Hatton and Hatton

FAMILY COURT OF AUSTRALIA

HATTON & HATTON

[2007] FamCA 551

FAMILY LAW - PROPERTY - Interim spousal maintenance - Sale of matrimonial home - Review of Judicial Registrar's orders

Family Law Act 1975 (Cth)

APPLICANT:

Mrs Hatton

RESPONDENT:

Mr Hatton

FILE NUMBER:

SYF

2657

2004

DATE DELIVERED:

29 May 2007

PLACE DELIVERED:

Adelaide

JUDGMENT OF:

Watts J

HEARING DATE:

18 December 2006 & 16 March 2007

REPRESENTATION

COUNSEL FOR THE APPLICANT:

Mr Campton

SOLICITOR FOR THE APPLICANT:

Karras Partners

SOLICITOR FOR THE RESPONDENT:

Adrian Twigg & Co

Orders

The orders of Judicial Registrar Johnston made 9 November 2006 be discharged.
After the provision of the sum of $8,800 pursuant to order 5 of the other orders made this day, A Service Limited pay to the wife, from monies payable to the husband from time to time, as soon as those monies become payable:-
2.1.The sum of $23,875 or sums totalling $23,875;
2.2.Amounts equivalent to $923 per week calculated from 16 March 2007.

IT IS NOTED THAT:

The effect of order 1 is to restore orders made 1 March 2006.
The arrears under the spousal maintenance order made 1 March 2006, as at 16 March 2007, are $23,875.

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYF 2657 of 2004

Mrs Hatton

Applicant

And

Mr Hatton

Respondent

REASONS FOR JUDGMENT

INTRODUCTION

This is an application for a review of orders by Judicial Registrar Johnston made on 9 November 2006 so far as they relate to financial matters. On that day the Judicial Registrar varied orders made on 1 March 2006 for spousal maintenance of $925 per week and made an order that “the husband pay to the wife $500 per week for her accommodation and $500 per week pending further order upon her vacating the home at [M]”. The Judicial Registrar set aside orders 1.2, 1.3 and 1.4 made on 6 April 2006. These orders provided that the husband pay the wife’s lawyers four amounts of $5,000 in April and May 2006 (of which the husband failed to pay three).
The Judicial Registrar also ordered that the property in which the wife lives at M be listed for sale at a reserve price of $3.5 million.
The Judicial Registrar stayed his orders of 9 November 2006 “pending completion of the review”.
The applications which were before the Judicial Registrar are to be heard by me as a hearing de novo.
The central questions for determination are:-
5.1.Whether the wife, pending the determination of the final property application, can continue to reside in her current property at M with the children or is that property to be immediately listed for sale;
5.2.Whether the orders made on 1 March 2006 for the payment of spousal maintenance and payment of interim costs should be varied;
5.3.In relation to any arrears and in respect of future responsibility for payment of periodic amounts, is there any mechanism by which the husband’s performance of his obligations can be assured.

FACTS NOT IN DISPUTE

The husband was born … February 1967.
The wife was born … December 1964.
The parties commenced cohabitation in January 2000. They married on … May 2000.
The parties separated in December 2005 (according to the wife) and 10 January 2006 (according to the husband).
In May 2003 the parties moved to the premises which the wife currently occupies at M on the Coast of NSW.
The parties initially separated for the first time in March 2004 and interim orders were made by the Family Court on 3 May 2004.
The parties reconciled in the second half of 2004 and the Family Court orders were discharged by consent on 1 October 2004.
On 1 March 2006 orders were made mainly relating to interim property matters. An order was made giving the wife exclusive occupation on an interim basis of the M property (order 4).

APPLICATIONS

The applications of the parties are as follows:-

The wife

The wife’s application filed on 4 October 2006 sought that the respondent husband attend upon an enforcement hearing and bring certain documents with him. The husband was examined in respect of his financial circumstances, both before me on 18 December 2006 and 16 March 2007 and before the Judicial Registrar on 9 November 2006.

