KANE & KANE

[2015] FamCA 652

FAMILY COURT OF AUSTRALIA

KANE & KANE [2015] FamCA 652

FAMILY LAW – PROPERTY ‑ INJUNCTION – INTERLOCUTORY ‑ Application to restrain husband from the disposition of the assets and income of a self-managed superannuation fund and its trustee company – Where the husband had transferred substantial and valuable assets from the company to a third party without notice to the wife – Where the value of the superannuation fund had rapidly diminished throughout the course of the proceedings – Where the orders sought by the wife restraining the husband from the further disposition of assets were made, subject to the husband’s ability to draw a weekly allowance from the superannuation fund.

Family Law Act 1975 (Cth)

APPLICANT: Ms Kane

RESPONDENT: Mr Kane

FILE NUMBER: SYC 1097 of 2010

DATE DELIVERED: 7 August 2015

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Rees J

HEARING DATE: 30 July 2015

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Kearney SC

SOLICITORS FOR THE APPLICANT: Gayle Meredith & Associates

SOLICITORS FOR THE RESPONDENT: Stacks The Law Firm

Orders

IT IS ORDERED BY CONSENT

1. That pending further order and save as provided by these Orders, the husband be and hereby is restrained from by himself/herself, his/her servants and/or agents doing and/or causing or permitting to be done, any of the following:

   1.2alienating or further encumbering any of the shares in K Pty Ltd (“the Company”) and/or R Investments (“the Fund”) and/or in which the Company and/or the Fund have any interest or any entitlement;

   1.3issuing any new shares or otherwise altering the shareholding (including any rights and entitlements attaching to or any other incident of the same) or interests of the parties in the Company and/or the Fund;

   1.4removing, replacing or appointing any director or other officeholder of the Company;

   1.5removing, replacing or appointing any appointor, trustee or beneficiary of the Fund;

2. That pending further order and save as provided by these Orders, the husband be and hereby is restrained from by himself/herself, his/her servants and/or agents doing and/or causing or permitting any and all interest, entitlement and benefit of the husband, the Company and/or the Fund pursuant to:

   2.1Deed of Novation entered between the Company, D Pty Limited and E Pty Ltd dated 17 July 2015;  and

   2.2Share Sale and Purchase Agreement entered between the Company and E Pty Ltd dated 17 July 2015;

   to be paid and/or applied other than to a controlled monies account in the names of the solicitor for the wife and the solicitor for the husband.

3. That the husband forthwith:

   3.1comply with paragraph 2 of the Orders of 1 June 2015; and

   3.2do all things, including providing all documents necessary, to permit F valuers to prepare a valuation of the interests of the parties (or either of them) in each entity in respect of which there is issue, including but not limited to each of the Company, the Fund, D Pty Limited and D Pty Limited.”

4. That the costs of the proceedings are reserved.

IT IS ORDERED

1. That pending further order the husband be permitted to draw from the Fund not more than $1,200 per week.

2. That pending further order, and subject to Order 6, the husband be restrained, himself and his servants and/or agents from causing or permitting to be done any of the following:

   (a)transferring, encumbering or dealing in any way with the assets, income or undertakings of the Company both in its own right and as trustee of the Fund; and

   (b)exercising any power of appointment or distributing of capital or income, or any power of revocation, variation or re-settlement in respect of the Company and/or the Fund.

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

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYC 1097  of 2010

Ms Kane

Applicant

And

Mr Kane

Respondent

REASONS FOR JUDGMENT

The Proceedings

1. The substantive proceedings for property settlement between Ms Kane (“the wife”) and Mr Kane (“the husband”) are listed for Callover on 10 August 2015. A substantial dispute exists between the parties, for the purpose of the proceedings before the Court today, about two assets. The first is a self-managed superannuation fund (“the Fund”) and the second is the trustee of the Fund which is K Pty Ltd (“the Company”). 

2. The Company, in addition to being trustee of the Fund, is also a vehicle through which the husband conducts commercial transactions.

3. The wife asserts that, in the course of the proceedings, the value of the Fund appears to have diminished from some $2.84 million in 2011, to approximately $946,362 according to the husband in a Joint Balance Sheet filed with the Court in June 2014, to $721,548 according to the husband’s Financial Statement sworn 2 December 2014 and, according to the solicitor for the husband today, to $533,075. There is no evidence before the Court in relation to the value asserted for the Fund at the hearing.

4. In October 2012 the husband, through the Company, purchased shares in D Pty Limited (“D”) for $392,000. The husband, through the Company, also lent D a further sum of $713,600.

5. It is asserted on behalf of the wife that directions made by the Court in June and October 2014, and in February and June 2015, for the provision of documents to enable this matter to proceed have not been complied with. The husband disputes that assertion. It is not possible in interim proceedings to determine whether the directions, which primarily concerned the provision by the husband of financial information relating to the Fund and to the Company were complied with. This will be a matter to be explored at the hearing.

6. At all times the husband and those advising him have been aware that the financial history of the Fund and of the Company and the value of those entities were a matter of contention in the proceedings.

