Kosign and Kosign

[2010] FamCA 814

FAMILY COURT OF AUSTRALIA

KOSIGN & KOSIGN [2010] FamCA 814

FAMILY LAW – COSTS – legal fees
FAMILY LAW – PROPERTY – exclusive occupation

Family Law Act1975 (Cth)

APPLICANT: Ms Kosign

RESPONDENT: Mr Kosign

FILE NUMBER: SYC 3295 of 2010

DATE DELIVERED: 13 August 2010

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Loughnan J

HEARING DATE: 13 August 2010

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Kearney

SOLICITOR FOR THE APPLICANT: Broun Abrahams Burreket

COUNSEL FOR THE RESPONDENT: Mr Batey

SOLICITOR FOR THE RESPONDENT: Turner Freeman Lawyers

Orders

1. That until further order the husband pay into the trust account of Broun Abrahams Burreket, Solicitors, an amount equal to any monies he henceforth pays to his solicitors or any monies he pays for his legal fees from whatever source and that is to occur simultaneously upon the payment being made to his solicitors or for his legal fees.  The character of those payments to the solicitors for the wife is a matter for the Trial Judge at the final hearing of the property proceedings.

2. That the parties do all things and sign all documents to cause any monies held on behalf of the parties in the trust account of Broun Abrahams Burreket, Solicitors, to be forthwith paid to the wife.

3. The injunctions contained in Order 2 of the orders made on 13 July 2010 continue until further order.

4. The order made in terms of Order 6(2A) made on 13 July 2010 continue until further order.

5. Orders are made in terms of paragraphs 15 and 16 of the Interim Orders sought in the wife’s Initiating Application filed 26 May 2010 as set out hereunder but changing 24 hours to 7 days in paragraph 16:

   “15.That pending further Order, the wife to continue to reside at the former matrimonial home (“the [H] property”), being […, H], in the State of New South Wales, to the exclusion of the husband.

   16.That within 7 days of the date these Orders are made, the husband shall return to the wife, or as she directs, all keys to the [H] property he has in his possession or control, including but not limited to house key, post box key and gate key.”

6. Leave to either party to restore the matter to the list on giving 7 days’ notice to the Court and to the other party.

IT IS NOTED that publication of this judgment under the pseudonym Kosign & Kosign is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER:  SYC 3295 of 2010

MS KOSIGN

Applicant

And

MR KOSIGN

Respondent

REASONS FOR JUDGMENT

1. These are proceedings in the context of proceedings for settlement of property.  The matter came before me on 13 July 2010. There was not time to determine all issues, some orders were made and the matter was adjourned to today’s date for hearing. The parties were both present and represented. The matter was listed at 2.15pm.  I heard submissions from the parties’ counsel and at about 4 o’clock I indicated that I would give reasons this afternoon. I excused the parties and their legal representatives from attendance. It is now a bit after 5 o’clock. The parties’ counsel are not here. The husband is present and the wife is here with her solicitor.

2. The proceedings involve a wife and husband who are about 44 and 47 years of age, respectively. They started to live together in 2002 and were married in that year. They separated in November of 2009.  They have one child, T, who is six years of age. There are three other children of the wife who lived with the parties: N, D and J. They are 18, 16, and 14 years of age respectively.  The husband has a daughter, S, who is about 20 years of age.

3. The wife seeks orders in accordance with annexure B to her Initiating Application filed 26 May 2010. She seeks injunctions in relation to a company, M Proprietary Limited; injunctions in relation to payments made by M Proprietary Limited;  injunctions to prevent the husband receiving payments without the wife’s consent;  disclosure;  spousal maintenance at $1,138 a week, paid monthly, in addition to payment of private health insurance and medical bills; outgoings on the former matrimonial home at H, including mortgage arrears, mortgage payments; mortgage payments and arrears on a property in South Africa; and repatriation to her of all rent paid in relation to that property.

4. Relevantly, she also seeks a child support departure at $492 per week, payable monthly, for the child T, together with all educational expenses at her private school, including incidentals, extracurricular activity costs, additional tuition fees, medical insurance, and all medical expenses. The wife seeks that those payments would account for 100 per cent of the husband’s assessed liability.