The husband

The husband’s response filed 31 October 2006 sought an order setting aside the spousal maintenance order and an order setting aside the part of the order for the wife to receive some payment for her legal costs, which order was made on 6 April 2006 so far as it still remained to be paid.
The husband also sought the sale of the property at M by auction at a reserve price of $3.5 million and that mortgages on the property be discharged from the sale proceeds.
The husband, with leave, filed an updated financial statement on 18 December 2006.
The husband ceased to pay the weekly amount ordered to the wife (which was in effect a combination of spousal maintenance and child support) of $925 per week from 8 September 2006. Exhibit B was a schedule of spousal maintenance arrears tendered by consent which indicated that the unpaid spousal maintenance as at 18 December 2006 was in the sum of $13,875.
The order of 6 April 2006 required a total payment of $20,000 to the wife’s lawyers over a period of 42 days. The husband only made the first payment. It is an agreed fact that the husband failed to pay $15,000 out of the $20,000 that he was ordered to pay by way of interim costs on 7 April 2006.
Enforcement sought on 18 December 2006 against the husband was in the sum of $28,875 ($13,875 + $15,000).
It was accepted on 16 March 2007 that no further payments of spousal maintenance had been made to that date. The further arrears that had accumulated in relation to spousal maintenance were in the sum of $12,025 ($925 x 13 weeks). The total arrears of spousal maintenance as at 16 March 2007 was consequently in the sum of $23,875 ($11,850 + $12,025).
Additionally, the orders for interim spousal maintenance required the husband to pay various specific items.
No evidence was led that these matters were not being attended to by the husband and there was no application that those orders be varied.

EVIDENCE

Both parties relied on affidavits sworn by each of them.
The transcript of the proceedings before the Judicial Registrar on 9 November 2006 was tendered in evidence. That transcript contains submissions by Mr Twigg that he incorporated into his final submissions before me.

Exhibit E

I will refer later in these reasons to a document which was produced by L Pty Ltd which became exhibit E.
The overall purpose of the document seems to be an attempt to obtain finance for the husband to redevelop the X site. The husband in cross examination didn’t adopt anything that was contained in this document. He says it was prepared by a business broker whom he had sacked because he was unable to obtain the necessary finance. I take into account that exhibit E is not a document that has been adopted by the husband but I conclude that it was a document that was prepared with his knowledge and was submitted to Bankwest with his approval.

THE LAW

The husband in effect wants the court to make an order for the sale of the matrimonial home on an interim basis.
When exercising power to make an interim property order the Full Court in Harris and Harris (1993) FLC 92-378 (at pp 79,929 – 79,930) said that the following matters need to be considered:
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 sec 79 proceedings.
2.It is an exercise of the sec 79 power. Consequently it must be performed within those parameters. Since it is not the final hearing the Judge is unlikely to have the 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 the parties at the final hearing or that the order which as contemplated is capable of being reversed or adjusted if it is subsequently considered necessary to do so.

THE HUSBAND’S ORAL EVIDENCE

The husband gave oral evidence. At times he was flippant; at other times almost belligerent. On occasions he presented himself as a man who looked at the big picture and employed others (particularly his accountants and a financial controller) to attend to the finer detail. However, on occasions, he actively gave information to the court from behind his lawyer when he perceived that an incorrect perception was being created in relation to actual figures.
Before the Judicial Registrar, the husband asserted he didn’t have a detailed knowledge of financial statements and documents that he had produced to the court. He said a lot of them were not prepared by himself and he was not an accountant. He commented that he was alright with profit and loss statements, but not with balance sheets. The husband’s belligerence and occasional inappropriately derisive comments when being cross examined by Counsel for the wife before the Judicial Registrar were at a higher level than they were before me (although they were not absent before me).
In relation to the husband’s level of knowledge about his own financial affairs, before the Judicial Registrar Counsel for the wife put this question to the husband “In respect of your various property holdings throughout the group, you have got equity of approximately $2 million in there, don’t you?....I don’t know mate. You are making the rules up at the moment. I don’t know mate”. At the end of a number of questions the husband’s final response was “Possibly I do, mate. Possibly I do”. Counsel for the wife referred the husband to annexure Y of his affidavit (on page 176 of the husband’s affidavit) which it is said shows that equity position.
The husband said to Counsel for the wife before the Judicial Registrar, “Mate, I am not a walking, talking computer”.
The husband suggests that apart from some general checking and overview he didn’t have anything particularly to do with the day to day running of the financial affairs of the properties.

Conclusion about the husband’s oral evidence

Within the confines of this hearing there was a total inability to test the underlying accuracy of information in business records. I have little confidence in the sworn testimony of the husband about his financial circumstances given that he conceded on a number of occasions that the figures were prepared on his behalf by others and that he didn’t really have the ability to provide detailed evidence about specific items.
Mr Twigg on behalf of the husband indicated that the two exhibits which contain financial information prepared for the purposes of obtaining loans were “neither prepared or adopted by the husband”. He made the point that one of the documents had the properties valued at $6.5 million when they are now said to be only worth $4.5 million. The auditors’ documents were projections for 30 June 2007, projections only.

