Hurford & Hurford

[2016] FamCA 328

FAMILY COURT OF AUSTRALIA

HURFORD & HURFORD [2016] FamCA 328

FAMILY LAW – INTERIM PROPERTY – Where the husband’s financial circumstances are complex and unclear – Where the wife seeks that the husband provide written details of any liability incurred since 8 December 2014 – Where the husband asserts that such an order is onerous – Where the wife seeks to change an existing order so that the husband is required to seek the wife’s permission to enter into a liability – Where the husband asserts that such an order would make his businesses impossible to run - Where the husband seeks to discharge orders requiring him to fund single expert reports - Where orders are made for the husband to provide written details of any liability in excess of $50,000 – Where an order is made that the husband is required to seek the wife’s permission in relation to transactions other than in the ordinary course of business – Where the matter is adjourned so that the husband can make inquiries as to obtaining assistance to fund single expert reports – Where a “dollar for dollar” order is made.

Family Law Act 1975 (Cth)

APPLICANT: Ms Hurford

RESPONDENT: Mr Hurford

FILE NUMBER: SYC 6924 of 2013

DATE DELIVERED: 2 May 2016

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Watts J

HEARING DATE: 8 April 2016

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Lloyd, SC

SOLICITOR FOR THE APPLICANT: Pigdon Norgate Family Lawyers

SOLICITOR FOR THE RESPONDENT: Litigant in person

Orders

Orders made 8.4.2016

1. This matter be adjourned for a further mention before myself at 9.15am on 18 May 2016.

2. I note that I intend to manage and hear this matter as docket judge.

3. By 16 May 2016 the husband to provide written details of all and any transactions entered into after 8 December 2014 which have the effect or had the effect of creating any liability for the husband and/or any of the companies or any of the trusts listed in Schedule 1 of the consent orders dated 8 December 2014 where that liability exceeded an amount of $50,000 and on an going basis, give this information to the wife by the 16^th of June 2016 and each proceeding month.

4. Order 1 made 8 December 2014 be varied by the deletion of the words “the Husband provide to the Wife’s solicitors twenty one days’ notice in writing before doing, causing or permitting any act or thing to be done or giving any direction in relation to any of the companies or Trusts listed in Schedule 1 which might have the effect of”, and substituting the following:

   “and in the absence of the Wife’s consent being forthcoming in writing, the Husband be restrained from doing, causing or permitting any act or thing to be done or giving any direction in relation to any of the companies or Trusts listed in Schedule 1 which might have the effect of”

5. Liberty granted to both parties to apply to me on 14 days notice in relation to the implementation of the preceding order. 

6. Within seven (7) days after any future payment by or on behalf of the husband of any money in payment of accounts rendered by any lawyers that give any advice or do any work for the husband that has any connection with these proceedings, the husband pay or cause to be paid the same sum of money to the solicitors for the wife.

7. Within 24 hours after the payment by or on behalf of the husband of any money referred to in order 6, the husband cause to be given to the wife’s solicitors, a memorandum stating the amount or amounts so paid to the solicitors.

8. All money paid to the solicitors for the husband including on his behalf pursuant to order 6, shall be held in trust by the solicitors for the husband and not applied in payment to the husband’s solicitors until such time as the same amount has been paid by or on behalf of the husband to the solicitors for the wife.

9. In the event that the payment to the wife referred to in order 6 is not made within seven (7) days thereafter, the husband is to direct his solicitors to pay 50 per cent of whatever is received (as referred to in order 8 and held by them in trust), to the solicitors for the wife.

10. The amounts paid pursuant to these orders to the solicitors for the wife are to be applied by them in payment of the costs and disbursements incurred by the wife in the conduct of these proceedings.

11. The question of how payments to the wife under orders 6 and 9 are to be treated at the final hearing shall be matters for determination by the trial judge.

