Gelb & Gelb

[2007] FamCA 514

FAMILY COURT OF AUSTRALIA

GELB & GELB [2007] FamCA 514

FAMILY LAW – PROPERTY - Application by wife for interim property settlement or, alternatively, interim spousal maintenance – Wife’s application for final orders proposes payment to her of $500 million plus the transfer of realty in Sydney – Husband’s application for final orders proposes payment to the wife of $30 million plus the transfer of realty in Sydney – Order for interim property settlement of $10 million - Other orders related to certain repairs to the property at G and the commencement of the development of the slipway at the property according to the approved development application – Husband to pay. 

Family Law Act 1975 (Cth)

Harris and Harris (1993) FLC 92-378
Hickey and Hickey and Attorney-General for the Commonwealth of Australia (Intervenor) (2003) FLC 93-143

APPLICANT: Mrs Gelb

RESPONDENT: Mr Gelb

FILE NUMBER: SYC 177 of 2007

DATE DELIVERED: 5 June 2007

PLACE DELIVERED: Sydney

JUDGMENT OF: Moore J

HEARING DATE: 4 June 2007

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Gould

SOLICITOR FOR THE APPLICANT: Antonys Lawyers

COUNSEL FOR THE RESPONDENT: Mr Grieve QC with Ms Messner

SOLICITOR FOR THE RESPONDENT: Michie Shehadie & Co

Orders

1. The husband and the wife do all things and sign all documents necessary to distribute to the wife on or before 14 days from this day from the funds invested with the Macquarie Private Bank by W Pty Limited as trustee for the S Trust the sum of $10 million by way of interim property settlement.

2. The husband take all steps necessary and make all payments necessary –

   (a)       to repair the entrance to the property at G1;

   (b)       to rectify water damage and drainage problems at G1

   (c)       to repair any leaks in the roof of the property at G1

   provided the husband is to be at liberty to approve the work to be undertaken and to engage architects or engineers to design and supervise the work. 

3. Upon the wife undertaking to the court to permit all contractors engaged by the husband for the purpose to have access to the G properties, the husband is to take all steps necessary to undertake the work on the slipway at the G properties in accordance with the approved development application so as to avoid the lapsing of the development approval. 

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYC 177 of 2007

Mrs Gelb

Applicant

And

Mr Gelb

Respondent

REASONS FOR JUDGMENT

1. First amongst the wife’s applications is a claim for interim property settlement in the sum of $15 million.  Other claims include an order for the provision of funds by way of maintenance on an interim basis. 

2. The orders she sought initially are to be found in her application filed 11 April 2007.  Expressed in a summary way they are:

   a)$18,540 per week spouse maintenance

   b)$300,000 for the purchase of a new Mercedes motor vehicle

   c)$1.5 million to be used by her to complete the restoration and renovations to the G properties [excluding the development of the slipway]

   d)$2.5 million to be used to complete the development of the slipway

   e)$185,000 to be used to complete the restoration and renovations to the R apartment [in Austria]

   f)delivery of certain documents to her solicitors

   g)payment of her credit card debt and payment of her overdraft on her bank account in Austria

   h)partial property settlement of $5 million.

3. The husband filed a response on 4 May.  On his proposal, he would be obliged to undertake and pay for repairs to the entrance to the G1 property which would include the engagement of an architect to design and supervise the repairs.  He would also be obliged to undertake and pay for repairs necessary to rectify the water damage and drainage problems at the G1 property including the engagement of a qualified hydraulic engineer to design, call for and consider tenders and supervise the necessary repairs.  Otherwise, he sought the dismissal of the wife’s application.

