Gabrys and Gabrys and Ors

[2014] FamCA 931

FAMILY COURT OF AUSTRALIA

GABRYS & GABRYS AND ORS [2014] FamCA 931

FAMILY LAW – PROPERTY – interim – where the wife seeks orders for a lump sum spouse maintenance payment – where the wife seeks a declaration of dividends by a company – where the wife seeks orders against the husband’s business partner – where evidence is adduced that the proposed orders would cause hardship for the third party – s 90AF – where the wife’s proposed orders are dismissed – where the proceedings are expedited.

Family Law Act 1975 (Cth) ss 79, 90AF

Strahan & Strahan (2009) 42 Fam LR 203

APPLICANT: Ms Gabrys

RESPONDENT: Mr Gabrys

SECOND RESPONDENT:	Mr Nesbitt
THIRD RESPONDENT:	J Holdings Pty Ltd
FOURTH RESPONDENT:	J Pty Ltd
FIFTH RESPONDENT:	J Investments Pty Ltd
SIXTH RESPONDENT:	F Pty Ltd

FILE NUMBER: SYC 828 of 2013

DATE DELIVERED: 24 October 2014

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Stevenson J

HEARING DATE: 1 September 2014

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Richardson SC

SOLICITOR FOR THE APPLICANT: Gordon & Barry Lawyers

COUNSEL FOR THE RESPONDENT: Mr Holmes

SOLICITOR FOR THE RESPONDENT: KD Holmes Solicitors

COUNSEL FOR THE SECOND 

RESPONDENT:

Mr Heath

SOLICITOR FOR THE SECOND

RESPONDENT:

Mclaughlin & Riordan

Orders

PENDING FURTHER ORDER:

1. That paragraph 7 of the wife’s Minute of Order provided to the court on 1 September 2014 is dismissed.

2. That the order whereby Mr Nesbitt was joined as a party to the proceedings is discharged.

3. That the final hearing of these proceedings is expedited.

4. By consent that the parties, in their capacity as directors of F Pty Limited, take all steps necessary to sell the property Z Street, Suburb P, for the best price reasonably obtainable in the following manner:

   4.1within five business days of the making of this order, the husband and wife shall instruct a lawyer as agreed within seven days and failing agreement with a lawyer as nominated by the President of the Law Society of NSW to have the conduct of the sale on behalf of both the husband and the wife the costs of and incidental to such appointment to be borne equally by the husband and the wife as and when same fall due;

   4.2within five business days of the making of this order, the husband and the wife shall appoint an agent as agreed within seven days and failing agreement as nominated by the President of the Real Estate Institute of NSW to have the conduct of the sale on behalf of both the husband and the wife as and when same fall due;

   4.3list the P property for sale by public auction six weeks from the date of appointment of the agent;

   4.4the reserve price for the purpose of such auction shall be $2,000,000 or such price as nominated as the fair market value of the P property by a valuer as agreed by the parties or failing agreement as nominated by the President of the Australian Property Institute, the costs of and incidental to such appointment and valuation to be borne equally by the husband and the wife as an when same fall due;

   4.5the valuer shall, if requested by either the husband or the wife at a date three calendar months after the date upon which the P property is first listed pursuant to order 4.3 and thereafter at three calendar monthly intervals until the property is sold, nominate a sale price other than the originally nominated sale price;

   4.6the husband and the wife shall each cooperate in every way with the agent including (without limiting the generality of the foregoing):

   4.6.1    making the key available to the agent;

   4.6.2allowing inspection of the P property at all reasonable times requested by the agent;

   4.6.3    doing or saying nothing to hinder or prevent a sale being effected;

   4.6.4ensuring the P property including the grounds are in a neat and clean condition at the time of inspection by the agent and prospective purchasers; and

   4.6.5signing all documents requested by the agent in relation to the listing for sale of the P property except a contract or agreement for sale which has not been authorised by the lawyer;