12. The Second Response to the Application in a Case filed by the husband on 6 April 2016 is dismissed.

13. I note that the parties have agreed that B Valuers will value the property in Country K and that they have provided a quote of approximately $15,000. I note that C Valuers has been agreed as the real estate valuers of the property in Queensland and they have provided a quote of $45,650. I note that Mr D will be doing real estate valuations in New South Wales and he has provided a quote of $11,000.

14. I note that the wife has identified two valuers in the US to value the two properties there. They are E Valuers and F Valuers. The wife’s lawyers are to provide to the husband as soon as is practicable quotes from both of those experts and to do everything possible to ensure that we have those quotes no later than when the matter is next before me.

15. Both parties are to do all things that are within their power to obtain an estimate of the costs of valuations by Mr G and Mr H so that those quotes are available on the next occasion.

16. The wife’s lawyers, if they have not already done so, are to provide with husband with draft letters of instructions to each of the real estate valuers and to the forensic accounting expert.

17. If either party wants particular orders on 18 May relating to the valuations, they are to forward a minute of their proposed order to my associate by 11 May 2016.

18. By 18 May 2016 the husband is to do everything that he can to work out a method by which the valuations can be financed and by 11 May the husband is to have sent a written document to the wife’s lawyers and to my associate indicating what he proposes.

19. Both parties are to generally do everything within their power to facilitate instructions being given to valuers to value the assets.

20. I note the husband wishes a redacted version of Mr I’s report to be provided to the single expert forensic accountant. Within three weeks the husband is to send to the wife’s lawyers a redacted version of Mr I’s report so that it contains matters which are not contentious and would, in the husband’s view, be of assistance to the forensic accountant. The husband is also to send a copy of that redacted report to my associate.

21. By 11 May 2016 the lawyers for the wife should indicate what their attitude is to what is being proposed by the husband in relation to a redacted version of Mr I’s report.

22. It is my understanding that the subpoena that the wife issued to J Attorneys in respect of which they lodged an objection on behalf of the husband has been set for argument in relation to that objection on 20 April. I vacate that date. I list the hearing of any objection to that subpoena before me at 9.15am on 18 May. In the event that J Attorneys wish to maintain an objection in their own right they are to appear on 18 May for the purposes of agitating that objection.

23. On or before 4 May 2016 J Attorneys are to indicate what their position is in relation to any objection that they take in their own right.

24. The lawyers for the wife are to draw the attention of J Attorneys to the last two orders as soon as possible.

25. I reserve my reasons.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Hurford & Hurford 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 6924  of 2013

Ms Hurford

Applicant

And

Mr Hurford

Respondent

REASONS FOR JUDGMENT

1. On 8 April 2016 I made the orders set out above and reserved my reasons in relation to some of those orders.

2. The evidence and information that I have been asked to consider in the context of this interim application is voluminous.

3. The wife filed an Amended Application in a Case in February 2016. She did not seek to press orders 1 and 4 as sought in that application. Order 2 would require the husband to provide written details of any liability that he had incurred or that had been incurred by any company or trust set out in Schedule 1 of the orders of 8 December 2014 since that order was made. In final submissions the application was amended so that it was confined to liabilities in excess of $50,000. Orders 5-10 sought by the wife seek a “dollar for dollar” order in her favour. The husband opposes such an order.

4. Part of the unresolved dispute between the parties is the implementation of an order made in November last year for single experts to carry out valuations of the real estate holdings both within Australia and overseas and the businesses run by family controlled companies and trusts. The husband seeks to discharge order 7 made 12 November 2015 which requires him, in the first instance, to fund single expert reports. The wife opposes this change to the order.

5. The husband accepted that his financial circumstances were “very complex”. He agreed that he would not expect the wife to be able to understand it without independent assistance. Schedule 1 of the 8 December 2014 orders lists 48 companies and 7 trusts. The husband, his two brothers and sister control the business operations conducted by these entities. By way of example, one of the entities owns a mountain in Country K which accommodates a business. There are also properties in Queensland and the United States of America. The US properties were acquired by the husband’s father in the 1970s.

6. The husband asserts that there are latent capital gains tax liabilities in respect of the US properties which he does not ever expect will materialise given that his siblings and himself have no intention of disposing of the US properties but rather leaving them as an asset for future generations.

