Forlan and Forlan

[2015] FamCA 1055

FAMILY COURT OF AUSTRALIA

FORLAN & FORLAN [2015] FamCA 1055

FAMILY LAW – PROPERTY – interim orders – where the parties have effective control over various corporate entities – where the wife seeks orders for spousal maintenance and other expenses – where the husband seeks an adjournment – where both parties seek orders for discovery – where the wife seeks an order of injunction and restraint against the husband when dealing with any of the assets of the companies – where the wife has funds available to her – where the husband alleges he does not have the financial capacity to support the wife – where the husband concedes that he would cause to be paid to the wife the sum of $25,000 and that he will take no action to repossess the car in the possession of the wife – where the husband agrees to provide the wife with a copy of any contract for sale of any item within seven days – where no order is made in relation to discovery considering the parties have an obligation to make full and frank disclosure under the Family Law Rules 2004 (Cth).

Family Law Act 1975 (Cth)
Family Law Rules 2004 (Cth) – pt 12, pt 13

APPLICANT: Ms Forlan

RESPONDENT: Mr Forlan

FILE NUMBER: ADC 1582 of 2015

DATE DELIVERED: 30 November 2015

PLACE DELIVERED: Adelaide

PLACE HEARD: Adelaide

JUDGMENT OF: Berman J

HEARING DATE: 26 November 2015

REPRESENTATION

COUNSEL FOR THE APPLICANT: Ms Lewis

SOLICITOR FOR THE APPLICANT: Paul Doube Solicitors

COUNSEL FOR THE RESPONDENT: Ms Cocks

SOLICITOR FOR THE RESPONDENT: Mellor Olsson

Orders

1. That the hearing of the interim proceedings is adjourned to 3.30pm on 29 January 2016.

2. That forthwith the husband cause to be paid to the trust account of Paul Doube Lawyers for and on behalf of the wife the sum of TWENTY FIVE THOUSAND DOLLARS ($25,000) NOTING that at the election of the husband the said sum can be paid by him or by transfer from the parties daughter Ms B.

3. That until the payment of the said sum has been made save as may be necessary to make the payment, the husband is restrained and an injunction granted restraining him from accessing any funds standing to his credit with NAB, ANZ or Westpac Banks.

4. That the husband be restrained and an injunction is granted restraining him from removing or causing to be removed from the possession of the wife the Audi motor vehicle NOTING that the wife will continue the lease payments as they fall due.

5. That the parties take all steps necessary and sign all documents as may be required to enable the wife (and the husband) to obtain an income tax refund due to her (and him) for the financial year ended 30 June 2015.

6. That during the period of the adjournment a mandatory injunction is granted requiring the husband to provide to the wife through her solicitor with a copy of any contract for sale of any item and if no written document confirmation of an intention to sell any item not less than seven (7) days prior to a contract being signed or an intention to dispose of, sell or transfer any item and following any sale, to confirm receipt of payment of such sale proceeds within seven (7) days of it having been received.

7. That the husband do all such things as may be required to authorise Benchmark Business Brokers to provide to the wife upon her request such information as she may reasonably require in relation to the conduct of the sale of the F Group or any part thereof.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Forlan & Forlan 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 1582  of 2015

Ms Forlan

Applicant

And

Mr Forlan

Respondent

REASONS FOR JUDGMENT

INTRODUCTION  

1. By Amended Initiating Application filed 19 November 2015, Ms Forlan (“the wife”) seeks final orders for property settlement that would divide the property and other interests of the parties equally between them.  In addition, she seeks an order of spousal maintenance in the sum of $1500 per week.

2. The interim orders sought by her are more expansive.  She seek by way of urgent or interim spousal maintenance that Mr Forlan (“the husband”) pay to her the sum of $1500 per week together with an amount equivalent to expenses as set out in 3 (a) to (e) of the interim orders sought but summarised as follows:

   (1)An amount of $1500 (net of tax).

   (2)Superannuation entitlements to be calculated on income received by her (if the payment to her is by way of a wage as opposed to a payment of spousal maintenance).

   (3)Petrol costs to the sum of $50 per week.

   (4)The premiums in respect of her AMP life and trauma insurance.

