Gandega and Fulmali & Anor
[2018] FamCA 491
•29 June 2018
FAMILY COURT OF AUSTRALIA
| GANDEGA & FULMALI AND ANOR | [2018] FamCA 491 |
| FAMILY LAW – PROPERTY – INTERIM PROPERTY AND/OR COSTS SOUGHT– where order sought against third party to marriage – where entitlements as between third party and husband yet to be determined – where outstanding s106B application as to disposition of husbands shares to third party – where not appropriate to make any interim order – where application dismissed. FAMILY LAW – PRACTICE AND PROCEDURE – where application for order as to “taking accounts” in respect of various financial transactions and records– where application inappropriate where court has appointed a Single Expert forensic accountant – where application dismissed. FAMILY LAW - PRACTICE AND PROCEDURE –Legal professional privilege – where claim of legal professional privilege – where communication transactional and not for the dominant purpose of legal advice – where otherwise dissemination of communications to others inconsistent with claim for privilege – where claim as to privilege dismissed. |
| Evidence Act 1995 (Cth) s 118 Family Law Act 1975 (Cth) ss 79, 106B Uniform Civil Procedure Rules 2005 (NSW) r 46.3 |
| Bilal & Omar [2015] FamCAFC 30 Strahan & Strahan [2009] FamCAFC 166 |
| APPLICANT: | Ms Gandega |
| RESPONDENT: | Mr Fulmali |
| INTERVENOR: | Mr Akbar |
| FILE NUMBER: | PAC | 4811 | of | 2016 |
| DATE DELIVERED: | 29 June 2018 |
| PLACE DELIVERED: | Parramatta |
| PLACE HEARD: | Parramatta |
| JUDGMENT OF: | Foster J |
| HEARING DATE: | 27 November 2018 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Ms Druitt |
| SOLICITOR FOR THE APPLICANT: | Marsdens Law Group |
| COUNSEL FOR THE FIRST RESPONDENT: | Mr Hanrahan |
| SOLICITOR FOR THE RESPONDENT: | Bond Lawyers |
| COUNSEL FOR THE SECOND RESPONDENT: | Mr Maurice |
| SOLICITOR FOR THE SECOND RESPONDENT: | Kazi Portolesi Lawyers |
Orders
(1)That all interim applications be dismissed.
Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Gandega & Fulmali has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
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 r 17.02 Family Law Rules 2004 (Cth).
| FAMILY COURT OF AUSTRALIA AT PARRAMATTA |
FILE NUMBER: PAC 4811 of 2016
| Ms Gandega |
Applicant
And
| Mr Fulmali |
Respondent
Mr Akbar
Intervenor
REASONS FOR JUDGMENT
In the context of ongoing property proceedings the applicant wife Ms Gandega filed an Application in a Case on 4 August 2017.
Relevantly orders were made by consent (including the second respondent) on 14 December 2016 as follows:
(1)That the Second Respondent do all acts and things necessary to cause to be delivered to the Applicant by 28 February 2017:
(a) All bank statements held by the Second Respondent for any and all bank accounts held jointly between the Second Respondent and the Respondent Husband for the last 12 months in his personal capacity; and
(b) All bank statements for the last 12 months for any and all bank accounts held in the name of the companies:
a. [B] Pty Ltd; and
b. [C] Pty Ltd.
(2)That the Second Respondent be restrained from causing the disposal of any assets held by [B] Pty Ltd (save for the sale of a [motor vehicle] sold for $20,000.00 on 13 December 2016 for the discharge of finance in the sum of approximately $25,000.00).
(3)Notwithstanding Order 2, the Second Respondent be permitted to continue to operate the business of [B] Pty Ltd and meet the day-to-day reasonable business expenses and liabilities of that entity as and when those liabilities and expenses arise and fall due.
(4)That the Second Respondent produce to the Applicant all Company Tax Returns and Profit and Loss Statements completed by [B] Pty Ltd to date and do all acts and things necessary to cause the delivery of the completed Tax Returns and Profit and Loss Statements to the Applicant by 28 February 2017.
…
On 21 February 2017 the court by consent (including the second respondent) made relevantly the following orders:
(1)That except for monies owed by [D] Pty Ltd as specified in Order 2 below, the remaining monies owing to [D] Pty Ltd in connection with the sale of the property known as [E Street, Suburb F] including the proceeds of any refund of stamp duty to be paid to a Controlled Monies Account held in the parties’ joint names with the 2nd Respondent’s solicitor, and both parties are restrained from withdrawing any funds from that account.
