Ruslan & Ruslan
[2024] FedCFamC1F 50
•9 February 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Ruslan & Ruslan [2024] FedCFamC1F 50
File number: SYC 44 of 2022 Judgment of: MCCLELLAND DCJ Date of judgment: 9 February 2024 Catchwords: FAMILY LAW – PROPERTY – Application for partial property distribution – Where the matter has been set down for final hearing in April 2024 – Where the husband seeks a distribution of funds from sale proceeds of former matrimonial home to fund litigation – Where the husband has failed to establish that the Court should exercise its discretion – Application dismissed – Costs reserved to final hearing Legislation: Family Law Act 1975 (Cth) ss 79, 80(1)(h)
Federal Circuit and Family Court of Australia Act 2021 (Cth) ss 67, 68
Civil Procedure Act 2005 (NSW) ss 56, 60
Cases cited: Aitken & Murphy (No 2) [2012] FamCA 239
Cook by her tutor Kristy Stewart v Riding for the Disabled Association (NSW) Raymond Terrace and Lower Hunter Centre [2023] NSWSC 1503
Davidson and Davidson (No 2) (1994) FLC 92-469; [1994] FamCA 33
Gabel & Yardley (2008) FLC 93-386; [2008] FamCAFC 162
Hardwick & Hardwick (No 2) [2022] FedCFamC1A 216
Harris and Harris (1993) FLC 92-378; [1993] FamCA 49
Iphostrou & Iphostrou and Ors [2011] FamCA 20
Medlow & Medlow (2016) FLC 93-692; [2016] FamCAFC 34
Pinta & Pinta [2022] FedCFamC2F 34
Stanford & Stanford (2012) 247 CLR 108; [2012] HCA 52
Strahan & Strahan (Interim Property Orders) (2011) FLC 93-466; [2009] FamCAFC 166
Widmann and Widmann [2016] FamCA 1164
Yunghanns & Yunghanns (1999) FLC 92-836; [1999] FamCA 64
Division: Division 1 First Instance Number of paragraphs: 38 Date of hearing: 21 December 2023 Place: Sydney Counsel for the Applicant: Mr Batey Solicitor for the Applicant: Holmes Donnelly & Co Solicitors Solicitor for the Respondent: Mr Hargrave, Fox Cheshire ORDERS
SYC 44 of 2022 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MR RUSLAN
Applicant
AND: MS RUSLAN
Respondent
ORDER MADE BY:
MCCLELLAND DCJ
DATE OF ORDER:
9 FEBRUARY 2024
THE COURT ORDERS THAT:
1.The husband’s Application in a Proceeding filed 8 November 2023 be dismissed.
2.Costs of the husband’s Application in a Proceeding filed 8 November 2023 be reserved for determination at final hearing.
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 Ruslan & Ruslan has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
MCCLELLAND DCJ:
This matter concerns an Application in a Proceeding filed by the respondent husband, Mr Ruslan (“the husband”) on 8 November 2023, seeking an order for an interim partial property distribution to himself and for the wife, Ms Ruslan (“the wife”) of $200,000 each, to be distributed from the proceeds of sale of the former matrimonial home that is currently held in the husband’s solicitor’s trust account. The application is opposed by the wife.
For the following reasons, I have dismissed the husband’s application.
BACKGROUND
The husband was born in 1965 and is currently 58 years old. The wife was born in 1968 and is currently 55 years old.
The parties commenced cohabitation in or around 1996 and were married in1999. The parties have two children who are now adults, Ms B, who is presently 23 years of age and Mr C, who is presently 22 years of age.
The husband has worked primarily in contracting throughout the relationship. The wife was primarily a homemaker having ceased work after the birth of Ms B to take on parenting responsibilities.
The parties separated on 1 December 2018 and were divorced in 2023.
At the commencement of the parties’ relationship, the husband owned two properties, one in Suburb D, Queensland valued at $130,000 and one in Suburb E, Victoria valued at $130,000. The husband also owned Motor Vehicle 1.
