Newport and Newport & Ors

[2017] FamCA 177

FAMILY COURT OF AUSTRALIA

NEWPORT & NEWPORT AND ORS [2017] FamCA 177

FAMILY LAW – PROPERTY – INTERIM PROCEEDINGS – Where the wife seeks an order that the husband and the second respondents sign authorities to enable her to obtain documentation currently held by the Australian Taxation Office – Whether the information sought by the wife from the Australian Taxation Office is of relevance to the issues in dispute – Where such documents are of relevance to the proceedings – Orders made in the terms sought by the wife.

FAMILY LAW – PROPERTY – INTERIM PROCEEDINGS – Where the wife seeks an interim injunction to restrain the husband and second respondents from dealing with the interests of two businesses – Where the wife asserts that there is a  risk that the husband and second respondents may deal with their business interests in a manner that diminishes or disperses matrimonial property – Whether the injunction sought should be made – Where there is a real risk that funds from the businesses may be applied and disbursed prior to the final hearing – Where appropriate for injunction to be granted.

Family Law Act 1975 (Cth) s114(3)

Evidence Act1995 (Cth) s 75

A & The A Group (2006) FLC 93-271
Alister v R (1984) 154 CLR 404
Andrew Garrett Wine Resorts v National Australia Bank Ltd (No. 6) (2005) 92 SASR 419
Beacham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618
Blue Seas Investments Pty Ltd v Mitchell and McGillivray (1999) FLC 92-856
Cardile v LED Builders Pty Ltd (1999) 198 CLR 380
Commissioner for Railways v Small (1938) 38 SR(NSW)
G and T (2004) FLC 93-176
Giumelli v Giumelli (1999) 196 CLR 101
Kelleher & Anderson [2007] FamCA 137
Killorgan Investments Pty Ltd v Baycorp Advantage Business Services Limited and Ors [2002] VSC 270
Lawson & Crawford and Ors [2014] FamCA 1012
Martin & Martin and Anor (No. 2) [2014] FamCA 232
Martiniello and Martiniello (1981) FLC 91-050
Mullen & De Bry (2006) FLC 93-293
Norton & Locke (2013) 284 FLR 51
Ryder & Lee [2009] FamCA 531
Sieling and Sieling (1979) FLC 90-627
Stowe & Stowe (1981) FLC 91-027
X Pty Ltd and Ors & Merhi [2015] FamCA 622
Yunghanns & Ors v Yunghanns & Ors (1999) FLC 92-836

APPLICANT: Ms Newport

1ST RESPONDENT: Mr Newport

2ND RESPONDENTS: Mr K Newport and Ms L Newport

INDEPENDENT CHILDREN’S LAWYER: Ms Maitland

FILE NUMBER: SYC 2571 of 2015

DATE DELIVERED: 16 March 2017

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: McClelland J

HEARING DATE: 31 January 2017

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Campton SC

SOLICITOR FOR THE APPLICANT: Pearson Emerson Meyer Family Lawyers

COUNSEL FOR THE 1ST RESPONDENT: Mr Lloyd SC

SOLICITOR FOR THE 1ST RESPONDENT: Mills Oakley Lawyers

SOLICITOR FOR THE 2ND

 RESPONDENTS:

Tiyce & Lawyers

Orders

THE COURT ORDERS PENDING FURTHER ORDER THAT:

1. The respondent husband and the second respondents shall not, without first providing at least fourteen (14) days’ written notice to the applicant wife, do any act or thing, or give any direction, which has the effect of: 

   (a)borrowing any monies from Company M ABN … and/or Company N ABN … except in the ordinary course of business;  

   (b)assigning, transferring, disposing of, or in any way dealing with, any of the assets of Company M ABN … or Company N ABN … except in the ordinary course of business;  

   (c)       closing down Company M and/or Company N.

2. The respondent husband shall, within seven (7) days of the date of these Orders, provide to the applicant wife’s solicitors a signed written authority and direction addressed to the Australian Taxation Office (“the ATO”) authorising the ATO to provide to Pearson Emerson Meyer Family Lawyers and to Mills Oakley Lawyers the following:

   (a)the respondent husband’s personal income taxation returns and notices of assessment for the financial years ended 30 June 1998, 30 June 1999, 30 June 2003 and 30 June 2004; and,

   (b)the taxation returns for the Mr K and Mr Newport Partnership, Mr K and Mr Newport trading as Company M ABN … for the financial years ended 30 June 1998, 30 June 1999, 30 June 2003 and 30 June 2004.