(2)That the following monies owed by [D] Pty Ltd be paid from the funds held in the Controlled Monies Account as per Order 1 in respect of costs associated with the sale of E Street, Suburb F, for
(a) Agent’s fees
(b) Conveyancing/legal fees.
(3)Prior to the release of monies in accordance with Order 2 above, and within 7 days, the second Respondent will provide the Applicant and First Respondent with a copy of the relevant invoices.
(4)The Second Respondent is to produce all evidence/documents to the Applicant wife in relation to the $600,000 that has been received by the Second Respondent and disbursed, by 7 March 2017.
(5)The Applicant Wife be authorised to have sole access to the AMP Offset Deposit Account currently held in the joint names of [Mr Fulmali], [Ms Gandega] with Account details: BSB … Acc: …42
(6)…
(7)That pursuant to s 114(1) of the Family Law Act the Second Respondent is restrained from dealing with the property of the Respondent husband, including but not limited to selling, assigning or reassigning any business interests of the Respondent Husband unless as agreed in writing by the Applicant wife’s solicitors.
(8)Notwithstanding Order 7 the Second Respondent will be permitted to continue to operate the business/businesses jointly owned with the First Respondent and meet the day to day reasonable expenses and liabilities of those entities as and when they fall due.
…
On 5 May 2017 further orders were relevantly made as follows:
(2)The subpoena issued by the wife and directed to the Proper Officer, G Pty Ltd is struck out.
(3)Leave is granted to the wife to issue a further subpoena containing the following schedules:
Books, documents and things you must produce from your possession, custody or control:
(1) A copy of this subpoena.
(2) Copies of all statements of account in relation to any cheque, savings, trading, loan, mortgage, investment, deposit, credit card or other style of account whatsoever kind and whatsoever nature conducted with you during the period from 1 January 1998 to the present date whether held solely or jointly with any person or persons or as Trustee or joint Trustee for any person or persons in the name of:
• [Mr Fulmali], born on …1966;
• Any business with which [Mr Fulmali] is associated.
(3) A copy of any Power of Attorney with which [Mr Fulmali] is associated;
(4) All Bank Statements and full accounting records for year ending 2015 and 2016 including but not limited to the loan accounts, ledger and general ledgers in the name of the following entities either solely or jointly with any other person or persons:
(a) B Pty Ltd, ACN:…;
(b) C Pty Ltd, ACN: …;
(c) D Pty Ltd, ACN: ...
(5) All current contracts pertaining to services, supplies, land, financial services or equipment entered into by the following entitles:
(a) B Pty Ltd, ACN:…;
(b) C Pty Ltd, ACN: …;
(c) D Pty Ltd, ACN: ….
(6) Correspondences between parties of all current contracts pertaining to services, supplies, land, financial or equipment entered into by the following entities:
(a) B Pty Ltd, ACN:…;
(b) C Pty Ltd, ACN: …;
(c) D Pty Ltd, ACN: ….
(7) All Financial Statements and Business Activity Statements lodged by the following entities in the three (3) financial years preceding the making of these Orders:
(a) B Pty Ltd, ACN:…;
(b) C Pty Ltd, ACN: …;
(c) D Pty Ltd, ACN: ….
(8) Documents pertaining to land holdings, contractual obligations, income and outgoings for the following entities:
(a) B Pty Ltd, ACN:…;
(b) C Pty Ltd, ACN: …;
(c) D Pty Ltd, ACN: ...
IT IS FURTHER ORDERED THAT
(4)By consent, order 1 made on 21 February 2017 be varied so as to permit the Second Respondent’s solicitor to pay the sum of $15,620.00 to H Pty Ltd, on behalf of the company, D Pty Ltd and otherwise the injunction is confirmed.
The wife’s application
In her application the wife sought orders in summary, seeking to enforce compliance with a subpoena for production of documents filed 17 May 2017 and for the appointment of a single expert to value the husband’s interest in certain business entities. The application was supported by an affidavit of the wife filed 3 August 2017.
On 28 August 2017 the respondent husband Mr Fulmali filed a Response to the wife’s Application in a Case seeking that “the court makes an order for an amount of $90,000 to be set aside in Bond Lawyers Trust account on account of legal and disbursement costs in representing the first respondent”. Otherwise in the same Response the husband sought final orders as to property as against the second respondent and the wife.
On 12 September 2017 the husband filed what appears to be an Amended Response to the wife’s Application in a Case seeking, as before, an order for the provision of $90,000 and an additional order for the appointment of a single expert to undertake valuations of certain corporate entities. The husband’s response was supported by his Financial Statement filed 28 August 2017, his affidavit filed 28 August 2017, his affidavit filed 12 September 2017, and his Financial Statement filed 12 September 2017.