4. At the commencement of the case leave was granted for the wife to file a further interim application.  Again expressed in a summary way she sought orders for the husband –

   a)to pay rates and insurances and ‘other outgoings’ of the G1 home ‘including but not limited to gardener’s costs, telephone, electricity, water accounts, and regular necessary maintenance including but not limited to the Husband doing all things necessary and taking all steps reasonably required to effect the repairs required’ [(a)to the entrance including the engagement of an architect to design and supervise; (b) to rectify the water damage and drainage problems including the engagement of a qualified hydraulic engineer; (c) to repair the roof including the engagement of appropriate tradespersons]

   b)to commence and continue work on the slipway according to the approved development application

   c)        to repair the bathrooms at the R apartment

   d)to pay all outgoings for the R apartment including but not limited to body corporate fees

   e)        to pay her $15 million partial property settlement.

5. The husband responded to this by putting forward several propositions, again summarised:

   a)He sought an undertaking that the wife would permit all contractors he engaged to carry out the work to complete the slipway according to the development application [exhibit 1]. 

   b)He proposed

   ·paying $50,000 per month interim spousal maintenance;

   ·paying the cost of maintaining the house properties at G including the swimming pool maintenance, gardening and house cleaning; rates and taxes on the G properties; the gas and electricity utilities used at G1; registration insurance and maintenance of the 1994 Mercedes current used by the wife; and paying 20,000 euros per annum for the maintenance and upkeep of the R apartment. 

   ·He noted the wife would continue to receive the rental from the other G property [[G2]] of approximately $2,000 per week from which she would meet all outgoings payable with respect to that property; and

   ·he proposed implementing his payment of outgoings by obliging the wife to provide relevant documents to his personal assistant. 

6. Their positions crystallized, no adjudication is required about the provision of documents according to paragraph 6 of the wife’s initial application and she will give the undertaking to permit all contractors carry out the work necessary to begin the slipway development.  It was conceded by counsel for the wife that she would not be entitled to spouse maintenance if her application for interim property settlement is successful and the point at which her maintenance claim could be put aside would be payment of $10 million. 

7. Whatever is determined, the interim arrangements are unlikely to operate for any substantial time.  I say that because the parties have agreed to undertake three days of mediation in September for which they have agreed to confer with the aim of agreeing about the net value of assets.  If the mediation is unsuccessful, there will be a further mention before me on 21 September.  While there are substantial assets involved – the wife’s estimate of his net assets in his financial statement is in excess of $500 million while a value of $800 million for the public listed shares alone is the estimate given by the wife’s counsel - the valuation of their assets, if not agreed, is unlikely to be a complicated exercise.  They own real estate located here and in Europe, public listed shares, and superannuation.  The parties’ affidavits filed for these interlocutory proceedings propound their case for the most part and it is agreed little will be required to conclude the evidence necessary for a final hearing.  So it is reasonable to anticipate that if mediation does not succeed, hearing dates could be allocated at the mention on 21 September and the matter heard over 3 - 5 days [the difference depends on any dispute about value] which is likely to be heard before the end of the year or relatively soon thereafter. 

8. With that in mind, I turn to the application for interim property settlement because that is the application given precedence in the wife’s case.  As for matters of principle, it is clear from the Full Court decision of Harris and Harris (1993) FLC 92-378 [per Nicholson CJ, Fogarty and Moore JJ] that the court has power to make interim property orders in an appropriate case. That derives from s 80(1) (h) and (k) of the Act which has remained unchanged from 1993 despite various later amendments to the Act. No one here argued to the contrary. More pertinent for present purposes are the circumstances in which the discretion to exert the power is exercised. In doing so, Harris identified at p.79,929 the need to consider the following matters:

   ‘(1) The exercise of the power should be confined to cases where the circumstances presented at that time are compelling.  As a generality, the interests of the parties and the Court are better served by there being one final hearing of s. 79 proceedings.  However, circumstances may arise before there can be a final hearing which dictate that some part of the property of the parties should be the subject of orders.  A common example is where both parties agree to the disposal of some assets pending the trial.  However, we do not consider that it is confined to cases where the parties consent.  Urgent situations may arise where it is necessary to exercise this power if injustice is to be avoided.  Examples include cases where it is necessary to do so to avoid an asset being eroded or lost in the intervening period, and cases (beyond the maintenance power) where an order in favour of one party is necessary to preserve or obtain a home for or is otherwise necessary for the welfare of the children.

