Murillo & Murillo

[2021] FamCA 326

FAMILY COURT OF AUSTRALIA

Murillo & Murillo [2021] FamCA 326

File number(s):

SYC 3325 of 2017

Judgment of:

ALTOBELLI J

Date of judgment:

24 May 2021

Catchwords:

FAMILY LAW – INTERIM SPOUSAL MAINTENANCE – Payment of mortgage on former matrimonial home – Where the wife is unable to support herself financially – Where the husband has re-partnered and had another child – Where husband claims no capacity to pay – Issues of inadequate disclosure by the husband – Adverse inferences drawn – Orders made for husband to pay mortgage repayments as and when they fall due.

Legislation:

Family Law Act 1975 (Cth) ss 72, 74, 75

Cases cited:

Redman & Redman (1987) FLC 91-805

Soblusky & Soblusky (1976) FLC 90-124

Weir & Weir (1993) FLC 92-338

Williamson & Williamson (1978) FLC 90-505

Number of paragraphs:

28

Date of last submission/s:

22 April 2021

Date of hearing:

22 April 2021

Place:

Sydney

Counsel for the Applicant:

Mr Todd

Solicitor for the Applicant:

Mills Oakley

Solicitor for the First Respondent:

Sarah Bevan Family Lawyers

The Second Respondent:

No appearance

Solicitor for the Independent Children's Lawyer:

Legal Aid NSW

ORDERS

SYC 3325 of 2017

BETWEEN:

MS MURILLO

Applicant

AND:

MR MURILLO

First Respondent

MS BEDOW

Second Respondent

INDEPENDENT CHILDREN'S LAWYER

ORDER MADE BY:	ALTOBELLI J
DATE OF ORDER:	24 MAY 2021

THE COURT ORDERS THAT:

1.The matter be placed into my docket.

2.The matter be listed for mention before me on 1 July 2021 at 9.30am.

3.Upon the making of these orders, the First Respondent husband shall be responsible for payment of the mortgage to Company E Loans Accounts …32 and …40, secured against the title of the property situated at and known as  L Street, Suburb K in the state of New South Wales (being the whole of the land contained in folio identifier …) (‘the Suburb K property’), as follows:

(a)Within 14 days of the date of these orders, the First Respondent shall pay or cause to be paid in full any amounts outstanding by way of arrears owing to Company E Loans in relation to Home Loan Accounts …32 and/or …40; and

(b)From the date of these orders, the First Respondent shall pay or cause to be paid the mortgage repayments in respect of the Suburb K property, or any shortfall, as and when they fall due.

Note:   The form of the order is subject to the entry in the Court’s records.

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 17.02 Family Law Rules 2004 (Cth).

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

REASONS FOR JUDGMENT

ALTOBELLI J:

1. This matter came before me as an urgent matter in my duty list.  An Application in a Case was filed on 15 April 2021 by the Applicant wife.  In this Application, she seeks a number of orders in relation to the allocation of the first Court date before a trial judge, injunctions, payment of mortgage and arrears, business valuation and other orders.  The Application is supported by an Affidavit of the wife that was sworn on 8 April 2021.  The most pressing matter arose from a notification the wife received from the mortgagee of the jointly owned property at Suburb K, that as a result of arrears and payment of the mortgage they would seek vacant possession and effect a mortgagee sale of the property.  The wife contended that arrears of over $132,000 had now accumulated on the mortgage.  When the matter came before me her counsel, Mr Todd, indicated that only orders 2, 3 and 4 were pressed on an urgent basis, with the remaining matters to be dealt with at a later date.

2. Order 2 sought the allocation of a first Court date before a trial judge.  This was not opposed by the solicitor who appeared on behalf of the Respondent husband, Mr Layson.  The Independent Children’s Lawyer in this matter, Ms Phillips, also appeared as there are outstanding parenting issues.  She was excused from attendance, but the Court infers that she also supports this matter going into a judge’s docket.  The proceedings commenced in 2017, has had multiple Court events, presents as an intractable dispute between the parties, and in the view of this Court, would benefit from going into a judge’s docket at the earliest possible time.  Order 2 is therefore granted.

