MAWSON & HARKNESS
[2018] FamCA 1082
•19 November 2018
FAMILY COURT OF AUSTRALIA
| MAWSON & HARKNESS | [2018] FamCA 1082 |
| FAMILY LAW – PRACTICE AND PROCEDURE – Where the wife seeks orders for disclosure – Where the husband asserts documents have been provided – Where the husband can provide details of when the documents were provided in answer to a further order for disclosure – Where orders are made for documents to be provided. FAMILY LAW – PROPERTY – Interim Orders – Where the husband seeks that a property be transferred to him on an interim basis – Where the Court is to exercise its power under s 79 of the Family Law Act 1975 (Cth) conservatively – Where if the property is transferred and encumbered the Court is not satisfied that this can be undone – Where no order is made transferring the property. |
| Family Law Act 1975 (Cth) ss 79, 80 |
| Hickey & Hickey & Attorney-General for the Commonwealth of Australia (Intervenor) (2003) FLC 93-143; [2003] FamCA 395 In the Marriage of Harris & Harris (1993) FLC 92-378; [1993] FamCA 49 |
| APPLICANT: | Ms Mawson |
| RESPONDENT: | Mr Harkness |
| FILE NUMBER: | SYC | 7604 | of | 2016 |
| DATE DELIVERED: | 19 November 2018 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Loughnan J |
| HEARING DATE: | 19 November 2018 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr O’Ryan QC |
| SOLICITOR FOR THE APPLICANT: | Broun Abrahams Burreket |
| COUNSEL FOR THE RESPONDENT: | Mr Campton SC |
| SOLICITOR FOR THE RESPONDENT: | Barkus Doolan |
Orders
Orders are made in terms of paragraphs 1, 1.1, 1.2, 2, 2.1, 2.2, 2.3, 3, 4 as amended, 4.1, 4.2, 4.3, 4.4, 5, 5.1, 6 and 7 of “Attachment A” attached to the wife’s outline of case provided on behalf of the wife on 19 November 2018, as set out hereunder:
1. Within 28 days from the date of this Order the husband provide to the wife:
1.1a list of all margin loans and/or debt facilities obtained by the Harkness Family Trust in the period 1 January 2016 to date, including:
1.1.1the date the debt facility was obtained;
1.1.2the financial institution that provided the debt facility;
1.1.3the amount of the debt facility;
1.1.4if the debt facility has been closed,
1.1.4.1the date the debt facility was repaid; and
1.1.4.2the sum repaid; and
1.1.5unless previously provided copies of the relevant application forms and bank statements supporting 1.1.1 to 1.1.4, to the extent such documents are in the husband’s custody and control.
1.2a reconciliation of the asset sales listed below by the Harkness Family Trust and the use and application of the net sale proceeds:
1.2.1the B Pty Ltds investment in February 2017;
1.2.2the C Pty Ltd investment in March 2017;
1.2.3the D Bank shares in or about May 2018;
together with supporting documentation, noting the disclosure by the husband to date comprises those documents set out in Annexure “A” hereto, including but not limited to:
1.2.4documents recording the sale price; and
1.2.5bank statements and/or such other documents available that record the application of the sale proceeds.
2 On the 28th day of each alternate month, commencing 1 February 2019:
2.1the husband and the wife provide to the other a complete set of bank statements and credit card statements for the preceding month for all bank accounts in their respective names, in the name of a company or trust within their respective control and/or on which they are authorised to transact, including but not limited to those accounts nominated in Annexure “B”;
2.2the husband provide to the wife details of any shares and/or securities acquired and/or sold by the husband and/or the Harkness Family Trust in the preceding two months together with supporting documentation; and
2.3the husband provide to the wife details of all advances and/or distributions made by the Harkness Family Trust in the preceding month and in the event there has been no determination of the distributions at that time, then the husband disclose the present intention of the advance.
3 In the event the wife is assessed to pay income tax for the financial year ended 30 June 2018, the tax referrable to any distribution declared to the wife by the Harkness Family Trust in the financial year ended 30 June 2018 shall be paid by the husband directly to the Australian Taxation Office within seven days of the wife providing the husband a copy of her Income Tax Assessment for the financial year ended 30 June 2018 together with a calculation of the tax to be paid by the husband pursuant to this order.
