Ruisa and Ruisa

[2008] FamCA 895

FAMILY COURT OF AUSTRALIA

RUISA & RUISA [2008] FamCA 895

FAMILY LAW – INJUNCTIONS – Urgent injunctive relief – sale of property to avoid corporate entity being liquidated – importance of clear evidence

Family Law Act 1975 (Cth)

APPLICANT: MR RUISA

RESPONDENT: MS RUISA

FILE NUMBER: MLC 2341 of 2007

DATE DELIVERED: 27 OCTOBER 2008

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: THE HONOURABLE JUSTICE CRONIN

HEARING DATE: 24 OCTOBER 2008

REPRESENTATION

COUNSEL FOR THE APPLICANT: MS STOIKOVSKA

SOLICITOR FOR THE APPLICANT: BERGER KORDOS LAWYERS

COUNSEL FOR THE RESPONDENT: MS VOHRA

SOLICITOR FOR THE RESPONDENT: LANDER & ROGERS

Orders

1. That the application in a case filed 21 October 2008 and the response to that application filed 24 October 2008 be both dismissed.

2. That of the orders made on 15 August 2008 by Mushin J, paragraph 4 (a) is extended to 5 December 2008, paragraph 4 (b) is extended to 19 December 2008 and paragraph 4 (c) is extended to 19 January 2009.

3. That there be liberty to either party to apply on urgent and short notice to me in respect of the issue of the liquidation of R Pty Ltd by the Australian Taxation Office notwithstanding paragraph 6 of the said orders of Mushin J.

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

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLC 2341  of 2007

MR RUISA

Applicant

And

MS RUISA

Respondent

REASONS FOR JUDGMENT

1. This is an interim matter that I heard on Friday 24 October 2008.

2. On 21 October 2008, the husband filed an application seeking urgent interim orders. Those orders were in essence and in so far as they are relevant:

   a)that the husband and wife as directors of R Pty Ltd sell property on two titles in B;

   b)that the net proceeds of the sale of the B property be applied to pay out the company’s liability to the Australian Taxation Office (“ATO”) in the sum of $112,678.40; and the balance be applied to reduce a current mortgage to the National Australia Bank (NAB) encumbering the B property.

3. The other orders sought are not relevant to these reasons and were not vociferously argued or at all.

4. With my leave, the wife filed her responding material in court. She sought some orders that were also not argued. However, her position was that I should order that she be given an opportunity to retain the B property by using the sale proceeds of some other pending settlements to satisfy the ATO and in part, the NAB and that she then have an opportunity to negotiate some sort of financial arrangement with NAB to service any liability arising out of the shortfall.

5. To some extent, the clarity of the position of the ATO and the possibility of the deal between the wife and NAB was complicated by the absence of the relevant personnel from both of those organisations on leave.

6. The positions of the parties were polarised. Each relied upon affidavit material that could not be tested.

7. Before dealing with the discrete issue, the background should be understood.

8. The wife is 46 years of age and described herself as a bookkeeper. The importance of that is that she is currently unemployed. Counsel for the husband therefore pointedly asked how someone who desired to retain a property and to do so, wanted to make a security arrangement with NAB could do so without a job. Counsel for the Wife said that was being pursued but there was no evidence of that.

9. The husband is 47 years of age and is a tradesman and company director by occupation. He pointed to the importance of the resolution of the tax position because the company was the vehicle by which he operated. Liquidation of the company would have severe financial consequences.

10. The parties have a relationship of almost 20 years and of their 3 children, only one is still under 18 years of age. Children’s issues did not feature in these proceedings.

11. There have already been a number of court appearances in the short duration since separation. The last of those culminated in orders by Mushin J on 15 August 2008. There, as the matter remained unresolved and headed for final trial, his Honour ordered (inter alia) that the parties attend a conciliation conference and file their trial material. The wife’s obligatory date has now passed without extension. Counsel for the husband pointed to that saying that the wife had now claimed she did not want to sell the B property because she wanted to retain it as part of the property settlement yet no plan or proposal had been set out in any material. The difficulty with that is that the anticipated conciliation conference did not occur because the parties were not ready and another date has been set. It is apparent from his Honour’s orders that he did not intend the parties to file their financial trial material until they had had an opportunity to do some reality testing with the registrar. That is apparently still to occur but I am pessimistic about prospects having regard to the polarised positions.

12. Ironically, Mushin J ordered that no-one file material in the proceedings without his leave but no-one took the point.

13. The final trial remains listed for February 2009.

14. Thus, the urgency arises because of the pressing action of the ATO as a creditor of the company of the parties.

15. The husband’s evidence was that the wife was the financial operator of the company during the relationship. He said that the ATO served a statutory demand for payment on an accountant who apparently was the company’s accountant but according to the husband, should not now be. There is a side issue there but it is not relevant to my determination.

