PAPPAS & PAPPAS

[2018] FamCA 297

FAMILY COURT OF AUSTRALIA

PAPPAS & PAPPAS [2018] FamCA 297

FAMILY LAW – PROPERTY – Interim – Where the wife seeks interim costs and partial property settlement – Where the husband seeks funds from a controlled monies account to be directed to the payment of capital gains tax – Where the wife seeks for the mortgage over a jointly owned property to be discharged and the husband opposes that order – Where there is no current assessment of capital gains tax – Court finds that making orders in relation to payment of capital gains tax would be premature – Order made establishing a mechanism for regular mortgage repayment – Order made for both parties to receive a payment from the controlled monies account – Order made for the wife to receive a partial property settlement

APPLICANT: Ms Pappas

RESPONDENT: Mr Pappas

FILE NUMBER: SYC 7631 of 2016

DATE DELIVERED: 8 May 2018

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Stevenson J

HEARING DATE: 23 April 2018

REPRESENTATION

COUNSEL FOR THE APPLICANT: Ms Eldershaw

SOLICITOR FOR THE APPLICANT: York Law

COUNSEL FOR THE RESPONDENT: Mr Cook

SOLICITOR FOR THE RESPONDENT: Anderson Lawyers

Orders

By consent it is ordered that:

1. Order 8 made on 5 December 2016 is discharged.

2. Within 14 days, the parties do all acts and things to establish an offset

   
   

   account to operate in conjunction with the home loan account for a

   
   

   property owned jointly by the parties at F Street, Suburb D with the CBA (Loan Account BSB …;  No….05), such account to be operated on the signatures of both parties or by further order of the Court and each party shall be restrained from operating upon, or drawing down on such account except with the express written consent and co-signature of the other party or Court order (“Offset Account”) or for the purpose of making loan repayments as and when they fall due.

3. Within 14 days of the date of these orders, the parties will do all acts and

   
   

   things to cause the whole of the balance of NAB Account BSB … Account …45 to be transferred to the abovementioned Offset Account.

It is further ordered that:

1. Within 14 days of the date of these orders, a sum equal to the arrears owing in respect of the Commonwealth Bank of Australia mortgage on the title to the Suburb D property in an amount of approximately $14,000 will be transferred from a Controlled Monies Account held in the name of York Law Family Law Specialists P/L and ITF Mr Pappas and Ms Pappas, be transferred to the Offset Account.

2. Time for the husband to comply with orders and directions of Senior Registrar Campbell on 12 February 2018 is extended to a date 14 days from the date of these Orders as to the filing and service of an Undertaking as to Disclosure and provision of an inventory of antiques and artworks and furniture in the possession, custody or control of the husband (whether owned by the husband personally or as trustee for the Pappas SMSF);  copies of all invoices and valuations in relation to all antiques, artworks, furniture and jewellery in his possession, custody or control;  and an inventory of antiques and artworks and furniture sold by the husband together with all documents evidencing the sale date and sale price, whether owned by the husband personally or the Pappas SMSF for the period 1 September 2009 to date;  depreciation schedule for the Pappas SMSF for the financial years 2009 to 2017.

3. The husband authorise and direct his accountant to work with the wife’s accountant, Mr F of F & Co Pty Ltd for the purpose of enabling Mr F to prepare any outstanding tax returns for the wife.

4. Each of the parties will do all things necessary to cause the following payments to be made from the Controlled Monies Account held in the name of York Law Specialisation Pty Ltd and ITF Mr Pappas and Ms Pappas by way of partial property settlement:

   (a)       A sum of $150,000 to the husband

   (b)       A sum of $300,000 to the wife.

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 Pappas & Pappas 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 7631  of 2016

Ms Pappas

Applicant

And

Mr Pappas

Respondent

REASONS FOR JUDGMENT

The proceedings

1. Ms Pappas and Mr Pappas are locked in litigation concerning financial issues.  On 23 April 2018 their competing interim applications came before me in a Duty List.

2. The parties were able to reach partial agreement and consented to the following orders:

   1.That Order 8 made on 5 December 2016 be discharged.