On 14 September 2017 husband filed an Application in a Case seeking orders that in summary provided:
a)that payment of the invoice dated 25 August 2017 addressed to D Pty Ltd by the solicitors for the Second Respondent, be stayed until after that claim for legal costs has been assessed by a costs Assessor of the Family Court of Australia;
b)that the Second Respondent provide an ACCOUNT of the proceeds of the sale/rescission of the Property at E Street, Suburb F NSW, as set out in his Affidavit sworn 3 March 2017 & 20 April 2017, including all monies recovered and disclosing the amount recoverable by the First Respondent in relation to that transaction;
c)that the Second Respondent DISCLOSE the nature & value of all assets of B Pty Ltd A. C. N. …; and
d)that the sum of $25,000.00 representing the legal costs incurred and anticipated to be incurred by the First Respondent before any final hearing, be paid from the CONTROLLED MONEYS ACCOUNT into the Trust Account of Bond Lawyers forthwith.
On 18 September 2017 the second respondent, Mr Akbar, filed a Response to the husband’s Application in a Case seeking in summary the following orders:
a)that Order 1. made 21 February 2017 be discharged;
b)that within 7 days the parties do all necessary things and sign all necessary documents to procure payment from the funds held by the second respondent’s solicitor in a controlled monies account to the second respondent in the sum of $295,224.61 and to B Pty Ltd in the sum of $9,467.04;
c)that the second respondent be released as a party to these proceedings; and
d)that the applicant and/or the first respondent pay the costs of the second respondent, either from funds remaining in the controlled monies account or from their entitlement in property settlement proceedings, whichever first occurs.
The Response by the second respondent was supported by his affidavit filed 18 September 2017.
On 8 October 2017 the respondent husband filed An amended Application a Case seeking in summary the following orders:
a)that payment of a costs invoice dated 25 August 2017 addressed to D Pty Ltd by the solicitors for the second respondent be stayed until assessment of such costs;
b)that the second respondent provide an account of the proceeds of the sale/rescission of the property at E Street, Suburb F NSW, including all monies recovered and disclosing the amount recoverable by the first respondent in relation to that transaction;
c)that the second respondent disclose the nature and value of all assets of B Pty Ltd as at 16 September 2016;
d)that there be a payment by way of interim property distribution of $60,000 from money held in a joint bank account or the controlled monies account managed by the second respondent’s solicitor to the respondent husband solicitor’s trust account on account of costs;
e)that the second respondent provide certain documents by way of disclosure as to his financial circumstances and that of B Pty Ltd, C Pty Ltd, and D Pty Ltd;
f)that the second respondent provide accounts (properly vouched before a Registrar of the court) for the previous 3 years since 1 September 2014 relating to B Pty Ltd, C Pty Ltd, and D Pty Ltd;
g)that the second respondent pay to the trust account of the solicitors for the respondent husband the amount found to be due to the husband after taking of accounts as provided for; and
h)that a single expert be appointed to value the assets and undertakings of B Pty Ltd, C Pty Ltd, and D Pty Ltd.
The Amended Application in a Case filed by the husband was supported by an affidavit of his solicitor filed 8 October 2017.
Subsequently on 6 November 2017, the second respondent filed a further Response to an Application in a Case, presumably by way of an amendment seeking in summary the following orders:
a)that Order 1. made 21 February 2017 be discharged;
b)that within 7 days the parties do all necessary things and sign all necessary documents to procure payment from the funds held by the second respondent’s solicitor in a controlled monies account to the second respondent the sum of $491,245.31, to B Pty Ltd the sum of $9,467.04, to G Pty Ltd the sum of $22,000, to J Pty Ltd the sum of $6976.59 and to the Australian Securities and Investments Commission the sum of $254; and
c)that the second respondent be released as a party to these proceedings.
The further Response was supported by the affidavit of the second respondent filed 6 November 2017.
On 9 November 2017 a Single Expert was appointed in the following terms:
(1)That pursuant to division 15.5.2 of the Family Law Rules 2004, [Mr K] is appointed to value the Respondent Husband’s interest as of 16 September 2016 in the following business entities:
(1.1)B Pty Ltd, ACN: …; and
(1.2)C Pty Ltd, ACN: ….
(2)That within seven (7) days of the date of these orders, the Applicant shall provide the Respondents with a draft Joint Letter of Instruction.