5. In relation to N, D and J, the wife seeks stepchild maintenance of $1,930 a week.  That is $689 for N, $643 to D, and $598 for J.  In addition she seeks that the husband pay all medical insurance and all medical costs.  The wife seeks a payment of $134,348 within seven days, with that payment to be categorised by the trial judge.  In lieu of that the wife seeks a dollar for dollar order in relation to her costs. That is to say, on the payment of any moneys by the husband to his solicitors from whatever source, that he be required to cause a payment in a similar amount to the wife’s solicitors. Again, the wife seeks that those payments be categorised by the trial judge. The wife seeks an order against herself that she be required to account for the moneys paid to her.  She seeks exclusive occupation of the H property and that the husband deliver up all keys to the property. She seeks that the husband surrender to the Registrar, T’s South African and other passports.  She seeks all these orders on short notice and costs.

6. The husband, by his Response filed 24 June 2010, opposes all of the orders sought by the wife and seeks the sale of the H property, with a payout of the mortgage and the balance divided equally. He seeks the sale of the South African property, a payout of the mortgage, and the balance to be divided equally. He also seeks costs.

7. After a violent hijacking at their home in South Africa in about August of 2007, the parties decided to leave South Africa.  They ultimately decided to move to Australia.  They rented their South African home.  On 28 May 2008, the High Court of South Africa made orders permitting the wife to remove the older children from South Africa to Australia and provided for their father to spend time with them in South Africa - seven weeks a year made up of two trips - and in Australia, with the costs of travel to be shared in a particular way.

8. The parties came from South Africa to live in Australia in July of 2008.  They separated under one roof in November 2009.  Physical separation occurred when the husband moved out of the parties’ home and into his parents’ home in March 2010. There is an agreement in relation to T’s care, whereby she spends five nights out of 14 with the husband and otherwise lives with the wife.

9. The wife’s income is $327 a week, made up of a proportion of the rent from the South African property at the rate of $189 a week and child support paid under an assessment for T at the rate of $138 a week. The wife asserts that she has no Centrelink entitlements, because she is a temporary resident of Australia. The wife says that it was possible for her to have paid employment in South Africa, as:

   ·    she lived only two minutes from her work place;

   ·    she worked in the travel industry and had a client base built up over 22 years;

   ·    the elder children lived with their father for three nights a fortnight and during school holidays; and

   ·    she had the assistance of two housekeepers, a gardener, and a pool service.

10. It is the wife’s evidence that the parties lived at a very comfortable level in South Africa. The wife has South African orders for child support from the father of the older children, at the equivalent of about $1,900 a month. The wife says that he has not paid except for $2,900 and $1,400 paid in November 2008 and February 2010 and one more recent payment. The wife had paid employment for about 12 months in Australia. I think I was told that was for four days a week, from 9am to 2pm each day.

11. After separation, the husband paid the mortgage but on an interest-only basis.  He has paid T’s school fees and additional expenses.  He also, between 16 March 2010 and 5 May 2010, paid a total of $5,662 to the wife.  She continued to access a joint credit card for living expenses, but on 9 April 2010 the husband caused that access to be cut.  On 12 May 2010 the wife transferred $6,350 from that card in order to make provision for her own support.  On 7 May 2010 the husband told the wife he would pay for T’s school fees and private health insurance.

12. The wife says that she has otherwise managed since prior to separation, on advances from members of her family. She says that she received gifts totalling $72,000 from her mother; a loan of $4,000 from her mother; some hundreds of dollars from her stepfather; a loan of nearly $10,000 from her sister; and a loan of $10,000 from her cousin. The wife says that she cannot make ends meet.

13. When the matter came before me on 13 July 2010, I made the following orders:  I adjourned the proceedings to today’s date. I made orders by way of injunction restraining the husband, pending further order, from taking a step, or permitting a step, which would have the effect of altering rights of the shareholders in M Pty Limited; altering the memorandum of articles of association of that company;  issuing any new shares in the capital of that company;  increasing the number of directors;  approving the transfer of any shares to any person, company, or trust; altering the rights attached to any shares; further mortgaging, charging, and encumbering the share capital, except in the ordinary course of business;  from assigning, transferring, disposing of or in any way dealing with any asset of the company, except in the ordinary course of business;  removing the husband and/or the wife from any position or office held in the company and causing the company to obtain a loan or advance in excess of $10,000.  There were a couple of prayers that I didn’t grant.