4 By 14 March 2019 the husband file and serve an affidavit setting out with specificity:
4.1details of all monies borrowed by the husband from Ms E Harkness and/or all monies gifted from Ms E Harkness to the husband for the period dated 1 July 2017 to date including:
4.1.1the date each sum was provided;
4.1.2the quantum of each payment or borrowing made to the husband;
4.1.3the application of the funds provided to the husband; and
4.1.4in the event, any sum has been repaid to Ms E Harkness, the date of such payment and the quantum repaid.
4.2details of all distributions, drawings, advances or such other payments made by the Harkness Family Trust for the benefit of the husband, the wife, F Pty Limited, Ms E Harkness or Mr G Harkness for the period from 1 July 2018 to date.
4.3noting the husband contends the wife had the benefit of the funds as stated in the Barkus Doolan letter to Broun Abrahams Burreket dated 31 October 2018, a detailed calculation of how the husband contends the sum of $243,304.15, being the disclosed drawings by the wife recorded in the draft Financial accounts for the Harkness family Trust in the financial year ended 30 June 2018, has been applied, including:
4.3.1the date the alleged expense was made;
4.3.2the entity to whom the alleged payments were made; and
4.3.3the purpose of the payment.
4.4with respect to each of the loans identified at items 46 – 51, 54 and 65 of the Balance Sheet marked AH-1 to the affidavit of the husband sworn 1 November 2018 (the Westpac loans):
4.4.1details of the security provided for each of the Westpac Bank loans; and
4.4.2details of the use and application of the Westpac Bank loans.
5 The husband be restrained from causing any further advances and/or distributions to be paid and/or declared by the Harkness Family Trust:
5.1to the wife without first providing the wife 21 days’ written notice of his intention to do so, save and except for those funds paid directly to the wife or applied to the payment of the mortgage secured on title to the property situated at [H Street, J Town] presently in the amount of $1,730.00 per week; and
6 Within 28 days from the date of Order the husband provide to the wife a comprehensive written response to the letter from Broun Abrahams Burreket to Barkus Doolan dated 12 February 2018 attached at Annexure “C”.
7 The parties be relieved of the obligation to attend a Conciliation Conference given the parties attended a private mediation on 19 September 2018.
The Court notes that the orders made in terms of paragraphs 2.1, 2.2, 3 and 7 are made by consent.
Otherwise the Applications or Responses for interim orders by the parties are dismissed.
An order is made in terms of paragraph 7, as set out hereunder, of the Amended Response to an Application in a Case filed on behalf of the husband as to credit card statements only and within the same time it is ordered that any covering letter providing the bank statements over the period required by that order, a copy of that letter also being provided to the solicitors for the husband.
7. That the wife provide within 28 days all cred card statements for the K Partnership for the period 1 January 2012 to date.
The costs of the parties of and incidental to the proceedings today are reserved.
ATTACHMENT B
PROCEDURAL HISTORY
·17 November 2016 The wife swore a Financial Statement.
·17 November 2016 The wife filed an Initiating Application.
·13 December 2016 The husband swore a Financial Statement.
·14 December 2016 The husband filed a Response to Initiating Application.
·15 December 2016 The wife swore an affidavit.
·16 December 2016 The wife filed an Application in a Case.
·13 February 2017 The husband filed an Amended Response to Initiating Application.
·13 February 2017 The husband filed a Response to an Application in a Case.
·13 February 2017 The husband affirmed an affidavit.
·13 February 2017 The husband swore a Financial Statement.
·13 February 2017 The wife swore an affidavit.
·13 February 2017 Ms L swore an affidavit on behalf of the wife. She gave evidence about the husband’s behaviour.
·29 May 2017 Orders were made by consent providing for each party to make specific disclosure. The orders (Order 1.9.1 and 1.9.2) sought disclosure by the husband of the current value of the Harkness Family Trust investment assets - C Pty Ltd and B Pty Ltd investment.
·30 June 2017 Mr M of N Group completed an Expert Report in which he valued the O Group that comprises O Pty Ltd and P Pty Ltd as trustee of the Q Trust.
·8 August 2017 Directions were made by Registrar Campbell.
·28 September 2017 Orders were made by consent.
·20 October 2017 On the application of the wife a subpoena was issued to R Bank.