(3)That within seven (7) days of receiving the Joint Letter of Instruction, the Respondents shall respond with any required amendments to the Joint Letter of Instruction prepared by the Applicant
(4)That within seven (7) days of receiving the amended Joint Letter of Instruction prepared by the Applicant, the parties shall sign the Joint Letter of Instruction and sign all other documents and do all things necessary to facilitate the valuations.
(5)That the costs of the valuation shall be paid from the controlled monies account held by Kazi Portolesi Lawyers.
(6)…
IT IS FURTHER ORDERED THAT
(7)The solicitor for the applicant wife is to forward an electronic typescript of the document marked “A” as amended to the Court within two business days.
(8)The costs of the single expert [Mr K] of and incidental to the preparation of the single expert report be paid from the present controlled monies account with ultimate liability for the single expert’s fees as between the parties reserved to determination at final trial.
(9)All outstanding interim issues are adjourned for hearing to 10.00am on Monday, 27 November 2017.
(10)The parties file and serve any further affidavit material to be relied upon by no later than Friday, 24 November 2017.
The various interim issues were before the court for hearing on 27 November 2017. On that date the court made orders as follows:
(1)The second respondent file and serve any supplementary written submissions to be relied upon including submissions as to the question of legal professional privilege attaching to the documents marked today MFI-A and the question of outstanding costs payable by [D] Pty Ltd to Kazi Portolesi Lawyers in respect to the sale of the Suburb F property by no later than 19 December 2017.
(2)The first respondent file and serve an outline of written submissions by no later than 19 January 2018.
(3)The applicant wife file and serve an outline of submission in reply by no later than 2 February 2018.
(4)The second respondent should he be so advised should file and serve short submissions in reply by no later than 16 February 2018.
(5)Thereafter judgment be reserved noting the agreement of the parties that subject to the Court’s determination as to the question of legal professional privilege documents comprising MFI-A will either be marked into evidence as an exhibit or rejected.
(6)The parties are granted leave to issue such subpoena as they consider relevant to the issues both interim and final for determination before the Court with such subpoena to be returnable by no later than 30 March 2018.
THE COURT NOTES THAT
(7)The solicitors for the applicant wife will provide a copy of Exhibit “B” to the other parties within seven (7) days from today’s date.
The Respondent Husband:
On hearing it was determined that the primary application for determination was the Application in a Case filed by the respondent husband on 14 September 2017 as amended by the Amended Application in a Case filed 8 October 2017.
The husband relied upon his affidavit filed 14 September 2017 and the affidavit of his solicitor filed 8 October 2017.
The husband sought in brief:
a)an order for provision of his costs in the sum of $60,000;
b)an accounting of the disposition by the second respondent of funds relating to the proceeds of the sale/rescission of the property at E Street, Suburb F NSW. (An accounting it was submitted on behalf of the second respondent that had been done in the second respondent’s affidavit material.); and
c)that the second respondent disclose the nature and value of all assets of B Pty Ltd. (This notwithstanding the appointment of a Single Expert valuer.)
The Second Respondent
The second respondent relied on his Response filed 18 September 2017 to the Application in a Case of the husband as amended by his further Response filed 6 November 2017 and his affidavits filed 18 September 2017 and 6 November 2017.
At the commencement of the interim hearing the second respondent provided to the court a Case Outline (Exh A) that incorporated the minutes of orders sought by the second respondent. These were later amended in submissions. The orders now sought by the second respondent are as follows:
a) that Order I of the Family Court of Australia orders made 21 February 2017 be discharged;
b) that within seven days from the date of these orders, the parties do all necessary things and sign all necessary documents so as to procure a payment from the funds presently held in a controlled monies account by the second respondent solicitor in trust of the parties to:
i.G Pty Ltd of $22,000;
ii.J Pty Ltd of $6976.59;
iii.Australian Securities and Investments Commission of $254;
iv.B Pty Ltd of $9467.04;
v.Kazi Portolesi Lawyers of $40,754.10; and
vi.second respondent in the proceedings of $450,491.21;
c) that in the alternative to Order 2 vi), the balance of the monies held in the controlled monies account be distributed as follows:
i.the applicant wife and/or respondent husband sum of $105,991.21;
ii.the second respondent the sum of $375,787.05; and
iii.that the applicant wife and/or the respondent husband pay the costs of the second respondent; and
d) that the second respondent be released as a party to these proceedings.
The husband’s evidence
The husband is presently 52 years of age.
He asserts that he met the second respondent in about 2008 subsequent to which they began to work together.
On 31 March 2010 the company B Pty Ltd (CAN…) (“B”) was registered.
