Morrow and Morrow

[2013] FamCA 367

FAMILY COURT OF AUSTRALIA

MORROW & MORROW [2013] FamCA 367

FAMILY LAW ─ INTERLOCUTORY APPLICATION ─ INJUNCTIONS ─ Where the wife sought injunctions restraining the husband from dealing with the commercial entities which he controls other than in the ordinary course of business ─ Where it was the wife’s expectation at separation that the parties had an unencumbered house and at least $1.5 million in cash due to the sale of their interest in a business ─ Where the Court found that the husband had wasted by gambling significant funds which are unspecified, failed to account for $850,000 from the sale of the business, and failed to properly account for about $156,000 from the funds withdrawn from the mortgage on the house ─ Where the Court considered it appropriate, in light of the husband’s failure to make proper disclosure, to make the injunctive orders sought by the wife, restraining the husband from dealing with assets other than in the ordinary course of business ─ Where the Court also considered it appropriate to make the orders sought by the wife for the provision of financial documents and trading information by the husband

FAMILY LAW ─ SPOUSAL MAINTENANCE AND CHILD SUPPORT ─ Where the wife sought orders for spousal maintenance and orders for urgent child maintenance ─ Where the husband conceded that the threshold test in s 72 of the Family Law Act1975 (Cth) for spousal maintenance was satisfied ─ Where the wife sought a departure order in relation to any assessment which might issue in the future ─ Where the Court was of the view that there is no power to make a departure order until such time as an assessment is issued ─ Where the husband’s evidence in relation to his income was unsatisfactory ─ Where the Court was left with comfortable certainty that the husband’s assets exceeded those which he disclosed and that his income exceeded that which he asserted ─ Orders made for spousal and child maintenance

Child Support (Assessment) Act 1989 (Cth) s 139
Family Law Act 1975 (Cth) s 72

APPLICANT: Ms Morrow

RESPONDENT: Mr Morrow

FILE NUMBER: SYC 2294 of 2013

DATE DELIVERED: 15 May 2013

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Rees J

HEARING DATE: 15 May 2013

REPRESENTATION

COUNSEL FOR THE APPLICANT: Ms Mastrofilippo

SOLICITOR FOR THE APPLICANT: York Family Law

COUNSEL FOR THE RESPONDENT: Ms Doring

SOLICITOR FOR THE RESPONDENT:

Warren McKeon Dickson

Lawyers

Orders

IT IS ORDERED BY CONSENT

1. That within 7 days from the date of Orders the parties shall do all acts and things and sign all documents necessary so as effect a sale of … B Street, Town C (B Street) for the best price reasonably obtainable and for the purposes of implementation of this Order the parties shall do the following:

   1.1List the Properties for sale by private treaty with D Real Estate Agents, (Agent) with the costs of and incidental to such appointment to be borne equally by the parties;

   1.2The sale price at which B Street shall be listed shall be mutually agreed upon by the parties or, in the absence of agreement reached at a price recommended by the Agent;

   1.3The parties shall each co-operate in every way with the Agent including (without limiting the generality of the foregoing):

   (a)      making the keys available to the agent;

   (b)allowing inspection of B Street at all reasonable times requested by the agent;

   (c)doing or saying nothing to hinder or prevent a sale being effected;

   (d)ensuring B Street is in a neat and clean condition at the time of inspection by the agent and prospective purchasers; and

   (e)signing all documents requested by the agents in relation to the listing for sale of B Street, including but not limited to an Agency Agreement, except a contract or agreement for sale which has not been authorised by the parties’ solicitors;

   1.4The parties shall instruct E Conveyancers (Conveyancer) to have the conduct of the sale of B Street on behalf of both parties and the costs of and incidental to such appointment to be borne equally by the parties as and when same fall due;

   1.5The parties shall each execute a contract for sale in the form prepared by the Conveyancer; and

   1.6Neither party may confer on any agent without the consent of the other party any right to any sole or exclusive agency in respect of B Street or to any commission.

