Finazzi and Finazzi (No 2)

[2011] FamCA 1022

FAMILY COURT OF AUSTRALIA

FINAZZI & FINAZZI (NO 2) [2011] FamCA 1022

FAMILY LAW – PROPERTY – Hogan Order

Family Law Act 1975 (Cth)

Gabel & Yardley (2008) FLC 93-386
Strahan & Strahan  (2011) FLC 93-466
Zschokke and Zschokke (1996) FLC 92-693

APPLICANT: Ms Finazzi

RESPONDENT: Mr Finazzi

FILE NUMBER: BRC 3023 of 2010

DATE DELIVERED: 9 November 2011

PLACE DELIVERED: Brisbane

PLACE HEARD: Brisbane

JUDGMENT OF: Murphy J

HEARING DATE: 9 November 2011

REPRESENTATION

SOLICITOR FOR THE APPLICANT: Mr Jones of Jones Mitchell Lawyers

SOLICITOR FOR THE RESPONDENT: Ms Ross of Hopgood Ganim Lawyers

Orders

1. Yet To Be Provided By Solicitor

IT IS NOTED that publication of this judgment under the pseudonym Finazzi & Finazzi is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT BRISBANE

FILE NUMBER: BRC 3023 of 2010

Ms Finazzi

Applicant

And

Mr Finazzi

Respondent

EX TEMPORE

REASONS FOR JUDGMENT

1. An issue emerges in the context of the parties otherwise agreeing to directions that will see the trial in respect of financial issues proceed before me over seven days, commencing 12 December 2011, that is, in about four and a half weeks’ time. 

2. During the course of discussions with the solicitors for each of the parties, an additional issue arose with respect to an aspect of the valuation of a piece of real property.  The best means of determining that aspect of that dispute between the parties is, as it seems to me, to direct that a copy of the relevant part of the transcript where I set out what I consider to be the proper position of the valuer’s evidence within these proceedings, and for that transcript to be provided to each of the parties free of charge.

3. A remaining issue in respect of part of that valuation of that piece of real property is the payment of fees with respect to that component of the valuation. But, that issue forms part of a broader issue which the parties ask me to determine. Should, in accordance with the prima facie position set out in the Family Law Rules 2004, the parties equally pay valuation fees in respect of both real property valuations and business valuations that are to be conducted, so as to allow the trial to take place on the dates to which I have earlier referred?

4. The costs of that aspect of the real property valuation to which I have referred form part of overall valuation costs which are estimated to be in the region of $100,000. There is the potential for further, I might infer, more minor valuation expenditure in respect of horses and plant and equipment, but no evidence is before me in respect of the potential cost of any such valuations should they be needed. 

5. As I have said, prima facie, each party should pay equally the costs of the valuation fees of single experts in accordance with the Rules.  The wife applies for an order that the husband pay her share of the fees in the first instance and for that to be credited, as it were, against any entitlement she otherwise receives, pursuant to ultimate property orders to be made.  The husband contends for a position in accordance with the prima facie position outlined in the Rules.

6. The issue before me, though, needs to be seen in context; it is an issue about who should pay $50,000, that being approximately half of the valuation fees outstanding to which I have earlier made reference.  The payment of that sum falls to be considered in the context of a property dispute involving property of various significant value, and where the parties have spent, or will spend, a total of about $1 million in legal fees. 

7. The parameters of the property dispute to be determined by me are these.  The wife’s case is that she could receive not less than 40 per cent of a net pool which she says could not be less than $45 million.  That is to say she would receive in the region of about $18 million, inclusive of any property which she currently retains.

8. The husband contends that the “pool” will likely have a net value closer to $30 million and that the wife will receive not greater than 25 per cent of that pool.  It is also said that she already has about $6 million. Thus, it is contended, her entitlement will be about $1.5 million from the husband. 

9. It is also submitted on the husband’s behalf that there will be considerable difficulties associated in raising the payment of that sum and that this will be the subject of submissions with respect to the justice and equity of the form of the orders that are ultimately made.  The solicitor for the husband refers, in helpful written submissions, to this case being akin to an application for what is often called a ‘Hogan order’. Mr Jones, who appears for the wife, does not contend otherwise. 

10. The written submissions refer to the decision of the Full Court in Zschokke and Zschokke (1996) FLC 92-693. Of course, more recent decisions also refer to the principles referred to in that case more generally, including decisions in the Full Court in Strahan & Strahan (2011) FLC 93-466 and Gabel & Yardley (2008) FLC 93-386.

11. In the latter case in particular, the importance of the ability to “claw back”, or render “reversible”, any order made ahead of the final property orders was emphasised.  I cannot see that that is an issue in this case.  Whatever orders are made ultimately, it is plain that the wife will receive significantly more than $50,000 and as a result, an appropriate adjustment can be made so as to accommodate any payment that she receives in that sum.

12. The question here, by reference to the principles in those cases to which I have referred, is one of relative financial strength, the current respective liquidity of the parties and, as a result, the justice and equity of any orders that might be made today ahead of a trial.  Given that the Rules provide a prima facie position, it seems to me that the question is, is there a sufficient evidentiary foundation to displace the prima face rule, such as to convince the court to dispense with compliance with that rule. 

