Epaminondas and Epaminondas (No 2)

[2015] FamCA 1151

FAMILY COURT OF AUSTRALIA

EPAMINONDAS & EPAMINONDAS (NO 2) [2015] FamCA 1151

FAMILY LAW – PROPERTY – interim orders – where there are funds held on term deposit – where the husband seeks orders in relation to property and the distribution of monies – where the wife seeks orders for the distribution of monies and that the matrimonial home be placed on the market for sale – where there is capital gains tax and personal income tax due by both parties – where there is a company – where there are previous orders that provide for refinancing of debts of the company and the management and operation of the business – where orders are made for monies to be invested for the purpose of meeting the various tax liabilities – where orders are made for the remaining monies to be divided equally between the parties – where orders are made for a property to be placed on the market for sale.

APPLICANT: Mr Epaminondas

RESPONDENT: Ms Epaminondas

FILE NUMBER: ADC 2118 of 2014

DATE DELIVERED: 21 December 2015

PLACE DELIVERED: Adelaide

PLACE HEARD: Adelaide

JUDGMENT OF: Berman J

HEARING DATE: 15 December 2015

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Lindsay

SOLICITOR FOR THE APPLICANT: Jordan & Fowler Barristers and Solicitors

COUNSEL FOR THE RESPONDENT: Mr Richards

SOLICITOR FOR THE RESPONDENT: Camatta Lempens Pty Ltd

UPON NOTING:

(a)that there remains the sum of $172,294 together with interest accrued thereon invested on term deposit with the Commonwealth Bank of Australia by B Pty Ltd (“B”) in account number 065000050543792;

(b)that the parties agree that they have a capital gains tax liability of about $70,154;

(c)that there is an income tax shortfall due by B for the 2014/2015 financial year in the sum of $14,000; and

(d)that each of the parties will have a personal income tax payable in respect of dividends from C Pty Ltd of about $3500 each.

Orders

1. That the sum of $91,154 from monies currently invested with the CBA by B shall remain so invested for the purpose of meeting the capital gains tax of the Epaminondas Family Trust (“the Trust”), company tax of B and the parties personal tax pending an advice from the accountants for the parties confirming the amounts to be paid to the Australian Taxation Office and the date upon which payment is required whereupon the parties will do all things necessary to cause the said monies to be disbursed in accordance with the capital gains tax, company tax and personal income tax as assessed and levied.

2. That the sum of $13,500 from monies currently invested with the CBA by B shall remain so invested pending the determination of paragraph 2(a) of the wife’s Response.

3. That the sum of $67,640 shall be divided equally between the parties by payment to the trust account of the solicitors for the husband and the wife each in the sum of $33,820.

4. That on or before 4 pm on 29 January 2016 the husband do file and serve an affidavit directed to the matters raised in paragraphs 26.2, 26.3 and 26.4 of the wife’s affidavit filed 11 December 2015.

5. That the husband and wife do all things necessary to cause B as trustee for the Trust to forthwith place the property situate at Y Street, Suburb Z comprised and described in Certificate of Title Volume … Folio … to be placed on the market for sale by public auction or private treaty upon such terms and conditions as the parties may agree but in default of agreement as may be ordered by this Honourable Court.

6. That subject to the agreement between the parties as to how the net proceeds of sale are to be disbursed, they shall be invested in the joint names of the parties for and on behalf of B as trustee for the Trust pending written agreement of the parties or further order of this Court.

7. That subject to the sale of the Suburb Z property and the discharge of mortgage number … to the Commonwealth Bank of Australia, the husband and wife do all things necessary to cause that B as trustee for the Trust to transfer to the wife by way of distribution in specie to her of her interest in the property at L Street, N Town, Queensland.

8. Save as to paragraph (2)(a) of the Response of the wife filed 11 December 2015, the Application of the husband filed 30 October 2015 and the balance of the wife’s Response are dismissed.

