Kalinec and Kalinec and Anor
[2020] FCCA 1767
•5 August 2020
FEDERAL CIRCUIT COURT OF AUSTRALIA
| KALINEC & KALINEC & ANOR | [2020] FCCA 1767 |
| Catchwords: FAMILY LAW – Evidence – interim proceedings – where documents sought to be tendered – where documents objected to as being illegally obtained – where there is no evidence that documents have been illegally obtained – whether documents are hearsay documents – where source of documents known – documents received into evidence. |
| Legislation: Crimes Act 1900 (NSW), s.308H Criminal Code Act 1995 (Cth), s.478.1 Evidence Act 1995 (Cth), ss.75, 59, 138, 142 Family Law Act 1975 (Cth), ss.69ZR, 79, 114 Federal Circuit Court Rules 2001 (Cth), pt 17 |
| Cases cited: Blueseas Investments Proprietary Limited & Mitchell and Ors [1999] FamCA 745 Cirillo & Citicorp Australia Limited [2004] SASC 293 Reid & Brett [2005] VSC 18 M & DB [2006] FamCA 1380 Suell & Suell(Re-Opening) [2009] FamCA 55 Eastman & Eastman & Anor [2015] FamCA 808 |
| Applicant: | MS KALINEC |
| First Respondent: | MR KALINEC |
| Second Respondent: | MS B KALINEC |
| File Number: | SYC 5407 of 2018 |
| Judgment of: | Judge Morley |
| Hearing date: | 30 October 2019 |
| Date of Last Submission: | 20 May 2020 |
| Delivered at: | Sydney |
| Delivered on: | 5 August 2020 |
REPRESENTATION
| Counsel for the Applicant: | Dr McConaghy |
| Solicitors for the Applicant: | AJB Stevens Lawyers |
| Counsel for the First Respondent: | Mr Ginges |
| Solicitors for the First Respondent: | Avondale Lawyers |
| Counsel for the Second Respondent: | Mr Bolger |
| Solicitors for the Second Respondent: | Chatswood Law |
ORDERS
PENDING FURTHER ORDERS, THE COURT ORDERS:
That the Application in a Case filed by Ms Kalinec (‘the Applicant Wife’) on 29 April 2020 and the Response to Application in a Case filed by Mr Kalinec (‘the Respondent Husband’) on 15 May 2020 are dismissed.
That the Respondent Husband is restrained from entering into any agreement by way of grant of put and/or call option, selling, mortgaging, assigning, or further encumbering the real property known as C Street, Suburb D in the State of New South Wales being Lot ... in Deposited Plan ... (‘the C Street, Suburb D property’) except with the written consent of the wife.
That the Respondent Husband is restrained from entering into any agreement by way of grant of put and/or call option, selling, mortgaging, assigning, or further encumbering the real property known as E Street, Town F in the State of New South Wales being Lot ... in Deposited Plan ... (‘the E Street, Town F property’) except with the written consent of the wife.
That each of the Respondent Husband and the Applicant Wife as directors of G Pty Ltd as trustee of the G Pty Ltd Superannuation Fund are restrained from selling, mortgaging, assigning, or further encumbering the real property known as H Street, Town J in the State of New South Wales being Lot ... in Strata Plan ... (‘the H Street, Town J property’) or any business operated from the H Street, Town J property.
That the Respondent Husband is restrained from altering the shareholding or the officeholders in either of the corporations K Pty Ltd or L Pty Ltd, and from assigning or encumbering his shareholding or interest of any nature in either of those corporations.
That the Respondent Husband is restrained from dealing with, disposing of, or in any manner encumbering the assets of either of the corporations K Pty Ltd or L Pty Ltd otherwise than in the ordinary course of business.
That the Respondent Husband is restrained from drawing down on the Westpac Equity Access Loan – Plan 2 account in his name with BSB ...4 and account number ...63 (secured by registered mortgage on the E Street, Town F property) so as to increase the debit balance of that account to $520,000.00.
That the Respondent Husband is restrained from drawing down on the M Bank account in his name with BSB ...5 account number ...30 (secured by registered mortgage on the C Street, Suburb D property) so as to increase the debit balance of that account to $1,030,000.00.
That the Respondent Husband is restrained from drawing down on any bank accounts other than those referred to in orders (7) and (8) herein, including loan accounts, that he can operate, whether in his sole name or in his name jointly with any other person, persons, entity or entities other than for normal day to day living expenses and required loan account payments.
That the Respondent Husband is restrained from drawing down on any bank accounts in the name of either of the corporations K Pty Ltd or L Pty Ltd, or in the name of the deregistered corporation N Pty Ltd, in each case other than in the normal course of business or so as to apply a capital sum not exceeding $700,000.00 towards the repayment of the loan account with O Bank with facility number ...93 and account number ...85 that expired 27 February 2020 and which must be repaid by 15 August 2020.
That each of the Respondent Husband and the Applicant Wife is restrained from depositing rental income received in relation to the H Street, Town J property into any account other than the account operated by G Pty Ltd as trustee of the G Pty Ltd Superannuation Fund.
That the Respondent Husband have sole occupation of the C Street, Suburb D property as between the Respondent Husband and the Applicant Wife and in that regard the Applicant Wife is restrained from entering the C Street, Suburb D property without the written and signed permission of the Respondent Husband.
That within 14 days the Applicant Wife return to the Respondent Husband through medium of one of their adult children the contents of the safe custody box removed by the Applicant Wife from the C Street, Suburb D property, being the contents thereof as they were when that safe custody box was first opened by or for the applicant wife following its said removal.
That the Application in a Case filed by the Applicant Wife on 4 February 2019 and the Response to Application in a Case filed by the Respondent Husband on 18 September 2019 are otherwise dismissed.
That the Application in a Case filed by the Respondent Husband on 5 March 2019 and the Response to Application in a Case filed by the Applicant Wife on 17 June 2019 are otherwise dismissed.
That the application for interim orders in the Response filed by the Second Respondent on 20 September 2019 is dismissed EXCEPT as to orders (4.4) and (4.5) of order (4) sought therein.
That pursuant to rule 17.06 of the Family Law Rules 2004 (Cth), the Applicant Wife file and serve an Undertaking as to Damages by no later than 4:00PM on 19 August 2020 AND IN THE EVENT that the Applicant Wife fails to comply with this order then orders 2 to 11 inclusive shall lapse at 4.00PM on 19 August 2020.
That by no later than 4:00PM on 19August 2020, the Applicant Wife file and serve any written submissions in relation to the competing applications for costs of these interlocutory proceedings.
That by no later than 4:00PM on 2 September 2020, the Respondent Husband file and serve any written submissions in relation to the competing applications for costs of these interlocutory proceedings.
That by no later than 4:00PM on 16 September 2020, the Applicant Wife file and serve any written submissions in reply to the Respondent Husband’s written submissions in relation to the competing applications for costs of these interlocutory proceedings.
IT IS NOTED that publication of this judgment under the pseudonym Kalinec & Kalinec & Anor is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYC 5407 of 2018
| MS KALINEC |
Applicant
And
| MR KALINEC |
First Respondent
| MS B KALINEC |
Second Respondent
REASONS FOR JUDGMENT
Introduction
These are interim property settlement proceedings under the Family Law Act1975 (Cth) (‘the Act’) between the applicant wife, Ms Kalinec (‘the wife’), the first respondent husband, Mr Kalinec (‘the husband’), and the second respondent, Ms B Kalinec (‘the second respondent’), who is the daughter of the husband and the wife.
The proceedings were commenced by the wife as final property settlement proceedings. The husband responded seeking final property settlement orders and interim orders that the second respondent be joined as a party to the proceedings. In relation to the second respondent the husband sought the transfer to the wife of a property at P Street, Town Q, NSW (‘the P Street, Town Q property’) of which:
a)The second respondent is the sole registered proprietor;
b)The husband asserts he is the sole beneficial owner;
c)The husband asserts the property is held upon trust for him by the second respondent; and
d)The husband seeks final orders that the wife be the sole owner and in law and equity of the P Street, Town Q property.
The second respondent was joined as a party.
The husband and the wife are the sole members of a self‑managed superannuation fund called G Pty Ltd Superannuation Fund. G Pty Ltd is the trustee of that superannuation fund, of which the husband and the wife are the directors and shareholders. The main asset of the superannuation fund is real property at H Street, Town J (‘the H Street, Town J property’).
The husband is the sole registered proprietor of real property at C Street, Suburb D (‘the C Street, Suburb D property’) and E Street, Town F (‘the E Street, Town F property’). The husband is a director of, and holds shares in, K Pty Ltd, which conducts a business at Suburb R and L Pty Ltd which trades as Company S.
There are various bank accounts in evidence, including loan accounts, in the husband’s sole name and in the names of L Pty Ltd and K Pty Ltd. There is also a bank account with O Bank in the name of N Pty Ltd, a company that was deregistered on 8 August 2010.
