Pettis and Pettis and Anor
[2019] FCWA 154
•18 JULY 2019
JURISDICTION : FAMILY COURT OF WESTERN AUSTRALIA
ACT: FAMILY LAW ACT 1975
LOCATION: PERTH
CITATION: PETTIS and PETTIS & ANOR [2019] FCWA 154
CORAM: DUNCANSON J
HEARD: 24 APRIL 2019
DELIVERED : 18 JULY 2019
FILE NO/S: PTW 6827 of 2017
BETWEEN: MS PETTIS
Applicant
AND
MR PETTIS
First Respondent
AND
COMPANY A
Second Respondent
Catchwords:
PROPERTY - Amendment of order pursuant to slip rule - Application for interim property settlement - Change of accountants - Disclosure - Applications to vary and enforce order for spousal maintenance - Turns on own facts
Legislation:
Family Law Act 1975 (Cth) s 79, s 80(1)(h), s 83(2), s 83(6B)
Family Law Rules 2004 (Cth) r 17.02, ch 20
Superannuation Industry (Supervision) Act 1993 (Cth)
Category: Reportable
Representation:
Counsel:
| Applicant | : | Mr R Hooper SC & Ms L Croft |
| First Respondent | : | Mr M Berry SC |
| Second Respondent | : | No Appearance |
Solicitors:
| Applicant | : | Carr & Co |
| First Respondent | : | Law Firm A |
| Second Respondent | : | Bannerman Solicitors |
Case(s) referred to in decision(s):
Drysdale & Drysdale [2011] FamCAFC 85
Strahan & Strahan (Interim Property Orders) (2011) FLC 93-466
WORDS IN SQUARE BRACKETS REPLACE WORDS USED IN THE ORIGINAL JUDGMENT – PARTIES’ NAMES AND IDENTIFYING DETAILS HAVE BEEN CHANGED
IT IS NOTED that publication of this judgment by this Court under the pseudonym Pettis & Pettis has been approved by the Family Court of Western Australia pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
1On 3 April 2019, the wife [Ms Pettis] filed an application in a case seeking various interim orders in these financial proceedings. She also filed a consolidated minute of orders containing the orders which she sought at the hearing on 24 April 2019. The husband, [Mr Pettis] filed a response on 17 April 2019, containing the orders sought by him.
2The parties relied on affidavits filed in support of their application and response, but also upon previous applications and responses and orders made in the proceedings.
3At the conclusion of the hearing I made orders by consent in terms of a minute as a consequence of which some limited issues fell away. Many of the interim issues agitated in these proceedings are best determined at trial as they require findings of fact. Clearly there are limits to an interim hearing in that I cannot resolve disputed issues of fact and in these proceedings there are many. The issues remaining in dispute are set out below.
BACKGROUND
4The husband was born [in] 1958. He is 61 years of age. The wife was born [in] 1960. She is 59 years of age.
5The wife is a [receptionist]. The husband is a [businessman].
6The parties commenced cohabitation and were married [in] 1980. The parties separated [in] 2015 and were divorced [in] April 2018.
7The parties have three adult children.
8The wife commenced property settlement proceedings on 3 November 2017.
THE DISPUTED ISSUES
Company B payment to Company C
9The wife seeks an order in the following terms:
Pursuant to Rule 17.02(1)(e) and (1)(h) of the Family Law Rules 2004 (Cth) Order 4 of the Orders made by consent on 13 July 2018 be varied by:
(a)removing the reference to "[Company D] as trustee for [Investment Trust A]" in the first and second lines of the Order and inserting [Company C] in lieu thereof; and
(b)removing the references to the "Investment Trust" before the word "expense" in the third last line of the Order and after the phrase "to distribute the" in the second last line of the order and inserting [Company C] in lieu thereof.
10An order was made on 13 July 2018, by consent in the following terms:
4Forthwith upon receipt by [Company D] as trustee for [Investment Trust A] of its share of the Payment (as defined in clause 5 of the Deed of Acknowledgment and Assignment of Debt between [Company C], [Company E], [Company F] and [Company G] exhibited to these orders and marked "2", the husband in his capacity as director of [Company D] do all acts and things and sign all documents necessary, at [Investment Trust A's] expense, to distribute [Investment Fund A's] share of the Payment to the husband and to the wife, in the manner directed by them, in equal proportions.
11It was subsequently drawn to the wife's attention that the above order contained an error, in that it referred to Company D as trustee for Investment Trust A, where it ought to refer [to] Company C. The reference to the wrong entity was an error made by the wife's solicitor in drafting the minute, which was prepared in a haste and which related to a complex transaction.
12The wife deposed that notwithstanding the error, the husband was willing to sign an amended minute of consent orders which would result in the Company B slip being rectified, provided she signed a minute of consent orders covering other issues which he believed were not contentious but which she described as significant issues with which she did not completely agree.
13The wife's position was that notwithstanding the error, it was clear that it was intended that the payment to be made pursuant to the Deed of Acknowledgement and Assignment of debt between Company C, Company E, Company F and Company G was to be divided in equal proportions between the parties.