3. Order 3 sought injunctions against the Second Respondent, Ms Bedow, who is the Respondent husband’s current partner.  As the Court was satisfied that the Second Respondent was aware of the present proceedings, the Court proceeded to deal with order 3 in her absence.  The Court was satisfied that the evidence supported the making of a temporary injunction in terms of order 3.  Ex tempore reasons were given.

4. The critical issue before the Court is related to order 4— the payment of the mortgage and arrears of what is referred to in the Application in a Case as ‘the Suburb K property’.  In this regard, it should be noted that the Applicant and Respondent consented to orders in terms of order 1c of the husband’s Response to an Application in a Case filed 21 April 2021.  The effect of this order is that money held in the Respondent husband’s solicitor’s trust account, being the proceeds of sale of a property at Suburb D, a suburb of Sydney, be applied towards the payment of arrears owing to the bank, with the balance to be paid against the remaining mortgage liability.  The payment of the arrears will remove the immediate urgency in this matter.  However the important issue that is still raised by order 4 is who is to continue to pay the mortgage in circumstances where both the wife and the husband contend that they have no capacity to do so, and there is a live dispute between them as to whether the property in question should be sold as part of the alteration of property interests between them.

5. As mentioned above, the husband filed a Response to an Application in a Case on 21 April 2021, in fact late in the afternoon before the matter came before the Court.  He sought a number of orders, but due to the late filing of his Response the Court declined to deal with any matter raised in his Response that was not directly relevant to the urgent issue that the Court was prepared to determine.  The Court notes that the husband raises issues about the application of funds to pay for business valuations as well as a single joint expert in the parenting case, the application of rental from the Suburb K property, and the sale of that property in the event that the mortgage payments cannot be met.  The husband also sought injunctions relating to the wife’s dealings with the various mortgage accounts.  For all practical purposes, the husband’s case was that he opposed any order requiring him to pay the mortgage.  The husband’s Response was supported by his Affidavit filed 21 April 2021.

6. Both the husband and the wife filed Financial Statements.

7. The background of this long-running and often intense litigation does not necessarily inform the determination of the issues before the Court.  Where it is relevant, it will be mentioned in these reasons.

   BACKGROUND

8. The wife is 43 years old and the husband is 40.  They commenced cohabitation in 2005, married in 2006, and separated in 2017.  They are divorced.  They have two children, Y who is 12, and Z who is 10.  The children live with their mother and do not spend time with their father.  The parties had a business that was involved in fitting out the interiors of buildings.  Historically, the impression formed from the evidence, as conflicting as it is, is that the business was quite successful.  The husband contends that there were a number of serious setbacks, even before the COVID-19 pandemic.  The value of the business, and the movement of money in and out of the business is a major issue raised by the wife in this case.  The wife contends that the property pool has been depleted by the husband in an amount of between two and three million dollars.  The husband concedes that on 17 July 2017 the company that operated the business loaned $709,160 to his current partner to enable her to purchase a home that they now live in with their own child.  The husband characterises this as a loan owed by his partner to the company.  The wife alleges that the property to which the loan was applied is in fact held on trust for the husband and the wife.

   THE SUBURB K PROPERTY

9. Turning to the Suburb K property, the mortgage of which is the focus of the present Application, it is common ground that the wife has received all the rental proceeds from this property for about two years since she vacated the property and moved to AA City with the children.  She has not met any mortgage repayments and, she contends, relies on these funds to live.  The husband concedes that he paid the mortgage until 12 May 2018.

10. A preliminary issue for the Court is to establish the precise source of power to make the orders proposed by the wife. No specific submissions were made in this regard by either party. The Court will treat this as an application by the wife for spousal maintenance applied for the purposes of meeting the mortgage over the Suburb K property. There are several reasons for this. Firstly, in the wife’s Application she frames her orders as distinguishing between injunctions and other orders. Order 3 is specifically described as a restraint by way of injunction, whereas order 4 is specifically described as payment of mortgage and arrears. It would be straining the words of order 4 to describe it as an interim property application. Moreover, and perhaps most significantly, both counsel for the wife and solicitor for the husband made submissions as if the wife was seeking maintenance. They both referred the Court to the evidence about need and capacity to pay. Thus, the Court concludes the wife’s application is one for interim maintenance orders, governed by ss 72, 74 and 75 of the Family Law Act 1975 (Cth).

