Dyne & Dyne (No 2)

[2022] FedCFamC1F 568

Federal Circuit and Family Court of Australia

(DIVISION 1)

Dyne & Dyne (No 2) [2022] FedCFamC1F 568

File number(s):	SYC 5928 of 2020
Judgment of:	ALTOBELLI J
Date of judgment:	25 July 2022
Catchwords:	FAMILY LAW – PROPERTY – Interim – Where husband owns all shares in a company – Where wife alleges the company is insolvent – Whether accountant of the company should be paid from the sale proceeds of the former matrimonial home – Appointment of administrator.
Legislation:	Family Law Act 1975 (Cth) ss 79, 80, 106A, 114
Division:	Division 1 First Instance
Number of paragraphs:	17
Date of hearing:	25 July 2022
Place:	Sydney (via videoconference)
Counsel for the Applicant:	Mr Batey
Solicitor for the Applicant:	Parks Family Law
Counsel for the Respondent:	Mr Cahill
Solicitor for the Respondent:	Genuine Legal
Solicitor for the Independent Children's Lawyer:	Excused from attendance

ORDERS

SYC 5928 of 2020
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN:	MS DYNE Applicant
AND:	MR DYNE Respondent
INDEPENDENT CHILDREN'S LAWYER

order made by:	ALTOBELLI J
DATE OF ORDER:	25 JULY 2022

THE COURT ORDERS THAT:

1.The Respondent husband’s (“husband”) oral application for an adjournment is dismissed.

2.The parenting aspect of these proceedings is placed in the docket of the Honourable Justice Altobelli.

3.The parenting proceedings be provided with an expedited final hearing date.

4.The parenting aspect of these proceedings is listed for final hearing on 6 March 2023 at 10am, with an estimated hearing time of three days.

5.The parenting aspect of these proceedings is listed for mention on 29 September 2022 at 9am to further consider the expert evidence in this case with the benefit of participation by the Independent Children’s Lawyer, and to make trial directions in relation to the parenting case.

6.The solicitor for the Applicant wife (“wife”) is directed to notify the Independent Children’s Lawyer of the orders made today.

7.The wife’s costs in relation to this application are reserved.

8.The husband, in his role as sole director and shareholder of B Pty Ltd, shall, forthwith pursuant to section 80(k) of the Family Law Act 1975 (Cth) do all such things, make all such resolutions and sign all such documents as may be necessary to appoint an administrator of B Pty Ltd.

9.For the purpose of the previous order, the company administrator shall be as agreed between the parties and failing agreement the company administrator shall be as agreed between the parties and failing agreement within 14 days of the making of this order the Court shall appoint jointly and severally Mr C and Mr E of Firm F.

10.Within seven working days of the making of this order the parties shall jointly instruct the administrator to commence the administration of B Pty Ltd.

11.For the purpose of the administration, the husband  shall:

(a)Provide to the administrator all documents, information and information as the administrator may require from time to time;

(b)Do all acts and things and sign all documents required at law to complete the administration of B Pty Ltd;

(c)Sign all authorities necessary to permit the administrator to copy in the wife to any written communications to the husband including but not limited to any requests for information or updates.

12.Within six weeks after the making of this order the administrator shall advise both parties as to the determination of the company creditors whether B Pty Ltd shall be liquidated or enter into a Deed of Company Arrangement.

13.In the event that creditors instruct the administrator to liquidate B Pty Ltd then:

(a)The administrator appointed in accordance with these orders shall be appointed liquidator; and

(b)The husband shall do all acts and things and sign all documents required at law to complete the winding up of B Pty Ltd; and

(c)The husband shall instruct the liquidator, to distribute to the husband as the sole shareholder of B Pty Ltd (simultaneously with the cancellation of the Husband’s share in B Pty Ltd) all remaining net assets (after payment to third party creditors and liquidator’s costs) of B Pty Ltd, including but not limited to cash at bank derived from the sale of any company assets, and for such payment to be held in the G Trust account pending final settlement.

14.The following orders that provide for the valuation of B Pty Ltd be discharged:

(a)Order 7 of Orders dated 18 November 2020;

(b)Order 3, 6, and 7 of Orders dated 26 May 2021.

15.The husband shall do all such things and sign all such documents to cause the income of B Pty Ltd to be applied only as follows to pay the husband the sum of $2,895.00 per week.