   As to the position in England under the Matrimonial Causes Act 1973 in relation to an interim property order in opposed proceedings and as to the matters to be taken into consideration in the exercise of that discretion including the ''overriding grounds of individual or family welfare'' -- see the discussion in Barry v Barry [1992] 3 All E.R. 405.

   (2) It is an exercise of the s. 79 power.  Consequently it must be performed within those parameters.  Since it is not the final hearing the Judge is unlikely to have the final findings, but the exercise must fall within that general framework and the material available at that time.

   (3) Of necessity it is likely to be a somewhat imprecise exercise.  Consequently, it must be exercised conservatively and the Judge must be satisfied that the remaining property will be adequate to meet the legitimate expectations of both parties at the final hearing, or that the order which is contemplated is capable of being reversed or adjusted if it is subsequently considered necessary to do so.  It is for this reason that we doubt whether the distinction which Nygh J drew between interim and partial orders is necessary or desirable.’

9. Taking up (2), the general framework for the making of orders pursuant to s 79 is well known.  Section 79 empowers the court to make such orders as it considers appropriate altering the interests of parties to a marriage in property, including an order for a settlement of property in substitution for any interest in the property.  It is not to do so unless it is satisfied in all the circumstances it is just and equitable to make the order and in considering that question it is obliged to take into account the various matters set out in s 79(4).  A long line of cases at appellate level establish that the first step is to identify the property and ascertain its value; the second is to evaluate the contributions of various kinds identified in s79(4)(a)-(c) each have made; the third is to consider adjusting the contribution assessment after taking account of any relevant factors set out in s 75(2); and finally, it is necessary to review the outcome to ensure it brings about a just and equitable result in all of the circumstances [see eg. Hickey and Hickey and Attorney-General for the Commonwealth of Australia (Intervenor) (2003) FLC 93-143].

10. As for the first step, there is no agreed net value of the parties’ property at this stage.  In his financial statement the husband estimates the total value of realty owned to be $31.5 million.  This is made up of the G1 property ($12 million), the G2 property ($7 million), a property at B ($600,000), an apartment he acquired since separation at T ($9.4 million) and the R apartment ($2.5 million).  Shares, bonds and cash amounts to just under $680 million.  The bulk of this – over $578 million – is held by W Pty Limited as trustee for the S Trust.  A copy of the Trust Deed has not yet been provided in any of the evidence, but I am told it is a discretionary trust and the wife is one of a number of potential beneficiaries.  The assets of W Pty Limited as trustee of the S Trust include an investment with Macquarie Private Bank.  A copy of a portfolio valuation of that investment as at 13 April 2007 became exhibit 3.  That reflects a market value of over $24.677 million made up of a mix of investments including cash and equivalent, interest rate securities, Australian and International shares, property and private equity.  More relevant to present purposes is the concession by the husband through his counsel that it would be feasible to withdraw $10 million from the Macquarie Bank funds in the near future.  Indeed, that is borne out by the balance of cash and equivalents at 13 April 2007 of over $9.162 million.  In any event, the total gross value of assets on the wife’s estimate in his financial statement - realty and other investments - amounts to around $1011.5 million.  Added to that there is his superannuation worth 5.068 million, making a total of $1,016.568 million.  Liabilities, including potential capital gains tax of around $156.44 million on the sale of shares, he estimates at $183.165 million.  Deducting that from the total value of assets leaves $833.4 approximately, but of course that includes a substantial deduction for a contingent tax liability related to sale.  It would seem reasonable for present purpose to take the estimated net assets to be around $833 million, though obviously fluctuations in the value of the listed shares alone will have a significant bearing on the figure at any given time. 

