Rahma & Rahma

[2008] FamCA 284

FAMILY COURT OF AUSTRALIA

RAHMA & RAHMA [2008] FamCA 284

FAMILY LAW  -  PROPERTY  -  interim  -  failure by husband to make financial disclosure  -  interim injunctions  -  costs against husband

Family Law Act 1975 (Cth)

HUSBAND: Mr Rahma

WIFE: Mrs Rahma

FILE NUMBER: MLC 8719 of 2007

DATE DELIVERED: 14 March 2008

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: Brown J

HEARING DATE: 14 March, 2008

REPRESENTATION

COUNSEL FOR THE HUSBAND: Ms C.E. Molyneux QC

SOLICITOR FOR THE HUSBAND: McDonald Murholme

COUNSEL FOR THE WIFE: Mr A.I. Strum

SOLICITOR FOR THE WIFE: Taussig Cherrie & Associates

Orders

IT IS ORDERED BY CONSENT

1. That within 28 days hereof, the husband make, file and serve:

   (a)an updated financial statement or affidavit giving further particulars in relation to his financial affairs as set out in his financial statement filed 6 September 2007 and any changes to his financial circumstances since that time pursuant to Division 13.1.2 of the Family Law Rules 2004; and

   (b)a formal affidavit of documents listing the documents to which the duty of disclosure applies pursuant to Divisions 13.2.1 and 13.2.3 of the Rules and forthwith make available for inspection and copying all documents so discovered and not subject to a claim of privilege or other objection to production.

1. That the parties’ competing applications for final orders (being the wife’s application filed 3 August, 2007 and the husband’s response filed 6 September, 2007) be referred to the list of cases awaiting finalisation for the allocation of a callover and/or trial notice directions.

IT IS FURTHER ORDERED

1. That, until further order, the husband, by himself, his servants and agents, be and is hereby restrained from selling, transferring, gifting, further encumbering or howsoever otherwise dealing with the former matrimonial home registered in his sole name and situate at R in the State of Victoria. 

(4 ) That the further hearing of the wife’s application for an injunction be adjourned to 29 April, 2008 in the interim judicial duty list at 10:00 am.

1. That the wife file and serve an amended application for interim orders and affidavit(s) in support by 18 April, 2008. 

1. That the husband file and serve a response to the application filed by the wife pursuant to paragraph (5) hereof and affidavit(s) in support by 24 April, 2008.

1. That until further order upon any sale of any of the real properties situate at :

   (a)B;

   (b)M;  and

   (c)C;

   the husband personally and in his capacity as sole director and shareholder of S Pty. Ltd. be and is hereby restrained from dealing or abiding any dealing with the proceeds of sale thereof, save and except for :

   (i)payment of reasonable costs and expenses of sale;  and

   (ii)payment of any moneys owing to Bendigo Bank secured against such real property/properties;

   and that the balance of the proceeds of sale be forthwith deposited into an interest bearing trust account in the name of the solicitors for the wife, Taussig Cherrie & Associates, upon trust for the husband and the wife pending further order or the written agreement of the parties.

1. That the husband pay towards the wife’s costs of this day the sum of $3,150 and such costs be paid within three months hereof. 

1. That the wife have leave to issue a subpoena to produce documents addressed to ASIC.

1. That the reasons for judgment this day be transcribed and copies made available to the parties.

1. That pursuant to Rule 19.50 of the Family Law Rules 2004 this matter reasonably required the attendance of counsel, including senior counsel.

IT IS NOTED that publication of this judgment under the pseudonym Rahma & Rahma is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER:  MLC 8719 of 2007

MR RAHMA

Husband

And

MRS RAHMA

Wife

REASONS FOR JUDGMENT  

1. The case comes before the court today by an application in a case, filed on 6 March 2008, by the wife.  It is supported by an affidavit sworn by her.  No response to that application has been filed and, thus, no affidavit in support of any response.

