REAGAN & REAGAN

[2015] FamCA 452

FAMILY COURT OF AUSTRALIA

REAGAN & REAGAN [2015] FamCA 452

FAMILY LAW – PROPERTY – Interim – Where the husband makes an urgent application to the Court seeking to have the money that the wife unilaterally transferred out of a business bank account into various bank accounts in Australia and the Country G, returned to the business account – where the wife seeks a number of interim orders in respect of spousal maintenance, interim litigation funding, disclosure, and orders to grant her exclusive use of the former family home – where some orders were made by consent – where the balance of the orders were determined following the hearing.  

Family Law Act 1975 (Cth)

APPLICANT: Mr Reagan

RESPONDENT: Ms Reagan

FILE NUMBER: BRC 3545 of 2015

DATE DELIVERED: 16 June 2015

PLACE DELIVERED: Brisbane

PLACE HEARD: Brisbane

JUDGMENT OF: Forrest J

HEARING DATE: 15 June 2015

REPRESENTATION

SOLICITOR FOR THE APPLICANT: Ms Parry
Best Wilson Buckley Family Law

COUNSEL FOR THE RESPONDENT: Dr Brasch QC

SOLICITOR FOR THE RESPONDENT: Damien Greer Lawyers

Orders

IT IS ORDERED, BY CONSENT, UNTIL FURTHER ORDER

Spousal Maintenance

1. That the Husband pay or cause to be paid to the Wife spousal maintenance of $600 per week commencing Monday 15 June 2015, such sum to be paid weekly, with the husband to:

   (a)pay the weekly amount owing each Monday, commencing Monday 15 June 2015 into Westpac account BSB: … Account Number: …;

   (b)in addition to the $600 per week, the husband pay, or cause to be paid, the mortgage, as and when it falls due, for the former matrimonial home.

Property located at B Street, C Town

1. Pending the finalisation of this matter:

   (a)       the Wife have the sole right to occupy the real property;

   (b)the Husband pay all rates and like apportionable outgoings of the real property as they fall due;

   (c)the parties hold their respective interest in the real property upon trust pursuant to these Orders;

   (d)neither party encumber the real property without the consent in writing of the other party.

Disclosure

1. Each party shall meet the obligations set out in the Family Law Rules 2004 as to disclosure.

2. Within seven (7) days of the date of these Orders, the Husband in his personal capacity or capacity as Director of D Pty Ltd provide to the Wife’s solicitors by way of disclosure continuing on a monthly basis the following:

   (a)electronic form ledgers reflecting the loan accounts for D Pty Ltd;

   (b)business activity statements for D Pty Ltd as they are lodged;

   (c)       the monthly Xero reports.

Valuations

1. That the Husband pay for the costs of the single expert witness, Mr E, in the first instance, who shall be engaged to value the parties’ interests in D Pty Ltd, with the Wife’s equal half share of those costs to be paid from her property settlement.

Restraints

1. That both parties are hereby restrained from:

   (a)discussing these proceedings with or showing any documents prepared in this matter to any person/s, business associates or colleagues or employees of D Pty Ltd; and

   (b)denigrating the other and/or the business/company D Pty Ltd in the hearing or presence of any client, business associate, business colleague or employee of the said company, or any other person associated with the said company.

2. That the Husband in his personal capacity or capacity as Director of D Pty Ltd:

   (a)provide the wife with a draft copy of the end of year financial accounts for D Pty Ltd and management accounts at the same time as he provides them to Mr E;

   (b)be restrained from engaging in any conduct or financial activity outside of the normal course of business of D Pty Ltd;

   (c)be restrained from engaging in any transactions on or behalf of D Pty Ltd in excess of $30,000 for a single new transaction without the express written consent/authority of the Wife;

   (d)give the Wife twenty-one (21) days written notice prior to lodging the company returns with the ATO.

Mediation

1. That within seven (7) days of:

   (a)the Husband complying with his disclosure obligations pursuant to paragraph 3 hereof; and

   (b)all necessary valuations being undertaken and provided to the parties;

   the parties shall do all acts and things required to appoint Mr F as mediator.