11. As for their respective contributions, their evidence makes it apparent that this is likely to be an area about which opinions differ, and if property settlement is not resolved it will be necessary to evaluate contributions after all the evidence is available and tested.  This application does not require that evaluation to be done here and now – it could not be done in any complete way – and nor is it necessary to set out or canvas in any comprehensive or detailed way the evidence relevant to contributions.  Some key facts which give a broad overview of the financial history will suffice:

    a)The parties met in Europe in Austria in 1981 where the wife, who was born in Germany, was then working.  They married on … January 1982 in Sydney.  They have two children: a son (22) and a daughter (20).  They separated in 2005 when the husband left the family home at G and went to live in rented premise in Sydney with the daughter.  He has since acquired an apartment in Sydney [at [T], mentioned earlier] which has been – or is being – renovated.  The wife continues to occupy the G home, as she has throughout the marriage.  The son lives separately from both of his parents.  There is an apartment in R in Austria which has been used by the family over the years on trips to Europe, registered in the wife’s name, and family members have continued to use the apartment at various times since the separation. 

    b)At the time of their marriage the husband had an interest in an engineering business, a one-quarter interest in a property at E, Sydney, and a residential property at G.  Subsequently the G property was subdivided into two properties, with the new property identified as being located in G2, where a substantial home was built.  The property at E, the initial location of the business, was later sold and other business premises acquired for a higher sum. 

    c)The husband’s business has undergone substantial metamorphosis over the years since 1982, detailed by him in his affidavit at paragraph 33.  After years of expansion, it was listed on the Australian Stock Exchange in 2002.  There has since been the acquisition of a Canadian company and more recently the company has been renamed.  It has major international contracts in engineering in a variety of fields, including oil, gas, minerals and chemicals if current contracts are any indication.  The husband says the company turns over about three billion dollars per annum and has an after tax profit approaching $200 million per annum.  In its field, he says, the company is one of the top 4 or 5 in the world. 

    d)The husband maintains his wife had little or no involvement with his business during their marriage.  Her evidence is to the contrary in that she sets out in some detail a history of her support with entertainment of colleagues and business associates and her husband’s active encouragement of her support and involvement in that milieu as representing assistance to him in the business. 

    e)The wife has not been in paid work since 1983 prior to the birth of their first child.  She has been the principal carer for the children, particularly during times of their father’s absence for reasons related to business.  She cared for the husband some years ago when he was diagnosed with and treated for non-Hodgkins Lymphona.  Over the years she has been responsible for running their home at G and the many tasks associated with that, including the oversighting of considerable work done to the property, set out more particularly in her affidavit.  She has contributed to the maintenance and repairs of the R apartment since its acquisition, ensuring that all has been in order for their annual visits.  More recently she has had some health problems, some of which flow from being hit by a car on a pedestrian walk in 2001 and more recently she underwent an operation to remove lumps from her breast. 

    f)On any reading of the evidence, the parties have enjoyed a high standard of living, indicated by their substantial waterfront home in Sydney, an apartment in Austria, frequent domestic and international holiday travel, the availability of luxury cars, and similar lifestyle indicia.  No one argues to the contrary.  In particular, the wife had funds available to her during the marriage for spending without any apparent budget or restriction. 

    g)Mid 2006 or thereabouts appears to mark the beginning of correspondence exchanged between their lawyers.  It is not necessary to recite the difficulties reflected in that correspondence.  Suffice to say the wife has expressed dissatisfaction with difficulties she has experienced in receiving money from the husband, including funds not being available through her credit cards, inexplicable delay in funds being deposited to her bank account in Germany, and the need to borrow money from friends while she was ill in Europe last year. 

