KALLAS & KALLAS

FAMILY COURT OF AUSTRALIA

KALLAS & KALLAS

[2014] FamCA 815

FAMILY LAW – PROPERTY – Interim property applications – where wife seeks orders for interim property provision to meet her legal and other expenses – where husband seeks orders as to interim property to meet ongoing obligations of his property investment activities – where the financial circumstances of the husband’s property investment company problematic – where it is appropriate to order company to sell real property to alleviate ongoing debt – where ongoing issue as to the husband’s proper disclosure and discovery of income and expenditure of his company – where it is appropriate to release partial funds to meet pressing debts – where payments to be facilitated by single expert appointed by the parties – where parties obligated to overwhelming mortgage payments in relation to jointly owned property – where appropriate for that property to be sold.

APPLICANT:

Mr Kallas

RESPONDENT:

Ms Kallas

FILE NUMBER:

PAC

1501

2013

DATE DELIVERED:

24 September 2014

PLACE DELIVERED:

Parramatta

PLACE HEARD:

Parramatta

JUDGMENT OF:

Foster J

HEARING DATE:

4 August 2014

REPRESENTATION

COUNSEL FOR THE APPLICANT:

Mr Blackah

SOLICITOR FOR THE APPLICANT:

Warren McKeon Dickson Lawyers

COUNSEL FOR THE RESPONDENT:

Ms Beck

SOLICITOR FOR THE RESPONDENT:

York Law Family Law Specialists

Orders

That the husband and wife do all things necessary to forthwith sell the property at B Street, Suburb C for the best price reasonably obtainable and that the net proceeds of sale be applied as follows:
(a)Legal costs on sale, agents commission valuers fees and auction expenses (if any) on sale;
(b)Discharge of mortgage and payment of outstanding Council and water rates;
(c)Balance remaining to be invested in an interest bearing controlled monies account in the joint names of the parties’ solicitors;
and that the parties or either of them have liberty to apply as to implementation or enforcement of this order.
That the husband and wife do all things necessary to direct that NAB term deposit …20 be closed and that the funds be paid to a trust account operated by the Single Expert Accountant Mr D to be paid out by him on an ongoing basis in payment of proper expenses of and to creditors of the company E Pty Ltd as authenticated and prioritised by him and that the parties or either of them have liberty to apply as to implementation or enforcement of this order.
That the husband do all necessary things and sign all necessary documents so as to cause E Pty Ltd to sell the property at F Street, Suburb G at the best price reasonably obtainable and after payment of sale costs, legal fees on sale, final adjustments on settlement and discharge of mortgage to pay the then net proceeds of sale to the single expert accountant Mr D to be paid out by him on an ongoing basis in payment of proper expenses of and to creditors of the company as prioritised by him and that the wife have liberty to apply as to implementation or enforcement of this order.
That the parties have leave to issue such further subpoena as are relevant to the issues for determination in these proceedings.
That within one month from the date of these orders the husband provide to the wife’s solicitors a detailed response to information requested by email dated 17 March 2014 by H Accountants on behalf of the wife comprising Annexure A to the wife’s amended response to an application in a case filed 16 July 2014.
That the costs of both parties to the present application be reserved.

