Ferrara & Ferrara
[2021] FamCA 536
•27 July 2021
FAMILY COURT OF AUSTRALIA
Ferrara & Ferrara [2021] FamCA 536
File number(s): SYC1747 of 2021 Judgment of: REES J Date of judgment: 27 July 2021 Catchwords: FAMILY LAW – INTERIM PROPERTY – Application by the wife for interim financial relief – Where the financial position of the parties is complex – Where the wife is unable to support herself – Where the husband contends the former matrimonial home must be sold to generate funds – Evidence of large sums being transferred between the husband and various corporate entities – Orders granting the wife interim relief. Legislation: Family Law Act 1975 (Cth) s 117 Cases cited: Salvage & Fosse (2020) 61 Fam LR 45; [2020] FamCAFC 144 Number of paragraphs: 104 Date of hearing: 22 July 2021 Place: Sydney Counsel for the Applicant: Mr Dura Solicitor for the Applicant: Capelin Law Pty Ltd Counsel for the Respondent: Mr Blank Solicitor for the Respondent: Sage Solicitors ORDERS
SYC 1747 of 2021 BETWEEN: MS FERRARA
Applicant
AND: MR FERRARA
Respondent
ORDER MADE BY:
REES J
DATE OF ORDER:
27 JULY 2021
THE COURT ORDERS PENDING FURTHER ORDER:
1.That within 14 days of the date of this order the husband shall vacate the property at B Street, Suburb C in the state of New South Wales (“Suburb C”) and thereafter the wife shall be entitled to the sole occupation of that property.
2.That the husband shall pay, as they fall due, all mortgage payments, building and contents insurance premiums and rates relating to Suburb C.
3.That the husband pay to the wife by way of periodic spousal maintenance the sum of $1,320 per week, the first payment to be made forthwith and payments thereafter to be made weekly to the wife’s nominated bank account.
4.That within 28 days of the date of these orders, the husband pay to the wife, by way of lump sum spousal maintenance, the sum of $100,000.
5.That until such time as the husband has paid the sum of $100,000 in accordance with Order 4, the husband is restrained from dealing with the proceeds of sale of the vehicles described by him as Motor Vehicle 1 and Motor Vehicle 2, other than for the purpose of complying with that order.
6.That the wife do all things necessary to sell the unregistered Motor Vehicle 3 and to retain the proceeds of sale, provided that if the wife has not sold the vehicle within 14 days of the date of these orders, then the husband shall forthwith sell the vehicle and pay to the wife $22,000 or such greater sum as is paid for the vehicle.
7.That the husband’s application for the sale of Suburb C is dismissed.
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 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to 17.02 Family Law Rules 2004 (Cth).
IT IS NOTED that publication of this judgment by this Court under the pseudonym Ferrara & Ferrara has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
Rees J:
Ms Ferrara (“the wife”) and Mr Ferrara (“the husband”) commenced to live together in 2005 and married in 2006. They have one child aged 11 years.
They separated on 8 January 2019 when the wife and the child left the home after an altercation. Since that time, the husband has remained in occupation of the home at B Street, Suburb C (“Suburb C”).
Since the parties separated, the husband has retained the sole use and control of all of the assets and income of the marriage, subject to some payments made on behalf of the wife to which reference will be made later in these reasons.
The wife now seeks orders in the following terms:
·Sole occupation of the former matrimonial home.
·Interim property settlement in the sum of $150,000.
·Urgent or interim spousal maintenance of $1,815 per week.
The husband, in his response to that application, sought an order that the wife’s application be dismissed and that the former matrimonial home be sold with an interim distribution to each party of $100,000.
In the course of submissions, counsel for the husband modified the husband’s position to seek orders in the following terms:
·That Motor Vehicle 3 be sold and the proceeds of $22,000 be paid to the wife.
·That, within 30 days, the husband pay the wife a further sum of $100,000 from the proceeds of sale of one of his luxury vehicles. Such payment to be characterised as spousal maintenance.
·That the wife’s application for periodic spousal maintenance be dismissed.
