Easom and Burhan
[2019] FamCA 861
•25 November 2019
FAMILY COURT OF AUSTRALIA
| EASOM & BURHAN | [2019] FamCA 861 |
| FAMILY LAW – PROPERTY SETTLEMENT – Interim – significant amounts involved – dispute about whether husband or his sister was properly entitled to $11m – husband having access to a loan facility of up to $3m – that source of funds was well capable of meeting the wife’s claim to spousal maintenance and interim property orders – wife’s applications granted. |
| Child Support (Assessment) Act 1989 (Cth), pt 7 div 5 Family Law Rules 2004 (Cth), ch 13 |
| Bing & Bing [2007] FamCA 418 Hall v Hall (2016) 257 CLR 490 L’Estrange v F Graucob Ltd [1934] 2 KB 394 Zschokke & Zschokke (1996) 20 Fam LR 766 |
| APPLICANT: | Ms Easom |
| FIRST RESPONDENT: | Mr Burhan |
| PROSPECTIVE SECOND RESPONDENT: | Ms Burhan |
| PROSPECTIVE THIRD RESPONDENT: | C Pty Ltd |
| PROSPECTIVE FOURTH RESPONDENT: | C Family Trust |
| PROSPECTIVE FIFTH RESPONDENT: | C2 Pty Ltd |
| PROSPECTIVE SIXTH RESPONDENT: | C2 Unit Trust |
| FILE NUMBER: | MLC | 11409 | of | 2018 |
| DATE DELIVERED: | 25 November 2019 |
| PLACE DELIVERED: | Melbourne |
| PLACE HEARD: | Melbourne |
| JUDGMENT OF: | Wilson J |
| HEARING DATE: | 12, 18 November 2019 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr G Dickson of One of Her Majesty's Counsel |
| SOLICITOR FOR THE APPLICANT: | DSA Law |
| COUNSEL FOR THE FIRST RESPONDENT: | Mr M Wilson |
| SOLICITOR FOR THE FIRST RESPONDENT: | Lander & Rogers |
| COUNSEL FOR THE PROSPECTIVE SECOND RESPONDENT: | Not applicable |
| SOLICITOR FOR THE PROSPECTIVE SECOND RESPONDENT: | Pigdon Norgate Family Lawyers |
| COUNSEL FOR THE PROSPECTIVE THIRD RESPONDENT: | Not applicable |
| SOLICITOR FOR THE PROSPECTIVE THIRD RESPONDENT: | Pigdon Norgate Family Lawyers |
| COUNSEL FOR THE PROSPECTIVE FOURTH RESPONDENT: | Not applicable |
| SOLICITOR FOR THE PROSPECTIVE FOURTH RESPONDENT: | Pigdon Norgate Family Lawyers |
| COUNSEL FOR THE PROSPECTIVE FIFTH RESPONDENT: | Not applicable |
| SOLICITOR FOR THE PROSPECTIVE FIFTH RESPONDENT: | Pigdon Norgate Family Lawyers |
| COUNSEL FOR THE PROSPECTIVE SIXTH RESPONDENT: | Not applicable |
| SOLICITOR FOR THE PROSPECTIVE SIXTH RESPONDENT: | Pigdon Norgate Family Lawyers |
Orders
The husband pay to the wife by way of lump sum spousal maintenance in the sum of $50 000.
Pursuant to Part 7 Division 5 of the Child Support (Assessment) Act1989 (Cth) the applicant husband is responsible for and pay all of the private school fees and associated educational expenses for the children of the marriage namely X born in 2003, Y born in 2005 and Z born in 2011, and such payments not be credited against any administrative assessment of child support in force from time to time.
The husband continue to meet all mortgage repayments, rates, taxes and body corporate fees (if applicable) on the properties situated at:
(a)D Street Suburb E (“The Suburb E Property”);
(b)F Street, Suburb G, with the associated two car parks (“the Suburb G Property”); and
(c)M Street, Town N (“the Town N Property”)
(Jointly referred to as “the properties”).
The husband forthwith return to the wife her Motor Vehicle O, fully repaired and contemporaneously the wife shall return the Motor Vehicle P to the husband.
The husband reimburse the wife the sum of $20 000 for the balloon payment recently paid by the wife.
The husband pay by way of litigation funding the sum of $100 000 to the trust account of the solicitors for the wife, such funds to be utilised by the said solicitors to meet the wife’s legal and accounting costs of these proceedings.
The husband’s interim application is otherwise dismissed.
I refer the proceeding to the Senior Registrar for directions so as to expeditiously progress the proceeding to trial.
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 Easom & Burhan 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 MELBOURNE |
FILE NUMBER: MLC 11409 of 2018
| Ms Easom |
Applicant
And
| Mr Burhan |
First Respondent
And
| Ms Burhan |
Prospective Second Respondent
And
| C Pty Ltd |
Prospective Third Respondent
And
| C Family Trust |
Prospective Fourth Respondent
And
| C2 Pty Ltd |
Prospective Fifth Respondent
And
| C2 Unit Trust |
Prospective Sixth Respondent
REASONS FOR JUDGMENT
Introduction
When this proceeding was commenced in the Federal Circuit Court of Australia (“FCCA”), the applicant sought orders for the division of property in her favour as to 80%. Parenting issues remain ongoing. On 12 and 18 November 2019 the wife’s application for interim property orders was heard before me in the judicial duty list subsequent to this proceeding having been transferred to this court by order of a judge of the FCCA made on 19 June 2019.
The wife sought an interim property order and other orders.
The husband opposed the making of the interim property orders on a variety of bases. Those included the following –
a)one of the properties should be sold thereby providing cash for both parties; and
b)discovery was defective making it impossible to assess need.
Synopsis
For the reasons that follow, I make orders in terms of the wife’s minute emailed to my chambers on 18 November 2019.