   (5)The mortgage instalments in respect of mortgage number 11761400 secured over the property situate at C Street, Suburb D being the wife’s current residence.

3. In alternative relief, the wife seeks that if the sum of $1500 together with other expenses as set out is not received by way of spousal maintenance, then she seeks that the husband do all things as may be reasonably required to ensure that the E Pty Ltd (“E”) or F Pty Ltd Pty Ltd (“F Pty Ltd”) or any other entity of the F Group should cause those monies to be paid to the wife.

4. The interim orders also include detailed orders for the provision of discovery and a requirement that the husband do all things necessary to facilitate a forensic accounting consideration by the wife’s nominated expert as to the structure and operation of the F Group provided that the cost of the report shall be shared equally between the husband, the wife, the husband’s father and four unrelated minority shareholders involved with various of the entities that comprise the F Group.

5. Order 6 seeks an order of injunction and restraint against the husband restraining him from authorising or effecting the sale, mortgage, charging, transfer or dealing with any of the assets of the F Group unless the transaction is carried out “in the ordinary course of business” , with that to be defined as a transaction that has the agreement of the solicitors for each of the parties, or by subsequent order of the Court.

6. It is not controversial that the parties are actively engaged in the marketing and sale of the principal entities comprising the F Group.  A business broker has been instructed and the wife seeks that they be authorised to provide to her upon her request such information as she may reasonably require.

7. For reasons that will become apparent, the wife seeks particulars of bank accounts that relate to E and the Forlan Family Trust (“Forlan FT”) in order to track and trace funds that the wife alleges were held in bank accounts as at 30 June 2015.

8. The wife seeks by way of litigation funding that the husband pay to her the sum of $100,000 in anticipation of legal expenses and costs of litigation.

9. The proceedings were originally commenced by the wife on 21 October 2015.  It is a reasonable observation that both the final orders, but in particular the interim orders sought by the applicant, are not dissimilar in the Amended Application to those sought by her at first instance.

10. The wife relies upon the following documents in support of her interim application:

    (1)Affidavit of wife filed 21 October 2015

    (2)Financial Statement of wife filed 21 October 2015

    (3)Affidavit of wife filed 19 October 2015

    (4)Affidavit of wife filed 22 November 2015

11. The proceedings first came before a Registrar on 3 November 2015.  The order of the Registrar reflects that the wife was represented by counsel and the husband by senior counsel.  Orders were made that required the husband to file and serve answering documents within 21 days in anticipation of the proceedings be adjourned for interim argument before me today.

12. Consistent with the orders made by the Registrar, the husband filed an Application in a Case on 25 November 2015 seeking the following orders:

    (1)That the hearing of the wife’s Initiating Application seeking urgent orders be adjourned.

    (2)That the parties take all steps necessary to enable the wife’s income tax return to be lodged for the financial year ending 30 June 2015.

    (3)That the wife make discovery of various bank records, credit card statements and other documents for the period 1 January 2015 to the present date.

13. The husband also sought an order in respect of the parties dog , but counsel for the husband submitted that the husband no longer pursued that application.  His application was supported by his affidavit filed 25 November 2015, which document importantly annexes a financial statement sworn 25 November 2015.

14. The basis of the adjournment application was that the husband’s senior counsel had suffered an accident and was due to undergo medical intervention on the day of the hearing of the wife’s application.  Senior counsel could be considered as the husband’s counsel of choice and it was argued that the matter should not proceed in terms of any detailed consideration of the wife’s orders sought.

15. The Court was however assisted by counsel on behalf of the husband.

16. Ultimately, I considered that there was merit in the application for adjournment and determined that further consideration (subject to counsel’s availability) should be adjourned to 29 January 2016.  Notwithstanding that decision, the wife’s counsel submitted that I should consider some interim orders to ensure that the wife was not prejudiced by the delay in circumstances where the adjournment was sought at the request of the husband notwithstanding that he had notice of the wife’s circumstances and her orders.

17. I considered that there was merit in the submission of the wife’s counsel.

BACKGROUND

1. The parties met in 1985.  They married in 1987 and there are now two adult children of the relationship namely Ms B born in 1988 and Ms G born in 1996.