·That the former matrimonial home be sold and each party receive an interim distribution of $100,000.
The wife relied upon her Financial Statement sworn 14 May 2021, an affidavit sworn by her on 7 June 2021 and an updating affidavit sworn on 20 July 2021 together with a tender bundle.
The husband relied upon a Financial Statement sworn by him on 20 July 2021, an affidavit sworn by him on 20 July 2021 and an affidavit of Ms D sworn on 16 April 2021.
Ms D is a director of various corporate entities which hold half of the shares in an education enterprise, the other half of the shares being controlled by the husband.
Reference was also made in the husband’s case outline document to an affidavit of Ms E sworn on 25 May 2021, however I was not taken to any part of that affidavit in submissions and it does not appear to have any relevance to the issues for determination and I have disregarded it.
THE HUSBAND’S FINANCIAL POSITION
The financial position of the parties is complex and involves a number of corporate entities. The husband conducts business in real estate and, through a corporate entity, owns and conducts a half interest in an education business.
The following explanation of the corporate structure is taken from a document prepared by the husband and found at page 137 of the exhibits to his affidavit. The state of the evidence renders it impossible to understand the position with any accuracy and I have done the best I can with the material available. Obviously, the husband, had he chosen to do so, could have given detailed and precise evidence about this matter. He did not.
F Pty Limited (“FPL”)
The husband is the sole shareholder and the sole director of FPL. Its business is real estate. FPL owns two luxury vehicles which the husband proposes to sell. He deposed that he has entered into a contract to sell one of the vehicles for $120,000 to Mr J who has paid a deposit of $10,000. He proposes to sell the other vehicle for $130,000.
The financial statements for the year ended 30 June 2020, disclose that FPL had total equity of $2,801,537.
G Pty Limited (“GPL”)
The husband is the sole shareholder and director of GPL which the husband asserts has not traded since 2007.
H Pty Limited (“HPL”)
The husband is the sole shareholder and director of HPL which the husband says has not traded in 2021. The financial statements of HPL for the financial year ended 30 June 2020 disclose that in 2020 the company had retained earnings of $70,706 and its assets included a loan to the K Family Trust of $1,505,311 and a loan to MPL of $2,792,153.
The company had liabilities in excess of $4,000,000 which included $2,465,391 owed to the husband and $1,875,560 owed to FPL.
L Pty Limited (“LPL”)
The husband holds 50 per cent of the shares in LPL and is one of three directors. The other two directors are the husband’s parents who hold the other 50 per cent of the shares.
No financial statements have been provided for LPL despite the wife having requested them. No explanation has been given by the husband for his failure to provide the financial statements despite the fact that they are clearly within his control as a director. There is no evidence of the value of LPL or its income and asset position.
M Pty Limited (“MPL”)
The husband is the sole shareholder and director of MPL. I infer that MPL is the trustee of the M Trust. MPL owns a property at Suburb N. The husband deposed that he is currently “in the process of preparing O Street, Suburb N for sale”. Exhibited to the husband’s affidavit is a Sales Inspection Report and Exclusive Agency Agreement dated July 2021 which estimates the sale price of the Suburb N property to be between $5,685,000 and $6,175,000. The husband deposed that the mortgage over Suburb N is $2,000,000. Thus the equity in Suburb N is as much as $4,000,000 (allowing for selling costs) and not less than $3,500,000.
The wife first received notice of the proposed sale of Suburb N in the husband’s affidavit sworn on 20 July 2021.
Although there is no evidence from the husband about the consequences of the sale of Suburb N, I accept that capital gains tax would have to be paid. However I note that the financial statements of the M Trust show the Suburb N property having cost more than $3,800,000, including acquisition costs and other costs, so the amount of capital gains tax may not be great.
From the sale proceeds, MPL can repay the sum of $2,792,153 which it owes to HPL and HPL can then repay the sum of $2,465,391 which it owes to the husband. Because that payment would be in repayment of a loan, it is not assessable as income in the husband’s hands.