3. The second respondent, Mr K Newport, shall, within seven (7) days of the date of these Orders, provide to the applicant wife’s solicitors a signed written authority and direction to the ATO authorising the ATO to provide to Pearson Emerson Meyer Family Lawyers and to Tiyce & Lawyers his personal income tax returns and notices of assessment for the financial years ended 30 June 1998 to 30 June 2016 inclusive.         

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 Newport & Newport and Ors 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: SYC 2571 of 2015

Ms Newport

Applicant

And

Mr Newport

1^st Respondent

And

Mr K Newport and Ms L Newport

2^nd Respondents

REASONS FOR JUDGMENT

introduction

1. This matter concerns an application by the wife for procedural orders and an interim injunction intended to preserve marital property pending final hearing. The application is made in the context of an intensely contested matter involving competing applications for both property and parenting orders. The applicant is the wife and the first respondent is the husband. The second respondents are the husband’s mother and father (hereafter “the second respondents”). The second respondents are parties as a result of their involvement, with the husband, in two businesses called “Company N” and “Company M” (“the businesses”). The extent to which those businesses should be included in the matrimonial property pool is a central issue in the proceedings. The matter has been listed for final hearing on 16 October 2017. The substance of the wife’s interlocutory application is:

   ·Firstly, an order requiring the husband and his father to sign authorities to enable the wife to obtain documentation currently held by the Australian Taxation Office (“the ATO)” in respect to their earnings and those of the businesses; and,

   ·Secondly, injunctive orders to restrain the husband and second respondents from dealing with their business interests prior to the final hearing.

2. The first issue arises from a dispute between the parties as to whether the husband and wife are obliged to repay any monies to the second respondents in respect to monies which the husband and the second respondents assert they have either paid directly to the husband and wife, or which have been withdrawn from the businesses. The husband and the second respondents submit that they have been operating the businesses in partnership and that the husband has benefitted from loans and a disproportionate share of drawing from the businesses.

3. The second issue arises from the wife’s concerns that the husband and second respondents may deal with their business interests in a manner that diminishes, or disperses matrimonial property, prior to the final hearing of this matter.

Orders sought

1. This application is concerned with proposed orders 1, 2 and 3 of the wife’s  proposed “Minute of Orders” dated 31 January 2017 (Exhibit “A”) which are as follows:

   1. Until further Order, the respondent husband and the second respondents be restrained from doing any act or any thing or giving any direction without the consent in writing of the applicant wife which might have the effect of:

   1.1    Borrowing any monies from [Company M] and/or [Company N] except in the ordinary course of business;

   1.2    Assigning, transferring, disposing or in any way dealing with any of the assets of [Company M] or [Company N] except in the ordinary course of business; and

   1.3    Closing down [Company M] and/or [Company N].

   2.Upon the making of these Orders and before leaving the precinct of the Court, the respondent husband shall provide the applicant wife’s solicitors with a signed the written authority and direction to the Australian Taxation Office in the form attached to this Minute of Order and marked “1” to provide Pearson Emerson Meyer Family Lawyers and Mills Oakley Lawyers with his personal income tax returns and notices of assessment for the years ended 30 of June 1998, 1999, 2003 and 2004 and Partnership Tax Returns for the Mr K and Mr Newport Partnership, Mr K and Mr Newport trading as Company M ABN ... as at 30 June 1998, 1999, 2003 and 2004.

   3.Upon the making of these Orders and before leaving the precinct of the Court, the second respondent Mr K Newport shall, within 7 days, provide the applicant wife’s solicitors with a signed written authority and direction to the Australian Taxation Office in the form attached to this Minute of Order and marked “2” which includes his tax file number, to provide Pearson Emerson Maher Family Lawyers and Tiyce and Lawyers with his personal income tax returns and notices of assessment for the financial years ended 30 June 1998 to 30 June 2016 inclusive.         