2. The parties shall attend such mediation within thirty (30) days of appointing Mr F as mediator.

AND IT IS FURTHER ORDERED

1. That the wife shall forthwith take all such steps as are necessary to cause the sum of $14,500 to be withdrawn from Australian bank accounts solely controlled by her and to be deposited to her solicitors’ trust account to be used solely for the payment of legal fees and outlays already incurred by her or yet to be incurred by her.

2. That the wife shall forthwith take all such steps as are necessary to cause the further sum of $14,500 to be withdrawn from Australian bank accounts solely controlled by her and to be deposited to the trust account of the husband’s solicitors to be used solely for the payment of legal fees and outlays already incurred by him or yet to be incurred by him.

3. That once the sum of $14,500 deposited to the trust account of the husband’s solicitors pursuant to paragraph 11 hereof is fully expended, until further order, the husband shall pay or cause to be paid to the trust account of the wife’s solicitors an amount equal to any amount he pays or causes to be paid to his solicitors for his legal fees and outlays in this matter save for any amount he pays as outlays for the provision of any reports done by a jointly appointed expert witness, and such amount shall be paid to the wife’s solicitors’ trust account within seven (7) days of the payment by him of any account rendered by his solicitors or any amount deposited by him or on his behalf into his solicitors’ trust account on account of his legal costs and outlays.  

4. That each party shall keep the other party fully informed, in writing, at least on a monthly basis, as to the amount of legal costs and outlays each is incurring in this matter on an ongoing basis.

5. The characterisation of the payments made pursuant to paragraphs (10), (11) and (12) of these Orders shall be a matter for determination by agreement between the parties or, in default of agreement, by the Judge who determines final property adjustment orders as between the parties.

6. The wife shall take all such steps as are necessary to forthwith repatriate funds taken by her from their business bank account and transferred to bank accounts controlled by her in the Country G, being amounts said to total around USD $35,000 as at 15 June 2015, and to cause such funds to be deposited back into the business bank account out of which they were withdrawn. 

IT IS NOTED that publication of this judgment by this Court under the pseudonym Reagan & Reagan has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT BRISBANE

FILE NUMBER: BRC 3545 of 2015

Mr Reagan

Applicant

And

Ms Reagan

Respondent

REASONS FOR JUDGMENT

1. The husband and wife in this matter came before the Court for the first time yesterday, 15 June 2015 on the hearing of competing interim applications in respect of property and financial matters.

2. After some discussion and negotiations between their experienced legal representatives, fortunately, they were able to reach agreement in respect of most of the matters that were in dispute between them when they came into the Court at the start of the day.

3. There remained a couple of matters that they were not able to resolve that the Court must determine. Written and oral submissions were given to the Court by legal representatives for both parties and I reserved overnight to consider those against the evidence.

Some relevant background

1. Both the husband and the wife were born in the Country G. They came out to Australia to work and travel as young adults. They met and started living together in Melbourne in 2007, marrying there in mid-2008. Two little boys were born of their marriage and they are now six and four and a half years old.

2. The parties both worked in media production before establishing their own business through a company, D Pty Ltd that they both were directors of and the husband was the sole shareholder of. The company traded in another name, producing various media products The business also developed a website through which its products are also promoted.

3. On the evidence, the business, established in 2012, has been growing well since its establishment. One valuation that was commissioned by the parties at some point in the recent past projects gross takings for the 2015 financial year of in excess of $1,000,000, costs of around $700,000 and net profit of in excess of $300,000.

4. Both parties worked in the business, the wife’s role being tailored around her responsibilities to provide principal parenting for their two little boys.

5. The family had settled on the H Region of Queensland and had bought a home that each says is worth about $500,000, borrowing funds from a bank to do so.  They each say that they owe about $390,000 to the bank on that mortgage.

6. The couple’s relationship became strained early in 2014 and they finally separated with the husband moving out of the family home in mid-November that year. Some acrimony developed between them over the final months that they were still living together and has continued in the months since their separation. They have apparently lost trust in each other.