7. The husband asserts that there has been extensive financial disclosure during the period of the litigation which commenced in February 2014. The wife on the other hand says that she is almost totally in the dark about the real level of the husband’s assets and liabilities.

8. The husband has filed a number of financial statements which contain what seems to be significantly different information. Senior counsel for the wife submitted that the husband’s position gleamed from the financial statements that he has filed from time to time as to the nature of his assets, liabilities and income, was manifestly unclear. Senior counsel for the wife indicated that it may well be that the wife would need to apply for an order for the appointment of a receiver, given that the wife has been attempting to obtain information from the husband for two years to establish what his financial position is.

9. Exhibit 3 is the husband’s most recent tax return. It indicates a receipt by the husband of distributions from trusts in the sum of about $1.773 million in the financial year ending 30 June 2015. That income did not find its way onto the relevant financial statement filed by the husband. There was consequently a disparity between what the husband was telling the Australian Taxation Office (“ATO”) and what the husband was telling the court about the level of his income in the 2015 financial year.

10. The husband asserts that he owes over $10 million to L Pty Ltd. The wife asserts that she does not know the particulars in respect of this loan although the husband and Mr Curtis, the long term family and company accountant (“the accountant”), have now provided some information about the function of L Pty Ltd within the family group, namely, that it is a financial company set up by the family to centralise all loans within the group.

11. In 2014 the husband engaged, without any apparent agreement by the wife, a forensic accountant, Mr I, to value the husband’s interests in the multiple entities in which he is involved. Mr I’s evidence was not before me because the wife objected on the basis that the husband had not sought any leave to adduce evidence from Mr I and in November 2015 orders had been made for a single expert to value the husband’s business interests.

12. In relation to the future use of Mr I’s evidence, I indicated that given the complexity of the husband’s financial position, a redacted copy of Mr I’s report which contained non-controversial matters, for example in relation to corporate and trust structures, could be provided to the single expert so that the single expert does not have to redo that work but rather, simply check it. I shall resolve any controversy about that on the next occasion.

Order 2 as sought by the wife

1. There is sufficient information presented by the wife that would confirm to me that she has little understanding of the husband’s interests in the husband’s family company and trust structure and that the information that has been provided from time to time has, on occasion, been significantly inaccurate. As an example, on all but the last financial statement, the husband’s interest in the Country K property had been omitted. The interest that the husband holds in the Country K property is held through M Trust and the figure now disclosed on the most current financial statement by the husband is $4.275 million.

2. The husband also asserted that on a previous financial statement he forgot about a personal liability that he owed to the N group of companies in the sum of $8.6 million. The husband’s explanation for forgetting a personal liability of that magnitude was that although he spent a lot of time with the accountant, he was relying upon the accountant to prepare the financial statement. This type of discrepancy in documents presented by the husband underscores the fact that the wife is entitled to attempt to gain as accurate picture as possible of the husband’s financial circumstances.

3. Another example is what happened with the husband’s 2015 tax return. On 13 January 2016 the husband received into his account a tax refund in the sum of $531,403. This refund was based on the husband’s 2015 tax return which was lodged with the ATO on 23 December 2015. The wife had been calling upon the husband to produce his 2015 tax return (see paragraphs 26, 28 and 38 of the wife’s affidavit of 1 April 2016). The tax return was not provided to the wife’s lawyers until after the husband’s refund had been received and disbursed by him. The clear inference to be drawn is that the husband’s failure to immediately provide to the wife a copy of the tax return that he had lodged with the ATO in December was that there was a fear that the document would have disclosed an imminent substantial refund of tax in respect of which the wife may well have attempted to seek orders prior to it being disbursed by the husband. The husband would have defended any such application on the basis that the credits that had led to the refund were all part of an internal arrangement aimed at eradicating certain tax problems that exist within the structure.