Short factual narration
The applicant is 44 years of age. She works in health care. The respondent is 50 years of age. He is a health care worker. The applicant and respondent commenced to live together in 1999, they married in 2003 and separated in April 2018. They have three children, two of whom are teenagers.
The property that falls to be divided in this litigation is valuable. It is made up of the following –
a)F Street Suburb G together with two car parking spaces at F Street Suburb G estimated by the wife to be valued at approximately $900 000 encumbered by a mortgage in the sum of about $680 000;
b)the land and dwelling at M Street, Town N, the estimated sale value being $4m, encumbered by a mortgage of approximately $960 150; and
c)the property at D Street Suburb E, the estimated value of which is $3m, encumbered by a mortgage of approximately $580 000.
The Suburb G property is an investment property that the wife said was registered in the husband’s name. The Town N property is in the husband’s name, used by both on weekends. The Suburb E property is registered as to an interest of 60 % in the wife’s name and as to an interest of 40% in the husband’s name.
The wife swore an affidavit to commence this proceeding on 24 September 2018 in which she deposed to having cash in four accounts, then aggregating $31 000. She also deposed to her ownership of a motor vehicle that the husband drove and another vehicle in the husband’s possession. She said the husband was the owner of a motor vehicle that she drove. She deposed to the husband owning certain small amounts of cryptocurrency and her superannuation of $60 000. She said she was aware of the husband alleging that he was liable to tax for $1.2m although she said she had seen no evidence of that indebtedness.
The husband swore an affidavit on 11 March 2019. Relevantly paraphrased, the following matters were raised in his affidavit –
a)the couple’s eldest son attends H School, the middle son attends J School and the youngest son attends Q Primary School;
b)since April 2018, during the school term the children live with the father from Thursday until Sunday evening and with the mother at all other times;
c)he owned three of five shares in the Suburb G property and the wife owned two of five shares in that property;
d)he vacated the Suburb E property and now lives in rented accommodation in Suburb R;
e)he seeks an interim order for sole use and occupation of the Town N property (although that order was not among the orders sought in the husband’s proposed minute emailed to chambers on 18 November 2019) ;
f)he established three businesses, each called S Pty Ltd in 2001;
g)in 2010 an entity known as K Pty Ltd acquired the S Pty Ltd businesses for $5.4m (he gave very imprecise details of the way the purchase price of $5.4m was disbursed);
h)subsequent to K Pty Ltd acquiring the S Pty Ltd business, the husband was retained (although he did not say whether by contract of employment, consultancy or otherwise) to work as what he called “health care work” for a 5 year minimum term;
i)K Pty Ltd required the husband to manage a business in T Street in addition to the S Pty Ltd businesses;
j)in mid-2010 he and others decided to acquire the fit-out of premises at U Street, Suburb V for $175 000;
k)C2 Pty Ltd, the trustee of the C2 Unit Trust acquired the fit-out;
l)The husband’s sister Ms Burhan has the sole interest in and control of the C Family Trust;
m)in mid-2010 when the fit-out was acquired C Family Trust was the sole unit holder in the C2 Unit Trust;
n)two key colleagues of the husband eventually acquired a 20% holding each in the units in the C2 Unit Trust;
o)in 2013 K Pty Ltd acquired K Pty Ltd;
p)the husband brokered a deal for K Pty Ltd to acquire the business conducted by, through or on behalf of the trustee of the C2 Unit Trust, in consequence of which K Pty Ltd became entitled to receive the profits of the Suburb V business;
q)in 2014 the two unit holders in C2 Unit Trust whose interests aggregated 40% sold their unit holdings leaving the holder of the units in C Family Trust as the sole unit holder in C2 Unit Trust;
r)the ATO audited the husband (or entities owned and controlled by him) and the ATO now contends that the husband is to be assessed for taxation liability on the sum of $11 429 480 for the financial year ended on 30 June 2017;
s)the husband fears he will or might be liable to pay the ATO $5.77m;
t)the husband has objected to his tax liability but his objection is on hold;
u)in June 2017 K Pty Ltd paid the husband or entities associated with him $1 242 948 plus $1 015 390 as one-off payments;
v)he has not lodged his 2017 tax return;
w)he made a voluntary payment to the ATO of $1 164 000, derived from funds he borrowed from his sister;
x)he is eligible to earn a bonus;
y)he wants to sell the Suburb G property; and
z)he takes the view that the Suburb G property must be sold.
When this proceeding was first before me on 12 November 2019, Mr Mark Wilson of counsel for the husband sought an adjournment by reason of the late provision of discovery. On behalf of the wife, Mr Dickson QC said that the respondent had been less than diligent in meeting his disclosure obligations. On behalf of the wife, a folder of documents containing mainly bank statements was provided to Mr Wilson in court. He said that in order to properly prepare to respond to the wife’s application for interim property orders Mr Wilson needed the documents identified in paragraph 14 of the husband’s affidavit sworn 6 November 2019. It is utile to reproduce those four categories of documents –
1.“individual tax returns for your client for the previous three financial years;
2.in relation to your client's business known as L Pty Ltd:
a.bank statements held in the business’s name or into which income generated by the business is deposited for the previous 24 months;
b.schedule or calendar of all appointments made by clients of the business; and
c.any lease or licence agreements for the letting or subletting of the business’s place of business, as well as any documents evidencing any income received by the business from such letting or subletting;
3.invoices or documents substantiating the expenditure on medical services referred to in Part N of your client’s financial statement sworn 22 October 2019 within the past 12 months; and
4.updated bank and credit card statements for any account in your client’s sole name, or joint names with any other person (other than our client), or in the name of a business controlled by her, noting that we have previously received the bank statements listed in the enclosed schedule”.