7. The wife, who had unrestricted access to the business bank account, had been transferring funds out of the business bank account into various other bank accounts in Australia and in the Country G throughout 2014 and continued to do this in early 2015.

8. In April 2014, the wife filed initiating proceedings in this Court seeking final parenting orders that permit her to relocate the two boys back to the Country G to live with her there and also seeking final property adjustment orders. In the meantime, she and the boys continue to live in the former family home on the H Region and the husband rents accommodation elsewhere.

9. The husband, aware that the wife had transferred over $100,000 out of the business bank account over the past year or so, began asking for explanations and details in respect of the wife’s conduct in taking that money and what she had done with it. Unsatisfied with her responses, and asserting that the money is needed to meet business expenses, he filed an Application in a Case seeking to have the money returned by her from the various bank accounts in which she holds it all to the business account. Around the same time, the husband exercised authority to unilaterally terminate the wife’s employment with the business and to remove her as a co-director of the company. Since then he has continued to run the business by himself without her.

10. Maintaining a case of need for financial support from the husband for her and the two boys as well as needing to be able to fund her ongoing legal representation, the wife responded with her own application for spousal maintenance, interim litigation costs funding orders, disclosure orders, and for orders granting her exclusive use of the former family home.

11. Matters that the parties agreed on yesterday, that will be reflected in orders that are made by consent today are the payment by the husband of $600 per week by way of interim spousal maintenance, in addition to the continued payment by him of the $600 per week mortgage repayment in respect of the family home and the local authority rates pertaining thereto. They agreed to an order being made that the wife can have exclusive occupation and sole use of the property on an interim basis, as well as orders in respect to disclosure and the husband’s management of the business on an interim basis.

12. They agreed to procedural matters relating to the instruction of an independent single expert accountant to value their interests in the company through which they run the business and to the conduct of mediation with an experienced family law mediator with a view to resolving the matters that vex them still.

13. They asked the Court to determine a few matters that remained in dispute between them. Those matters relate to the treatment of funds the wife took from the business account and still maintains sole control over.

14. It was common ground yesterday that the wife still has around AUD $35,000 in bank accounts in Australia and around USD $35,000 in bank accounts in Country G that she has agreed will be repatriated to Australia in the very near future to be dealt with as ordered by the Court. There is no dispute that around $29,000 of the money in the Australian bank accounts controlled by the wife is money taken by her from the business bank account over the last year. As to the other $6,000 of that money, the wife says it is money that is held on trust for the two boys and was not sourced from the business bank account. That is not accepted by the husband at this point in time.

15. There is also no dispute that the money held in bank accounts in Country G was all sourced from the business bank account.

The Parties’ Competing Positions

1. The husband came to the Court seeking to have all of the money in Australian bank accounts and in the Country G bank accounts returned to the business bank account. At the end of the day yesterday, he advanced the case that of the money in the Australian bank accounts each of the parties should receive $15,000 by way of interim litigation costs funding with those payments to be characterised as payments received by way of partial property settlement. As for the balance, he contended that all of it, including the money in the Country G bank accounts, should go back into the business bank account to be utilised in meeting outstanding accounts that the company currently owes and ensuring that the company remains solvent.

2. The wife came to the Court asking for spousal maintenance orders and for the money in the bank accounts to be deposited into her solicitors’ trust account and held as security for the payment by the husband of weekly spousal maintenance, including the housing mortgage payments.  She also asked for an interim litigation costs funding order in what has become known as a “dollar for dollar” form, which would require the husband to pay to the wife’s solicitors for the wife’s use to meet her legal costs and outlays an amount equal to any amount that he pays his own lawyers.

3. At the end of the day yesterday, however, the wife’s position changed and she  asked the Court to order that she could retain all of the money in the Australian bank accounts with the characterisation of that to be left for the trial judge to determine and for the money in the Country G bank accounts to be held on trust in her solicitors’ trust account as security for the payment by the husband of the spousal maintenance and mortgage payments that he would be obliged to make pursuant to the orders that the parties had informed the Court the husband was consenting to.