On 27 September 2019, an interim hearing was commenced and on that day various issues between the parties were resolved by consent, including:
a)Issues going to disclosure by the husband;
b)Action to be taken by the husband toward preparation of financial statements and taxation returns to enable disclosure to be made by the husband; and
c)An order for the sale of the P Street, Town Q property, with the net proceeds of that sale to be held in a controlled moneys account upon trust for the parties.
The interim hearing continued on 30 October 2019 in relation to the interim issues still outstanding between the parties, after which judgment was reserved. An issue not dealt with at that interim hearing and still outstanding, because the sale of the P Street, Town Q property has not yet occurred, is the second respondent’s application for interim orders that, following the sale of the P Street, Town Q property, a sum of $175,000 be held upon trust for the parties pending final orders and that the balance of net proceeds of sale of the P Street, Town Q property be paid to the second respondent.
An application was made by the wife, by an Application in a Case filed 4 May 2020 for leave to adduce further evidence in respect of the interim hearing, and that application was heard on 20 May 2020, after which judgment was reserved.
Proceedings up to the interim hearing
The proceedings were commenced by the wife filing her Initiating Application on 24 August 2018 seeking final property settlement orders. The matter had its first mention on 1 November 2018, at which both parties were represented. Directions were made for the husband to file his response documents, and the matter was adjourned to 11 February 2019 with the Court noting that the husband would seek to join the second respondent in relation to the disputed beneficial ownership of the P Street, Town Q property.
The wife filed an Application in a Case on 4 February 2019 seeking interim orders for injunctive relief for protection of assets, urgent spousal maintenance, interim spousal maintenance, and sole occupancy of the C Street, Suburb D property. The husband filed his Response and supporting documents, seeking interim and final orders, on 5 February 2019.
The matter was next mentioned on 11 February 2019 and orders were made for the valuation of:
a)The husband’s shareholding in K Pty Ltd and L Pty Ltd trading as Company S,
b)G Pty Ltd including the H Street, Town J property – the real intent of the order presumably being the valuation of the husband and wife’s members’ accounts in the G Pty Ltd Superannuation Fund, they being the only members of that self‑managed superannuation fund; and
c)The C Street, Suburb D property and the E Street, Town F property.
The matter was adjourned to 18 June 2019.
On 18 June 2019, an order was made joining the second respondent as a party and setting the matter down for interim hearing on 27 September 2019. Orders were again made for valuation of all those assets ordered to be valued on 11 February 2019, with the addition of the P Street, Town Q property.
On 20 September 2019, the second respondent filed her Response setting out the interim and final orders sought by her, including seeking orders for:
a)A sale of the P Street, Town Q property;
b)That after the payment of the secured loan account and other costs of sale, an amount of $175,000 be held in a controlled moneys account on behalf of the husband and the second respondent; and
c)That the balance of the net proceeds of sale be released to the second respondent.
On 27 September 2019, the matter was listed for interim hearing, but a consent position was agreed between the parties on a number of issues relating to disclosure by the husband, including:
a)Requiring the husband to take positive steps to have a Financial Statement and income tax returns prepared;
b)For a sale of the P Street, Town Q property; and
c)Payment of the net proceeds of sale into a trust account to be held on trust for the parties.
The matter was listed for interim hearing on 30 October 2019.
On 30 October 2019, the interim hearing took place on the issues referred to below at [23] and judgment was reserved. As the P Street, Town Q property had not, by that time, been sold, the second respondent’s application for interim orders providing for partial distribution of proceeds of sale of the P Street, Town Q property was adjourned for hearing to 27 March 2020. Ultimately, that date was not utilised as the P Street, Town Q property had still not been sold at that time.
On 4 May 2020, the wife filed an Application in a Case seeking leave to reopen the evidence in relation to the interim hearing held on 30 October 2019, and on 15 May the husband filed a Response to an Application in a Case opposing that application.
On 20 May 2020, I heard the wife’s Application in a Case for leave to reopen the evidence in relation to the interim hearing. Orders were made by consent of all of the parties in relation to the time for the sale of the P Street, Town Q property, which had still not been sold pursuant to the orders that had been made by consent on 27 September 2019.
An order was also made by consent on 20 May 2020 that the issue relating to the P Street, Town Q property as between the husband, whose case in that regard was set out in a Points of Claim, and the second respondent, whose case was set out in Reply to a Points of Claim, be listed for a final hearing as a separate question in the proceedings, pursuant to part 17 of the Federal Circuit Court Rules 2001 (Cth) (‘the Rules’).
After the 20 May 2020 hearing judgment was reserved.
The issues
The issues at the interim hearing were:
a)Whether orders be made restraining the husband from dealing in any way with real properties at C Street, Suburb D and E Street, Town F, both properties being in the husband’s name as sole registered proprietor;
b)Whether an order should be made restraining the husband as a director of G Pty Ltd as trustee of the G Pty Ltd Super Fund from dealing in any way with an asset of the fund, being real property at H Street, Town J;
c)Whether the husband should be restrained from making any alteration to the shareholding in, or office bearers of, the companies K Pty Ltd and L Pty Ltd, and be further restrained from dealing with, disposing of, otherwise encumbering, or further encumbering any of the assets owned by those companies, save and except as may be provided for in orders, or in the ordinary course of business, or in order to meet all necessary expenses of the companies;
d)Whether the husband should be restrained from making any alteration to the shareholding in, or office holders of, G Pty Ltd as trustee of the G Pty Ltd Superannuation Fund, and from dealing with, disposing of, or otherwise encumbering or further encumbering any of the assets of the G Pty Ltd Superannuation Fund, save and except as provided for in orders, or as necessary in the ordinary and proper conduct of the superannuation fund;
e)Whether the husband should be restrained from drawing down on any bank accounts operated in his name alone or jointly with any other person, or on the business accounts operated by K Pty Ltd, L Pty Ltd, and a bank account in the name of a deregistered company, N Pty Ltd, and from increasing the indebtedness of the husband and wife including by drawing down on loan accounts;
f)Whether the husband should be restrained from depositing rental income received from tenants of the H Street, Town J property into any account other than the proper account operated by G Pty Ltd as trustee of the G Pty Ltd Superannuation Fund;
g)Whether the husband should be restrained from transferring or depositing any sum of money to any account in the name of any person or entity outside the Commonwealth of Australia;
h)Whether the wife should be restrained from entering or attending the C Street, Suburb D property without the specific invitation and/or approval of the husband;
i)Whether an order should be made for the wife to return to the husband the safe custody box and the contents thereof, “including but not limited to personal documents, business documents, cash and other items”, removed from the C Street, Suburb D property by the wife after separation;
j)There was an evidentiary issue raised by the husband at the September 2019 hearing that emails sought to be relied upon by the wife should not be admitted into evidence pursuant to the court’s discretion under section 138 of the Evidence Act 1995 (Cth) (‘the Evidence Act’) as having been illegally or improperly obtained; and
k)Whether the wife should have leave to re-open the evidence.
Initially, the interim orders sought by the parties also involved:
a)Issues of disclosure by the husband;
b)Issues of disclosure by the second respondent;
c)A sale of the P Street, Town Q property and retention of the net proceeds of sale upon trust for the parties pending final resolution;
d)Interim spousal maintenance sought by the wife; and
e)Sole occupancy of the C Street, Suburb D property by the wife.
However, the issues relating to disclosure and sale of the P Street, Town Q property were resolved by orders made by consent on 27 September 2019 and the wife’s application for sole occupancy of the C Street, Suburb D property was not pressed by her, nor was her application for interim spousal maintenance.
Material relied upon
Due to the expanded nature of the interim hearing, the parties have properly relied upon numerous documents. The husband relied upon the following material on the hearing dates in 2019:
a)Case Outline document (unattributed);
b)Response to an Application in a Case, filed 18 September 2019;
c)Application in a Case, filed 5 March 2019;
d)Affidavit of the husband, affirmed and filed 23 October 2019;
e)By leave of the Court, affidavit of the husband, affirmed and filed 30 October 2019; and
f)Financial Statement of the husband, sworn or affirmed and filed 23 October 2019.
In relation to the wife’s Application in a Case for leave to adduce further evidence, heard on 20 May 2020, the husband relied upon:
a)A Case Outline document prepared by the husband’s solicitors and filed 19 May 2020;
b)His Response to an Application in a Case, filed 15 May 2020;
c)The affidavit of the husband, affirmed and filed 15 May 2020; and
d)The affidavit of Mr T, the husband’s solicitor, affirmed and filed 15 May 2020.