Background

1. The husband and the second respondents contend that, in late 1996, they entered into a partnership to establish and run a business called "Company M." The parties are in agreement that the "Company M” was registered as a business on 17 January 1997 and that on 1 July 1999 the husband’s father, Mr K Newport, was added as a registered partner.

2. The husband and the second respondents contend that, in 2004, they commenced a second business, also in partnership, called "Company N." That business traded from the same premises in which the business "Company M" traded. Those premises are owned by the second respondents.

3. The husband’s father, Mr K Newport, contends that, from 1999 Company M and from its inception, Company N have traded from the premises owned by the second respondents at  O Street, Suburb P, at substantially less than market rent.

4. On 13 October 2005 the husband and wife purchased a property at Q Street, Suburb R in New South Wales (“the Suburb R property”). The husband and the second respondents contend that shortly after the Suburb R property was purchased, the husband with the full knowledge of the second respondents, commenced regularly and routinely transferring funds from the businesses into the Westpac Mortgage accounts secured against the Suburb R property and operated by the husband and wife. The husband and the second respondents contend that the purpose of this arrangement was to enable the husband to utilise the business funds to offset the outstanding mortgage secured against the Suburb R property, thereby reducing the interest payments. At the same time, it was contended that this arrangement ensured that funds were available to redraw from the home mortgage accounts, as and when it was necessary, to meet various expenses of the businesses when they arose.

5. The husband and the second respondents contend that the funds transferred from the business accounts into the mortgage secured against the Suburb R property were by way of interim loans from the businesses and that it was mutually understood that the funds would be repaid to the businesses.

6. It is further contended that shortly after the husband and wife purchased the Suburb R property, the second respondents consented to the husband taking a larger share of the drawings from the businesses than his father. The husband and the second respondents contend that this was to assist the husband and the wife who were facing financial challenges as a result of the acquisition of the Suburb R property and the financial burden of caring for their young children.

7. Again, the husband and the second respondents say that it was understood between them, that the disparity in drawings was by way of a loan from the businesses to the husband and those funds are repayable to the businesses by the husband. Annexure B to the affidavit of Mr K Newport summarises the amount that he claims is owing to him as result of the disparity in drawings taken from the businesses by the husband. The amount claimed is $1 021 155 (in the case of Company M) and $1 596 604 (in the case of Company N).

8. The wife, on the other hand, contends that in October 1997 the husband entered into a lease in his sole name at the premises owned by the second respondents for the purpose of carrying on the business known as "Company M". The wife further contends that in the period from 1 July 1997 until 30 April 1998, the business was recorded in its trading accounts as "[Mr Newport] trading as Company M."

9. The wife also contends that, on 17 June 2004, the husband registered a business "Company N" in his sole name, that business operated from the second respondents’ property at S Street, and that business paid rent to the second respondents. The wife asserts that the financial statements completed in these proceedings in respect to the business “Company N" have, from its commencement date, been completed as Mr Newport trading as Company N.[1]

   [1] Wife’s Case Summary Document filed 11 November 2016 at page 5.

10. The wife asserts that there is no valid partnership agreement between the husband and the second respondent, Mr K Newport, in respect to the businesses. In that respect, at paragraph 85 of the Wife’s Affidavit, dated 24 August 2016, she asserts that “the tax returns disclosed to date do not distribute the profits to Mr K Nicolas in any year”.

11. The wife further contends that in the period from March 2004 until May 2005, the husband drew upon the parties’ home loan facility increasing the mortgage by about $365 000. The wife asserts that those funds have not been properly accounted for by the husband or the second respondents.

12. The wife further asserts that in the period subsequent to the acquisition of the Suburb R property, the parties borrowed against the mortgage in respect to the businesses. Specifically, the wife alleges that on 18 June 2010, the parties obtained a further loan secured against the Suburb R property in the sum of $300 000 which was referred to as “Company M Loan”.

13. The wife alleges that between May 2012 and 31 December 2012, the husband withdrew a further sum of $200 000 from the parties’ home loan redraw facility secured against the Suburb R property. The wife contends that on 31 December 2012, as result of those withdrawals she requested the bank to freeze that account facility.