2. On settlement of the sale of B Street, the proceeds of sale be paid in the following manner and priority:

   2.1All costs and expenses of sale including but not limited to legal costs and disbursements, marketing costs, agents commission, and auction expenses;

   2.2The amounts required to pay all municipal and water rates outstanding;

   2.3The amount required to discharge the mortgage in favour of Bendigo and Adelaide Bank registered dealing number … (B Street Mortgage); and

   2.4In payment to of the balance then remaining to a controlled money account until the determination of the proceedings.

3. In the event B Street fails to be sold by private treaty within a period of three months from the date that the property has been listed for sale then both parties shall take all necessary steps and execute all documents necessary to cause B Street to be sold by auction at the earliest possible date at a price to be agreed on between the parties and failing such agreement to be determined by the President of the Real Estate Institute of New South Wales or his nominee and that the proceeds of the said sale be distributed as set out in Order 2.

4. Pending further Order both parties shall do all acts and things and sign all documents necessary to cause all rental income received with respect to B Street to be applied in payment of all outgoings associated with B Street, including but not limited to:

   4.1The mortgage repayments in relating to the mortgage in favour of Bendigo and Adelaide Bank registered dealing number … that is registered on the title of B Street (B Street Mortgage);

   4.2The house and contents insurance;

   4.3Water and Council rates; and

   4.4Electricity, telephone and foxtel.

5. In the event that either party refused or neglects to execute any deed or instrument necessary to give effect to these Orders then the Registrar of the Court is appointed pursuant to Section 106A of the Family Law Act, to execute such deed or instrument in the name of such party and to do all things necessary to give validity and operation to the deed or instrument.

IT IS ORDERED UNTIL FURTHER ORDER

1. That other than in the ordinary cause of business, the husband be restrained by injunction from encumbering, further encumbering, drawing against any loan facility, selling, dealing with or in any way dealing with any property in his name or in joint names of the husband and any other person or the underlying assets or the shares in any and all Entities associated with the Husband or in which the Husband has an interest in (Entity/Entities being a company or companies in which the husband is a director or a shareholder; or a trust in which the husband is an appointor/co-appointor or trustee/co-trustee) including but not limited:

   (a)the parties' former matrimonial home or the mortgage secured against it, being the property situated at … F Street, Suburb G in the State of New South Wales;

   (b)H Family Trust;

   (c)I Pty Limited;

   (d)J Assets Pty Limited;

   (e)J Pty Limited;

   (f)J Mortgage Pty Limited;

   (g)K Pty Limited;

   (h)The husband’s super with L Super Fund being account number …; and

   (i)Any other property or asset.

2. That within 14 days from the date of these Orders, the husband provide to the wife such of the following documents as are in his possession:

   (a)Contracts, Deeds, Agreements and all other documents evidencing the sale of the husband and the wife’s interest in Business M in or about 2008 together with all documents evidencing the receipt of sale proceeds such documents to include but not limited to all bank statements evidencing the deposit of the sale proceeds as well as all source documents (including bank statements, letters, emails and all other documents) evidencing the dealing with the sale proceeds which were paid by instalments from about 2008 until 2011 and then in one lump sum in 2011; and

   (b)All documents evidencing how the parties mortgage account in respect of the mortgage secured against the Suburb G property increased from $1.60 in 2011 to the current balance such documents to include but not limited to bank statements, tax invoices, agreements, deeds and all other documents showing the dealing with or the application of funds transferred or withdrawn from the mortgage account.

3. That on a monthly basis the husband in his personal capacity as well as in his capacity as the controller of the H Family Trust and the Entities referred to in Order 6 hereof, provide to the wife’s solicitors the following:

   (a)Bank statements for each account operated by each of the entities referred to herein;

   (b)MYOB or similar records showing Trial Balance and Profit & Loss Statements;

   (c)BAS (unless the BAS reporting is quarterly whereupon the provision of the BAS will be on a quarterly basis); and

   (d)Copies of all Contracts, Agreements or Deeds entered into by any of the entities and any third parties including any loans, purchase of loan books, consulting agreements to provide consulting services and all other documents showing or tending to show the trading activities of each of the entities referred to herein.

