KELBY & KELBY

[2016] FamCA 698

FAMILY COURT OF AUSTRALIA

KELBY & KELBY [2016] FamCA 698

FAMILY LAW – PROPERTY – INTERIM PROPERTY PROCEEDINGS –Where the wife seeks an interim property settlement and spousal maintenance in the alternative – Where the amount sought falls within the wife’s expectation on a final distribution – Orders made – Spousal maintenance – Where the wife does not meet the threshold test taking into account the interim property settlement orders made – Application dismissed.

FAMILY LAW – PROPERTY – INTERIM PROPERTY PROCEEDINGS – Restraining orders – Where the wife sought that the husband inform her before dealing with a property – Orders made –Where the wife sought that the husband be restrained from dealing with the assets of the company – Where there was no evidentiary basis per Waugh & Waugh (1999) 27 Fam LR 63 for making such orders.

FAMILY LAW – PROPERTY – INTERIM PROPERTY PROCEEDINGS – Where the wife sought that the husband produce documents relating to the company – Where the husband has produced the records of the company for inspection – Application dismissed.

Family Law Act 1975 (Cth)
Family Law Rules 2004 (Cth) r 15.49

Waugh & Waugh (1999) 27 Fam LR 63

APPLICANT: Ms Kelby

RESPONDENT: Mr Kelby

FILE NUMBER: SYC 8071 of 2014

DATE DELIVERED: 24 August 2016

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Rees J

HEARING DATE: 22 August 2016

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Fernon

SOLICITOR FOR THE APPLICANT: Yates Beaggi Lawyers

SOLICITOR FOR THE RESPONDENT: Mcgirr Lawyers

Orders

IT IS ORDERED

1. That within twenty-eight (28) days of the date of these Orders, the husband pay to the wife, by way of interim property settlement, the sum of $250,000.

2. In default of payment of the sum referred to in Order 1 by the due date, the husband do all acts and things and sign all documents required to effect the sale of the property at B Street, Suburb C (“Property D”), to pay the costs of the real estate agent and the legal costs of sale and to pay one half of the balance remaining to the wife by way of interim property settlement.

3. That the wife’s application for spousal maintenance is dismissed.

4. That, in the event the husband proposes to dispose of, encumber or deal with his interest in the property at E Street, Suburb F, he shall give the wife no less than fourteen (14) days’ notice in writing of his intentions.

5. That the wife’s application for restraining orders contained in Orders 4 and 5 of the Amended Application in a Case filed 14 July 2016 is dismissed.

6. That the wife’s application for the provision of documents contained in Order 6 of the Amended Application in a Case filed 14 July 2016 is dismissed.

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

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

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

Rules 2004 (Cth).

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYC 8071 of 2014

Ms Kelby

Applicant

and

Mr Kelby

Respondent

REASONS FOR JUDGMENT

1. Ms Kelby (“the wife”) and Mr Kelby (“the husband”) commenced cohabitation in 1973 and married in 1975. They have three adult children. They separated in October 1999.

2. At the time of separation, the parties were the owners of a property at G Street, Suburb H (“Property I”) which is a house on 10.66 hectares of land. The wife and the children remained at Property I. The wife still lives there and wishes to retain Property I as part of her property settlement.

3. In 1979, a company, J Pty Ltd (“JPL”) was incorporated, the husband owning 75 per cent of the issued shares, and the wife the remaining 25 percent. The husband and the wife are both named as directors of the company.

4. The wife deposed that she was involved with the day to day running of the business until early to mid-2000. The husband deposed that she was not involved in the business.

5. JPL and Property I were the substantial assets of the parties at separation. A single expert has been instructed to value the shares in JPL.

6. After separation, the husband continued to operate the business through JPL, and the wife occupied Property I.

7. After separation, using funds originally borrowed from his parents, and then a subsequent inheritance, the husband acquired further assets, including a property at Property D, a property at Suburb F and investments. On behalf of the husband, it was submitted that the property of the husband, acquired after separation, was not part of the asset pool for distribution between the parties, but should be regarded as a financial resource. I reject that submission.

8. There is some dispute about the level of financial support paid to the wife after separation. The husband asserts that he continued to provide support until 2006. The wife asserted that the support stopped when their youngest child finished school.

9. The wife trained as a health professional. After separation, she refreshed her qualifications and from 2003 she was employed in various capacities.

10. In 2013, the wife was injured in an accident where she was hit by trolleys in a car park. As a result of her injuries, she eventually was unable to continue working. The wife last worked in 2014. She is aged 62 years and in receipt of a Centrelink pension.

11. By an Application in a Case, the wife seeks orders for spousal maintenance, or in the alternate, interim property settlement, and an order restraining the husband from disposing of a property owned by him at Suburb F. She also seeks orders restraining the husband in his capacity as shareholder and director of JPL from dealing with the assets of the business and orders for the production of documents.