2. The children currently reside with the husband in the home of his father.

3. At the commencement of their relationship, the husband had an interest in F Pty Ltd.  He had apparently been appointed as a director in 1981.  His parents held the majority shareholding.  It seems that the financial circumstances of the parties flourished and there is a somewhat complex history of the purchase and development of both domestic and commercial real estate.

4. The property in which the wife currently resides was purchased in 2005.  It remains registered in the sole name of the wife.  There is no mortgage secured over the property in respect of its’ purchase but rather, there is a mortgage to NAB by way of a business related loan.

5. An example of the commercial complexity of the financial affairs of the parties can be gleaned from the information in paragraph 32 of the wife’s affidavit filed 21 October 2015 wherein she sets out how the net proceeds of sale of a property owned by the parties in Suburb H was disbursed.  It was a matter of some focus by the wife’s counsel that the net proceeds were primarily used to discharge loans in relation to a number of corporate entities that are loosely described as part of the F Group.

6. I am uncertain whether there is a contention in relation to the date of separation, but the wife considers that it occurred in February 2013.

7. The wife’s father died in 2014 and she received an inheritance of $47,000.  Those monies were placed in a term deposit with Bendigo Bank and they are reflected in her financial statement.

8. In 2013 she received a tax refund of $29,000.  Those monies were retained in a bank account in the joint names of the husband and the wife.  Further monies were added and then $50,000 was placed on fixed term deposit.

9. At paragraph 43 of the wife’s first affidavit, she deposes to those monies being withdrawn by her and having them paid to the account of her daughter Ms B who was to hold them on trust for her as she was apparently concerned as to the financial position of the F Group.  It is the wife’s position that her daughter agreed to hold the funds and by implication would return them to her when they were required.

10. The wife sought and received from her daughter the cumulative sum of $20,000.  Some of the monies were used to pay her previous solicitors.  Others were used to improve and refurbish her current home.

11. A recent request to her daughter to return the balance of the monies held namely $30,000, resulted in an agreement only that $5000 would be returned.  The daughter’s refusal was apparently based on an assertion that she intends to hold the balance of the monies for the husband.  A sum of $5000 was however transferred to the wife.

12. The husband concedes a similar understanding as to the basis upon which his daughter holds those monies.

13. It is now his position that those monies should be returned to the wife and as I have indicated to the parties and with the consent of the husband and no opposition by the wife, I propose to order that the wife be reimbursed the sum of $25,000 either from the daughter or the husband at his election.

14. It is reasonable to describe the business structure as between the parties and the composition of the F Group of Companies as complex.  The main entities appear to be F Pty Ltd being the principal entity, with the husband, the wife and the husband’s father as the directors and the husband holding one quarter of the issued shares, with his father and an entity controlled by his father holding 75 per cent of the shareholding.

15. The activities of that company appear to relate to scaffolding and construction.  There is significant involvement as a beneficiary in the  B Forlan family Trust (“B Forlan FT”) and as a beneficiary of the Forlan FT.

16. Forlan Investments Pty Ltd (“Forlan Investments”) is the corporate trustee of the Forlan FT.  The husband is the appointor of the trust.  The husband and wife are shareholders and directors of the trustee company.

17. Other significant entitles appear to be I Pty Ltd(“I Pty Ltd”), E and Forlan FT.  The wife alleges that the husband has managed the F Group, certainly during the course of their marriage and any suggestion that he is subordinate either to his father or indeed to other minority shareholders is a fiction.

18. For his part, the husband does not resile from the historical observation of his corporate control, but says that of recent date the business has been experiencing significant cash flow and his current poor health has limited his ability to attend to the business operations.

SALE OF F GROUP

1. The parties agree that the F Group should be sold.  The original asking price was $10,000,000, but given there was no interest, the sale price has been reduced to $8,000,000.  In addition, the husband proposes the sale of another scaffolding enterprise which the wife says would be sold at a significantly reduced price.  Without further consideration and investigation, she is resisting that proposal.

2. Annexure “SF3” to the affidavit of the wife filed 19 November 2015 is the memorandum and prospectus of sale.

3. The document has some importance in that it sets out the various entities that comprise the F Group and are therefore intended to transfer with any successful sale.

4. A financial summary of the group provides the consolidated profit for 2013, 2014 and 2015.  At first consideration it appears that there is significant and increasing net profit across three years culminating in adjusted net profit of $2,209,305 for the 2015 year.