4. That pursuant to s.72 and s.74 of the Family Law Act 1975, the husband:

   (a)pay as and when fall due the mortgage repayments in relation to the former matrimonial home at … F Street, Suburb G in the State of New South Wales as well as meet outgoings on the said home being internet, telephone, Foxtel, council rates, water rates, electricity and home and contents insurance;

   (b)Pay to the wife the sum of $600 per week by way of periodic spouse maintenance; and

   (c)maintain the wife in the Family Private Health Cover with HCF with extras at the same level that the fund was as at the date of the Parties’ separation.

5. That pursuant to s.139 of the Child Support (Assessment) Act 1989 the husband pay to the wife or as she may direct in writing the sum of $750 per week by way of periodic child support such payments to continue until the Child Support Agency issues a child support assessment and pay the children’s education expenses and Family Private Health Cover with HCF at the same level that the fund was as at the date of the Parties separation.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Morrow & Morrow 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 SYDNEY

FILE NUMBER: SYC 2294 of 2013

Ms Morrow

Applicant

And

Mr Morrow

Respondent

EX TEMPORE

REASONS FOR JUDGMENT

introduction

1. Before the Court is an application by Ms Morrow (“the wife”) in relation to the property of the marriage between her and Mr Morrow (“the husband”).  The proceedings before the Court seek interim orders. 

2. The first order which is sought is in respect of the sale of a property owned by the parties at Town C and that order will be made by consent. 

3. In addition, the wife seeks injunctions restraining the husband from dealing with the commercial entities which he controls other than in the ordinary course of business and that application is opposed by the husband. 

4. The wife also seeks orders for the provision of financial information and that order is opposed by the husband in part. 

5. The wife further seeks orders for spousal maintenance and for urgent child maintenance and those orders are opposed in part also by the husband.

6. In the application before the Court, the wife also seeks an order for lump sum spousal maintenance in the sum of $200,000 and an order for interim property settlement in the sum of $200,000.  Before me, those applications are not pursued and the wife concedes that she cannot today, point to a fund to satisfy that application. 

7. The husband, for his part, concedes that the wife meets the threshold test in s 72 of the Family Law Act1975 (Cth) as a precursor to her application for spousal maintenance.

8. The husband submits that the proper order of the Court is that the wife should be paid $30,000 from monies in the family trust. 

background

1. The parties commenced cohabitation in 1996 and married in 1997.  There are three children, N, aged 11, O, aged 10, and P, aged 2.  O is an autistic child.  The wife has been a full-time parent to the children. 

2. The parties separated on 22 March 2013, the wife remaining in the family home at Suburb G (“Suburb G”) with the children. 

3. The husband has been the financial controller of the family’s assets and he works in the financial industry. 

4. In October 2010, the documents indicate that the mortgage over Suburb G had a balance of $1.60. 

5. In 2011, the parties sold their interest in a business for $1,577,652.  The whole of that sum was paid into accounts controlled by the husband.  There is no evidence of other funds in the account at the time, but the evidence is that the parties had bought and sold real estate prior to the sale of the business and it may be that they had other funds in bank accounts.  It was the wife’s expectation at separation that the parties had an unencumbered house and at least $1.5 million in cash. 

discussion

1. The evidence is that the mortgage on the house is now $456,000 in debit and that the amount remaining from the sale of the business is about $56,000.  It is the wife’s case that the parties should have funds in excess of $2 million, the disappearance of which is unexplained by the husband. 

2. The husband’s explanation for the missing funds was this.  He says he gambled away an amount, but he is unable to quantify the amount.  In his affidavit, he says:

   I cannot say how much I gambled, but I acknowledge that it was a large amount.

   The husband says he invested $600,000 in superannuation for himself and his wife, $300,000 for each of them.  However, the documents which were tendered in the wife’s case indicated that the total investment in superannuation was $372,844. 