The husband asserts that the company by special resolution on 13 September 2016 resolved that:
a) the husband be entitled to wages up to 19 August 2016;
b) that the husband be entitled to profits according to his then shareholding of 50 per cent up to the end of “currently running projects;
c) that any contingent liabilities will be deducted before profit distribution; and
d) that all profits and remaining assets and net shareholding equity would be distributed to the shareholders after all accounts are prepared and finalised by L Pty Ltd.
As at the date of the purported special resolution the husband was in the Asia.
The husband further asserts that cash funds in the company were removed by way of cash withdrawals and that as at August 2016 the assets of the company were in the order of $2.7 million.
The husband further asserts that on 5 October 2016 he was removed as a director of the company. He denies that at any time has he assigned or transferred his shareholding in the company and further denies that he has been paid any money in consideration for such shareholding.
The wife seeks an order that the disposition of the husbands interest to the second respondent be set aside under s106B. It is common ground that such relief can only be properly determined at final hearing.
The husband says that as at December 2016 the company D Pty Ltd (“DPL”) had a value of about $1.3 million. He says the company had purchased a parcel of land that he asserts has now been disposed of but he has no knowledge as to the whereabouts of any funds realised.
The husband further says that he was a director and equal shareholder of the company C Pty Ltd (“C”) which he says was “used for import and export”. The husbands says that that company owned a motor vehicle having a value of about $30,000 with the car later being sold. He is unaware as to where the proceeds of sale were paid.
On 18 August 2016 the husband went to the Asia and shortly thereafter he was arrested and charged with various offences.
The husband otherwise relies upon the affidavit of his solicitor filed 8 October 2017. The solicitor deposes that as at the date of the affidavit being sworn the husband remained in custody in Asia.
The solicitor refers to the husband’s Financial Statement filed 12 September 2017 in which the husband deposes that his assets comprise his interest in the former matrimonial home at Suburb M and his interest in the companies referred to above.
The solicitor asserts that the husband’s shareholding and interest in the companies were transferred to the second respondent pursuant to a power of attorney purportedly given by the husband. It appears that the intention of the second respondent, in circumstances where the husband was in custody in Asia in respect to certain criminal charges, was for the second respondent to facilitate the husband’s exit from the various companies and any associated entities as provided for in the “special resolution” of the company B on 13 September 2016.
The solicitor asserts that in breach of “arrangements” between the husband and the second respondent the second respondent terminated the retainer of the company’s accountants and has failed to account to the husband for profits and other monies received.
The solicitor asserts income received by BPL from various projects has been about $2.3 million, that CPL has not accounted for the sale of the vehicle referred to and that DPL has failed to account for sums totalling about $950,000 paid to it following the termination of a proposed contract for purchase of land.
The solicitor asserts that the husband is in need of funds for his legal fees, to pursue his claims against the second respondent, to obtain valuations and to obtain expert forensic evidence.
On 19 September 2017 the solicitor wrote to the second respondent’s solicitors seeking an itemised statement in relation to their costs invoice dated 25 August 2017 for acting in relation to the proposed sale of the property at E Street, Suburb F by DPL . No response has been received.
The second respondent’s evidence
The second respondent acknowledged his relationship with the husband and that they created and operated the three companies referred to above.
The second respondent asserts that on 22 September 2016 his accountant, a Mr P, informed him that the husband had appointed him as his power of attorney pursuant to a General Power of Attorney signed by the husband in Asia on 21 September 2016.
The general power of attorney provides, inter alia, that Mr P as the husband’s attorney must keep reasonable accounts and records of the husband’s money and property, always act in the husband’s best interests and always act honestly in all matters concerning the husband’s legal and financial affairs. Whether Mr P has so acted in divesting the husband of his interest in BPL will be a matter for determination in due course.
The second respondent asserts that at the wife’s requested that he transferred to her various sums totalling $8,000 in late 2016. Otherwise he asserts that he has transferred various funds at the request of the husband totalling about $24,000 in late 2016.
Company B
He says that the company B had advanced to him and the husband various funds by way of director’s loans. He says that as at 30 June 2015 the company had advanced to the husband $576,778 and to him $210,000. Some of the funds advanced by the company to the husband were paid to the mortgage secured over the husband and wife’ matrimonial home. It must be inferred that the funds advanced to the husband and second respondent as directors were derived from cash resources available to the company by way of retained profits or otherwise.
The second respondent complains that the circumstances of the company were adversely affected by the husband being charged with certain criminal offences and being incarcerated in Asia pending trial.