13. The wife’s affidavit filed 31 October 2011 refers to her current financial circumstances.  She deposes to receiving income of about $3900 per week and expenses of about $3800 odd, which she details in that affidavit.

14. She deposes to the fact that, late last year, she approached the National Australia Bank to enquire whether she could sell any properties in order to raise funds to meet living expenses and legal fees.  She also deposes to having made application, and received approval in July 2011, for a loan of $300,000, and deposes to holding nine pieces of real property in her name but which properties are cross-collateralised. 

15. The wife deposes that, “I will need to explore further funding options.  I am not certain if Westpac Bank will allow me to borrow further funds.”  In respect of the husband’s position, she asserts that he earns annual income of about $2 million a year and that he spends about $28,000 a month or $7000 a week on his sporting pursuits, made up of the headings to which she refers in the affidavit. In that respect, she deposes further that financial statements produced by the husband reveal that he spent in the region of a quarter of a million dollars a year on sports related expenses in the financial year ending 30 June 2010, and between $200,000 and $240,000 in the financial year ending 30 June 2011.  She goes on to depose to the husband owning at least 27 horses and his estimate of the value of those horses being about $120,000. 

16. The wife also deposes that, for the financial year ending 30 June 2010, the husband, through his business group, donated just over $1 million to F Pty Ltd and just over $800,000 in the financial year ending 30 June 2011. 

17. The husband contends that the significant business interests which he has are facing very difficult times.  He deposes that the group is presently behind in its payments to the bank and has only been able to make one amortisation payment during this calendar year of just over $100,000, and that the group has been unable to pay the $125,000 per month required of it by the bank. 

18. He goes on to depose that as a result of being behind in the payments required by the bank, the bank has asked the group to sell more properties by the end of this year to “compensate for the $1 million that we are behind in principle repayments, which were intended to be met from cash flow.  In total, we are eight monthly payments short of $125,000 each, a total of $1 million.”

19. The husband goes on to depose to an agreement reached with the bank as to a moratorium on payments “until September 2011, from January 2011, but on the basis that the payments be made up.”  He goes on to say that the group cannot afford to do so.  Further, he deposes more generally to the financial difficulties confronted by the group and refers to the fact that the financial controller for the group, Ms M, has requested a meeting with the National Australia Bank in Sydney later this month to see if “some further leniency can be given, particularly over the Christmas period.  I am doubtful that this request would be successful.”  As I have earlier referred to, the husband, like the wife, anticipates spending considerable legal fees in the preparation for, and conducting of, the trial due to take place in a few weeks time.

20. In response to issues raised by the wife in her affidavit, the husband makes the point that, despite the very high income deposed to by the wife and received by him, that income is used to meet very considerable expenses of which examples are given in the affidavit. 

21. He deposes to a shortfall in the mortgage secured over the home of over $2 million and that the repayments on that mortgage are nearly $5000 per week, and that other expenses include $5000 a week payable to the wife in respect of moneys paid direct to her and expenses paid on her behalf. 

22. He goes on to depose that he does not have any funds in the personal bank accounts of substance, that he has an overdraft facility with National Australia Bank of $500,000 that is “presently at or close to its limit”. Although there is a loan account owing to him of just under $1 million from the G Trust, that entity, he says, does not have the capacity to make any payment referred to in that loan account. 

23. The husband agrees in that affidavit that he did make a proposal to the wife to fund valuation expenses of the real property valuer, but he says, “I simply cannot afford to meet all of that payment as [Ms Finazzi] suggests.” 

24. The excerpts from the affidavit material just outlined together with other matters referred to in each of the affidavits, highlights a significant difficulty in this case and in cases of this type that has been referred to in many earlier decisions of the court.

25. In an application of this type, the court is not in a position to make findings with respect to matters of fact that are in contest between the parties.  That is all the more so in circumstances where it is clear that a number of significant factual allegations and counter-allegations will be the subject of the trial about to take place. 

26. The best that can be done in circumstances such as the present is to look to those matters which do not appear to be the subject of significant contention and/or the subject of admission, with a view to arriving at the most just result that can be achieved despite the underlying central difficulty. 

27. The written submissions on behalf of the husband contend, centrally, that the wife has failed to demonstrate that she is unable to meet payment of her share of the costs of the valuations which are thereafter tabulated.

28. Those submissions also point out that the wife has jewellery and artwork based on an earlier valuation, totalling over $200,000.  It is submitted that “the total of the wife’s anticipated further expenses is therefore between $330,000 and $430,000, leaving the wife with a further $70,000 to $170,000 if (my emphasis) her loan is approved”.  That is a reference to the fact that the wife deposes to having made a further application for half a million dollars in funding to Westpac, to which I have earlier referred and that she depose in her affidavit to outstanding legal and accounting fees of about $130,000 and anticipated fees of between $200,000 and $300,000.