14The wife sought to have paragraph 4 of the minute corrected to read as follows:
Forthwith upon receipt by [Company C] of its share of the Payment (as defined in clause 5 of the Deed of Acknowledgement and Assignment of Debt between [Company C], [Company E], [Company F] and [Company G]) exhibited to these Orders and marked "1", the husband in his capacity as director of [Company C] do all acts and things and sign all documents necessary, at the expense of [Company C], to distribute [Company C's] share of the Payment to the husband and to the wife, in the manner directed by them, in equal proportions.
15The wife was not prepared to agree to the other matters which the husband required her to do as a condition of signing an amended minute.
16On 16 October 2018, the wife filed an application in a case seeking an order varying paragraph 4 of the Orders dated 13 July 2018, as set out at [9] above.
17The application was listed on 13 December 2018 before [the] Magistrate.
18[The] Magistrate made an order that the parties do all acts and things and sign all documents to authorise the sum of $259,264.15 to be paid from the net proceeds of the sale of [Property A] to the wife in lieu of the monies due and owing to her as a result of the Company G transaction that was finalised on 13 July 2018.
19Although [the] Magistrate did not correct the order, he made an order which provided that the wife receive funds from the proceeds of the sale of Property A in lieu of the funds she ought to have received from the Company G transaction.
20The importance of the amendment to the wife is that it will assist her in demonstrating that the husband removed the entire Company G transaction funds and applied them to his own purposes, whereas she received an amount equivalent to her half from the proceeds of the sale of Property A, which her counsel described as "joint money".
21The husband's position was that the order should not be amended. He submitted that the Court has a discretion about whether to amend the order and he referred to Rule 17.02 of the Family Law Rules 2004 (Cth) which provides as follows:
17.02 Varying or setting aside orders
(1)The court may at any time vary or set aside an order, if:
…
(h)there is an error arising in the order from an accidental slip or omission.
22The husband accepts there was an accidental slip or omission. The husband's concerns were twofold.
23Firstly the husband said the wife had received the sum of $259,264 from the sale proceeds of Property A in lieu of the monies owing as a result of the Company G transaction. She also received a further sum of $166,867. The husband's concern was that if the orders are amended pursuant to the slip rule, the order would be capable of being enforced in circumstances where the wife had received payments in lieu of the payment she was intended to receive albeit not from the Company G transaction. His counsel described this as "double enforcement".
24Secondly, the husband deposed to the ongoing financial pressure experienced by the [Pettis Group] and that he had utilised the remaining monies in payment of outstanding debts and expenses of the Group and if the order was amended the husband would be in breach of the order.
25Counsel for the husband submitted I should take into account those consequences when exercising my discretion as to the amendment pursuant to r 17.02.
26The wife disputed that she could enforce the order if amended.
27It is not in dispute that:
•there is an error arising in the order from an accidental slip or omission;
•the error arose as a result of an inadvertent mistake/oversight by the wife's legal representative; and
• the order is capable of variation pursuant to r 17.02.
28The question is whether I should exercise my discretion to vary the order in circumstances where the husband said the wife had received the payment she was supposed to receive, although not from the intended source and a variation would place him in breach of the orders.
29In the event that the order is varied, I am not persuaded the wife would be able to enforce it. Paragraph 2 of the orders dated 13 December 2018 provides that the wife be paid the sum of $259,264 from the proceeds of sale of Property A in lieu of monies due and owing to her as a result of the Company G transaction. I think it unlikely the court would exercise its discretion to enforce an order in circumstances where the wife had received a payment in lieu of that intended.
30The amendment may place the husband in breach of the order as he applied the entire funds from the Company G transaction to his own purposes which he explained were the debts of the company, whereas it was agreed between the parties that the order would provide that those proceeds be divided equally between the parties.
31In my discretion I consider that the order should be amended pursuant to the slip rule in circumstances where both parties agree that there was an accidental slip or omission which is capable of being amended pursuant to r 17.02.
32The facts of the matter will speak for themselves. Any consequences arising as a result of the amendment will be a matter for determination at the final hearing by the Trial Judge as to how the husband applied the funds from the Company G transaction.
Property A
33Three issues arise in relation to the sale of Property A. They are:
•whether a formal loan agreement should be entered into to document the repayment of $2 million to [Bank A] by the wife on behalf of Company C;
•whether Company A controlled monies account should be amalgamated with the controlled monies account in the name of [Company H]; and
•whether the proceeds of the amalgamated accounts should be paid to the wife by way of partial property settlement.
Loan agreement
34The wife sought an order in the following terms:
10The husband and the wife do all acts and things necessary to enter into a formal loan agreement on commercial terms, to be settled by a Registrar if not agreed, between the wife as lender and [Company C] as borrower in relation to the wife as guarantor repaying [Bank A] $2 million on behalf of [Company C] from the proceeds of the sale of [Property A].