1. At the start of the hearing, counsel for the wife made an oral application, to which I will refer in a moment.  Some evidence referable to that oral application is before the court in admissible form; some, necessarily (as facts giving rise to the application arose as recently as yesterday) is not before the court.  It must be said if the husband had made full financial disclosure in the proceedings for final orders, material referable to aspects of the oral application would have been before the court.

1. The wife is 41, the husband is 62.  They married in September 1988.  They have six children aged from 18 to four.  As I read the material, they separated in about March 2005 and proceedings were initiated in this court on 5 April 2005.  A file relating to those proceedings is with the file relating to the current set of proceedings.

1. Having not read every document on the two files, I cannot be sure how much is common ground but it appears that the first set of proceedings were discontinued as there was an attempt at reconciliation.  A second set of proceedings was commenced by the wife on 3 August 2007 and the interim application before me is filed in those proceedings. 

1. In the course of submissions, reference has been made to material filed by the husband in the first set of proceedings.  Insofar as that might contain evidence of matters of which the wife now asserts total ignorance, that material would be relevant;  it was served on her and she could be said to have knowledge of its contents.  The husband argues that she was able to draw conclusions about his present financial state and status, based on material prepared for all those earlier proceedings, but I do not find that to be a sound argument.

1. The application filed by the wife on 6 March 2008 sought to give the husband a fortnight in which to do that which he has been required to do on a number of occasions, which is to provide details of his financial position.  There is an obligation on a party to financial proceedings to make full financial disclosure.  In this case, specific orders requiring that to be done were made on 6 September 2007.

1. On 6 September, 2007 Senior Registrar FitzGibbon ordered that the husband pay the wife the sum of $1,000 per week for her interim support.  He also ordered the husband - and this was by consent – to pay the mortgage and credit facility to the Bendigo Bank, and H School arrears.  Other orders, made not by consent, required him to pay a number of outgoings in respect of the former matrimonial home in R, and the costs of registration and insurance on the wife's car.

1. The most relevant part of those orders for today’s purposes was, again, made by consent.  It provided for the husband to make specific disclosure in relation to a number of specified areas, including :

   ·    assets, real or personal, held or owned by him or on behalf of the wife, any company of which he was a director or shareholder, any trust of which he was an appointed trustee or beneficiary, and any of the children of the marriage, whether in Australia or overseas;

   ·    the disbursement and disposition of the proceeds of sale of factory premises by S Pty Ltd in about September 2006;

   ·    the matters specified in paragraph 49 of the wife's affidavit filed 3 August 2007 (that paragraph refers to the husband's business activities, share trading, tax returns and credit card debts, amongst other things).

1. A conciliation conference was fixed for 17 December, some three months later.  The husband failed to comply with those orders, save for the production of a few, and clearly inadequate, documents.  As the conciliation conference could not proceed in any effective way, Registrar Kaur noted the husband's failure to comply and ordered he pay the wife's costs of $750.  She granted leave to the wife to issue subpoena (an expensive but effective way of getting evidence before the court) and adjourned the matter otherwise to the judicial duty list on 4 February.  It was then administratively adjourned to today's date.

1. The material in support of the wife's application filed on 6 March 2008 demonstrates that her solicitors have written many, many letters to solicitors on the record for the husband (when these solicitors were on the record) and made significant attempts to have the husband comply.  He has not done so. 

1. The husband's solicitors then went off the record.  He has consulted another solicitor.  That solicitor contacted the wife's solicitors on 11 February 2008 and there was some discussion between them.  That firm filed a notice of address for service today.

1. An order requiring the husband to file an updated financial statement or affidavit, and a formal affidavit of documents, is not opposed by the husband today.  Nor is an order that the parties' competing applications for final orders be referred to the list of cases awaiting trial notice directions. 

1. The wife seeks an order that the husband’s response to the application for final orders be struck out, if he fails to comply with the orders requiring him to file a financial statement and affidavit of documents.  Her counsel supported a right of reinstatement on compliance, but sought that the wife's application for final orders proceed to a hearing on an undefended basis, once the response was struck out.