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

FAMILY COURT OF AUSTRALIA AT PARRAMATTA

FILE NUMBER: PAC 1501 of 2013

Mr Kallas

Applicant

And

Ms Kallas

Respondent

REASONS FOR JUDGMENT

The application for determination is an application in a case filed by the applicant husband seeking interim property distribution and the wife’s response thereto.
The husband in the application in a case seeks in summary the following orders:
a)That the husband and wife do all things necessary to direct that NAB term deposit …20 be closed and that the funds be paid to E Pty Ltd;
b)That certain orders made on 28 May 2013 be discharged (those orders restraining the husband in his capacity as a director of the company from selling or encumbering the property at Unit AA, Property 1-2, I Street, Suburb C and that a single expert be appointed to value the company including real estate owned by the company and the property at B Street, Suburb C and that the husband in the first instance pay the costs of the single expert);
c)That the husband cause the company to effect a sale of the property at I Street, Suburb C and that the net proceeds of sale be paid to the company;
d)That for the purposes of facilitating the sale of the property the wife remove the Caveat registered by her as against the title to the property and cooperate with the sale process;
e)That the husband provide to the wife 28 days’ notice of her need to vacate the property and that the husband pay the wife’s reasonable costs of vacating the property including removalist and cleaning fees and a bond for new rented accommodation together with rent of $1300 per fortnight pending further order;
f)That the husband cause the company to apply funds received from the proceeds of sale of the property in payment of the following:
i)In payment of the husband’s outstanding legal fees;
ii)In payment of outstanding invoices and other debts of the company relating to its development at J Street, Suburb Q;
iii)In payment to the Australian taxation office of any GST, BAS and other tax liabilities of the company and/or the husband as at the date of orders;
iv)To the reasonable expenses incurred by the company in its ordinary course of business including mortgage payments in relation to the property at F Street, Suburb G;
v)To the reasonable day to day expenses of the husband including mortgage repayments in relation to the property at B Street, Suburb C, and living expenses, spousal maintenance and child support for the wife;
vi)In payment to the Australian Taxation Office of any further GST, BAS and other tax liabilities of the company and/or the husband as and when they fall due;
g)That the husband account to the wife for all payments made pursuant to these orders providing her with copies of statements for the account and cheque butts for all cheques issued on a monthly basis;
h)That the husband’s costs of the application in a case be reserved.
The wife for her part opposes the orders sought by the husband and in her amended response to an application in a case seeks in summary the following orders:
a)That the husband’s application in a case be dismissed;
b)That the husband provide a response to the request for particulars dated 17 March 2014 from the wife’s solicitors;
c)That the husband comply with order 6 made in July 2013 by providing the electronic version of the companies’ MYOB accounts for the last 5 financial years and in default the husband make the relevant computer storing such information available to an IT person appointed by the wife to copy same;
d)That within 7 days the following sums be released from the controlled monies account held on behalf of the parties:
i)$223,100 to the wife’s solicitors by way of interim costs;
ii)$5500 to H Accountants with the characterisation of that payment reserved to the trial judge;
iii)$25,000 to the wife’s solicitor’s trust account on account of future work to be done in relation to the audit of the husband’s financial dealings with the characterisation of that payment reserved to the trial judge;
iv)$8000 to the wife’s solicitor’s trust account referable to the amount owing by the wife to her former solicitors;
v)$8883 to the wife by way of partial property settlement to meet the wife’s outstanding MasterCard liability with the characterisation of that payment reserved to the trial judge;
vi)$20,000 to the wife by way of partial property settlement for the wife to repay the loan to her father with the characterisation of that payment reserved to the trial judge;
vii)$25,000 to Mr K to be held by him as a contingency amount that the wife may need to meet her or the child L’s expenses provided that notice of expenditure is provided to the husband;
viii)$12,400 to the wife by way of lump sum spouse maintenance for the period 31 May 2014 to 28 December 2014 pursuant to orders made on 28 May 2013;
e)That a forensic accountant be appointed to undertake an audit of the company and that the costs of the expert be paid for by the husband in the first instance with characterisation of that payment reserved to the trial judge;
f)That the husband and wife do all things necessary to sell by public auction the property at B Street, Suburb C for the best price reasonably obtainable and that the net proceeds of sale be applied as follows:
i)Legal costs on sale, agent’s commission, valuer’s fees and option expenses;
ii)Discharge of mortgage payment of outstanding Council and water rates;
iii)Balance to be invested in a controlled monies account in the joint names of the parties’ solicitors;
g)That in the event that there is no order for sale of the B Street, Suburb C property then a new single expert, other than Mr M, prepare a valuation report of the said property on the basis of the property in its current state and the property being completed taking into account the quantity surveyors report to be obtained and furnish to the expert;
h)The wife’s solicitors nominate three quantity surveyors for the purposes of being appointed to prepare a report as to the cost of completing works at the Suburb C property and that the husband choose one of such experts within a further 7 days;
i)That the husband within 14 days produce to the wife’s solicitors the handwritten ledger he refers to at paragraph 7(58) of his affidavit of 6 May 2014 together with all source documents used by the husband to compile that ledger;
j)That the husband pay the wife’s costs on an indemnity basis.