   2.That within 14 days, the parties do all acts and things to establish an offset account to operate in conjunction with the home loan account for a property owned by jointly the parties at F Street, Suburb D with the CBA (Loan Account BSB …;  No….05), such account to be operated on the signatures of both parties or by further order of the Court and each party shall be restrained from operating upon, or drawing down on such account except with the express written consent and co-signature of the other party or Court order (“Offset Account”) or for the purpose of making loan repayments as and when they fall due.

   3.Within 14 days of the date of these orders, the parties to do all acts and things to cause the whole of the balance of NAB Account BSB … Account …45 to be transferred to the abovementioned Offset Account.”

3. The parties agreed also to an order in the following terms, subject to a dispute as to the amount so to be transferred:

   “4.That within 14 days of the date of these orders, the sum of
   $______ be transferred from a Controlled Monies Account held in the name of York Law Family Law Specialists P/L and ITF Mr Pappas and Ms Pappas, be transferred to the Offset Account.”

4. Additionally, the parties agreed to orders and directions in the following terms:

   3.That time for the husband to comply with orders and directions of Senior Registrar Campbell on 12 February 2018 be extended to 7 May 2018 as to the filing and service of an Undertaking as to Disclosure and provision of an inventory of antiques and artworks and furniture in the possession, custody or control of the husband (whether owned by the husband personally or as trustee for the Pappas SMSF);  copies of all invoices and valuations in relation to all antiques, artworks, furniture and jewellery in his possession, custody or control;  and an inventory of antiques and artworks and furniture sold by the husband together with all documents evidencing the sale date and sale price, whether owned by the husband personally or the Pappas SMSF for the period 1 September 2009 to date;  depreciation schedule for the Pappas SMSF for the financial years 2009 to 2017.

   4.That the husband authorise and direct his accountant, Banyan Consulting, to liaise with the wife’s accountant, Mr F of F & Co Pty Ltd for the purpose of enabling Mr F to prepare any outstanding tax returns for the wife.”

5. The issues remaining for determination were thus as follows:

   1.should the wife receive a sum of $150,000 on account of interim costs and a further amount of $300,000 as a partial property settlement from funds held in a controlled monies account by her solicitor?

   2.should each party receive a sum of $150,000 from those funds as a partial property settlement?

   3.should a sum of approximately $600,000 in the controlled monies account be directed to the Australian Taxation Office on account of capital gains tax?

   4.should funds held in the controlled monies account and in a joint National Australia Bank account be paid in reduction of a mortgage on the parties’ jointly owned property at Suburb D?

Background

1. The husband and the wife, who are aged 57 and 55 respectively, married and commenced cohabitation in 1987.  The date of separation is a matter in dispute, with the husband alleging that the parties have lived apart since 1999 and the wife maintaining that the relationship broke down finally in February 2014.  The parties have two children, Ms G and Ms H, who are aged 27 and 24 respectively.

2. Since 1999 the husband has lived in the home of his mother and the wife has occupied the property at Suburb D.  The Commonwealth Bank of Australia holds a mortgage on the title to the Suburb D property, with a current debit balance of approximately $784,000 and arrears of about $14,000.

3. The parties incurred a capital gains tax liability upon the sale in 2016 and 2017 of investment properties at Suburb C and Suburb J.  The net proceeds of these sales are held in a National Australia Bank account and a controlled monies account by the wife’s solicitor.  At the interim hearing I was informed the controlled monies account has a current credit balance of approximately $1.35 million.

4. The husband has paid the mortgage instalments in relation to the Suburb D property since its purchase.  The mortgagee commenced enforcement proceedings in late 2016, when he ceased to make these payments.  On 5 December 2016 interim orders were made which, inter alia, created a mechanism for payment of the mortgage instalments from the joint National Australia Bank account.

5. On 10 March 2017 interim orders were made which provided that each of the parties receive a sum of $165,000 from the controlled monies account.  These payments were not characterised in the Orders made on 10 March 2017.

6. The mortgage on the Suburb D property again fell into arrears in late 2017/early 2018.  By email dated 9 February 2018 a bank officer advised the wife that the outstanding amount was $14,399, which was attributable to three months default in payment.