   4.7in the event the bidding at an auction does not reach the reserve price the husband and the wife or such of them as attends the auction may negotiate with the highest bidders or any other interested person and effect a sale of the property at a price which is not more than 10 per cent below the reserve price, or at such other price as the husband and the wife agree upon in writing;

   4.8if the property remains unsold, the parties shall do all acts and things and sign all documents necessary to continue to relist the property for sale by the public auction at three monthly intervals, and the provisions of orders 4.4, 4.5 and 4.6 shall apply successively until the property has been sold so that at each successive auction the reserve price shall be 10 per cent less than the reserve price at the immediately preceding auction unless otherwise agreed by the parties in writing;

   4.9on settlement of the sale of the property the sale proceeds be paid in the following manner and priority:

   4.9.1all costs and expenses of sale including legal costs and disbursements, agent’s commission, valuer’s fees, and auction expenses (including repayment of any such expenses as have been paid by either or both the husband and the wife);

   4.9.2the amounts required to pay all municipal and water rates outstanding with respect to the P property;

   4.9.3the balance then remaining shall be paid to an interest earning account of F Pty Ltd ATF the Gabrys Superannuation Fund with the parties to be the signatories to the said account and the parties to be restrained by injunction from drawing upon such account unless agreed in writing or as ordered by the court.         

5. 5.1      That within six weeks the husband use his best endeavours to cause the carrying into effect of the orders made herein on 22 April 2014.

   5.2That the husband is at liberty to offer the property X Street, Suburb X, as security for loan funds advanced by any lending institution pursuant to the orders of 22 April 2014. 

6. That, in the event that the husband fails or is unable to secure compliance with the orders of 22 April 2014, the parties have liberty to restore the proceedings to the list of Stevenson J on seven days’ notice.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Gabrys & Gabrys 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 SYDNEY

FILE NUMBER: SYC 828 of 2013

Ms Gabrys

Applicant

And

Mr Gabrys

Respondent

Mr Nesbitt

Second Respondent

REASONS FOR JUDGMENT

the proceedings  

1. The substantive proceedings herein concern alteration of property interests and parenting issues between Mr Gabrys (“the husband”) and Mrs Gabrys (“the wife”).  On 2 June 2014 the wife filed an Amended Application in a Case, whereby she sought a raft of orders against the husband, his business partner Mr Nesbitt and four companies.

2. On the day of the interim hearing, a Minute of Orders Sought was submitted on behalf of the wife.  The effect of these orders can be summarised as follows:

   1.The husband pay to the wife and her lawyers lump sums of $337,365.70 and $23,163.

   2.In default of such payment, the husband and Mr Nesbitt be compelled to cause the company J Investments Pty Limited to pay to them dividends of $337,365.70 and $144,585.30 respectively.

   3.That the husband pay his dividend amount to the wife and her solicitor.

   4.That there be a garnishment order against the ANZ Bank.

   5.Further in default of payment of the lump sums by the husband to the wife, the parties effect the sale of the former matrimonial home X Street, Suburb X and pay the lump sums to the wife and her solicitor.

   6.That the wife have exclusive occupation of the X property prior to the sale and a warrant issue for the arrest of the husband to enforce this order.

   7.That the parties cause the sale of the property Z Street, Suburb P by the trustee of the parties’ self-managed superannuation fund.

   8.A “dollar for dollar” order for payment by the husband of the wife’s legal costs, in the event that she obtains no other form of the relief claimed in her Minute of Proposed Orders.

3. The husband and Mr Nesbitt strongly opposed the orders which would force them to receive dividends from J Investments Pty Limited.  Mr Nesbitt was joined as a party to the proceedings on the application of the wife.

Background

1. The husband was born in 1957 and is currently 57 years of age.  The wife was born in 1969 and is presently 45 years old.  The parties married in 1989 and separated under one roof in January 2013.  The wife vacated the former matrimonial home on 1 June 2013. 

