JUHANI & JEBALI

[2020] FamCA 97

FAMILY COURT OF AUSTRALIA

JUHANI & JEBALI [2020] FamCA 97

FAMILY LAW – ENFORCEMENT – Where the husband has not complied with Consent Orders – where the husband is in arrears of his obligations pursuant to the Consent Orders – Where the husband asserts his earning capacity has diminished since orders were made – Where the husband has not sufficiently demonstrated that he has had insufficient income to comply with the orders.

APPLICANT: Ms Juhani

RESPONDENT: Mr Jebali

FILE NUMBER: SYC 6703 of 2016

DATE DELIVERED: 21 February 2020

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Rees J

HEARING DATE: 5 February 2020

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Schonell SC

SOLICITOR FOR THE APPLICANT: York Family Law Specialists

COUNSEL FOR THE RESPONDENT: Mr Richards

SOLICITOR FOR THE RESPONDENT: Walter & Elliott Family Lawyers

Orders

IT IS ORDERED

1. That within six weeks of the date of these orders, the husband pay to the wife the sum of $159,340.

2. That if the husband has not made the payment referred to in Order 1 by the due date, then the husband shall forthwith do all things required to sell the property … at B Street (“B Street”) and to distribute the net proceeds of sale, after payment out of the mortgage, agents’ commission and legal costs of sale, in the following manner and priority:

   (a)In payment of the sum of $159,340, together with interest at the rate prescribed by the Family Law Rules, calculated from the due date until the date of payment, to the wife.

   (b)The balance to a controlled monies account jointly in the names of the solicitors for the wife and the solicitors for the husband, to be held pending further order.

3. That the application of the husband seeking the sale of the property at D Street, Suburb E, be dismissed.

4. That the wife’s application to vary the orders for payment of the costs of the single expert valuer be dismissed.

Note: The form of the order is subject to the entry of the order in the Court’s records.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Juhani & Jebali has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYC 6703 of 2016

Ms Juhani

Applicant

And

Mr Jebali

Respondent

REASONS FOR JUDGMENT

1. Proceedings for property settlement between Ms Juhani (“the wife”) and Mr Jebali (“the husband”) were filed in October 2016. They were placed in the pool of matters awaiting allocation to a judge in October 2019.

2. The proceedings come before the Court on the application of the wife for expedition and to enforce orders which were made by consent on 28  November  2016 (“the Consent Orders”).

3. The application in relation to expedition will be dealt with separately and does not form any part of these reasons.

4. The Consent Orders, relevantly, provide:

   …

   3.The husband shall cause to be paid as and when such account(s) fall due the following:

   a.The mortgage payments for the property known as D Street, Suburb E (“the home”)

   b.All water rates, insurances, council rates, house and building insurance, maintenance and statutory charges relating to the home.

   c.The registration, service fees, car insurance, maintenance and finance payments relating to motor vehicle Motor Vehicle 1

   d.The school fees relating to the children as and when they fall due.

   e.Tuition fees for the children

   f.All costs connected with the children’s extra-curricular activities

   g.All school uniforms, text books costs, extra-curricular activities for the children.

   4.By way of facilitating the payments outlined in Order 3(b)-(g) the husband shall cause those monies to be deposited into a bank account nominated by the wife.

   5.The husband shall cause the payments outlined in order 3(a) to be paid directly to the mortgage account in the amount and at intervals directed by the mortgage provider.

   6.The husband is restrained and injuncted from:

   a.Further encumbering or causing to be further encumbered:

   i.The former matrimonial home

   ii.Any real estate interest that is held in his name or for his benefit.

   iii.Any other asset that he owns directly or beneficially

   Without the express written consent of the wife.

   7.The husband is restrained from drawing any sum from any business that he owns or operates except as is necessary in the ordinary course of business.

   …

5. The wife asserts, and the husband concedes, that the husband has not complied with Order 3 since September 2017.

6. By an Application in a Case filed 23 December 2019, the wife seeks:

   ·    A declaration that the husband owes $360,100.19 being arrears of the husband’s obligations pursuant to the Consent Orders.

   ·    Interest of $23,749.05.

   ·    Sale of a property owned by the husband being Suite at B Street (“B Street”).

   ·    That she be appointed Trustee for Sale in relation to B Street.

   ·    That the net proceeds of sale of B Street be applied in reduction of the arrears.

   ·    That the husband pay the remaining costs of the valuation of his business.

7. The husband, by Response to the Application in a Case, seeks:

   ·    That the Consent Orders be discharged from 20 September 2017.

   ·    In the event that the wife’s enforcement application is successful, an order that the property at Suburb E, in which the wife and the children live, be sold.