The second respondent asserts that his accountant exercising the power of attorney given to him by the husband transferred to the second respondent the husband’s shares in the company on 5 October 2016 and the husband was then removed as a director. The business of BPL was providing product installation and services. As at about the time the husband was divested of his interest in the company it had 38 full-time employees, over 29 subcontractors for regular clients and about 40 to 50 credit account facilities with suppliers. It appears that the company was of some substance and with significant turnover. Yet the second respondent asserts that by September 2017 he was the only person in the employ of the company with the company having no credit accounts with suppliers.
In December 2016 the company changed accountants to G Pty Ltd.
The second respondent asserts that in difficult circumstances he attempted to keep the company operating and advanced funds to the company from his own funds and from his business N Pty Ltd that has a trading relationship with B Pty Ltd.
Otherwise it appears that the second respondent in 2016 caused the company All Air Group Pty Ltd to be incorporated. It is the husband’s contention that this company is simply a new entity conducting the business formerly operated by the husband and the second respondent as B. A determination of this issue will await consideration by the appointed single expert. Otherwise Exhibit C is indicative of the second respondent representing to a third party his intention to assume the business of B into a new organisation, N, having “the same staff/customers and suppliers as [B Pty Ltd]”.
The second respondent’s actions, conduct and evidence must be considered with some circumspection.
DPL
This company was incorporated by the husband and the second respondent in late 2000 for the purposes of acquiring a property at E Street, Suburb F (“the Suburb F property”) for the sum of $6 million. A deposit of $600,000 was paid and later released to the vendors.
The second respondent asserts that the deposit funds comprised funds from the husband of $280,000, himself of $291,000 and funds drawn from BPL of $31,000.
Subsequent to exchange of contracts the purchaser company paid stamp duty of $360,150. The second respondent asserts that funds for the stamp duty were provided by his self-managed super fund as to $115,400, from his own funds as to $25,510 and from B in the sum of $219,246.10. Subsequently BPL provided a further sum of $15,000 in relation to the purchase. The funds asserted to have been advanced by BPL are at odds with that company’s balance sheet as at 30 June 2016.
The second respondent asserts that an agreement was reached to extend settlement of the purchase by DPL to 11 July 2016 in consideration of the payment of a sum of $102,000. The second respondent asserts that these funds were provided to firstly BPL by him and were then on lent to DPL by the company. Settlement was not able to be completed by 11 July 2016 and a further agreement for an extension to 24 February 2017 was negotiated in consideration of the payment of $203,000. The second respondent asserts that these funds were advanced to DPL by BPL.
Otherwise the second respondent asserts that he has provided various sums to DPL for outgoings and other expenses totalling about $91,000 in the period from December 2015 to June 2017.
In January 2017 DPL and the vendors of the Suburb F property agreed to rescind the contract for purchase with the deposit paid of $600,000 to be returned to DPL following the sale of the subject property by the vendor to a new purchaser. The new purchaser entered into an agreement with DPL to pay to DPL $344,510 on settlement of its purchase of the property. Stamp duty as referred to above of $360,510 was refunded to DPL. In all DPL received funds totalling $1,305,020.
The second respondent controls this company presumably in the absence of the husband. In such circumstance, orders can be made against the second respondent to cause the company to do such things as are required.
Illustrative of the second respondent’s control the second respondent says that the funds variously received by DPL were disbursed by him as follows:
a) $138,480 in repayment of the sum advanced by his self-managed super fund including interest;
b) $11,000 in payment of accounting fees for the company;
c) $354,200 in repayment to BPL relating to funds advanced by it to DPL; and
d) $92,154.20 in repayment to the second respondent of monies he asserts were paid by him on behalf of DPL;
these payments totalling $595,834.20.
Other payments have been made from the DPL funds as follows:
a) $15,620 to H Pty Ltd pursuant to orders made 5 May 2017; and
b) $127,790 to O Real Estate as commission in respect of the transaction.
The second respondent asserts that there are outstanding legal fees payable to his solicitors in the sum of $40,754 for legal fees relating to the DPL transactions. The husband disputes the quantum of this amount and has sought an itemised invoice which as yet has not been provided. There is only a lump sum bill from the solicitors without particularisation.
Subject to the issue of the solicitor’s outstanding costs, and if they are ultimately paid in the sum sought, an amount of about $520,475 would remain in the controlled monies account.
No tax returns or financial statements for DPL for the year ended 30 June 2016 and 2017 were in evidence before the court. It is to be expected that those accounts when prepared will accurately reflect the various transactions asserted by the second respondent. The various transactions will also be the subject of consideration by the agreed single expert valuer in ascertaining the interest of the husband in DPL by way of loan account or otherwise.