11. For all practical purposes, the issue was about the husband’s capacity to pay.  No submission was made on his behalf as to what is commonly described the threshold issue, that is, that the wife was unable to support herself adequately.  The absence of such a submission is entirely appropriate.  The wife is residing at the home of the maternal grandparents with the two children.  She is not currently in paid employment and relies on Jobseeker, Family Tax Benefit and the rental received from the Suburb K property, as well as assistance provided by her parents.  She has not worked for a period of time.  She has a tertiary qualification.  She was previously employed in the family business. The wife’s Financial Statement shows a weekly deficit of $555, and that takes into account government benefits which should be excluded.  There is a dispute about whether or not she receives child-support – she says she does not, but documents produced by the husband suggest he does pay.  If he does pay child support, this provides that to the wife about $375 each week.  The wife discloses that she receives each week $264 as net rental from the property at Suburb K.  She contends that utilities and expenses pertaining to the property, presumably council and water rates, are deducted before the rental is received by her.  Whilst the solicitor for the husband, in veiled terms, raised concerns about the wife’s Part N expenses, the Court notes that it would not change the overall impression from the evidence before the Court that the wife is in need of maintenance, and has no capacity to pay the mortgage, despite being legally obliged to. 

12. The focus then turns to the husband’s financial circumstances.  The starting point is his Financial Statement filed 21 April 2021.  At Part B, he deposes to a weekly surplus of $451.  His income is $3,075 per week derived from the business.  He deposes that his partner is the only other income earner in his household, and earns $500 per week.  In relation to his expenses, the most expensive item, at $1,500 per week, is described as mortgage payments/rent paid to his partner, Ms Bedow.  In submissions, the husband’s solicitor clarified that this was, in effect, a payment of her mortgage, rather than a direct payment to her. 

13. In relation to property owned, the husband deposes to be a joint owner of the Suburb K property, the total value of which he estimates to be $1.2 million.  He deposes to a credit balance in a bank account of $2,200.  The Court notes that this is hardly surprising given that he deposes to a surplus of income over expenses each week.  The husband also deposes to have the sale proceeds of the Suburb D property held in trust, in the amount of $324,220.  The husband indicates that the value of his business interests is not known.  In relation to liabilities, he deposes that the total mortgage on the Suburb K property is about $805,000.  He has relatively small amounts owing on credit cards.  At Part N he deposes that $609 per week of expenses pertain to him personally, and $115 per week pertain to children, but he does not identify whether this is his child with the Second Respondent, or the children of his marriage with the Applicant. The Court assumes it is the latter.  In his Financial Statement he deposes that he is the sole officeholder of the three companies that seem to make up the business group: V Pty Ltd, T2 Pty Ltd and T1 Pty Ltd. He further deposes that he is the sole shareholder of the first two companies, and that T2 Pty Ltd is the sole shareholder of T1 Pty Ltd.

14. Various documents were tendered at the hearing, and became exhibits.  Exhibit A2 was a document entitled ‘Payments Overview’ provided by the Child Support Agency.  It indicates that as at 21 April 2021, the husband’s child support arrears totalled $33,135.52.  However, the same document indicates that since 7 February 2021, on the seventh day of each month until

    
    

    7 April 2021, he has been paying $1,623 each month by way of child support.  It is possible, the Court notes, that these monthly payments include an element of arrears.  Exhibit A3 was a trust account statement from the husband’s lawyers as at 21 April 2021.  This document indicates that the husband has paid a total of $98,162.27 by way of legal fees since 30 August 2018.  There appears to be a credit balance remaining of $7,000.  This year alone he has had the capacity to pay $14,361.60.  It is hard to avoid forming the impression that, at the very least, the husband has prioritised paying his lawyers over paying child-support and paying the mortgage on the Suburb K property.  No criticism of the quantum or the fact of lawyers’ fees should be implied by this observation.  It is nonetheless a reasonable observation to make on the evidence.