Thus the husband could, if he chooses, have access to almost $2,500,000 from the sale of Suburb N.
The husband has not, in his Financial Statement, included this sum as his asset.
K Pty Limited (“KPL”)
KPL is the trustee of the K Family Trust. The husband and the wife are equal shareholders and are both directors. KPL holds a 50 per cent share of the education business.
The tax return of the K Family Trust for the year ended 30 June 2020 shows net income of $310,060.
The financial statements of the K Family Trust show income for the year ended 30 June 2020 of $471,524.
The trust declared that it distributed $199,551 to the wife; $58,625 to the husband; $11,690 to the M Trust and $201,658 to HPL. The total distributions for that year were $471,524. The wife did not receive $199,551 as the document suggests. I accept that the whole amount of $471,524 was received by the husband or entities which he controls.
The husband’s tax return for the year ended 30 June 2020 was not in evidence and I am not aware what amount of income he claimed to have received.
There is no evidence which establishes what KPL received in the financial year ended 30 June 2021 and no evidence of what husband received from KPL in that year.
KPL owns 50 percent of the shares in P Pty Limited which is the trustee of the P Unit Trust and 50 per cent of Q Pty Limited which is the trustee of the Q Unit Trust.
R Pty Limited (“RPL”)
RPL is the trustee of the R Super Fund. The shareholders are the husband and the wife and they are both directors. No financial statements for RPL were in evidence. RPL owns 50 per cent of the shares in S Pty Limited, the trustee of the S Trust and 50 per cent of the shares in T Pty Limited as trustee of the T Trust.
No financial statements for S Pty Limited or the S Trust were in evidence. I am unaware of the financial position of those entities. Ms D deposed that S Pty Limited owns real estate with development approval.
The financial statements for the year ended 30 June 2020 for the T Trust show that the trust owned real estate returned at costs of $5,909,250. The mortgage secured over that real estate is $4,600,000. A further $2,153,904 is owed in unsecured loans. I infer that half of that sum, $1,076,952, is owed to entities controlled by the husband.
No real attempt was made by the husband to give a transparent account of his finances.
At annexure F to the husband’s Financial Statement sworn on 20 July 2021, the husband listed the corporate entities in the following manner:
Name of Company/Trust Position in Company/Trust Your % Share Value The M Trust Beneficiary No fixed share as it is a discretionary trust NK F Pty Ltd ACN … Director and Shareholder 100% of the shares E$250,000 K Family Trust Beneficiary No fixed share as it is a discretionary trust NK H Pty Ltd ACN … Director and Shareholder 100% of the shares Nil G Pty Ltd
ACN …Director and Shareholder 100% of the shares Nil Ferrara Family Trust Beneficiary No fixed share as it is a discretionary trust NK
It is immediately obvious that there is no reference in that table to a number of the entities referred to above and, most significantly, no reference to any of the entities which own and run the education business or to the S Pty Ltd entities.
The case outline document prepared by counsel for the husband and dated 21 July 2021, included a document entitled “Balance Sheet Drawn from Parties [sic] Financial Statements” which is set out below:
Assets H FMH B Street Suburb C 4,000,000 W CBA a/c…34 34 W BB Bank a/c ...41 83 W CC Bank.....42 20 W CC Bank…06 170 W NAB …79 10 W Motor Vehicle 3 20,0002 W Interest U School NK H Bank accounts 23,564 H DD Company shares 500 H Shares F P/L 233,000 H Cars 88,000 Superannuation W Superannuation R Super Fund 392,316 H R Super Fund Plan 1 773,355 Liabilities W Tax 65,000 W Loan Ms V 8,500 W Loan Ms W 34,500 W Y Company 14,800 W Legal fees 54,300 H Mortgage on FMH 3,100,00 H Loans from Mr & Mrs Z Ferrara 6,903,594 H Credit card 14,245 H Loans from AA Company 320,211
It is impossible to reconcile either of those documents with the documents in the evidence relating to the husband’s corporate interests.
The husband’s disclosure of his income was also criticised.