8. Some background is necessary to understand the competing applications.

9. The husband and the wife separated finally in about June 2016. In July 2016, the wife and the children, now aged 11 years and 9 years, moved back into the former matrimonial home at Suburb E which is registered in the name of the husband and at all times was subject to a mortgage.

10. The wife is a healthcare professional by profession. The husband is a lawyer in sole practice.

11. When the Consent Orders were made in November 2016, the husband was earning in excess of a million dollars per annum.

12. In September 2017, the husband was arrested and charged with insurance fraud. His right to practise was suspended. The firm continued to trade but the husband was required to hire a manager. For a period of about three months the husband was not allowed access to the law firm.

13. The charges were withdrawn and it has been agreed that the NSW Police will pay the husband’s costs incurred in relation to the criminal proceedings. The husband says he has spent about $300,000 which he expects to be repaid.

14. The husband’s practising certificate was reinstated in August 2019.

15. The substantial assets and liabilities of the parties, at the time of these proceedings, and for the purpose of this application, are:

    Husband

    ·Suburb E home valued at $3,500,000 with a mortgage of $ 1,419,000.

    ·B Street valued at $520,000 with a mortgage of $250,000.

    ·Husband’s legal practice which is being valued by a single expert valuer who has produced an interim report.

    Wife

    ·Property at Suburb F owned by the Present Trust valued at $1,300,000.

    ·Property at Suburb G owned by the J Company valued at $850,000.

WIFE’S APPLICATION TO ENFORCE CONSENT ORDERS AND HUSBAND’S APPLICATION TO DISCHARGE THEM

1. The husband concedes that he has not complied with the Consent Orders since September 2017.

2. There is a dispute as to the validity of orders relating to the payment of expenses for the children being Order 3(d) to (g) inclusive.

3. The husband contends that, when the orders were made, there was no Child  Support Assessment in relation to the children and no application had been made for an assessment. In those circumstances, he submits, the Court had no power to make an order for the payment of school fees and associated costs.

4. The wife contends that the Court had power to make a Departure Order as she sought in her Initiating Application and therefore the orders are validly made. However, the wife does not assert that she had, before 28 November 2016, made an application for a Child Support Assessment.

5. The evidence does not permit me to determine whether the orders relating to the support of the children were validly made. Sufficient doubt exists about that issue that, until it is determined, enforcement could not be considered.

6. The husband concedes that mortgage payments totalling $142,932 have been made by the wife since October 2018.

7. The wife asserts that she has also paid council and water rates totalling $8,487 and insurances of $7,921. The husband does not concede the accuracy of those figures and the wife has not provided documents to verify her assertion.

8. The wife has also paid $31,434 for “maintenance”. Those payments are challenged by the husband. There is some validity in the husband’s challenge. The wife provided a schedule of the maintenance payments under cover of a letter dated 2 December 2019. Most of the payments relate to cleaning and gardening. The husband asked for documents verifying the claimed payments. They have not been provided.

9. For the purpose of this application, I am prepared to accept that the wife has paid the rates and insurance as she claimed and to assume that the arrears owed by the husband total $159,340.

10. The wife’s position is that those arrears can be met from the sale of B Street.

11. The husband seeks to vacate the Consent Orders as and from 20 September 2017, the date to which they stand paid.

12. It is his case that his income has decreased substantially as a result of his criminal charges and his suspension from legal practice.

13. The wife’s case is that the husband has not made full and frank disclosure of his income and the income of his legal practice and that the Court could not accept that his income is as he has stated.

14. The husband deposed that his income for the financial year ended 30 June 2016 was $1,180,377. For the year ended 30 June 2017, his income was $525,280.

15. The husband swore a Financial Statement on 22 May 2018 in which he deposed that he had no income and no personal expenditure but was “borrowing” $4,500 per week from his legal practice. He gave no evidence about the actual income of the practice at that time.

16. The husband swore a Financial Statement on 4 February 2019. He deposed that his income was $4,000 per week or $208,000 per annum. He deposed that this amount had been calculated by reference to the amounts drawn by him from the  practice between 1 June 2019 and 30 November 2019.

17. However, I do not accept that the amount that the husband actually drew from the practice can be accepted to be his only income for the purpose of these proceedings.

18. The husband is a sole trader. The income received by the practice is his income, to deal with as he pleases. The husband has not provided the financial statements of the business for the financial years ended 30 June 2018 or 30 June 2019.

19. The husband is a practising solicitor. He has at all times been legally represented. He is well aware of his obligation to make full and frank disclosure.