16.Save as provided for in Order 15 herein the husband be restrained from drawing on his loan accounts with B Pty Ltd.

17.That except as provided for in Order 15 herein the husband shall be restrained from making any payments to any D bank credit card except with the written consent of the wife.

18.In the event that either party fails, refuses or neglects to execute any deed, document or instrument necessary to give effect to these orders, then pursuant to s 106A, a registrar of the Federal Circuit and Family Court of Australia is hereby appointed to execute all deeds, documents and instruments in the name of the defaulting party and to do all such acts and things necessary to give validity and operation to such deeds, documents and instruments.

THE COURT NOTES THAT:

A.The property aspect of these proceedings will continue to be managed by the docket registrar.

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 Dyne & Dyne has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

EX TEMPORE REASONS FOR JUDGMENT

ALTOBELLI J:

1. In this matter, I provide the following ex tempore reasons for judgment.  The matter comes before me this morning for interim hearing. I am satisfied that the issues raised are urgent and that a decision needs to be made today.  The chronology which comprised part of Ms Dyne’s (“the wife”) case outline filed 22 July 2022 is a useful overview of a matter that has been litigated for two years, and is reproduced in Schedule A to these reasons for judgment, noting of course, the inherent limitation in that some of the more contentious facts asserted in the chronology are based on the wife’s material only.

2. The orders sought by the wife are set out in her Third Amended Application in a Proceeding filed 12 July 2022 (“application”).  Her application is supported by her affidavit filed 12 July 2022 and the affidavit of a Mr C filed 18 July 2022.  Mr C is a registered liquidator.  The orders sought by Mr Dyne (“the husband”) are contained in his Amended Response to a Second Amended Application in a Proceeding filed 6 May 2022 (“amended response”).  In addition, the minute of orders proposed by the husband is set out in his case outline filed 21 July 2022.  The husband’s evidence is his affidavit filed 13 July 2022.  I have had regard to all of those documents, as well as the specific documents that counsel referred me to during submissions, mostly from the wife’s tender bundle.

3. The effect of the orders sought by the wife are as follows. She seeks appointment of an administrator to a company, the sole shareholder and director of which is the husband.  The company was owned and operated by the husband throughout the marriage, and it was the vehicle by which the financial needs of this family have been met, at least until the date of separation.  The wife proposes that the company administrator would be the person agreed to between the husband and the wife, but failing agreement within 14 days of the making of this order, it would be Mr C and in effect, his partner, Mr E.

4. The parties were jointly instructed to commence the administration of the company.  To this end, the husband would provide to the administrator all relevant documents and sign all authorities necessary, to ensure that the wife is kept advised of the progress in relation to the administration.  The purpose of the administration is revealed in the order that requires the administrator to advise both parties within six weeks of making the order as to the determination of the company’s creditors, whether the company should be liquidated, or entered into a deed of company arrangement, or indeed, there could be other possibilities.  In the event of the creditors instructing the administrator to liquidate, then the administrators would become liquidators, and the husband would be required to do all things necessary to wind up the company.  Any remaining net assets after payment to third party creditors and the liquidators’ costs would be paid to and held by the wife’s solicitors in their trust account, pending final settlement and presumably, some form of court order.

5. The wife seeks an order discharging previously made orders to have the company valued.  She also seeks an order the effect of which would be to limit the husband’s drawings and/or income from the company to a certain amount, and restrain him from drawing on his loan accounts with the company.  The wife seeks an order that would restrain the husband from making any payments to any D bank credit card, except with her written consent.

6. She also seeks an order that the parenting proceedings be expedited.  The husband consents to this, and in fact, the Court will make an order to that effect.

7. By contrast, and subject to some confusion caused by inconsistencies between the orders sought by the husband in his case outline and amended response, the husband seeks orders requiring the parties to pay the invoices of the company’s accountant from the sale proceeds of the former matrimonial home, which sale proceeds are currently held in trust for the parties.  Thereafter, the accountant would finalise the company’s financial statement so that the jointly appointed expert could complete evaluation of the company.  Whilst it is not entirely clear, Order 5 of the orders sought in the amended response seems to seek a distribution of $100,000 to the husband from the trust account by way of partial property settlement. Counsel confirmed that this was, in fact, for the purposes of paying the accountant.  The husband also sought contingent orders in relation to appointing another accountant if the present one could not complete the task, and he also seeks orders in relation to disclosure—that is, disclosure by the wife.