35By way of background, when the sale of Property A settled, $2 million was claimed by Bank A who held collateral security over the property for a loan made to Company C. The wife was the guarantor because she was the owner of the property which provided the security. Her position was that the claim upon her as guarantor by the bank and the payment of $2 million from the sale proceeds of property owned by her, represented a loan by her to the company and a claim she may make against the company exercising her rights as guarantor. She sought to have this arrangement formally documented, to recognise that she had pursuant to a guarantee, paid a debt of the company. She submitted this should be evidenced by way of a formal loan agreement on commercial terms.
36Counsel for the wife submitted that it was a separate issue as to whether the company was able to repay the loan sought to be documented and if that was the case, it was all the more reason why the loan should be documented.
37In relation to the Bank A loan of $2 million to Company C secured over Property A, the husband said Property A was originally put in the wife's name for asset protection and tax purposes. He said it was nevertheless a matrimonial asset funded by the proceeds of a previous property which had been in their joint names together with funds from his business endeavours and bank funding. The interest payments were paid from his business earnings. The $2 million was borrowed by Company C against Property A and lent to the related entities to provide capital for the businesses. The husband's position was that the repayment of the $2 million Bank A loan from the Property A sale proceeds should have been treated as a joint replacement asset and not one in the wife's name as contended by her simply because the matrimonial home was in her name for asset protection and tax purposes.
38Counsel for the husband submitted that the $2 million debt is to be treated in the accounts of Company C as a loan owed to the parties jointly. Counsel for the husband said no loan document was created at the time and the husband did not accept there was any credible evidence that the asset was at risk if the loan agreement was not created.
39I decline to make the order sought by the wife that a formal loan agreement be entered into as upon the evidence I am not persuaded I should do so. Although Property A was in the wife's sole name, it was a property acquired during the marriage with funds derived from the efforts of both parties. It is disputed as to whether the asset is at risk and I am unable to make any findings in that respect. The order sought by the wife requires me to make findings as to the circumstances surrounding the loan and the guarantee which I am unable to do in these interim proceedings.
Amalgamation of accounts
40The wife seeks an order that the sum of $612,954.83 (the Company A controlled monies) invested in a controlled monies account pursuant to Order 1 of the orders made on 20 November 2018, be paid to the controlled monies account in the name of Company H as trustee for the husband and the wife ("joint controlled monies account").
41In effect the wife sought to amalgamate these two accounts and having done so, the wife sought an order that the entire funds be paid to her to be applied to the purchase of an unencumbered home in her sole name by way of partial property settlement.
42The history of the $612,954 debt is set out in the affidavit of [Mr A] who was a director of Company A. He deposed that the original contract was for $3 million and to fund the building the parties obtained a bank loan. The land owner was the wife and the contract was therefore between her and Company A. Ultimately the cost of building the home exceeded the original contract price and the final cost amounted to $3,612,954. $3 million was funded through the banking facility and paid to Company A. The balance of the contract price, being $612,954, was funded by Company A in the first instance and recorded as a loan in the books of the company. Mr A deposed that when the keys were handed over the company had been paid $3 million by the bank and the balance was recorded at the time as an amount receivable in the ledger and was due and owing. A Division 7A loan was never raised. Company A has since ceased operating and the debt is overdue.
43When the house was sold the monies were ordered to be retained in a controlled monies account. Mr A deposed to the creditors of the Pettis Group. He deposed there is a possibility that Company A could be rendered insolvent and should the debt be pursued by a liquidator, the wife would be liable for it.
44The wife disputed the contractual claim and her position was that the orders sought by her can be made and still protect Company A.
45[Mr B], the wife's accountant deposed there was no evidence of the claim appearing in the financial accounts for the relevant entity prior to the parties' separation.
46The wife deposed she never authorised additional works to Property A. She deposed the claim had only been made after the breakdown of the marriage and in excess of two years after the completion of the construction of the property. On the contrary, Mr A deposed to the wife’s heavy involvement in the variations to the property.
47The wife believes any liability alleged is a sham, created by the husband and his friend and longstanding business partner, Mr A.
48The husband expressed concern that Company A could be forced into administration if the sum of $612,954 is not paid to it.
49The husband acknowledged that he had received funds, but said that apart from a relatively small amount, these had been paid into the business to repay debts.
50The amalgamation of accounts was opposed by the husband. It was opposed because third party owners are involved indirectly. Counsel for the husband emphasised that Company A is owned 50% by a third party, namely Mr A. Company A has 2,700 ordinary shares issued and is wholly owned by [Company I] and Company I is itself owned 50% by two different entities, one being Company C and the other being Company E. Company E is a company under the control of Mr A and Company A is a Pettis family entity. Consequently, counsel for the husband submitted that the $612,954 debt which is owed to Company A is not just a "round robin" between the parties, but it is owed to a company in which a third party has an interest. This company structure was not in dispute.
51The point of this submission was that it was inappropriate to amalgamate the Company A controlled monies account and the joint controlled monies account in circumstances where a third party has an interest in the entity which owns Company A. The husband submitted there was no prejudice to the wife if she established that the debt was a sham as the funds remained there to be dealt with by the Court.
Partial property settlement
52The wife explained she is renting accommodation. She wishes to purchase a home. In the event that she does so, a property would be purchased in her sole name and would be subject to a restraint upon her dealing with it pending the final outcome of these proceedings. In effect therefore she would simply be converting cash into real property, but it would provide her with a home. She deposed that the amount sought is within the parameters of what she is likely to receive at a final settlement.
