SAINES & SAINES

[2020] FCCA 1744

FEDERAL CIRCUIT COURT OF AUSTRALIA

SAINES & SAINES [2020] FCCA 1744

Catchwords:
FAMILY LAW – Property – value of a company and associated entities – application to join a third party to these proceedings – where the husband is a director and may be a beneficial owner of the company – where the wife asserts the company produced a misleading profit and loss statement and suggests this was done deliberately, indicative of tax fraud – complex valuation issues and serious allegations of fraud mean trial is likely to take 4 to 7 days – transfer to Family Court of Australia.

Legislation:

Family Law Act 1975 (Cth)

Applicant: MS SAINES

Respondent: MR SAINES

File Number: DNC 242 of 2018

Judgment of: Judge Young

Hearing date: 15 June 2020

Date of Last Submission: 15 June 2020

Delivered at: Darwin

Delivered on: 15 June 2020

REPRESENTATION

Counsel for the Applicant: Mr P. Zufic

Counsel for the Respondent: Mr M. Hibble

Solicitors for the Respondent: Darwin Family Law

ORDERS

UPON NOTING:

A.That Counsel informed the Court that the trial in this matter was likely to take between four to seven days.

THE COURT ORDERS:

1. That the Initiating application filed by the wife on 5 July 2019 and the application in a case  filed by the wife on 8 May 2020 seeking to join B Pty Ltd to these proceedings be transferred to the Family Court of Australia, Registry Darwin to be listed on a date and time to be advised to the parties.

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

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT DARWIN

DNC 242 of 2018

MS SAINES

Applicant

And

MR SAINES

Respondent

REASONS FOR JUDGMENT

Ex-Tempore

1. These reasons for judgment were delivered orally. They have been corrected from the transcript. Grammatical errors have been corrected and an attempt has been made to render the orally delivered reasons amenable to being read.

2. This is a property matter and the parties have so far filed a multitude of affidavits essentially focusing on the question of the value of a company, B Pty Ltd, and the associated entities.  C Pty Ltd, which is a trustee for the C Pty Ltd Trust, has four beneficiaries.  One of the beneficiaries, I think a 25 per cent beneficiary, though I have not seen the trust document and it may even be a discretionary trust, it is not clear to me at the moment.  It appears though that the husband is, or may be, a 25 per cent beneficial owner of the company B Pty Ltd, which operates on the outskirts of Darwin.

3. The wife has filed an affidavit from Mr D who asserts that the financial statements of B Pty Ltd misrepresent the true situation and various expenses have been included in the operating costs to produce a misleading profit and loss statement or statements, and hence misleading indications of taxable income.  He suggests that must have been done deliberately and is indicative of tax fraud by B Pty Ltd and indirectly by the husband, who is one of the four directors of the company.

4. Those are very serious allegations and it would I think be fair to say that the material or the basis for that assertion depends entirely upon Mr D’s opinion and interpretation of the creation of the financial statements.  I am not aware of any other evidence that points to evidence of fraud by the husband.  It appears to me that is going to be a complex matter to pursue, if it is pursued. 

5. The other issue of course is that in pointing to what he considers to be a misleading or faulty financial statement prepared by half of B Pty Ltd, Mr D has recreated the balance sheet and profit and loss statement for the company, for the 2019 year at least, which makes a significant difference in the income of the company. 

6. Mr Zufic, who is appearing for the wife, told me that in his view there would need to be a valuer appointed to value the company.  Mr Hibble agrees and he says that the Court ought to appoint a joint expert to do that, I agree.  That sounds like the sensible course to take and really it would be appropriate for the parties to negotiate and try and agree on the terms for the appointment of a single expert to value B Pty Ltd.

7. I consider that at this stage at least the valuation issues look to be complex or if not complex then highly contested, which is sometimes the same thing.  For example, there is in the balance sheet of the company an item for working rights which Mr D has put in the balance sheet at $2 million.  On inquiry with Mr Zufic about the basis for that it is far from clear to me that that item at that value is properly included in the balance sheet.  It may be, I just do not know. 

8. There is another complexity and it is a valuation complexity that may require a valuation of a lease.  I am told that the lease for the premises is due to expire in 2021.  It does not own ground itself, it is leasing ground from a Mr E.  Mr Hibble says that it was simply a two year lease for which B Pty Ltd paid $2 million which, if correct, would seem to reflect a form of royalty on the value of the material taken from the premises. 

9. There are, as can be seen, complex valuation issues in this case and, along with serious allegations of fraud, I am satisfied that this matter will take at least four days.  I think it is very likely to take five to seven days or even more, which is Mr Hibble’s estimate.  Pursuant to the protocol between this Court and the Family Court matters of five days or more ought to be transferred to the Family Court.  I am satisfied that this is an appropriate matter to transfer.  

10. There is an outstanding application that is the wife’s application to join B Pty Ltd as a party to the proceeding. I think that is a matter best left to Berman J, on the assumption that it is Berman J who deals with the matter, and I do not think I have to deal with that today. 

I certify that the preceding ten (10) paragraphs are a true copy of the reasons for judgment of Judge Young

Associate: 

Date: 29 June 2020