Pratley & Pratley
[2021] FedCFamC1F 55
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Pratley & Pratley [2021] FedCFamC1F 55
File number(s): CAC 298 of 2019 Judgment of: GILL J Date of judgment: 16 September 2021 Catchwords: FAMILY LAW – INJUNCTIONS – Preservation of property – Variation – Interim injunctive orders restricting actions in relation to business accounts varied to enable particular payments to be made – Disclosure required in relation to these payments Legislation: Family Law Act 1975 (Cth) s 117 Division: Division 1 First Instance Number of paragraphs: 38 Date of hearing: 9 September 2021 Place: Canberra Counsel for the Applicant: Mr Kearney SC Solicitor for the Applicant: Farrar Gesini Dunn Counsel for the Respondent: Mr Schonell Solicitor for the Respondent: Hijazi Curran Cameron Lawyers ORDERS
CAC 298 of 2019 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS PRATLEY
Applicant
AND: MR PRATLEY
Respondent
ORDER MADE BY:
GILL J
DATE OF ORDER:
16 SEPTEMBER 2021
THE COURT ORDERS THAT:
1.Order 7 of the Orders made on 26 February 2019 is discharged.
2.The husband is restrained by injunction from withdrawing any amount from the AA Bank accounts ...91 and …52 (being the working accounts for B Pty Ltd – the Business), except to pay the following:
2.1.Rent payable by B Pty Ltd trading as C Business(“the Business”);
2.2.Wages and commissions for the Business;
2.3.BAS equal to the assessed amounts from time to time, to be paid as they fall due and not prior, for the Business;
2.4.Insurance for the Business, for current premiums only; to be paid as they fall due and not prior;
2.5.Advertising for the Business;
2.6.Taxation liabilities for the Business as and when they are due and payable;
2.7.Income Activity Statements payments for the Business, to be paid as they fall due and not prior;
2.8.Lease repayments for the Business equipment currently leased;
2.9.Franchise fees for the Business;
2.10.Payments to ongoing suppliers for the operation of the Business, including but not limited to phone bills, stationery, and internet;
2.11.Legal costs payable by the Business to BB Lawyers, including outstanding fees in the sum of $67,249.96, for:
2.11.1.Proceedings in the Supreme Court commenced by the Business against CC Pty Ltd, for the debt recovery of unpaid commissions payable by 3PG to the Business;
2.11.2.Other advice or representation properly and reasonably incurred for business related matters, provided the husband has given the wife 7 days’ notice of his intention to seek such advice or representation.
2.12.Principal and interest loan repayments, to be paid as they fall due and not prior, for the loans secured by mortgage against the following properties:
2.12.1.1 Q Street, Suburb S;
2.12.2.Z Street, Suburb E;
2.13.Outstanding home loan repayments due to ANZ Bank in the sum of $8,280.38 in addition to the payments due in the preceding sub-clause;
2.14.Outstanding rates and land tax for the properties at 1 Q Street, Suburb S and Z Street, Suburb E;
2.15.The husband’s rental expenses for the lease at his current residence;
2.16.Outstanding school fees payable to DD School in the sum of $25,000;
2.17.Ongoing school fees for the parties’ children to attend DD School, to be paid as they fall due and not prior;
2.18.Icon water bills for the property at Z Street Suburb E by either the due date or within 7 days of provision of such bills to the husband by the wife, whichever is the later; and
2.19.Continued payments to the husband by way of his salary in the sum of $2,000 per week.
3.Order 8 of the Orders made on 26 February 2019 is amended in the following terms: That at least 14 days prior to any date fixed for settlement of the sales of any project development of which the Business has acted as agent, or such shorter period as the controlling party to the transaction provides, the husband provide to the wife’s solicitor, full settlement statements showing all commission payable to the Business and forthwith upon receipt of said commissions, pay the gross amount of the commission into the AA Bank account ...05 (“the Commissions account”) of the Business with both parties required to authorise payments from this account. For the purpose of this Order, gross commission means the commission received prior to any deduction payments due to any salesperson, franchise payments or GST. The husband shall have liberty to apply within 48 hours in respect of varying this Order. Further, the husband is restrained by injunction from withdrawing any amount from the Commissions account. However, subject to the husband providing documents evidencing the current status of funds either owed to Mr EE or funds Mr EE owes the Business, including employment contract that evidences his entitlement to future commissions, the husband may pay the following:
3.1.The “advanced commissions” to Mr EE up to $4,000 per fortnight from the date of these orders; and
3.2.Any adjustment due to Mr EE, pursuant to his employment contract, upon receipt by the Business of commissions received into the Commissions account from the sale of project developments from the date of these orders.