4. The husband says that the order as originally sought by the wife is unrealistic and onerous given the volume of transactions involved over the period of the last 16 months. Initially, the wife’s application suffered from the difficulty that any liability (for example, somebody working in the Country K business for the company) would need to be documented. For example, the husband said that in the business (in which he is a minority shareholder) its annual operating costs were in excess of $1 million. Similarly, the operating costs of the property in Queensland were in excess of $1 million. The Country K business employed 40-60 people at peak. The property had in excess of 80 tenants. The husband claimed that the order as originally sought would place an “astronomical” burden upon him.

5. The wife amended her application so that it related to any liability in excess of $50,000. In my view, the wife is entitled to have information that would enable her to assess whether or not the husband has complied with the existing orders. To facilitate that, the husband should give details to the wife in relation to liabilities that have been incurred, other than in the ordinary course of business, by the husband or any company or trust with which he is associated. In my view, it would be reasonable to set a threshold of $50,000 in relation to any individual liability incurred as some filter for the information that the husband has to obtain and provide to the wife. The husband will be given until 16 May 2016 to provide that information to the wife.

Order 3 as sought by the wife

1. The wife wished to change the preamble to order 1 of 8 December 2014 so that instead of giving the wife notice of an intention to do that which is set out in that order, the husband is required to seek the wife’s permission to do any of those things.

2. Senior counsel for the wife submitted that the wife was entitled to know if the husband was about to enter into a liability which increased the liabilities to which he was exposed in a material way. The wife says, I think correctly, that she does not know the true position in relation to the husband’s liabilities. The husband’s personal position in relation to liabilities would significantly change if there was a major acquisition contemplated by one of the companies or the trusts. Any such significant liability that was contemplated would need the wife’s approval under this order, which approval should not be unreasonably withheld and if there is a controversy about failure by the wife to give approval, the matter could be brought back to the court at short notice.

3. The husband said that if the order for permission related to getting permission for transactions that would happen in the ordinary course of business, it would make the businesses impossible to run. The US property and the Country K operation are run by employees overseas. The husband asserted that if that restriction was placed upon him, his family would most likely remove him as a manager from the family group.

4. I note that order 1.6 of 8 December 2014  makes it clear that this order is not aimed at interfering with the selling, mortgaging, charging or encumbering of any asset in the ordinary course of business carried out by the husband, family companies and trusts.

5. This matter has now been placed in my docket and the proceedings will be judicially managed. There will be some recourse to the husband if he asserts that the wife is unreasonably withholding consent to a particular borrowing that is not in the ordinary course of business.

The “dollar for dollar” order

1. There can be no issue in this case that the husband has all the knowledge relevant to his financial circumstances (or at least is able to obtain and understand that knowledge with the assistance of those who advise him and the companies/trusts) and that together with his two brothers and sister, he controls the purse strings.

2. A common example of where the dollar for dollar order might be contemplated is in circumstances where there are closely held family assets and where capital may not be immediately available without the consent of others but where those others are perfectively happy to make arrangements to fund a party to the proceedings to pursue the litigation against their spouse. In this case the husband has said that both his mother (who has no active involvement in the day to day running of the business operations) and the accountant are both prepared to advance funds to the husband for his legal fees but not if half of the funds that they pay for the purpose find their way to the wife’s lawyers.

3. The husband asserts that his net wealth is only in the order of a couple of million dollars, saying that the assets are worth $25.6 million and the liabilities are $23.6 million. The wife is unable to assess whether or not those assertions are remotely accurate (the assertions in the husband’s various financial statements as to his gross wealth and net wealth have varied significantly over time).

1. Exhibit 12 would indicate that the husband has expended thus far $435,000 in relation to legal fees and owes about $30,000. Exhibit 13 indicates that the wife has expended about $153,000 in relation to legal fees and owes about $40,000. That is a very unusual imbalance given the respective levels of knowledge of the husband and wife about the husband’s financial circumstances.

2. When the matter was before me on 29 February 2016 there was an energetic discussion between senior counsel for the husband and myself about the wife’s application for a dollar for dollar order and the date from which it might commence. Since that time it appears that about $105,000 has been paid to the husband’s lawyers and they have thereafter ceased to act for him in the proceedings four days before this hearing (see debtors’ ledger produced by the husband’s former lawyers (Exhibit 5)).