53In submissions counsel for the wife raised the issue of whether the thrust of these proceedings should be to preserve the property of the parties or to preserve the alleged viability of various entities. He submitted that if property was in the possession of the wife she would not be susceptible to claims as the husband may be as to "whatever guarantees" he has given for the various entities in which he is involved. Counsel submitted the wife was endeavouring to "save the furniture".
54The husband opposed the partial property settlement order sought by the wife. He referred to the asset and liability schedules prepared by [Mr C], who is the Group accountant and those prepared by Mr B, pointing out that there is a $6.5 million difference between them which cannot be resolved at this interim stage.
55The husband said the wife is seeking to convert liquid cash into property in her sole name, whereas his position is that the money should be retained in cash pending disposal of the case. He said it is not going to be easily reversible or alterable if the funds are tied up in an expensive home in the name of the wife. There is no prejudice in retaining the funds as cash.
56The husband deposed he has been renting accommodation since September 2015.
57The husband submitted if the Court considered it appropriate to make the order, the Court would have to do an abbreviated assessment of s 79(4) of the Family Law Act 1975 (Cth) (" the Act"). He submitted although an identification of the property interests of the parties would reveal that the wife was the owner of Property A, one would have to look at the contributions aspect to which he referred. Given the significant disparity between the accountants in the assessment of the net asset pool, he submitted it was not appropriate even on a cursory assessment of s 79(4) matters, to make the interim orders.
58In Strahan & Strahan (Interim Property Orders) (2011) FLC 93‑466 the Full Court discussed the power of the Court to make orders for interim property settlement pursuant to ss 79 and 80(1)(h) of the Act. The principles arising from that case can be summarised in two steps. In relation to the first step, when considering whether to exercise the power "the overarching consideration" is the interests of justice. It is not necessary to establish compelling circumstances. All that is required is that in the circumstances it is appropriate to exercise the power.
59The Full Court said that in exercising its wide and unfettered discretion the court should have regard to the fact that the usual order pursuant to s 79 is a once and for all order made after a final hearing. The Full Court also said more is required than the mere fact that the applicant would receive the property sought or an amount in excess of that sought at a final hearing.
60Once the Court has found it appropriate to exercise the power the second step is to then undertake a consideration of the matters in s 79(4) where sections must be considered and applied "but with limitations given that it is not the final hearing".
61One of the questions to be asked here is whether the applicant is likely to receive a sum at the end of the day which will cover the amount of the advance, or interim property settlement?
62The Court must also consider the "adjustment issue" or "claw back issue". The Court must consider whether the interim order it proposes to make would give the applicant such that it could not be capable of adjustment at a final hearing. The interim order must be reversible. Put another way, the interim order must not compromise the Court's ability to achieve a just and equitable final property settlement and, therefore, the Court should exercise a degree of caution.
63In Strahan (supra), Thackray J said [at 223]:
… it is important to note that s 81 or s 90 ss (1) is couched in the permissive. Hence, although the Court must give consideration to the matters set out in s 79(4) or s 90SM when hearing an application for interim payment, it has no obligation to make an interim order. The Court "may" do so if it considers that it should in the exercise of its discretion.
64There are a number of matters in dispute between the parties, including:
•The circumstances of the $2 million loan to Company C in respect of which the wife was guarantor and the husband’s position that although Property A was registered in the wife’s sole name, it was a matrimonial asset.
•The circumstances surrounding the $612,954 debt. The company's accountant said it was recorded in the books. The wife's counsel submitted that it did not arise until after separation. I cannot at this interim stage determine whether it is due and payable to Company A, a company in respect of which a third party has an indirect interest.
•The evidence is in dispute as is the viability of Company A. I do not know whether it is in a precarious financial position and whether repayment of the alleged debt of $612,954 is necessary for its survival.
•There is a significant disparity in the asset pool value as estimated by each party's accountant.
65I consider the husband's submissions with respect to the amalgamation of the accounts and the partial property settlement order sought by the wife, to have merit.
66I am not persuaded that the controlled money account and trust account should be amalgamated. The interest of third parties arise and at this interim stage I intend to take a more cautious approach and to retain separate accounts.
67In all the circumstances, being mindful that the overarching consideration is the interest of justice, I am not satisfied that it is appropriate to make an order for interim property settlement, having regard to the fact that the usual order pursuant to s 79 is a once and for all order made after a final hearing.
68Even if I had been satisfied that I should in my discretion exercise the power to make the interim order sought, the disputed evidence is such that I am unable to consider the matters in s 79(4) even in a limited way.
69The interests of justice are best served by a single and final determination of property orders in the circumstances of this case. Even if the wife established that her ultimate entitlement would cover or exceed the amount sought in these interim proceedings that is not on its own sufficient to establish that the order should be made.
Sale proceeds of property in Country A
70The wife sought orders with respect to the sale proceeds of a property in her sole name situated in City A in Country A. Specifically the wife sought an order that the net proceeds of the sale of that property be paid to her by way of partial property settlement.