2. The parties have one child, A (“the child”), who was born in 1999 and is presently 14 years of age.  The child attends boarding school and spends alternate weekends and half of all holidays with each parent. 

3. The husband established the company J Pty Limited in 1988.  Later he incorporated the companies J Investments Pty Limited and J Holdings Pty Limited. 

4. Mr Nesbitt is a 30 per cent shareholder in J Holdings Pty Limited, which is the beneficial owner of one ordinary and 3,100,000 preference shares in J Pty Limited.  Mr Nesbitt holds 30 per cent of the issued shares in J Investments Pty Limited and is a director of all three companies.  The husband holds the remaining shares in all of these entities and is a co-director with Mr Nesbitt. 

5. The company F Pty Limited was incorporated in 1990 and is the trustee of the Gabrys No. 2 Superannuation Fund.  The husband and wife each hold one share in and are directors of F Pty Limited.  This company is the registered proprietor of the property Z Street, Suburb P (“the P property”).  The parties agreed to a sale of this property and investment by F Pty Limited of the net proceeds of sale in an interest-bearing account. 

6. On 7 June 2013 orders were made by consent which provided for the parties to establish a mortgage facility with the ANZ Bank in an amount of $320,000, on security of X Street, Suburb X (“the X property”).  These orders provided that the wife receive $280,000 and the husband $10,000 from such loan funds.   Additionally, the orders provided that the husband pay to the wife a sum of $10,000 within seven days. 

7. On 22 April 2014 orders were made by consent which provided, inter alia, that the parties do all things necessary to increase the mortgage facility by $350,000 and that each of the parties receive a sum of $150,000.  The ANZ Bank declined to extend additional funds to the parties.

8. In her affidavit of 15 August 2014 the wife deposed that she has received total funds of $490,681 between February 2013 and May 2014.  In the same affidavit the wife purported to account for her expenditure of $357,930 from these funds, leaving an unexplained balance of $132,750.  The husband took issue with the legitimacy of some of the wife’s alleged expenditure.  He maintained that the wife received some $516,000 between February 2013 and May 2014.

Consideration

1. As a general principle, the power pursuant to section 79 of the Family Law Act 1975 (Cth) (“the Act”) should be exercised once only. In Strahan & Strahan (2009) 42 Fam LR 203 the Full Court (Boland & O’Ryan JJ) said:

   132. In relation to the first stage, in our view, when considering whether to exercise the power under ss 79 and 80 (1)(h) of the Act to make an interim property orders the “overarching consideration” is the interests of justice. It is not necessary to establish compelling circumstances. All that is required is that in the circumstances it is appropriate to exercise the power. In exercising the wide and unfettered discretion conferred by the power to make such an order, regard should be had to the fact that the usual order pursuant to s 79 is a once and for all order made after a final hearing.

2. In the event that the wife is successful in her present application, the court will have exercised power pursuant to section 79 on three occasions. These circumstances appear to be unusual but are not a sufficient reason, as a stand-alone consideration, to warrant dismissal of the wife’s application. The reality which these parties face is that they need to finalise their dispute and, for that purpose, both require access to funds.

3. As noted, the wife conceded that she has received funds amounting to $490,000 between February 2013 and May 2014. She failed to account for approximately $132,700. In my view, it is extraordinary that she spent an amount in the vicinity of $500,000 in only fifteen months, with full knowledge that the proceedings are yet to be finalised and that she would require money to fund her litigation. Nonetheless, the husband as well as the wife will benefit if she is able to fund the litigation to conclusion. Her use of money which she has obtained from partial property settlements, or other sources, can be explored and considered at the final hearing. Accordingly, I will entertain the wife’s application for a further exercise of power pursuant to s 79 of the Act.

