Harris and Walters

[2012] FamCA 48

FAMILY COURT OF AUSTRALIA

HARRIS & WALTERS [2012] FamCA 48

FAMILY LAW - ENFORCEMENT OF ORDERS – Property Settlement – Where application is made by the husband for the wife to transfer security deposit – Whether the security deposit was an asset of a company transferred to the husband or the wife’s property – Security deposit advanced by the wife to the company which transaction was reflected in loan account - Where the security deposit found to be a company asset – Orders made as sought by the husband.

APPLICANT: Mr Harris

RESPONDENT: Ms Walters

FILE NUMBER: SYC 2583 of 2007

DATE DELIVERED: 10 February 2012

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Ryan J

HEARING DATE: 30 January 2012

REPRESENTATION

SOLICITOR FOR THE APPLICANT: Gayle Meredith & Associates

COUNSEL FOR THE RESPONDENT: Mr Hodgson

SOLICITOR FOR THE RESPONDENT: Fay Frischer

Orders

1. That by way of enforcement of Order 5.6 of orders made in this Court on 30 November 2009 that Ms Walters (“the wife”) forthwith do all acts and execute all documents necessary to cause the security deposit being account with the St George Bank in her name to be transferred to the name of P Pty Ltd (ACN …) or as otherwise directed by Mr Harris (“the husband”).

IT IS NOTED that publication of this judgment by this Court under the pseudonym Harrris & Walters 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 2583 of 2007

Mr Harris

Applicant

And

Ms Walters

Respondent

REASONS FOR JUDGMENT

1. This is an application by Mr Harris (“the husband”) to enforce a property settlement order made by consent in this Court on 30 November 2009.  Relevantly, the husband acquired Ms Walters’ (“the wife”) interest in P Pty Ltd.  An issue has arisen about whether a security bond first given in September 2001 in relation to premises leased by P Pty Ltd at Sydney Suburb H belongs to P Pty Ltd or the wife.

2. The husband relies upon Order 5.6 which is set out below:

   5.6that the wife sign all documents and do all acts and things necessary to transfer and assign to the husband all of her right title and interest in the issued share capital of [P Pty Ltd] and any credit loan account that she has with [P Pty Ltd];

3. To enforce the wife’s compliance with Order 5.6 he asks that the Court order that she:

   … forthwith do all acts and execute all documents necessary to cause the security deposit provided by [P Pty Ltd] [ACN] being account with the St George Bank in the name of the wife to be transferred to the name of [P Pty Ltd] or alternatively be paid into an account with the St George Bank in the name of [P Pty Ltd].

4. The wife argues that the husband’s application should be dismissed.  Upon its dismissal, she will press an application pursuant to s 79A of the Family Law Act 1975 (Cth) (“the Act”) to ultimately achieve a declaration that the St George security bond belongs to her and that P Pty Ltd releases her from any liability associated with the bond and pays the bond to her.

5. It is the husband’s unchallenged evidence that in September 2001 P Pty Ltd entered into a lease with the owner of premises in Sydney Suburb H, a condition of which required that P Pty Ltd provide a security deposit in a nominated amount.  At that time, P Pty Ltd did not have sufficient funds to provide the security deposit.  The husband and wife had savings, some of which were held in a St George bank account in the wife’s name.  From the wife’s St George bank account, $35,640.00 was given by way of bank guarantee for P Pty Ltd’s lease.  According to the husband, the funds were lent to P Pty Ltd by he and the wife in which advance is reflected in their P Pty Ltd loan accounts.

6. The Summary of Director’s Loan account movement for P Pty Ltd in relation to the year ended 30 June 2002 shows an opening debit balance as at 1 July 2001 of $529,558.09.  Relevantly, there is an entry, “Loan Drawdown Repayment” which shows advances by the parties to the company that year in the amount of $59,778.00.  It is the husband’s evidence that this includes the $35,640.00 advanced by the parties from the wife’s St George account for the security bond.  It is the wife’s evidence that she has no recollection of the deposit.