1. I do not propose to make that order today.  It is true that there is a plethora of authority which would allow the court, were the husband to maintain his position, to draw very significant adverse inferences against him.  In that context, a court need not be unduly cautious when making findings about the financial circumstances of the non-disclosing party.

1. However, the court must be cautious when considering whether to summarily dismiss an application.  To strike out a respondent’s defence, in these circumstances, is tantamount to summary dismissal of his claim.  In my view, it would be premature to do so at this time.  If the husband fails to comply with these orders, he should not be surprised if an order in those terms is then made.

1. By oral application, the wife seeks an interim injunction, restraining the husband from selling or dealing with the former matrimonial home, which is registered in his own name.  She also seeks orders providing that on the sale of three other pieces of real estate, the proceeds of sale (after the payment of reasonable costs and expenses) be disbursed to discharge moneys secured against those properties, and otherwise be paid into an interest-bearing account.

1. It is late in the day but I do need to say something to put that application in context.  There is reference to four pieces of real estate.  One is the former matrimonial home in R, owned by the husband prior to these parties' marriage.  It is registered in his sole name and in it live the wife and their six children.  There is another piece of residential real estate in C in which, I am told, the husband lives.  That property is owned by a company, S Pty Ltd.  The husband is the sole director and a shareholder of that company, which is the trustee (I am told today) of the P Family Trust.  He is in residence. 

1. There are then two commercial properties, being offices and warehouses; one is in B and one is in M. 

1. I am told from the bar table that the B property is owned by the L Family Trust through S Pty Ltd, and the M property is owned by the A Family Trust, through its corporate trustee.

1. It is put that funds advanced by the Bendigo Bank (some $2.2 million is owing) are secured over these properties.  A first mortgage to St George was previously secured over the former matrimonial home.  The husband's evidence - and this is in the affidavit he swore in September 2007 - is that a property was sold in 2006 and, from that sale, over $1.5 million was paid to St George Bank to discharge that mortgage.

1. In the affidavit he swore in September 2007, the husband sets out, in a long paragraph, a list of dealings with the balance of the proceeds of the sale.  It must be said that the dealings described are not the dealings of a person in dire financial straits in Australia, as is the husband's contention.  The list includes, for example, buying real property in two cities in Egypt for the benefit of the parties’ adult daughter, and an account of losing some $US20,000 or part of $US20,000, which was left in the boot of his car, and stolen.  No doubt that evidence will be the subject of cross‑examination in due course.

1. Through his counsel, it is put (from the bar table) that a company, V Pty Ltd, was incorporated by the husband on 6 February 2008.  The three directors are the husband, wife and the eldest child of the marriage and each of those people are shareholders.  What the husband seeks is to have that company lease the former matrimonial home and, as lessor, by licence or sub-lease, allow the wife and children to live in that home for some nine months.  The property, subject to the lease (and licence or sub-lease) would be sold, presumably on a contract giving vacant possession in nine months.

1. I add that it was late in the hearing that senior counsel advised of instructions that the husband has signed an authority to auction this property on 3 May, 2008.  No document was tendered.

1. When it was put to senior counsel for the husband that in the only affidavit filed in these proceedings, the husband deposed to the property being worth only $1.8 million without a permit but significantly more with a permit to develop six units, she responded that “that would be the intention”.  I cannot say if the intention is to sell the property with a permit and subject to a nine-month lease, or on some other basis.

1. On hearing those assertions from the bar table, counsel for the wife informed the court that, on his instructions, the wife has no knowledge of V Pty Ltd.  She has not consented to be a director or to hold shares in it.  She has not knowingly signed any document in respect of it.

1. None of the assertions of counsel is on affidavit and I have allowed, perhaps, too many statements from the bar table.  I am mindful of the fact that this is an oral application, that the orders sought are significant and that counsel for the wife submitted that no undertaking for damages should be required from her.

1. I will order a transcript of today's hearing.  It is vital that the husband deposes to the truth of all matters put to me today by his counsel.