In his Financial Statement sworn on 16 April 2021, the husband stated his income to be $14,957 per week and his expenses to be $14,530 per week.
In his Financial Statement sworn 28 May 2021, the husband stated his income to be $8,438 per week and his expenses to be $16,229 per week.
In his Financial Statement sworn 20 July 2021, the husband stated his income to be $8,438 per week and his expenses to be $15,074 per week.
The husband’s tax returns for the financial years ended 30 June 2019, 2020 and 2021 were not in evidence.
How his income was calculated is entirely unclear.
In his affidavit sworn 20 July 2021, the husband deposed:
12.I am a professional as set out below. Prior to 17 May 2021, the regular income that I received for payment of outgoings were in the form of distributions paid into K Pty Ltd (via the trust known as K Family Trust) from P Pty Ltd and at times, from Q Pty Ltd. All of the remaining companies (i.e., H Pty Ltd, G Pty Ltd, F Pty Ltd, M Pty Ltd and R Pty Ltd) were not and are not generating any cashflow as a going concern and will only produce cashflow once those projects are completed and sold. As a result, I have been funding those projects from borrowings that the companies obtain from third parties, lenders and the sale of assets as necessary by example.
13.The only company that generates cashflow to meet day-to-day expenses is K Pty Ltd as trustee for the K Family Trust ('KPL').
14.KPL receives distributions of profit from its interest in the Q Unit Trust and the P Unit Trust. An unrelated entity also has an interest in the Q Unit Trust and the P Unit Trust and it receives an equal distribution of any profit distributed by the trustees of those trusts.
The financial statements of the P Unit Trust and P Pty Limited were not in evidence so it is impossible to know what income was available from those entities for distribution to the husband. A financial statement for the Q Unit Trust was in evidence but whether they are the same entity is unknown.
The husband deposed:
27.As of 17 May 2021, I commenced receiving a fortnightly wage of approximately $8,110 net (‘wage’) for services rendered to P Pty Ltd (the education business). This wage will vary from month to month based on the education business cashflow.
Significantly, the husband does not give any evidence of the income received by KPL from the operation of the education business, all of which he can apportion to himself.
Ms D deposed that in January 2020 the land at B Street, Suburb C, upon which the education facility stands, was subdivided. The evidence does not establish what corporate entity owns the real property.
Ms D deposed that one of the subdivided lots was sold in October 2020 for $1,050,000 and that, from that sale, $450,000 was paid to KPL.
That transaction has not been disclosed by the husband and there is no evidence about it in his affidavit or his financial statement.
Ms D deposed that there is a second block of land on the market. Contracts were exchanged for the sale of that block for $1,050,000 but the sale did not proceed. I infer that when that block is sold, KPL will receive a further amount.
Again that transaction has not been disclosed by the husband and there is no evidence about it in his affidavit or his financial statement.
After the wife and the child left the home, the husband agreed to pay the rent on a leased townhouse for their occupation. The rent was $625 per week. The husband paid $550 and the wife received rent assistance from Centrelink of $75. The wife deposed that the husband paid her a total of $1,000 each week.
When the parties separated, the mortgage over Suburb C was $1,600,000. On 6 December 2019, without notice to the wife, the husband refinanced the mortgage and borrowed $2,600,000. In relation to the additional borrowing of $1,000,000, the husband deposed that “a portion” of those funds were applied towards existing projects through MPL, Q Pty Limited, T Pty Limited and S Pty Limited. What that portion was is not disclosed.
On 3 April 2020, the husband, in an email to the wife, stated:
I haven’t been for quite some time and definitely no longer in the position to sustain our lifestyle and will have no choice to drastically reduce costs if we are to survive this crisis. To this extent I propose that I pay you the following for as long as I can manage commencing next week:
•$2000 per month (divided into 4 payments each month) and not the $4000 I am currently paying. So next week is the last $1000 instalment into your account, less the payments I will make directly for [the child’s] piano lessons and some of [the child’s] psychology fees. These fees add up to $840 and I will deduct $390 this week and $450 next week…
(As per the original)
Clearly the amount the husband was proposing to pay was not sufficient to cover her rent.