Some more relevant facts

1. The wife has in recent months been able to obtain some freelance work that has been earning her an average of around $400 per week. In addition, she receives $180 per week from a tenant who occupies a granny flat situate on the same property as the family home. She retains that money to her benefit. She will now have orders that the husband pay the $600 per week mortgage repayments in respect of the loan the parties used to buy that property, as well as the local authority rates. She will also receive a cash spousal maintenance payment from the husband of $600 per week. Accordingly, she will have income of around $1,180 per week to meet her expenditure needs, but will not have to pay the mortgage instalments or the rates. She also receives a small amount of Commonwealth Government benefits to help her. She set out her weekly expenditure requirements, not including the mortgage instalments and the rates, to be $1,764. That included $372 in weekly expenses solely attributed to expenses relating to the children, not to mention other amounts included in the balance of the expenses she set out that are attributable to expenditure on the boys. 

2. I am quite satisfied that the sum of $1,180 in income that the wife should receive sufficiently meets her own weekly expenditure requirements. As for the children, that is another matter and is a matter to be determined as between the husband and the wife by reference to the child support system established within the various pieces of child support legislation. The husband’s attitude to the responsibilities of parenthood, demonstrated by how he deals with questions of child support, is, of course, a matter that must be taken into account in determining what parenting orders are in the children’s best interests if and when the Court is required to determine any such orders.

3. In the meantime, the evidence before the Court included a valuation of the parties’ business as at 5 February this year by a firm of accountants. Relevantly, it attached a document described as an “Adjusted Management Profit & Loss Statement”. It showed profit and loss figures for the financial years ended June 2012, June 2013, June 2014 and for the six months ended 31 December 2014 with figures for the financial year ending 30 June 2015 being projected therefrom.

4. Those figures show total income for those periods being $104,024, $794,546, $926,875, $679,304 and with the projection for this full financial year to be $1,083,464. Total operating expenses and costs of sale for the same periods are also set out as $89,964, $680,519, $810,710, $480,203 and for the financial year ending 30 June 2015 being projected to be $752,442.

5. These figures then lead to adjusted net profit for the same periods as $14,060, $114,027, $116,165, $199,101 and projected for this financial year $331,022.  That is a projected adjusted net profit of $6,365 per week.

6. Accordingly, it is seemingly apparent that the husband has the capacity to pay the mortgage repayments on the former family home, rent for his own accommodation and $600 per week spousal maintenance that he has now agreed to pay the wife on an interim basis. It is seemingly apparent that he has the capacity to additionally assist in the financial support of his children as well.

7. The Court was told that the wife has already paid around $36,000 in legal fees to her solicitors from money that she transferred out of the business account over the past year. In addition, she has some $8,700 in unbilled fees for work already done for her.

8. For the husband it is said that his billed fees to date have been around $7,000 but that there is around $10,700 in unbilled work already done for him. The difference in the amount of fees the wife has incurred to date is apparently explained by the fact that she started seeing her solicitors and taking advice some time before the husband did.

9. The husband has given evidence that the business has around $250,000 in outstanding accounts that need to be paid and it was common ground that the business has $28,000 in a bank account for its use at the moment. The wife disputes the amount said by the husband to be owing, apparently not satisfied that the current debt level is that high. The husband certainly did not particularise that amount of current liabilities and the Unadjusted Balance Sheet attached to the February valuation adduced into evidence by the wife listed current liabilities of the company as at 31 December 2014 at $98,813 which include, amongst others, $74,450 of accounts payable, $21,608 in GST payable and $12,459 in PAYG tax payable. Without explanation, $250,000 seems high by comparison some five and a half months later, but in any event, taking over $100,000 out of the business bank account over a year, I am satisfied, must have some sort of impact on the business capacity to continue to meet its ongoing liabilities, particularly where the income the business is generating is required to go further now by supporting two separate households until financial matters between the parties are finalised.