The Relief Sought By Way of Declarations of Dividends By J Investments Pty Limited

1. Mr Nesbitt is a stranger to the marriage, whose only connection to the parties is that he is the business partner of the husband. The orders sought by the wife would cause him to incur a tax liability, which is a matter that the court must take into account when determining whether to make an order binding on a third party pursuant to s 90AF of the Act. I am most reluctant to make orders which would be highly likely to have an adverse impact on the financial position of a stranger to the marriage, in circumstances which would be entirely beyond his control.

2. Additionally Mr Nesbitt gave uncontradicted evidence, as a director of the companies within the J Group, as to probable impact of these orders as sought by the wife upon their financial position.  He deposed:

   24.      [J Group] also has a lease for approximately 400m2 of commercial office space [in the Sydney CBD] from where it operates its business.  The lease duration is for five years commencing on 1 August 2014, with an option to extend for a further five years.  If [J Group] defaults on payment the consequences are a breach of contract and a loss of $150,000 bank guarantee held by the landlord as security over rental payments and damages beyond that. 

   25.      The effect of the payment of an interim dividend as sought by the wife would remove or potentially remove the substantial part of the working capacity necessary: -

   ·to retain [J Group’s] staff and contractors; and

   ·for the business to fulfil its contractual obligations thereby avoiding the potential triggering of the default provisions of its [J Group] contracts; and/or

   ·to meet lease payments for [J Group’s] commercial premises [in the Sydney CBD] with the consequential loss of our $150,000 bank guarantee.

3. If these consequences were to come to pass, it could well be that Mr Nesbitt may find himself to be in breach of his fiduciary duties as a director of the companies.  I would be most reluctant to make orders which place a stranger to the marriage at such a risk. 

4. I digress to note that I refused to admit into evidence an affidavit of an accountant, Mr B.  I did so because I took the view that Mr Nesbitt’s first-hand evidence was adequate to explain the risks to the companies of orders as sought by the wife. 

5. Senior counsel for the wife indicated at the commencement of his submissions that her “relief is now limited to a dividend from [J] Pty Limited”.  A little later, however, he made submissions in support of the alternate orders set out in the Minute.

6. In final written submissions on behalf of the husband it was stated inter alia:

   …if, contrary to our submissions, the power is again to be enlivened, the following matters ought to be born in mind, simply:  i the parties agreed that they are to take $150,000; ii the husband be permitted a normal or reasonable period to find that sum, with power to the husband to pledge the security of the [X] property for such finances as he may reasonably be able to locate, before then ordering either a sale or considering of the, with respect, Draconian relief now sought by the wife – simply because the bank at that time would not lend.

7. I am disposed to accede to that proposal for the following reasons:

   ·    the wife has already had access to substantial funds and failed to account for her use thereof adequately

   ·    the parties’ only child is a full-time boarder at S School, thus responsibility for her care is no impediment to the wife’s engaging in employment

   ·    as recently as April 2014 the wife agreed to a proposal whereby both parties would receive $150,000, yet now she seeks more than double that amount

   ·    the husband wishes to retain the X property as part of a final settlement

   ·    the alternative relief sought by the wife reasonably can be described as “draconian”, as submitted on behalf of the husband.

8. I will allow the husband an opportunity to rearrange the financial affairs of the parties so as to ensure that they each receive a sum of $150,000 by way of bank borrowings.  Accordingly I will dismiss all aspects of the wife’s Interim Application which concern Mr Nesbitt and allow the husband an opportunity to arrange for the parties to obtain further finance.  I will make orders by consent which cause the sale by F Pty Limited of the P property.  I will grant liberty to restore the wife’s interim application to my list, in the event that it becomes necessary for consideration to be given to the alternate relief sought therein.

The Husband’s Application for Expedition

1. I will order expedition of these proceedings upon the application of the husband.  There is no disadvantage to the wife in an end to this litigation.

I certify that the preceding twenty three (23) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Stevenson delivered on 24 October 2014.

Associate:     

Date:              24 October 2014