I should note that the following documents were relied upon by the second respondent on 27 September 2019, 30 October 2019, and 20 May 2020:
a)Case Outline prepared by her solicitor and by Mr Bolger of counsel and filed 27 September 2019;
b)Response to an Application in a Case filed 20 September 2019;
c)Affidavit of the second respondent, sworn or affirmed 18 June 2019 and filed 20 September 2019;
d)Affidavit of the second respondent, sworn or affirmed 28 October and filed 29 October 2019; and
e)In relation to the hearing on 20 May 2020, the second respondent relied upon the affidavit of Mr U, her solicitor, sworn and filed 19 May 2020 and a Minute of Order of the second respondent.
The wife relied upon the following materials:
a)Case Outline document prepared by Mr V, solicitor, and by Dr McConaghy, counsel for the wife;
b)Application in a Case, filed 4 February 2019;
c)Response to Application in a Case, filed 17 June 2019;
d)Affidavit of the wife, sworn 22 October 2019 and filed 23 October 2019;
e)Financial Statement of the wife, sworn 22 October 2019 and filed 23 October 2019;
f)Exhibit A1 – 71 page bundle of bank statements; and
g)Exhibit A2 – screenshot of a computer screen of an O Bank statement dated 22 October 2019 for account number ending #...95.
In the course of the interim hearing, objection was made by Mr Ginges for the husband to annexures K5, K6 and K7 to the wife’s affidavit of 22 October 2019 under section 138 of the Evidence Act. The basis for the objection was that the evidence had been improperly or illegally obtained. Those documents were certain emails sent and received by the husband on his personal email account.
In relation to the wife’s Application in a Case for leave to adduce further evidence, she relied upon the following:
a)Case Outline document prepared by her solicitor and by Dr McConaghy of counsel;
b)Application in a Case, filed 4 May 2020;
c)Affidavit of the wife, sworn and filed 29 April 2020;
d)Exhibit A1 – 20 May – letter dated 15 May 2020 from the solicitor for the husband to the solicitor for the wife;
e)Exhibit A2 – 20 May – letter dated 19 May 2020 from the solicitor for the husband to the solicitor for the wife;
f)Exhibit A3 – 20 May – a chain of emails (five pages) beginning 9 January 2020 and ending 30 March 2020; and
g)Exhibit A4 – 20 May – invoice ... dated 6 January 2020 by Mr W for his valuation of the H Street, Town J property, the C Street, Suburb D property and the E Street, Town F property.
The orders sought
The orders sought by the wife were set out in her Application in a Case filed 4 February 2019 and were opposed by the husband, who sought that her Application in a Case be dismissed. The orders sought by the husband were set out in his Application in a Case filed 4 March 2019 and were opposed by the wife, who sought that his Application in a Case be dismissed.
The orders sought by the second respondent were set out in her Response to an Application in a Case, filed 20 September 2019.
I do not set out all of the orders sought here, as many resulted in agreements and consent orders, and those parts of the parties’ applications that went to interim hearing and in relation to which judgment was reserved are summarised under the heading “The issues” earlier in these reasons.
The evidence
At the time of the interim hearing, the wife was 54 years of age, the husband was 57 years of age, and the second respondent was 27 years of age.
The husband and wife were married in 1988, and they did not cohabit prior to their marriage. They separated on 3 March 2016.
The husband and wife have four adult children:
a)The second respondent Ms B, aged 27;
b)Ms X, aged 25;
c)Mr Y, aged 23; and
d)Mr Z, aged 18.
The elder three children all live independent of the husband and wife. Mr Z resides with the husband.
At various times, all four children have worked with the father and the mother in the Company S business. Ms B no longer works in that business, Mr Y is now the general manager of the business, Ms X is employed as a manager, and Mr Z does casual work a couple of days a week when he is not attending to his university studies.
At the date of separation on 3 March 2016, the husband and wife remained living under the same roof at the C Street, Suburb D property, their former matrimonial home, until the wife moved out in September 2018. The husband remains in occupation of the C Street, Suburb D property, and Mr Z continues to live with him.
Each of the husband and the wife, in their respective affidavits relied upon at the interim hearing, set out some evidence in relation to their contributions, their current circumstances, and their future needs. On the basis of that evidence, it is plain that it will be just and equitable to proceed with a property settlement under section 79 of the Act if and when the matter comes to a final hearing. It is also plain on the basis of that evidence, and the orders sought by each of the husband and the wife, that orders will be made for adjustment of property between the parties at a final hearing.
The following facts are agreed in the evidence between the parties unless indicated otherwise and are set out as they are germane to the issues to be determined in the interim hearing.
In 1990, the parties purchased a property at E Street, Town F and lived there. That property was in the husband’s sole name.
In 2000, the husband purchased a business, and he ran that business on a full-time basis.
In 2008, the parties purchased the C Street, Suburb D property in the husband’s sole name, and that property eventually became their matrimonial home.
In 2011, the second respondent purchased the P Street, Town Q property for $300,000 in her sole name, obtaining a loan from the National Australia Bank in the sum of $240,000, secured over the property, and applying a sum of about $15,000 received from the First Home Buyers Grant and moneys provided to her by the husband. The second respondent had the benefit of a stamp duty exemption for the purchase. In 2011, the second respondent and the husband entered into an unregistered mortgage in relation to the P Street, Town Q property as mortgagor and mortgagee, respectively, to secure a sum of $75,000.
In 2014, the husband and the wife set up the G Pty Ltd Superannuation Fund with G Pty Ltd as the trustee of the fund. The husband and the wife, as required by law, are the directors of that corporation as they were and continue to be the members of the superannuation fund. In August 2014, G Pty Ltd, as trustee of the fund, purchased the H Street, Town J property, a shop premises at which a business was conducted. The wife ran that business from November 2014 until March 2016 and resided for some of that time in the P Street, Town Q property. The wife ceased the conduct of that business in March 2016 at the time the husband and wife separated.
At either the end of 2014, on the wife’s evidence, or in 2015, on the husband’s evidence, the husband purchased an existing real estate business entitled Company S. It is unclear on the evidence relied upon by all of the parties in the interim hearing whether the private corporation L Pty Ltd (of which the husband is a shareholder and director and the wife is not) purchased the business and trades as Company S or if the husband purchased the business himself.
The implication in the evidence, though I cannot make a finding, is that L Pty Ltd trades as Company S and that the business was purchased by the corporation. However arranged, the purchase of the Company S business cost $525,000 and a further $100,000 was spent on a fit-out for the business premises. The whole of those funds were borrowed from O Bank in the sum of $650,000, repayable in February 2020, though in evidence as part of exhibit A2 from the proceedings of 20 May 2020 is a copy of a letter dated 14 May 2020 to the directors of K Pty Ltd, indicating that though the expiration date for the loan is 27 February 2020, the bank is “able to offer you until 15 August 2020 to repay the loan/s in full”.
It would seem by necessary inference that the moneys borrowed from O Bank to purchase the Company S business and pay for the fit-out were borrowed by K Pty Ltd. The husband provided his personal guarantee in relation to the loan.
It is apropos at this point to set out parts of the husband’s affidavit in relation to various activities undertaken from time to time by the husband in moving large sums of money from account to account between the various corporate accounts, his personal accounts, and the loan accounts secured on the E Street, Town F and C Street, Suburb D properties. The husband deposes that:
As part of the loan application process, O Bank (as is general practice amongst lending institutions) requires a personal guarantee of the loan. In order to qualify for the loan, I was required to enter into a personal guarantee and satisfy that bank that there are sufficient financial means to service the loan facility.
I would, therefore, often move funds from the equity of the properties to the company to demonstrate that the company was capable of borrowing these large sums of money. These moneys would eventually be paid back into the properties. This was a consistent pattern of trading that existed prior to separation. In the past, I would often use the equity in the properties to provide loans to the company when required, which was used to shore up the business. These funds were ultimately repaid by the company and diverted back to the properties.[1]
[1] Affidavit of the father sworn 23 October 2019, [55]-[56].
I do not know on the basis of the evidence relied upon by all of the parties at the interim hearing if the husband is the sole director of and sole shareholder in K Pty Ltd and/or L Pty Ltd, but there is an inference to that effect, and it is plain that the wife is neither an officeholder in nor a shareholder of either corporation.
At some time, and, as far as I can ascertain on the evidence, beginning at about the end of 2016, the wife was working as an office manager for Company S. She has since ceased to be employed in that business, however when that employment ceased is not in the evidence.
The wife gives evidence that she had no personal knowledge throughout the cohabitative relationship of the family’s finances, the businesses, or indeed in relation to purchases or sale of assets.
In July 2016, the husband and wife gave Ms B, Mr Y, and Ms X a total of $95,000 to assist them with the purchase of AA Street, Suburb BB. Upon their purchase of that property, Mr Y, Ms B, and Ms X took up residence there. In September 2018 when the wife left the C Street, Suburb D property, she also took up residence in her children’s AA Street, Suburb BB unit. At that time, Mr Y and Ms X were still residing there, but Ms B had left. The unit has four bedrooms.
