Lovell and Lovell

[2009] FamCA 982

FAMILY COURT OF AUSTRALIA

LOVELL & LOVELL [2009 ] FamCA 982

FAMILY LAW – PROEPRTY – proceeds of sale paid into interest bearing account
FAMILY LAW – INJUNCTION – restraint re property

Family Law Act 1975 (Cth)

APPLICANT: Ms Lovell

RESPONDENT: Mr Lovell

FILE NUMBER: SYC 1876 of 2008

DATE DELIVERED: 17 June 2009

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Loughnan JR

HEARING DATE: 17 June 2009

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr J. Levy

SOLICITOR FOR THE APPLICANT: Barkus Doolan Kelly

COUNSEL FOR THE RESPONDENT: Mr B. Levet

SOLICITOR FOR THE RESPONDENT: Segal & Associates

Orders

1. Leave to the parties to inspect documents produced on a call by the husband.

2. Orders are made in terms of paragraphs 1, 2, 3, 4, 5, 6, 7, 9 and 10 of the document titled “Minute of Order Sought by the Wife” marked Exhibit A.  IT IS NOTED that orders in terms of paragraphs 3, 5 and 9 are by consent.

3. That the husband pay the costs of the wife of and incidental to this Application and these proceedings today.  Those costs to be as agreed or assessed by a taxing officer and are to be paid, unless the parties agree to the contrary, within 28 days after that agreement or assessment.

4. The Court requested that the Registry Manager hold the passports of the husband pending further order.

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

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYC 1876 of 2008

MS LOVELL

Applicant

And

MR LOVELL

Respondent

REASONS FOR JUDGMENT

1. These are proceedings in the shadow of property proceedings between the parties.  I understand the husband and wife are both 64 years of age.  The husband practices a profession and the wife the practice manager for his practice.  The parties have been married and divorced and married again.  They first married I think in June 1970 and they were most recently married in December 1998. They separated in December 2006.  They have at least two children.  I been asked to read one affidavit for each of the parties and they do not give a full history.  S is mentioned in the wife's first affidavit.  There is reference to R.  I think S might be 37, I do not know how old R is. I gather he is an adult because I was told today he manages some properties for the parties. 

2. These proceedings were started in April 2008 by the wife.  There have been a number of occasions when directions have been made to prepare the matter for a Conciliation Conference, which is the first resolution step in our process, apart from a Case Assessment Conference.  Those directions are yet to be complied with.  I am told that later this month there is a mention date to see about appointing a Conciliation Conference for the case. 

3. The wife says that over about 25 years the parties have bought and sold between 15 and 20 properties. Both parties had professional training in Russia.  The husband has worked as a professional since about 1979 or at least, he bought a professional practice in 1979. A business was commenced by the husband for the production of metal products in a south-eastern suburb, for sale in Russia.  Then from about 2005 a company H Foods Pty Ltd was created to promote and sell product as the name suggests. There was also an overseas aspect to that enterprise. 

4. The wife says that the husband has something like 23 bank accounts and he has not, despite numerous requests, provided required statements and information in relation to many of them. In her affidavit of April 2009, she says she was aware of five mortgages with Perpetual Trustee, one with Wizard Home Loans, two with the NAB and one with the ANZ Bank. She says that the husband had only produced documents in relation to three of them.  Since separation she says that he sold three properties – P, D and B.  She says the P property was sold in September 2007 (after separation), for $2.75 million.  The net proceeds of $683,000-odd were traced to a transfer of $433,788 to a St George account of the husband and a bank cheque of $250,000-odd which the wife understands may have been drawn to a Mr G or G Pty Ltd. $200,000 was paid out from the St George account on 2 October. Husband says that went to his NAB account.  On 14 November 2007 there was a withdrawal of all but that sum ($199,000).  A request was made on 23 March 2009 for details of the fate of that withdrawal and at the date of the affidavit there had been no response. 

5. In relation to the D property, it sold for $2.3 million in February.  There was a deposit of $75,000 paid to the husband.  There was a mortgage of about $2 million.  The parties agreed that the balance would be paid into a controlled moneys account and the wife says the husband reneged on that agreement and paid those moneys into his National Australia Bank account. She says that he has also failed to account for the $75,000.

6. In relation to a property at B there was an exchange of contract on 20 May 2008 for $2.65 million. A deposit of $133,250 was paid to the husband which he put into an NAB account.  The mortgage stood at $1.268 million.  The purchaser paid $6,917 for an extended settlement but ultimately the sale did not go ahead.  It is the wife's case that the husband has not accounted for either the $133,000 or the $6,917.  A sale was subsequently achieved at $2.2 million. Exchange took place on 23 March 2009. The deposit of $110,000 paid to the husband, put into a National Australia Bank account.  Settlement was planned for 4 May 2009. The husband proposed that the net proceeds of sale of $900,000 be applied as to $150,000 to one mortgage, $150,000 to another and the balance to be distributed among unidentified mortgages - presumably mortgages in relation to the parties' Australian properties. The wife said she did not agree to that and as at the date of her affidavit there has been no response.  The disposition of the proceeds of that sale of that property is a matter before me today.   

