Krala & Krala and Anor

[2007] FamCA 1214

FAMILY COURT OF AUSTRALIA

KRALA & KRALA & ANOR [2007] FamCA 1214

FAMILY LAW – PROPERTY SETTLEMENT – Interim Order – 14 year marriage – Wife would ultimately be entitled to a property settlement, most probably in excess of the $450,000 settlement offer made by the husband – Wife has current need for funds – Partial property settlement ordered in the sum of $100,000

FAMILY LAW – SPOUSAL MAINTENANCE – Husband has a vastly superior capital position while wife has some capacity to support herself though should not be expected to become financially self-sufficient at 65 years of age – 6 month lump sum maintenance of $31,200 ordered

FAMILY LAW – INJUNCTIONS – Wife seeks orders restraining husband from dealing with, disposing or encumbering assets other than in the normal course of business – No evidence of any real risk of the wife’s claim being defeated by the husband’s conduct – The wife is protected by her caveats over the husband’s property and s 106B

Family Law Act 1975 (Cth)

APPLICANT: Mrs A Krala

1st RESPONDENT: Mr Krala

2nd RESPONDENT: Mrs B Krala

FILE NUMBER: MLC 7492 of 2007

DATE DELIVERED: 5 September 2007

PLACE DELIVERED: Melbourne

JUDGMENT OF: Kay J

HEARING DATE: 5 September 2007

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr J.M. Salamanca

SOLICITOR FOR THE APPLICANT: Lander & Rogers

COUNSEL FOR THE 1ST RESPONDENT: Mr Smart

SOLICITOR FOR THE 1ST RESPONDENT: Auditore Pty Ltd

COUNSEL FOR THE 2ND RESPONDENT:

SOLICITOR FOR THE 2ND RESPONDENT:

Mr P. Sweeney

Dorrough Smart

Orders

1. That within 14 days the husband pay to the wife the sum of $31,200 for her maintenance up to and including 1 March 2008.

2. That within 30 days the husband pay to the wife by way of partial property settlement the sum of $100,000.

3. That BY CONSENT within 28 days the husband provide

   (a)income tax returns/financial statements (as applicable) of the husband and the companies

   ·K Industries (Aust) Pty Ltd;

   ·K International Pty Ltd;

   ·The Krala Family Trust;

   ·The G Pty Ltd Superannuation Fund;

   ·K Industry Superannuation Fund No 2

   for 2003 financial year (save for K International Pty Ltd, for 2005 (save with respect to the Krala Family Trust and G Pty Ltd Superannuation Fund) and for 2007.

4. That within 14 days the husband make available for collection by the wife her remaining personal possessions and chattels held at the real property at M.

5. That contemporaneously with the delivery up of the possessions and chattels the wife shall return to the husband the alarm remote control, keys to the dwelling at M, keys to the K factory, the letter box and filing cabinets at M.

6. The wife shall forthwith notify the husband of the password to the security camera system at the K factory.

7. The application in a case filed 2 July 2007 and the orders sought in the response filed 27 August 2007 are otherwise dismissed.

8. That the conciliation conference currently fixed for hearing on 21 September 2007 now be held on 22 October 2007 at 2.15pm.

9. That the costs of this day be reserved.

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

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLC 7492 of 2007

MRS A KRALA

Applicant

And

MR KRALA
1^st Respondent

And

MRS B KRALA

2^nd Respondent

REASONS FOR JUDGMENT

1. I have before me an application in the Duty List by the wife seeking some interim relief pending the determination of property and maintenance proceedings. Unusually the former wife of the husband in these proceedings has been joined as a party to the proceedings.  The circumstances that involve her well become apparent in a moment. 

2. Just in broad terms the husband is approaching his 75th birthday towards the end of this year.  The wife is 65 years of age.  There is some dispute as to when they commenced their relationship but it is clear that they married in 1993 and separated in June of this year, so on anybody's view of the story they were together for at least 14 years.

3. The second respondent to the proceedings is the second wife of the husband and the mother of his daughters S and E who are each in their 40s. When the marriage between the husband and the second named respondent ceased, they began to investigate dividing up their assets and reached some agreement.  They realised that its implementation would trigger off some capital gains tax events, which they were not keen to do, and accordingly they in fact made no formal arrangements in relation to dividing up the assets that they acquired during the course of their marriage. It is asserted they reached an informal arrangement that they would continue to hold their assets in the form in which they were, and then ultimately they would pass to their children and their grandchildren. 