I granted Mr Wilson until 3pm on 12 November 2019 for him to examine the folder of documents to ascertain whether the documents so provided satisfied his client’s request identified in paragraph 14 of his 6 November 2019 affidavit. At 3pm Mr Dickson QC told me that certain discovery issues had been agreed. I made interim consent orders as follows –
1.By 4pm on 13 November 2019 the wife provide to the husband’s solicitors such of the documents in Schedule A as are within her possession, power and control.
2.By 4pm on 13 November 2019 the husband provide to the wife’s solicitors such of the following documents as are within his possession, power and control –
a.all documents as to the application of the $2 300 000 received by him in June 2017 (and referred to in paragraph 27 of his affidavit of 14 March 2019); and
b.all documents (including any emails) in relation to the profit share and bonus payable to him/his entities for the financial year ending 2018 and 2019.
3.The husband is at liberty to file and serve a future affidavit by 4pm on 14 November 2019 (including identifying any alternate sources of funds).
4.The proceeding is adjourned part heard to 18 November 2019 at 11am.
During the hearing before me on 12 November 2019 the husband’s sister was represented by Mr Buckley, a solicitor. Mr Buckley’s role in the case was curious because no order had been made granting the husband’s sister leave to intervene nor had she been joined as a party. Yet neither Mr Dickson nor Mr Wilson submitted that Mr Buckley lacked standing in order to address me. Mr Buckley informed me that his client sought a copy of the court documents filed in this proceeding. Mr Dickson, Mr Wilson and Mr Buckley reached an accommodation on that issue that did not involve any determination by me and in response to Mr Buckley’s request, he was excused from further participation in the hearing of the wife’s application for interim property orders.
By 3pm on 12 November 2019 it was readily apparent that the unexpired balance of the court day would elapse without completing the application then underway. With the agreement of Mr Dickson and Mr Wilson, Mr Dickson developed his application and Mr Wilson had the balance of that day plus the time between the resumption of the application on 18 November 2019 to overcome complications that he said were associated with discovery issues.
Before addressing the competing contentions in the application for interim property orders, it is necessary to say a little about the hearing on 8 October 2019 before the Senior Registrar as the narration that follows addresses, at least in a preliminary way, some of the debate about the sum of $11m.
The involvement of K Pty Ltd
On 12 December 2018, the wife issued a subpoena directed to K Pty Ltd. The proceeding was then in the FCCA. Relevantly recited, the subpoena was in the following terms –
Books, documents and things you must produce from your possession, custody or control
1.a copy of this subpoena
2.Copies of all documents and things relating the husband, Mr Burhan and any corporate or trust entities in which he is an office bearer, shareholder, or appointor including but not restricted to:
a.All employment contracts for the past five years.
b.All contracts for the sale, lease, acquisition of any business or company interest involving the husband
3.Electronic Summaries of all payments made to the Husband or on his behalf for the past 3 years.
Note: You may, with the consent of the issuing party, produce a copy, instead of the original of a document
Notice of that subpoena came to the attention of the husband and his sister. Each objected to the production of the documents sought in the subpoena. It is useful to record the grounds each advanced for objecting. The husband’s sister was represented by solicitors who filed the relevant notice of objection on her behalf. Eight grounds of opposition were advanced. Reproduced verbatim they were as follows –
1.There has not been service of the subpoena on C2 Pty Ltd as Trustee for the C2 Unit Trust as an interested third party and (that represents) a failure of the Wife to comply with Rule 15.A.06(2) of the Federal Circuit Court Rules 2001.
2.The documents which have been produced as a result of the subpoena include documents in relation to an entity which is controlled by C2 Pty Ltd. C2 Pty Ltd is not a party to the proceedings.
3.Documents produced by the subpoenaed party are purported to include documents relating to the sale of a business by the C2 Unit Trust. The Husband is not a beneficiary or appointer of the C2 Unit Trust, nor is he a director or shareholder of C2 Pty Ltd.
4.The subpoena has not been drafted with sufficient clarity to exclude those documents, and is too wide.
5.The subpoena has not be drafted with sufficient clarity to allow the recipient to produce documents relevant to the proceedings.
6.No notice, other than being advised by the Husband’s lawyers has been given as to the existence of the subpoena affecting the interest of the Trust.
7.The terms of the Subpoena seek documents which impinge on the privacy of a third parties in circumstances where there is no evidence that the Trust has been put on notice of the subpoena affecting its interests.
8.The documents sought and provided pursuant to the subpoena constitute fishing. (All errors were in the original).
The husband’s notice of objection was a repetition of his sister’s. It incorporated four grounds. They were as follows –
1.There has been inadequate service by way of failure of the Wife to comply with Rule 15A(2).06 of the Federal Circuit Rules 2001.
2.The Documents sought by the Subpoena include documents which have no apparent significance.
3.The Documents sought by the Subpoena constitute fishing.
4.The Subpoena has not been drafted with sufficient clarity.
Those objections provoked the wife to respond in writing to each of the grounds of objection that the husband and the husband’s sister raised. Using the eight paragraphs of objection adopted by the husband’s sister, in her written response to the husband’s sister’s objections the wife took issue with the grounds of objection described as privacy, allegedly defective service, the alleged fishing nature of the subpoena and the allegation that the subpoena was an abuse of process. More substantively, the wife’s written submissions contained three significant matters. They were as follows –
4. The Objector purportedly controls various entities which received the sum of close to $11.5m in FY2017 arising from the management and performance of various businesses managed by the husband. It is the wife’s case that all such funds are held by the sister/her entities for and on behalf of the husband. That is a matter of dispute. The sister has been joined to the proceedings, in her own capacity and in her roles under C Pty Ltd, C Family Trust, C2 Pty Ltd and C2 Unit Trust.