71On 13 December 2018, an order was made that after certain deductions, the net sale proceeds of the property in Country A be paid half to the wife and the other half into the controlled monies account. The wife sought an order that she receive the entire proceeds. These proceeds are sought to enable her to purchase a home. Counsel for the wife submitted that the property is in the wife's name. He said she had diligently attempted to sell it, but there were defects which require rectification, although the husband appears to dispute this. Counsel submitted that a way of resolving this dispute would be for her to receive the entire proceeds of sale and if she wishes to improve the property to get a better price, then that is her decision.
72The husband's response was similar to that with respect to the Property A proceeds, namely they should be retained as cash at this interim stage.
73As orders were made on 13 December 2018 regarding the property in Country A, I am not persuaded I should revisit those orders and I do not intend to do so. The order sought by the wife in this respect is encompassed in my determination with respect to the partial property settlement order sought. I therefore decline to make the order sought by the wife in this respect.
Accounting
74The husband and the wife are directors of and shareholders in [Company J], the Trustee of the [Company J Superannuation Fund].
75The orders sought by the wife are set out paragraphs 15 and 16 of her consolidated minute and are as follows:
15The parties in their capacities as directors of [Company J] as trustee for the [Company J Superannuation Fund] and as directors of [Company K] as trustee for the [Company K Superannuation Fund] do all acts and things and sign all documents necessary to forthwith appoint [Mr D], or such other suitably qualified independent accountant as the Court may direct or they may agree in writing, to prepare such accounts or amended accounts for the Fund as he considers necessary, at the Fund's Expense, for the financial years ended 30 June 2016, 2017, 2018 and 2019 (once completed).
16The parties forthwith do all acts and things and sign all documents necessary to appoint such independent accountant as may be agreed between them and failing agreement, [Auditor B], to prepare the financial statements and income tax returns for the financial year ended 30 June 2018 for the following entities:
(a)[Family Trust A];
(b)[Syndicate A];
(c)[Trust B];
(d)[Company D] and [Investment Trust A];
(e)[Company C]; and
(f)any other entity in which the husband and the wife or the abovementioned entities have an interest, whose accounts were previously prepared by [Company L].
76The wife sought to have independent accountants deal with the accounts for the Superannuation Fund. She said that a "mezzanine finance" loan had been provided by the Superannuation Fund for the [F] apartment development in circumstances of inadequate security and in respect of which interest payments had not been accounted for or sought.
77The wife was concerned that the Fund is non-compliant by reason of having made loans to related parties. She was concerned the transaction had the potential to be found against the Superannuation Industry (Supervision) Act1993 (Cth) (“the SIS Act”) requirements.
78She is not confident the accounts have been properly done and will not execute the draft financial statements of the Superannuation Fund for 2018.
79The wife is concerned that the accounts are prepared by Mr C who is aligned with the husband. The wife does not anticipate the cost of the appointment of an independent accountant to be significant.
80The husband explained that the loan referred to by the wife is reviewed each year by [Auditor A] who sign off on an audit report each year. The husband referred to the correspondence signed by the parties as trustees of the Fund dated 29 April 2016, 23 January 2017 and 6 June 2018 to the effect that they are complying with their obligations and have so represented to the auditor of the Fund.
81No concerns have been raised by the auditor.
82The wife disputed that she signed the 2018 letter and doubted whether the signature thereon is hers.
83The husband said there were insufficient funds in the Fund to pay for an independent audit and that such an audit was unnecessary when the Fund is already audited each year by a reputable superannuation specialist firm and had been deemed compliant with the SIS Act.
84At this interim stage I am unable to resolve the disputed issue of whether the Fund is compliant. I cannot resolve whether or not the wife signed the letter dated 6 June 2018.
85The wife sought to appoint an independent accountant to prepare financial statements and income tax returns for the year ended 30 June 2018 for the various entities referred to in subparagraphs 16(a), (b), (d), (e) and (f) of her consolidated minute. She said Mr C will not prepare them in an independent manner and although this might incur some additional expense the parties could have confidence the accounts are then properly drawn.
86The husband pointed to Mr C's experience and qualifications, as someone who has been involved with the parties and their entities for around 30 years. The husband disputed there is any reasonable basis to appoint different accountants and to incur the cost thereof.
87Again I am unable to make any finding as to the impartiality or otherwise of Mr C, and whether he has properly done the accounts of these entities. Consequently I am unable to determine whether it is necessary for the parties to instruct new accountants and incur the associated cost.
88Having considered the issue carefully, my view at this stage is that on balance I should refuse the orders sought by the wife. In this way the parties will not incur additional and possibly unnecessary costs. They will retain the benefit of work already carried out in relation to the preparation of the accounts and there will be no duplication of such work.
89The wife has engaged Mr B to verify the accounts, financial statements and income tax returns and she should be provided with sufficient financial information to enable her accountant to undertake that task.
90It will also be necessary for the parties to satisfy themselves as to the contents of the accounts and returns prior to executing the same.