14. I restrained the husband from making loan repayments to R Organisation of Europe, to the husband’s brother, to his father, and/or to HMK Business.  I made an order for discovery.  I made an order that the husband provide to the wife’s solicitor, within seven days, copies of bank statements, or transaction statements, in relation to M Pty Ltd. I ordered that the husband sell the securities in an interactive broker’s account of a certain number and pay the proceeds as to one half to the wife and the balance into a controlled moneys account in the name of the parties. In relation to that, I am told that $44,000 held in an account.  I restrained the wife from accessing the bank accounts of M Pty Ltd, pending further order.

15. The evidence is that the husband caused $83,000 to be paid to the wife’s solicitors, as to $19,000 on 20 July, $19,000 on 21 July, $19,000 on 22 July, $19,000 on 23 July and $7623 on 26 July 2010. The wife says that she paid $37,595 to her lawyers. The wife says that she has other debts totalling $39,493, including $32,827 owed to T’s school. The wife says that she proposes to move T to a Public School in term 1 of 2011.

16. The parties have both drawn on a mortgage offset account. The wife’s case about this is that she withdrew a net $28,000 (after she withdrew some and paid some back), compared to $413,000 withdraw by the husband.

17. The husband asserts and the wife denies that she has an interest in the A Trust and in the C Trust SA. It is an agreed fact that an advance of $1.4 million came from the C Trust and was applied by the parties to the purchase of the H property. The C Trust seems to be an entity associated with the wife’s mother. The wife and her mother assert that that advance was by way of loan. The husband will assert that it was by way of gift. The parties have borrowed about the same amount ($1.4 million) from the ANZ Bank.

18. In a balance sheet that I have seen, attached to the wife’s case Summary Document, it is asserted that the H property has a value of $2.9 million. On the wife’s case $2.8 million is owed to creditors. There’s a level of informality about transactions between the parties and members of their family or entities associated with members of their family, and I cannot get to the bottom of those issues.

19. Money is owed by M Pty Ltd to R Organisation. It is asserted that on 31 October 2008 $US400,000 was advanced by the Organisation. The R Organisation was associated with the husband’s father but it is asserted that there is no longer any association. There is evidence to the effect that as at 25 June 2010, M Pty Ltd had made repayments totalling $US356,000.  That comes from exhibit 4, which is a memo from the husband’s father to the Family Court, and it literally says that:

    I hereby confirm that [R Organisation] has made a loan to [M] Proprietary Limited for US $400,000 on 31 October 2008.  To date, [M Pty Ltd] has made repayments of this loan totalling AUD $356,000.  I attach a copy of the loan agreement.

20. He goes on later to say that HMK Business received 500,000 rand, approximately, the letter says, (A$72,000), from the husband in July 2008:

    [HMK] has made principal plus interest payments on this loan at the rate of 10,000 rand a month.  The balance of the loan is the equivalent of $61,000, based on 15 per cent interest less board and lodgings of $16,000 and repayments of $6000.  I have made additional payments to [the husband] of $A6000, which have been deducted from the loan owing by HMFJ.  It’s been agreed with [the husband] that in return for providing board and lodgings for [the husband] since 7 March 2010, the outstanding loan will be reduced by an amount of $16,000, $1000 per week, to 30 June 2010.  As at 30 June 2010, the balance of the loan, $A45,000, will be set off against amounts owed to [R Organisation] by [M Pty Ltd].

21. The husband says, paragraph 17 of his affidavit:

    As at the end of July 2010, [M Pty Ltd’s] debtors totalled approximately $716,000, being as follows:  $36,390 -

    and then he goes to talk about a failed or mistaken purchase of 24 tonnes of potassium chloride and the problems with suppliers trying to recover that money.  Secondly:

    US $475,883.71 by [HMK].

    So a debtor of M Pty Ltd is HMK as to $US475,883 as at the end of July 2010.  Unless that money was lent by M Pty Ltd to HMK between 25 June 2010 and the end of July 2010, there is something wrong with that evidence. The third amount is $163,350, owed by P Company. And the evidence elsewhere is that that money should come in between now and the end of this calendar year.