5. A live issue is the extent to which the husband was involved in the negotiation of, and directed the payments arising from such negotiations. It is the wife’s case that it was he, and not his sister, who was the driving force and controlling mind behind all aspects of the relevant negotiations and transactions, and that he is the true beneficiary of the dealings.
13. In any event Ms Burhan is said by the husband (and presumably by Ms Burhan herself) to be the underlying owner of all of the entities (a matter hotly in dispute) and she has been joined to the proceedings. The wife is entitled to amend her Application as of right at this stage of the proceedings in the Family Court. She has done so. She has also filed the Affidavit required by Rule 6.03(3) of the Family Law Rules.
The matter then came before me upon the Honourable Justice Johns referring the case to me when her Honour was the judge in charge of the judicial duty list on 12 November 2019. As mentioned above, the application on 12 November 2019 was commenced in real terms at 3pm following Mr Wilson’s examination of discovery issues. The argument was developed on the substantive issues by Mr Dickson. Mr Wilson was part-way only through his address when the application had to be adjourned, part-heard, to 18 November 2019.
In the intervening period on 14 November 2019 the husband swore another affidavit having examined the folder of documents that had been handed to him two days earlier in court. In it he maintained his complaints about deficiencies in the wife’s disclosure. Specifically, he swore that he still did not have documents from the wife that responded to his call for –
a)the wife’s schedule of appointments;
b)her tax returns;
c)documents about the lease or sub-lease of her business premises; and
d)documents supporting her claimed medical expenditure.
In the same affidavit the husband said he received certain tax returns by email on 12 November 2019 and a copy of the lease of the wife’s business premises on the afternoon of 12 November 2019. Yet he said the wife had still not provided her appointments calendar, because, in debate with Mr Wilson about the importance (or otherwise) of that document, Mr Wilson said the husband believed some of the wife’s patients were paying the wife in cash. The husband said that in the absence of the wife’s appointments diary he was unable to cross-reference the entries on bank statements for accuracy as a reflection of the sources of income for the wife. However, the husband said that the closing balances on quarterly statements in the wife’s business account in the period 30 April 2018 to 31 October 2019 was between $20 000 and $25 000 or thereabouts. The husband said the wife spent money on discretionary spending that included travel, overseas holidays and anti-wrinkle injections.
The husband said that his sister is not prepared to lend him further funds. He said the Commonwealth Bank has told the husband that on a joint application made by both husband and wife, a redraw of $400 000 could be obtained.
In debate on 18 November 2019 it was revealed that K Pty Ltd wrote to the husband to inform him that he was to obtain payment of a bonus in the sum of $250 486.50 in respect of the financial year ended 31 May 2019.
The deed of loan
An issue described somewhat theatrically as “the elephant in the room” was the payment of $11m or thereabouts. Very little evidence was given about it by the husband. However, the issue arose in debate on 12 November in response to my question about how the parties represented by Mr Buckley fitted into the litigation, they being described erroneously as the second to sixth respondents. I say that description of them as parties was erroneous because no order for their joinder had been made. Mr Wilson responded in the manner extracted below and Mr Dickson added his submissions, also extracted below –
HIS HONOUR: Well, just explain where the second, third, fourth, fifth and sixth respondents fit into the picture.
MR WILSON: Certainly, your Honour. There is a big dispute between the husband and the wife about a deal that was done, by which the second respondent and her entities received something in the order of $11 million by way of payment for the sale of – I was going to say a business, but rather the fit out of a business.
HIS HONOUR: So the second through to the sixth are incoming purchasers of a ‑ ‑ ‑
MR WILSON: No. The second respondent is my client’s sister and ‑ ‑ ‑
HIS HONOUR: Okay.
MR WILSON: ‑ ‑ ‑ she is the controller of the entities that are named as the third, fourth and fifth respondents and my client’s case is that he was able to broker a sale of a fit out of a business from his sister, the second respondent, and her entities to an arm’s length purchaser and in excess of $11 million was paid and it’s his case that he has no interest. He brokered the deal, but he has no interest in the money from the sale of that fit out of the business. Now, that is ‑ ‑ ‑
HIS HONOUR: No commission or any spotter’s fee?
MR WILSON: He got a – he got a fee for having brokered it, but he has no equitable interest in the outcome of the deal. Now, that transaction is also the subject of a dispute with the ATO because the ATO are conducting an investigation into that as to whether or not my client got anything more than his brokerage fee out of that.
HIS HONOUR: So just explain how the amount that’s relevant to respondents 2 to 6 has a bearing on what I have to determine or someone will have to determine in this case.
MR WILSON: Yes. Sorry, your Honour. You mentioned reference to?
HIS HONOUR: Respondents 2 to 6. I mean, is there – what’s the relief claimed against them?
MR WILSON: The wife seeks in her amended application, your Honour, that was filed on 8 October – sorry – 7 October, a further amended application, the orders that she seeks in relation to those are – sorry. It’s the amended application before that, your Honour. I’m going to have to ask your Honour to go back one. It’s the amended application filed on 30 April of this year and what the wife seeks in orders 7 and 8 of the relief sought in that application, the amended initiating application of 30 April of this year, she seeks, firstly, as – number 7 – that there be a declaration pursuant to section 78 of the Family Law Act that the husband is beneficially entitled to the proceeds of sale of the business referred to and known as W Pty Ltd:
…that the second, third, fourth respondents, being Ms Burhan in her own capacity and in her roles under the entities C Pty Ltd, C Family Trust, C2 Unit Trust and the C2 Unit Trust repay to the husband and wife the proceeds of the sale
HIS HONOUR: Well, that goes beyond the role of a broker, so I’m still having trouble understanding the nature of the claim.
MR WILSON: The wife’s claim?
HIS HONOUR: Well, how respondents 2 to 6 become embroiled in all of this. It’s alleged that a declaration is sought against them as to ‑ ‑ ‑
MR DICKSON: I will put it simply, your Honour. We say it’s a sham. We say the whole thing is a sham.