4. Somehow the husband is of the view that as that arrangement has been made with his former wife, his current wife has no claim on the assets that were in existence at the commencement of the current marriage.  I am not sure that that view will coincide ultimately with the application of s 79 principles in determining how large a property settlement the current wife should be entitled to. 

5. The assets that are held by the husband and his former wife include the matrimonial home in these proceedings in M, the business premises where the rather successful business of the husband has been conducted, an investment property in Singapore and a recently sold property in Victoria, proceeds of which sale have been paid to the former wife and supposedly held on trust for the children.

6. The husband has been conducting a business for 35 years making hardware components. It trades through a corporate entity known as K Industries Australia Pty Ltd.  It appears to be successful. At this stage it has not been valued. The husband is effectively the sole shareholder in the company. There has also been an attempt at running an agency offshore.  It does not appear to be too successful at the moment.  There is a discretionary trust involved in the exercise that is somehow involved in the running of the business.  Its exact entitlements and the nature of the role it carries out is not currently detailed before me.

7. The present situation is that in June of this year the wife left the former matrimonial home. She had been previously employed in the business and that employment dried up at the beginning of this year, and since then she has been left with no capacity to earn an income for herself.  She is 65 years of age and it would be quite inappropriate one would have thought, to expect her to become economically self-sufficient at this stage in her life.  She has been left with some modest superannuation entitlements, something in the vicinity of $250,000 and of recent weeks she has drawn down on those entitlements to help fund the litigation and to provide for her own support. 

8. The husband, aside from his interests in the various properties and the corporate entities that I have already detailed, has superannuation interests of about $2 million, and having regard to his age it has been conceded by his counsel that the money is currently readily available for him to draw down without any taxation implications or other restrictions. In addition he has a shareholding in listed of shares of about $500,000. 

9. He has been drawing an annual salary and dividends of about $200,000 gross, and until last year the wife was earning herself from his company probably around about $60,000, maybe a bit less.

10. So there has been an adequate cash flow in the family to keep the parties at a very comfortable standard of living. 

11. The husband is now anxious to retire and pass control of the business to his daughter E, and it has been put on his behalf that his cash flow will dry up once he stops working in the business, and he expects to do that by Christmas in about three months time. 

12. The wife's claims before me are for the provision of a lump sum effectively by way of a partial property settlement to enable her to be put in a situation where she has some financial independence and ability to conduct the litigation and have some money to live on. She would also like me to make allowance in any lump sum for a maintenance component because she has the needs, and the only ability she has to meet her needs would be to eat into her rather modest capital. 

13. The husband accepts, through his counsel that some funds will need to be provided to the wife, but seeks to limit that to perhaps $40,000 or $50,000 by way of partial property settlement and lump sum maintenance to cover say three months at whatever rate I think is appropriate. 

14. The material that each party sets out in their statements of financial circumstances which of course have not been capable of being tested in these summary proceedings would indicate that the wife estimates that she needs $3092 a week to live on, and the husband estimates it will cost him  $2674 a week for his own needs.

15. I make no comment about the extravagances of two people of retirement age that have the capacity to meet that expenditure, although between them the capacity of having to meet the total of about $5500 a week may be starting to seriously diminish the available funds if they were to continue at that pace.  However, it seems to me that it is appropriate that the wife be provided with some moneys towards her own self-support by the husband who has at least an earning capacity for the balance of this year and then a vastly superior capital position. He can draw down part of his superannuation to assist in the provision of maintenance of himself and his wife, he having conceded already the purpose of the accumulation of superannuation assets was to provide for the parties in their retirement. 

16. The wife's position is far more modest, but she does have some capacity to provide towards her own support. It seems to me doing the best I can on an interim basis that it would be appropriate that the husband provide for the wife maintenance at the rate of $1200 a week for a period of six months, and hopefully in that period of time that matter can be resolved. That is to be inclusive of motor vehicle expenses, and hospital benefits that the wife has asked be separately dealt with, and it seems to me that requires a payment of $31,200 to be categorised as maintenance for six months.

17. In addition, the husband concedes in his answer to the wife's property application that she should have a settlement upon her of $450,000.  No doubt her claim will be significantly larger than that, and no doubt if the parties cannot resolve it themselves a judicial officer will impose some order upon them, but it seems to me the wife has current needs to be met in relation to the conduct of these proceedings, and that it would be quite inappropriate for her to have to draw down on her rather limited capital, notwithstanding that her lawyers indicate that they are optimistic that she has a good claim. In order to make her situation more comfortable, to enable her to meet the exigencies of life and to meet her needs to provide her lawyers with some money, I would propose that the husband pay on account of property settlement a further sum of $100,000. He should pay the maintenance within 14 days and the balance within 30 days.