Context

The husband is nearly 47 years of age and the wife is 46 years of age.
The parties married in 1995 and that was the commencement of their cohabitation.
There is one child of the relationship L born in 1997. L is now 17 years of age and lives with the wife.
At cohabitation the wife brought into the relationship compensation verdict of about $155,000, part of which the husband asserts was used to assist her parents.
At the time of cohabitation the husband was a self-employed tradesman trading as Kallas Pty Ltd. He owned a property at Suburb N and a property at Suburb O.
The parties purchased initially a property at Suburb O with the purchase price comprising balance of the wife’s compensation payment and some savings provided by the husband with the remainder financed by way of mortgage advance.
From about April 2001 the husband’s main focus was property investment and he changed the name of his company to E Pty Ltd. He and the wife both drew income from the company which was applied to the family finances.
Over the years the parties and the company have bought, developed and sold off various properties.
The parties separated on 26 March 2011. At the time of separation the parties were residing at Property 2, I Street, Suburb C.
The husband moved out of that property and into the shed of the partially constructed property owned by the parties at B Street, Suburb C. The B Street property has a value asserted by the husband of about $1.9 million and is subject to an outstanding mortgage of $1.835 million. The husband’s accountant estimates that in reality the property has an equity of about $200,000.
The husband is a property investor by occupation, conducting his business through the corporate entity E Pty Ltd. The husband is the sole director and shareholder of the company. The company operates by purchasing residential land, obtaining development approval for multiple dwellings, constructing the project and then on-selling the completed residences. The net income for the company is dependent upon the completion and sale of assets constructed by it.
The company has recently contracted to build a commercial building at J Street, Suburb Q for P Pty Ltd.
Otherwise the company has recently purchased a development site at F Street, Suburb G.
The significant assets of the company, the husband asserts, are as follows:
a)NAB investment account  $   554,050
b)Unit AA, Property 1-2, I Street, Suburb C             $1,000,000
c)Car and office equipment  $       5,906
d)F Street, Suburb G       $1,150,000
The husband asserts that the company liabilities comprise the following:
a)Outstanding invoices Suburb Q project  $   383,180
b)Estimated cost to complete Suburb Q project                  $   125,000
c)CBA mortgage Suburb G property  $   980,000
d)Debt to ATO  $     62,894
e)Outstanding BAS payments  $     51,941
f)Estimated 2014 financial year tax liability            $   203,648
g)Interest on loan from A and R Kallas  $   115,000
h)Loan from Mr S Kallas   $   175,000
The husband submits that the company has substantial unpaid debts and other ongoing expenses that need to be paid.
The husband asserts that if injunctive orders were not in place the company would have sold Unit AA and applied the proceeds of sale to its debts and expenses.
The husband asserts that monthly mortgage payments in relation to the company property at Suburb G and the property occupied by him at B Street, total about $15,500. He says that as a consequence he has been unable to pay spouse maintenance payments since the 31 May 2014.
The husband expresses concern as to his ability to establish another property investment business in the event that the company is wound up.

The I Street development

In January 2005 the company purchased Property 1, I Street, Suburb C for $720,000 funded in part by a mortgage of $576,000. In March 2010 the husband purchased a neighbouring property at Property 2, I Street, Suburb C for $1,000,025 funded in part by a mortgage of $820,000.
The two properties were later developed into villas and townhouses. At the commencement of construction in August 2011, after separation, the wife and child moved to a rented property at Property 3, I Street, Suburb C with the husband paying rent and living expenses whilst they lived there. They later returned to live in Unit AA in the new development.
The husband asserts that in October 2011 he borrowed $175,000 from his brother Mr S Kallas. There is no loan agreement evidencing the advance. The funds were borrowed to purchase a drainage easement from a neighbouring property to the development and to fund some pre-commencement fees.
The husband further asserts that in November 2011 he borrowed $600,000 from his other brother and his brother’s wife. These funds were used he says to substantially discharge the mortgage secured over Property 1, I Street, Suburb C. A deed of loan was entered into between the husband and his brother and sister-in-law on 5 November 2011. Notwithstanding low interest rates then prevalent in the community the husband agreed to pay to his brother and sister-in-law 15 per cent interest. It appears that interest on this arrangement has been capitalising since the advance.
The development was completed in late 2012 and all units have been sold except for Unit AA in which the wife and the child now live.
The husband says that he paid his brother and sister-in-law back their advance of $600,000 leaving unpaid interest of about $115,000.
The husband further says that he has not repaid his brother Mr S Kallas the $175,000 borrowed from him.

