Fortune & Delaney
[2024] FedCFamC1F 277
•18 April 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Fortune & Delaney [2024] FedCFamC1F 277
File number(s): SYC 8738 of 2020 Judgment of: ALTOBELLI J Date of judgment: 18 April 2024 Catchwords: FAMILY LAW – PROPERTY – Where there are sale proceeds of the former matrimonial home to be divided – Where there is a debt of the parties’ previous company to the Australian Taxation Office – Where the balance sheet is negative – The husband proposes to appoint a liquidator and use the sale proceeds to repay the debt – Where the wife states this is not necessary – It is determined that there is no need to appoint a liquidator – The parties are to negotiate the debt and meet any outstanding amounts equally. Division: Division 1 First Instance Number of paragraphs: 12 Date of hearing: 18 April 2024 Place: Sydney Counsel for the Applicant: Ms Treherne Solicitor for the Applicant: Dimocks Family Lawyers Counsel for the Respondent: Mr Fantin Solicitor for the Respondent: Jack Rigg Solicitors ORDERS
SYC 8738 of 2020 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MR FORTUNE
Applicant
AND: MS DELANEY
Respondent
ORDER MADE BY:
ALTOBELLI J
DATE OF ORDER:
18 APRIL 2024
THE COURT ORDERS THAT:
1.The parties shall do all things necessary as promptly as possible to negotiate a reduction and/or waiver of any liability for taxation, interest or penalties of B Pty Ltd.
2.Any such amount as is successfully negotiated with the Australian Taxation Office shall be paid by the parties out of the proceeds held in the trust account of C Lawyers and if there is a surplus, such amount is to be divided equally between them.
3.Should there be a shortfall between the funds held in the trust account of C Lawyers and the amount that is successfully negotiated with the Australian Taxation Office then each party shall meet the said shortfall in equal shares.
4.If at any time a Director’s Penalty Notice is issued to the parties in relation to their personal liability for the debts of B Pty Ltd then such amount is to be paid from the monies presently invested to the parties’ credit in the trust account of C Lawyers.
THE COURT ORDERS BY CONSENT THAT:
5.Except as these orders provide to the contrary, as against the Husband, the Wife shall be entitled to retain as the sole beneficial owner:
(a)her bank savings;
(b)her shareholding in D Pty Ltd
(c)her shareholding in E Pty Ltd;
(d)her shareholding in F Pty Ltd
(e)her shareholding in G Pty Ltd;
(f)her superannuation; and
(g)all other assets and financial resources of whatsoever nature and kind presently in the possession, control or name of the Wife, and which she has disclosed in these proceedings herein, including bank savings, household contents, motor vehicles, leave entitlements, superannuation and life insurance policies.
6.Except as these orders provide to the contrary, as against the Wife, the Husband shall be entitled to retain as the sole beneficial owner:
(a)his bank savings;
(b)his shareholding in H Pty Ltd;
(c)his shareholding in J Pty Ltd
(d)his superannuation; and
(e)all other assets and financial resources of whatsoever nature and kind presently in the possession, control or name of the Husband, including bank savings, household contents, motor vehicles, leave entitlements, superannuation and life insurance policies.
7.Except as these orders provide to the contrary, the parties shall each otherwise be and remain liable for any debts in their own name as at the date of these orders, and in this respect, shall indemnify and keep indemnified the other from any liability in relation thereto.
8.In the event that either party refuses or neglects to execute any deed or instrument necessary to give effect to these orders then a Registrar of the Court be appointed pursuant to Section 106A of the Family Law Act 1975 (Cth) (“the Act”) to execute such deed or instrument in the name of the defaulting party and to do all acts and things necessary to give validity and operation to the deed or instrument.
9.The wife’s application for lump sum spousal maintenance pursuant to section 77A of the Act be dismissed.
10.There be no order as to costs.
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 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Part XIVB of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish an account of proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under a pseudonym has been approved pursuant to subsection 114Q(2) of the Family Law Act 1975 (Cth).
EX TEMPORE REASONS FOR JUDGMENT
ALTOBELLI J:
In this matter, I provide the following ex tempore reasons. This is day four of a combined parenting and property matter between the applicant husband (“the husband”) and the respondent wife (“the wife”). Earlier this morning, I made final consent orders in relation to parenting. I have just made a suite of orders by consent in relation to alteration of property interests.
I am asked to adjudicate on one issue only and the issue is basically twofold: (1) how to divide up and/or apply the sum of approximately $48,000, which stands to the credit of a trust account with C Lawyers and which represents the sale proceeds of the former matrimonial home at K Street in Suburb L; and (2) how to crystallise and seek to divide a debt of a company known as B Pty Ltd (“the Company”) (a company in respect of which the husband and the wife are directors, and which was the vehicle used for the purposes of a business or businesses that they operated).