18. The issue then of costs would be left entirely to the trial judge to be dealt with discretely under s 117 of the Family Law Act 1975 (Cth) (“the Act”).

19. By defining the nature of today’s orders I avoid leaving the trial judge with the task of working out what it was that I was giving the wife moneys for today. It has the added advantage of the wife having to understand that if she spends too much money on her lawyers at this stage, she will do it potentially out of her own capital and not out of the husband's capital and that may well act as some fetter upon the manner in which this proceeding is allowed to go forward.

20. I have a serious degree of sympathy with the husband when he spoke from the witness box from the heart and admitted that he views the money spent on the lawyers - extravagantly at least - as being something that is not in the interests of the parties. Such views were also contained in the note that the wife exhibited to her affidavit in which the husband said, "Let's try to work this out on a friendly and cooperative level…That will be far better…than involving lawyers who inflame the situation by making ridiculous demands.”

21. I do not want my sympathy for the husband’s views to be seen as a disparaging remark by me about the solicitors or counsel in this case, but the reality is that occasionally these matters get severely out of hand as a result of the manner in which the system enables them to get out of hand.  Sometimes it is the lawyers who are excited, sometimes the system puts requirements that perhaps ought not be there, but from the client's perspective proportionality is rapidly lost and matters take on a life of their own. 

22. In those circumstances it seems to me that the safest thing to do is to give the wife some of the moneys to which it is acknowledged she will ultimately become entitled. There does not seem to any reason why she should not have at least some of it now. She should also have a modest amount of support. 

23. The application also seeks some further discovery matters and the parties reached agreement about those and I will make orders about that.  They asked to vacate the date for a settlement conference that was due to take place in a couple of weeks time as it will not be ready, and we now have a new date which is 22 October at 2.15 pm.

24. The other matter that is before the Court is an application by the wife seeking injunctions to restrain the husband from dealing of, with or disposing of or encumbering his assets other than in the normal course of business. She particularly relies upon the conversations over the last couple of weeks between the parties in which the husband has said to her, and he acknowledges that he said to her that the earlier wife - the second respondent to these proceedings - is determined to make sure that she did not get any of the. That is described by the wife in these proceedings as "not get a cent".

25. It is conceded by the husband that he acknowledged that the earlier wife did not want to allow the applicant in these proceedings to get her hands on any of the property, being the 1993 property, the business and the real estate, and that she would go to enormous lengths to protect her interests and to that end she is represented in these proceedings today by a solicitor who has come from interstate, so maybe there is some substance in what is said there. It is suggested that he told the wife that if he is ordered to pay a cent of her legal fees he would withdraw all the money and set fire to it.  He would rather burn it.

26. At this stage I am not ordering him to pay any money towards her legal fees and so I do not see there is a real and immediate threat.  That is a bit tangential but the precondition has not yet been met.  It is also suggested that the husband said that, "If the judge awards it to you, the money isn't there.  You won't get it and we'll appeal for as long as it takes, then you'll get nothing," which the husband explains as saying what that means is, "I told the wife that if the judge orders me to pay more than there is you'll never get it, and they'll have to keep appealing and you just won’t get it, so don't get too excited in your claims."

27. I am not persuaded that there is presently evidence of any real risk to the wife's claim being defeated by any action that the husband is likely to try to conduct over the next period of time. She is protected not only by the fact that she has caveats over the real estate in which the husband has more than an ample legal interest to meet any claims that she could possibly make, she is also protected by the provisions of s 106B of the Act which would enable the Court to set aside any transactions that have the effect of defeating her claims, and she is further protected by the assurances given by the husband's counsel today that the husband says he is an honourable person and everything is on the table and he is not going to be taking any steps to defeat her lawful entitlements.

28. His perspective of what her lawful entitlement is and her perspective of what her lawful entitlement is may be different, but at least at this stage I will take the husband at face value and I am not persuaded that it is yet appropriate to grant the injunctions. 

29. There are agreements in relation to a cross-application brought by the husband that the wife will remove her possessions from the former matrimonial home and will hand back keys and security passwords and the like.

I certify that the preceding Twenty (29) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Kay

Associate

Date:  11 October 2007