7. P Pty Ltd’s Financial Statements for the years ended 30 June 2002 – 30 June 2009 are in evidence, as are Summaries of Director’s Loan account movements for the years ended 30 June 2000 – 30 June 2002 inclusive.  So that it is clear, these summaries do not record individual transactions and provide an end of financial year snapshot.

8. In relation to the 2002 Balance Sheet, there is identified as a current receivable, a security deposit lodged with Sydney Electricity.  There is no reference to a security deposit in relation to the Sydney Suburb H lease, which if ownership in the money passed to P Pty Ltd there should have been.  It is clear, however, that the parties’ loan account was adjusted, inter alia, (debit transactions are recorded as well) by reference to advances they made to the company.  Subsequent Financial Statements reveal that the first reference to a security deposit in relation to leased premises is for the year ended 30 June 2005.  That deposit related to premises leased in Brisbane.

9. The first mention of a security deposit in relation to Sydney Suburb H in the Financial Statements is for the year ended 30 June 2008.  This is for an amount of $12,096.00.  That year, P Pty Ltd entered into a new lease of the Sydney Suburb H premises in relation to which the lessor required an increased bank guarantee.  From funds held in the name of P Pty Ltd a further $12,096.00 was held by the National Australia Bank on the company’s behalf.  It follows, that that item in the Financial Statements is not the security deposit under consideration.

10. In anticipation of the 2009 property settlement hearing, the parties instructed Mr F to value P Pty Ltd.  This valuation shows at annexure “J” security deposits in the amount of $83,892.00 as assets of P Pty Ltd as at 30 June 2009.  Although the security deposits are not identified item by item examination of the 30 June 2008 Financial Statements, shows a break up of security deposits which total $83,442.25.  The 2008 Financial Statements do not identify the subject security deposit.  I infer that the $450.00 increase in the value of security deposits probably relates to accrued interest.  It follows, that the security deposits referred to in the 2009 account do not include the subject security deposit.

11. The questions which arise are whether this means P Pty Ltd has never regarded the subject security deposit as its asset or was there an initial accounting error which permeated later year Financial Statements? 

12. It is common ground that in the property settlement proceedings the wife did not disclose the subject security deposit as her asset, nor provide discovery in relation to it.  No issue was taken about this by the husband because he believed the security deposit was an asset of P Pty Ltd. 

13. For this hearing, the wife retained Mr M, who is a chartered accountant, to identify:

    … the existence of an alleged credit loan account standing in the name of [the wife] to which the Applicant refers in his Application, Affidavit sworn 13 July 2011 and letter from Gayle Meredith & Associates dated 12 October 2011.

14. In response, Mr M said:

    The Financial Statements for [P Pty Ltd] for the year ended 30 June 2002 (Attachment B) disclose that [the wife] and [the husband] have a debit loan account (not a credit loan account) with [P Pty Ltd] shown at Note 3.  The movements in this account do not show a deposit of $35,640 (Attachment J).

15. He correctly records that throughout the year ended 30 June 2002 the loan account was in debit.  From this he deduced that there “…could not have been a credit loan account”.  These observations, however, are not to the point.  It was not the end of year balances or whether the loan account for the period under question was constantly in debit that is in issue, but whether consistent with the husband’s evidence the loan account was credited with the monies advanced from the wife’s St George account.  On balance, I am satisfied that it was.  I am also satisfied that the security deposit is not identified in P Pty Ltd’s Financial Statements (and Mr F’s report) as an asset of P Pty Ltd but that this is an accounting error in the Financial Statements and not evidence that the parties and company treated the security deposit as being owned by the wife.

16. For completeness, it is appropriate to record that the property settlement orders also required that the husband discharge any debit loan account in the wife’s name to P Pty Ltd.  If there was any doubt about whether title to the security deposit passed to P Pty Ltd in 2001, the combined effect of the property settlement orders is that no later than when those orders were made, the wife’s interests and any liabilities reflected in the loan account were transferred to the husband. 

17. For these reasons I am satisfied that the security deposit is an asset of P Pty Ltd and that the husband is entitled to the relief sought by him.

I certify that the preceding seventeen (17) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Ryan delivered on 10 February 2012.

Associate:                 

Date:    10 February 2012