The Suburb Q Contract

The company has virtually completed the final stages of building a commercial building at Suburb Q as referred to above that it contracted to build in July 2013.
The husband asserts that his assessment of building costs for the contract were $1.4 million with building costs payable on invoice to P Pty Ltd as progress payments. From the progress payments the husband through the company is responsible for paying for the project including materials and payment of subcontractors.
As at July 2014 the company had issued invoices for progress payments totalling $1,325,000 and the husband alleges that he has paid a total of $1,128,808 in expenses for the project. The husband further asserts that he has outstanding costs of the project which have been invoiced to him of $383,180 together with a further $125,000 he expects to be invoiced in the foreseeable future. Thus owing over $500,000 to contractors and suppliers.
The husband asserts that he will issue a final invoice by way of progress payment for about $75,000 and on that basis there will be a significant shortfall.
Somewhat curiously the husband asserts that when he tendered through the company for the Suburb Q project he accounted for a profit of only between $50,000 and $100,000 in order to secure the job. That level of profit on a $1.4 million contract seems inexplicable, the inference being that it would not even pay the husband for his own time in relation to the development.
During the course of submissions it was conceded that in effect the husband has “robbed Peter to pay Paul” in that income received by way of progress payments for the Suburb Q development have been diverted to pay his own private mortgage payments and mortgage payments and other expenses otherwise payable by the company and unrelated to the project.
Hence the significant shortfall that represents more than one third of the development project cost.
Not surprisingly the wife has significant reservations in relation to the husband’s accounting for income and expenditure in relation to this project.
The husband asserts significant amounts outstanding in relation to GST owing by the company, presumably arising from the Suburb Q contract. Whilst the company has received significant payments in relation to the contract the husband has elected non-payment of contractors as a means of funding otherwise the company’s outgoings. It is to be inferred that if the husband had paid contractors from income arising from the Suburb Q contract then input credits in relation to GST would all but offset the liability of the company for GST arising from income received.
This is a circumstance of the husband’s own making.
The company tax returns for the financial year ended 30 June 2013 have been filed, tax assessed and outstanding tax paid in November 2013. It is the husband’s expectation that income tax returns for the company for 2014 will not be lodged until May 2015 with income tax payable if any assessed thereafter.
It is also to be expected that having regard to the company’s parlous present income circumstances as assessed by the husband, application could be made to the ATO for a variation of the company’s provisional taxation liabilities.

The F Street development

On 13 May 2013 the company contracted to purchase a new development site at F Street, Suburb G for $1.225 million. The Suburb G purchase was to settle on 13 May 2014.
The husband paid 5 per cent deposit plus stamp duty and related expenses totalling about $139,000. The husband negotiated mortgage finance for the purchase price from the CBA.
As settlement of the purchase drew near the husband had no available cash funds to provide for the settlement other than moneys that he could divert from the Suburb Q project.