Consideration

Payment of capital gains tax

1. The husband deposed that his 2016 tax return is under review, as he has lodged an amended form with the assistance of a new accountant.  The husband deposed further that he requires information from his overseas employer before his accountant is in a position to lodge this amended return.  The outcome of this process could have an impact on the quantum of capital gains tax payable in relation to the sale of the Suburb J property.

2. The husband deposed that he has not yet lodged a tax return for the 2016/2017 year.  Accordingly, no assessment yet exists in relation to capital gains tax payable on the sale of the Suburb C property.  The husband could rely only on an estimate provided by his accountant.

3. In these circumstances, it seems to me to be premature that any orders be made in relation to payment of capital gains tax from the controlled monies account.  The fact is that there will be funds available to meet this liability when the quantum has crystallised, upon the relevant assessments being issued by the ATO.  Of course, this availability of funds will be negated if the parties’ liquid assets are applied largely to the discharge of the Suburb D mortgage.  In these circumstances I will not make any orders in relation to payment of capital gains tax.

Payment of monies from the joint National Australia Bank account and the controlled monies account in reduction of the mortgage on the Suburb D property.

1. The wife sought that a sum of $627,901 from the controlled monies account, together with the balance of the joint National Australia Bank account, be applied so as to discharge the mortgage on the Suburb D property.  This proposed arrangement would impact significantly upon the availability of funds to meet the joint liability of the parties for capital gains tax arising from the sale of the Suburb J and Suburb C properties.  As indicated above, the precise amount of capital gains tax payable has yet to be assessed and awaits the processing of two tax returns of the husband by the Australian Taxation Office.

2. It seems to me to be premature that a large proportion of the parties’ liquid assets be applied to discharge the Suburb D mortgage at this stage of the proceedings.  I appreciate that the wife intends to mount an argument of conduct which amounts to waste on the part of the husband, which in part involves his failure to meet the mortgage instalments and pay tax liabilities in a timely manner.  I am of the view that it is in the parties’ financial interests, at this stage, to put in place a mechanism for regular payment of the mortgage instalments.  I am not prepared to make the order sought by the wife in relation to the discharge of the Suburb D mortgage.

3. As noted above, an amount of approximately $14,000 is payable to the Commonwealth Bank of Australia on account of arrears of the Suburb D mortgage.  I will order that this sum be transferred to the account to be created pursuant to agreed orders 1, 2 and 3 from the controlled monies account.

Partial property settlement and interim costs

1. Ultimately, the husband conceded that the wife should receive $150,000 from the controlled monies account provided that he has access to the same amount.  The husband sought to characterise these payments as partial property settlements.  The wife sought to characterise payment of $150,000 to her as interim costs.

2. I see no reason why each of the parties should not receive $150,000 from their joint funds.  Withdrawal of the sum of $300,000 would leave a balance in excess of $1,000,000 and the parties hold additional assets, including the Suburb D property and an apartment at Suburb E.

3. The remaining issue is whether the wife should receive an additional sum of $300,000 as a partial property settlement.  The husband contended for a net pool of assets and superannuation of approximately $2,000,000, whereas the wife’s figure was approximately $4.2 million.  As stated in the wife’s

   
   

   Outline of Case document “there is a significant dispute relating to addbacks and waste.”  It would thus appear that the Balance Sheet will be finalised only at or close to the time of trial of these proceedings.

4. I have regard to the financial inequality between the parties.  The husband deposed to a gross weekly salary of $4,230, whereas the wife receives a sum of $959.  The husband deposed to weekly mortgage expenditure of $1,950 but this figure includes the Suburb D mortgage, which henceforth will be paid from the offset account.  Obviously, the husband’s financial situation is superior to that of the wife.

5. In these circumstances, it seems to me that it is appropriate that the wife receive a further sum from the controlled monies account by way of partial property settlement.  I will order that she receive an additional payment of $150,000, which will be characterised as an interim or partial property settlement.

I certify that the preceding twenty-two (22) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Stevenson delivered on 8 May 2018.

Associate: 

Date:  8 May 2018