15. Exhibit K1 was a bundle of documents tendered in the husband’s case.  The focus will be only on those that are relevant to the Application before the Court.  A particular focus of the wife’s case was the mortgage reflecting a loan from the business to the husband’s partner.  At item M of exhibit K1, there is a copy of the mortgage dated 9 December 2017 between Ms Bedow and V Pty Ltd.  The date of the loan is 17 July 2017, the principal of the loan is $709,160, and the term of the loan is four years, making the date of repayment 16 July 2021.  The interest rate is fixed at 7% being the lower rate, and 9% being the higher rate.  The interest is payable annually in arrears with the first instalment due on 16 July at 2021.  If the Court has interpreted this document correctly, and if Ms Bedow has not yet made any repayments, this means that on 16 July 2021, a mere matter of months away, $709,160 is due back to the company as principal, together with simple interest estimated at $198,565, or $220,404 if compound interest.

16. A number of inferences can be drawn from this, bearing in mind that the onus was, at all relevant times, on the husband to disclose the circumstances relating to this loan, interest payments, and the imminent final repayment of it.  If the loan is repaid, then the company’s financial circumstances will benefit from an injection of over $900,000 which, one would have thought, would assist with liquidity, cash flow, as well as the balance sheet.  As the husband is the sole director and shareholder of the company, it would enhance his financial circumstances to this extent.  If, on the other hand, the loan is not repaid in accordance with the mortgage, the husband will reasonably be expected to provide to the wife and to the Court an explanation why.  Given that the husband deposes to paying to his partner $1,500 per week towards her mortgage, the Court would have expected him to also disclose how that figure was calculated, what proportion of the mortgage he was paying, and why. Paragraph 62 of the husband’s Affidavit is inadequate in this regard.

17. The husband produces documents relating to criminal proceedings against him and to answer allegations by the wife that he forged her signature on certain loan mortgage documents.  The Court is not quite sure what he intended to communicate by producing these documents, but this is the impression that the Court forms after reading them.  At the very least, the husband signed mortgage and loan documents on behalf of his wife, but certainly presented documents on the basis that she had signed.  The wife may well have a different interpretation of these events, but that is the impression created by the transcript of the criminal proceedings relating to the husband.  In the transcript of the extemporaneous reasons for judgment by the learned Magistrate, his Honour says that even though the loans were already approved, and he forged his wife’s signature for the sake of convenience, it was still a relatively serious step to engage in that sort of behaviour.  His Honour noted that the offender, the husband, does have a criminal history, the record of which contains a number of entries for different types of offences including offences of dishonesty.  He observes that it is not a record that would particularly assist the offender in seeking leniency that a person without such a record would be entitled to.  His Honour notes that clearly there was a breach of criminal law in this case, as evidenced by the plea of guilty.  He referred to the need of for general deterrence.  The husband was convicted on 18 July 2019 and fined the sum of $1,500.  Despite the clear reasons for judgment and his Honour’s specific use of the word ‘forgery’, at paragraph 30 of his Affidavit the husband “strenuously” denies forging his wife’s signature.

18. The question for the Court is whether the wife has reasonably satisfied the Court at an interim hearing that, notwithstanding the husband’s protestations, he does not have capacity to pay, he does indeed have capacity to pay the mortgage.

19. The wife was entitled to argue that the husband had, at all relevant times, a duty of disclosure to the Court about his financial affairs.  She contended that he had failed to discharge that duty and that, consistent with well-established authority, even at an interim hearing the Court should not hesitate to draw adverse inferences against him in relation to the issue at hand. The Full Court in Weir & Weir (1993) FLC 92-338, 848 made it clear that it is open to the Court to draw adverse inferences against a party who has deliberately failed to disclose their financial circumstances.