The husband filed an application in a case seeking release of funds to be able to facilitate a settlement of the purchase and meet other ongoing expenses. The hearing of the application in a case could not be facilitated before it was necessary for the husband to complete the purchase and the husband negotiated for a prepayment of monies relating to the Suburb Q project to facilitate a settlement. Settlement was effected on or about 27 May 2014.
On settlement the CBA advanced to the company $979,800 towards the purchase with the husband using about $190,000 of funds diverted from the Suburb Q project to complete the purchase.
The husband asserts that he is under pressure from many of the Suburb Q subcontractors and suppliers who are agitating for the payment of the invoices. The husband negotiated a further early payment in relation to Suburb Q to meet some of these expenses.
The husband asserts that he needs access to funds in the NAB investment account to pay outstanding expenses in relation to the Suburb Q project and meet ongoing mortgage payments in relation to the Suburb G development site and the property at B Street.
As at July 2014 the husband was facing difficulty in obtaining development approval for his proposed development of the Suburb G property. The property was purchased by him on the basis of a draft local environmental plan exhibited by the T Local Council that would have facilitated the Suburb G property being developed into a block of townhouses.
Since purchase of the Suburb G property the T Local Council has stopped accepting applications for development based on the proposed future local environmental plan. It is the husband’s expectation that he may need to make application to the Land and Environment Court to obtain approval in relation to the Suburb G development. In its present state the Suburb G property is only suitable for the development of a new home or duplex. The husband is reluctant to undertake this development on the basis that he would lose money.
The husband has entered into a fixed fee arrangement with an environmental planning expert in relation to his proposed Land and Environment Court application at a fee of $65,000 plus GST.
The Suburb G property is rented at $500 per week with the rent being applied to mortgage payments of $5169 per month. There is a considerable shortfall.

Orders of 28 May 2013

On 28 May 2013 orders were made as referred to above. Other orders were made in summary that provided for the husband to pay:
a)Outgoings in relation to Unit AA and the B Street property;
b)Health insurance for himself, the wife and the child;
c)Gas, electricity, phone and motor vehicle expenses for the wife;
d)Spousal maintenance for the wife in the sum of $400 per week.

Orders 31 July 2013

On 31 July 2013 further orders were made that provided for:
a)the company to apply the proceeds of sale of units [BB] and [CC] to:
i)Agents commission and legal fees on sale;
ii)Payment of outstanding invoices in relation to the development;
iii)Payment of amounts owing to the ATO by the husband and/or the company;
iv)Payment of stamp duty to the purchase of the [F Street] property;
v)Payment of $117,120 to the company superannuation fund;
b)Payment to the husband by way of partial property settlement of $400,000 and payment to the wife by way of partial property settlement of $100,000.
After completion of the sales and payment of funds as provided for in the orders there was a net sum of $547,368 ultimately deposited to the NAB.

The Husband’s Other Borrowings

In May 2013 the husband borrowed further sums from his brother and sister-in-law totalling $100,000.
Monies received by the husband by way of partial property settlement, he asserts, have been applied by him as follows:
a)In repayment of the $102,000 to his brother and sister-in-law;
b)$69,000 to his solicitors for legal fees;
c)$18,467 in spouse maintenance payments;
d)$4786 towards the wife’s gas, electricity, phone and motor vehicle expenses;
e)$4467 for child support including arrears;
f)$115,703 in mortgage payments for the B Street property, where he lives in the shed;
g)$17,524 on behalf of the company relating to DA approval for F Street;
h)A further payment of $10,000 from the company account for the mortgage on B Street.
The husband further asserts that he has paid general living expenses for himself and the child and other company expenses that total about $137,000 per annum.

The Asset Pool

The present matrimonial asset pool as best can be determined in the context of this interim application is as follows:
a)The jointly owned property at B Street, Suburb C having an estimated value of $1.9 million and subject to an outstanding mortgage of $1.835 million. Subsequent to purchase of this property by the parties the home on the property was demolished and the parties are in the process of constructing a new home on the property. The availability of funds for this ongoing development at best can best described as problematic;
b)Shareholdings held by the husband valued at about $5000;
c)Furniture, furnishings and effects owned by the parties, value not known;
d)The husband’s shareholding in E Pty Ltd, value not known. The underlying assets of the company have been discussed above;
e)The husband’s superannuation having a value of about $88,000;
f)The wife’s superannuation having a value of about $54,000.