CPL
The second respondent asserts that this company owned a motor vehicle used by BPL. That vehicle was the subject of a finance obligation. The second respondent asserts that he and the husband’s attorney agreed to sell the vehicle with the whole of the funds being applied to discharge the financed debt.
Otherwise the second respondent complains that he has incurred legal fees in and about the conduct of the family law proceedings between the husband and wife.
The second respondent further asserts that in order to keep BPL operating he has advanced from his own funds or his companies about $760,000 to BPL. Of these funds $275,401 have been paid to the Australian Taxation Office for taxation liabilities arising since 1 March 2017 by way of company tax, outstanding GST and penalties for failure to lodge returns and general interest charges all accruing since the company has been operated solely by the second respondent. There has been no accounting for income otherwise generated by the company over the same period or for monies the second respondent asserts has been repaid to the company by DPL.
No taxation returns or financial statements for BPL are in evidence before the court for the financial years ended June 2016 and June 2017 where the trading revenue of the company for the financial year to June 2017 was $2.859m (Exh B) and an analysis of the company’s general ledger raises more issues than it solves as to the second respondent’s application and use of company funds. Such concerns can, as was submitted by the wife, be the subject of questions to the single expert when the report is to hand.
Legal Professional Privilege
Section 118 of the Evidence Act 1995 (Cth) (“the Evidence Act”) provides:
Legal advice
Evidence is not to be adduced if, on objection by a client, the court finds that adducing the evidence would result in disclosure of:
(a) a confidential communication made between the client and a lawyer; or
(b) a confidential communication made between 2 or more lawyers acting for the client; or
(c) the contents of a confidential document (whether delivered or not) prepared by the client, lawyer or another person;
for the dominant purpose of the lawyer, or one or more of the lawyers, providing legal advice to the client.
In Bilal & Omar [2015] FamCAFC 30 the Full Court of this court said:
[39] In Mann v Carnell (1999) 201 CLR 1, it was made clear that the subjective intention of the holder of the privilege does not determine whether the privilege is impliedly waived. Rather, it is the inconsistency between maintenance of the confidentiality which the privilege protects and conduct which is inconsistent with the maintenance of that confidentiality…
[40] The decision in that case prompted an amendment to s 122(2) of the Evidence Act 1995 (Cth) which sought to make clear that the privilege is lost by reference to “… the behaviour of the holder of the privilege, as opposed to the intention of the holder of the privilege.” (Explanatory Memorandum to the Evidence Act Amendment Bill 2008 (Cth) at [178]). As a result of the amendment, the section now provides:
(2) Subject to subsection (5), this Division does not prevent the adducing of evidence if the client or party concerned has acted in a way that is inconsistent with the client or party objecting to the adducing of the evidence because it would result in a disclosure of a kind referred to in section 118, 119 or 120.
The evidence sought to be adduced by the husband is comprised in the document marked MFI A that was conditionally admitted into evidence subject to a determination as to the second respondent’s claim of legal professional privilege.
Leaving aside for a moment the question of whether the documents fall within the class of documents or communication the subject of s118 of the Evidence Act a cursory glance at the documents reveal that the email correspondence comprised therein and emanating from the second respondent’s solicitor to the second respondent or otherwise or from the second respondent to his solicitor or otherwise was variously copied to the husband or to the accountants retained by B or the husband’s attorney.
In such circumstances it is impermissible for the second respondent to seek to maintain a claim of legal professional privilege in relation to the various communication as he has acted in a way that is inconsistent with his objection to the evidence being adduced. Accordingly, the document marked MFI A shall be marked as Exhibit MFI A in the proceedings.
Otherwise the documents by way of various email communications are as contended by the wife “transactional” and clearly do not fall within the category of being for the dominant purpose of providing legal advice.
Determination of the issues
Final submissions by the parties were received on 23 February 2018 and on that date judgement as to the interim issues was reserved.
Prior to judgement being reserved, the second respondent unilaterally filed a further affidavit on 22 February 2018 raising further issues. The matter was relisted on 27 March 2018 and on that day the further affidavit of the second respondent was struck out as no leave had been granted to file the same nor had there been any application to reopen.
In submissions the husband contends that the conduct of the second respondent is “attempting to hide behind the corporate veil of the companies, despite being in a position to provide all disclosures and accounting records that are required”.
To a reasonable extent the evidence of the second respondent is supported by documents albeit documents that he controls and that are, to some extent, of his own creation.