12. The wife filed an application for property settlement on 11 January 2007.  She claims payment of $500 million and transfer of the title to the properties at G.  Going on the husband’s estimate of value of those properties, this would result in a distribution to her in the order of $519 million [disregarding any increment in the value of the G properties from the foreshadowed repairs and development of the slipway].  The husband’s response filed 22 February 2007, on the other hand, proposes that she receive $30 million in cash and/or assets, he transfer to her his interest in the G properties, she transfer to the children in equal shares her interest in the R apartment, and otherwise she transfer to him her shares in relevant companies and resign from positions held by her in those companies.  Again relying on his estimates of current value, the effect is to propose an entitlement of approximately $49 million.  Obviously the gap between their formal positions is wide and evaluation of their entitlements will be undertaken at a later time if they do not settle. 

Interim property settlement

1. What needs to be evaluated here is the wife’s claim for $15 million to be paid to her now rather than await the outcome of either settlement at mediation or later court hearing.  To support that claim, her counsel makes a number of submissions:

   ·The wife does not want to be beholden to her husband for her financial support or needs.  Where money was not an issue at an earlier time, there have been changes in ways that have been distressing for her; she has been embarrassed and humiliated by not being able to withdraw money on her card from the ATM for example.  Despite being worth ‘somewhere between $800 million and $1 billion’ the husband says she can go and withdraw $1,000 per day on her credit card but that is not appropriate for people in their positions.

   ·The wife is able to satisfy the court that she has a proper property claim.  Theirs was a 24 year relationship, she fulfilled the role of homemaker and parent often in difficult circumstances, each has had health difficulties, and she has entertained clients and colleagues connected with his business over the years. 

   ·It is submitted that the history would result in a finding that prima facie she has a significant entitlement to settlement of property and it would be ‘inconceivable’ that it would be limited to the ‘$30 million plus as per the husband’s claim’. 

   ·She should not have to come and ask for funds to maintain her dignity.  They had a high standard of living, indicated by their waterfront home, business class travel and the husband’s purchase of a Bentley for his own use, leaving the wife to drive a 13 year old Mercedes Benz.  He controls a vast empire of wealth, yet she has no money to replace the vehicle she has been left with. 

   ·The wife would like to improve the G and R properties and pay $1 million into her superannuation before the end of June [to take advantage of recent legislative changes] which the husband could do without anyone ‘second guessing’ his decision. 

   ·Accordingly, it is submitted, the wife has made a case for settlement of property, she is entitled to a significant sum, no one has accounted for money in the past, she should not be ‘kept on a string’ about funds when he has ‘unlimited sums’ available.  She should be allowed to live with the dignity she seeks.  From the funds made available she could pay her legal fees and will not have to go through the ‘indignity’ of asking for funds from her husband for that purpose. 

   ·Moreover, there are funds available in the Macquarie Bank investment which could be accessed to satisfy her interim claim. 

2. In his reply, counsel for the husband pointed out that any difficulties experienced in the past with accessing funds through the ATM would be overcome by the $50,000 per month to be paid to her, payment of her legal fees had not been the subject of any request to date and would be considered if a proposal was put forward, and any proposition that the hsuband’s attitude to the provision of funds had been ‘demeaning’ was ‘absurd’.  His proposals more than meet the equivalent of the wife’s expenditure in the past, as demonstrated by the evidence of Ms M, summarised as amounting to around $17,000 per month during the 2004/05 year.  The expenditure at Tab 62 of the wife’s affidavit represents a ‘gross exaggeration’ of her needs.  Referring more specifically to the claim for interim property settlement, counsel cites Harris and submits the application here flies in the face of the need to act conservatively, for there to be compelling reason to make an order for interim property settlement, and for that to be within the purview of s 79.  The application is without legal or factual support.  The husband had responded ‘properly and some would say generously’ to her asserted lack of means by his proposals.  In short, there is no case for interim property settlement and the husband’s proposal would properly meet her needs on an interim basis by providing her with a house worth about $10 million to live in with the rates paid, rent and maintenance free, plus an income stream of around $60,000 per month after tax and a motor vehicle which is adequate. 