·7 November 2017 The child Ms E filed a Notice of Objection to the subpoena to R Bank.
·23 November 2017 On the application of the husband a subpoena was issued to the wife’s solicitors.
·24 November 2017 The wife swore an affidavit.
·27 November 2017 Leave was granted to inspect documents produced by R Bank
·7 December 2017The wife’s solicitors filed a Notice of Objection to the subpoena to the wife’s solicitors.
·8 December 2017 The wife completed a Financial Questionnaire.
·11 December 2017 The husband completed a Financial Questionnaire.
·14 December 2017 Orders were made by consent for access to subpoenaed documents.
·12 July 2018 Mr S of T Group completed an Expert Report in which he valued:
·The Harkness Family Trust;
·U Investments Pty Ltd;
·U Financial Services Pty Ltd;
·the Harkness Superannuation Fund;
·V Pty Ltd;
·the K Partnership; and
·the estate of the wife’s late father,.
·17 July 2018 The wife filed an Application in a Case.
·17 July 2018 The wife swore an affidavit.
·17 July 2018 The wife swore a Financial Statement.
·15 August 2018 The parties signed consent orders that provided as follows:
6.That pending further order and without admissions, from the date of the making of this order, the Husband in his personal capacity and his capacity as the sole director of U Financial Services Pty Limited ATF Harkness Family Trust is restrained from declaring and/or paying any distribution to the wife in relation to the Harkness Family Trust, or on her behalf, without first giving to the wife 28 days’ notice of his intention to do so.
7.The Husband shall pay direct to the Australian Taxation Office, forthwith upon presentation by the Wife of her Notice of Assessment for the Financial Year ended 30.6.17 the Wife’s income tax assessed up to the sum of $35,471 and provide to the Wife a copy of the receipt of payment forthwith upon the said payment being made.
8.The Wife’s Application in a Case filed 17 July 2018 be adjourned to the first available date after 19 September 2018.
The parties have not received a sealed copy of the orders and they are not on the Court portal. However, the parties are proceeding on the basis that orders have been made.
·20 August 2018 This was the return date of the wife’s Application in a Case filed on 17 July 2018. The proceedings were adjourned because the parties were attending a private mediation arranged for 19 September 2018.
·19 September 2018 The parties attended a private mediation. The matter did not settle.
·1 November 2018 The husband swore an affidavit.
·1 November 2018 The husband swore a Financial Statement.
·1 November 2018 The husband filed a Response to an Application in a Case. This was in response to the wife’s Application in a Case filed on 17 July 2017.
·1 November 2018 The wife’s solicitors wrote to the husband’s solicitors and enclosed a copy of a proposed minute.
·2 November 2018 The husband filed a an Amended Response to an Application in a Case.
·5 November 2018 Loughnan J adjourned the proceedings to 19 November 2018.
·12 November 2018 The wife swore a second affidavit.
ATTACHMENT C
FINANCIAL DISCLOSURE BY THE HUSBAND
The husband has filed three Financial Statements in which he disclosed the following:
13/12/201613/02/17 01/11/18
Income 5,891 4,983 3,846
Expenditure 9,492 7,615 7,434
Property 2,421,511 1,892,136 3,394,739
Superannuation 694,082 694,081 861,468
Liabilities 3,910,249 3,910,839 2,104,815
Financial Resources 100,866 100,866 nilIncome
Salary, P Pty Ltd 2,884 2,884 2,885
Dividends 12 12 13
Rent 910 910 910
Harkness Family Trust 1,177 1,177 -
Total 4,983 4,983 3,836Property
W Street 1,500,000 1,500,000 1,850,000
Westpac Bank # 2,285 2,285 1,434
R Bank # 9,961 4,850 3,119
X Bank # 14,553 13,749 10,614
Company Y shares 2,895 2,895 6,960
Westpac Bank shares 6,732 10,899 10,043
F Pty Ltd - - 127,563
Shares, U Investments Pty Ltd 825,185 275,185 1,331,706
Motor vehicle 1 - 4,700 3,000
Motor vehicle 2 - - 7,500
Interest, O/P nil - nil
Harkness Family Trust - - 10,852
Household Contents 50,000 50,000 25,000
Wine collection 9,000 9,000 8,000
Power tools and equipment 900 900 800
Jewellery and watches - - 9,000
Funds held by solicitors - 17,673 -
Total 1,412,511 1,892,136 3,394,739Superannuation
Harkness Family Superannuation 658,748 658,748 823,010
R Bank Superannuation 35,333 35,333 38,358
Total 694,082 694,081 861,468Liabilities
Home mortgage 127,000 127,000 127,000
Other mortgage 1,818,908 1,815,908 1,806,985
Amex 26,613 3,234 18,856
Westpac Bank credit card 1,293 871 3,994
Z Bank 142 - 2,800
R Bank 6,615 6,615 1,991
Westpac Bank credit card 678 211 nil
Harkness Family Trust 128,000 128,000 21,384
Personal guarantee, AA Bank 1,804,000 1,804,000 -
Loan, daughter Ms E for legal fees - 25,000 121,804Total 3,910,249 3,910,839 2,104,815
Financial resources
The Harkness Family Trust 100,866 100,866 -
The husband swore an affidavit on 1 November 2011 being the date on which he swore his third Financial Statement. In the affidavit he disclosed the following:[1] (at [21] & AH--1):
[1] Aff H 01/11/18 [21], AH-1.