After a brief period of time where the parties lived in Country F, the parties returned to live in Sydney in 1997 where the parties resided in a self-contained unit in the wife’s mother’s home, rent free and later, a rental property in Suburb G from 1998.
In 2001, the parties purchased H Street, Suburb J NSW (“the Suburb J property”) for around $550,000. The parties jointly contributed $110,000 for the purchase with the balance financed by way of a mortgage.
In 2007, the parties sold the Suburb J property for over $900,000 with the proceeds of sale applied towards the purchase of the former matrimonial home, K Street, Suburb L NSW (“the Suburb L property”). That property was purchased for over $1,500,000 in 2007. The remaining balance was financed by way of a mortgage.
In 2011, the husband established his company, M Pty Ltd (trading as N Pty Ltd). The husband established a number of trust and corporate entities that loaned monies to M Pty Ltd, and later to Q Company. Q Company was another start up company established by the husband.
The husband sold his property in Suburb E, Victoria for $550,000 in 2014, with $430,000 of the proceeds of the sale applied to the mortgages of the Suburb L property and P Street, Suburb D QLD (“the Suburb D property”).
In 2018, the parties separated but remained living under the same roof. On 6 January 2022, the wife filed an Application for Final Orders in Division 2 of this Court.
Consent orders were made on 19 April 2022 for the parties to sell the Suburb L property with the property to be listed for sale by public auction in mid-2022. Order 4.7 of the consent orders noted that upon settlement, each party would receive $150,000 with the balance to be held in a controlled monies account on behalf of both parties.
The property ultimately sold for over $3,000,000 with settlement having occurred in late 2022. Following the discharge of the mortgage, the remaining balance was $2,025,386.58. The husband noted that following the making of the orders dated 19 April 2022 and the sale of the former matrimonial home, the parties agreed to increase the amount they would receive to $250,000.[1] On 12 September 2022, the sum of $1,525,386.58 was deposited in the husband’s solicitor’s trust account. The parties have disbursed a further $18,634 to pay for the Single Expert Report and $13,768.48 for private mediation.[2] As of November 2023, $1,492,984.10 remains in the controlled monies account.
[1] Husband’s affidavit filed 8 November 2023, paragraph 10.
[2] Husband’s affidavit filed 8 November 2023, paragraph 12.
The husband states that, since July 2021, he has been paid $155,000 per year as the Managing director of M Pty Ltd. The husband deposes that his salary is “effectively paid by loans that [M Pty Ltd] incurs” and that his “other weekly income is derived from the approximately $532, being the rental income from the [Suburb D] property”.[3]
[3] Husband’s affidavit filed 8 November 2023, paragraph 18.
Between September 2020 and September 2022, the husband borrowed funds from M Pty Ltd as a Division 7A loan. It has a regulatory interest rate of 4.52 per cent.
The husband states that, as at the date of settlement of the Suburb L property, he had the following liabilities:
21.1 NAB Visa [#...82]: $8,362.91 (excluding rental bond of $4,216.80…)
21.2 […] Amex […08]: $5,114.75
21.3 Westpac Mastercard [#...26]: $21,252.15
21.4[R Finance] Home Loan secured against [P Street, Suburb D]: $324,303.95
21.5ATO Debt: [$]76,911.12
21.6[S Company] Loan: $64,465
21.7Loan to [M Pty Ltd] $154,214.40
21.8Westpac […] Loan $28,420.74[4]
[4] Husband’s affidavit filed 8 November 2023, paragraph 21.
The husband states that, on 13 September 2022, the husband repaid the M Pty Ltd loan in the sum of $154,214.40 from the $250,000 received per the orders of 19 April 2022. He did not state why it was necessary for that amount to be paid to the company at that point in time. The balance of the proceeds of sale was applied towards the discharge of the Westpac Loan, the husband’s legal fees and living expenses.[5] The husband states that since the sale of the Suburb L property, Ms B has lived with him in rental accommodation. Mr C lived with the husband from September 2022 to August 2023. The husband states that he had been paying for the living expenses of the adult children during that period.[6]
[5] Husband’s affidavit filed 8 November 2023, paragraphs 22 and 24.