12. By way of interim property settlement, she sought an order for the sale of a property owned by the husband at Property D and agreed to be valued at $500,000, and the payment of half of the net proceeds of sale to her.

THE ASSET POOL

1. For the purpose of this application, the wife asserted (and the husband did not dispute) that the asset pool (omitting minor chattels) was:

Property I property (jointly owned)	14.      $2,950,000
Wife’s bank accounts	$6,161
Wife’s loan to Mr and Ms K	$23,000
Wife’s superannuation	$273,132
Suburb F property (owned by husband)	$1,500,000
Property D property (owned by husband)	$500,000
JPL (husband’s estimate of the value of 75 per cent is $525,572.50)	$700,763
Mortgage loan (owned by husband)	$850,000
Husband’s bank accounts	$11,608
Debt owned by JPL (included in the husband’s financial statement as an asset separate from the value of JPL)	$419,929
Husband’s superannuation	$193,988
Total	$7,428,581

1. Each party has superannuation entitlements. The wife has $273,132 and the husband $193,988. The wife does not work and, as she is aged 62 years, she is entitled to her superannuation entitlement. The husband is also aged 62 years. It was not asserted that he is presently entitled to his superannuation but he deposed that he is unable to work for health reasons so it seems that he will be so entitled, by the time this matter is resolved, and both their entitlements have been included as assets.

THE COMPETING APPLICATIONS FOR PROPERTY SETTLEMENT

1. The wife seeks an order that she receive Property I unencumbered and a payment from the husband of one million dollars, as well as half the net proceeds of sale of JPL after any encumbrances are paid. On the asset pool as presently understood, that would result in a division of about 58 per cent in favour of the wife and 42 per cent in favour of the husband (depending on the net value of JPL).

2. The husband seeks an order that the wife receive Property I, subject to her paying him an amount equivalent to 65 per cent of its value. On the values adopted for the present application, that would involve a payment to him of $1,917,500. The husband further seeks that he receive JPL.

3. Overall, the husband’s application would result in a division of the assets as to about 18 percent to the wife and 82 per cent to the husband.

4. Both the wife and the husband may have somewhat unreal expectations.

INTERIM PROPERTY SETTLEMENT

1. I propose to consider, firstly, the wife’s application for interim property settlement. The authorities are clear and do not need to be exhaustively restated. If the wife seeks an order that would fall within her expectation on a final distribution, then she ought to be entitled to receive her property and do with it as she pleases. She should also have funds to pursue her case and to engage appropriate legal representation.

2. In the present case, the wife’s application is somewhat confused. In her Amended Application in a Case filed on 14 July 2016, she seeks orders for spousal maintenance in Orders 7 and 8 of the Application in a Case. In those orders she asks the Court to order that Property D be sold and that half of the net proceeds of sale be paid to her.

3. Order 6A states:

   The Applicant wife may appoint an accountant to undertake an investigation of the Company’s business and financial affairs, including its financial performance, payments, assets, obligations and its financial records since 1 July 2000 to date and to prepare an expert report in respect of such investigation for use in these proceedings.

4. Order 6A is not an application. It appears to be a notation of the wife’s intention. There is no application pursuant to Rule 15.49 for the appointment of an adversarial expert. In the present case, where the report of the single expert is not yet available, it is difficult to see how the pre-conditions in Rule 15.49(2) for such an application could be satisfied.

5. In Order 8A the wife seeks:

   In addition to the payment to the Applicant Wife pursuant to prayer 8, the Respondent Husband pay to the Applicant Wife by way of spousal maintenance the sum of $75,000 (excluding the sum of $2,000 paid to the Applicant Wife within 7 days of these Orders) in respect of the accountant to be appointed pursuant to prayer 6A.

6. In oral submissions, counsel for the wife appeared to couch the applications in the alternative and the legal representative for the husband specifically addressed the application for interim property settlement.

7. I propose to consider the applications for the sale of Property D and the payment to the wife of half the net proceeds of sale, together with the application for the payment of a further sum of $75,000, as firstly, an application for interim property settlement.

8. Half of the net proceeds of sale of Property D will be something less than $250,000 depending on the costs of sale.

9. If, at trial, the wife is found to have an entitlement which is less than the combined value of Property I and half of Property D, then the Court can have recourse to the value of Property I to recompense the husband. Even on the husband’s case, the wife is entitled to in excess of one million dollars (35 per cent) of the value of Property I.

10. The husband in response to the Application in a Case, proposed to borrow $250,000 against Property I and to pay $100,000 to the wife, $100,000 to the husband and $50,000 into what I infer to be an offset account, against the interest. He was not prepared to borrow against Property D.

11. There is no evidence that such a loan will be forthcoming. No loan application, let alone loan approval, is annexed to the husband’s affidavit. An order in the terms proposed by the husband may be of no effect if no lending institution will advance the money.