THE HUSBAND’S FINANCIAL POSITION

What are the family’s current net assets?

There are wide discrepancies in the documents in evidence as to what the husband’s wealth might be.
The husband was shown a four page document which was produced by L Pty Ltd (exhibit E). That document is dated 28 June 2006.
That document asserts that Bankwest is secured against assets for the value of $31 million (a table on page 2 of the document sets out how that $31 million is calculated). On this information, the husband’s worth might be about $8 million. This is to be compared with the husband’s assertion in his most recent financial statement which says his liabilities are $23 million.
In his financial statement sworn 1 March 2006, the husband indicates that his property is valued at $10,375,000 and his liabilities are $15 million.
On the face of the husband’s financial statement sworn 18 December 2006 his assets are currently $23,364,002 and his liabilities are $26,541,344. Those figures are set out in Part K, in annexure 1 and in annexure 2 (pages 12 – 14) of the financial statement. The husband’s evidence is that the figures in his financial statement sworn 18 March 2006 were worked out by his accountant.
Therefore on the face of the husband’s most recent figures there is about a $3,200,000 shortfall, however there are mathematical inaccuracies in this calculation (see below).
Counsel for the wife said the reasons for the difference in the two financial statements relates to the fact that some assets were not in the first financial statement and some have been acquired since.
Counsel for the wife said that items 1 to 7 in the husband’s financial statement had a value of $16.5 million and that these assets were security for the Bankwest debt of $12.5 million.
The husband’s evidence in his financial statement is mostly hearsay. The husband indicated he had no idea how some of the figures were arrived at and that they were all put together by accountants employed on his behalf. No evidence from the accountants themselves was called.
There are some anomalies in the way those figures have been presented. At the end of submissions, Mr Twigg on behalf of the husband conceded that there were two items in annexure 1 of the husband’s financial statement sworn 18 December 2006 (items 10 and 11) in respect of which a full debt had been claimed, yet the husband had only valued his interest as a percentage of the assets.
In relation to item 10 the husband claims he only has a 50% shareholding in the K property and service business. It was conceded that the full liability in relation to that business was contained in annexure 2 (fourth row) being a debt to Bankwest in the sum of $2,150,000. If the whole of the real estate and business was assumed to be the husband’s it would add another $1.2 million to the pool. If one assumed that only half the debt was the husband’s, again it would add something over $1 million.
The other item was the G and X properties. In his financial statement sworn 18 February 2006, the husband asserts that he has a 60% interest based on a value of “$3,500,000 - $4,000,000 (depends on offers)”. The husband claims a 60% shareholding in an amount of $2,100,000 (see item 11, annexure 1). That is not consistent with his oral evidence. His oral evidence is that he has the entire interest in that operation and the entire responsibility for that debt. The responsibility for the debt is contained in the second row of annexure E and is in the sum of $5 million. The evidence the husband gave on 18 December 2006 was that heads of agreement that had been entered into with a purchaser at $4.5 million, subject to conditions. He said those conditions were not acceptable to Bankwest at this point. On 16 March 2007 the husband said the properties had been sold for $4.8 million (see below).
In any event, say 40% of $4.5 million has to be added, that is, another $1.6 million. That bridges the gap between the assets and liabilities so that on the husband’s version in his financial statement there is about a $200,000 shortfall in assets over liabilities ($3.2m - $1.2m - $0.8m).
The husband gave evidence that he was a 60% shareholder in the AP Pty Ltd business.
In oral evidence before the Judicial Registrar the husband was unable to estimate the value of the maintenance business. He said it was purchased for $700,000 with a debt against it of about $500,000. He said he thinks he put about $150,000 into it.
The husband said that he had heads of agreement to obtain a development application in relation to a service business at P in which he would take the lease of a building from a developer. On 16 March 2007 the husband said he still wished to acquire this child care centre that is subject to a pending development application.
There is a mortgage of about $1.375 million on the husband’s residence at the SV property.
The S property is rented out.
On 9 October 2006 the husband said that he was in the process of opening two service centres, one at N and the other at H.
N Service Company was to open within three weeks from that time. The husband had funding through the bank to finish off that project. The centre cost $2.2 million and it was just about finished. The finance for this had been obtained about October 2005. The husband gave evidence that he didn’t know whether or not it would make a profit. The husband acquired the service centre at N in equal partnership with Ms C. He asserted that they were equal partners in that business (but as pointed out above, he had in his most recent financial statement assumed the responsibility for the whole of the debt).
N Service Company is now the subject of a dispute with Ms C. On 16 March 2007 the husband said he had separated from his new partner, Ms C, and is in a dispute with her over the N Service Company. The husband says that the equity in that centre is about $200,000 and that Ms C should be entitled to one half of that equity ($100,000). He says she wants $1 million.
The husband said he didn’t own the building at which the H service business operated, and only had a leasehold there. No money had been expended on that and he was yet to get finance for it which he hoped to do by the end of January 2007. He attested that he would need a loan to put equipment, white goods and all the usual things into the service business. The October 2006 the husband was hopeful that somebody other than Bankwest would provide him with the finance to open H service business.
Counsel for the wife points to the creditors at $1.5 million. I asked Mr Twigg to identify where in the material I would find details. He was unable to identify the details, but referred me to the husband’s primary affidavit. I have looked there, but not found that information. Annexure “Y” gives me no clue.
The husband said that he was behind in GST payments. The husband told the Judicial Registrar that whilst he didn’t have anything from the Commissioner of Taxation, the moment he told the Commissioner of his situation the Tax Department would in his view, declare him bankrupt.
I have no evidence before me as to whether or not the estimates of value of the husband’s businesses contained in the schedules to his financial statement are accurate. His oral evidence before me was that significant losses were made when child care centres were started. The husband says there is a lot of competition in the market place at the moment, so it takes a little while for a centre to achieve full capacity.
I have no information as to how the husband has valued the direct or indirect interests which he has in the service businesses. He made it clear in oral evidence that it is the potential growth in value in these businesses as they establish themselves which is what attracts him to them as an investor.
The husband’s case is that he should be able to retain any asset that is currently producing an income (even if the current net effect is that it is trading at a substantial loss). The rationale is that these early losses will be more than compensated in the medium term by capital growth in the asset. What the husband is asking the court to do, when asking to be excused from failing to honour court orders to pay the wife and her lawyers, is to place the wife and her lawyers at the bottom of the list of creditors whilst the husband continues to grow his businesses and continues to open up new service businesses which on the husband’s own case are trading at a significant loss in the early period of their operation. The husband’s case is also that he needs to look after his suppliers.