HIS HONOUR: Right.
MR DICKSON: And there was at all times – it’s the husband’s money. He’s the professional. He’s the one who’s involved in the business. He was the principle. He negotiated all the deals and his sister is nothing more than a patsy, we say. That’s our case and that’s how we will be putting it. That’s an issue for another day. It’s an issue for trial. I think what your Honour is asking is why does that impact on spousal maintenance and payments today? The answer to that, I think, is this, but ‑ ‑ ‑
HIS HONOUR: Well, that’s exactly where I was going with all this.
MR DICKSON: The husband says ‑ ‑ ‑
MR WILSON: I can answer that, your Honour.
MR DICKSON: The husband says he has put in place a loan facility with his sister, presumably using the very 11 and a half million dollars, which is so contentious, and he says, “I’ve got a loan facility in place for $3 million. I’ve drawn about one and a half on that.” We’ve put in our outline that in order to meet the claims that we make today he doesn’t have to, but he could draw down on that remaining unexpired loan facility. That’s, I think, where Mr Wilson is going with this.
HIS HONOUR: Okay. And just to round off the involvement of respondents 2 to 6 Mr Wilson’s client is in a dispute with the ATO. Is that right? Did I hear you correctly?
Pausing there, that much only of the narration led me to certain preliminary observations about the sum of $11m. They are as follows –
a)a serious and significant dispute exists between the husband and the wife about the sum of $11m;
b)the evidence about the way in which that sum was generated is in an embryonic state, to say the least;
c)it is undesirable to make any factual findings about the circumstances surrounding the $11m at this early interlocutory stage of this litigation and in this application in a case that has travelled very little distance;
d)the husband’s sister has not been heard on the issue;
e)on behalf of the husband, the contentions mentioned above were made by Mr Wilson to the effect that the husband acted as broker but he otherwise has no interest in the funds; and
f)on behalf of the wife, the contentions recorded above were made by Mr Dickson to the effect that the $11m is the husband’s money.
Mr Dickson said the husband negotiated the deal and “his sister is nothing more than a patsy” (his words).
Mr Dickson was firm in his characterisation of the arrangement in relation to the $11m as a sham. He said the wife relied on the terms of the loan facility between the husband and the trustee of his sister’s trust. I asked whether some inconsistency emerged in his case by contending that the arrangement including the loan facility was a sham on the one hand and yet concurrently contending on the other hand that the deed had to be construed according to ordinary principles for the construction of agreements thereby presupposing the legitimacy of the deed. The exchange was as follows –
HIS HONOUR: But just a moment, are you not advancing wildly inconsistent propositions on the one hand to be contending that it’s a sham and on the other to say it’s to be construed according to its terms, which presumes its efficacy.
MR DICKSON: It doesn’t matter which of those your Honour is satisfied about. If either – either one will do me because if it’s, in reality, his money and it’s a sham, I don’t think I can persuade your Honour of that today. But even if you were persuaded about that, that it’s his then he should be drawing on it. If it’s not, and it’s the sister’s money and she has lent it to him on particular terms, that’s okay. That will do for me for today. That’s ‑ ‑ ‑
It became necessary to examine the loan facility made between C2 Pty Ltd as lender and the husband, as borrower. In the execution portion of the deed the lender’s execution of the deed was attested by Ms Burhan as sole director and secretary of the lender and who, from other evidence, was identified as the husband’s sister. The husband executed the loan facility as the borrower. In the definitions section of the deed, several important issues emerged, including the following –
a)the commencement date of the facility was defined to mean 1 July 2017;
b)the rate of interest was defined to be zero; and
c)the maximum facility limit was defined to mean $3m.
Pursuant to clause 2.1 of the deed the lender agreed to (the word used was “shall”) advance money to the borrower up to the maximum facility limit on and from the commencement date. The precise words of clause 2.1 were as follows –
2.1The Lender shall advance money to the Borrower up to the Maximum Facility Limit on and from the Commencement Date.
Before addressing any other provision of the deed, several things must be said about clause 2.1. They are –
a)the obligation imposed on the lender is mandatory, hence the use of the word “shall”;
b)the mandatory obligation that fell to the lender to perform was the obligation to advance money to the borrower up to the amount of $3m from 1 July 2017;
c)the lender was not given a discretion to refuse a request for the provision of funds of up to $3m;
d)no mechanical provisions existed in relation to the form of the borrower’s request for the advance (for example, whether the request needed to be in writing or whether the borrower needed to allow the lender a particular period of time within which to respond to the drawdown request);
e)no restriction was imposed limiting the amount of any drawdown; and
f)no prerequisite existed in relation to the borrower’s solvency when drawing down any particular sum up to the maximum facility limit.
The events of default were identified in clause 2.3. Mr Wilson relied on clause 2.3(v). In substance, that clause provided that the principal sum plus interest (yet in this deed no interest was due) became immediately due and payable on the happening of one or more of the events described in the subclauses. Of relevance was subclause (v). That event of default was as follows –
(v)if any distress, execution sequestration or other process of an amount exceeding one thousand dollars ($1,000) is issued against the property and assets of the Borrower or any part thereof and is not satisfied within seven (7) days.