Assets
W Street 1,850,000
Westpac Bank # 6,875
R Bank # 4,887
X Bank # 10,651
Company Y shares 3,135
Westpac Bank shares 10,515
F Pty Ltd 49,831
Shares, U Investments Pty Ltd 1,331,704
Motor vehicle 4,000
Motor vehicle 7,900
Interest, O/P -
Harkness Family Trust (854,633)
Household Contents -
Wine collection -
Power tools and equipment -
Jewellery and watches -
Funds held by solicitors -
Legal fees paid 143,548
Sports club membership -
Harkness Family Superannuation -
R Bank Superannuation 37,491U Super & F Superannuation Fund 867,043
Liabilities
Home mortgage -
Other mortgage -
Amex 81,015
Westpac Bank credit card -
Z Bank -
R Bank 02 5,209
Harkness Family Trust 202,099
Personal guarantee, AA Bank -
Loan, daughter Ms E for legal fees -
Loan from daughter Ms E 121,804
Westpac Bank #40 759,908
Westpac Bank #16 156,000
Westpac Bank 53 349,605
Westpac Bank 00 253,055
CGT on sale of Trust shares 319,285
Westpac Bank 12 4,726
Westpac Bank 76 199
Westpac Bank 63 0
28 Degree card 93 1,290
Westpac Bank 34 545,737
CGT on sale of helicopter 148,050
CGT on sale of Business BB 94,500
CGT on. Sale of W Street 252,390
Tax on winding up of U Investments 75,606
Costs of sale of W Street 36,663
Depreciation in OG valuation 159,671Inclusion of expenses in OG accounts 367,872
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 Mawson & Harkness 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: SYC7604 of 2016
| Ms Mawson |
Applicant
And
| Mr Harkness |
Respondent
REASONS FOR JUDGMENT
These are proceedings for interim orders in the context of proceedings between husband and wife for settlement of property. The wife is 54 years of age. She has a fledgling business as an alternative healer. The husband is 53 years of age and is a financial planner through a vehicle called O Group (“OG”). They started to live together in 1986, were married in 1987 and separated under one roof in February 2016 with the husband vacating the former matrimonial home in about March of the next year. They have two adult children, Ms E who is 28 years of age and Mr G who is 26 years of age.
The relief sought by the wife is found in the wife’s outline of case where at Attachment A she seeks a number of orders which are really in the nature of discovery and disclosure. She seeks within 28 days that the husband provide to her a list of the margin loans or debt facilities obtained by the Harkness Family Trust including certain details, a reconciliation of the asset sales by the Harkness Family Trust and the use and application of the proceeds in relation to something called the B Pty Ltd, the C Pty Ltd and some D Bank shares together with the supporting documentation and source documents indicating the sale price and the fate of the moneys.
She seeks a reciprocal order for the provision by the husband and wife to each other of bank statements and credit card statements for the preceding month. She seeks that the husband provide to her details of shares and securities acquired or sold for the preceding two months, and, in relation to those two prayers, the husband agrees. She also seeks and the husband opposes that the husband provide her with details of all advances or distributions made by the Harkness Trust in the preceding month and if there has been no distribution, the present intentions for any advances.