Sale of the properties

The husband confirmed that the G and X properties were actually owned by a company called Q Pty Ltd (“[Q Company]”) and that he guaranteed $6.5 million worth of debt (this is to be compared with $5 million in his financial statement filed 18 December 2006).
It is common ground that the husband is in fact not a director or a shareholder of Q Company, however he claims that whatever he says in respect of that company will happen.
The husband is disposing of the two properties he says have caused him significant financial pain. He indicated that there is litigation involved in relation to representations that were made to him at the time he acquired those properties.
The husband was asked questions about a settlement of $2.7 million in respect of a dispute with a vendor of the two Brisbane properties. The husband gave evidence that the person from whom he brought the properties had accepted liability, meaning he effectively walked away from $2.7 million. The husband claimed that had been taken into account when estimating the current value of the hotels. The husband asserted that certain documents indicated the figure of $2.7 million was owing under a vendor finance agreement, but that it wasn’t there anymore.
The husband was asked in cross examination for documentation in relation to the sale of the hotels on 9 November 2006 before the Judicial Registrar. The husband said that he had Mr W, the best business dealer in Australia, looking after the sale. He commented that he didn’t want to give an exclusive deal because a large consortium were also looking. There is nothing in writing to support what the husband was saying. The sale was by way of expressions of interest.
The husband’s evidence before me about the state of negotiations in respect of the disposal of the properties is less than satisfactory. He produced no up to date documentation in relation to the negotiations or the heads of agreement that have been signed.
In December 2006 the evidence was that the husband was in the process of selling the G and X properties. In paragraph 8 of his affidavit sworn 1 November 2006 the husband said that Bankwest, the bankers for the borrowings in relation to the X and G properties in Brisbane required the sale of the properties by mid December 2006. The husband said that he received an extension of time from the bank and that he was currently dealing with people. When I tested that, the husband indicated that there was heads of agreement and a sale at $4.5 million on terms that the bank had not accepted.
The husband gave further oral evidence on 16 March 2007. The husband confirmed that the hotel interests have now been sold for a sale price of $4.8 million or a lesser sum depending on vendor finance agreements. The husband, however, has not provided to the wife a copy of the exchange contract. The new purchaser intends to find finance with Bankwest, who have approved the deal subject to valuation. The husband says that he understands that the valuer the bank is using is completing his valuation shortly and he is hopeful that a valuation will be obtained that allows the matter to proceed.