9. That the wife is at liberty to relist paragraph 2(a) of her Response PROVIDING she does so within twenty one (21) days of the date upon which she receives the husband’s affidavit as ordered AND if the matter is not relisted within the time as provided for THEN the balance of monies invested on term deposit by B shall forthwith be divided equally between the parties.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Epaminondas & Epaminondas (No 2) has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT ADELAIDE

FILE NUMBER: ADC 2118  of 2014

Mr Epaminondas

Applicant

And

Ms Epaminondas

Respondent

REASONS FOR JUDGMENT

INTRODUCTION  

1. By Application in a Case filed 30 October 2015, Epaminondas (“the husband”) seeks complex orders by way of interim settlement of property that can be summarised as follows:-

   (1)That monies standing to the credit of the parties in the sum of $172,294.51 following the sale of a property at Q Street, Suburb R is to be disbursed by payment of anticipated capital gains tax, income tax due by B Pty Ltd (“B”) as trustees for the Epaminondas Family Trust (“the Trust”) the payment of personal income tax likely to be levied against each of the parties and any balance to be distributed equally between the parties by payment to their respective trust accounts.

   (2)That the parties cause B to transfer to the wife by way of distribution in specie L Street, N Town free from its current mortgage.

   (3)That the parties do cause B to transfer to the wife by way of distribution in specie a commercial property at Y Street, Suburb Z free from any mortgage.

   (4)That the wife transfer to the husband all of her interest in the former matrimonial home situate at O Street, Suburb P.

   (5)That the husband discharge various mortgages but in particular the mortgages secured over the N Town and Suburb Z properties.

   (6)That the wife resign from any office held by her in B and to transfer her shares to the husband and that thereafter she shall resign from any office held by her in the Epaminondas Family Trust (“the Trust”).

2. By response filed 11 December 2015, the wife opposes the orders sought save as to paragraph 1(b) of the husband’s application which relates to the transfer to the wife of the interest that B holds in the N Town property.

3. Additionally the wife seeks the distribution of the funds held with the Commonwealth Bank of Australia (“CBA”) firstly to her in the sum of $81,140.50 which would represent the balance of monies remaining following the retention of sufficient monies to make the agreed payment of levied capital gains tax, company tax and personal income tax.

4. Otherwise, the wife seeks that the monies held be divided in the following manner:

   (a)to the wife the sum of $13,500 in arrears of monies owing to her pursuant to paragraph 5 of orders made on 19 June 2015;

   (b)to the wife the sum of $11,282 to represent an amount equivalent to a sum the wife alleges was received by the husband from the sale of the Bell Potter share portfolio;

   (c)the balance of monies to be divided equally between the parties and likely to be in the sum of $28,179 to each party.

5. The wife also seeks that the former matrimonial home at Suburb P be placed on the market for sale.

BACKGROUND

1. The parties are not in significant disagreement as to the relevant history and current circumstances.  On 19 June 2015 orders were made which provided for the orderly management and operation of B, C (the principal business of the parties) and the Trust.  The husband was to continue to manage and operate the business, but was required to provide detailed information and regular financial information to the wife.

2. Order 3 is relevant to the current dispute:

   That the parties do execute all documents necessary to give effect to any offer from NAB to refinance the debts of [C], [B] and the Trust provided that any refinancing with NAB not be on terms more disadvantageous to the parties, the Trust and the companies than had previously been in place with the CBA.

3. At the date of the orders made on 19 June 2015 there was some confidence that the husband would be able to secure refinancing with NAB.

4. It is common ground that the CBA is no longer prepared to continue their credit facilities with the parties and the corporate and trust entities and have been pressing the husband to obtain alternate finance to enable him to repay the overdraft and other facilities that were extended to C.  By letter dated 7 October 2015 (Annexure E to the affidavit of the husband filed 30 October 2015), the bank has indicated its intention to levy default rates of interest and to enforce their securities.  By further letter dated 27 October 2015 (Annexure F) the following appears in correspondence:

   Hi [Mr Epaminondas]

   Just for info, I am about to arrange issue of demand for full repayment of the overdraft.  The limit will be formally cancelled and recovery action starts.