Authorities
91The wife sought the following order:
17Forthwith upon the making of these Orders the husband do execute the authorities directed to the following, attached to the wife's Form 2 application filed 16 October 2018 and marked "1":
(a)[Finance Company A];
(b)[Company L]; and
(c)[Auditor B].
92The purpose of the authorities is for the wife to be provided with documents which her counsel submitted are plainly discoverable and in circumstances where the husband had been slow to give full disclosure.
93The husband opposed the execution of these authorities. The husband said he was in the process of relevant disclosure and had provided a thumb drive with 37,000 pages on it. He said the authorities are unnecessary and carry a significant cost associated with the retrieval of information. In essence the husband's position was that the order sought was unnecessary and disproportionate.
94I have refused the order sought by the wife for the appointment of independent accountants and in doing so, noted that she has appointed her own accountant who ought to have the necessary information to enable him to undertake the task of checking and verifying those accounts. To that end, and against the background of the wife's complaints about the husband's disclosure, I intend to make the order sought by the wife in this respect.
Spousal Maintenance
95The wife sought the following orders:
19On the wife's undertaking that she will do all acts and things and sign all documents necessary to cancel the registration of debt with the Department of Human Services and instruct them to desist from any further attempts of collection, the husband forthwith pay or cause to be paid to the wife the following sums, by way of direct bank transfer to her [Bank A] account:
(a)$20,400, being the periodic maintenance he was obliged to pay pursuant to paragraph 5 of the Orders dated 28 May 2018 for the months of November 2018 through to April 2019 (inclusive);
(b)$61,200, by way of capitalised periodic maintenance pursuant to paragraph 5 of the Orders dated 28 May 2018 for a period of from 1 May 2019 until 1 October 2020 (inclusive);
(c)$3,851.19 for maintenance costs undertaken to the property situate at and known as [Property A] he was obliged to pay pursuant to paragraph 7(a) of the Orders dated 28 May 2018; and
(d)$1,815.43 for rates for the property located in [City A, Country A] he was obliged to pay pursuant to paragraph 7(b) of the Orders dated 28 May 2018.
20The wife have liberty to apply for payment of further periodic maintenance in the event the case is not heard and determined by October 2020.
21In the event that the husband fails to comply with order 1 within 48 hours of orders being made, there be an order pursuant to Section 106A of the Family Law Act 1975 (Cth) for a Registrar of this Honourable Court to sign such documents as will facilitate payment of the sum of $87,266.62 to the wife.
96The order sought by the husband is that paragraph 5 of the orders dated 28 May 2018, which provides for payment of periodic spousal maintenance to the wife, be discharged with effect from 1 October 2018.
97Therefore the wife sought to enforce the order for spousal maintenance made on 28 May 2018 and she further sought some lump sum spousal maintenance. In contrast the husband sought to discharge the order for spousal maintenance retrospectively to 1 October 2018.
98It is convenient to deal with the application by the husband to discharge the order first, as if it is successful this will determine the outcome of the order sought to enforce.
99On 28 May 2018 [the] Acting Magistrate handed down her reasons for decision and relevantly made the following orders:
5Until further order of the Court, the Respondent, [MR PETTIS], pay as and by way of periodic spousal maintenance to the Applicant, [MS PETTIS], commencing on the Monday following orders being made, and calendar monthly thereafter, the sum of $3,400 to be deposited into the Applicant’s [Bank B] Account, with such payments to be net of tax and back dated to 1 February 2018.
6Until further order of the Court, the Applicant pay:
(a)all payments as and when they fall due associated with the [Bank A] housing loan secured against [Property A]; and
(b)all rates, taxes and insurances associated with [Property A] on the basis of the current level of insurance cover being maintained.
7Until further order of the Court, the Respondent pay as and by way of further spousal maintenance the following as and when the same fall due for payment:
(a)all costs of necessary repairs and maintenance being undertaken to [Property A] of a reasonable nature;
(b)all rates, taxes and insurance on the basis of the current level of insurance cover being maintained associated with the property owned by the parties in [Country A]; and
(c)all costs of necessary repairs and maintenance being undertaken to the [Country A] property.
100In seeking the retrospective discharge the husband relied on s 83(6B) of the Act which provides as follows:
83(6B)Where, as provided by subsection (6), an order discharging an order is expressed to be retrospective to a specified date, any moneys paid under the second‑mentioned order since the specified date may be recovered in a court having jurisdiction under this Act.
101The husband's position was that there had been a material change in circumstances since the orders were made by [the] Acting Magistrate on 28 May 2018. The husband's position was that he no longer has the capacity to make the payment of spousal maintenance.
102The husband said he had little or no financial resources to rely on apart from a reduced income he takes from his position at [Pettis Group]. The husband referred to Schedule A to his financial statement filed 6 December 2018 in which he deposed to a weekly income of $2,975 and weekly expenses of $9,384, a deficit of $6,409 per week.
103The husband's weekly expenses include the following:
Accounting fees
$1,442
Legal fees
$2,885
[Company A] Division 7A loan repayment
$2,032
50% share of business valuation
$721
104The husband acknowledged that if those expenses were deleted from his list of expenses there would be a surplus of $671 per week, or $2,907 per month.