Disposal of other assets

The husband gave evidence before the Judicial Registrar that he had sold his Mercedes for $170,000 and that was probably sufficient to pay out the motor vehicle lease.
Before the Judicial Registrar the husband was asked questions about an entry on the financial statements for Hatton Trust for the year ended 2005. The balance sheet showed that the trust had a short term deposit of $393,358. Mr B tried to find out what had happened to that money. The husband’s best explanation was that it would have been something that had been generated by “an internal transfer to the point of saving tax” and “I can assure you that if you think that I have $393,000 in an account somewhere, trust me, I would be using it to get myself out of trouble”. The husband could not give any explanation as to why the amount of $393,000 had ceased to appear on the financial records of the trust.
In the cross examination before the Judicial Registrar the husband was asked about the 2006 draft personal statements which show that I Company owed him $120,000. The husband’s response was “I don’t understand balance sheets, I never have. And to be quite frank I hope I never do”. He said, however, that he understood profit and loss statements. A balance sheet for the husband for June 2006 was tendered and that was exhibit 6 before the Judicial Registrar. The husband asserted that I Company had no funds from which that loan could be repaid (if, in fact, it existed which, from an accounting prospective, I accept that it does). He said any monies that were moved around in that way would have to be redistributed through other centres that were making a loss, so his global position would still be negative.
The husband was selling his boat for $80,000: there was $81,000 owing on it.
The husband gave evidence that he disposed of a boat and that a man at F Company owed him $25,000 of which he had paid him $10,000 (which the husband thought was used on solicitor’s fees). Although he owed him $15,000, the husband gave evidence that the man is now broke and doesn’t have the money to give him. The husband agreed that he had intended to buy a new boat for $750,000, but that was “before the trouble”.
In paragraph 10 of his affidavit sworn on 1 November 2006 the husband says that four service businesses were sold during 2006. The husband said that he received about $400,000 but conceded it could have been $450,000. He said that from that he paid $150,000 that was owing to the wife’s father, settled a debt that he had incurred in respect of the acquisition of a maintenance business of $150,000 and that all of the balance money (which would have been about $150,000) went towards paying bills and debts. He prioritised his creditors and said unfortunately the court order to pay the wife’s lawyers wasn’t amongst his list of priorities. That is, the husband indicated that complying with a specific court order that had been made with his consent wasn’t something to which he thought any great priority should be given.
There is in the L Pty Ltd document (exhibit E) what purports to be a quote from the husband in “his own words” which gives different information in relation to the disposition of the proceeds of the sale of the child care centres in the middle of 2006. The repayment to the wife’s father seems to be $160,000 (not $150,000). The payment in respect of the maintenance business was said to be $250,000 (not $150,000 as given in the husband’s oral evidence).
The husband had no idea how much he had paid his own lawyers. It was put to him that he had incurred more than $100,000 in legal fees. He was unable to say. Before the Judicial Registrar the husband confirmed that his prior solicitors had been paid at least $15,000 from his overdraft - “it didn’t come from under a rock. It came out of my trading accounts”. The husband said to the Judicial Registrar (as at 9 November 2006) “I am that close to being bankrupt, it’s not funny”. Mr Twigg had been paid $5,000 on 8 November 2006. The husband said he borrowed that money from his sister.