   I guess there is a possibility that action may be helpful in that you can present to the Court that the Bank is serious in wanting our debts repaid in full.  Problem is that we are serious and if the Court takes too long then we may not be willing to wait that long.

5. I am satisfied that the threat from the CBA is real and that the bank has a genuine intention of cancelling the existing finance facilities.

6. The husband has sought alternate finance with the National Australia Bank (“NAB”).  The parties agree (although for different reasons) that the NAB will not approve the husband’s application.  For his part he says that the refusal by the bank is motivated by a policy decision that will not allow refinancing whilst there are unresolved property proceedings between parties.  By implication, the husband considers that the refusal by NAB to assist is motivated by the perception of increased risk arising from matrimonial disharmony.

7. The wife considers that it is more likely that the NAB is not satisfied that the husband is managing the business well and that the risk is not so much one of policy but financial management and business acumen on the part of the husband.

8. The focus of the orders sought by the husband is to resolve the major items of property by way of interim property settlement.  To some extent the husband is motivated by the conceded position of the parties that once the asset pool has been identified and a respective value attributed to the interests of the parties in property both joint and several, each of the parties should be entitled to one half thereof.

9. On that basis the husband seeks to resolve all outstanding differences save and except the contentious issue of the value to be attributed to the parties interests in the C business by requiring the wife to receive the N Town, Queensland property and the commercial property at Suburb Z.  The husband would retain the property at Suburb P and on that basis he considers that the NAB are likely to provide finance which would enable the mortgages to be discharged.

10. The wife is not so confident that even if the orders as promoted by the husband were given effect that that would necessarily result in a successful finance application.

RELEVANT ISSUES

1. The division and disbursement of the net proceeds held on term deposit with the CBA is not a matter of significant contention.  Whilst the parties have a different position as to the manner in which those funds should be disbursed, there is agreement that the funds should generally be applied first to the likely taxation obligations of the parties and B and the balance divided between the parties.  On the husband’s case equally, on the wife’s case disproportionately.

2. The wife consents to the transfer of the N Town property, but there may be a difficulty in that property being transferred whilst the mortgage secured over it is extant and outstanding.

3. At this stage the wife is not agreeable to transferring the Suburb P property to the husband and she considers that it should be sold.  On closer analysis of her affidavit in support of that proposition, it is self-evident that she considers the sale of the property to be an alternative to the refinancing by the husband.  Simply put, the equity in the Suburb P property, if realised, would be sufficient to discharge the outstanding liabilities.

4. The husband does not wish for the property to be sold and I accept that he would seek to retain that property as part of the settlement.

5. I indicated to the parties at the commencement of the application that I did not consider that the sale of the Suburb P property at this stage in the proceedings was warranted.

6. The orders that were made on 19 June 2015 provide for the proper ongoing arrangements for the management and operation of the C business.  No affidavit material has been filed which suggests that the orders have not or are not capable of achieving some stability pending a final hearing.  It is therefore not necessary at this stage to require the wife to resign from any position held in C, B or the Trust or to transfer her shareholding.

7. The linchpin to the husband’s application is the order seeking that B transfer to the wife its interest in the commercial property at Suburb Z.  The wife does not want the property and it is difficult to understand how the husband could reasonably consider that a Court would make an order forcing the property upon her.  It is a commercial property that generates rental income.  At present however, there is a hiatus in the tenancy arrangements.  The current tenant is midway through the lease.  The tenant has entered into negotiations with the parties seeking to be released from the lease upon the payment of the sum of $175,000.  The parties have agreed to the tenant’s proposal, intend to release the tenant upon the payment of the settlement sum and have agreed that the money will be held in an interest bearing account for and on behalf of “[B Pty Ltd] as trustee for the [Epaminondas] Family Trust”.

8. It therefore has an uncertain commercial future in the short to medium term and I do not consider that the wife could be criticised for not wishing to receive the property.

9. I suggested to the husband’s counsel that order 1(c) currently providing for the transfer of the Suburb Z property to the wife be amended to require the parties to do all things necessary to cause B to place the property on the market for sale.  Consideration was given by each of the parties to that proposal and ultimately a consent position has now been reached.