7. The husband paid out the mortgage on a property at E in 2007, reducing that mortgage from $240,000 to nil. In the same year mortgages on suites 5 and 6 in Sydney were reduced from $380,000 to nil.  The husband reduced the mortgage on the property at B, from $1.68 million to $1.373 million.  He has told the wife that debts in relation to L Pty Ltd - the company that traded the metal products - increased from $471,000 to $612,000 and a debt in relation to the food company by $100,000 from $770,000. 

8. The competing proposals are in similar terms with a couple of differences.  The husband has filed an affidavit by leave today in which he discloses that he has paid a debt associated with the companies in the sum of about $770,000.  He did that yesterday.  He does not purport to have given the wife advanced notice of it, to have obtained this court's permission in relation to it nor does he assert that the wife agreed to it. He says the wife knew that they had debts of this sort.  I am taken by Mr Levet of counsel (for the husband) to a document prepared by the wife's solicitors that identifies, albeit disputed as far as the wife is concerned, debts associated with those two companies. 

9. It is the husband’s case that the wife knew of the debts or at least knew that he asserted they were debts and when one of the creditors became aware that there were proceedings on foot he was afraid the creditors would become nervous.  There were discussions on 5 June 2009 when the husband sought to obtain an extension of a facility and he was unsuccessful in negotiating a further indulgence. Consequently the husband paid them $US564,000 on 15 June.  Some of those moneys came from a source that would have been affected by the application of the wife filed on 23 April 2009. That application was returnable on 27 April and was adjourned to today's date. 

10. The net effect, I am told, is that something like $770,000 has been repatriated from Australia overseas.  As a result of that and as a result of the history I have given, the wife seeks that the B property proceeds be held in a controlled moneys account and not disbursed.  She seeks that the husband be restrained from dealing with any existing facility or creating any further encumbrance on a number of properties without her prior written consent or an order of the Court.  She seeks that the husband be restrained from causing any money that he has, that either of the two companies have and that some other companies have, F Pty Ltd, A Pty Ltd and S Pty Ltd, in Australia to be disbursed or transferred outside Australia. The wife requires discovery. She wants the husband to surrender his passport, and that has been done. The wife wants the husband restrained from leaving Australia and from making application for a fresh passport.  She wants the Australian Federal Police to assist in that order by a watch list order and she wants the husband to get the moneys back that he has paid overseas. She also seeks orders about service and an order for costs. 

11. The husband does not oppose some of those orders.  The matters that are contentious are, firstly, the husband wants in a version of the proposal he made earlier, the B property proceeds to be distributed as to $176,000 to two properties, one at O and one at D.  The D property is a property in the wife's name.  He wants the rest to be applied equally across the mortgages secured on properties at T, another property at O, two properties at Y, a property at E and the suite of professional rooms in Sydney, which are the practice and the business headquarters for H Foods.

12. He does not oppose an injunction in respect to the properties but seeks that the wife be similarly restrained. He does not oppose the injunction in relation to a Homeside deposit offset account. That consent suggests that has been the source of some of the moneys repatriated.  Again in relation to repatriating money overseas, he seeks a reciprocal order against the wife.  He agrees with discovery and he strongly opposes the orders that would limit his movements out of Australia.

13. Courts can make orders in aid of jurisdiction.  The example in this case is a Mareva injunction, which is an order whereby the subject matter of proceedings is preserved in the jurisdiction so that there can be an argument about it in the substantive proceedings.  Classically the case out of which the term comes was a case in relation to a boat.  The boat was the thing within jurisdiction and an order was made preserving that situation for the time being. 

14. There are elements of that in this case.  The parties have real property, corporations, and cash interests. There is an extra jurisdictional aspect to the case.  The parties were born and lived in Russia.  Their enterprises have traded outside the jurisdiction.  The husband has travelled regularly for the purposes of the businesses.  It is asserted from the Bar table that he will be required to travel again.

15. As I said during the course of submissions, it is a very serious thing to restrain a person's travel. Minds differ about the extent to which such an order should be contemplated. 

16. The problem, as I said in the course of submissions, is that where there are liquid assets it is possible for the subject matter of financial proceedings to be beyond the effective range of orders of the Court. If not frustrating the processes of s.79, that can dramatically complicate the proceedings.  It is so much easier if orders can be made in relation to assets where the Court can have a direct impact on the subject matter of the proceedings.  For example, it is relatively straightforward to make effective orders about real estate within the jurisdiction. On the other hand, there are restrictions on courts making orders about immoveables in other jurisdictions. 

17. In relation to personalty, I do not know of any significant regime of agreements between countries, certain none that I know of between Australian and Russia, that would allow this court to easily enforce orders in relation to cash assets held in that country.  In those circumstances, what is sought to do for the time being - is to hold the husband in the jurisdiction because whereas I cannot make an order effectively against personalty outside the jurisdiction, I can make an order against the husband to cause him to deal with those assets.