The husband’s income and cash flow

Before the Judicial Registrar the husband was referred to his financial statement of March 2006. In that financial statement the husband indicated that he had a net loss of $10,658 per week. He was asked how he calculated that. He said he sat down, worked out his expenses and worked out his income. However, he could not produce any document which indicated what his current income was.
The husband was cross examined before the Judicial Registrar in respect of his income tax return for the financial year ended 30 June 2005. It apparently showed that the husband’s income was $337,000.
The husband, however, suggested that his situation had deteriorated since the filing of that return. He was also shown a draft of a personal profit and loss statement for the 2006 year, or at least a document showing the husband’s comparative position as at 30 June 2004/05 and 2006. The husband asserted that that was not a true reflection on anything. That document became exhibit 5 before the Judicial Registrar. The husband asserted that it did not fully show his personal situation, given that it did not make reference to the fact he was a guarantor on the properties and it didn’t take into account the profit and loss of each of the service businesses which also were his.
Counsel for the wife put to the husband that he knew what his position was when he consented to the orders that required him to make a regular weekly payment to the wife of $925 per week plus four payments to the wife’s lawyers of $5,000 each. The husband relied upon his claims as to a critical worsening financial situation as a basis for the claimed variation and non compliance with court orders.
The husband told the Judicial Registrar that some months he was losing $150,000. Other months he was losing $50,000.
The husband’s most recent financial statement indicates that a summary of his net profit and loss for year ended 30 June 2006 discloses that his loss of income on an annualised basis is $1,872,000 or a loss of $36,003 per week.
The husband was shown exhibit F which seems to be a draft profit and loss statement for the financial year ended June 2006 for himself personally. It appears to have been prepared on 27 October 2006. It shows total income of $1.3 million, total expenses of $1.215 million with an operating profit of $86,000. This is to be contrasted with the loss asserted in the husband’s most recent financial statement of $1,872,000. The husband said that the figures in exhibit F were not accurate. He was unsure as to how they had been produced.
The husband opined that exhibit F might be incorrect because it didn’t include depreciation (depreciation in the previous year had been $294,391). However, that doesn’t explain the difference.
The husband’s evidence was that his cash flow had temporarily worsened and that a reason for that was that there had been two interest rate rises in 2006.
The husband says that because his level of debt was about $20 million or $25 million, an interest rate rise of that nature affected him in a significant way. Appendix 2 to the husband’s most recent financial statement asserts that his level of debt is about $26,300,000. Not all of that is to financial institutions. Mr Twigg submitted that 0.25% increase in interest on a level of debt of $26,300,000 equated to in excess of $1,000 per week (in fact it would be closer to $1,300 per week).
The husband did not contest that he had received rental income from six of the child care centres which totalled in excess of $1 million each year.
The husband gave evidence that he received $200 a month maximum from O Lending. He had not calculated that $50 a week amount into the income that he received.
Exhibit C is a draft of a report produced by the auditors entitled “[The husband] and Group”. The evidence was that it was prepared for the purpose of presenting it to Bankwest.
That document was created some time in the middle of 2006. The executive summary indicates a projected operating profit of the maintenance business, hotels and child care centres of $1,970,117 per annum. The projections conclude that the properties are expected to have made a profit of $674,578 in the year ended 30 June 2007. That is not in accordance with the evidence before me. If, however, the losses incurred by the hotels are eliminated by the pending sale, then the document would indicate that profits from the maintenance business and service companies would be expected to be somewhere in the vicinity of $1,295,500 per annum. The husband in direct quotes in exhibit E says that the maintenance business is providing a good cash flow.
This is to be contrasted with the husband’s oral evidence on 16 March 2007 where the husband asserted that he currently doesn’t have the cash flow “to do anything”.

The Natwest account

The solicitor for the husband put particular emphasis on what he referred to as the “buck stops here” account. He made the point that the Natwest account had gone from $300,000 in debit on page 171 of the bank statement to $956,000 in debit on 19 October at page 174. It showed that interest on borrowings under $300,000 was 10.1% but in excess of that it was 17.1%.
I accept that account reflects cash flow problems that the husband currently has relating to the two hotels which created a negative drain on his resources, as set out above. As at 16 March 2007, heads of agreement had been reached for the sale of the properties.

Refinancing

When before the Judicial Registrar, the husband was asked whether or not he had some letter from Bankwest saying they were ceasing to be his financiers. His response was “You don’t need a letter when you deal with someone as high as I do. He just tells you, ‘no’”. The husband told the Judicial Registrar at the beginning of November that Bankwest had ceased to back him as a financier for the future.
The husband asserted before the Judicial Registrar that if he hadn’t sold or refinanced the hotels by 5 December 2006 then Bankwest would force him into receivership and sell off all his assets, effectively sending him broke and destroying everything that he has worked for. That hasn’t happened yet.
On 16 March 2007 I allowed a reopening of evidence in relation to financial issues. The husband filed information in a further affidavit sworn 13 March 2007. In addition a letter was tendered (exhibit 7). Paragraph 5 of that document reads:
We have also been advised that the Bank wishes to sever the Bank-Client relationship as soon as possible. To that end, the Bank expects all facilities extended to [the husband] or his associates to be repaid in the shortest period of time and by no later than at the same time as the sale of the hotels.
The husband is currently working to refinance his affairs with his broker Ms L from D Company.