The wife gives some evidence in relation to family violence that she asserts was perpetrated by the husband against her. The husband gives evidence of being affected by health issues and in particular depression. He is being treated for depression by his general practitioner and by a psychiatrist and is on medication, being Zoloft. He put into evidence two medical certificates from his general practitioner, one dated 19 September 2019, stating that he is “not able to work full time”, and the other dated 5 October 2019, stating that he is “unfit to continue his usual occupation”. Neither the issues of alleged family violence or the husband’s health are germane to the issues to be decided in this interim hearing.
The objection to evidence
The wife annexed to her affidavit of 22 October 2019 copies of some emails that, on the evidence, came from the husband’s private email account. The documents objected to are annexures K5, K6 and K7 to that affidavit. The basis of the objection was that the documents were improperly or illegally obtained and that pursuant to section 138 of the Evidence Act, the Court should exercise its discretion and not admit the documents into evidence.
Section 138 of the Evidence Act provides that evidence that was obtained improperly or in contravention of an Australian law or in consequence of an impropriety or of a contravention of an Australian law is not to be admitted unless the desirability of admitting the evidence outweighs the undesirability of admitting evidence that has been obtained in the way in which the evidence was obtained.
Subsection 138(3) of the Evidence Act provides that without limiting the matters that the Court may take into account in exercising the discretion under subsection 138(1), it is to take into account the matters listed therein at (a) to (h).
The first step, of course, is to determine whether the evidence objected to was obtained improperly or in contravention of an Australian law or in consequence of an impropriety.
The husband, in making the objection through his counsel, asserts that the evidence was obtained in contravention of an Australian law, being section 308H of the Crimes Act 1900 (NSW) and/or section 478.1 of the Criminal Code Act 1995 (Cth) in that he asserts that the wife herself accessed his Microsoft Outlook email account by hacking into that account.[2]
[2] The husband gives his evidence in relation to alleging the crime committed by the wife in paragraphs [4]-[12] of his affidavit of 23 October 2019.
In that evidence he names the email account in relation to which the subject emails were sent and received and says that the email account was created by him after separation for the main purpose of private and confidential communication between himself and his solicitors. The husband deposes that he never granted the wife access to that email account and that, “I have never shared my password with Ms Kalinec, nor have I ever permitted Ms Kalinec to use a shared computer with me post separation.”
The husband says that after he became aware that the wife had the subject email prints, he contacted the IT technician:
...for the company to investigate this issue further and ascertain details of the access. The technician inspected my computer and provided me with a record of the login for the email address, which is exhibited at page 1 of K1.[3]
K1 is an exhibit to the husband’s affidavit. The husband gives evidence in paragraph 11 of his affidavit as to what he asserts page 1 of exhibit K1 indicates. The document referred to is a hearsay document, and there is no indication on the face of it if it is a business record. However, these are interlocutory proceedings, and, accordingly, hearsay evidence is admissible in circumstances where evidence is also given of the source of the hearsay evidence.
[3] Affidavit of husband sworn 23 October 2019, [10].
However, the page referred to by the husband as page 1 of exhibit K1 has no provenance. It is, on the husband’s evidence, not a document created by the husband, and the husband is not entitled to give evidence in interpretation. Nevertheless, taking the document on its face, it purports to indicate that on 20 September 2019, there was an unsuccessful sign-in attempt and then a successful sign-in attempt, both at 2.11 (AM or PM or 24-hour time not indicated) to the husband’s subject email account from a certain IP address. The husband asserts that the successful sign in to his subject email account was by the wife. There is no evidence to that effect.
As pointed out in submissions by Dr McConaghy for the wife, a subpoena to produce documents was issued by the Court at the request of the husband to Optus for the purpose of attempting to provide evidence that the subject IP address was an IP address used by the wife. The documents were produced by Optus in answer to the subpoena and had been inspected, but no tender was made from those documents. I was asked to draw an inference under the principle in Jones v Dunkel[4] for the purpose of the argument on admissibility of evidence, the inference being that as the Optus documents were subpoenaed by the husband for that purpose, and as they were available to the husband at the interim hearing but no evidence was tendered, any evidence contained in the documents produced by Optus would not have assisted the husband’s case on the admissibility of evidence issue.
[4] Jones v Dunkel (1959) 1010 CLR 298.
The wife’s evidence is that that:
I have also recently discovered emails, which cause me great concern. I discovered these emails when they were handed to me by my son Mr Y on or about 18 September 2019. He said to me words to the effect of, “I found these emails on Dad’s computer. I thought they were important. I don’t like the fact that he’s doing this to you.”
I asked him how he got these. He said words to the following effect: “I have access to Dad’s computer at work because I am required to have access to his work emails sometimes. I know the password to the computer; his personal emails were open on the screen when I accessed the computer.”[5]
[5] Affidavit of the wife sworn 22 October 2019, [42]-[43].
As noted earlier from the evidence, Mr Y is the general manager of the business conducted by the husband.
The discretion to exclude otherwise admissible evidence provided in section 138 of the Evidence Act on the basis that it was obtained improperly or in contravention of an Australian law or in consequence of an impropriety or a contravention of an Australian law does not apply unless one of those criteria are present.
In making a finding in relation to the facts necessary for deciding the question of whether evidence should be admitted or not admitted, whether in the exercise of a discretion or not, the Court must apply the civil standard – the balance of probabilities – according to section 142 of the Evidence Act.
I find on the balance of probabilities that I am not satisfied that the evidence objected to by the husband was obtained improperly or in contravention of an Australian law or in consequence of an impropriety, and, specifically, I am not satisfied that a breach of section 308H of the Crimes Act 1900 (NSW) or section 478.1 of the Criminal Code Act 1995 (Cth) has occurred in relation to that evidence. Accordingly, the discretion in section 138 is not invoked.
The emails objected to are in the nature of hearsay evidence and would be excluded under section 59 of the Evidence Act unless an exception applies. One possible exception covering these documents is in section 69 of the Evidence Act relating to business records. However, I need not make a finding in that regard as I apply section 75 of the Evidence Act that provides:
In an interlocutory proceeding, the hearsay rule does not apply to evidence if the party who adduces it also adduces evidence of its source.[6]
That section has been satisfied by the wife. I find that paragraphs 46 to 48 inclusive of the wife’s affidavit and annexures K5, K6 and K7 as referred to in those paragraphs are admissible.
[6] Evidence Act 1995 (Cth) s 75.
The wife’s application to admit new evidence following the interim hearing
The interim hearing continued on 30 October 2019. On 4 May 2020, the wife filed an Application in a Case, seeking leave to adduce further evidence in respect of the interim hearing, namely, her affidavit sworn and filed 29 April 2020. The husband filed his Response to an Application in a Case on 15 May 2020, seeking that the wife’s said Application in a Case be dismissed with costs.
The wife’s affidavit of 29 April 2020, so far as it was relevant to the issues for determination in the interim hearing, related to correspondence initiated by the wife through her solicitors to the solicitors for the husband following the interim hearing. The correspondence addressed disclosure in relation to:
a)Overseas travel by the husband after the interim hearing;
b)Disclosure of financial documents, in particular bank statements for a period after the interim hearing; and
c)Evidence in relation to an asserted delay by the husband in:
i)Providing required instructions to the single court expert appointed by the parties to value the husband’s shareholding in the corporate entities; and
ii)Providing required instructions to the single court expert appointed by the parties to value the C Street, Suburb D property, the H Street, Town J property, and the E Street, Town F property.
The husband filed with his Response to Application in a Case an affidavit affirmed and filed by him on 15 May 2020 in which he sought to give evidence not only in support of his application that the wife’s Application in a Case, seeking leave to adduce further evidence, be dismissed, but in response to that further evidence sought to be adduced by the wife. Additionally, the husband’s said affidavit sought to adduce evidence in relation to an Apprehended Domestic Violence Order matter arising in March 2020.
I heard the fresh application and response in the interim hearing on 20 May 2020. Counsel for the wife and the solicitor advocate for the husband appearing on that day provided Case Outline documents containing written submissions. The wife submitted that the evidence in relation to which she sought leave was material to the interests of justice in the matter, may affect the result of the earlier interim hearing, could not have been discovered earlier due to the husband’s failure of disclosure after the time of the interim hearing, and did not prejudice the husband, asserting that “the other party’s poor conduct is the basis of the evidence”.
It was submitted for the husband that the further evidence was “at its height, mere speculation”, would not affect the result of the earlier interim hearing, could have with reasonable diligence been discovered prior to the earlier interim hearing, and that the husband would “suffer significant prejudice” if the Court admitted the evidence against the husband. It was submitted that the evidence sought to be adduced by the wife if leave was granted could mislead the Court as it consisted largely of correspondence from the wife’s solicitors to the husband’s solicitors but did not include the responses made to the wife’s solicitors by the husband’s solicitors.