Mr Wilson submitted that this litigation in this court was “other process” issued against the property and assets of the borrower with the consequence that the husband was already in default under clause 2.3. While it is not necessary to finally decide the point, at trial I suspect that clause 2.3(v) may well be differently construed. That is because this property settlement proceeding was not “distress, execution (or) sequestration” and it was not “other process of an amount exceeding one thousand dollars ($1,000) issued against the property and assets of the borrower”, nor was any such process unsatisfied for seven days. This litigation was not “process issued against the property or assets” of the borrower, as might have been a warrant of execution that the sheriff of a Supreme Court might enforce. Mr Wilson’s argument was inventive yet it must be measured against the plain words that have been used as has been held by the High Court in recent times in Ermogenous v Greek Orthodox Community of SA Inc,[1] Pacific Carriers Ltd v BNP Paribas[2] and Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd.[3]
[1] (2002) 209 CLR 95
[2] (2004) 218 CLR 451
[3] (2004) 219 CLR 165
It is not for me to embark upon a detailed consideration of construction issues relevant to the deed, particularly on an interlocutory application. Suffice it to say that the deed in this instance is signed by the borrower as well as by the lender, it was prepared by solicitors and it relates to a significant sum of money. The importance of a person’s signature to an agreement has been espoused over centuries in such cases as Parker v South Eastern Railway Co,[4] Foreman v Great Western Railway Co,[5] L’Estrange v F Graucob Ltd[6] and Whelpdale’s Case.[7] They were surveyed by the High Court in Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd.[8]
[4] (1877) 2 CPD 416
[5] (1878) 38 LT 851
[6] [1934] 2 KB 394
[7] (1604) 77 ER 239
[8] (2004) 219 CLR 165
Mr Dickson argued that the deed demonstrated that the husband had access to funds from a loan facility of up to $3m. I agree. He urged me to reject the assertion that the lender (his sister or interests controlled by her) had expressed her unwillingness to advance further funds. The husband’s sister may be unwilling to advance further funds, but clause 2.1 imposes an obligation (presumably enforceable by mandatory injunction) to advance up to $3m.
Accordingly, on the threshold issue of the source of funds required to meet any sum ordered pursuant to these orders, in my view the husband’s line of credit pursuant to the loan deed provides the answer. So too does the amount paid by K Pty Ltd to the husband on 10 July 2019 where he received the sum of $250 486.50.
Motor vehicles
The balloon payment in respect of which the wife sought payment of $20 000 by the husband was paid by the wife. She sought an order reimbursing her. She also sought the return of her Motor Vehicle O and contemporaneously therewith she agreed to return to the husband his Motor Vehicle P. The regime in respect of motor vehicles proposed by the husband was complicated, cumbersome and went beyond what should have been straight-forward. His proposal was as follows –
6.That the Husband transfer to the Wife at her expense, all his right title and interest in the Motor Vehicle P by way of further interim settlement of property.
7.The Wife transfer to the Husband at his expense, all his right title and interest in the Motor Vehicle O by way of further interim settlement of property.
8.That the parties each pay or cause to be paid as and when they fall due one half of the balloon payments in respect of the Motor Vehicle P and Motor Vehicle O.
That was to be contrasted with the order sought on the same issue by the wife. It was this –
4.The Husband forthwith return to the wife her Motor Vehicle O, fully repaired and contemporaneously the wife shall return the Motor Vehicle P to the Husband.
The wife’s proposal was a simple return of the current vehicle to the registered proprietor of it. No costs were involved and no transfer of title was involved. The husband’s proposal involved title transfer, the treatment of that title transfer as an interim property settlement and it involved a balloon payment of each vehicle, now the subject of application. I see no warrant to engage in the complications in which the husband has proposed. Paragraph 4 of the wife’s minute has its attractions. Mr Dickson quite properly put the position thus –
MR DICKSON: At the moment, he drives the Motor Vehicle O that’s in her name, so the Motor Vehicle O is in my client’s name. She makes the lease payments on it. He’s the one that has got the balloon coming up. She drives an Motor Vehicle P in the husband’s name and he makes the lease payments on that, so my client simply wants to swap the cars back to those whose names they are actually in so that she’s driving her car and he his, and then she takes care of the balloon payment but she needs some money in order to do that. That’s what’s proposed. I don’t, I think, need to say a lot more about the common sense of driving a vehicle in your own name. It avoids arguments about, for instance, fines, damage to vehicles, those sorts of things; it just reduces the ‑ ‑ ‑
HIS HONOUR: Well, if the car is claimed as tax it would make a difference, for log purposes and suchlike.
MR DICKSON: Yes, I don’t know that’s necessarily the motivating factor, your Honour, behind that ‑ ‑ ‑
HIS HONOUR: Anyway.
Real property
The wife proposed there being no present alteration to ownership to the Suburb E residence, the Suburb G investment property and car parks and the M Street, Town N farm. Her proposal was in simple terms. It was as follows –
3.The Husband continue to meet all mortgage repayments, rates, taxes and body corporate fees (if applicable) on the properties situated at:
a.The property situated at D Street, Suburb E (“The D Street, Suburb E Property”);
b.The property situated at F Street Suburb G with the associated two car parks (“the F Street Suburb G Property”); and
c.The property situated at M Street, Town N (“the M Street, Town N Property”). (“Jointly referred to as "the properties”).
Conversely, the husband proposed the sale of the F Street Suburb G property and the application of the proceeds from that sale partly to him and partly to the wife. His proposal was as follows –
3.That forthwith and until further order the parties each do all things and sign all documents and give all necessary instructions as may be required to sell the property situate at and known as F Street Suburb G (“ F Street Suburb G ”) on such terms and conditions as may be agreed, but in default of agreement, on such terms and conditions as are determined reasonable and necessary by this Honourable Court (“the Sale”) and that the proceeds of the Sale be applied as follows:
3.1first, to pay all costs, commissions, and expenses of and incidental to the Sale;
3.2second, to pay the amount necessary to discharge any and all mortgages secured over F Street Suburb G; and
3.3third, to pay the remaining balance to the parties in equal shares, with the payment to each party to be characterised as:
3.3.1a payment on account of their respective ultimate property settlement entitlements; or
3.3.2in the alternative, a payment by way of interim litigation funding.