I understand that there is no agreed balance sheet in this case. However, it does seem common ground that the balance sheet is negative, in the sense that the liabilities are greater than the assets, or the known assets. The debt of the Company to the Australian Taxation Office is put at $142,961. I don’t know whether this is a current debt or not.
It needs to be recognised that the Court is somewhat in the dark about the actual financial circumstances of the husband and the wife. Be that as it is, in reality, the Court is dividing liabilities, some of which appear to be corporate liabilities. The Court has the profound sense of not really knowing what is going on in this case about the finances and this is perhaps reflected in the proposals of the parties as to how I should deal with the issues that I have identified.
On the one hand, the husband in the Minute of Order that he tendered proposed as follows: that the net sale proceeds of the property be used for the purposes of appointing a liquidator and to then use any amount which is payable by the parties to the Australian Taxation Office arising out of, presumably, any unpaid taxation liability of the Company to the so paid. The order also would have proposed that the Company be reinstated. Thereafter, a liquidator is to be appointed whose task would be to wind up the Company and for all practical purposes, negotiate the best possible deal, if I can call it that, with the Australian Taxation Office.
The husband says that this is an orderly disposition of the assets of the parties which will crystallise the liability of the Company and, one would have thought, the potential liability of the husband and the wife as directors. It seems, from the evidence, that the cost of the liquidation would be at least $8,000 in accordance with the letter from a liquidator dated 15 April 2024, including her consent to act as the liquidator, and being the amount of the contribution from the directors. On the husband’s proposal, the Company needs to be reinstated before it can be wound up.
By contrast, the wife’s proposal is really, in effect, that it is neither necessary to reinstate the Company nor thereafter to liquidate it, that there is no need for anyone to do that which they themselves could do, and that is to seek to negotiate the best possible outcome, in terms of their personal liability, of the Company debt.
On 28 March 2022, the husband, and the Court accepts in all likelihood, the wife, received a warning of possible Director Penalty Notice for an unpaid company debt from the Australian Taxation Office. At the time, the debt was goods and services tax in the amount of $38,477.72. It is not clear whether this represents all of the debt at the time or merely, part of it. On the evidence, there is no indication that either of the parties have, in fact, received a Director Penalty Notice. Until that notice is received, it would seem, doing the best the Court can to understand the relevant legislative provisions, that the liability remains that of the Company, and not that of the directors individually.
On both the husband’s proposal and the wife’s proposal, they are going to need to be able to cooperate and coordinate in doing something. On the husband’s proposal, in effect, he needs her to assist with the reinstatement application of the Company and then, the appointment of the voluntary liquidator. On the wife’s proposal, she needs him to assist, participate, or at least collaborate in some fashion in relation to what must be negotiations with the Australian Taxation Office, with a view to reducing and/or waiving any taxation liability of the Company, or interest and penalties. The track record of both parties, in terms of their ability to cooperate and coordinate, is not very high, as is demonstrated in the evidence in the parenting proceedings. One would have thought, there is a significant incentive for both of them to seek to negotiate the best possible outcome, in terms of reducing, not just the Company’s debt, but their own personal liability. They have different approaches to achieve that. The husband’s approach is to cause the Company to be reregistered and then wound up at a cost of, a minimum, of $8,000, with no guarantee that the outcome, in terms of reduction of penalty, interest and liability, would be any greater than if they simply did it themselves.
I am not persuaded that the husband’s proposal has any greater merit than the wife’s proposal. I am not persuaded that the parties would necessarily have the capacity to collaborate on reregistering the Company and then winding it up. There is a risk that the liquidation of the Company potentially opens up a can of worms. I think that, in a case where there are no good options, the least of the worst options is to make an order that is consistent with the wife’s proposal.
I accept that s 81 of the Family Law Act1975 (Cth) enjoins the Court to do the best it can to finalise the financial circumstances of the parties, but as I indicated, it looks like, in real terms, if the debt of the Company is treated as the debt of the parties, as is often the case in family law proceedings, it is an insolvent estate anyway. So doing the best the Court can, it intends to make the following further orders, in addition to the orders that have just been made by consent.
I’m otherwise satisfied that these orders are just and equitable. Or, to be more realistic, in the circumstances of this case, as just and equitable as the circumstances and the evidence of this case allows.
I certify that the preceding twelve (12) numbered paragraphs are a true copy of the ex tempore Reasons for Judgment of the Honourable Justice Altobelli delivered on 18 April 2024. Associate:
Dated: 10 May 2024
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