20. The wife has sought extensive disclosure by way of provision of documents from the husband. In particular, a letter from the wife’s solicitors dated 11  September  2019 sought extensive documentation. An order was made on 1 October 2019 that the documents be provided by 31 October 2019. The husband did not comply with that order. That documentation had not been provided at the commencement of this hearing and the husband consented to an order that the documents be provided within 28 days.

21. On 1 October 2019 the Court noted the husband’s assurance that the financial statements of the practice for the year ended 30 June 2018 would be provided by no later than 31 October 2019. Those financial statements have still not been provided. There appears to be no attempt or intention to provide the 2019 financial statements for the practice.

22. There are a number of matters which give rise to concerns about the accuracy of the husband’s statements about his financial position.

23. Mr H, the single expert valuer, in his draft report dated 27 May 2019, stated that there was presently insufficient reliable evidence to form an opinion as to the value of the practice or the net realisable assets. Mr H said that he had insufficient evidence to evaluate the financial performance.

24. Mr H stated that the bookkeeping fees seemed unreasonably high relative to the size of the firm. He noted that the records indicated that the husband had generated some $2.5 million in net earnings in the three financial years to 30  June 2017 but said that the actual earnings could have been higher given the apparently excessive bookkeeping fees.

25. Mr H raised concerns about the payment of rent by the practice to six different entities including a smash repairer although the premises are owned by the husband’s mother. He asked for the identities of the persons to whom payments were made which were recorded as “Costs of Sales’; “Disbursements”; “Consultants”; Service fees”; and “Bookkeeping fees” and was told by the husband that those persons did not wish to be identified.

26. The husband, through his counsel, said that Mr H’s queries have now been answered but whether Mr H is satisfied with those answers is not known.

27. There was a discrepancy between the gross sales reflected in the Business Activity Statements (“BAS”) and the information provided to Law Cover in relation to the practice.

28. On behalf of the husband, it was submitted that the Court could be satisfied that the husband’s income had been substantially diminished because the gross sales had diminished. I do not accept that bald assertion. Presumably, if the gross sales had diminished substantially, then the costs of business had also diminished proportionately.

29. Generally, in relation to the application of the husband to discharge the Consent  Orders, I am not satisfied that the husband has discharged the onus of demonstrating that he has had, from time to time since September 2017, insufficient income to comply with the orders.

SALE OF B STREET

1. B Street is currently tenanted and generates positive income for the husband.

2. On his behalf it was submitted that, in the event that the Court determined that B Street should be sold, he should be given the opportunity to attempt to refinance the mortgage or to borrow from family members to retain the property.

3. The wife agreed that the husband should be allowed six weeks to attempt to borrow funds to satisfy the arrears.

4. The equity in B Street is about $250,000. The arrears are $159,340.

5. The husband will be allowed six weeks to raise that sum in default of which B Street will be sold.

SALE OF SUBURB E

1. The wife, in her substantive application, seeks to retain Suburb E and the husband, in his substantive application, seeks to transfer Suburb E to her.

2. On behalf of the husband it was submitted that, if the arrears were enforced, then the former matrimonial home should be sold and the proceeds disbursed in payment of his debts totalling $3,369,381 and a further payment to him of $250,000.

3. Suburb E is value by the husband at $3,500,000. The mortgage balance is $1,419,000. The net equity is about $2,000,000 making an allowance for costs of sale. The husband’s proposal would extinguish the whole of the equity.

4. On any view of such a partial property settlement, having regard to the asset pool, such a distribution could never be reversed in a final hearing and potentially would have the effect of defeating the wife’s claim.

5. The alternative, which was not part of the husband’s application, of selling Suburb E and preserving the net proceeds until such time as the substantive application can be heard, would seem to have no utility and would deprive the wife and the children of their residence.

6. The husband’s application for the sale of Suburb E will be dismissed.

PAYMENT OF FEES FOR THE COMLETION OF THE SINGLE EXPERT’S REPORT

1. The existing orders provide that the parties will each pay half of the cost of the report. To date they have each paid about $60,000.

2. On behalf of the wife, it is submitted that the costs of the single expert have been exacerbated because of the manner in which the husband’s records have been kept and that he should be required to pay for the finalisation of the report.

3. Further, it is submitted that only the husband has access to the material required to be provided to the single expert and that the timely provision of that material is solely within his purview.

4. There is some force in that submission but I do not propose to vary the existing orders.

5. The payment to the wife of the arrears will provide her with some financial flexibility.

6. The judge who hears and determines the substantive proceedings will be in a better position to determine where the costs of the single expert should lie.

7. That application will be dismissed.

I certify that the preceding sixty two (62) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Rees delivered on 21 February 2020.

Associate: 

Date:  21/02/2020