105The husband's contention however, was that the aforementioned expenses which he incurred were "real expenses".
106The second limb of his argument was that the wife's financial position had improved by way of the interim payment she had received. He referred to Mr B's affidavit filed 3 April 2019 at Annexure 2, in which Mr B set out a schedule of assets and liabilities.
107In that document Mr B asserted the husband's position as to total assets was about $174,000. Counsel listed the wife's assets to include the following:
Line item 33 cash at bank
$80,000
Line item 34 term deposit
$352,000
Line item 53 sum paid in lieu of monies owing from [Company G] transaction
$259,264
Line item 54 payment pursuant to orders dated 13 December 2018
$105,973
108The husband's counsel submitted the wife had cash under her control of approximately $796,000 whereas the husband's position was poor. In essence the husband's argument was that the wife did not have a need for maintenance as she had a substantial amount of cash at her disposal.
109The husband questioned from where he could pay arrears and submitted he should not have to do so from capital in circumstances where the wife had capital available to her.
110Further and in addition to seeking a discharge of the maintenance order the husband opposed the orders sought by the wife at paragraph 19 of the consolidated minute, that is for enforcement of maintenance, capitalised periodic maintenance, payment of maintenance costs paid for Property A and payment of rates for the property in Country A, by way of enforcement of orders dated 28 May 2018.
111In response the wife said her need for maintenance was "obvious". She submitted the husband's position that she should live on capital is inappropriate.
112The wife responded with reference to Annexure 2 of Mr B's affidavit and pointed out the following:
Line item 39 is the disputed sum of $612,956;
Line item 40 is the proceeds of [Property A] held by [Company H];
Line item 41 is the $2 million paid to [Bank A] pursuant to the wife’s guarantee;
Line item 45 is the predicted proceeds after the sale of the property in [Country A]; and
Line items 53 and 54 are monies which were to be paid to her pursuant to the interim orders of December 2018 and the [Company G] transaction.
113Counsel submitted these items were in the name of the wife but to say that the wife had approximately $4 million under her control was clearly an overstatement.
114Counsel for the wife pointed out that the schedule was missing the sum of $518,000 (being two payments of $259,000) which the husband retained from the Company G transaction.
115The husband said he had applied this sum to the expenses of the Group, although that has not been established and remains in dispute.
116A submission made on behalf of the wife which I consider has merit is that when [the] Acting Magistrate made the orders for spousal maintenance she specifically excluded legal costs and costs of the proceedings in her calculations of the financial circumstances of both parties. The husband now seeks to include those very expenses in circumstances where the wife submitted he did not adequately describe his income, which he described as "drawings".
117Section 83 of the Act provides for the modification of spousal maintenance orders. In submitting that there has been a material change in the circumstances, I infer that the husband relies on s 83(2)(a)(i) and (ii) which provides as follows:
83(2)The court shall not make an order increasing or decreasing an amount ordered to be paid by an order unless it is satisfied:
(a)that, since the order was made or last varied:
(i)the circumstances of a person for whose benefit the order was made have so changed (including the person entering into a stable and continuing de facto relationship);
(ii)the circumstances of the person liable to make payments under the order have so changed; or …
118The thrust of the husband's argument was that he incurs these costs by way of legal and accounting costs and Division 7A loan repayments. In my view this is not a change in the circumstances of the husband as this aspect of his expenditure was specifically addressed by [the] Acting Magistrate in her reasons when she said at:
55I turn to the wife's accounting expenses, financial advisor fees, and legal fees which total some $1,410 per week. I am persuaded by submissions from counsel for the husband that those expenses should not be sought to be effectively paid by the husband on a spousal maintenance application.
56If those sums were removed, together with the [Street A] expenses, the wife's reasonable expenses amount to some $2,530 per week. With her income, which I find is $1,749, this leaves her with a shortfall of some $781 per week.
…
61.The husband's legal fees and accounting fees as set out in Exhibit 7 total some $4,430 each week, being in excess of $230,000 as an annual total. If I apply the same standard to the husband as to the wife insofar as legal and accounting expenses are concerned, and those expenses are removed from his weekly expenditure, then his surplus income per week is $4,977. A contribution to the wife's weekly commitments should take higher priority than the husband's legal fees of $2,475 per week, in particular, in my view.
62.Further, I note that the expenses claimed by the husband are based on expenditure for the last 6 months and a projection for the next 6 months. I do accept there will be ongoing legal fees and valuation fees incurred by both parties, but as foreshadowed by counsel for the husband, there is no reason these expenses cannot be paid from each party's capital. The fees may also be less than the projections.
63.The husband in his affidavit filed 12 April 2018, at paragraph 64, confirms one of the reasons he ceased spousal maintenance payments to the wife was due to the "excessive accounting and legal fees" that he was paying from "his drawings" of $30,000 per month.