16. The statutory demand is for $112,678 being monies owed as a result of the lodging of BAS statements. The husband’s position was that he did not know of the details in the BAS statements to give rise to the ATO’s statutory demand. He received the demand on 13 October from the wife and his lawyers sent a request to the wife’s lawyers for details.

17. The wife’s version of this point was more expansive. She said that the husband excluded her from decisions relating to the company. In her affidavit, she pointed to the husband’s activities in selling various properties of the company. She referred to correspondence and complaints about lack of response.

18. According to the wife, the husband unilaterally put 6 units on the market for sale over 12 months ago. Disputes seem to have arisen between the parties about the various sales. She then said in her affidavit that in September 2008, she sought injunctive orders about these sales but she in fact meant “2007”. The year’s difference in reading the affidavit makes a substantial difference.

19. The properties were sold and according to the wife, that gave rise to a Capital Gains Tax liability. Her evidence was that she became aware of the liability in July 2008 and told the husband’s accountant by letter but received no response.

20. The wife said that at the hearing before Mushin J, the ATO account was produced but how the problem was to be resolved was not sorted out. No mention of that point was made in the husband’s material. I raise that because in his affidavit, the husband said that to meet the pressing liability of the ATO, he instructed his solicitors to write to the wife’s solicitors and in that letter, he proposed the sale of the B property. That letter is dated 15 October 2008. It refers to a discussion between the lawyers of that day. The husband’s lawyer said it was “imperative” that B property be sold to satisfy the ATO. The solicitors threatened that if there was no agreement by the following day, an urgent court application would be pursued.

21. There can be no doubt that by 15 October, the situation was urgent because the ATO was threatening liquidation but I found the silence between August and October puzzling.

22. Oddly enough, the wife’s response was to tell the husband to sell his personal property to satisfy the company’s ATO obligations. That was hardly likely to have been met with a positive response from the husband’s side.

23. By 15 October, there was a classic stand-off.

24. In and around that time, the respective lawyers were involved in discussions and correspondence with the ATO.

25. The husband’s lawyer filed an affidavit on 21 October 2008. He said that he had spoken to Ms C from the ATO on 21 October in relation to the statutory demand. Ms C told Mr Berger that the demand had been posted on 29 September. The husband points the finger at the wife to say that she held on to it because he says he first became aware of the demand when it was faxed to his accountant.

26. Mr Berger said that he was told by Ms C that if the husband obtained a court order for the immediate sale “of property” to be applied to payment of the debt, the ATO would not seek liquidation of the company. Just exactly what Ms C meant and understood remains something of a mystery. For example, if the order for the sale of the property was granted, is the ATO happy to wait for any specific period of time for payment on the assumption that the wheels will grind slowly before payment occurs? Does the current economic climate affect that potential sale? Is the ATO willing to negotiate some other form of payment in satisfaction of its debt and if so, on what basis? What about interest and penalties? Are they to be paid in addition to the ongoing capital debt?

27. The wife’s solicitor also filed an affidavit. She said she sent a message to the ATO on 16 October seeking “an indulgence” because the parties “were exploring” other avenues in relation to payment. It also remains a mystery what exploration was being undertaken by the parties because it seems that only the wife was pursuing some alternative.

28. The wife’s solicitor said that she also spoke to Ms C on 21 October 2008. Notwithstanding the statutory demand, the company had not been liquidated by the time of that conversation.

29. According to the wife’s solicitor Ms Antoniades, Ms C said she had been told that the husband was pursuing urgent court orders.  Ms Antoniades told Ms C that she was in correspondence with NAB about seeking an arrangement which would see the ATO paid.

30. Ms C apparently told the wife’s solicitor that she was unaware from her discussions with the husband’s solicitor, about the recent sale by the parties of three properties which would shortly settle. Ms C asked for copies of contracts for confirmation and they were provided.

31. The wife’s solicitor then said of Ms C:

    She further advised me that in the circumstances, given that we were attempting to resolve the situation and make payment of the ATO liability, the ATO would not be taking further action at this stage.

32. The husband’s solicitor filed another affidavit in which he said that on 21 October, he spoke to Ms C as a result of becoming aware of what the wife’s solicitor had said. He made a note of their conversation which recorded that he said to Ms C that he did not believe that the NAB would allow the ATO to be paid from the sale proceeds. Ms C apparently asked to be notified of the outcome of the court hearing. Mr Berger’s note then reads:

    I then queried the discussion that Ms [C] had had with the other side and particularly a statement in their letter to our office indicating that the ATO were not in the process of taking action and were not going to take action in the near future. Ms [C] said this was untrue and that the only basis for that statement was if we were able to obtain a Court date this week as we had previously agreed with her.

33. The positions could not be more stark. It is unfortunate that lawyers have had to place their credibility on the line here because each statement could be open to misinterpretation or indeed, Ms C could have given two different versions to two different lawyers. However, it is this conflict which creates a problem for my decision and that is something to which I shall return.

