Meeta and Sibi and Anors (No 3)

[2012] FamCA 1011

FAMILY COURT OF AUSTRALIA

MEETA & SIBI AND ANORS (NO 3) [2012] FamCA 1011

FAMILY LAW – Interim orders; third party debts; part payments.

Family Law Act 1975 (Cth)

APPLICANT: Ms Meeta

RESPONDENT: Mr Sibi

2^ND RESPONDENT: Mr H Sibi

3^RD RESPONDENT: BI Pty Ltd

4^TH RESPONDENT: BC Pty Ltd

FILE NUMBER: MLC 9309 of 2011

DATE DELIVERED: 5 December 2012

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: Cronin J

HEARING DATE: 28 November 2012

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Werner

SOLICITOR FOR THE APPLICANT: Aughtersons

COUNSEL FOR THE 1^ST, 2^ND

AND 4^TH RESPONDENTS:

Dr Ingelby

SOLICITOR FOR THE 1^ST, 2^ND

AND 4^TH RESPONDENTS:

Gadens Lawyers

SOLICITOR FOR THE LIQUIDATORS OF THE 3^RD RESPONDENT: Leonard Legal

Orders

1. From the net proceeds of the sale of the property at C Street, D Town, a payment be made to Mr H Sibi in the sum of $30,169.71 as reimbursement for expenses paid by him personally with respect to the C Street property.

2. That the net proceeds of sale thereafter be deposited in an interest bearing account in the names of the parties pending further order of the court.

3. That the amended application in a case filed by the second respondent Mr H Sibi on 29 November 2012 be dismissed.

4. That the application in a case of the father filed 29 November 2012 be dismissed.

5. That all outstanding applications otherwise await a listing for trial.

IT IS CERTIFIED:

1. That pursuant to Order 19.50 of the Family Law Rules 2004 it was reasonable to engage counsel to attend.

2. Reserve the costs of all parties of and with respect to this application.

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

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLC 9309 of 2011

Ms Meeta

Applicant

And

Mr Sibi

1^st Respondent

And

Mr H Sibi

2^nd Respondent

And

BI Pty Ltd

3^rd Respondent

And

BC Pty Ltd

4^th Respondent

REASONS FOR JUDGMENT

1. The parties to this interim financial dispute were not married but they have a child so for my purposes, I shall refer to them as “the mother” and “the father”.  There is another respondent who is the father’s brother.  I shall refer to him as “the brother”.  There are also two other respondents.  One is the company BC Pty Ltd.  That is a corporate entity of which the brother and the father are the shareholders and directors.  A second company which is also a respondent is BI Pty Ltd but this company is in liquidation and the liquidator has taken no part or shown no interest in the proceedings.

2. This case has wandered through the court process and I have given reasons previously about the difficulty in obtaining information to make clear and final orders.  That position is now much clearer due to the involvement of lawyers acting for the father and the brother.

3. From the sale of real property, some of which was held by a corporate entity, there is approximately $86,000 in trust.  That sum is the focus of these interim disputes.

4. There are three issues that require a decision:

   (a)should the brother be paid about $30,000 being money he paid on behalf of the parties or either of them and/or their entities by way of debt reduction;

   (b)should the sum of $86,000 be used to satisfy arrears of a mortgage encumbering a real property in which the father resides, albeit that he does not appear to pay any of the periodic expenses; and

   (c)should the brother be paid about $40,000 from the sum to satisfy the shortfall on a financial debt over a Mercedes Benz motor vehicle where the car has been repossessed and although leased by a company, the father and his brother are personal guarantors.

5. Other issues as between the parties were compromised and do not need to be mentioned here. 

6. This case was dealt with on the submissions of counsel without cross-examination upon reading the affidavits of all parties.  The brother and the father relied upon affidavits filed 6 August 2012, 7 November 2012 and 27 November 2012.  The mother relied upon an affidavit filed at the hearing on 28 November 2012.  Each issue needs to be considered separately as they are not interwoven.  I propose to deal with the issues sequentially. 

7. The brother claimed $30,169 for “expenses” paid concerning the properties owned by corporate entities in D Town.  It was the brother’s evidence that he had lent BC Pty Ltd that sum.  In a schedule annexed to his affidavit, the brother pointed to the home loan instalments, insurance, water and rates that he had paid by way of a loan to the company. 

8. In her responding affidavit, the mother disputed the entitlement without documentary evidence.  It was common ground that those documents had been provided to establish the brother’s entitlement to payment.  However that was not until immediately prior to the hearing.  It was not the mother’s case that the brother had not paid these debts.  Counsel for the mother conceded that the language in her affidavit was clumsy but she could not deny the payments were made, rather, she just did not know.

9. Counsel for the mother submitted that there was no inconvenience for the brother having to wait until trial when comprehensive discovery would have been complete.

10. The brother’s counsel submitted that the debts as alleged were not seriously challenged. 

11. When analysed, the position was that the brother knew the consequences of the mortgage and associated commitments not being met by the company.  The company was in fact the registered proprietor of the property.  He lent the money to the company.  No loan account document was produced to show that the company recognised the debt as a result of the brother’s payment into its coffers.  However, this was not a debt involving the company in liquidation.

12. Ultimately on the dispute about the division of the property between the mother and the father, what will be divided is the net value of the father’s shares in the entity.  It was common ground that the father and his brother had equal shareholdings. 