64.I note from the husband's Costs Notification handed up in Court and dated 19 April 2018, that the fees to his solicitor and his accountant have been paid from the [Family Trust A], and the fees paid to [Auditor B] have been paid by [Company A] for 2017 and [Company I] for 2018. As far as I can ascertain, the husband's income is received by way of drawings from "[Company I]". It is difficult to reconcile then that he can claim all of the accounting fees as his personal expenses, and being paid only from his income/drawings. The wife, and/or a third party also appear to have an interest in, or connection to, the entities referred to as paying the [Auditor B] fees.
119[The] Acting Magistrate specifically excluded the parties' liabilities for legal and accounting costs and the inclusion of those items now as the husband's expenditure is not, a change in circumstances. If the husband was dissatisfied with [the] Acting Magistrate's decision and the basis for it, there were other remedies open to him.
120As to the parties' capital position both parties have capital in their respective names. Various items listed in the name of the wife are in dispute. The purpose to which the husband applied the Company G transaction funds is also in dispute. There is a very significant disparity between the parties as to the net asset position of the marriage.
121In all the circumstances I am not persuaded that there has been a change in the circumstances of either party, such that the order for maintenance should be discharged and I refuse the husband's application in this respect.
122The interim order made for payment of spousal maintenance and my order refusing the husband's application to discharge it, are orders made after circumscribed hearings in which the evidence is not tested and issues of fact cannot be resolved.
123In Drysdale & Drysdale [2011] FamCAFC 85, Coleman J said at [40]:
It is the nature of an interim spousal maintenance order that, as here, it is made after a circumscribed hearing, in reliance upon evidence which is incomplete and/or unable to be fully tested. Whilst different to urgent spousal maintenance pursuant to s 77 of the Act, orders for interim maintenance are as their title implies. The Court hearing and determining financial proceedings between the parties on a final basis, as clearly will occur in this case in the absence of any intervening settlement, has abundant power to accommodate within its final orders, whether by way of settlement of property or spousal maintenance, any anomalies which full agitation of disputed issues of fact may reveal to have resulted from an earlier interim spousal maintenance order...
124I now turn to paragraph 19 of the wife's consolidated minute in respect of which 19(a), (c) and (d) are for enforcement of spousal maintenance and other costs which the husband was ordered to pay pursuant to the orders of 28 May 2018.
125Chapter 20 of the Family Law Rules 2004 (Cth) provides for enforcement of financial obligations and orders.
126In my discretion I consider the orders should be enforced and the husband should transfer to the wife's bank account as sought the arrears of periodic maintenance and the sums of $3,851.19 for maintenance costs to Property A and $1,815.43 for costs in relation to the property in Country A.
127I now turn to order 19(b) which is the wife's claim for lump sum periodic maintenance in the sum of $61,200 which she described as capitalised maintenance for the period from 1 May 2019 until 1 October 2020.
128The thrust of her argument was that the husband had not complied with the order for payment of periodic maintenance. There are arrears and she seeks to receive lump sum spousal maintenance to avoid the necessity of returning to Court for enforcement.
129The husband opposed the orders sought. He sought a discharge of the order and on that basis the order sought would fall away, but in the event that the discharge is not granted he was opposed to payment of capitalised periodic maintenance.
130I propose to take a cautious approach to this aspect of the wife's application because of the finality of lump sum orders and the difficulties in making predictions into the future. I am not persuaded that the order sought by the wife for capitalised periodic maintenance should be made.
THE PROPOSED ORDERS
131Subject to hearing from counsel the orders I propose to make are as follows:
1Pursuant to Rule 17.02(1)(e) and (1)(h) of the Family Law Rules 2004 (Cth) order 4 of the orders made by consent on 13 July 2018 be varied by:
(a)removing the reference to "[Company D]" as trustee for the "[Investment Trust A]" in the first and second lines of the order and inserting "[Company C]" in lieu thereof; and
(b)removing the references to the "Investment Trust" before the word "expense" in the third last line of the Order and after the phrase "to distribute the" in the second last line of the order and inserting "[Company C]" in lieu thereof.
2Orders 8 to 16 of the consolidated minute of orders sought by the wife be dismissed.
3Forthwith upon the making of these orders the husband to execute the authorities directed to the following, attached to the wife's Form 2 application filed 16 October 2018 and marked "1":
(a)[Finance Company A];
(b)[Company L]; and
(c)[Auditor B].
4Orders 20 and 21 of the orders sought by the Respondent in the Form 2A response filed 6 December 2018 be dismissed.
5The husband forthwith pay or cause to be paid the following sums by way of direct bank transfer to the wife's [Bank A] account:
(a)$20,400, being the periodic maintenance he was obliged to pay pursuant to paragraph 5 of the Orders dated 28 May 2018 for the months of November 2018 through to April 2019 (inclusive);
(b)$3,851.19 for maintenance costs undertaken to the property situate at and known as [Property A] he was obliged to pay pursuant to paragraph 7(a) of the Orders dated 28 May 2018; and
(c)$1,815.43 for rates for the property located in [City A, Country A] he was obliged to pay pursuant to paragraph 7(b) of the Orders dated 28 May 2018.
6Orders 19(b), 20 and 21 of the wife's consolidated minute of orders be dismissed.
7All interlocutory applications and responses be otherwise dismissed.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Family Court of Western Australia.
RM
Associate18 JULY 2019
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