The husband’s written submissions referred to the principles in relation to the grant of leave to adduce fresh evidence set out by Habersberger J in the Supreme Court of Victoria in Reid & Brett.[7] There, his Honour said at [41]:
[7] Reid & Brett [2005] VSC 18.
The criteria governing the exercise of the discretionary power to re-open a case to admit further evidence where the hearing has concluded but judgment has not been delivered have been said to be as follows:
(a) the further evidence is so material that the interests of justice require its admission;
(b) the further evidence, if accepted, would most probably affect the result of the case;
(c) the further evidence could not by reasonable diligence have been discovered earlier; and
(d) no prejudice would ensue to the other party by reason of the late admission of the further evidence.
In Smith & New South Wales Bar Association (1992) 176 CLR 256, the High Court of Australia stated that in such a situation, it was difficult to see why “the primary consideration should not be that of embarrassment or prejudice to the other side”.[8]
[8] Reid & Brett [2005] VSC 18, [41].
His Honour referred to Re Australasian Meat Industry Employees’ Union (WA Branch); ex parte Ferguson[9] at [493]-[494], per Toohey J, citing Watson & Metropolitan (Perth) Passenger Transport Trust[10] and Murray & Figge[11]
[9] Re Australasian Meat Industry Employees’ Union (WA Branch); ex parte Ferguson (1986) 67 ALR 491, [493]-[494].
[10] Watson & Metropolitan (Perth) Passenger Transport Trust [1965] WAR 88.
[11] Murray & Figge (1974) 4 ALR 612.
I also note the comments of Murphy J in Suell & Suell(Re-Opening).[12] In that matter, his Honour was dealing with a parenting issues matter and the specific powers found in section 69ZR of the Act, but his Honour helpfully made some general comments, including:
...it might broadly be said that common law principle [govern] applications to reopen in this court: see example in the marriage of Gelley (No. 1) (1992) 15 Fam LR 474; 107 FLR 52; (1992) FLC 92-290 and the cases there discussed.
Those principles make it clear that the granting of leave to reopen is discretionary. That discretion is guided by the interests of justice. The essential question is, is the court more able to do justice in the facts and circumstances of the particular case if the application is granted: see example Smith & New South Wales Bar Association (No. 2) (1992) 176 CLR 256; 108 ALR 55 (Smith); Urban Transport Authority (NSW) & Nweiser (1992) 28 NSWLR 471 at 478; and EB & CT (No. 2) [2008] QSC 306 (EB).
In cases where reasons for judgment have not been delivered, the High Court has held that the primary consideration should be embarrassment or prejudice to the other side: see Smith above at CLR 266-7; ALR 62.
Prejudice or embarrassment, though, is a broad concept and is not limited merely to cost or expense. The significant stress imposed upon litigants, particularly where the prior litigation history has been lengthy, has been widely recognised as an element of prejudice. Moreover, litigants have a right to expect finality in litigation.[13]
[12] Suell & Suell(Re-Opening) [2009] FamCA 55.
[13] Suell & Suell(Re-Opening) [2009] FamCA 55; 40 Fam LR 690, [8]-[11].
In relation to the application to admit further evidence, I find:
a)That the further evidence sought to be adduced by the wife is not so material that the interests of justice require its admission;
b)The further evidence, if accepted, would not most probably affect the result of the interim hearing;
c)That the further evidence could not by reasonable diligence have been discovered earlier, that is, so as to be adduced on 30 October 2019; and
d)That no prejudice or embarrassment to the husband would ensue by reason of the late admission of the further evidence.
The above findings are made on the balance of probabilities. I find that, given the nature of the further evidence sought to be adduced by the wife that is actually relevant to the issues for determination in the interim hearing conducted on 30 October 2019, leave should not be granted to the wife to reopen that interim hearing so as to enable the wife to adduce that further evidence.
Injunctive relief in financial matters – the law
Section 114(1)(e) of the Act may be used to protect assets from wastage or disposal by one party so as to preserve the matrimonial asset pool.
In proceedings for interlocutory injunctions, the Court, before making an order, is required to find that there is a serious issue to be tried and that the balance of convenience supports the making of an order.[14]
[14] Blueseas Investments Proprietary Limited & Mitchell and Others [1999] FamCA 745.
Pursuant to section 114(3):
A court exercising jurisdiction under this Act...may grant an injunction, by interlocutory or otherwise, in any case in which it appears to the court to be just or convenient to do so and either unconditionally or upon such terms and conditions as the court considers appropriate.[15]
[15] Family Law Act 1975 (Cth) s 114(3).
As the Full Court said in M & DB,[16] “Ultimately, each case will involve an overall assessment of a number of factors to determine the just or convenient result.” The Full Court went on to say:
...establishing on the balance of probabilities a risk or danger of a disposal of property intended to defeat an order –
was the first part of the relevant test and that:
In an inquiry into the risk of disposal, the question of intention or scheme [to dispose of assets] is but one of a number of factors relevant to the objective risk of disposition to defeat an order.
and further still that:
While, ultimately, a particular factor may overwhelm others, it is generally unwise to commence with a rigid focus on finding to a particular standard of proof one or more of a number of factors relevant only at a discretionary level and subsidiary to the ultimate question.[17]
[16] M & DB [2006] FamCA 1380, [47].
[17] M & DB [2006] FamCA 1380, [47].
In Eastman & Eastman & Anor,[18] Watts J said:
In M & DB, the Full Court considered the objective risk of disposal of assets to defeat judgment, of which any evidence of intention is only one consideration. A mere thought on fear of disposition by a spouse, absent any context where an objective risk might be said to exist, is still not enough. The Full Court confirmed:
A court...may grant an injunction...in any case in which it is just or convenient to do so –
[18] Eastman & Eastman & Anor [2015] FamCA 808.
and:
In order to determine what is a “just or convenient” result, the court will conduct an overall assessment of a number of factors.[19]
[19] Eastman & Eastman & Anor [2015] FamCA 808, [14]-[15].
His Honour at [20] described the test set out by the Full Court in M & DB as being (in my own words):
a)Firstly, establishing that there is a real risk that a spouse may dispose of relevant assets or property in their possession or under their control; and
b)Secondly, that the risk of that disposal of property would defeat a likely judgment of the Court in making an order under section 79 of the Act.[20]
[20] Eastman & Eastman & Anor [2015] FamCA 808, [20].
The asset pool
On the basis of the evidence before the Court on the interim hearing, I make the following findings in relation to the asset pool:
a)No value is yet established or even proffered by either of the parties for the husband’s shareholding in L Pty Ltd. There is inference in the evidence that L Pty Ltd trades as Company S, though it would seem that the funds borrowed to purchase the business ‘Company S’ were lent by O Bank to K Pty Ltd, with a directors guarantee being provided by the husband. The husband has shareholding in L Pty Ltd. I cannot ascertain from the evidence available on interim hearing if there are any other shareholders in L Pty Ltd, but, certainly, the company is controlled by the husband as director. The husband asserts in his Financial Statement that the combined value of L Pty Ltd and K Pty Ltd is $300,000.
b)Once again, there is no value established or proffered by either of the parties for the husband’s shareholding in K Pty Ltd. There is inference that K Pty Ltd trades as the business located at Suburb R, though there is no clarity in the evidence as to structure. The husband is a shareholder. He may be the only shareholder, but that is not clear on the evidence, and he is certainly in control of the company as director. It seems, on inference on the evidence, though not on direct evidence, that K Pty Ltd is indebted to O Bank in the sum of $650,000, being the moneys borrowed to purchase the ‘Company S’ business, though the evidence dos not enable me to make a specific finding to that effect.
c)There is an account with O Bank in the name of a private corporation, N Pty Ltd. That corporation was deregistered on 8 August 2010 and, consequently, is not a legal entity and, of course, can have no shareholders or directors. Nevertheless, the bank account in that former corporation’s name is still open and, on the evidence, is operated from time to time by the husband. There is, as at 21 October 2019, a balance of $1,344.30 remaining in that bank account.
d)The C Street, Suburb D property is the former matrimonial home, of which the husband is the sole registered proprietor. The husband asserts in his financial statement of 23 October 2019 that the property is valued at an estimated $1,900,000. He also indicates therein that the property is security by way of registered mortgage for a loan account in the husband’s sole name with a debit balance of $1,024,564.
e)For the E Street, Town F property, of which the husband is the sole registered proprietor, the husband in his Financial Statement asserts that the property has an estimated value of $650,000 and that it is security by way of a registered mortgage for a loan account in the husband’s sole name with a debit balance of $516,373.
f)The wife indicates in her Financial Statement of 22 October 2019 that she has savings with CC Bank of $6,000.
g)The husband indicates in his Financial Statement that he has savings with the Commonwealth Bank of Australia of $3,372.
h)The husband claims a beneficial interest in the P Street, Town Q property of which the second respondent is the sole registered proprietor and in relation to which the second respondent is mortgagor and the husband is mortgagee under an unregistered mortgage to secure an asserted debt of $75,000 owed by the second respondent to the husband.
i)There is a judgment debt in the husband’s favour against the second respondent in the Local Court at Sydney in the sum of $20,000.
j)The wife asserts in her Financial Statement that she is the sole owner of a life insurance policy through her Super Fund DD, being a death cover policy, with a value of $143,920. In reality, it is almost certain that the policy itself has no surrender value and that a value of $143,920 would only vest upon the death of the wife. As yet, she still lives.
k)The husband asserts in his Financial Statement that he had household contents to an estimated value of $5,000 and other personal property, being clothes, sporting equipment and wedding ring, to an estimated value of $5,000.