20. Whilst it is true that an interim hearing is not “as final or exhaustive a hearing as would be the case if one were hearing the matter finally” (Williamson & Williamson (1978) FLC 90-505), it is nevertheless open to the Court to making findings, noting that these findings will not be so precise as findings made at a final hearing (Redman & Redman (1987) FLC 91-805).

1. The issue is, assuming the husband does have some capacity, whether he was entitled to structure his affairs in a way that prioritised the financial obligations he owes to his new family, as opposed to his old family. The husband’s responsibility to his new family is a consideration captured under s 75(2)(e), the operation of which is helpfully summarised by the Full Court in Soblusky & Soblusky (1976) FLC 90-124 at 75,589:

   A Court is required under para. (e) to consider in a realistic way the fact that a party has assumed a responsibility to support another person, and the weight to be given to that fact depends upon the circumstances of each individual case. To adopt a view that in every case the responsibility referred to in that paragraph must be subjugated to the responsibility of the party of his or her spouse is in our view to unduly restrict the scope of para. (e) and may in particular circumstances produce a result which is unrealistic in the circumstances.

2. In considering this factor against the other factors under s 75, I am satisfied that the husband was not entitled to prioritise his new family at the expense of his former family.

3. What is self-evidently clear from the husband’s own Financial Statement is that he has the capacity to pay $451 each week towards the mortgage payments over Suburb K.  There is no reason why he should not be doing so.

4. The wife’s case appropriately draws attention to what might neutrally be described as the unusual financial arrangement that the husband has caused the company to enter into with his new partner.  A feature of this is that the company depleted its assets and possibly also its cash flow to the extent of $709,000. In addition to this, the husband’s personal income is also being depleted to the extent of $1,500 per week, paid to the Second Respondent.  Perhaps, in these circumstances, the husband would do well to reflect on how such a transaction might be viewed from the wife’s perspective, let alone the Court’s perspective.  Where is the benefit to the company, which is undeniably an asset available for distribution between the husband and wife in the present proceedings? 

5. At paragraph 109 of the husband’s Affidavit he describes the financial stress that the business has been under, as well as the economic impact of COVID-19.  He deposes to a significant downturn in sales for his business.  He says that in the March 2020 quarter, total sales amounted to $1,280,240 but that by the June 2020 quarter, business sales had reduced to $573,013.  The Court accepts his contention that sales are not a reflection of profitability.  He annexes his Australian Taxation Office business activity statements in the tender bundle.  The Court notes that such documents refer to the husband, and not to any of the companies comprising part of the business.  He produces statements for the periods of April to June 2020, July to September 2020, and October to December 2020.  Each of these statements report total sales of zero.  Quite apart from the inherent implausibility of the business  having no sales at all for the second half of 2020, there is the obvious inconsistency between paragraph 109 of the husband’s Affidavit, in which he says that the June 2020 quarter sales were $573,013, and the statement which he produces, which says nil.  Again, at all relevant times the duty of financial disclosure lay on the husband, and the wife was well entitled to raise concerns about this.

6. During submissions the Court was told by counsel for the wife that the weekly mortgage payments are $810 per week, consisting of both principal and interest.

7. The husband’s own evidence concedes that he has capacity to pay the sum of $451 per week.  The Court is satisfied that the husband in fact has the capacity to make up the difference between the actual mortgage payments, and the $451 per week surplus.  His own evidence suggests selective disclosure about his financial affairs, and a certain flexibility of financial arrangements that allows him to access company resources when he needs to.  The financial arrangements as between the husband and his partner are by no means clear to the Court.  As the Court is entitled to, the Court draws an adverse inference against the husband in relation to his financial affairs.  The orders sought by the wife at order 4 will be made.

8. This matter will come before me on a date to be advised.  There are outstanding issues about valuation and expert evidence in the parenting aspect of the case that need to be considered.  The orders sought by the husband in his Response to an Application in a Case filed 21 April 2021 need also to be considered.  The parties are encouraged to consider the broader implications of the Court’s observations of the evidence set out above.

I certify that the preceding twenty-eight (28) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Altobelli.

Associate:

Dated:       24 May 2021