Conclusion

1. Assuming the net assets are worth around $833 million, the wife’s interim claim for payment of $15 million represents around 1.8% of net assets and a payment of $10 million, said by her counsel to be sufficient to submerge her spousal maintenance claim, represents around 1.2% of net assets.  These are very modest proportions given the broad history of their lengthy marriage.  Added to that, whether the wife were paid $15 million or $10 million, both fall well below what the husband himself proposes she receive as a settlement in the final analysis. 

2. Having regard to these considerations, it could hardly be said there would not be sufficient property to ‘meet the legitimate expectations of both parties at the final hearing’ as per Harris were either $10 million or $15 million paid to the wife at this stage.  The need to exercise the power conservatively, therefore, would seem not to be put in jeopardy by an order for payment of either sum. 

3. As for confining the power to those cases where the circumstances are compelling, there are considerations in this case to satisfy that.  This is not a case where one party controls all of the property accumulated during their relatively long marriage – the wife, for example, occupies without dispute the substantial family home at G - but it is a case where one party controls access to the liquid funds.  Given the wife has a legitimate claim for property settlement in excess of the amount she seeks be made available now, given her husband’s application for final orders proposes she receive in excess of the amount she asks be made available, and where she wishes to use those funds not only to support herself but to spend it in a manner of her choosing - a discretion not denied her husband, evident in his purchase of the apartment at T for example – there are sufficiently compelling circumstances, in my opinion, for her to be put in control of some capital as an advance on her ultimate entitlement.  This is bolstered by the not unreasonable proposition that she would thus have the opportunity to take advantage of the benefit of contributing to her superannuation by the end of this month, a decision her husband can make if he so chooses without any reference to her, and pay for her legal costs and any other outlay she considers appropriate or necessary without having to seek her husband’s agreement.  Her management of the funds, so as to acquire a motor vehicle, contribute to superannuation, pay legal costs as well as investing to derive a sufficient income stream for her own support, will be a matter for her.  Whether or not she would have been better off financially by accepting her husband’s proposal, at least from the point of view of an available stream of income as an interim arrangement, is irrelevant. 

4. Having determined as a matter of principle that the wife should receive some capital as an advance on her property entitlement, it remains to consider what that sum should be and the source of payment. 

5. Plainly there are substantial assets but the Macquarie Bank investment is identified by the wife’s counsel as the source from which funds could be made available quickly.  That is conceded as to $10 million which is the cash component of the investment.  I am not aware of the implications, if any, of withdrawing a sum greater than this or, to put it another way, whether a greater sum can be withdrawn on short notice without repercussion.  It is probably more prudent in the circumstances to take the conservative approach and order payment of the lesser sum, particularly as the wife concedes that is sufficient to also satisfy her interim spousal maintenance requirements.  I know of no reason the funds could not be paid on or before 14 days from today which would give her sufficient time to make the superannuation contribution if she so decides.  Orders will be made accordingly. 

6. There remains the question of the repairs to the G property and the development of the slipway.  The husband proposed paying for the repairs identified in his initial response [subject to the engagement of professionals to supervise the work], through his counsel he agreed to pay for the roof repairs sought by the wife in her application filed at the commencement of the hearing, and he proposed paying for the development of the slipway subject to the wife giving an undertaking to allow access for contractors.  While I am conscious those arrangements were all part of his case which did not include payment of interim property settlement, I conclude those repairs and development work should proceed nonetheless.  From their separate applications it can be inferred the repair work to the entrance, the water damage and drainage problems, and the roof repairs are necessary to properly maintain the property and the work on the slipway is necessary if development approval is not to lapse.  Therefore that work should be carried out and certainly there are resources available to do it.  To the extent that funds are expended on maintenance and improvement, regard can be had in due course to any appreciation in value of the G properties as a result, and whatever is involved in the undertaking can be added to the post separation financial history. 

7. For those reasons the orders will be as set out earlier. 

I certify that the preceding twenty-one (21) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Moore

Associate: 

Date:  5 June 2007

IT IS NOTED that this judgment for all publication and reporting purposes be referred to as GELB & GELB