motor vehicle expenses including petrol.
The current circumstances of the husband has been made more opaque by his decision to liquidate the company and set up a new entity namely, the SS Trust trading as Dunn & The Dunn Family Trust. The new business apparently employs the same people employed by the company in liquidation and as might be expected, significant costs have been incurred in setting up the new business. It must be remembered that the company is in voluntary liquidation and is neither insolvent nor was it considered to be trading insolvent.
It is also notable that the expenses in respect of the D Town property significantly exceed the rental income.
On an interim basis, it is difficult to unravel the husband’s current financial circumstances. The relationship that he has with his father as second respondent and Mr Q, who the husband describes as a “pawn broker” and has provided significant sums owing to the first and second respondent, is far from clear.
Accordingly, I consider that the wife has established an entitlement as to $930 per week and that the husband has a capacity to meet that sum. However, given the way that the husband has arranged his affairs, it is unlikely that he would be able to make payment of the sum as ordered. Accordingly, I propose to order a spousal maintenance entitlement to the wife in the sum of $930 per week for a period of twelve months which sum is to be satisfied from the balance of the net proceeds of sale of the Suburb J property following the discharge of the arrears of spousal maintenance.
I make orders as appear at the commencement of these reasons.
I certify that the preceding eighty-eight (88) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Berman. Associate:
Dated: 28 November 2022
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