Sale of matrimonial home

There are various estimates in the material as to the current value of the property in which the wife and the children currently reside. They range from slightly less than $3 million to around $4 million. I have no expert evidence that would assist me in respect of the value of the property.
The husband gave evidence that the house in which the wife was living was costing him $6,000 per week. He said that he had “stretched the rubber band” when they purchased it. It wasn’t an income producing house and he needed to sell it to free up some of his cash flow.
Mr Twigg, before the Judicial Registrar and before me, asserted that $6,000 per week far exceeded what the wife and children would expect to pay for reasonable housing. Whether or not that is so is not the crucial point. What the husband is seeking is a sale of the matrimonial home and for the wife and children to be moved out of the home. That is an application for interim property order, not an application that relates to variation of spousal maintenance. In considering whether or not I make that order, I am guided by the principles of Harris (supra, see above).
The husband asserted that his financial circumstances compelled the sale of the matrimonial home and that there was no reason why the wife and the children needed to live in a $4 million property.
If the mortgage on the home the wife is living in is in the sum of $3.5 million, then payments at a rate of $6,000 per week would equate to an interest rate of 8.91% on an interest only basis.
Before the Judicial Registrar, the husband gave evidence that if the wife vacated the matrimonial home he would make funds available for her to re-accommodate herself with the children, maybe up to a rent of $500 a week.
On 16 March 2007 the husband was frustrated and angry that he is currently continuing to pay $6,000 per week in respect of the mortgage associated with the acquisition of the matrimonial home. In addition, he is paying for a gardener. His view is that the $4 million house should be sold. He would expect to pay about $350 per week to rent somewhere suitable on the NSW Coast to have the boys with him overnight and he says that when the sale of the matrimonial home is settled he will be able to do that.

Husband’s lifestyle

The husband was cross examined about expenses he had incurred by way of his credit cards in recent months. He flippantly said that an expenditure with a retail store of $6,991 on 13 November 2006 was to buy himself a television. When I queried him on whether or not he was joking, he indicated that he was and said he used the money to set up the H Service Company. He agreed that he had spent $250 recently at a restaurant; that he had spent $650 on 21 November 2006 at a restaurant on the Queensland Coast; he paid off his membership to U Company, brought tickets to a rock concert; travelled to Canada in July; purchased sporting goods for $3,115 and spent fees at sporting clubs.
In relation to some of these expenditures the husband’s explanation was that he had been with others or had made purchases on behalf of others; the whole of the amount expended was put on his credit card and he was given cash back.
Notwithstanding that explanation, expenditures in the areas highlighted in cross examination are indicative of a lifestyle which the husband enjoys without it apparently being affected in any way by what he claims to be his parlous financial state.
When questioned about the use of business class airfares on a regular basis he explained that most of the time he took the cheap airfare, but because he had one million frequent flyer points he would from time to time upgrade to business class using those points.

SV property

The husband lives in a property at SV which was described as being “new” in the L Pty Ltd document of June 2006. The husband says that it has been listed for sale at $1.35 million. Tendered in evidence (exhibit 4) is a flyer indicating the property has been listed for sale with a Real Estate agent. The husband says the listing price is $1.35 million, but by March 2007 the husband’s residence had been on the market for nine months and hasn’t moved. When asked in December 2006 whether or not he considered reducing the sale price, the husband indicated that everything in Queensland starts at a higher price.
Given the husband’s evidence I have no real confidence that he is in fact genuinely trying to dispose of SV property, despite his indication that he would be perfectly happy to live in rental accommodation. When the matter was before me on 16 March 2007, no new evidence of the progress in the marketing of SV property was given. On 16 March 2007 the husband said that when he sells SV property the husband’s intention is to rent on the NSW Coast.

Mercedes

The husband gave evidence that he had disposed of his Mercedes motor vehicle and the sale had discharged the debt on that motor vehicle.

Social security for the wife

The husband didn’t understand why the wife was not entitled to Centrelink benefits. The answer seems to be that she is notionally the owner of one of the child care centre businesses. The husband indicated that the wife, as proprietor of the business, owed him rent as the registered proprietor of the property at which those businesses operated.

Conclusion

It is clear from what is set out above that at this interim stage there are a number of conflicting pieces of information in respect of the husband’s current net worth.
In the current document he indicates that the value of his property is $23,364,000 and his liabilities are $26,541,000. As previously indicated in his financial statement sworn 1 March 2006, the husband indicated that his property was valued at $10,375,000 and his liabilities were $15,000,000.
Other documents indicate the assets might be worth $8,999,000.