The Accountant’s Report

The husband provides a report from his accountant dated 11 July 2014 in relation to the company generally.
The accountant estimates that the Suburb Q project will result in a loss of approximately $190,000 and notes that progress payments received from the project have been used to meet other commitments to the detriment of the creditors on this job being the contractors.
The accountant further notes that Units BB and CC in the I Street development were sold during the 2014 financial year generating cash flow. However $554,050 of the proceeds of sale have been placed in a trust account by court order and has not been available to pay creditors.
The accountant further reports that the company has funded $472,388 worth of works on the property owned by the parties at B Street, Suburb C, being the property occupied by the husband. None of these costs have been paid by the parties to the company and the company has carried the costs as work in progress.
The accountant reports that there is $409,250 owing to trade creditors for both the Suburb Q and Suburb G projects up to 30 June 2014 and thereafter. The accountant warns that if funds are not released soon and if the company does not sell Unit AA or obtain external finance there is a risk of the company being placed in external administration.
The accountant sounds a significant warning that the company cannot continue to support the parties’ “huge mortgages, living expenses, legal costs, pay creditors, overheads and so on”.
The accountant provides three alternatives for consideration:
a)Firstly that cash held in trust be released to pay the ATO $62,346, creditors as at 30 June 2014 $260,077, BAS for the June quarter 2014 $51,941, partial settlement to the wife for legal costs and living expenses $50,000, the balance of $129,686 to the company to meet creditors and overheads.
The accountant warns that this option is a “Band-Aid job” and does not solve the financial position of the company.
The accountant recommends that Unit AA be sold, and that the company commence development of the site at Suburb G.
This option sees the wife and child dislocated from their residence and is problematic as to the Suburb G site having regard to the husband’s own evidence as to the difficulties facing its development.
b)Secondly the accountant recommends a sale of Unit AA with estimated net proceeds of sale before income tax of $907,280. The accountant suggests that a partial settlement to the wife of $200,000 be deposited in a trust account to pay for her relocation and rent pending final settlement and pay her $600 per week for living expenses and that the balance of about $707,280 be paid to the company to meet its commitments.
This option again sees the wife and child dislocated from their living circumstances, does not deal with the issue of the ongoing drain on company finances as a consequence of the parties’ private borrowings in relation to the B Street property and the ongoing drain on the company finances as a consequence of the Suburb G mortgage.
c)Thirdly the accountant recommends the sale of the Suburb G property that is estimated to realise an amount of about $200,000. However the accountant warns that a sale of the property is a step toward the winding up of the company as the company has always relied upon its own developments to survive and to provide for the parties. The accountant expresses the opinion that if Suburb G is developed it would be the only way for the company to continue trading.
Regrettably the husband’s own evidence casts serious doubt on the ability of the company to develop Suburb G in a timely fashion so as to emerge from its current financial difficulties. It appears on the husband’s evidence that the development potential of the Suburb G property is at present simply a matter of conjecture at some indeterminate future time. Meanwhile there is a significant obligation for ongoing mortgage expenses and property outgoings.
The accountant otherwise notes:
Outside the company there is the asset of [B Street, Suburb C] owned by a [first initial of husband and wife’s given names Kallas]. You have indicated that the net proceeds of this property if sold would be in the range of $100,000-$150,000. A sale of this asset is of no benefit to the company’s financial position. The only benefit would be a saving of $127,000 a year in mortgage payments currently paid by the company.
The trial balance for the company as at 30 June 2014 reveals that the husband and wife are indebted to the company by way of loan account as at 30 June 2014 in the sum of $325,622. It is to be inferred that this sum represents accumulated mortgage payments made by the company on the parties’ behalf in relation to the B Street property and other drawings made by the husband.
The trial balance further reveals that the company has outstanding work in progress of $568,174 but of this sum $472,388 is work done by the company on the parties’ property at B Street and owed by the parties to the company. There are no assets in the parties’ name that can be called upon to meet the work in progress owed to the company as the B Street property has, at least on the accountant’s report, equity of about $200,000 only.
It is to be expected that the loan owing by the parties to the company of $325,622 will have adverse income tax ramifications in the absence of some agreement to repay those monies to the company. The prospect of this loan ever being recovered by the company is on current indications nil.
The inescapable conclusion on the husband’s own evidence is that he has locked the company into an untenable financial position.
There is no short-term prospect of the Suburb G property being able to be developed in the absence of appropriate planning amendments and approval from the local council. Indeed the husband himself foreshadows that an application to the Land and Environment Court may well be necessary.