4.Each party is responsible for paying their own tax liabilities arising as a result of the Capital Gains Tax arising from the sale of the properties at 1 Q Street, Suburb S and R Street, Suburb S in the Australian Capital Territory.
5.It is noted that the wife reserves her position at the final hearing of this matter regarding the treatment of any tax liabilities paid by her pursuant to order 4 above.
6.Without admissions, the husband shall provide to the wife, documents evidencing the following payments:
6.1.In relation to Order 2.2, at the conclusion of each month, documents evidencing the wages and commissions paid by the Business for that month, including but not limited to the particulars of the employer or the person or entity that was paid any commission.
6.2.In relation to Order 2.3, within 7 days of any BAS being lodged, copies of the BAS and any documents requested by the wife relevant to the preparation of the BAS lodged for the Business.
6.3.In relation to Order 2.4, at the conclusion of each month, documents evidencing insurance payments paid by the Business for that month.
6.4.In relation to Order 2.5, at the conclusion of each month, documents evidencing payments made by the Business for advertising.
6.5.In relation to Order 2.6, at the conclusion of each month, documents evidencing any taxation liabilities paid by the Business for that month.
6.6.In relation to Order 2.7, at the conclusion of each month, documents evidencing the payment of any Income Activity Statements payable for that month.
6.7.In relation to Order 2.8, at the conclusion of each month, documents evidencing any lease repayments for Business equipment currently leased paid by the Business for that month.
6.8.In relation to Order 2.9, at the conclusion of each month, documents evidencing Franchise fees paid by the Business for that month.
6.9.In relation to Order 2.10, at the conclusion of each month, documents evidencing the payment of ongoing suppliers by the Business.
6.10.In relation to Order 2.11, at the conclusion of each month, documents evidencing the payment of any legal costs to BB Lawyers with respect to the current Supreme Court proceedings, including but not limited to any itemised invoices from BB Lawyers.
6.11.In relation to Order 2.15, at the conclusion of each month, documents evidencing payments of the husband’s current rental expenses by the Business.
7.The remainder of the orders sought by the husband in his Amended Application in a Case filed 30 July 2021, and updated case summary filed 7 September 2021 are dismissed.
8.The husband shall pay the wife’s costs for this application as agreed or as assessed.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Pratley & Pratley has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
GILL J:
The parties to this proceeding are Ms Pratley, the applicant wife, and Mr Pratley, the respondent husband. The general background is that during the relationship the parties jointly operated a business in the Suburb D area. That cooperation in the business ended with the end of their relationship, with such business now being controlled and operated by the husband. The husband has now commenced a parallel business, operating a business in the Suburb CC area in a manner that sees some overlapping use of the resources in each business.
In February 2019 injunctions were imposed in the Federal Circuit Court restraining the husband in his use of the income of the Suburb D business.
The dispute is now as to change to those injunctive restraints. In general terms, those restraints were firstly in relation to the various working accounts then in existence in the Suburb D business. Those working accounts received the general income of the business which is principally made up of income from its rental management business and from commissions from ad hoc sales. The current injunctions permit funds to be drawn down from those accounts but not to the degree that it would bring the balance in those accounts together below $250,000, unless the husband first obtains the consent of the wife. The second aspect of the restraints relates to a project commissions account. This is an account that came into existence following the imposition of the injunctions which provided that any commissions received by the Suburb D business, as a result of its project work, would be deposited into this account and could not be drawn against without the mutual agreement of the husband and wife.
The husband seeks to be released from the above restrictions, but subject to restriction in the manner in which he may deal with those funds. The wife agrees to the restrictions as to how the funds might be applied and accepts that the balance in the working accounts may be reduced below the $250,000 mark, but resists the husband having access to the project commissions account to do so.
MATERIAL RELIED UPON
The husband relied upon the following material:
(a)Amended Application in a Case filed 30 July 2021;
(b)Affidavit of Mr Pratley filed 30 July 2021;
(c)Financial Statement filed 30 July 2021; and
(d)Updated case summary filed 7 September 2021.
The wife relied upon the following material:
(e)Further Amended Response to an Application in a Case filed 7 September 2021;
(f)Affidavit of Ms Pratley filed 25 June 2021;
(g)Financial Statement filed 25 June 2021; and
(h)Updated case summary filed 8 September 2021; and
(i)Minute of orders provided 9 September 2021.