The husband disposed of about $450,000 worth of assets without considering that any accommodation should be made to the wife in respect of orders made by the court.
Counsel for the wife makes the simple submission that that’s actually an improvement in the husband’s financial position by about $3 million from 1 March 2006 to 18 December 2006.
Mr Twigg submits that the reason for the increase is primarily in relation to a difference in the way the financial figures have been presented to the Court, although there had been some acquisitions of property. It is not always the case that complete financial disclosure can be expected at an interim stage in matters where the financial circumstances of the parties are complex. In most interim applications in financial matters, the court has to make judgments on incomplete information, but in this case the husband’s substantial application is for the sale of the matrimonial home based on what he asserts to be his parlous financial situation. In those circumstances there is an onus on him to provide a complete and coherent picture as to his current financial position. He has not done that. He has not, for example, attempted to provide any expert evidence in relation to the current value of the child care centres. I only have his estimates to go on. What the centres are worth will be a central issue in the final hearing in respect of the alteration of property between the parties. The overall net worth of the parties as at the date of the final hearing will in turn determine whether or not the wife is successful in her application to retain the current home in which she and the children currently live.
The husband currently presents the case that his substantial assets are offset by substantial debts. I am unable to say on the evidence before me as to whether or not that is accurate. I accept that he currently has cash flow problems. On the information I have before me however, I am not convinced that the sale of the matrimonial home is necessary to resolve those cash flow problems. I am unable to say that there are compelling reasons that would lead to an order for the sale of the home. I am unable to find compelling reasons that would lead to an order for the sale of the home. I am unable to discount the possibility the wife may at the final hearing (depending on valuation evidence) be able to maintain a case that she should maintain the current home in which she lives.
I need to be conservative. Clearly an order for the sale of the home in which the wife lives is not easily capable of being reversed or adjusted if it is subsequently considered necessary to do so.
Accordingly, I will dismiss the order made by the Judicial Registrar for the sale of the home.
I am likewise unconvinced that the husband doesn’t have the financial capacity to meet the order that he agreed to in March 2006 for the payment of periodic spousal maintenance. Accordingly, I will discharge the order made by the Judicial Registrar which vacated that spousal maintenance order (given that the Judicial Registrar stayed his order discharging the spousal maintenance order, it has in fact continued to operate, although the agreed fact is that the husband has failed to make any payment under that order).

AN ORDER FOR THE ATTACHMENT OF EARNINGS AND DEBTS

As set out above, the arrears in relation to spousal maintenance as at 16 March 2007 was $23,875. There is a further amount of $15,000 outstanding and relating to the order for payment towards the wife’s legal fees.
Counsel for the wife referred to the part of exhibit C which is the investigating accountant’s report on the child care centres. That part of the report indicates that two of the premises are owned by the husband personally. They are P1 and P2 and both are subject to 15 year leases to A Service Limited, a service company listed on the Australian Stock Exchange. That publicly listed company operates businesses at those sites known as “W Service Company” and “HL Service Company”. The husband gave evidence during cross examination that he receives about $16,000 per month from A Service Limited.
Consequently that income to the husband is a source of funds against which an order could be made to secure payment of the husband’s responsibilities under the court orders.
Mr Twigg asserts that is a simplistic solution because it doesn’t take into account the husband’s other creditors. Counsel for the husband submitted that when making enforcement orders I had to consider the question of outside creditors and I have to look at proper debts. That is so, but I take the view that the husband has talents and capacities which would enable him to reorganise his financial affairs so that those other creditors might be accommodated.
Rule 20.05(b) Family Law Rules is in the following terms:
An obligation to pay money may be enforced by one or more of the following enforcement orders:-
(b) an order for the attachment of earnings and debts, including under a Third Party Debt Notice (see Part 20.4).
Part 20.4 Family Law Rules is the normal way to attach a debt under the Rules but it is not an exclusive method.
The difficulty with Part 20.4, in this case, is that it does not necessarily allow the court to make an order in relation to monies that will become payable to the husband on a periodic basis in the future.
Rule 20.05(b) Family Law Rules is not restricted in that way. That rule allows the attachment of earnings and debts which are not reliant on the Third Party Debt Notice processes. The rule is based on the powers contained in Section 105 and Section 123 Family Law Act 1975.
Consequently I intend to make an order that A Service Limited make payments to the wife from monies payable to the husband from time to time to satisfy the husband’s obligations under existing court orders.

EXPEDITION/JUDGE MANAGEMENT

This matter had a pre trial conference scheduled for 19 December 2006. That date has been vacated. The expedition of this matter should be considered as long as the court is satisfied that both parties have provided as much financial information as is possible and the other side has had adequate time to analyse that information and any expert reports available.
There is a strong argument that this matter should be managed in a way that will get it to a hearing as soon as possible with as much available information about what the assets are worth and what the husband is doing.

I certify that the preceding one hundred and thirty-seven (137) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Watts

Associate:

Date: 29 May 2007

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

[2007] FamCA 551

29 May 2007

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