7. On 17 July 2015, without notice to the wife, the husband entered into an agreement whereby he agreed to sell the shares in D for $392,000; the consideration to be paid initially as to $1,000 and the balance to be paid within 24 months of the date of the agreement. The purchaser of the shares also agreed to repay the debt owed by D to the husband, through the Company, of $713,600 within 24 months. There is no evidence of any security provided either for the payment of the purchase price of the shares or the repayment of the loan. Thus the husband, on the evidence before me, has transferred assets to the value of $1,105,600 to a third party without security for the remaining consideration.

8. The transaction on 17 July 2015 was disclosed to the wife in a letter dated 20 July 2015 sent by email from the husband’s solicitors to the wife’s solicitors, advising, inter alia:

   Our client instructs us that he has entered into an agreement to sell his interest in [D].

   We will provide you with details of the contract later this week.  As a result of the contract, our client has resigned his position as Director and Secretary. Given this development there will be no need now to undertake any further valuations of the companies [D].

9. The letter dated 20 July 2015 did not disclose either the identity of the purchaser or the amount of consideration for the proposed sale. No information was given to the wife about the manner in which the loan to D had been dealt with.  

10. The letter did not inform the wife that the transaction had been completed. Accordingly the wife sought orders by way of injunction to restrain the husband from dealing with the relevant interests. She did not become aware of the fact that the transaction had already occurred on 17 July 2015 until the husband filed his affidavit in response to her Application in a Case. Neither was the wife advised that the consideration for the transaction was not to be paid for two years or that there was no security for the eventual payment.

11. When the matter came before the Court on short notice on 30 July 2015, a Minute of Orders was provided by counsel for the wife which sought, in substance, that pending further order the husband was restrained from dealing with assets of the Fund or the Company, and that any monies received by the husband by virtue of the agreement entered into on 17 July 2015 was to be placed into a controlled money account. 

12. After some discussions between counsel for the wife and the solicitor for the husband, agreement was reached in relation to all but two aspects of the wife’s application.

13. The orders which remained in dispute were orders which restrained the husband pending further order from:

    1.1transferring, encumbering or dealing in any way with the assets, income or undertakings of [the Company] both in its own right and as trustee of [the Fund]”); and

    1.6exercising any power of appointment or distributing of capital or income or any power of revocation, variation or re-settlement in respect of the Company and/or the Fund.

14. The position of counsel for the wife was that the husband should be restrained, in the terms set out above, having regard to the fact that he acted without notice to the wife in relation to the disposition of assets, that he acted in such a manner that the payment of the consideration is delayed and unsecured, and having regard to the diminution of the value of the Fund, it being common ground that the Fund had significantly diminished in value between December 2014 and the date of hearing.

15. The solicitor for the husband submitted that, if orders 1.1 and 1.6 set out above were made, the husband would have no ability to distribute any income to himself for his day-to-day living expenses and that the orders should only be made on the basis that the husband is provided with income. The solicitor for the husband referred the Court to an undertaking which the husband had given on 3 December 2014 to the effect that he would not draw an income from the Fund of more than $2,500 per week. 

16. There was no evidence before the Court on behalf of the husband of the value of the Fund, other than that advised by the solicitor for the husband. The information that the value of the Fund had diminished, it was asserted by $400,000, was only made known to the legal representatives for the wife in the course of submissions. There was no evidence before the Court about the income which is earned by the Fund from its investments and therefore it is not possible to know to what extent the husband, by drawing down on the Fund to pay his living expenses, is or has been, drawing upon capital rather than upon income.

17. In my view, it is reasonable for the husband to have money to pay his weekly expenses. The solicitor for the husband was asked to address the Court in relation to the reasonable amount required by the husband. The only evidence before the Court in relation to his financial position was that which is contained in his Financial Statement dated 2 December 2014. In that statement the husband deposed that the gross value of the Fund was $721,548. At Part M of the Financial Statement the husband deposed that he had disposed of $645,924 in payments to his solicitor and to his children, all of those monies coming from the sale of shares owned by the Fund.

18. There was no evidence before the Court of the current value of the assets of the Fund. The solicitor for the husband asserted, but did not prove, that the value of the Fund had diminished because the value of the shares had diminished. That issue, too, will no doubt be explored at the final hearing of the matter when the appropriate documentary evidence should be available.

19. The Financial Statement disclosed that the husband paid $265 per week in mortgage payments and $23 in rates and levies.

20. At Part N of the Financial Statement the husband’s expenses included, inter  alia:

($)
petrol	180
car maintenance	152
entertainment and hobbies	300
holidays	200
gifts	200
financial subscriptions	64
health insurance for the children	67
cigarettes	105
miscellaneous costs alcohol	350 70
Total	$1,688

1. The total of the husband’s Part N expenses was $2,418.

2. In circumstances where the Fund is rapidly diminishing and where the husband has disposed of substantial and valuable assets without notice to the wife it is not reasonable for him to maintain the style of living to which he claims to be accustomed. I propose that the husband be allowed the sum of $1,200 per week to pay his basic expenses pending the determination by the Court of the competing applications for property settlement.

3. Therefore I propose to make orders 1.1 and 1.6 as sought by the wife subject to allowing the husband to draw not more than $1,200 per week from the Fund.

4. Otherwise it is appropriate to make the orders sought by the wife restraining the husband from dealing further with the funds in dispute.

I certify that the preceding twenty-four (24) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Rees delivered on 7 August 2015.

Associate: 

Date: 7/8/2015