On about 7 April 2020 the husband, again without notice to the wife, borrowed a further $500,000 secured against Suburb C. That borrowing occurred within days of the husband telling the wife that he could not afford to continue paying her $1,000 per week.
The husband deposed “these funds were applied in the same manner…” as the $1,000,000 referred to in the previous paragraph. Again, the husband gave no evidence about the precise distribution and use of those funds.
The husband has given no accounting for the sum of $1,500,000 borrowed against Suburb C after separation.
Against the background of the husband’s reducing the support provided to the wife, it is instructive to look at the movements in his personal bank account with the Commonwealth Bank ending #...09:
·On 1 April 2020, the balance was $135,379.
·On 7 April 2020, the husband transferred $40,000 to MPL.
·On 9 April 2020, there was a deposit of $500,000, transferred from another account in the name of the husband, leaving a balance of $595,379.
·On 16 April 2020, $20,000 was transferred to MPL.
·On 20 April 2020, $5,000 was transferred to MPL.
·On 21 May 2020, $50,000 was transferred to MPL.
·On 2 June 2020, $120,000 was transferred to MPL.
·On 29 June 2020, $190,000 was transferred to MPL.
·On 2 July 2020, $40,000 was transferred to MPL.
·On 3 July 2020, $90,000 was deposited by MPL.
·On 8 July 2020, $510,000 was deposited by MPL.
·On 28 July 2020, $80,000 was transferred to MPL.
·On 14 August 2020, $100,000 was deposited from another account in the name of the husband.
·On 20 August 2020, $45,000 was deposited by MPL.
·On 24 August 2020, $60,000 was deposited from another account in the name of the husband. The balance at that date was $727,263.
·On 6 October 2020, the husband transferred $600,000 to LPL with the reference “Loan Ret”.
Clearly the #...09 account is not the husband’s only account with the Commonwealth Bank.
In relation to the payment to LPL, there is no evidence that there was any requirement to repay those funds. The document which is relied upon by the husband to substantiate to indebtedness to LPL clearly states that repayment is to occur by 2024.
Counsel for the wife referred to numerous transactions in the bank statements of the various entities where large sums of money are transferred between the entities and the husband. I have not set them out here in detail because they demonstrate a similar picture to that gained by examination of the #...09 account. The transactions demonstrate that the husband appears to have access to large sums of money and to move funds between the various entities at will.
The husband has made no payments for the support of the wife since March 2021. As a consequence, she has not been able to pay rent and is facing eviction.
THE WIFE’S FINANCIAL POSITION
The wife has the care of the parties’ 11 year old child.
She worked full time at the education business until separation. It is her evidence that she wanted to continue to work there but the husband would not allow it. The husband does not dispute that evidence.
The wife deposed that she has been working for 20 hours each week but that work has now been cancelled. In her Financial Statement sworn on 14 May 2021, the wife deposed that her income was $400 per week.
She now has no income.
The wife has $515 in her bank account. She has no other significant assets.
Other than to assert that the wife could work if she wanted to, the husband made no challenge to the wife’s evidence of her financial position.
I accept that the wife is unable to support herself.
Against that background, I propose to consider the competing applications.
OCCUPATION OF SUBURB C
The wife seeks an order for sole occupation of Suburb C. The wife wants to retain it as part of her final entitlement to property division. The husband seeks its sale.
No cogent reason is advanced by the husband for the sale of Suburb C, other than his assertion, which for the reasons set out above I do not accept, that he has insufficient funds to service the outgoings. If the husband needs to raise funds, he can sell Suburb N.
The issue of occupation of Suburb C is to be determined on the balance of convenience.
The wife has no ability to pay rent and has been given notice that she will be evicted from her present home.
The husband’s proposal is that he will pay the wife $100,000 and that, from that sum, she can rent alternate premises and support herself.
In her Financial Statement the wife deposed that her reasonable expenses, including rent of $625 per week, are $2,215 per week. There was no challenge to the reasonableness of those expenses.