[6] Husband’s affidavit filed 8 November 2023, paragraph 25.
In late September 2022, the husband asked his solicitors to write to the wife’s solicitor requesting that the proceeds of the Suburb L property be applied to reduce the liabilities that he was incurring. No agreement was reached.[7]
[7] Husband’s affidavit filed 8 November 2023, paragraph 23.
On 30 April 2023, the Single Expert Report of Mr T of U Financial Services was released to the parties. That report values M Pty Ltd at $11,810,499. The husband disputes this valuation.
In July 2023, the husband received $113,500 from his mother as an early payout of his inheritance. He has used this to pay back debt, living expenses, legal expenses and to lend to M Pty Ltd to cover cash flow issues.[8] The husband deposes that he made another offer for the proceeds of the Suburb L property to be disbursed but that request was refused by the wife. As a result, the husband filed his Application in a Proceeding on 8 November 2023.
[8] Husband’s affidavit filed 8 November 2023, paragraph 26.
The wife submits that the husband’s application to be dismissed, stating that the sale proceeds of the former matrimonial home represents the only liquid asset in the marital pool.[9] In circumstances where the husband disputes accuracy of the Single Expert valuation of his interest in M Pty Ltd, the wife contends that there should be no further distribution of funds to the parties from the joint property of the parties. The wife acknowledges, however, that the husband has the capacity to either borrow against the security of the Suburb D property, which is in his sole name, or to sell the property in order to raise funds to meet his debts including legal fees.[10]
[9] Case Outline Document (Interim Hearing) of wife filed 20 December 2023, paragraph 30.
[10] Case Outline Document (Interim Hearing) of wife filed 20 December 2023, paragraph 12.
The matter is currently listed for final hearing from 2–5 April 2024.
COMPETING APPLICATIONS
The Minute of Order proposed by the husband was as follows:
1. That within fourteen (14) days of the date of these Orders, the parties do all acts and things and sign all documents necessary to authorise and direct Holmes Donnelly & Co Solicitors (holding funds on trust for the parties) to pay $200,000 to each of parties from the proceeds of sale of [the Suburb L property] held on trust in the parties’ joint names, such payment to be the subject of a determination as to character of the payment at Trial.
2. That the Respondent Wife pay the Applicant Husband’s costs of and incidental to this Application.
The Minute of Order proposed by the wife was as follows:
1. That the Application in a [Proceeding] filed 8 November 2023 be dismissed.
2.That the Respondent pay the Applicant’s cost as agreed or assed in respect of the Application in a [Proceeding].
MATERIALS RELIED UPON
The husband relies upon the following documents:
(a)Outline of Case Document (Interim Hearing) filed 20 December 2023;
(b)Application in a Proceeding filed 8 November 2023;
(c)Affidavit of the husband filed 8 November 2023;
(d)Financial Statement of the husband filed 8 November 2023; and
(e)Valuation Report of M Pty Ltd prepared by U Financial Services dated 30 April 2023.
The wife relies upon the following documents:
(a)Outline of Case Document (Interim Hearing) filed 20 December 2023; and
(b)Affidavit of the wife filed 29 November 2023.
THE LAW
Consideration as to whether discretion should be exercised to grant an application for partial property distribution involves consideration of the following principles:
(1)The exercise of discretion: ss 79 and 80(1)(h) of the Family Law Act 1975 (Cth) (“the Act”) confer power on the Court to make orders for a partial distribution of property prior to the final hearing. That is:
(a)Section 79 confers a discrete power to make orders for property settlement and the Court may exercise that power through “a succession of orders until the power ... is exhausted” or until a final order dealing with all the known property of the parties is made: Strahan & Strahan (Interim Property Orders) (2011) FLC 93-466 (“Strahan”) at [110], quoting Gabel & Yardley (2008) FLC 93-386 at [57].