Liabilities
The parties identify the following liabilities in their evidence:
a)There is a Westpac Bank Equity Loan Account – Plan 2 in the husband’s sole name with a debit balance of $516,373, according to the husband’s Financial Statement, secured by way of a first registered mortgage on the E Street, Town F property.
b)There is a loan account with M Bank in the husband’s sole name with a debit balance of $1,024,564 according to the husband’s Financial Statement secured by way of first registered mortgage on the C Street, Suburb D property.
c)The wife asserts at item 51 of her Financial Statement that she has credit card debts of $1,000, though she does not describe the card provider and type, and indicates at item 30 in her Financial Statement that there are no weekly payments payable in relation to any credit cards.
d)There is an asserted debt owed by the husband on his Commonwealth Bank of Australia Mastercard in the estimated sum of $48,215, according to his Financial Statement, in relation to which he makes payments of an estimated $175 per week.
e)The husband’s asserts he has a debt on his Visa card in an estimated sum of $43,280, in relation to which he makes payments of an estimated $30 per week.
f)The husband asserts, at item 50 of his Financial Statement, that he is indebted to K Pty Ltd – presumably, K Pty Ltd – in a sum of an estimated $650,000. Neither the basis of that assertion nor the origin of the asserted debt are indicated in any of the other evidence. It may be that the debt asserted refers in reality to either the husband’s guarantee of such sum borrowed by K Pty Ltd from O Bank and applied to purchase of the ‘Company S’ business, or that the said sum was borrowed from O Bank by K Pty Ltd and then lent by that company to the husband, who either applied it toward purchase of that business or lent that sum to L Pty Ltd, which purchased the business. If the latter is true, the debt asserted by the husband would be counterbalanced by a debt owed by the corporation L Pty Ltd to the husband.
g)The husband asserts in item 53 of his Financial Statement that he is indebted in an estimated sum of $405,000 in relation to “unpaid invoices for renovations and furniture for the [P Street, Town Q property]; unpaid invoices for renovations of the [C Street, Suburb D property]; unpaid invoices for roof replacement for [the P Street, Town Q property]”.
Superannuation entitlements
a)The husband and the wife are members (I can only infer that they are the only members) of the self-managed superannuation fund G Pty Ltd Super Fund, of which G Pty Ltd is the trustee. In compliance with the law, I presume that the husband and the wife are both directors and shareholders. The principal asset of the superannuation fund, of which G Pty Ltd is the registered proprietor, is real property at H Street, Town J – the H Street, Town J property. The wife does not mention any interest in that fund in her financial statement. The husband mentions the fund and asserts that his interest in the fund has an estimated value of $479,000. It is not known if that is intended by the husband to be the estimated value of his member account within the fund, or an assertion by him of the total value of the fund.
b)The wife has entitlements in Super Fund DD with an estimated value of $40,000 according to her Financial Statement.
c)The husband has an interest in Super Fund EE with an estimated value of $30,000 (husband’s Financial Statement).
Assessment of the pool
If I take an estimated value of the assets in the matrimonial property pool, not including an interest, if any, of the husband in the P Street, Town Q property, and not including the wife’s assertion of her value of her death cover through her Super Fund DD, there is a gross matrimonial asset pool valued at $2,869,372.
If I calculate the husband and wife’s liabilities, not including the husband’s asserted debt to K Pty Ltd of an estimated $650,000, there are total liabilities of the husband and wife of $2,038,432. If including the husband’s asserted debt to K Pty Ltd, the total is $2,688,432.
The parties assert total superannuation entitlements of $549,000.
The net matrimonial asset pool on the above figures, including superannuation and when not including the asserted $650,000 debt, is $1,379,940. If including the asserted $650,000 debt, it is $729,940.
Based on the evidence available in the interim hearing, the wife seems to have a significant claim for an adjustment of property in her favour from the husband. The major assets in the property pool are all in the sole control of the husband as between the husband and the wife. On the evidence, those major assets would seem to be in the sole control of the husband as between himself and any other person. The exception to that should be the parties’ member accounts in the self-managed superannuation fund, which should be in their equal control as co-directors of the trustee company of the fund if it is established and stands according to law.
Consideration of the real risk that the husband may dispose of or waste relevant assets in his possession or under his control
In the interim hearing, the wife tendered a 71-page tender bundle that was admitted into evidence without objection and is exhibit A1. The bundle consists of the following documents:
a)Copies of the bank statements for the Westpac Bank Equity Access Loan – Plan 2 account in the husband’s sole name, account ending #...63, for the period from 16 October 2015 to 16 October 2019, but omitting the period 17 October 2018 to 15 January 2019;
b)A company’s index search results sheet for N Pty Ltd, indicating that the company was registered on 15 March 2006 and was deregistered on 8 August 2010;
c)O Bank statements for the account in the name of N Pty Ltd, being an account number ending #...05, for the period 1 January 2016 to 21 October 2019;
d)Bank statements for a M Bank loan account, accepted in the interim hearing as being the M Bank loan account in the husband’s sole name, secured on the C Street, Suburb D property, for the period 4 January 2016 to 16 October 2019;
e)Selected pages from bank statements with account number ending #...95 and being for the periods 14 August 2017 to 24 August 2017, 8 February 2018 to 21 February 2018, 13 September 2018 to 28 September 2018, 9 August 2019 to 23 August 2019, and 20 September 2019 to 3 October 2019; and
f)A single-page document headed “Mr Kalinec Summary of Australian Passport”, setting out the travel dates and destinations of the father between 2014 and 2019.
In the course of submissions by Dr McConaghy on behalf of the wife and by Mr Ginges on behalf of the husband, I was taken to various entries in the bank statements forming part of exhibit A1. The entries to which I was taken indicate a practice by the husband, admitted by him, of moving significant sums of money between accounts. For example:
a)On 13 May 2016, $1,100,000 was deposited into the O Bank account of the deregistered company, N Pty Ltd. Then, on 27 June 2016, a sum of $350,000 was withdrawn, with a transaction detail “electronic debit – Mr Kalinec loan refund ...96”. On 7 July 2016, $750,000 was withdrawn, with the transaction detail “electronic debit – Mr Kalinec loan refund ...12”. I asked Dr McConaghy if it was known where the $1,100,000 had come from, and she indicated the wife had no information that would provide answer.
b)Also, in the O Bank account for the deregistered company, there was a deposit on 11 September 2018 of $900,000 and then a withdrawal on 27 September 2018 of $50,000, with the transaction details “electronic debit – K Pty Ltd loan – from Mr Kalinec”. On 11 February 2019, there is a withdrawal of $850,000, with the transfer details “electronic debit – K Pty Ltd loan transfer refund”. I asked Dr McConaghy if the wife had any information as to where the deposit had come from or where the withdrawals had gone to, and Dr McConaghy indicated that the wife did not have information to provide an answer.
c)At 4 January 2016, the debit balance of the M Bank loan account was $822,660.97. There was a withdrawal of $300,000 on 16 May 2016. There was a deposit on 7 July 2016 of $750,000, described as “loan from N Pty Ltd”. There was a withdrawal of $700,000 on 12 September 2018, a deposit of $700,000 on 7 June 2019, described as “loan from N Pty Ltd”, and a withdrawal by cheque of $700,000 on 30 September 2019, with the debit balance on 16 October 2019 being $1,024,564.24. The debit balance of the loan account had increased by $201,903.30 between 4 January 2016 and 16 October 2019.
d)In her submissions for the wife, Dr McConaghy pointed out that the $850,000 withdrawn on 11 February 2019 from the O Bank account of the deregistered company occurred within a week of the wife filing her Application in a Case seeking to restrain the husband from drawing down on relevant accounts.
e)In relation to the husband’s Westpac Bank Equity Access Loan – Plan 2, being a loan account in his sole name and secured by way of mortgage on the E Street, Town F property, the wife, through Dr McConaghy’s submissions, pointed to a deposit to that account on 27 January 2016 of $700,920.15, source unknown, to give that account a credit balance of $273,415.62, and the debit balance as at 16 October 2019 of $516,373.36, a difference of $795,246. During the course of the account:
i)A sum of $800,000 was withdrawn from that account on 13 May 2016 by presentation of a cheque. The date corresponds with the deposit of $1,100,000 into the O Bank account for the deregistered company;
ii)A deposit was made into the account of $350,000 on 27 June 2016; and
iii)Withdrawals were made from the account on 1 July 2016 of $75,000 and $20,000 respectively, both by cheque presentation; and
iv)There was a withdrawal of $200,000 on 11 September 2018;
f)The wife pointed to several lesser but no less significant withdrawals from the account after separation, including:
i)$16,500 on 16 August 2017;
ii)$20,000 on 15 August 2017;
iii)$9,989.32 on 16 February 2018;
iv)$50,000 on 19 February 2018; and
v)$35,000 on 11 July 2019.