29. It is also contended on behalf of the husband that the wife has the capacity to borrow against unencumbered properties, and that ought to be contrasted sharply with the position of the husband outlined in those submissions and in the affidavit material to which I have earlier referred, which points to considerable difficulties in the business enterprises in which he is engaged and the inability to borrow, revealed in that affidavit material. 

30. Significantly, the submissions point to the fact that “the wife has failed to point to any source against which the husband can raise the funds to meet not only his costs, but her share of valuation expenses”. 

31. It is submitted that, in effect, the wife’s application should be likened to an application for a Hogan order. It is accepted (see, for example, Zschokke) that in order to succeed in such an application, an applicant would need to demonstrate the following, amongst other matters; (a) the respondent has the capacity to meet his or her own legal costs, and (b) that the applicant does not have sufficient assets, resources or income from which he or she can meet the costs of the proceedings. 

32. It is true that that decision refers to the need to point to a source of funds from which orders of the type discussed in that case can be met.  However, as in this case, where there are plainly very significant business enterprises of very considerable value, that is often not an easy thing to do because of the complex nature of those business enterprises and the manner in which they are conducted.

33. Moreover, as the Full Court sought to make clear, in both Strahan and Gabel & Yardley, the overriding consideration in a case of this type is to seek to effect justice and equity.  And the matters referred to by the Full Court in Zschokke, although necessary to be considered in a careful and methodical way, are not necessarily determinative of an application of this type in circumstances where it is clear that firstly, any such order is susceptible to “claw back” or is “reversible” as referred to in those authorities, or circumstances where the financial circumstances of the parties include complex arrangements with respect to the conducting of valuable businesses.

34. The problem in this case, as in so many cases of this type is an evidentiary one.  What evidence might be relied upon in fairness to each of the parties in circumstances where findings are unable to be made about factual matters about which there is significant contest. 

35. The crucial issue in this case is, ultimately, as it seems to me, the disparity in the respective financial positions of the parties – and, more importantly, in the current application, the capacity of each of the parties to control, or potentially control, the means by which funds or property (of whatever type or description) might be paid and/or dealt with. 

36. In that respect, it seems to me significant, against the background to which I have earlier referred, that in an affidavit filed 7 November 2011, the wife deposes that the husband is booked to travel overseas to participate in high altitude training with a sporting team, departing 13 November for 10 days and again from 14 December 2011 to 23 January 2012.

37. Mr Jones makes the point on behalf of the wife that the husband will be overseas for about 50 days out of a total of about 71 days.  I should point out that Ms Ross, who appears for the husband, says that although the current booked dates for the second of those two trips intersect with the trial, the husband proposes to make such changes as are necessary so as to be present at the trial.  In responding to that assertion by the wife, the husband says these things. I propose to quote in full paragraph 59 of his affidavit.  Firstly, though, he says what the wife says in her affidavit is correct, but he goes on to say that:

    (a)In relation to my proposed travel …, this is not a holiday as [Ms Finazzi] appears to suggest. I am travelling to attend a conference with players from the [sporting team].  There will be a large number of players in attendance, all of whom are earning $200,000 per annum or more.  I have been invited to present to the players in attendance on property investment.  I am attending, even though I prefer not to given the timing of the trip, because it is one of the best sales opportunities that I have been presented with in recent times and which I anticipate being presented with in the foreseeable future.  While other presenters are attending, I am the only property presenter and I am attending purely as a sales trip to try to gain new clients for our syndicates, and the group’s operations as a whole.  But for the potential sales arising from the trip, I would not be going.

    (b)I generally travel on one holiday each year.  This year I booked a trip for the Christmas period with my son [H].  I have booked this travel using frequent flyer points which I have indicated to [Ms Finazzi] through her solicitors on several occasions, because this is the only way that I can afford a holiday.  I have had to book to travel for 14 December 2011 as a preliminary booking only.  My staff ring Qantas generally every day to see if the booking can be changed to a later date, given the trial dates in this matter.  If a later flight cannot be secured then I will need to cancel that leg on frequent flyer points and purchase a flight, however I would prefer not to do so given the additional costs which I cannot afford.

38. The affidavit of the wife annexes other information relating to the travel. It reveals, for example, that the husband and the parties’ child, H, will travel to North and South America and that accommodation bookings that have been made include the a ski resort. 

39. The wife also refers to the fact that the parties’ daughter, and the husband’s current partner, will accompany the husband and H for all or part of that trip.  I also refer, additionally, the evidence to which I earlier made mention in respect of the husband’s sporting activities and very significant donations to charity. In respect of the overseas travel, I note that the email communications which contain the details to which I have made reference include an email from the wife in which she says that she too plans to travel overseas. 

40. A summary of that evidence reveals, as it seems to me, that the decision in this case is not a straightforward one.  However, what ultimately persuades me is that the husband has greater control over significantly greater assets than the wife and has a greater capacity, as it seems to me, to regulate payments so as to provide, in the first instance, the payment of half of the valuation fees to which I have just referred. 

41. On balance, I consider it just that he should pay one half of the fees in the manner contended for by the wife.

I certify that the preceding forty-one (41) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Murphy delivered on 9 November 2011.

Associate: 

Date:  17 November 2011