She seeks an order about taxation obligations that might fall to her arising out of distributions to her from a trust, and the husband agrees to provide that information. She seeks in paragraph 4 that the husband file an affidavit setting out certain information in relation to borrowings from the parties’ daughter Ms E or moneys gifted by her to the husband including specific details and details of distributions drawing and advances made by the trust for the benefit of the husband, the wife, a company F Pty Limited and the two children, and, in relation to that order, I understand that there is a level of agreement about providing that information.
The wife sought that information by 1 February 2019. Given that the accounts will not be completed until March, I suggested to the parties that the provision might be made in the middle of March. I did not hear any strong opposition to that proposal. I think the only prayer in order 4 that was disputed or objected to by the husband was a call for a reconciliation about the use and application of a sum of $2 million. I will come back to that in a minute.
An order was sought that the husband be restrained from causing advances or distributions from the trust to the wife without certain notice except for funds paid directly to her or applied to the mortgage secured on the property she lives in, or distributions to either of the children without the wife’s written consent. An order is sought that there be a comprehensive response to a letter dated 12 February 2018 from the solicitors for the wife to the solicitors for the husband.
The husband, for his part, seeks that within 14 days the wife transfer to him, subject to the existing encumbrances, her interest in a property at H Street, J Town (“the J Town property”) in the State of New South Wales and that the husband forthwith upon that transfer, refinance the loan secured on that property. He seeks an order that he cause the mortgage to be paid thereafter and that he be restrained from borrowing against the security of that property, a sum greater than the existing facility of $1.5 million. He seeks that if he fails to comply with the order about making the mortgage payments, he is to sell a property at W Street in Sydney and to apply the proceeds to various expenses including CGT on that sale and reduction in the OG loan. He seeks an order that the wife provide within 28 days bank statements and credit card statements for a particular partnership, I think, associated with a family farming enterprise from 1 January 2012 to date.
That last prayer is emblematic of the proceedings. I am told that this order has been complied with, that the documents have been provided.
We have two obviously intelligent parties, people of substance, who are represented by two of the most experienced firms dealing with family law and two very senior advocates, and they dare to come before the Court with a case made up of: “You have not provided this”, “Yes, I have.” That is disgraceful.
As I understand the background facts, the husband says that he came into the marriage with not much. He says that the wife came into the marriage with an interest in a farming enterprise associated with her family. Both parties to some extent, and particularly the husband, were engaged in that farming enterprise. The husband will say that his involvement was quite influential and that he made considerable inroads into improving the farming endeavour. He gives evidence about representations that were made to him by the wife’s father about his expectation in the future, perhaps, an expectation of an interest in the enterprise.
That farming involvement ceased about 10 years ago, maybe a bit more. The parties created an interest in O (referred to as O or O Group) with a partner. They had a three quarter interest in this enterprise and the partner held a one quarter interest. Money was borrowed for the purposes of that enterprise. The parties borrowed about $3 million. About $2 million of that went through to the enterprise, and it has been applied in a certain way.
The OG debt is now about $1.5 million. The borrowing was made through AA Bank, and the parties knew some years ago that the facility was to end at the end of this year. The parties also knew at least two years ago, that the facility would not be renewed. The husband complained to AA Bank and was told that the bank is no longer providing business loans of the type provided to OG.
That situation has led to the order sought by the husband in relation to the J Town property. The husband says that he has been advised by lenders that the parties will not be able to borrow solely against their business assets and that they will have to rely on real estate to restore the OG loan. The refinance is necessary because without it OG cannot operate. OG provides the husband’s income through wages of about, I think, $200,000 a year and some other benefits including distributions that are made through the Harkness Family Trust. That in turn is the source from which mortgages are paid on other pieces of real estate. The J Town property secures a loan of about $900,000.
The husband and his partner, Mr CC, need to find coverage for the OG debt. They correspond and Mr CC is willing to establish a facility using his resources to cover 25 per cent of the required finance. That leaves the husband to find the rest. The husband proposes that the parties resort to the equity in their properties. The J Town property is in the wife’s sole name and has an equity, he says, of about $645,000. The property at W Street, Sydney has an equity of about $440,000. The husband considers that the most effective way of raising the funds is to borrow against the J Town property and that’s why he seeks the order he does.