8. There was no suggestion from either party that the Court did not have the power to make any of the orders sought, or that there was insufficient evidence before the Court that would prevent it from exercising such powers, including any discretion. Indeed, the Court is satisfied that it has powers under ss 79, 80 and 114 of the Family Law Act 1975 (Cth) (“the Act”) to make the orders proposed. These are interim proceedings, and one can only form an impression of the financial circumstances of the parties, and in particular, that of the company. It is the latter which seems to be the main issue before the Court.

9. The clearest picture of the recent financial circumstances of the company is found in the wife’s tender bundle, especially correspondence dated 15 July 2022 from the company accountants to the wife’s lawyers, in effect, producing documents on subpoena (marked as exhibit A2).  The documents produced include the draft profit and loss account and balance sheet of the company for the period from 30 June 2018 to 30 June 2022.  In short, the wife contends that these documents illustrate quite clearly that the company is insolvent, and thus, it could not possibly be just and equitable to her to apply the parties’ joint funds to pay for the accountant in relation to tax returns, and ultimately, the evaluation of the company when the company is manifestly insolvent.

10. Counsel for the husband, who valiantly argued the husband’s case with such limited evidence as he had, had to concede (and quite properly) that the financial statements present a dismal picture of the company’s finances.  With respect to counsel, that is an understatement.  On any objective assessment of the draft documents produced by the company accountant, the company is insolvent.  The liabilities grossly exceed income.  The fact that the accountant’s fees cannot be paid through the company is the simplest but clearest example of the inability of the company to pay its debts as and when they fall due.  The situation is even more alarming from the wife’s perspective, because the same documents illustrate massive drawings by the husband, a significant PAYG tax liability and superannuation liability, and possibly unpaid GST as well.

11. Doing the best I could, I could not ascertain whether there were any assets in liquid form that could meet these liabilities.  Notwithstanding what I believe the financial documents clearly indicate, the husband insists that the business is profitable and can be made profitable as time goes by.  The futility of using personal funds to pay a company debt in these circumstances is self-evident from the wife’s perspective.  The very significant drawings by the husband at least create a doubt about his implied contention that he cannot pay the accountant’s fees himself.  The wife’s strategy of seeking to minimise the personal liabilities that might arise from the operation of the company (such as the unpaid tax and superannuation and presumably any debt that the husband has himself guaranteed) is understandable because of the impact that the same will have on the property settlement.

12. In some respects, the Court acknowledges that not paying the accountant to do the tax returns is self-defeating because it will need to be done, probably as part of the administration and possibly even liquidation of the company. However, from the wife’s perspective, company funds should be used for this and not joint funds.  The Court accepts that there are joint funds available that could be used for the purpose of paying the accountant, but in the circumstances arising out of the impression formed from the most recent financial statements, the Court cannot discern why, at this stage, joint assets should be made to bear a further company expense.

13. It is curious, indeed, that the husband would seek to attribute to the wife some responsibility for the parlous financial position of a company that he himself has managed at all relevant times.  For example, he points to salaries paid to the wife and indeed, to her father up until 2020, as well as the wife’s loan accounts in the company until 2020 as contributing to the financial difficulties of the company, and indeed, there may well be some historical basis for such contention, but the amounts in question are minuscule compared to his own drawings from the company.  The inevitable impression is that this company is insolvent, and that the wife is entitled to take steps that would mitigate the impact on the joint balance sheet of a company that is insolvent.  The Court can see no reason why her funds, that is to say, the joint funds, should be used to pay the accounting fees of the company.  There is no longer any utility in engaging a single joint expert to value the company, at least until such time as the administrator decides what to do with the same.

14. To the extent that the public interest is relevant, the appointment of an administrator is in the public interest as well as in the wife’s interest.  Once an order appointing an administrator is made, the question of the husband’s drawings becomes irrelevant.  It will be a law other than family law that governs this question.  Until then, however, the Court is satisfied that a ceiling does need to be placed on the husband’s income that he receives from the company, whether that is by way of salary or drawings, or by way of the loan account.  The wife also gives evidence that justifies the making of an order in relation to the husband’s D bank credit account.  The Court accepts the wife’s case and the submissions made by her counsel in the case outline and orally.  The Court also accepts that there is a basis for scepticism about the husband’s disclosure, and particularly in relation to the delay in producing the tax returns and the seemingly constantly changing story about why the tax returns have not been produced so far.