22. So the problem with that is, on the face of it, M Pty Ltd owed money to the R Organisation. There is evidence to suggest that the husband’s father has no connection with M Pty Ltd, and yet the husband’s father has called for payment of some of that debt to himself. At the same time, HMK, an entity associated with the husband’s father, owes M Pty Ltd a significant amount of money.

23. M Pty Ltd had an unusual business. It was involved in chemicals, and it was also providing invoice financing for HMK. In the latter role it operated on a 15 per cent commission, in effect, in smoothing out for HMK, payments and receipts. The evidence of the husband is that the invoice financing has been substantially unsuccessful because of currency fluctuations and the like. 

24. Now, on the other side of the case, we have the evidence about a loan of $1.4 million by the wife’s mother. In her affidavit the wife’s mother says:

    In August 2008, following [the wife] and [the husband] migrating to Australia, [the wife] and I had a conversation to the following effect:  “Mum, [the husband] and I have found a house we’d like to buy.  We can’t get a loan for the full amount.  Could you possibly loan us $1.4 million?”  “Okay, I can do that” -

    said her mother:

    “I will loan you $1.4 million on the understanding that when [the husband’s] business is established, I will be repaid.  Okay?”  “Okay, thanks so much” -

    said the wife:

    “Please send a fax over from your bank confirming that the money is available.”  “Okay, I will do that.”

    And somewhere in the evidence is a very brief document for the trust that says there is no commitment, but $1.4 million would be available. The wife’s mother says the outstanding balance is $1.4 million.

25. A document has been brought into being, we don’t know when, that says:

    I, [the wife’s mother], made a loan in September 2008 to my daughter, [the wife], for an undetermined period, interest free, and repayable at a time to be arranged.

26. The document is undated. If there is such a loan, there is virtually no asset of the marriage except for M Pty Ltd. The husband says M Pty Ltd is worth $6000, and the wife says she doesn’t know what it’s worth.

27. Some of the background facts are very confusing. The evidence about the standard of living of the parties in South Africa is not clear.  The husband says that, “Yes, we did have two maids, but it was the wife’s wages that went to pay for one of them.” The husband now says that M Pty Ltd isn’t worth anything, and yet he is resistant to the wife taking over that company. Presumably, it has some value to him.

28. The wife wants to retain the former matrimonial home in circumstances where, on her own case, she could not possibly afford to do that. She does not point to any resource that would enable her to service $2.8 million worth of borrowings.  In fact, she does not point to a source which would pay for the other outgoings on the property, let alone the borrowings.

29. Thus the parties’ cases do not make much sense and there are a number of ambiguous transactions between members of their families.

30. Going to the matters that I am required to deal with, no submissions were made in relation to the injunctions in respect of M Pty Ltd on behalf of either of the parties, and I will leave them in place.

31. As to spousal maintenance at $1,130 a week, private health insurance, medical bills, outgoings on the H property, mortgage arrears, mortgage payments, and arrears on the South African property and rent on the South African property: Starting with the latter property, the husband wants orders that it be sold.  Nothing was said against that on behalf of the wife. However, the wife seeks to retain the South African property. Again, that does not make any sense in the context of her version of the case unless M Pty Ltd is worth millions of dollars. If it is, why did she need to borrow money from her mother?  Why did she borrow money from anybody?  The parties were living on credit cards and so on.  The wife was borrowing money even before separation. Why would she do that?  So it doesn’t really make much sense.

32. For the purposes of today, I accept that there is a need for spousal maintenance.  The wife has given cogent reasons why she was able to work in South Africa and why she is not able to work here. She does not have the client base;  she does not live two minutes from her work;  she does not have someone with whom the older children can live on weekends and on some days of the week and school holidays. There is no domestic help. Those support systems aren’t there, and the parties have separated, therefore things are much harder for her than they would have been in South Africa. There is nothing about the fact that the marriage has broken down that puts her in a better position to earn income.

33. There is no real criticism of the wife’s claimed expenditure.  There was some mention of specific items by counsel for the husband, but no real criticism of the level of expenditure. I accept that there is a need and that it is of the order of that set out in the application.