Mr Ginges, in submissions on behalf of the husband, indicated, in support of the husband’s evidence in paragraph 56 of his affidavit of 23 October 2019, that the husband has pursued a practice, both before and after separation, of moving a large sum of money – on average between $700,000 and $800,000 – between the various company accounts and the loan accounts in his sole name to “show he has some liquidity”. It was submitted the husband has done this in relation to both the affairs of the various companies and in relation to his personal affairs when being required to guarantee or obtain loans, his submission being that, “That’s how he runs the business, the way it’s working, not depleting the moneys. It’s unorthodox, but it does not deplete the assets.” Mr Ginges submitted that the practice does not ground the grant of injunctive relief as sought by the wife, but submitted that orders may need to be fashioned to prevent disposition of, or any attempt to dispose of, the moneys.
I challenged Mr Ginges that the husband had failed to give any detail of these asserted business practices in his evidence other than his general statement in paragraph 56 of his affidavit, and that was, properly, conceded by Mr Ginges.
I find on the basis of the evidence contained in exhibit A1 that it is reasonable that the wife has a fear that the husband will dispose of assets, and in particular cash assets, to an extent that can defeat a likely judgment in the wife’s favour in making orders under section 79 of the Act.
But even if the evidence in exhibit A1 was not sufficient to establish a real risk on the balance of probabilities that the husband may dispose of relevant assets, or companies in his control may dispose of relevant assets, I find that the contents of annexure K-7 to the wife’s affidavit of 20 October 2019 is sufficient on its own standing to establish that risk. The document reads:
Hi Mr Kalinec
Please find attached the application forms to create the new company and trust that would hold all the shares in the respective companies.
We audit the company first, once we have the ACN number and the solicitor prepares the trust deed.
All we really need is the name of the company and trust, as we can pick up all your personal details from the existing companies.
You will be the shareholder, director, company secretary, and public officer within the company, and also the appointor and primary beneficiary of the trust.
One extra layer we could use is to have a company as the appointor of the trust, which we only do to protect assets in Family Law disputes. A company cannot be part of a marriage.
Can you send me the latest ASIC review for each company as well so we can prepare the share transfers into the new holding trust.
Once the payment to set these up appears, we order the company that day, then that afternoon, instruct the solicitor to prepare the trust deeds.
We could use that second-hand trust to backdate the share transfers, but I think other than using 30th June it could open up a can of worms if we tried to go back further with fees, penalties, and suspicion as to why you would need to backdate it.
However, doing it now is a normal business practice now that you understand the benefits of a restructure.
Happy to chat on the phone if you have a few minutes to do so.
Thanks, Mr FF.
The email is to the husband (on his admission) from Mr FF, Managing Director, GG Pty Ltd. The email is dated Thursday, 18 July 2019, 10.30AM.
There is also annexure K5 to the wife’s affidavit, being a print of an email sent 14 August 2019 at 5.02PM by the husband to a Mr HH and a print of an email sent Wednesday, 14 August 2019 at 5.37PM from Mr HH to both the husband and a Mr JJ at kk.com.au:
Mr JJ
I have a client looking for some assistance with possible refinance and cash out. Few [sic] free to give myself a call before you call Mr Kalinec so that I can go over the strategy with you.
I find that the wife has established sufficient risk of disposal of assets by the husband or by companies in his control to ground the granting of injunctive relief.
I find that as the injunctive relief sought by the wife would, on its terms, allow the husband to continue to conduct ‘the ordinary course of business’ and to ‘meet all necessary expenses’ of the various entities and businesses involved. I find the scope of the injunctions sought by the wife in relation to the real properties, being the C Street, Suburb D property and the E Street, Town F property, are appropriate. I find the scope of the injunctions sought by the wife in relation to the husband as director of K Pty Ltd and L Pty Ltd and as the authorised operator of the bank account in the name of the deregistered company N Pty Ltd are appropriate.
I find that it is appropriate to grant the injunction sought by the wife to restrain the husband from drawing down on any bank accounts operated in his name, alone or jointly with any other person, so as to increase the indebtedness of the husband.
I find that it is proper to grant the order, as sought by the wife, restraining the husband as a director of G Pty Ltd as trustee of the G Pty Ltd Superannuation Fund from depositing any rental income received in relation to the tenancy of the H Street, Town J property into any account other than the proper account operated by that company as trustee of the superannuation fund.
I find on the evidence that there is no basis to grant an order, as sought by the wife, restraining the husband from transferring or depositing any sum of money to any account in the name of any person or entity outside the Commonwealth of Australia, particularly in consequence of the other injunctive relief affecting the husband that I have found improper to be made.
It was submitted by Mr Ginges on behalf of the husband that if I find that it is proper to grant the injunctive relief sought by the wife, that I should leave the husband some leeway to operate the loan accounts in his name, such that an injunctive order in relation to his Westpac Bank loan account secured on the C Street, Suburb D property may be framed so as to prevent him drawing down on that account so as to increase the indebtedness past $1,030,000. Further, and in relation to the husband’s loan account secured on the E Street, Town F property, an injunctive order may be framed so as to restrain him from increasing the indebtedness beyond $520,000. Given that these are not the operating accounts of businesses but are loan accounts in the husband’s sole name, secured on real estate properties in his sole name, I find merit in that submission by Mr Ginges on behalf of the husband.
In relation to the evidence that the loan of $650,000 borrowed by some legal entity, the borrower being unclear on the evidence, and applied to purchase of the ‘Company S’ business is repayable as at February 2020, with leeway from the bank to make repayment up to August 2020, I find that it is appropriate to make an order relieving the husband from his restraints under the injunctive orders in relation only to applying funds to repayment of that loan. I make that finding provided same is done after a period of appropriate notice to the wife of the details of the source of the funds proposed to be so applied. Such an application of the funds would not be a disposal so as to defeat an ultimate property settlement order but would be an application of an asset to the resolution of a liability, with no effect upon the net matrimonial asset pool available for distribution.
Consideration of the risk that disposal of property would defeat a likely judgment of the Court in making orders under section 79 of the Act
I have found that the net matrimonial asset pool available for distribution between the husband and wife under section 79 of the Act, based only on the evidence in the interim hearing, is either $1,379,940 if the debt asserted by the husband to be owed by him to K Pty Ltd is not included, or $729,940 if that debt is included. Given that all of the principal assets – real properties and shareholdings – are in the control of the husband, with the sole exception of the self-managed superannuation fund, I find that there is a risk that a disposal of assets by the husband could defeat the making of an appropriate order adjusting property from the husband to the wife under section 79 of the Act. However whether or not such a disposal, in relation to which I have found a risk does exist, would defeat such an order would depend on the extent of the disposal. I find that sufficient risk is established of the possibility of a defeat of appropriate order to ground appropriate injunctive relief.
Should injunctive relief be granted?
The inconvenience or prejudice to the wife if the injunctive relief sought by her is not granted is the ongoing risk of a disposal of assets by the husband such that it defeats appropriate orders under section 79 of the Act for adjustment of property between the parties.
The inconvenience or prejudice to the husband if injunctive relief is granted will be that he will no longer be at liberty to conduct his business and personal affairs in the manner it is asserted on his behalf in submissions, and stated by him in general terms in paragraph 56 of his affidavit, that he has been want to conduct those affairs. That method is by moving large sums of money from account to account between legal entities for, presumably amongst other purposes, the presentation of an appearance of adequate liquidity when dealing with financial institutions.
Given the lack of specific evidence in the husband’s case about those activities and the specific evidence presented in the wife’s case as to movement of money, and given that any injunctive orders can be framed so as to enable the husband to operate accounts and conduct the affairs of corporations in which he is a director ‘in the ordinary course of business’, I find that the balance of convenience and justice is in favour of the injunctive relief sought by the wife being granted on appropriate terms.
An undertaking as to damages
In the material relied upon by the wife on interim hearing, there was no mention of her giving an undertaking as to damages in relation to the injunctive relief sought by her.