15. Turning to the orders to be made, with a focus on those set out in the wife’s case outline, I see no need at this stage to make an order for costs, but I certainly reserve the wife’s costs of the present application.  Orders 2–3 will be made in accordance with the orders set out in the case outline.  The evidence of Mr C satisfies the Court that he would be an appropriate administrator and liquidator of the company.  Orders 4–12 will also be made.

16. An order will also be made under s 106A of the Act in case it becomes necessary for a registrar to intervene, in the event of the husband’s failure to comply with an order made by this Court. The husband seeks orders in relation to the wife’s disclosure. I am not satisfied from the evidence that the husband has actually established a need for this to take place. I will take the parenting aspect of the case into my docket and set it down for hearing. I do so after reading, albeit not comprehensively, the report of Dr H dated 31 March 2022. The financial part of the case will no doubt be delayed by administration and possible liquidation, and thus, will continue to be case managed by a registrar.

17. I am going to set the parenting proceedings down for hearing on 6 March 2023 before myself.

I certify that the preceding seventeen (17) numbered paragraphs are a true copy of the ex tempore Reasons for Judgment of the Honourable Justice Altobelli delivered on 25 July 2022.

Associate:

Dated:       25 July 2022

Schedule A

DATE	EVENT	REF
1977	Respondent Husband is born. Now aged 45.
1978	Applicant Wife is born. Now aged 43.
2004	Parties marry.	GS[3]
Throughout the marriage	The husband owns and operates a company called B Pty Ltd as sole shareholder and sole director. Family financial needs are entirely met from the husband’s earnings from B Pty Ltd	GS[6]-[7]
2009	First child of the marriage, Child W is born. Now aged 12. The wife becomes primary carer for the children and works only for limited periods as a casual school teacher in between periods of maternity leave.	GS[4] GS[5]
2011	Second child of the marriage, Child X is born. Now aged 11.	GS[4]
2014	Third child of the marriage, Child Y is born. Now aged 7.	GS[4]
2016	Fourth child of the marriage, Child Z is born. Now aged 5.	GS[4]
April 2020	Parties separate.	GS[3]
1 July 2020	Parties attend mediation, where a parenting plan is signed that provides for the four children to live with the wife and spend five nights per fortnight with the husband.	GS[8]
18 November 2020	Orders are made by consent for the Husband to complete all outstanding tax returns and financials for the financial years up to June 2020 for B Pty Ltd by no later than 18 December 2020.	GS[11]
December 2020	The husband informs the court that neither he nor B Pty Ltd had completed tax returns since 2015, and therefore did not comply with the Orders made 18 November 2020.	GS[11]
22 December 2020	Following the wife making a Child Support Application following separation, the wife is advised by the Child Support Agency that, with the husband not having completed his tax returns since 2015, the husband’s provisional income as determined to be $51,151 per annum. Resultingly, the husband is assessed as paying child support of $99.27 weekly, despite disclosure having been provided to the wife identifying the husband was drawing a monthly income from B Pty Ltd Westpac Account $...64 of $101,142.72 per annum.	GS[12]
30 December 2020	The wife receives correspondence from Services Australia advising that the husband disputed his 2020 estimated income for the 2020FY and instead sought that it be $24,000, being $1,575 under the self-support amount. Resultingly, the husband does not pay child support.	GS[12], “GS-2”
18 February 2021	The husband’s finance professional, Mr J, advises that he has the data to complete the outstanding Business Activity Statements, Income Tax Returns and Financial Statements for B Pty Ltd for between April 2015 and January 2021, with said documents to be (expected to be) completed by 16 April 2021.	GS[16], “GS-3”
19 February 2021	At a Court mention, the wife seeks that the proceedings be adjourned to allow the husband’s finance professional more time to complete the returns.	GS[17]
26 May 2021	The matter comes before the Court, at which time the B Pty Ltd tax returns were still yet to be completed. Orders are made for: the husband to complete the 2018-2020 tax returns by no later than 8 June 2021 and the 2021 returns by no later than 15 July 2021; and the husband to swear an affidavit particularising what funds he was drawing from B Pty Ltd by way of income, personal drawings, directors loans, expenses or personal credit card payments. The wife to be at liberty to instruct Mr K to complete the valuations of the husband’s companies on the basis of the husband’s accounting records.	GS[19]- [20], [22]