Therefore the husband’s proposal would provide the wife, and therefore the child, with somewhere to live for about six months. It is clearly unacceptable that the wife and their child should have no secure housing.
Whether the husband has made arrangements for alternate premises, in circumstances where he seeks the sale of Suburb C, is not known but his capacity to fund alternate accommodation is far superior to that of the wife.
Suburb C includes a cottage which the wife deposed is currently rented for $375 per week and the wife hopes to rent for $500 per week. Whether the husband is currently renting out the cottage is not known but he discloses no income by way of rent in his Financial Statement.
The balance of convenience supports the wife’s occupation of Suburb C.
HUSBAND’S APPLICATION TO SELL SUBURB C
For the reasons set out above, the husband has not established that it is necessary to sell Suburb C.
WIFE’S APPLICATION FOR SPOUSAL MAINTENANCE
The wife will have the occupation of Suburb C and the orders which I will make will require the husband to pay the mortgage, rates and insurance.
There was no challenge to the wife’s expenses set out in Part N of her Financial Statement which she estimated to be $1,515 per week. However, those expenses included the sum of $220 for “children’s activities” which is not a proper expense to be taken into account when assessing spouse maintenance and that amount will be deducted. The only other expense which the wife incurs is car registration of $25 per week. Thus her reasonable expenses are $1,320. I will order that the husband pay that amount.
WIFE’S APPLICATION FOR LITIGATION FUNDING
The wife seeks the sum of $150,000 by way of interim property settlement.
The husband contends that when the matter is finally determined, the Court will find that the liabilities of the marriage exceed the assets.
In those circumstances, it is submitted, there should not be an order for interim property settlement as the amount could not be taken into account as part of the wife’s final entitlement.
It was the husband’s proposal that he pay the wife $100,000 by way of lump sum spousal maintenance, those funds to be raised from the sale of one of the two luxury vehicles he has on the market. Each sale will raise more than $100,000.
I accept that it was not the husband’s position that the wife should receive the lump sum of $100,000 if she were also to have the occupation of Suburb C.
However, the law in relation to the payment of a lump sum by way of litigation funding is clear. In circumstances where it is not appropriate to make an order for interim property settlement, the power to make such an order is found in the provisions relating to spousal maintenance or in the provisions relating to costs in s 117 of the Family Law Act 1975 (Cth), (“the Act”).
The Full Court in Salvage & Fosse [2020] FamCAFC 144 set out the test to be applied when making an order pursuant to s 117 in the following terms:
The critical question therefore is whether the applicant has “any real prospects of obtaining justice unless the order sought is made” (Parker v Parker (1992) 16 Fam LR 458 at 461), or in terms of s 117(2) of the Act, whether in all the circumstances the costs order is just.
The husband concedes his ability to pay $100,000. The wife has no assets with which to pay her legal costs.
Both parties have filed costs notices pursuant to Rule 19.04 of the Family Law Rules 2004 (Cth).
The wife has borrowed from family to pay some $5,485 and has costs of $72,418 outstanding. Her future costs are estimated to be $100,000.
The husband has paid $51,172, presumably from funds drawn from the various entities which he controls. His costs notice pursuant to Rule 19.04 describes his payments as “privately funded”.
The order for payment of litigation funding could be made pursuant to s 117 of the Act but, since the husband proposed a payment by way of lump sum maintenance, the amount will be paid on that basis.
Having regard to the husband’s history of dealing with assets without notice to the wife, the husband will be restrained from dealing with the two luxury vehicles, until payment has been made other than for the purpose of compliance with this order.
SALE OF MOTOR VEHICLE 3
Both parties seek the sale of the vehicle and payment of the proceeds to the wife.
The husband has a buyer for $22,000 which can be paid immediately. The wife wants the opportunity to find a buyer at a higher price.
The orders will allow the wife 14 days, as she asks, to attempt to sell the vehicle, failing which the husband is to sell it and pay the wife not less than $22,000.
I certify that the preceding one hundred and four (104) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Rees. Associate:
Dated: 27 July 2021
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