Issues

1. The issues to be determined are:

   1.Whether the information sought by the wife from the ATO of apparent relevance to the issues in dispute between the parties; and

   2.Whether the wife has established that there is a real risk that the husband and the second respondents may deal with the businesses such that the matrimonial property of the husband and wife may be depleted and/or disbursed prior to final hearing.

Consideration

Authorities to the ATO

1. Senior counsel for the wife submitted that the issue as to whether the husband and second respondents should be required to provide an authority to the ATO to release the parties’ taxation returns, in accordance with the orders proposed by the wife, is to be determined on the same basis that the Court would consider granting leave to issue a subpoena to the ATO. I agree that is the appropriate approach.

2. The following summary of the relevant legal principles in respect to subpoenas largely draws upon a similar summary that I set out in the case of X Pty Ltd and Ors & Merhi [2015] FamCA 622.

3. A subpoena must only be used for a legitimate forensic purpose. In considering this issue, it is unnecessary for the party issuing the subpoena to establish actual relevance. However, the party issuing the subpoena must “demonstrate [that] the documents have an apparent relevance to the issue or issues before the Court and in respect of which the subpoena was filed”.[2]

   [2] A & The A Group (2006) FLC 93-271 at 80,596.

4. While it is the case that the bar for establishing relevance is not high,[3] the party seeking to rely upon the subpoena must nonetheless establish that it is “on the cards” that the documents would bear upon and have relevance to the issues in the substantive proceedings.[4]

   [3] Martin & Martin and Anor (No. 2) [2014] FamCA 232 at [29] referring to Killorgan Investments Pty Ltd v Baycorp Advantage Business Services Limited and Ors [2002] VSC 270 at [7].

   [4] Martin & Martin and Anor (No. 2) [2014] FamCA 232 at [28] referring to Alister v R (1984) 154 CLR 404 per Gibbs CJ.

5. In terms of “fishing”, it is not legitimate for a party to issue a subpoena with a view to determining whether the issuing party has a case at all.[5]

   [5] See Unitingcare – Unifam Counselling & Mediation & Harkiss and Anor (2011) FLC 93-476 at 85,856 referring to Commissioner for Railways v Small (1938) 38 SR(NSW) 564 at 574-5 per Jordan CJ.

6. In that same context, in Ryder & Lee [2009] FamCA 531, Burr J adopted the following passage from the decision of Gray J in Andrew Garrett Wine Resorts v National Australia Bank Ltd (No. 6) (2005) 92 SASR 419 wherein his Honour said at 428:

   It is not enough for the party issuing the subpoena to raise a speculative possibility that the documents sought would assist the resolution of the dispute. The party supporting the subpoena must demonstrate that the documents sought in the subpoena are of real relevance to the issues in the case. It must be more than an outside chance that something useful might turn up in the documents.

7. In summary, it is not enough for a party issuing the subpoena to raise a “speculative possibility” that the documents sought would assist the resolution of the dispute. While the bar is not high, the party issuing the subpoena must demonstrate that the document(s) sought in the subpoena are of an “apparent relevance” to the issues in the proceedings. It must be more than “an outside chance” that something useful might turn up in the documents.

8. In these proceedings senior counsel for the husband contended that the documents sought from the ATO were of historical interest only, and therefore, are not relevant to the proceedings. In that context, it was noted that orders were made on 12 September 2016 for the husband to provide his personal income tax returns and the partnership tax returns for the businesses in respect to the 10 year period extending back to the financial year ending 30 June 2005. It was submitted that the issue should not now be reopened, particularly in circumstances where the wife had not referred to those income tax returns which have been produced by the ATO with a view to persuading the Court that the earlier income tax returns are now required.

9. The solicitor for the second respondents argued that the income tax returns predating 2005 were not relevant to the proceedings as the second respondents’ application relates to transactions extending back only to 2005.

10. I accept, however, the argument of senior counsel for the wife that the income tax returns of the husband and of the partnership for the business trading as “Company M” for the financial years ending 30 June 1998 and 30 June 1999, are of apparent relevance to these proceedings for the following reasons:

    1.   Firstly, they go to the issue as to whether the business was initially undertaken as a partnership, as contended by the husband and the second respondents, or whether the husband conducted the business as a sole trader.