34. The problem comes in trying to make effective orders, in identifying a source of funds. The husband’s evidence is that he receives $1,100 a week from another company, that he has long since stopped drawing a wage from M Pty Ltd and that he has made drawings on a loan account. Another confusing aspect of the case is that the loan account level shows a huge amount of money poured into M Pty Ltd by the husband since August 2008. At one point his loan account stood at $676,000. Even with the payments that have been made recently to repay his father and brother, the loan account stands at more than $500,000.

1. There is confusing evidence about his living arrangements.  The husband says in his Financial Statement that he lives with no one who has an income. That is not right. He says that it is M Pty Ltd and not his father, who provides board for him. However, the husband’s father says that he provides board and lodgings for the husband. That is not true either, because the father says that those things are set off against a loan owed by the husband to HMK Business. So that is very confusing.

2. There is no evidence of substantial lifestyle expenditure by the husband.  That is to say, as the matter is presented, there isn’t anything out of the ordinary in terms of a change in the husband’s expenditure patterns since separation. There is therefore no evidence suggesting that the husband has a source of income other than that which he discloses. 

3. It is said in the wife’s case, “Well, that’s all right; he draws on his loan account.” The problem is, as is said on behalf of the husband, the money has to come from somewhere. There can only be a drawing on the husband’s loan account if there is money in M Pty Ltd from time to time. We know that there might be something less than $163,000 paid into M Pty Ltd between now and the end of the year. It is said that there are set offs against that amount of the order of $30,000. There will be that money, but it is not as though M Pty Ltd has a bank account from which there can be a withdrawal. It has had money.  As at 30 June 2010 M Pty Ltd had about $33,000 with the Commonwealth Bank, $18,000 with ING, and a US cheque account of $45,000. But I am not taken to any such source of funds that exists today. Moneys receivable is different to moneys received.

4. It does the wife no favours, it seems to me, if I make an order without being able to point to a source of funds. If as he says, the husband’s income is committed, indeed overcommitted, that would leave the wife with enforcement proceedings. 

5. There does not have to be a satisfactory outcome to interim financial proceedings. In a case conducted on the papers I cannot make a finding of fact on a disputed issue without independent evidence that supports one version of an event or wholly excludes another. I am not allowed just to make up a fact or make an assumption without being reasonably confident that there is a basis for it.  That is why, in many cases where interim financial relief is sought, a capital fund is applied.  I indicated to counsel before I rose that the wife should retain the $44,000 that is in the Broun Abrahams Trust Account. I would be happy to make orders on the wife’s application beyond the orders that I have already made, if necessary, that would enable her to know when funds come into the hands of M Pty Ltd, so that she can make a claim for a payment.  But as things stand, I am not in a position to do more than that.

6. For the same reason, without going into the provisions of the legislation, I am not in a position to make orders for child support or step-parent maintenance. Child support is a separate head of jurisdiction under the Child Support (Assessment) Act. Where there is an assessment a court can make a departure order. As is sought here, the Court can make an order for payment of periodic payments and payments in kind, for school fees and so on. But in doing so, the Court is required to make a finding in the special circumstances of the case that there is a ground under section 117(2) of the Child Support Assessment Act and that it would be just and equitable under section 117(4), involving findings about many issues, and then that it would be otherwise proper, again under section 117(5), with findings about many issues, before one would make an order. I am simply not in a position to do that.

7. I do not think there is an issue about the need for departure.  Under the legislation, the parties have the obligation of support and the issue is how they share the obligation; and how the obligation sits as between them and the taxpayer.  In this case, because there are no Centrelink payments, the latter is not a relevant consideration.

8. The husband is making payments. The wife has indicated, sadly, that T will be coming out of her private school at the end of the year. Again, that suggests that she does not think it will be possible to find, in that sort of timeframe, the funds necessary to support the child at that school.

9. There is an application in relation to stepchild maintenance.  Section 66M says:

   A Court having jurisdiction under the Act may determine when it is proper for a step-parent to have a duty of maintaining a stepchild.  The Court is to take into account the matters referred to in section 60F, 66B and 66C - 

   Those provisions relate to whether children are children of the marriage, the objections and principles in relation to child maintenance orders, and the principles in relation to parents having a primary duty to maintain their children.  That is relevant here in relation to the obligations between the husband and the father of the children:

   The length and circumstances of the marriage;  (2) or the relationship with the parent of a child.  The relationship that existed between the step‑parent and the child -

   there isn’t much evidence about that here -

   The arrangements that have existed for the maintenance of a child -

   There is evidence about that.  And:

   Any specific special circumstances not taken into account.