34. The wife’s position is that if the sale proceeds which are destined for the NAB first cover the ATO and she was to make an arrangement with NAB, the problem was resolved and her potential to retain the B properties remained open.

35. I return to the wife’s evidence.

36. The wife said that she contacted Mr W of NAB and asked whether NAB would be agreeable, subject to the husband’s consent, to come to the arrangement to which I have just referred. Mr W responded that if the husband, she and/or the company took responsibility for the servicing of the debt, NAB would consent to the release of the funds to satisfy the ATO.

37. There are a number of problems with that position. First, it was to have been with the husband’s consent. One would wonder why the husband would not consent but with the polarised positions, I would have thought the wife would have to be pessimistic. Secondly, the “responsibility” for servicing of the arrangement is not clear. Does it mean that the NAB wants payments as well as some form of security and if so what? Does the “and/or” mean just that or does the NAB want the company’s ongoing security? The absence from work of Mr W did not make the resolution of those questions easy.

38. The wife’s position is that this is all being done with indecent haste and that there should be some exploration of her proposed arrangement with NAB. Her counsel suggested an adjournment to flesh these things out but to a very large degree that would depend upon the attitude of the ATO. The respective lawyers portray different positions about that and the husband was not prepared to wait and find out.

39. The husband’s position was that on the wife’s own case, she has no job and could not service the arrangement even if NAB would agree. However, that seems to me to be an arrangement between the wife and NAB.

40. The husband points to the fact that the wife has done nothing about all of this and therefore, with the metaphorical sword of Damocles already swinging in the hands of ATO, it is not appropriate to wait any longer.

41. There was no suggestion that the court does not have power to make the orders sought by the husband. The orders are of an asset-protection type and the powers in s 114 of the Family Law Act 1975 (Cth) (“the Act”) are clear.

42. Section 114 provides that the Court may make such order or grant such injunction as it considers proper with respect to the proceedings as defined in the section.

43. That provision is clearly discretionary and it is fundamental that any litigant who seeks the indulgence must provide evidence that is comprehensive.

44. I have an uncomfortable feeling in this case about three things. The first is that according to the wife, the issue of the need to face the ATO liability was raised in August. The husband’s case seemed to be based upon the fact that this was all a sudden revelation to him and the wife had not been diligent in bringing the problem to his attention. On all of the parties’ evidence, I would not be able to make a finding about that. The second is that there is a dispute between the two lawyers about whether the ATO has presently backed off from its rightful position of demanding payment. It may be that neither party has told the ATO the full extent of their respective positions or problems with the other party. It significantly troubles me that the lawyers have to some extent placed their own credibility on the line in circumstances where there may be some misunderstanding. The third is that I find it puzzling that the ATO who were involved in discussions with both parties would simply rely upon a court order without contemplating what the practical outcome of a sale would mean for ultimate payment. That must be of some concern if there are accruing penalties and interest on a daily basis and although the ATO may sit back and say that they are likely to get their money, it does not seem to me to be sound or urgent economic sense.

45. Both of my troubling issues could have been resolved by the clarification by Ms C and Mr W and despite the fact that I suggested that attempts be made to ascertain that information, at least the husband chose to proceed to ask me to determine the matter on the material placed before me. In so doing, I am to determine matters in circumstances where there is a significant dispute on the facts.

46. Therefore, I do not know whether the ATO and the NAB are amendable to some pragmatic solution which if agreed to, would obviate the necessity to sell the real property which I understand is very much the subject of at least one party’s desire to retain. That is not normally a major consideration but I do not have anywhere near sufficient evidence to understand what impact any of these proposed actions and outcomes would have on the pool of assets and whether the other company about which I have been told little, would be sufficient to satisfy the husband’s entitlement thus obviating the need for a sale of the B property in the final property settlement in February.

47. Having reached that position, I could not say that it would be proper to make the orders sought by the husband.

48. If the positions of the ATO and NAB are so clarified and there is evidence from them that there is no deal to be done and the liquidation is pressing on, a different position might be taken. To that end, I intend to give liberty to apply to me on urgent and short notice. However, I stress that the evidence would need to be clear.

49. I have not been asked to deal with a number of other parts of each party’s applications but I note that many of them are of a discovery nature. It is perhaps timely to remind all parties of their obligations to make full and frank disclosure. If a further application is made to the court to pursue the discovery issues, the cost consequences ought to be obvious.

50. I also extend the filing dates for the parties’ material. Of the orders of Mushin J, paragraph 4 (a) is extended to 5 December 2008, paragraph 4 (b) is extended to 19 December 2008 and paragraph 4 (c) is extended to 19 January 2009.

51. Accordingly, I dismiss the application of the husband filed 21 October 2008 and the response of the wife filed 24 October 2008.

I certify that the preceding Fifty One (51) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin

Associate: 

Date:  27 October 2008