1. The wife does not oppose the sale of the properties, save the one in which she is living with the children of the marriage.  I do propose to make an injunction in the terms of paragraph 2 of the handwritten minute tendered by counsel for the wife today. 

1. On the husband's account, he needs to sell these properties.  On the husband's account, the whole of net proceeds must be paid to the Bendigo Bank.  On the husband's account, there will not be a cent over, after the net proceeds are paid to the Bendigo Bank.  On that basis, an order that any balance after payment of proper expenses and encumbrances be held in trust can cause no prejudice whatsoever to the husband.  On his account, there will be no balance to be held in trust.  If there is, it should not be disbursed without further order or agreement.

1. The injunction sought by the wife in respect of the former matrimonial home is strenuously opposed.  Senior counsel for the husband put everything that could be put in support of her client's position.  In the form 13 the husband filed when these proceedings commenced, the business (which he runs through I Corporation) is said to have a value of nil.  So does S Pty Ltd, which is the trustee, as I have said, of at least two trusts, which own real property.  One would have to be sceptical about the nil valuation of the business, given that his own evidence is of some dozen business related overseas trips undertaken since selling the property in 2006, and his evidence that significant funds have been expended from the proceeds of that sale to purchase new demonstration equipment from the United States, and to help his negative cash flow in Australia.

1. His case, as I understand it, is that he is going backwards.  He cannot meet the obligations imposed on him by the orders of 6 September, and this includes obligations pursuant to orders made by consent.  It is absolutely vital that the former matrimonial home be sold to forestall the potential for a mortgagee's sale. I cannot say what sums will be realised by the sales of the three properties to which I have referred.  Experience in this court suggests that a diminution in the total sum outstanding, through the proceeds of such sales, is a factor the lending institution would consider when determining action in respect of the former matrimonial home. 

1. Having regard to all the evidence, I do propose, until the adjourned date, to restrain the husband from selling the former matrimonial home.  The matter will be adjourned to 29 April, 2008, some days prior to the alleged auction date of 3 May 2008.  The injunction will obviously be an impediment to any pre-auction sale. 

1. In relation to an undertaking as to damages, I am mindful of the need to be very cautious when injunctions are made in respect of commercial enterprises or real property in circumstances where questions of damages could arise.  It is a discretionary matter and the discretion must be exercised judicially, having regard to all the circumstances.

1. At this stage, I do not propose to require the wife to give an undertaking for damages.  I make it clear, particularly to the wife, that this order operates until the adjourned date and all aspects will be revisited at that time, including the question of an undertaking and the scope of injunctions.   

1. The wife has made an application for costs and I do not accept the husband’s submission that her costs should be reserved.  The application is best heard by the person before whom the matter has been argued.  I do not find there to be substance in the submission that the wife did not have to bring this application, and that she could have simply have waited for trial and relied, at that point, on the husband’s non-disclosure.  This hearing date could have been vacated if the documents which were sought had been provided.  In my judgment, the original interim application was necessarily and appropriately brought by the wife.  It is true an oral application has been argued but that has not raised the costs of the parties, save, possibly, the cost of instructing solicitors in the courtroom.

1. The costs claimed by the wife are some $1,500 in respect of her solicitor and $1,750 for counsel. The latter is the brief fee and the former seems to me to be modest. It is put that the husband is impecunious and that is a matter to which the court must have regard when considering making an order for costs pursuant to s.117 of the Family Law Act 1975. The wife was unsuccessful in the strike-out application but has been successful in obtaining an order that imposes a finite period on the husband's obligation to comply with orders. The application was necessitated by the husband’s failure to comply with an order. He filed no response to the application of which he had notice. In these circumstances I am satisfied the husband should contribute to the wife’s costs the sum of $3,150.

I certify that the preceding
36 paragraphs
are a true copy of the reasons for
judgment herein of the
Honourable Justice Brown AM.

Dated the           day of            2008.

…………………………………………
Associate.