3. The husband has filed a notice of address for service and currently appears on his own behalf. It is the husband’s position that up until this time, his mother has been providing funds for the payment of legal fees. Senior counsel for the wife said that the debt to the husband’s mother had been repaid upon the sale of the home and there is no debt to the husband’s mother recorded in the husband’s financial statement. The husband says that he has been informed by all persons who would be prepared to provide him funds that they are not prepared to pay any legal fees on the basis that one dollar of those monies would go to the wife’s lawyers.

4. I accept it may well be in this case that the imposition of a dollar for dollar order has the effect that the husband will choose not to be further legally represented in the case as a way of ensuring that no funds are provided to the wife’s lawyers.

5. If the aim is to use the provisions of s 117 of the Family Law Act 1975 (Cth) (“the Act”) to “level the playing field”, then the dollar for dollar order will have tilted the playing field back to something that is more level.

6. The effect of the dollar for dollar order may be that neither party has funds to pay lawyers from time to time. It may well be that the wife’s lawyers will continue on the basis that they will in effect fund the wife’s legal fees until the end of the litigation.

Husband seeking discharge of order that he pay single experts

1. The husband’s application is that order 7 made in November 2015 be discharged. That is, that the order requiring the husband to pay valuers be discharged. The practical effect of a discharge of that order would be that the intent of the orders of November 2015 to appoint single experts to value entities and the assets that they have would be nugatory.

2. A lengthy affidavit filed by the wife demonstrates the difficulties that have arisen in attempting to implement orders 2 to 8 of 12 November 2015. Some progress has been made. Some valuers have been identified and their quotes accepted, although that process has not yet been completed.

3. The estimated costs of the preparation of the expert evidence is in the order of $150,000. Estimates of fees have not yet been provided by Mr G or Mr H.

4. The fundamental difficulty is that the husband says that he has no capacity to pay for valuations. The husband asserts that he is asset rich but income poor; that he currently has debts to the ATO and to the NAB and that he has no liquid funds available to him to fund valuations.

5. On his most recent financial statement the husband says that his income is $5,860 each week but his expenditure is $7,492 each week. In a financial statement filed on 28 October 2015, the husband asserted that he had an income of $16,714 each week with expenditure of $21,389. This type of discrepancy only feeds into the uncertainty the wife has about the husband’s financial circumstances.

6. The husband points to the fact that he lacks majority control of business interests. There is no doubt however that the husband is actively involved in the day to day management of the companies and businesses (he says along with his two brothers and sister).

7. The husband’s application for a property settlement order filed in December 2014 remains that he pay the wife the sum of $750,000 and he retains all that he holds.

8. The husband complained that arrangements that he had attempted to make with the accountant for money to be available had broken down because the wife objected to those arrangements and the accountant objected to the notion that half of that money would go to the wife for legal fees. As at February 2016 the accountant was prepared to lend $100,000 to assist with the husband’s legal fees. The husband seemed to be of the view that if a dollar for dollar order was made it would also apply to the costs of disbursements for experts and that for every dollar paid to an expert, he would have to pay a dollar to the wife. He was disabused of that notion.

9. By the end of the hearing, the husband had agreed that the matter should be adjourned so that he could make inquiries as to whether or not those close to him were prepared to join with him in funding the valuation exercise that the husband had agreed to in November 2015.

SUBPOENA TO J ATTORNEYS

1. The wife has issued a subpoena to the husband’s former lawyers, J’s, for the production of documents. J’s have filed an objection on the husband’s behalf. In the event that they seek to object to the subpoena in their own right, I will entertain any submissions that the firm wishes to make on 18 May 2016. The wife should draw that opportunity to J’s attention. I have otherwise vacated the return date when the subpoena was to be argued which date was 20 April 2016.

I certify that the preceding forty-one (41) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Watts delivered on 2 May 2016

Associate: 

Date:  2 May 2016