(b)Section 80 is not, in itself, a source of jurisdiction for such an order to be made. Rather, the section is an “enabling provision” that provides various ways in which the general power in s 79 of the Act may be exercised in individual cases: Davidson and Davidson (No 2) (1994) FLC 92-469 at 80,875 and Yunghanns & Yunghanns (1999) FLC 92-836 at [118]. This includes, by s 80(1)(h), the making of “a permanent order, an order pending the disposal of proceedings or an order for a fixed term or for a life or during joint lives or until further order”.
(2)There are three stages to the hearing of an application for interim property adjustment orders:
(i)The first two stages were described in Strahan at 85,645–85,646, with the first being a “procedural step” which requires an analysis of whether the circumstances of the case triggers the Court’s power to invoke s 80(1)(h) of the Act to make an order for partial property adjustment. At this stage, the “overarching consideration” is the interests of justice: Strahan at [132].
(ii)The second stage is the “substantive step”, where the provisions of s 79 must be considered and applied, but with limitations, given that it is not the final hearing.
(iii)The third stage, although not necessarily to be considered in this order, is to assess whether the applicant for relief has discharged the persuasive burden referred to in Medlow & Medlow (2016) FLC 93-692 (“Medlow”) at [86], of establishing that there are sufficient assets available to satisfy the order sought without prejudicing the other party (“the Medlow onus”). In that respect, the Full Court said:
The onus was clearly upon [the applicant for relief] to establish that there were sufficient assets available for the interim distribution and that the effect of any interim order was capable of being reversed as part of the final hearing or at least would not defeat [the respondent’s] property claim. The onus was not on the [respondent] to adduce such evidence.
(iv)Moreover, the evidence required to discharge the Medlow onus is such that the Court should be “comfortably satisfied” of the sufficiency of assets to ensure that the applicant would receive, at final hearing, no less than the amount sought by way of interim property distribution: Widmann & Widmann [2016] FamCA 1164 at [14] and see Hardwick & Hardwick (No 2) [2022] FedCFamC1A 216 at [72].
(3)Even if there is sufficiency of evidence to discharge the Medlow onus, that is not the end of the matter. An applicant seeking orders for partial property distribution is required to show more “than the mere fact that upon a final hearing the applicant would receive the property being sought (or an amount in excess of the funds being sought) from the other party”: Strahan at [139].
(4)The overriding consideration at all stages of the process is that the Court is satisfied that it is “just and equitable” to make the order in the circumstances: Stanford & Stanford (2012) 247 CLR 108 at [35] (“Stanford”). The determination of that issue should not be approached on the basis of an assumption “that one or other party has the right to have the property of the parties divided between them”: Medlow at [72], quoting Stanford at [40]. This applies to an application for an order for a partial distribution of property in interim proceedings as much as it does to an application for the adjustment of property at the final hearing of the matter.
(5)In applying these considerations, the exercise of the Court’s jurisdiction should be conducted with an appreciation that “as a generality, the interests of the parties and the Court are better served by there being one final hearing of s 79 proceedings”: Strahan at [177], quoting Harris and Harris (1993) FLC 92-378 at 79,929–79,930.
(6)Additionally, subsequent to the introduction of the Federal Circuit and Family Court of Australia Act 2021 (Cth) (“FCFCOA Act”) in September 2021, the Court, the parties and their legal advisers are required to have regard to the “overarching purpose” set out in s 67 of the FCFCOA Act, which includes the public interest of ensuring that disputes are resolved “as quickly, inexpensively and efficiently as possible”. In respect to comparable provisions set out in ss 56 and 60 of the Civil Procedure Act 2005 (NSW), it has been determined that it will usually be the case those principles are best served by one rather than a multiplicity of hearings: Cook by her tutor Kristy Stewart v Riding for the Disabled Association (NSW) Raymond Terrace and Lower Hunter Centre [2023] NSWSC 1503 at [19].