5. It is not the wife’s position now to interfere with the sale, but rather the level of mistrust between the parties has reached a point where she seeks separate access to the advice of the business broker rather than to rely upon information pertaining to the sale as may be distributed by the husband.

THE PERIOD AFTER SEPARATION

1. Following separation, the wife continued to work in the business on a part-time basis.  It would seem uncontroversial that she was paid the weekly amount of $1800 net of tax by E and F Pty Ltd.  She was also paid superannuation, petrol allowance and the payment of her term life and trauma insurance premiums.

2. The relationship between the parties deteriorated to the point where an Intervention Order was taken out against the husband in June 2015.  The husband considered that he and the wife could no longer work cooperatively together and invited her to cease working in the business.  She was not asked to relinquish any shareholding and/or directorships and it appears that these remain unchanged to the present date.

3. The wife initially refused.  She alleges that the husband unilaterally reduced her salary from $1800 per week to $1000 per week and ultimately she accepted a proposal that she cease attending for work as and from 21 August 2015, but upon the basis that she receive a weekly payment of $1500 and the continuation of the other benefits that she had received.

4. On 13 October 2015 she was given notice that her weekly payments would be reduced from $1500 to $800 per week effective from 11 November 2015.

5. For reasons that would seem at best ill-advised, she was advised in early November 2015 that she would receive no further income payments and that all other benefits would be terminated, including the use of her motor vehicle, phone, the payment of fuel expenses and her insurance premiums.

6. The decision to cease any financial benefit or entitlement to the wife was foreshadowed not by the husband but by his father in his capacity as a director and majority shareholder of F Pty Ltd.  It is as a result of that action that caused Mr J Forlan to be joined as a third party to the proceedings.

7. The wife’s circumstances according to her were precarious and accordingly she seeks the orders as set out in her interim application.

8. The wife’s second affidavit filed 19 November 2015 annexes three volumes of financial statements relating to the principal commercial entities.

9. Whilst the financial statement as at 2015 has been the subject of detailed consideration by the wife, she acknowledges that there is information that is still required.

10. A summary of the wife’s position is that the husband (and the wife) have overwhelming and effective control over the various corporate entities.  Moreover, the entities have significant value and on first consideration, the entitlements of the husband and the wife are substantial.  By way of example, it is asserted that F Pty Ltd owes the husband, the wife and the husband’s father loan monies to the sum of $2,264,125.  Moreover, the balance sheet attached to the 2015 financial statements for Forlan FT disclose cash deposits of $900,000.  The parties would have a significant interest in the net proceeds of a successful sale of the F Group.

11. The significant complexity and financial inter-relationship between the entities is at the heart of the wife’s application that the husband provide all necessary documents and assistance as may be required by her forensic accountant.

12. It appears now that it is not the appointment of an expert to assist the wife in the preparation of her case that is opposed, but rather the suggestion that in some way the husband and/or his father and other unrelated parties should bear some of the cost of that work.

13. I made it clear to the wife’s counsel that whilst there could be no opposition to her seeking to investigate the financial affairs of the F Group, at this stage and in the absence of there being an application for a single expert to be appointed, the cost should properly be borne by the wife.

THE HUSBAND’S HEALTH

1. The husband says that he was diagnosed in 2013 with nerve damage to one eye as a result of an earlier infection.  The sequeli of that condition is vertigo, nausea and a limited capacity to concentrate.  He is currently compliant with a range of medical treatments and such is his condition that he has now been able to access his income protection insurance in the sum of $2249 per week before tax.  He is able to undertake some unpaid work related duties.

2. As a result, he says that he is not able to make any interim payments to the wife and his financial statement reveals that from the monies he receives by way of income protection, he has his own expenses and those of the two adult children who now reside with him on a full-time basis.

1. It is a regrettable aspect of the proceedings that the adult children appear now to have a strained relationship with their mother.

2. The husband had been able to draw on his company interests to pay his credit card accounts as and when they fell due.  He says that has now ceased and he is now left with substantial outstanding credit card liabilities.

3. Overall, the husband describes a parlous financial position.  Not surprisingly, the wife does not accept the husband’s assertion but rather, considers that his alleged impecuniosity is a device.