Orders sought
By a proposed minute of orders annexed to his amended case summary document filed 7 September 2021, the husband seeks the discharge of Order 7 of the 26 February 2019 orders and that Order 8 be varied to delete the words “with both parties required to authorise payments from this account”. Order 7 restrained the husband from making withdrawals from the business accounts of the Suburb D business which would reduce the balance of the accounts to below $250,000 in the absence of the wife’s consent or further order. Order 8 requires the commission earned by the Suburb D business on the sales of project developments to be paid into a business account which requires the authorisation of both parties for payments or withdrawals.
The husband’s proposed order 2 would impose an alternate injunctive mechanism on the husband, preventing him from making withdrawals from particular AA Bank accounts except to pay particular expenses including expenses payable by the business such as rent, wages, taxation and insurance. They also include identified personal costs.
In the alternative the husband proposes that each party should be liable for fifty percent of identified costs and expenses.
The wife agrees to the payment of the costs and expenses identified by the husband and agrees that where the husband is restrained to only withdrawing for such, then he should be permitted to allow the balance in the working accounts to dip below the $250,000 mark. She disagrees that that liberty should also be extended to making drawings against the project commissions account. The wife, however, offers a limited capacity to draw against the project commissions account in respect of the commission payable to a particular senior employee who has the responsibility of the sales related to those projects.
The circumstances
The husband asserts that the mechanisms that he puts forward properly protects the pool in so far as a risk to that pool does not arise because of the specification of the payments.
He describes that the working accounts, since the injunctions were imposed in February 2019, have gradually depleted, despite income from the business going into those accounts. Various expenses have been drawn from those accounts both for the business and for the parties, such that the balance in the accounts at the time of the imposition of the injunctions, being approximately $474,000, has now been reduced to the floor of $250,000.
The husband asserts that since the injunctions were imposed the expenses of the business have increased such that, rather than being at a level of $183,000 per month, they are now at a level of $206,000 per month. He asserts that despite some of the expenses that previously caused the reduction in the working account being non-recurrent (for example some payments in respect of the parties’ properties, some of which are now sold), that he now faces the prospect of a further diminution of the funds contained therein.
The husband also asserts that it would be highly undesirable, in the event of the complete depletion of the working accounts, that the parties be forced to return to the court yet again to conduct further interlocutory litigation. He asserts that this is so particularly where the parties are dealing with inarguable expenses and where there is no dispute either as to the payment of those expenses nor that they should be paid from the income of the business.
The wife accepts that out of the project commissions account there should be payment of some of the expenses of project commissions, being the specific expense described by the husband in his affidavit of the commissions for the senior agent responsible for those sales.
Against the further release of the project management account, the wife points to the pre-injunction depletion of the working account by the husband from a level of approximately $1 million in 2018 to, at February 2019 an amount of $474,000 by the husband as demonstrative of risk (although the husband asserts that the wife received $200,000 from the drawings).
The wife also points to the carving off of the project commissions as not being responsible for the shortfall in available income to meet expenses. The wife points out that the business did not derive income from project commissions until post separation. That is pre-separation the income derived by the business that is now payable into the working accounts was sufficient not only to meet the expenses of the business but to also fund the parties, providing their income and lifestyle.
The wife’s opposition to the further release of the project management account occurs where the parties’ relationship has ended under highly conflictual circumstances and against the underlying background of:
(a)The wife having been excluded from the Suburb D business that she and the husband previously operated together;
(b)The husband having control over the operation of that business;
(c)The husband commencing a Suburb CC based business arguably in competition with the Suburb D business;
(d)Issues of tardy disclosure and non-disclosure being raised in respect of the operation of the Suburb D business;
(e)A conceded position that the Suburb D business resources are used in the operation of the Suburb CC business (although the husband also asserts that this is accounted for);
(f)An apparent movement of part of the business of the Suburb D practice, being the project business, into the Suburb CC practice; and
(g)Where the Suburb D practice appears to be no longer deriving the previous levels of income that enabled not only the meeting of the expenses of the business, and the meeting of the expenses of the parties, but also the accumulation of cash reserves.
Against this background the wife asserts there is a risk that the husband is funnelling income from the Suburb D business to support his new enterprise in the parallel business in Suburb CC. She says that despite her agreement to the payment of the nominated list of expenses, allowing the husband to draw against the project commissions account risks an improper drawing down of that asset to fund apparent expenses of the Suburb D business that are in truth the expenses of the Suburb CC business.