4.In the alternative to paragraph 0 herein and until further order, the parties each do all things, sign all documents and give all necessary instructions as may be required to further draw against the CBA mortgage facility (“Suburb E Mortgage”) secured upon the real property situate at and known as D Street, Suburb E (“Suburb E”) in the sum of $400,000 (plus any bank costs and/or charges in respect of such further draw) to be disbursed as follows:
4.1$200,000 to the Husband; and
4.2$200,000 to the Wife
with the payment to each party to be characterised as:
4.3a payment on account of their respective ultimate property settlement entitlements; or
4.4in the alternative, a payment by way of interim litigation funding.
Self-evidently, the husband took the view that any funds that may be required for litigation funding should be generated from the sale of the F Street Suburb G property. He sought such an order as well as an order that he and the wife each enjoy a payment thereof in the sum of $200 000. It will be recalled that the wife opposed any sale of the F Street Suburb G property.
So far as interim property orders were concerned, certain guiding principles are applicable to the facts of this case. They include the following –
a)the majority of the court in Strahan & Strahan[9] held that when consideration is being given to the appropriateness of an order being made for an interim property settlement order, more is required than the mere fact that upon a final hearing the applicant would receive the property being sought (or an amount in excess of the funds being sought) from the other party;
b)balance must be given to the risks of unduly limiting the final orders that can be made against the circumstances said to show that it is just and equitable to make interim orders;
c)in Strahan it was held that the first stage of any consideration of an application for a partial property settlement order requires a determination of whether the interests of justice require the exercise of power under s 79 and s 80(1)(h) on an interim basis;
d)compelling circumstances need not be shown by an applicant for a partial property settlement order, as was held in Strahan;
e)ordinarily an order under s 79 is made once only after a final hearing, as was held in Strahan at [132];
f)consideration must be given to the reversibility of the order, as was held in Zschokke & Zschokke[10] and Gabel & Yardley;[11]
g)in addition, a court entertaining an application for a partial property settlement should consider the need for and effect of interim orders weighed against the risks that the exercise of the power on an interim basis will interfere with the power of the court to make just and equitable orders on a final basis;
h)further, a court entertaining an application for a partial property settlement order should consider whether the order is just and equitable according to at least a preliminary view of the likely range of outcomes;
i)further, a court entertaining an application for a partial property settlement order should balance the risks by considering not only the quantum of the orders but also the risk of unduly limiting the final orders that can be made or even potentially defeating parties’ claims; and
j)a court entertaining an application for a partial property settlement should take into account that a party should not be denied the ability to liquidate assets where there are real needs for those resources such as meeting debts due to creditors.
[9] (2009) 42 Fam LR 203
[10] (1996) 20 Fam LR 766
[11] (2008) 40 Fam LR 66
From those observations, several matters relevant to this case emerged. They include the following –
a)discovery has been deficient by both parties, a phenomenon that must change forthwith;
b)discovery must be undertaken in diligent compliance with Chapter 13 of the Family Law Rules; and
c)it is important for a proper assessment to be made about the need for and effect of interim property orders recognising that any exercise of the power to make interim property orders necessarily interferes with the power to make just and equitable orders on a final basis.
In this case Mr Dickson argued that according to the observations of this court in Bing & Bing,[12] it was not necessary for the court making interim property orders to identify a source of funds. True that may be, it remains necessary for the court to be satisfied that capacity exists to make the order at all. Of that matter I am well persuaded in this case.
[12] [2007] FamCA 418
Turning to the need to make interim property orders, the affidavit material in this case revealed several matters relevant to this application. They included the following –
a)the wife’s career as a health care worker is in its infancy;
b)the lifestyle hitherto enjoyed by the husband, the wife and their children has been in the upper ranges of comfortable;
c)to his credit, the husband has been a high-earning professional who has funded that lifestyle;
d)the wife’s income cannot reasonably meet the expenses associated with that lifestyle nor even compare with the income generated by the husband;
e)over several quarters since 2018 the wife has generated revenue over a substantial period of a sum in the vicinity of $20 000;
f)she is required to meet legal fees for a significant dispute in this court;
g)her income will not be sufficient for that purpose;
h)other sources are available to meet those needs;
i)selling real estate (especially jointly owned real estate) is not necessarily the preferred starting point in that process; and
j)the wife had home repairs to effect and a tax bill to pay.
The question of the wife’s need for any sum, whether by way of interim property orders, litigation funding or spousal maintenance was the subject of forceful submissions by Mr Dickson. He said that the husband’s request for orders for the sale of the F Street Suburb G property and then the disbursement to each of $200 000 represented a concession of need. That much is true.
The wife deposed to owing her solicitors $85 000 and that she will incur further expenses to legal practitioners in the future. She said she has paid $20 000 already. It seemed to me that the wife made out her application for litigation funding in the sum of $100 000. That sum should not be paid from the sale of the F Street Suburb G property. The wife has maintained that the F Street Suburb G property is an investment property. Once sold, it is forever disposed of for the purposes of the adjustment of property vis-à-vis the parties in this case, even though its sale price will produce a cash component for the parties. But in circumstances where –
a)the wife says she wishes that property to be retained for determination at trial; and
b)funds to satisfy an interim property can be raised from other sources then those other sources of funds should be adopted in preference to the sale of real estate.
For those reasons I reject the husband’s applications in paragraph 3 and 4 of his proposed orders.
It follows that the mortgages over each parcel of real property will need to be serviced on an ongoing basis. Having regard to the wife’s independent financial circumstances, she is unable to service the loans in respect of the Suburb E property, the Suburb G property or the Town N property. The husband can. No valid reason exists for his not doing so pending the hearing and determination of the trial of this proceeding. An order should be made in the terms of paragraph 3 of the wife’s proposal in relation to ongoing obligations under the relevant mortgages.