    2.   Secondly, and more relevantly, the initial years of trading of Company M provide a baseline in terms of assessing the respective drawings from the business by the husband on the one hand, and by the second respondent, Mr K Newport, on the other. This is relevant because the husband and second respondents allege that in the period subsequent to 2005, the husband commenced taking additional drawings from the businesses that were over and above those taken by the second respondent, Mr K Newport. As noted, there is a claim by the second respondents against the matrimonial property in respect to what they assert are the additional drawings allocated to the husband.

    3.   Third, the tax returns of the husband and “Company M” are relevant in respect to the financial years ended 2003 and 2004, because those years immediately predate the financial year in which the husband and second respondents allege that the husband commenced taking additional drawings from the businesses.

    4.   Fourth, the tax returns sought in respect to the second respondent, Mr K Newport, are for the period 30 June 1998 to 30 June 2016 inclusive. In my view, they are again of apparent relevance to the proceedings in that they will indicate the income that the second respondent, Mr K Newport, has received from the businesses. This issue is relevant to the dispute between the parties as to whether or not Mr K Newport was in partnership with the husband, as alleged by the husband and second respondents or whether the businesses were conducted by the husband as a sole trader.

    5.   Finally, the tax returns in respect to the second respondent, Mr K Newport, for the period 30 June 1998 to 30 June 2016 are relevant in so far as they provide evidence as to the portion of drawings that Mr K Newport took from the businesses prior to 2005, as against the portion of drawings that he took from the businesses in the period post 2005. As noted, the period post 2005 is the period that the second respondents allege that the husband withdrew a greater proportion of drawings from the businesses.

1. Accordingly, I propose to make orders in terms of orders 2 and 3 of the orders sought by the wife in Exhibit A, with some amendment given that the parties are no longer within the precinct of the Court.

Injunctions

1. When proceedings are before the Court, the Court has broad powers to grant injunctive relief including for the purpose of preserving the status quo, and/or otherwise regulating the conduct of the parties, pending final hearing.[6]

   [6] See G and T (2004) FLC 93-176 at [53] – [54] and where it is “just or convenient to do so”: see Mullen & De Bry (2006) FLC 93-293 applying section 114(3).

2. Before an injunctive order is made, pursuant to section 114(3) of the Family Law Act 1975 (Cth) (“the Act”), the Court must be satisfied that it is “just or convenient” to grant such an injunction or make an interlocutory order.

3. By way of summary, the following principles are relevant to the Court’s consideration of the parties’ respective applications in this matter:

   a)In so far as the purpose of the proposed injunction is to restrain dealing with property pending the final hearing, the Court must address the question as to whether there is evidence of a risk that there may be a disposal of any assets that would defeat any anticipated order in the substantive proceedings. However, that is but one of a number of factors to be considered.[7]

   [7] Lawson & Crawford and Ors [2014] FamCA 1012 at [52] referring to Mullen and De Bry (2006) FLC 93-293.

   b)The applicant seeking such orders must establish “a real risk of assets being disposed of” prior to final hearing.[8]

   [8] Cardile v LED Builders Pty Ltd (1999) 198 CLR 380 at 428[122].

   c)In assessing that risk, it is not necessary for the applicant to satisfy the Court as to the probability of success of the applicant’s case.[9]

   [9] Beacham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618 at 622-623.

   d)In that context, as was noted in Kelleher & Anderson [2007] FamCA 137 at [195]:

   [The applicant] for injunctive relief… bears the onus of establishing, on the evidence, a real risk of assets being disposed of and also that such disposal may cause [his or her] claim to be defeated or prejudiced. It would not be sufficient merely to show that there is a risk of disposal of assets, or the asset pool being diminished, without also establishing that there is a risk that the [party’s] claim may be defeated or prejudiced if the injunction is not granted.

   e)A precondition to the Court granting injunctive relief is that the Court finds that “there is a serious issue to be tried and that the balance of convenience supports the making of an order”.[10]

   f)In considering the nature of the injunctive relief sought by the applicant, it is important to be aware of the general principle that “equity intervenes to the minimum extent necessary to do justice”.[11]

   g)In the context of family law proceedings, in Sieling and Sieling (1979) FLC 90-627 at 78,265, the Full Court said:

   The power to grant injunctions is, of course, a discretionary power, not to be exercised lightly. The Court must balance the hardship to each party of granting or refusing an order and frame its order in such a way to impose no further restriction than is necessary to achieve the protection of the applicant’s interest. It will not lightly interfere with the rights of an owner of property on the basis of a vague or uncertain claim.

   h)In Martiniello and Martiniello (1981) FLC 91-050, it was suggested that a party should not be restrained from using their money for ordinary business purposes unless “it could be shown that there was a fear that [the party] would dissipate [the] funds.”[12]

   [10] Blue Seas Investments Pty Ltd v Mitchell and McGillivray (1999) FLC 92-856 at 86,128 and Yunghanns & Ors v Yunghanns & Ors (1999) FLC 92-836 at 85,723.

   [11] Giumelli v Giumelli (1999) 196 CLR 101 at [10] referred to in Norton & Locke (2013) 284 FLR 51 at [72].

   [12] at 76,422.

4. The evidence relied upon by the wife to support her application for the injunction she seeks is set out in paragraphs 18 to 26 and, paragraph 88 of her affidavit filed 24 August 2016.

5. Paragraph 18 of the wife’s affidavit sworn 24 August 2016 sets out a table of what she, at that time, understood to be the assets and liabilities of the parties that constituted the matrimonial property pool.

6. By way of summary, the wife’s evidence in paragraphs 19 through to 26 of her affidavit sworn 24 August 2016 is as follows:

   ·After separation the husband and the businesses continued to meet the loan repayments on the business loans for the businesses.

   ·On 12 February 2016 the husband advised, via his lawyers, that he was not in a position to meet the repayments in respect to the loans for the businesses for January 2016 and, further, that he was not in a position to meet future monthly payments. He also advised that he would cease to pay the home insurance repayments.

   ·Westpac issued a section 57(2) B notice requiring remedy of the default of the loans of the businesses by 15 and 21 August 2016 respectively.

   ·The loans taken out by the two businesses are secured by way of first registered mortgage against the former matrimonial home.

   ·The loans taken out by the two businesses are recorded in the Financial Statements as Company M and Company N. This is despite the fact that the loans were taken out in the names of the husband and wife.

   ·The interest payments on the respective loans have been paid for by “Company M” and loan repayments are recorded as a deductible expense of that business in the financial statements.

7. I respectfully agree with the submissions of senior counsel for the husband that that the evidence set out in paragraphs 18 through to 26 of the wife’s affidavit sworn 24 August 2016, does not establish a basis for the injunctive orders which are sought by the wife. Specifically, the evidence does not suggest that the funds and/or resources of the businesses have been misused or misapplied by the husband.

8. The wife’s concerns, as set out in paragraphs 88 and 95 of the wife’s affidavit, are that moneys held and received by the businesses are no longer being applied to meet the Company M loan and the Company N loan. Those loans are referred to in items 10 and 11 of the table set out in paragraph 18 of the wife’s affidavit.

9. Paragraph 88 of the wife’s affidavit sworn on 24 August 2016 is as follows:

   After separation [Mr K] and [Ms L Newport] [the second respondents] advanced [Company M] $300,000 of which it appears $190,000 was on lent to [Company N]. An examination of the Balance Sheet shows that these loans were not applied to the purchase of assets in the business, but rather taken as drawings by [Mr Newport] [the husband]. I do not know how he has spent those funds. I verily believe that this was done as a method of attempting to reduce the value of the businesses for our family law proceedings.

10. Further, at paragraphs 95 and 96 of her affidavit sworn 24 August 2016, the wife asserts that the husband has provided no explanation in respect to the following amounts that she asserts have been withdrawn from the business accounts by Mr K Newport, and subsequently repaid;

    (a) Company M Business Cheque Account 14 – ..84;

    i.$73,000 was transferred to Mr K Newport in various instalments on 15, 18 and 22 February 2016;

    ii.$73,000 was received from Mr K Newport on 29 February2016

    (b) Company N Business Cheque Plus Account 16 – 6066;

    i.$22,000 was transferred to Mr K Newport in various instalments on 15, 22 and 23 February 2016;

    ii.$22,000 was received from Mr K Newport on 29 February 2016.

    iii.$25,000 was transferred to Mr K Newport in various instalments on 14, 22 and 29 March 2016;

    iv.$25,000 was received from Mr K Newport on 4 April 2016.