In the course of submissions, I asked Dr McConaghy if the wife was prepared to give an undertaking as to damages, and Dr McConaghy indicated that it was the wife’s submission that she should not be required to give the usual undertaking as to damages in this case and referred to the decision of the Full Court of the Family Court of Australia in Blueseas Investments Proprietary Limited & Mitchell and Ors.[21] In that case, the Full Court said, in relation to the undertaking as to damages on grant of injunctive relief:
The common law position appears to be that the Court has a discretion not to enforce an undertaking as to damages, and this is because the undertaking is given to the Court and not to the other party: see Barratt Manchester Limited & Bolton MBC [1998] 1 WLR 1003 at 1009; [1998] 1 All ER 1; Cheltenham and Gloucester Building Society & Ricketts [1993] 1 WLR 1545 and 1551; [1993] 4 All ER 276; Air Express Limited & Ansett Transport Industries (Operations) Proprietary Limited (1981) 146 CLR 249 at 311-12; 33 ALR 578 at 581-582.[22]
[21] Blueseas Investments Proprietary Limited & Mitchell and Ors [1999] FamCA 745.
[22] Blueseas Investments Proprietary Limited & Mitchell and Ors [1999] FamCA 745, [50]
The Court in that case noted certain authorities that held that there was no requirement for an undertaking as to damages if the party seeking an injunction is impecunious or has limited means and the well-known principle that poverty or straitened circumstances should not bar a litigant’s access to justice. The Court went on to say:
It should be noted that these principles in relation to undertakings as to damages are principles of equity derived from civil litigation. There is, we think, an additional highly relevant matter that distinguishes litigation under the Family Law Act from ordinary civil litigation: that is the fact that very often the wealth of the parties is controlled by one rather than both of them. This in turn means that it is not uncommon for one of the parties to have no means of meeting any liability that may be incurred pursuant to an undertaking as to damages...[23]
and:
There is no doubt that in proceedings for interlocutory injunctions the Court, before making an order, is required to find that there is a serious issue to be tried and that the balance of convenience supports the making of an order: see American Cyanamid & Ethicon Limited [1975] AC 396; [1975] 1 All ER 504 and the other cases cited by the Full Court of this Court in Yunghanns & Yunghanns [1999] 24 Fam LR 400 at 433; FLC 92-386 at 85,723.
No doubt in ordinary civil litigation the impecuniosity of a party is a matter that may be relevant to the issue of balance of convenience. For the reasons already stated however, we consider that family law cases must be looked at in a different light. In our view, it would be unconscionable to accept a broad principle that the impecuniosity of a party in family law proceedings would be given such weight as to prevent an injunction being granted where all the other requirements for the grant of such an injunction are present. Indeed, it may even be doubtful whether the impecuniosity of one of the parties to family law proceedings would usually be a factor militating against a grant of interim or interlocutory injunctions if the other tests for the grant of the same were otherwise satisfied. This is not to say that such a factor would never be relevant but in the present circumstances at least, where the injunction may have the effect of preserving the only piece of property to which the wife might have recourse, it would be unreasonable in the extreme for her impecuniosity to operate to prevent an injunction being granted. [24]
[23] Blueseas Investments Proprietary Limited & Mitchell and Ors [1999] FamCA 745, [54]
[24] Blueseas Investments Proprietary Limited & Mitchell and Ors [1999] FamCA 745, [56]-[57].
The ‘exception’ in such Family Law Act property settlement matters stated by the Full Court in Blueseas is now noted by Meagher, Gummow and Lehane in Equity Doctrines and Remedies where the writers comment that the“…exception arises in family law proceedings where the impecuniosity of the plaintiff stems from the defendant’s control of the matrimonial assets” and then cite the Blueseas decision.[25]
[25] Meagher, Gummow & Lehane, Equity Doctrines and Remedies (Lexis Nexis, 5th ed, 2015) [21-410].
The ‘usual undertaking as to damages’, in its expanded form, is the applicant for the interlocutory injunctive relief undertaking to the Court that the applicant will pay to the party affected by the restraints imposed by the interlocutory injunction such compensation as the Court may, in its discretion, consider in the circumstances to be just, such compensation to be assessed by the Court and paid in such manner as the Court may direct.[26] The undertaking as to damages is given to the Court and not to the other party and so creates no right to damages in favour of the other party, the enforcement of the undertaking being in the discretion of the Court.[27]
[26] Young, Croft and Smith, “On Equity” (Law Bookco 2009).
[27]Cirillo & Citicorp Australia Limited [2004] SASC 293 at [72].
Once again, the principle arising in the authorities, derived from equitable jurisdiction and civil cases generally, that an undertaking from an impecunious applicant may not be accepted as it is worthless, is not always relevant in matters relating to property settlement under the Act. That is for the simple reason that in the equity or civil proceeding situations, where injunctive relief is sought and an undertaking as to damages is required, if a compensable loss is suffered by the party restrained, they would usually only have recourse to the assets of the applicant for the injunctive relief to satisfy any damages assessed by the Court pursuant to the undertaking. By contrast, in property settlement proceedings under the Act, such as the present case, there is, as I have found, most likely to be a movement of valuable assets from the ownership or entitlement of the parties sought to be restrained to the applicant by reason of the restrained party having very much the greater part if not all of the ownership, entitlement in and control of the principal assets of value.
Even if injunctive relief is granted as sought by an applicant and the undertaking as to damages is given and it is found that damage has been suffered by the restrained party, compensable by the applicant, it is still a matter within the discretion of the Court as to whether the damages are awarded and, if so, in what amount. I posit that in the context of proceedings under section 79 of the Act, the whole scenario could fall into and become part of the assessment element of the contributions exercise.
The wife in this matter, with regard to the Court identifying, according to ordinary common law and equitable principles, the existing legal and equitable interest of the parties in the relevant property, would be regarded as an impecunious litigant in the context of an undertaking as to damages, having neither income nor property that would back any assessment of damages going beyond about $6,000. However, she can anticipate orders being made so that she shares in a distributable net asset pool valued at somewhere between (on the currently necessarily imperfect available evidence) $729,940 and $1,379,940, with the latter figure being, on the evidence, the more likely of the two. Accordingly, at a time when any assessment of damages may occur in the exercise of the Court’s discretion in that regard, the wife would not be impecunious.
I find that it is appropriate in this matter that the wife be required to give the usual undertaking as to damages to the Court as a precondition to any injunctive orders affecting the husband becoming operative.
Conclusion
The husband and wife have a lot more work to do in this matter before they are in a position to present their evidence to enable the Court to decide, firstly, if it is just and equitable to proceed with the making of property settlement orders under section 79 in the matter, and, if it is found to be just and equitable to proceed on the base of the material before the Court on the interim hearing, to present their evidence to resolve the identifying and valuing of the property, liabilities and financial resources of the husband and wife.
In that regard, specific orders were made in relation to the appointment of single expert valuers on 11 February 2019 and 18 June 2019, and while the single Court experts have been identified, there has been on the evidence some delay by the husband in providing to the single Court experts, particularly in relation to valuation of the shareholdings in the corporate entities, the required source materials to enable the valuation to proceed. Until the parties have resolved those issues, the matter cannot proceed on any sensible basis to a conciliation conference or mediation. The parties must complete that process as soon as possible.
I will make orders by way of injunctions affecting the husband generally as sought by the wife in her Application in a Case filed 4 February 2019, but in the form I have found to be appropriate in these reasons.
In relation to the involvement of the second respondent in the proceedings, I note the order made by consent on 20 May 2020 that the issue relating to the first respondent’s Points of Claim and the second respondent’s Reply to Points of Claim should be listed for final hearing as a separate question in the proceedings pursuant to Part 17 of the rules of this Court.[28] For that purpose, I will make trial directions and list the matter for a compliance check in the first available compliance checklist.
[28] Federal Circuit Court Rules 2001 (Cth) Part 17.
In relation to the Application in a Case filed by the wife on 4 February 2019 and the Response to an Application in a Case filed by the husband on 18 September 2019, both of those parties seek that the other party pay their costs, the wife seeking that the husband pay her costs of those proceedings on the indemnity basis. In relation to the Application in a Case of the wife seeking leave to adduce further evidence, filed 4 May 2020 and the husband’s Response to an Application in a Case filed 15 May 2020, the husband seeks an order that the wife pay his costs. I will grant leave to the parties to make written submissions to chambers on the issue of costs of those interlocutory proceedings.
In relation to the husband’s Application in a Case filed 5 March 2019 seeking interlocutory relief against the second respondent and the second respondent’s Response filed 20 September 2019, both parties seek that the other party pay their costs of and incidental to the interim applications, but I will leave that issue, if pressed, for consideration following a hearing of the issue between the second respondent and the husband (with participation by the wife to the extent that she deems fit) on a final basis.
Accordingly, I make the orders set out at the start of these reasons.
I certify that the preceding one hundred and twenty-eight (128) paragraphs are a true copy of the reasons for judgment of Judge Morley
Associate:
Date: 5 August 2020
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