18. I said minds differ about this and no doubt the wife will receive advice about it.  Mr Levet says I cannot make the order.  I think he means I should not make the order.  I do not think that is right.

19. These are serious matters. I accept that such an order may not be justified if the husband demonstrates a proper reason for needing to leave Australia. I am not told of any harm done to the husband today by the making of such an order. It is opposed on principle. 

20. Mr Levet would say that is not sufficient reason for granting such an injunction, and I agree. The husband has not had a meaningful opportunity to put material on as to why he might need to leave the jurisdiction and so on. He will have ample opportunity to do that. The reason why such an order is justified is that despite notice of an application seeking to prevent him doing something he took that step in any event. In any event, he has taken a step with joint assets without any notice to or approval from the wife or the permission of the Court. 

21. This was the subject of the Full Court decision in Waugh & Waugh.  When the music stops in a marriage one party is often left as the steward of the parties' business affairs.  That is quite regular, quite common.  In that case the husband was a property developer for the parties and he kept on trading.  He said something to his wife like, "I am going to take all your money or stop you having any money," and the Court issued an injunction and was criticised for doing so.  In a more recent case of M & DB [2006] FamCA 1380; (2007) 36 Fam LR 454; (2006) FLC 93-293 the Full Court took a less restrictive approach. The thrust of it is that on separation the husband immediately goes from being an authorised representative of two parties in a marriage to a person with an interest adverse to the person to whom he owes a fiduciary duty. As soon as the parties are separated neither of them is free to take a serious step in relation to their finances without getting agreement from the other party. Once proceedings are started, to that moral obligation is added the legal obligations of disclosure. Once a party is on notice that certain conduct would be directly opposed by the other party, he or she must not take that step. Very frankly and quite properly, Mr Levet conceded today that that is exactly why his client took the action he did. He knew that he would not obtain his wife’s agreement, he did not want to wait for the Court’s permission and so he took the step in any event. Where there is an extra jurisdictional aspect to the case it seems to me, for the time being, that is a proper basis for so Draconian an order. That applies to the other orders sought on behalf of the wife.

22. On one hand, the application of funds to the mortgages, the application of the proceeds to the B property, to the mortgage on another property causes no harm. It does not move assets outside the jurisdiction. Mr Levy argues that this husband, who has taken a unilateral step already, who has provided no adequate disclosure, who has been conducting his affairs with the parties' money as if it was his money, may well have been more successful in harming his wife’s claim if funds continued to be held in cash. That may be so. On the other hand there is no evidence of any compelling reason for those payments.  There is no suggestion of a notice issuing under section 57(2)(b) of the Conveyancing Act in relation to any of the properties. Lest it be said that the husband was saving interest, the parties have bigger fish to fry. They are in a period of massive disinvestment. They are going to be spending money hand over fist on lawyers.  Certainly if they keep going the way they are going they will. 

23. The husband is the only party who has come to attention in relation to dealing with properties and assets without consent or notice.  The order should restrain him.  There is no evidence that I am aware of in relation to any conduct by the wife whereby she has acted in a way disadvantageous to the husband.  There is no suggestion, it is fairly put on behalf of Mr Levet that there has been any example of the wife repatriating funds to Russia or anywhere else outside the immediate reach of this court.  I think that deals with the matters that are contentious. 

24. Finally, there is an application for costs by the wife against the husband.  The basis for it is that the wife has had on foot an application that relied on conduct by the husband.  A direct example occurred and an example of the husband’s highhanded attitude to the parties' assets, to the wife's assets occurred on the eve of the hearing and without notice.  Dealing with the matters under s.117, generally parties bear their own costs.  The Court has power to make an order.  In doing so it is required to consider the financial circumstances of the parties.   I do not know about the earnings of the two companies, I think the metal products company has now been sold on the husband's version.  I think there is not a huge stream of income from the food company, if any.  The husband works two days a week in his profession and the wife is his practice manager. That is all I know.  Neither party is in receipt of legal aid.  There is nothing particularly about the conduct of the proceedings inasmuch as filing documents or attending at court.  The wife would be heard to complain about disclosure, as I have said.  The husband has been substantially unsuccessful.  The orders that he seeks today - I am not sure what he had on the formal record - some of them are agreed to by the wife or in same terms as the wife's application, but he has been substantially unsuccessful. There has been no breach of court orders, but certainly in the catchall provision the husband has caused the problems today.  He has turned what would have been a straightforward matter into something more lengthy and he has been substantially unsuccessful in relation to matters.  The integrity of the judicial process in property proceedings is entirely jeopardised by unilateral action and lack of disclosure. We might as well close the Court up if the parties take action that they know will be controversial without getting permission and if they do not provide timely disclosure.  There is a way of dealing with it.  The authorities say the Court will just make every inference against that person.  But it is not a very satisfactory mechanism.  So it seems to me for those reasons the husband should pay the costs of the wife of and incidental to these proceedings.  

I certify that the preceding twenty-four (24) paragraphs are a true copy of the reasons for judgment of Judicial Registrar Loughnan

Associate: 

Date:  20 October 2009