FY 2020/2021	Disclosure reveals that B Pty Ltd has receipted into Westpac Account …64 an income of $2,089,708.30. Dislocure reveals that B Pty Ltd has receipted into Westpac Account …80 an income of $3,053,445.74.	GS[55]-[6], “GS-17”, “GS-18”
31 August 2021	The wife files a Notice to Admit seeking inter alia that the husband admit: That post separation he had drawn $101,142.72 per annum from his company bank accounts and that such payments are described as ‘Pymt Mr Dyne R; and That despite drawing $101,142.72 per annum net from his company bank accounts, he advised the CSA that his income was $24,000 per annum.	GS[29]
14 September 2021	In a Notice Dispute a Fact, the husband agrees with both propositions in the Notice to Admit Facts filed 31 August 2021 but does not amend his estimated income with the CSA.	GS[29]
17 September 2021	The husband does not return the two older children to the wife’s care. The wife files an interim parenting application seeking their return.	GS[30]
Early October 2021	Following numerous submissions from the wife to the CSA, Services Australia assesses the husband’s income to be $236,943 per annum.	GS[31]
7 October 2021	The husband draws a lump sum of $10,000 by way of “personal loan” from the B Pty Ltd company accounts.	GS[62]
14 October 2021	Interim parenting orders are made for the younger two children to remain in the wife’s care and spend five nights per fortnight with the husband, and for the older two children to live with the husband and spend five nights per fortnight with the wife.	GS[33], “GS-8”
26 October 2021	The husband’s lawyers advise the court that the Tax Returns for 2018-2021 would be completed within two weeks.	GS[34]
10 November 2021	The wife causes correspondence to the husband’s solicitors seeking the tax returns to be provided.	GS[35]
22 November 2021	The wife again causes correspondence to the husband’s solicitors seeking the tax returns to be provided.	GS[36]
29 November 2021	The wife receives an email from School M, being the school that each children have attended since Kindergarten, advising that the husband had failed to pay any school fees (totalling $12,621.60) despite letters of demand and follow up calls to him from the school, and not having disclosing the liability to the wife neither personally nor in these proceedings.	GS[37] “GS-11”
December 2021	The husband unilaterally enrols Child W in School N and changes Child X’s school to the local state school.	GS[38]
9 December 2021	Orders are made inter alia for the husband by no later than 10 January 2022 to provide Xero Management accounts for 2019, 2020 and 2021 long with various bank statements.	GS[39]
15 December 2021	The husband files a Financial Statement. The wife seeks further financial disclosure regarding the husband’s income and spending.	GS[41], “GS-12”
28 January 2022	The wife causes correspondence to the husband’s solicitor again requesting the accounting records, following his failure to provide same pursuant to Orders made 9 December 2021.	GS[44]
7 March 2022	The wife files an interim application seeking that a neutral accountant be appointed to prepare the returns in the absence of the husband’s ability or willingness to do so.	GS[44]
11 March 2022	The wife receives correspondence from the husband’s lawyers advising that Mr J had completed the tax returns and that he would release them upon the payment of outstanding fees, being approximately $65,000. The husband sought that the fees be paid from joint funds and the wife that the fees be paid as partial property settlement.	GS[45]
7 April 2022	The single expert report of Dr H regarding parenting matters is released.
6 May 2022	The husband draws a lump sum of $10,000 by way of “personal loan” from the B Pty Ltd company accounts.	GS[62]
FY 2021/2022	Disclosure reveals that B Pty Ltd has receipted into Westpac Account …64 an income of $2,268,476.93. Disclosure reveals that B Pty Ltd has receipted into Westpac Account …80 an income of $3,007,555.81.	GS[55]-[6], “GS-17”, “GS-18”
2022	Bank statements provided by the husband suggest that the husband drew: $101,142.72 by way of monthly payments; $20,000 by way of personal loans; and 205,300 by way of payments to Mr Dyne’s personal D bank accounts.	GS[67]
12 July 2022	The wife files a Third Amended Application in a Proceeding.
25 July 2022	Matter is listed for Interim Hearing.