11. I acknowledge the submission of senior counsel for the husband that the wife’s evidence as to funds withdrawn from and deposited into the businesses is hearsay and, in that form, would not be admissible at final hearing. However, s 75 of the Evidence Act 1995 (Cth) provides that, in interlocutory proceedings, “the hearsay rule does not apply to evidence if the party who adduces it also adduces evidence of its source.”

12. In that respect, paragraph 88 of the wife’s affidavit dated 24 August 2016 refers to the Balance Sheet of the business as the source of information relating to the loans that the wife contended were made to the businesses. Paragraph 95 of the wife’s affidavit dated 24 August 2016 refers to the source of the information as being updated bank statements for the business accounts of each of the businesses provided by the husband’s legal representatives on 8 June 2016.

13. I note that the husband and second respondents contend that, in the past, funds have been withdrawn from the businesses, by way of loans and additional drawings, for the purpose of providing additional financial assistance to the husband in the period subsequent to the acquisition of the Suburb R property. The additional drawings are asserted by the second respondents to also be in the nature of loans from the businesses to the husband. In circumstances where it is alleged that there has been a utilisation of the business funds for private purposes and, in the absence of an explanation as to how the funds referred to in paragraphs 88 and 95 of the wife’s affidavit have been utilised, it is understandable that the wife has concerns as to whether the funds are being properly accounted for and being utilised for business purposes.

14. In that respect, it is not necessary for the wife to establish, as a matter of probability, that any funds of the businesses have been or will be misapplied. It is sufficient that she establishes that there is a real risk that misapplication of those funds may occur.

15. I note that, at least at this stage of the proceedings, there does not appear to have been adequate explanation provided as to the utilisation of the funds referred to in paragraphs 88 and 95 of the wife’s affidavit sworn 24 August 2016. I further note that there is dispute between the parties regarding the value of the businesses and the extent to which funds may be payable from those businesses to the second respondents. I further note that the respondents asserted that there has been a history of funds of the businesses being applied for private purposes.  In those circumstances, I am satisfied that there is a real risk that the funds of the businesses may be applied and disbursed prior to the final hearing, other than for the ordinary operation of the businesses, such that it may impact upon the Court’s ability to make appropriate orders to achieve a just and equitable adjustment of the parties’ interests in the matrimonial property. Any orders made however, must not impose any further restrictions on the businesses than is necessary to protect the interests of the party seeking the injunction.[13] This is also relevant to the assessment of the balance of convenience in terms of the potential impact that an order would have on the respective parties.[14]

    [13] Sieling & Sieling (1079) FLC 90-627 at 78, 264.

    [14]Sieling & Sieling (1979) FLC 90-627 at 78, 264; Stowe & Stowe (1981) FLC 91-027 at 76, 271.

16. I note that the affidavits of both the husband and the second respondents annexes a letter from their accountant, Mr T, dated 23 March 2016,[15] where Mr T sets out the detrimental impact on the businesses of not having access to adequate funds.

    [15] Affidavit of the husband filed 11 September 2016 at annexure J. 

17. Accordingly, rather than restraining the husband and the second respondents in the terms of the orders as sought by the wife, I propose to make an order requiring the husband and the second respondents to provide the wife with at least 14 days’ notice prior to engaging in the activities referred to in the proposed order 1 of Exhibit A. This will require the husband and second respondents to provide the wife with details of any proposed transactions and, in the event of the wife considering that the transactions will adversely impact upon her rights, she will have the opportunity of taking such action as she deems appropriate.

Orders

1. Accordingly, for all of these reasons I make the orders as set out at the commencement of these Reasons for Judgement.

I certify that the preceding forty-eight (48) paragraphs are a true copy of the reasons for judgment of the Honourable Justice McClelland delivered on 16 March 2017.

Associate:

Date:  16 March 2017