As I understand his proposal, in circumstances where each of the parties says that they want to retain the J Town property by way of property settlement, he would take a transfer of the property, he would encumber it, refinance the present liability and then presumably exhaust the security by borrowing to the limit allowed. His argument would run that the issue would still be alive for a trial judge or an agreement at the end of the day, to transfer the property back to the wife. There was no detailed argument about this this morning.
As I understand it, it would be argued on behalf of the husband that there is room under s 79 and s 80 of the Family Law Act 1975 (Cth)(“the Act”) (s 79 being the property settlement power, s 80 being a catch-all power of things that the Court can do) whereby there could be an interim order for the transfer of the property. It will be argued on behalf of the wife that that is beyond the scope of s 79 on an interim basis. I do not have to decide whether the Court has power or not. The power in s 79 is a power to change interests in property.
It is a nice argument as to whether one could change interests in property once and then change them again. There is a decision of Hickey & Hickey & Attorney-General for the Commonwealth of Australia (Intervenor) (2003) FLC 93-143 which confirms that a property settlement order can be made of many parts. I do not know that it has been authoritatively decided that the exercise of power in s 79 is exhausted by being exercised in relation to something. It is not a problem that arises in respect of cash but I suppose none of that really matters. The thing that we do know about this proposal is that the J Town property is to be fully encumbered.
The question is not whether a transfer from wife to husband could be undone in a way that decisions like In the Marriage of Harris & Harris (1993) FLC 92-378 spoke about (in terms of a conservative exercise of power under s 79) and something being done that could be undone on a final basis. The problem here is the fact that the property is to be fully encumbered. There is a significant range of dispute between the parties about the final property settlement. The husband argues that the property settlement should be effected by him keeping all or much of what there is: OG and the J Town property as well as receiving a payment from the wife. The wife has a very different view of the settlement that should be achieved between her and the husband.
In those circumstances, identifying a conservative exercise of power under s 79 is not without its complexities. Following from the representations said to have been made by the wife’s father there is a dispute in the substantive proceedings about who holds the beneficial interest in shares associated with the farming enterprise. Not only might there be an argument in relation to contribution to those shares but there might also be an argument in relation to their ownership.
It is the wife’s case that the husband has acted inappropriately through his control of the Harkness Trust. He is the appointer, he owns the shares, and is the director of the trustee of the trust. The wife contends that the husband has treated the trust funds as his own and has made dispositions from the trust by way of loans and by way of distributions, without explaining to her all of those things. He has been peremptory in the sense that he has made distributions to the wife, he has not involved her in the process and has then made disbursements from those distributions, representing that they were disbursements in respect of the wife’s debts. On advice, the wife has some questions arising out of the trust accounts. The husband would say that the accounts are provisional accounts, should not be read as final accounts and “it will be alright on the night”.
There have been substantial distributions made to the parties’ daughter. It is asserted on behalf of the husband that there is evidence available, to the effect that she has needed funds. But, unfortunately, there have also been distributions to her that were in fact used for the husband’s legal fees in these proceedings. It is said on behalf of the husband that the wife was involved in the finances of OG, she knows the truth of the circumstances of the parties’ daughter, she had been told over time about what has happened and knows that the husband has been discharging debt and she should be satisfied with those circumstances.
At least some correspondence between the wife’s solicitors and the husband’s solicitors has not been answered. There is no excuse for that. It is of concern that matrimonial funds are being applied to the husband’s legal fees without there being the courtesy of the wife having an opportunity to consent or even receive advance notice. Even on the husband’s case, there has been the fairly paternalistic arrangement whereby the husband has made drawings on the wife’s behalf from the trust and expects that the wife should simply assume that he has applied those funds properly. Now, that attitude might have been acceptable and probably was acceptable during the marriage. However, as I said during the course of submissions, the husband now finds himself in a different positon. He is a trustee, and has all the obligations of a trustee, but he is now in a conflict of interest. Suddenly he and one of the beneficiaries are in different interests. They have been in litigation against each other and that meant that he had to be very careful about disclosing what he intended to do, seeking permission and explaining his conduct. I am satisfied that he has not done that.