1. In the circumstances presented to me, particularly where:

   (a)There is no evidence that the husband has not been paying the mortgage payments in respect to the debt secured by mortgage over the former matrimonial home; and

   (b)The evidence satisfies me that the husband has, through his singular continued operation of the business, the current capacity to continue to meet those weekly mortgage payments in addition to paying the wife $600 per week for her spousal maintenance; and

   (c)I am not satisfied that withholding an amount of USD $35,000 (around AUD $45,000 on current exchange rates) of the business’ money will not place the business at some risk of not being able to meets its ongoing current liabilities; and

   (d)The wife only asks for the money to be kept in her solicitors’ trust account for security for payment by the husband of his obligations created by the orders that they have agreed to the Court making in respect of spousal maintenance and mortgage repayments;

   I am not satisfied that the money should not be ordered to be deposited back to the business bank account immediately upon its repatriation from the Country G bank accounts into which the wife caused it to be paid. That is what I will order.

2. The wife and her legal representatives should take comfort from the obligations that the disclosure orders the husband has agreed should be made will impose upon him in respect of accounting to the wife and her representatives for his use of money in his continued management of the business for the parties until their financial affairs have been disentwined by property adjustment orders.

3. As for the competing positions adopted by the parties in respect to the interim litigation costs funding, I am quite satisfied that the s 117 power to make such order as to costs as the Court considers just if the Court is of the opinion that there are circumstances that justify it in doing so, empowers me to make orders that $14,500 be paid to each of the parties’ solicitors from the money held by the wife in Australian bank accounts to be used solely by them on account of legal costs and outlays that have either already been incurred or are yet to be incurred and for the characterisation of each of those payments to be by agreement of the parties or at the discretion of the judge who makes final property adjustment orders in the matter. 

4. Making such an order, I am quite conscious of the reality that it is entirely common practice to treat amounts paid in legal fees from capital of the parties whilst matters are progressing to finalisation as amounts received as part of a party’s property adjustment entitlements but I am persuaded that it should remain a matter for the trial judge’s discretionary determination if the parties themselves cannot agree on that.

5. I particularly consider such an order justified and just having regard to the amount of money already spent by the wife on her legal fees as compared to that spent by the husband and the fact that both parties have not insubstantial legal fees currently unbilled, with the only obvious source of funds available to each of them to meet these legal fees being money generated by the business. In addition, I am mindful of the fact that there is dispute between the parties pertaining to $6,000 of the AUD $35,000 currently held by the wife in Australian bank accounts that I am not in a position to determine today. I am, consequently, not in a position to make an order in respect of that amount of the funds held by the wife.

6. I intend to make another order pursuant to s 117 to provide for interim litigation costs funding of the parties having raised the possibility with the legal representatives during their submissions, the wife having originally raised the matter by having applied for a “dollar for dollar” type order.

7. I am satisfied, on the evidence, that the husband pays for the legal fees that he incurs out of the business bank account and that he now has sole access to all of those funds that are generated by the business. I am also satisfied, as already discussed, that the business has been growing and is in a reasonably healthy financial state. The wife is earning a little income for herself but is principally reliant on the financial support of the husband, sourced from the income generated by the business they established and jointly ran until recently, for the meeting of her financial needs and the financial needs of the children who are predominantly in her care, in addition to paying for her ongoing legal representation. I consider it anything but just for the husband to be able to unilaterally access funds generated by the business to pay for his legal fees on an ongoing basis whilst the wife is not able to. Accordingly, I consider a “dollar for dollar” ongoing litigation costs funding order to be justified and just in the circumstances.

8. I will make an order that requires the husband to pay to the wife’s solicitors an amount equal to the amount he pays to his own solicitors for his legal costs and outlays, save for any that he pays for joint expenses such as single experts’ fees, once the amount of $14,500 that is to be paid to his solicitors trust account by the wife that I have already discussed has been fully utilised. I will also order that each party keeps the other fully informed, in writing, as to the amounts each spends on their legal costs and outlays on an ongoing basis.

I certify that the preceding thirty-eight (38) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Forrest delivered on 16 June 2015.

Associate: 

Date:  16 June 2015