3. The husband says that he used some of the funds to provide capital needed to set up the entity in which he now operates his current business, J Proprietary Limited.  There is no evidence of the amount which was needed to set up that business.  That evidence would have been peculiarly within the control of the husband and must be obvious from the records of the company and its loan accounts.  I cannot assume that the amount which was required to set up the business was of any substance. 

4. The husband says he paid $100,000 into a “Bendigo margin lending investment” and “about $30,000 in interest on the Bendigo loan”.  He gives no evidence of the investments which were made from the margin lending facility, again, evidence which must have been available to him.  Accordingly, I find that the sum of $100,000 is not accounted for. 

5. The husband further says that he paid $150,000 to $200,000 in tax debts.  Again, there is no attempt at accuracy on his part. 

6. The husband says that the balance of the funds was expended on living expenses, but there is no attempt to quantify or particularise those expenses.  It is the unchallenged evidence of the husband that $50,000 was spent on a holiday which was undertaken by the parties and the children and $30,000 was spent on the purchase of shares in racehorses. 

7. It is my calculation that the husband has accounted for $783,000, adopting the figure of $200,000 for tax, and taking into account the sum of $56,000 remaining in the trust account, leaving about $750,000 unexplained. That amount, however, arises to $850,000 if the margin loan investment remains unaccounted for. 

8. In relation to the draw down on the mortgage to the extent of $456,000, the husband says that $170,000 was used to purchase a share in a property at Suburb Q, although the bank records show a withdrawal from the bank accounts of $150,000.  

9. He says a further sum of $150,000 was used to purchase “[businesses in his field]”.  There is, however, no evidence of the nature of the business or businesses or of the income derived from them. 

10. The husband has accounted therefore for a total of $300,000 from the mortgage draw down, leaving $156,000 unexplained, except for the unsupported assertion that that money was used for living expenses. 

11. It is against that history that I come to consider the wife’s application for injunctions.  

12. The husband has wasted by gambling significant funds which are unspecified.  He has failed to account for $850,000 from the sale of the business and has failed to properly account for about $156,000 from the funds withdrawn from the mortgage.  In those circumstances, I consider it appropriate to make the orders which the wife seeks, restraining him from dealing with assets other than in the ordinary course of business. 

13. Turning then to the wife’s application for spousal maintenance, noting that the threshold issue is conceded.  The reasonableness of the wife’s claimed expenses was challenged by counsel for the husband.  The first challenge was to her claim for a payment of $70 a week for entertainment.  I find that expense reasonable.  The next challenge was to a claim of $185 a week for holidays and in the circumstances of interim maintenance, I do not propose to include that expense.  The wife no longer has a cleaner and therefore I will deduct a further $63 from her expenses and she does not pay for the scholarship fund of $40 a week or the expenses for the dog of $60 a week Therefore deducting $348 from her claimed expenses, leaves $613, which I round down to $600 a week as being her reasonable expenses. 

14. In relation to the children’s expenses, I firstly note that an assessment has been sought from the Child Support Agency, but no assessment has issued. In those circumstances, the power of the court to make an order for maintenance is found in s 139 of the Child Support (Assessment) Act 1989 (Cth). The wife, in her application, seeks a further order that the court make a departure order in relation to any assessment which might issue in the future. I take the view that I have no power to make a departure order until such time as an assessment is issued, and therefore, no further order will be made in accordance with that application.

15. The wife claims that the proper expenses of the children amount to $1076 per week.  From that amount, I will deduct, consistently with my earlier ruling, the sum of $200 per week, which is claimed for holidays.  The education expenses of $130 a week are paid by the husband and he has told the court that he will continue to pay them.  I therefore find that the reasonable expenses of the children are $746 a week, which I will round up to $750. 

16. The amount required therefore to support the wife and the children is $1,350.  It is the husband’s case that he does not have the capacity to pay.  I have already dealt with the failure of the husband to account for capital sums of approximately $956,000.

17. In the husband’s case, he tendered a schematic chart showing the various corporate entities to which reference will be made, all of which are operated under the “umbrella” of the family trust and its trustee K Pty Limited. It was not disputed that the husband controls the trust and its subsidiary entities.  