10. Then there are further considerations in section 66M.  As to some of those things, there is insufficient evidence. There is a confusing story in relation to the children’s father.  The father has an obligation, as I said, under South African law. An application has recently been made for international enforcement.  The mother is not sanguine about any money being forthcoming.  She thinks that Y (the father of the children) lives with his sister and isn’t in a financial position to pay. As is raised in the husband’s case, Y has been able to spend money on the contact side of his relationship with his children but has not been able to service their immediate needs for financial support. 

11. On the one hand the husband has been providing financial support for the older children. Indeed, he says that he was not even told that the wife had received the little child support, she says she has received from Y. So far as the husband is concerned, he or the parties have been providing all of the support. There is not much evidence about the children’s relationship with the husband, and I’m not in a position to make a decision about capacity from income. I cannot make a finding as to whether this is a proper case for stepchild maintenance.

12. There is an application, as I said, for interim costs. There is no available identified fund to meet that need. It is an appropriate application.  There is some mention of costs being paid to the husband’s lawyers. I don’t know how much that was. It is appropriate that the wife have adequate funds to argue her case.  Each of the parties says this is a fairly complicated case.

13. I cannot make that order today, except in that, any moneys that come to wife could be applied by her to that expense.

14. Then there is an application for a dollar for dollar order. That can be done.  The idea there is that if a payment is made to the husband’s solicitors, a similar payment should be paid to the wife’s solicitors.  There is no risk associated with such an order. If the husband doesn’t pay his own solicitors then no moneys need to be paid to the wife’s solicitors. I will make that order.

15. Then there is the issue of the exclusive occupancy of the H property.  I will make that order.  There were no submissions against the wife’s application. The husband is living elsewhere.  On the basis of the evidence, and in terms of the authorities, there is no reason why it would be reasonable, sensible, or practicable that the parties live together.

16. No submissions were made at all in relation to the passport issue.

17. From the husband’s point of view, as I said, the husband seeks the sale of the H property and the sale of the South African property.  That seems sensible to me and would be consistent with the wife’s case, but I cannot order it today. However, it might be forced on the parties. In addition to the claims of the wife’s mother there is an independent mortgagee. In the event that mortgage payments are not made, the bank will issue a section 57(2)(b) notice and the property will have to be sold.  If a section 57(2)(b) notice issues and the parties cannot agree to a sale, then I would make an order for a sale, just to save them the potential losses associated with a mortgagee sale. Having said that I won’t order it today, even though, as I say, I don’t really understand the wife’s case.

18. There is an application for an order ex parte against the husband’s father in relation to the distribution of the proceeds of the payments made to him by the husband. I am not satisfied that it is necessary that an order be made against a stranger to the marriage in these circumstances. I need to be satisfied that it would not be appropriate to return that application on short notice before making an order ex parte against a person. I am offered an undertaking as to damages but on the wife’s own case, she may not have the wherewithal to meet an undertaking as to damages. It is her case that she and the husband have no equity in the H home and that there is perhaps $600,000 - made up of the value of the South African property, in effect, and some personal and other items.  Of course, she doesn’t know what the value of the M Pty Ltd company will be.

19. It is not fatal to such an application that an applicant is not being able to support an undertaking as to damages. Here the wife had an inkling that a repayment had been made and that it was to an entity associated with the husband’s father. That was some time ago. In those circumstances, I will not grant an order against the husband’s father. I am told that there will be a formal application made, if that issue is to be pursued. 

20. I will make the orders until further order, so if there is a problem, that can be addressed.

21. I will give leave to either party to restore the proceedings to the list on giving seven days’ notice to the Court and to the other party, and I do that because I have not otherwise dismissed the applications. They are still on foot, and I can see, as I’ve said, merit in them.

I certify that the preceding fifty-five (55) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Loughnan delivered on 13 August 2010.

Associate: 

Date:  15 September 2010