Child support
The wife adopted an approach that was not altogether easy to follow in relation to her claim for child support. In her minute of orders she sought an order for the husband to be responsible for and pay all school fees and associated expenses for the children at their private schools. Her proposed order was recorded in paragraph 2 of the minute her solicitors produced. It was as follows –
2.That pursuant to Part 7 Division 5 of the Child Support (Assessment) Act 1989 (Cth) the Applicant Husband be responsible for and pay all of the private school fees and associated educational expenses for the children of the marriage namely X born in 2003, Y born in 2005 and Z born in 2011, and such payments not be credited against any administrative assessment of child support in force from time to time.
The important issue for her was the proposal for the payment of those school fees not to be credited against any administrative assessment of child support.
Yet in debate on 12 November 2019 Mr Dickson said he did not press for an order in the way it was cast in the application. He said he did not press for payment in that form because –
a)in 2017 school fees for the eldest boy were paid in advance to the completion of his secondary school days;
b)the middle son’s school will not permit pre-payment of school fees so his school fees will be paid on an ongoing basis, those expenses running at $3 000 per month; and
c)the youngest child is at a state school and he does not attract private school fees.
On behalf of the wife it was put that the husband does not pay the school fees and associated expenses of the children to the extent that those expenses call for ongoing payment. It seemed that at its core, the wife’s position on the payment of the middle child’s and youngest child’s school expenses centred around periodic support and the risks associated with there being no flow of funds to meet the school fees in respect of the middle child and associated expenses in respect of the youngest child. The order formulated under paragraph 2 of the wife’s minute was appropriate as it enabled those school fees plus associated expenses to be paid on a regular ongoing basis. I make the order.
Spousal maintenance
The wife sought spousal maintenance of $50 000 as a lump sum. It was put that the relevant legal principles were demonstrated to justify the making of such an order. Mr Dickson said the sum of $50 000 could be drawn down from loan funds. That much is true.
The relevant legal principles were not in dispute.
So far as the spousal maintenance claim is concerned, ultimately the issue is determined by application of the principles in s 72 and s 74 of the Family Law Act, a matter addressed by the Full Court in In the Marriage of Stein.[13] There, the Full Court (Kay, Holden and Dessau JJ) held as follows[14] –
Spousal maintenance is ultimately governed by the provisions of ss 72 and 74, namely there being no right to spousal maintenance unless there is a capacity to meet it and an inability by the claimant to meet the claimant's own self-support.
[13] (2000) 25 Fam LR 727
[14] Ibid (at [55])
In Hall v Hall[15] the High Court described the legislative gateway to the operation of Part VIII of the Family Law Act in relation to spousal maintenance as being s 72(1) of the Family Law Act. The High Court pointed to the power conferred by s 74(1) to make an interim order as distinct to the power conferred by s 77 to make an urgent order. Under s 77 two preconditions were required, namely, the immediate need of financial assistance and, second, it must not be practicable in the circumstances to determine immediately what orders if any should be made. Conversely, under s 74 the making of an interim order calls for satisfaction of the threshold requirement in s 72(1) plus any relevant matter in s 75(2). On that last issue the High Court affirmed the observations of the Full Court of the Family Court in In the Marriage of Redman and Redman.[16] Hence, the High Court in Hall v Hall held that in an application for an interim order under s 74 the court cannot determine the application without finding on the balance of probabilities on the evidence before it the threshold requirement of s 72(1) are met plus any relevant matters in s 75(2).
[15] (2016) 257 CLR 490
[16] (1987) 11 Fam LR 411
Section 72(1) is in the following terms –
A party to a marriage is liable to maintain the other party, to the extent that the first‑mentioned party is reasonably able to do so, if, and only if, that other party is unable to support herself or himself adequately whether:
(a)by reason of having the care and control of a child of the marriage who has not attained the age of 18 years;
(b)by reason of age or physical or mental incapacity for appropriate gainful employment; or
(c)for any other adequate reason;
having regard to any relevant matter referred to in subsection 75(2).
There was evidence of the wife’s inability to support herself by reason of the matters in subsection (a) of s 72(1).
Here, the relevant issue was s 72(1). It turned on the husband’s capacity and an inability of the wife to self‑support.
Applying the learning set out immediately above I was required to examine –
a)the existence of an inability of the wife to self-support; and
b)the existence of the husband’s capacity to meet her need for support.
I was persuaded that the wife’s cash-at-bank and overall ability to self-support was negligible. I was also persuaded that the husband had the capacity to meet an interim spousal maintenance claim by way of lump sum in the sum of $50 000.
Mr Wilson made substantial submissions about the difference between lump sum spousal maintenance and an order for periodic payments in the nature of spousal maintenance. No doubt those submissions were underpinned by matters relevant to cash-flow. But in my view the line of credit available to the husband from the C Pty Ltd facility of $3m was more than capable of accommodating the amount of $50 000 in spousal maintenance. In my view the wife’s application for lump sum spousal maintenance in the sum of $50 000 should be allowed.
Conclusion
On the first day of this interim hearing I invited the parties to explore means of progressing this case to trial with expedition. The orders each proposed to address the issues agitated on 12 and 18 November 2019 did no more than address the discrete issues that fell for determination on that hearing. In other words, no proposals were put forward to advance this case to trial. In debate with all counsel I urged them to take such measures as they might be instructed to take so as to progress this case to trial with expedition. In this court it is far from uncommon for a case to involve up to 30 interlocutory stoushes prior to the trial. This case should not fall into that camp. Nothing has yet emerged in response to my invitation for the parties to advance this case to trial with expedition. I propose to order this case to be dealt with hereafter by the Senior Registrar for expedition in directions as to the conduct of this proceeding in the lead up to trial.
I certify that the preceding sixty-four (64) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Wilson delivered on 25 November 2019.
Associate:
Date: 25 November 2019
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