18. The husband’s evidence in relation to his income was unsatisfactory. In the husband’s affidavit at paragraph 37, he estimates a total payment to his corporate entities from R Pty Limited for contract work to be $40,000 to $50,000.  It is not clear why the husband could not be specific since the records must have been available to him.  Documents tendered by the wife show that the amount actually received was $99,140, almost double that which the husband estimated. 

1. Turning to the husband’s Financial Statement, in Part B at item 2A, he states his income to be $5 a week.  In item 2B, he claims expenses of $2,999 a week.  The income of $5 a week is said to be the husband’s share of rent from the jointly owned property at Town C, which is owned as to 99 per cent by the wife.  In his expenses, the husband claims the whole of the mortgage over the Town C property of $530 a week, although it is common ground that the rent for Town C is applied to the mortgage and the husband meets only the shortfall. 

2. There is no mention in Part D of the Financial Statement of any income from the various corporate entities operated under the umbrella of the family trust.  There is no mention in Part D of the asserted personal taxable income of $28,506 for the year end at 30 June 2012, to which the husband refers in his affidavit. 

3. Under the heading “Trust distribution from [H] Family Trust”, the husband has inserted “NK” for “not known”.  Under the heading “Benefit from Employment” at item 14 on the Financial Statement, the husband again says “NK”, in contrast to item 18 where he discloses payment of $566 weekly on his behalf by K Pty Limited and J Pty Limited. 

4. Documents tendered by the wife demonstrate deposits into the accounts of various entities paid by way of commission.  Those entities were J Mortgage Pty Limited, J Pty Limited and J Assets Pty Limited.  Those deposits total $44,955 in March 2013 and $45,072 in April 2013.  Those three accounts may not represent all of the accounts of the various entities.  The schematic diagram which was tendered by counsel for the husband shows seven separate entities.

5. K Pty Limited clearly has a bank account because a deposit of $2,000 from K Pty Limited was made on 3 April 2013 into the account of I Pty Limited.  On 26 March 2013, $12,000 was withdrawn from the account I Pty Limited and transferred to K Pty Limited.  The picture drawn by the deposits into the accounts of the three companies to which I have earlier referred is but a part of the whole of the parties’ financial dealings.  It was clearly only the husband who could have provided the documents to complete the picture.  

6. The husband tendered the Business Activities Statements (“BAS”) for the periods to 31 December 2012 and 31 March 2013 for the following entities: Trustee for H Family Trust, J Assets Pty Limited, J Pty Limited and J Mortgage Pty Limited.  No business activities statement was tendered for I Pty Limited, although that entity operates bank accounts into which commissions are paid.  No source documents have been provided to indicate whether expenses claimed by one entity are referable to another.

7. The documents which were tendered were produced by the husband’s accountants and were therefore available to him had he chosen to ask for them.  I do not accept that the BAS which were tendered give an accurate or reliable picture of the husband’s income from all sources. 

8. There was no real or helpful attempt by the husband to comply with his obligations to make disclosure, such disclosure being clearly within his power. 

9. I am left with a comfortable certainty that his assets exceed those which he discloses and that his income exceeds that which he asserts. 

10. In those circumstances, I propose to make an order that he pay spousal maintenance of $600 per week and child maintenance of $750 per week.  I note that in the husband’s application, he seeks orders that he continue to pay outgoings on Town C and the children’s schooling expenses, the medical benefit insurance premiums and electricity, telephone, Foxtel, internet and rates in relation to the Suburb G property.  Those orders will be made.

11. The only remaining issues are the orders sought by the wife at paragraphs 4 and 5 of her interim application seeking the provision of documents and provision of trading information in the future by way of disclosure.  As to order 4, the husband should provide such documents as are within his possession.  In relation to order 5, the wife seeks a monthly accounting for each of the business entities.  In the circumstances set out earlier in these reasons as to the husband’s failure to make proper disclosure, it is reasonable that he do so and I propose to make that order.

I certify that the preceding forty-two (42) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Rees delivered on 15 May 2013.

Associate: 

Date: 27 May 2013