(7)As a related issue, the manner in which the party seeking a partial property distribution has conducted the proceedings will also be relevant. Most relevantly, that includes the extent to which the party and or their legal advisers have complied with their obligations pursuant to ss 67 and 68 of the FCFCOA Act to promote the overarching purpose by keeping costs to a reasonable and proportionate amount. To do otherwise, simply provides additional resources to the party to engage in ongoing “lawfare” at a likely disproportionate cost to the parties and to taxpayers.
(8)The party seeking the relief carries the persuasive burden of satisfying the Court that the circumstances of the case are such that the Court should exercise its discretion in their favour. In that respect, as noted by Thackray J in Strahan at [223]:
… it is important to note that s 80(1) [or s 90SS(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 an 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.
(9)Circumstances in which the Court has made an order for partial property distribution include, but are not necessarily limited to, where one of the parties has a monopoly in terms of access to the finances and resources of the parties such that they have a significant advantage in the litigation and, conversely, the other party is significantly disadvantaged: see, eg, Strahan at [80] and Iphostrou & Iphostrou and Ors [2011] FamCA 20 at [60].
(10)It is unlikely that the Court would grant such relief in circumstances where to do so would “potentially defeat any party’s claim or legitimate expectations in a final hearing”: Aitken & Murphy (No 2) [2012] FamCA 239 at [158].
(11)Additionally, I would add, that in considering whether to exercise my discretion to grant the relief sought by the husband in this case, I have had regard to the fact that he has an alternative source of funds to assist him to conduct the litigation in the form of the equity he has in the Suburb D property.
(12)Finally, among the matters that the Court may take into consideration in the exercise of its discretion is the proximity of the final hearing dates and the complexity of the issues involved in determining the likely ability of the Court to, if necessary, ‘claw back’ the funds released by way of interim property settlement: Pinta & Pinta [2022] FedCFamC2F 34 at [115].
CONSIDERATION
The husband contends that, even if it is subsequently determined that his interest in M Pty Ltd and associated entities has nil value, it is likely that, at final hearing, it will be determined that it is just and equitable to make property adjustment orders and that such orders would result in him receiving the amount in excess of $200,000 (being the portion he is seeking to meet his own legal fees).
For the purpose of considering the husband’s application, I accept that to be the case. However, as noted by reference to Strahan at [139], that is not the end of the matter.
The wife contends that, at final hearing it is likely that it will be determined that M Pty Ltd has substantial value even if that value may not be determined to be as high as opined by the single expert valuer. While the wife recognises that property adjustment orders may include orders that would require the husband to transfer a portion of his shareholding in N Pty Ltd to the wife, she will be pressing the Court that any property adjustment orders should maximise the cash component of the property adjustment settlement in order to permit her to take immediate steps to move on in her life, including acquiring appropriate housing.
That is, with respect, not an unreasonable position for the wife to take. Clearly, the reduction of cash on hand by an amount of $200,000 by the making of a partial property adjustment order in favour of the husband would reduce the amount available to maximise the cash payment payable to the wife.
In those circumstances, while I am satisfied that the payment of the sum of $200,000 to the husband, by way of partial property settlement, would not defeat the wife’s claim, it has the potential to significantly impact the character of the relief that might otherwise have been available had the partial property adjustment not been made. That is, by declining to make the order sought by the husband leaves intact the totality of money that is currently in the controlled monies account rather than reducing the liquid funds by $200,000. This would not be available to satisfy the wife’s application to maximise the cash component of property that would be distributed to her in any property settlement orders.
As against that detriment that would impact the wife, the husband has the capacity to fund his ongoing litigation by either selling or borrowing against the Suburb D property that is owned solely in his name.
Accordingly, for those reasons, I am not satisfied that it is appropriate or in the interests of justice for the Court to accede to the husband’s application for a partial property distribution, particularly in circumstances where the trial will commence within the next three months.
ORDERS
The Court therefore orders that the husband’s Application in a Proceeding filed on 8 November 2023 be dismissed.
In circumstances where I was not addressed by the parties in respect to costs, I will reserve that question to be determined at the final hearing.
I certify that the preceding thirty-eight (38) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Deputy Chief Justice McClelland. Associate:
Dated: 9 February 2024
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