The circumstances in which the husband was divested of his interest in the primary trading company B, the financial transactions within that company, its relationship with the DPL enterprise and the disbursement of part of the funds returned to DPL following rescission of the contract for sale of the Suburb F property will all be the subject of fuller examination in the valuation by the single expert of the husband’s interest in the various entities.
The evidence above is certainly indicative of funds presently held in a controlled monies account primarily remaining where they are subject to a small release of funds to the husband, such release being well within the ambit of the second respondent’s acknowledgement of the husband’s interest in such funds.
Whilst the husband contends, as does the wife, that this court should exercise an accrued power in effect to “take accounts” such as is provided in the Uniform Civil Procedure Rules 2005 (NSW) (r 46.3) the second respondent opposes such a course. In circumstances where this court in its everyday practice and procedure adopts the expertise of a single expert forensic witnesses to resolve vexed questions as to valuation and forensic enquiry the adoption of such a course need not be the subject of determination. In this regard the husband’s application will be dismissed.
Otherwise the husband seeks orders primarily to assist disclosure, investigation and enquiry as to the circumstances of the second respondent and how the second respondent has dealt with possible entitlements of the husband in the subject corporate entities and otherwise. There is significant evidence adduced by the second respondent that gives a prima facie overview of such dealings by him. That overview will facilitate the single expert’s forensic enquiries and determination as to the husband’s real interest in the entities and whether indeed the second respondent has procured as is suggested a “phoenixing” of the primary business enterprise formerly conducted by the husband and the second respondent to an entity solely controlled and owned by the second respondent.
It is thus appropriate to await the outcome of the single expert’s report before addressing what may be at that time outstanding issues as to disclosure and discovery by the second respondent either on an interlocutory basis or at trial.
It is clear that the husband seeks to hold the second respondent liable to account for his interest in the corporate entities as it should have been. The second respondent controls those entities and his own to which it appears there will be an argument as to the “phoenixing” of the business of BPL to entities under the control of the second respondent. Indeed the wife seeks that the disposition of the husband’s shares be set aside.
Thus the second respondent’s application to be removed from these proceedings must fail.
Interim provision of funds
There is no evidence before the court as to what the “matrimonial” pool of assets might comprise nor any evidence supportive of any contribution based findings as to the entitlement of the wife or husband.
The principles as to applications for interim property provision are well settled, (Strahan & Strahan [2009] FamCAFC 166) and require a two-step process.
In Strahan (supra), the Full Court said:
132. In relation to the first stage, in our view, when considering whether to exercise the power under s 79 and s 80(1) (h) of the Act to make an interim property order 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.
Firstly, there must be circumstances enlivening the power to make an interim order. The test is not limited to “compelling circumstances” but whether it would be “appropriate” to make an interim order, with the “overarching consideration” being the interests of justice.
Secondly, the Court is to have regard to relevant matters in s 79 of the Family Law Act 1975 (Cth) (“the Act”). It needs to be kept in mind that the final outcome of property settlement should not be compromised by an interim property order. Either the remaining property needs to be adequate to meet the legitimate expectations of both parties at the final hearing or the order that is contemplated needs to be capable of being reversed or adjusted if it is subsequently considered necessary to do so.
A detailed inquiry is not required, but there must be some assessment of s 79 factors.
It is now well settled that in property cases the Court must identify the existing legal and equitable interests of the parties in the property, the liabilities and financial resources of the parties at the time of the hearing and then whether it is just and equitable to make a property settlement order. Such a consideration should not be guided by an assumption that the parties’ rights to, or interests in, property are, or should be, different from those that then exist. The question is whether those rights and interests should be altered.
There is no evidence supportive of an interim property provision for the husband, or indeed the wife, as to the aforementioned considerations.
The husband seeks a provision from the funds in controlled monies but those funds are those of DPL and not of the husband or the second respondent. The interest of the husband, and for that matter the second respondent, in DPL is still the subject of determination by the single expert. The court must be mindful of the asserted rights of third parties to litigation of this type. The second respondent seeks a substantial payment to him from the controlled funds. His entitlement to such is yet to be determined in the overshadowing circumstances of the pending s106B application that may see him liable to pay funds to the husband, such funds then comprising part of the matrimonial pool for division.
Should the husband and wife seek some interim provision they may seek orders as against property of theirs that is not the subject of dispute as to its inclusion in the matrimonial asset pool.
Falling from the above discussion it is thus appropriate that the interim applications for determination by the court be dismissed.
I certify that the preceding ninety-four (94) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Foster delivered on 29 June 2018.
Legal Associate:
Date: 29 June 2018
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