As to the detail of the orders sought on behalf of the wife for disclosure, I have not tried to go through all of the documents tendered to check the evidence about his compliance with previous requests. It is a complete answer to a further order for production, if the husband wants to make it, that on the blank day of blank he provided that information. If it is information called from the past and he provided it, he should provide the detail of the letter under cover of which it was provided. There is no mischief to him in that approach.
Where there is some ambiguity about the information I will simply make the orders and leave the husband to provide information about what he has already done or provide the information now.
As to the sort of problems the parties have had, there was an order made by consent that the husband pay a tax obligation of the wife arising out of a distribution from the trust to her. There was a long course of correspondence from the wife’s solicitors saying in effect, “Well, this distribution has been made. There’s going to be a tax implication. What’s going to be done about it?” There was later correspondence to the effect: “Well, you haven’t told us so we put in two tax forms – one showing the distribution and one not. There’s going to be a tax obligation. What about it?” Finally, there was the consent order that the husband pay the tax and provide a receipt. He complied with the order, today. There is apparently a story to be told about that. I understand from his counsel that the husband thought that he had made the payment and did not know that the payment did not go through until a further complaint was made by the wife. There is no excuse for the husband because if he had set out to comply with the order that he provide a receipt to the wife, he would have known that the payment had failed.
In this context, the wife is asked to agree to surrender her property to refinance the OG loan. From her point of view the husband has traded on her interests in the trust without her permission or knowledge, there were large movements of money and she has not seen the associated records, and there have been distributions to their daughter that have already led to problems in the wife’s relationship with her. With that background the husband provides no evidence that he has the required finance lined up and he does not appear to have considered all other options for raising money such as the other assets on the balance sheet, such as a helicopter, for example, there are other pieces of property that have equity in them and so on. The wife now says that she is not sanguine about the property that she wants to retain as part of her settlement being encumbered in the way that the husband proposes. She says in effect “I’m not convinced that it’s necessary and I don’t agree to it.” The wife does not agree to transfer the property to the husband and has been given advice that such “temporary” transfer might be beyond the Court’s power.
All of this was played out to some extent during the course of submissions. As to the legal position, the Court is to exercise its power under s 79 conservatively. I cannot be sure that if the property is transferred to the husband and then is fully encumbered that that can be undone on a final basis. I will not make that order. As I said, it might be the husband’s proposal is a good idea. I do not know. However, whereas the parties are free to take risks and make a judgment about those things, in my view, I am not. I note that the husband also canvasses selling the W Street property. That too may have been, with other assets, a source of the required funds.
The other aspect of the husband’s amended response was the provision of bank statements associated with the farming enterprise from 2012. I am told they have been provided. In those circumstances I cannot find that they were not provided and I will make no further order.
I turn then to the orders sought by the wife and I see no problem in granting them. One response from the husband is that the wife was the bookkeeper of the business. Most of the orders deal with things that have happened since 2016.
As to the proposed Order 1, I will make it. Order 2 and 2.1 and 2.2 are agreed. I see no problem with 2.3, it is a prospective order in relation to advances or distributions made by the trust in the preceding month. So it is a reporting as we go forward month by month as to what has happened and some explanation about the intention and I think that is fine and will avoid problems.
Paragraph 3 is agreed. As I said, 4 is not opposed per se but it was suggested that the date could be later. I proposed 14 March. I will make Order 4 but substitute 14 March 2019 for 1 February 2019. But I am not going to make Order 4.5. As Mr Campton says, there was an explanation made in at least two places as to the disposition of moneys including $2 million of the $3 million OG loan. I am satisfied about that. If something else is required – some source documents or whatever – that is a different thing.
As to Order 5, I will make 5.1. Order 5.2 would interfere with advances or distributions to be paid to the parties’ children. In my view before that restraint is considered notice must be provided to the children. No undertaking as to damages have been offered as far as I am aware. I will not make Order 5.2. I am going to make Order 6. It is said that the letter is too broad - I confess I have not read it - but if it is too broad, that can be the response but it needs to be responded to. Order 7 is agreed.
I certify that the preceding thirty-two (32) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Loughnan delivered on 19 November 2018.
Associate:
Date: 18 December 2018
Key Legal Topics
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Family Law
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Commercial Law
Legal Concepts
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Costs
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Procedural Fairness
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Intention
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