12. On behalf of the husband it was submitted that the Court could not order the sale of Property D because the property is subject to a lease. The husband receives rent of $375 per week for Property D. However, no lease is in evidence. There is no evidence of the term of any lease or whether the property could be sold subject to such a lease. It was incumbent upon the husband to provide evidence if it is his case that Property D is not capable of sale.

13. In any event, $100,000 is not sufficient to pay the wife’s outstanding legal costs and secure her legal representation for the balance of the proceedings.

14. If the husband does not wish to sell Property D, he can borrow the required sum against either Property D or Suburb F and he will be given the opportunity to do so.

SPOUSAL MAINTENANCE

1. The wife sought payments in six different categories.

2. Firstly, she sought periodic support for her day to day living expenses.

3. Next, she sought a lump sum payment of $83,776 to pay for necessary repairs to Property I.

4. She sought payment of outstanding council rates of $1,140.30 but in the course of the hearing it was accepted that the rates had been paid by the husband.

5. She sought payment of $4,236.26, being the fees due to the single expert conducting a valuation of JPL. The husband and the wife were to share these expenses, and again it was accepted that those fees had been paid by the husband.

6. She sought $100,000 to pay legal expenses already incurred.

7. She foreshadowed that she would instruct an accountant to conduct an investigation of the affairs of JPL at a cost estimated in submissions to be $80,000.

8. It was not seriously argued on behalf of the husband that the wife has any capacity to support herself from employment.

9. I accept that she cannot.

10. However, the husband argued that the wife could call for her superannuation entitlements and use that sum of $273,132 to support herself. Having regard to the orders which are proposed in relation to interim property settlement, she will also have available to her a further sum of about $250,000.

11. Thus the wife will have cash available to her in excess of $500,000 and she cannot meet the threshold test of being unable to support herself.

12. How the wife chooses to use these funds is entirely a matter for her but she should understand that if she chooses to engage shadow or adversarial accountants to investigate the affairs of JPL, then she does so using her own money.

RESTRAINING ORDERS

1. The restraining orders sought by the wife fall into two categories. Firstly she asks the Court to restrain the husband from dealing with Suburb F other than with her consent. The wife is aware that the husband has entered into a Deed of Option in relation to Suburb F.

2. No submissions were directed to this issue on behalf of the husband. 

3. It is reasonable that the wife be informed if the husband proposes to deal with Suburb F and orders will require that she be given notice.

4. Secondly, the wife seeks to restrain the husband from selling, disposing of, encumbering or otherwise dealing with the assets of JPL. In addition, she seeks an order that would require her to approve a range of activities including (but not limited to) the adoption of a budget, acquisition of new business, and approving financial statements and transactions involving expenditure in excess of $5,000.

5. The wife has had no direct association with JPL since 2000. She has asked, through her lawyers, for the records of JPL from 2000 to date to be made available for inspection. The husband’s lawyers told the Court that the records of the company since 2008 are available and have been deposited with the company’s accountant so that they are available for inspection by both parties. The wife’s lawyers have not inspected the documents.

6. There is no evidence that the husband has, either in the past or at the present time, dealt with the assets of JPL contrary to his obligations as a director or other than in the interests of the company.

   As the Full Court said in Waugh & Waugh (1999) 27 Fam LR 63 at 78, there needed to be

   …some clear evidence given by the wife (even if denied by the husband) of some disposition of property by the husband, or other conduct by him from which an inference might reasonably be drawn that he had embarked, or was about to embark, upon a course of action which was designed to or, irrespective of design, would be likely to defeat any anticipated order in the substantive proceedings in the wife’s favour…

7. No such evidence has been adduced.

8. There is no evidentiary basis for making the order sought by the wife.

PRODUCTION OF DOCUMENTS

1. In Order 6 of the Amended Application in a Case filed 14 July 2016, the wife seeks:

   That within 48 hours of order the Company through its Director, [Mr Kelby], make available to the co-director [Ms Kelby] all books and records as defined in section 9 of the Corporations Act 2001, including without limitation all primary and source records for receipts and payments of the Company from 1 July 2000 to date.

2. As is earlier recorded the husband has produced for inspection the records of JPL from 2008 to date but the wife has not inspected those documents. The husband, through his lawyers, says that the company’s records for the period from 2000 to 2007 have been destroyed.

3. The wife has been a director of JPL from its incorporation. At no time before the institution of these proceedings in 2014 did she ask to inspect the company’s financial records or ask for any information about the company’s performance.

4. It is not surprising in those circumstances that the company has not retained its records beyond the period of statutory requirement.

5. If the wife has queries, after the documents, which include the company’s financial statements and taxation returns from 2008 to date, have been inspected, she can direct those queries to the husband’s lawyers.  

I certify that the preceding fifty-seven (57) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Rees delivered on 24 August 2016.

Associate:

Date: 24/08/2016