The wife also emphasises that although there has been a depletion in the working accounts from their level at February 2019 of $474,000 to the current level of $250,000 at September 2021, that the gradual depletion of the account points away from a need to release any further than the $250,000 remaining in that account pending the final determination of the proceedings.
Further, the wife asserts that despite the husband's list of approaches to the wife to exercise the consent drawdowns permitted under the orders such approaches have been limited, have been sullied by a lack of disclosure by the husband and have not included approaches to pay commissions (being a specific issue identified by the husband as warranting access to the project commissions).
The wife also asserts that the project commissions account monies, whilst the property of the Suburb D business, should be considered as though it was a separate asset. This is because the valuation of the business (which is currently for sale but as yet unsold) excluded from the value of the business monies held in that account. This leaves the non-liquid business asset distinct from the cash held in the account.
The parties have agreed to further disclosure mechanisms to accompany the amendment of the injunctions.
Consideration
Injunctions were put into place in February 2019 for the protection of the pool of property of the parties, in particular for the protection of the major asset of the parties, the Suburb D practice. The circumstances now confronting the court do not point to an unfettered relaxation of the restrictions, a matter frankly and appropriately conceded by Senior Counsel for the husband. The circumstances speak of potential risk to the assets of the pool.
The husband seeks relaxation of the injunctive restraints imposed as interim orders in February 2019. The onus rests on him to show both circumstances warrant revisiting the matter previously resolved until further order, and whether the circumstances also warrant a change in the arrangement.
A part of that change is uncontroversial as the parties both accept that on an identification of the appropriate expenses that are to be paid that the $250,000 floor may now be removed. Commendably the parties have agreed on the list of expenses to be paid, and that the payments should be made from the income of the Suburb D business.
The parties disagree on whether the project commissions may also be accessed. The husband asserts that the restraint is not necessary to protect the parties’ interests. The wife asserts that access to those funds is not necessary to fund the expenses pending final hearing.
Whilst it is true that the identification of the agreed expenses is a significant protection of the assets of the parties, the underlying circumstances identified above speak to a continuing risk as identified by the wife. It is against that risk that the husband is required to justify the changes in the injunctive relief that he pursues.
Recourse to the agreed further draw down of the working accounts limits the extent to which the new proposed restrictions allow a diminution of the pool of property in a manner that is not provided by extending the access to the project commissions account.
Particularly where the wife, responsive to a particular expense related to the project part of the business, proposes an order to allow that expense to be paid from the account, the need for access to the project management account in addition to the working accounts is not made out to a degree that justifies the further relaxation of the protections. It is true that it would be undesirable to see further litigation should there be the complete depletion of the working accounts. Such seems, at present, unlikely. If such occurs it may be a matter of some concern in the event that it signals an erosion of the Suburb D business.
Although the husband proposed a different alternative arrangement for the payment of particular expenses, those matters are better dealt with by the scheme proposed by the wife.
Orders will be made that permit draw downs for the agreed defined reasons against the working accounts and the floor of $250,000 will be removed. The restraint in relation to the access to the project commissions account will remain, save that drawings will be able to be made for the defined purpose of making commissions payments for the projects to the senior agent. The additional mechanisms for disclosure as agreed by the parties will also be the subject of orders.
Costs
Each of the parties pursued their costs in relation to these interim proceedings.
In circumstances where, in accordance with s 117 of the Family Law Act 1975 (Cth), the starting point is that each party bears his or her own costs, the key issue dwelt upon by the parties was as to their success or lack thereof in relation to the remaining contentious smatter, being the access to the project commissions account.
The husband observed that he filed an application in generally the current terms in June 2021. He complains that there has been a lack of concession by the wife until late in the proceedings. Since initially filing the husband has ameliorated his application to embrace a number of the matters raised by the wife, ultimately being unsuccessful in respect of what remained the only contentious matter, being the access to the project commissions account.
Similarly, since initially responding the wife has ameliorated her position, and, as early as 3 August 2021, the wife pursued orders largely aligned with the current result.
Reasonably, the husband asserted that if successful he should receive his costs, conceding that he would struggle to resist an order for costs in the event that he was unsuccessful, as is the case.
That lack of success justifies the making of an order that the husband pay the wife’s costs of this application as agreed or as assessed.
I certify that the preceding thirty-eight (38) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Gill. Associate:
Dated: 16 September 2021
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