Any funds released to the parties from the company’s assets including monies presently held in trust or from the proceeds of sale of Unit AA will have income tax ramifications for both parties. The extent of that income tax liability is not known.
To date it appears that both parties have expended significant sums on legal fees in respect of these proceedings and the various interlocutory applications that have been brought before the court.
The wife for her part has serious reservations as to the truthfulness of the husband’s financial disclosure particularly in relation to the company and its activities over the last three or four years. The wife seeks the appointment of a forensic expert as it were to conduct an audit in relation to the company affairs.
It is common ground that the parties have retained Mr D as the single expert to undertake a valuation of the husband’s interest in E Pty Ltd.
Clearly the wife has significant reservations as to the husband’s disposition of further funds that may be made available to the company. However it is also clear that funds need to be released for the company to meet at least pressing debts that can be objectively ascertained.
The parties have appointed a single expert to undertake a valuation exercise in relation to the husband’s shareholding in the company and there is no practical reason why if funds are released that payments could not be made on the recommendation of that single expert so as to avoid at least in the interim an application being made by a creditor for the winding up of the company or the appointment of a receiver.
On present indications the appointment of a receiver to manage the affairs of the company is indicated. However there is no such application before the court.
Yet it is clear that actions of the husband in the conduct of the company over the last few years have led to the current serious financial position of the company.
It may be that ultimately an order will be necessary for the sale of Unit AA to meet the further obligations of the company once those obligations have been objectively determined. In the interim it is appropriate that the disposition of company funds be overseen by an independent third party.
In the short term immediate cash funds are available to the company from the NAB trust account. Having regard to the ongoing reservations of the wife as to the husband’s voracity in relation to the company’s dealings and in circumstances where the court is unable to make determinations of fact on disputed matters it would be appropriate that the appointed single expert monitor the disposition of funds on behalf of the company and payments be made only upon his recommendation including payment of his fees.
Otherwise it is clear that firstly the company needs to rationalise its position in relation to the Suburb G property and facilitate a prompt sale of that property so as to alleviate its ongoing mortgage commitments in circumstances where any prospective development of that property is at best problematic.
It is also clear that the parties can no longer afford to retain the property at B Street. Mortgage payments in relation to that property have been a significant drain on company revenue in circumstances where those payments have been debited to the parties’ loan account and the parties themselves may well suffer adverse taxation implications as a consequence.
Further significant sums have been expended by the company from the realisation of the I Street properties that at present is booked as work in progress in the company accounts but in reality is a debt owed by the parties to the company. A debt that the parties have no funds to meet.
In such circumstances it is appropriate that the B Street property be sold.
Once the interim measures proposed are implemented the company may well have remaining as its only significant asset the unencumbered Unit AA having a value of about $1 million and some outstanding creditors. The difficulty confronting the parties is that any distribution of company funds to the parties by court order will give rise to income tax liabilities for each of them that are as yet unknown.
In reality the parties’ asset pool is ever diminishing.
For the reasons set out above the court is not disposed at this interim juncture to require a realisation by way of sale of Unit AA.
However the parties may apply as they are advised once the orders foreshadowed above have been implemented or in other circumstances of urgency.
Neither party has adduced evidence as to any readily available funds other than capital assets of the company that are available for immediate distribution by way of interim property settlement so as to meet various claims as to legal fees or other debts of each of the parties. In that circumstance the court is not mindful to make orders in that regard as sought by each of the parties.
Otherwise much of the information sought by the wife in relation to the affairs of the company is available by way of appropriate subpoena and leave will be granted for both parties to issue such further subpoena as they may be advised.
Further the wife is entitled to a response from the husband in relation to a request for information administered to the husband’s accountant by the wife’s solicitors under cover of an email dated 17 March 2014. An order to this effect will be made.
For the above reasons orders will be made as set out at the forefront of this judgment.

I certify that the preceding ninety-four (94) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Foster delivered on 24 September 2014.

Associate:

Date: 24 September 2014

[2014] FamCA 815

24 September 2014

Key Legal Topics

Areas of Law

Family Law

Civil Procedure

Legal Concepts

Costs

Discovery

Injunction

Remedies

Standing