THE WIFE’S CAR

1. For some considerable time, the wife has driven a German motor vehicle.  This car is referred to in correspondence from the husband’s father and is referred to by implication in seemingly unnecessary correspondence from a minority shareholder of F Pty Ltd.

2. The threat directed to the wife and with the clear support of the husband is that in November 2015 the wife is to return the car to F Pty Ltd.  If she does not then the chattel mortgage will be terminated with the consequence that the car will be repossessed.  There was an offer made by the husband’s father that she could purchase the car from the company for the sum of $25,000 without there being any explanation as to how that amount was calculated.

3. I do not consider that it is a coincidence that there has been a demand for the wife to return the car, nor do I consider that the husband, his father and/or the “oppressed” minority shareholders are acting in any way other than in concert.

4. Irrespective of their separate or joint intention, the motor vehicle has always been paid for by the wife (other than expenses and petrol) from income properly payable to her.  It is not then the case that there has been an inappropriate financial drain on any of the relevant entities by the wife’s retention of the motor vehicle.

5. Moreover, the motor vehicle does not appear on the depreciation schedule of any of the principal entities.  Its status is therefore uncertain and its ownership unclear.  It was put to counsel for the husband that the car may well have been purchased for the wife (or possibly the husband) in her or their private capacity, but that the chattel mortgage instalments were paid by one of the companies and accounted for by way of a deduction of a credit loan account entitlement.

6. That of course is speculation, but it is of interest that only the car driven by the husband appears in the depreciation schedules and as a commitment of F Pty Ltd, whereas the wife’s motor vehicle does not.

7. There may well be a clear explanation, but at present it seems that the previous attitude of the husband supported by his father and other interested parties may well have been unnecessarily oppressive in all the circumstances.

CONCLUSION

1. Ultimately, the husband conceded that he would cause to be paid to the wife the sum of $25,000 and that there would be no action taken in respect of the motor vehicle in the possession of the wife.

2. Given that the wife retains approximately $50,000 in her account, may well be entitled to an income tax refund and will now have the benefit of a further $25,000 to be returned either by her daughter or paid by the husband and reimbursed by his daughter, there is little prejudice that could now be occasioned to the wife by further consideration of her spousal maintenance application being adjourned.

3. The wife did not press a determination of her application and appears content with the proposal of the husband.

4. Accordingly, I propose to make orders that would see the wife receive the sum of $25.000 and an order of restraint and indemnity by the husband securing her continued use of the German motor vehicle currently in her possession.

5. Subject to it being at the cost of the wife, I think it reasonable that the husband should facilitate the financial investigation by the wife’s expert in circumstances where the wife has an entitlement as a director of various entities to pursue relevant documents without the consent of others.

6. It is of critical importance to the parties that they each be kept informed as to the success or otherwise of the sale of the F Group and as such it is reasonable that the wife have access to the business brokers as requested.

7. I do not propose to order that the husband be restrained from effecting the sale, mortgage charging or transferring the assets of F Group other than with the consent and approval of the solicitors for the parties.  At this stage that would appear to be too onerous.

8. The husband proposes that he would agree to provide to the wife through her solicitor a copy of any contract for sale of any item within seven days of the contract having been signed and to confirm receipt of payment for such sale within seven days.

9. Whilst that does not seem unreasonable, I can see no reason why the wife should not receive a copy of any contract for sale (or notice of any intention to sell) as soon as it is received, rather than after the contract has been signed.  In any event, it is difficult to understand how a contract could be signed without the consent of the wife in her capacity as a director of at least some of the more major entities.

10. Finally, each of the parties seek substantial orders for discovery.  I consider such consideration to be premature and I remind the parties of their obligations pursuant to part 12 and part 13 of the Family Law Rules 2004 (Cth). It is however obvious to the husband that there are certain areas of enquiry that are of substantial interest to the wife. Those matters have been raised both in correspondence but also during the currency of the proceedings.

11. The parties are reminded of their obligations to make full and frank discovery and the various options that are available to the Court should the parties fail to give proper heed to this most important obligation.

12. I made orders as appear at the commencement of these reasons.

I certify that the preceding seventy seven (77) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Berman delivered on 30 November 2015.

Associate: 

Date:  30 November 2015