13. Before the father’s entitlement could be ascertained, the balance sheet of the company would have to be determined and if its debts have been paid by the brother and a loan account has been raised, it is inconceivable that the net value of the shares of the father will not be affected by the company’s obligation to repay the brother’s debt. Consideration would have to be given to s 79(10) of the Family Law Act 1975 (Cth) (“the Act”) about the entitlement of the company as well as its ability to recover its debt. It was not contentious that the company currently has assets and as such, I consider its debt by way of properly raised loan accounts should be paid.

14. On this issue, there is a superficial attraction to waiting until trial to see what the evidence finally shows but here it is not controversial that the trust funds are a direct result of the sale of the legal interests of the company regardless of what equitable interest the parties may have.  There is therefore an inevitability about the repayment of the loan account.  If there is ultimately an argument about the genuineness of the loan account, because the company and the brother are parties to the proceedings, I see no reason why remedial action could not be taken at trial to rectify any error.

15. In my view, the amount should be paid to the company because the payments were incurred on its behalf and it is a matter for the directors to distribute those funds if the satisfaction of the loan account has been called for.

16. The second issue concerns the arrears of a mortgage.  In his affidavit, the father said that although he lived in the secured property, he had no capacity to pay the payments.  He said that if the debt was not paid, he would have to sell the property.  The mother’s response was simply that the father had helped himself to the money and caused his own dilemma.  The bank statement showed that the mortgagee had placed a limit on the credit facility available to the parties.  Thus, there was a fixed amount which could be accessed but the father had exceeded it. 

17. Whilst the excess of the limit may ultimately be adjusted at trial, the mother’s concern was that the assets for division were now very small and care had to be taken to ensure that any adjustment now could be undone later.  It concerns me that the father is unemployed and has no long term plan.  It may be that he will still have to sell the house encumbered by the relevant mortgage in the foreseeable future.  Counsel for the mother urged me not to permit the funds to be used to pay the debt because the adjustment at trial may just not be that simple. 

18. The dilemma on the state of the evidence requires me to look at what assertions are being made by each party and in this particular case, by the mother.  Counsel submitted:

    ·    At trial, the pool will be very small;

    ·    The single largest asset is the home of the mother;

    ·    The mother brought that home into the relationship;

    ·    The child of the relationship is cared for predominantly by the mother although that is a future contested issue between the parties;

    ·    The s 75(2) or equivalent factors (because the parties were in a de facto relationship), will focus on the significant health issues of the mother;

    ·    There will be an argument that the father has wasted significant sums of money on drugs;

    ·    The father has obfuscated particularly about discovery;

    ·    The father has undisclosed assets;

    ·    There are substantial costs orders against the father which are still unpaid; and

    ·    There are arrears of spousal maintenance under an order totalling $37,000 which is currently in a state of suspended animation.

19. I agree with counsel for the mother that this is not a matter where the father should have the indulgence he seeks.  It would appear on the facts that he caused the problem and because of all of those factors outlined above, I am not convinced that any long-term adjustment may be possible.

20. The third issue related to a request by the brother for the cash funds to be used to cover a potential claim against him for the shortfall on the repossessed sale of a Mercedes Benz.

21. The circumstances surrounding the removal of the car by a finance company are controversial.  It is asserted by the father and the brother that the mother called the finance company as a consequence of which, the car was repossessed well-knowing that the father was to undertake an ordered sale pursuant to a court order.  I am not able to make findings about what happened and specifically unable to say whether the mother misled the Court as well as her own lawyers and those representing the father about what she did.

22. What brings the matter before the Court is a claim by the brother that he had had an opportunity to sell the car in an orderly fashion and had he done so, he claimed he could have sold it for approximately $70,000.  He maintained that he obtained this value from “research” he had done but he did not say what it was.  The mother disputed the brother’s statement and relied upon internet searches which she produced to show that the sale price was within a reasonable proximity of the market valuation. 

23. The evidence of the mother is hearsay but at least she identified her source.  In my view, the mother’s position is the proper one to follow.  That does not obviate the dilemma which was the sale price did not completely cover the debt in any event.

24. I am satisfied on the basis of an agreed statement between counsel that the debt, albeit a company one which relates to the company now in liquidation, was guaranteed by both brothers.  It would seem on what understanding I have of the financial position, that the father has next to nothing by way of assets.  The brother’s assets are therefore vulnerable and he would have to deal with the father about sharing any of the loss on an indemnity basis.  To make an order in respect of this issue from the funds where the ownership is disputed, would be inappropriate.  First, I am unsure whose money I would be using.  Secondly, albeit the mother had the use of the car, I could not confidently say that the debt will ultimately be taken from the top of the pool of assets as one might expect.  For the reasons earlier mentioned about other debts, it may be that the debt belongs entirely to the father.  Thirdly, I do not have sufficient evidence to be confident that the liquidation will not solve the problem.  Fourthly, I am conscious that there is an assertion by the mother against the father that there are undisclosed assets.  If that was proved, the father would be able to meet his creditors including the finance company as well as refund any amount of money paid by the brother.  Fifthly, I am unsure what the brother’s financial position is but, as this was a company debt, he must bear some responsibility for it, absent evidence about arrangements to the contrary.

25. I agree with counsel for the mother that there are too many vagaries here to be satisfied that it is a just outcome to make the order sought on an interim basis.

I certify that the preceding Twenty Five (25) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin delivered on 5 December 2012.

Associate: 

Date:  5 December 2012