10. Whilst there is sufficient time for further consideration to be given as to how the proceeds will be disbursed upon any eventual sale, it is more likely than not that the proceeds will need to be primarily disbursed in the discharge of outstanding finance commitments to the CBA.  At the very least the mortgage secured over the N Town property will need to be discharged before the transfer to the wife can take place.

11. It may also assist in the husband’s negotiations with the CBA in an attempt to gain some further relief from default provisions imposed by the bank and may even assist in persuading the NAB that the risk is likely to be somewhat diminished by the orderly disposal of an asset of significant value.

DISTRIBUTION OF MONIES INVESTED ON TERM DEPOSIT

1. There remains the sum of $172,294 on term deposit with the CBA.

2. The parties agree that monies should be set aside sufficient to pay the capital gains tax in the sum of $70,154, a shortfall in tax due by B of $14,000 and payment of personal income tax likely to be in or about $3,500 for each party.

3. The focus is therefore on the balance which amounts to about $81,140.

4. The wife seeks that she receive two sums of $13,500 and $11,282 before the balance is then divided equally between the parties.

5. Order 5 of the orders made 19 June 2015 provide as follows:

   Pending further order, [B] distribute to each of the parties the sum of $1,500 per week and the parties be otherwise restrained and an injunction be hereby granted restraining each of them from making or authorising any further distributions or drawings for their personal expenses or the personal expenses of others, in particular members of the immediate family of the parties from [B], [C] or the Trust without the written consent of the other.

6. At paragraph 26.3 of her affidavit filed 11 December 2015, the wife considers the monies that she has received pursuant to order 5 by reference to her bank records.  In summary, at 26.4 she asserts that she should have received 24 payments of $1500 each totalling $36,000.  She suggests that her records show that she has received $22,500.  Accordingly, the husband is indebted to her in the sum of $13,500.

7. There is no formal answer from the husband, but that is not to be seen as a criticism given that the wife’s affidavit in support of her Response was filed on 11 December 2015 and it is reasonable to accept the husband’s complaint that he has only had a few days to consider its contents.

8. There may or may not be an answer.  The initial indication from the husband’s counsel is that he disputes the wife’s contention.

9. I do not propose to make an order in the terms as sought by the wife, but I propose to require the husband to file an affidavit in response to the allegation of the wife as set out in paragraphs 26.2, 26.3 and 26.4.  The sum of $13,500 will be retained with other monies as agreed.

10. The wife’s application in respect of the sum of $11,282 being representative of the funds the husband received from the sale of Bell Potter shares was a matter considered by me in my reasons of 19 June 2015.

11. He says that whilst he did receive the sum of $11,282, those monies have now been expended and in any event he argued that the wife had failed to explain what she did with the monies taken from C and B in 2014.  He used those monies to pay his legal fees, but argued that the wife also had used substantial company and trust funds for her litigation expenses.

12. At that stage, the wife’s position was that she should receive one half the monies retained by the husband namely, about $6000.  I did not consider that the amount was so significant that it was likely to cause prejudice to the wife and I declined to make any order at that time.

13. I do not consider the circumstances have changed and on an interim basis the orders sought by the wife in that regard is without merit.

CONCLUSION

1. The late agreement of the parties to cause the Suburb Z property to be sold has assisted in the ready disposal of the interim proceedings.

2. Unfortunately this matter is not yet in the list of cases that have been allocated a first day hearing and the difficulty for the parties is that it may not reach trial until late 2016.  Given that the parties agree on the adjustment between them but are not able to agree as to the property interests that form the pool, it is somewhat surprising that the dispute has the level of contention that is clearly evident.

3. Orders made on 19 June 2015 have however resulted in a report as to the value of the parties interests in the C business now having been completed and ready for publication in the week commencing 21 December 2015 and that document may well focus the parties to exploring a settlement of the proceedings at the financial conciliation conference listed for 29 January 2016.

4. I make orders as appear at the commencement of these reasons.

I certify that the preceding forty three (43) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Berman delivered on 21 December 2015.

Associate: 

Date:  21 December 2015