Salemi and Salemi

[2019] FamCA 976

FAMILY COURT OF AUSTRALIA

SALEMI & SALEMI [2019] FamCA 976

FAMILY LAW – PROPERTY – Interim distribution – Where the parties were engaged in the running of small businesses – Where there are existing tax debts owed by each of the parties – Where the parties agree that those debts be paid – Where it is difficult to ascertain the value and contents of the asset pool – Orders made for the payment of tax debts – Payment to come from the wife’s share of the proceeds of sale of the former matrimonial home – Wife to argue that a share of the husband’s property settlement be applied to those payments in the substantive proceedings – Where the husband seeks the appointment of an administrator – Where the Court declines to order the appointment of an administrator.

Family Law Act 1975 (Cth) s 79

APPLICANT: Ms Salemi

RESPONDENT: Mr Salemi

FILE NUMBER: SYC 7491 of 2018

DATE DELIVERED: 2 December 2019

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Loughnan J

HEARING DATE: 2 December 2019

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Longworth

SOLICITOR FOR THE APPLICANT: Pigdon Norgate Family Lawyers

RESPONDENT IN PERSON Mr Salemi

Orders

1. The solicitors for the wife forthwith make payments from the controlled monies account operated by those solicitors containing part of the net proceeds of sale of the former matrimonial home at Suburb B:

   (a)directly to the Australian Taxation Office, the moneys currently owed to the Australian Taxation Office for the items referred to at 4.1.1 and 4.1.2 of the Amended Application in Case of the wife filed 21 November 2019.

   The Court Notes that:

   (i)the current balances for those items are $1,094.92 and $33,327.86, respectively; and

   (ii)that an argument will be made at trial on behalf of the wife that there should be some contribution from the husband’s share of property settlement, for those payments.

   (b)directly to the bodies referred at paragraphs 4.1.8, 4.1.9, 4.1.10, 4.1.11 and 4.1.12 of the Amended Application in Case in respect of the balances of those credit card accounts as at 20 November 2019.

   The Court Notes that:

   (i)that an argument will be made at trial on behalf of the wife that there should be some contribution from the husband’s share of property settlement, for those payments.

   (c)directly to C Company $660 in respect of their fees in relation to the valuation of D Street, Suburb E.

   The Court Notes that:

   (i)that an argument will be made at trial on behalf of the wife that the husband should ultimately be responsible for that payment.

2. Within 21 days from today’s date the wife provide to the husband or to any solicitor who comes on to the record for the husband within that period, a copy of any statements of the accounts referred in paragraphs 4.1.8 to 4.1.12 of the Amended Application in a Case from 1 July 2016 to date, being statements which are in her possession or control.

3. In accordance with Orders made 9 May 2019 and 11 July 2019 pursuant to which Mr F is appointed the single expert to value G Pty Ltd and H Pty Ltd, the wife is permitted to forward to Mr F the letter of instruction which is Annexure A to the Amended Application in a Case, without the need for the husband’s signature.

4. As soon as practicable the wife obtain a quote from a single expert valuer for the purposes of valuing two grave sites held in her name at Suburb J and shall provide that quote to the husband.

5. As soon as practicable after receiving from the husband, the amount quoted for that valuation, the wife shall give instructions for the valuation to be provided.  The Court Notes that in the event that the husband does not provide that money to the wife, she is under no obligation to give instructions for that valuation.

6. The proceedings in relation to the wife’s prayers at paragraphs 4.1.3, 4.1.4, 4.1.5, 4.1.6, 4.1.7, 4.2, 4.3, 7 and 8 of the wife’s amended Application in a Case filed 21 November 2019 together with any application for interim property settlement or interim costs filed and served on behalf of the husband within 14 days from today’s date, be included in the short causes list for allocation to a judge, estimated hearing time half a day or such other hearing estimate upon which the parties agree in writing.

7. After 28 days from today’s date, a hearing date may be allocated by the registry on giving the parties 48 hours’ prior notice.

8. The Court Notes that today the husband opposed the orders sought by the wife at paragraphs 4.1.6 and 4.1.7 of her Amended Application in a Case and that she will pursue the husband for damages in respect of any penalty interest or costs that arise from the deferral of that claim.

Note:  The form of the order is subject to the entry of the order in the Court’s records.

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

Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER:  SYC7491 of 2018

Ms Salemi

Applicant

And

Mr Salemi

Respondent

REASONS FOR JUDGMENT

1. These are proceedings for settlement of property.  The proceedings started in November last year in the Federal Circuit Court, and were transferred to this Court on 25 October 2019. 

2. The parties are Ms Salemi (“the wife”) and Mr Salemi (“the husband”).  They are 46 and 47 years of age, respectively.  They started living together when they were married in 1998.  They separated on 28 April 2018 and therefore they cohabited for about 20 years.  They have two adult children.  In the context of the proceedings for final settlement of property, there are interlocutory orders sought by each of the parties.

3. The Court role is not to manage businesses, to review what has happened during the marriage, nor to review the management of companies associated with the parties.  The Court’s role is only, as I have said to the parties today, to identify, on the day of the hearing or as close as possible to it, the assets of the marriage, the liabilities of the marriage, and the financial resources of the marriage to make a judgment about their value and if appropriate, to make a just and equitable change in the interests the parties hold in property, so their finances can be separated.  That is the aim.

4. Sometimes it is necessary to make decisions in the course of the proceedings.  In this case the wife has sought a number of orders that relate to an interim settlement of property, interim disbursement of funds for various reasons, and the husband has sought some orders, including orders relating to the conduct of some businesses that he says are necessary for the work of the valuer that has been appointed to value the businesses.  The husband opposes, as a matter of principle (although he changed his position slightly before me), the disbursement of any funds, and he sought some orders that would facilitate the preparation of the matter for trial.

5. Now, in relation to the preparation for trial, the matter has priority from the date it commenced in the Federal Circuit Court, which is November 2018.  That is probably a year or more away from being allocated to a judge on the Court’s current resources.  In this Court, delay is carried between the last attempt to try and settle the case and the date the case is allocated to a judge.  When there are sufficient judges there is no delay.  Currently, there are about 225 files sitting in a pool waiting allocation to a judge. 

6. So the parties have a long row to hoe if they go to trial.  As I have explained to the parties it is unusual that they would, and there are big savings to be made, if they are able to resolve the matter, without a trial as early as possible.  Mr Salemi says that he is pretty confident the matter will require a trial.  He appears without a lawyer today.  Although he is familiar with the facts and the history of the case and has had some conversations with a lawyer, it may be that once he is ready and able to engage a lawyer he will take a different view about the utility of proceeding to trial with what seems to be a very messy case about a modest pool of assets.

7. The parties had a house at Suburb B.  It was sold under court order, and seven hundred and something thousand dollars is held in imbalanced shares, mostly by the solicitor for the wife, and partly by the solicitor for the husband.  Without complaint the husband explained that to me that his solicitor holds a share of the proceeds calculated to address a potential CGT obligation on the sale. 

8. There are some complications in the matter because the wife is the legal owner of a business, H Pty Ltd.  She explains that by saying that her brother was a bankrupt, that he wanted to start a business and she allowed him to put his share of the business in her name.  Further, she says that at his request, for reasons that are not explained at all, she allowed his business partner to put his share of the business in her name.  It is the wife’s evidence that apart from her borrowing money from her brother she has not contributed to the business.  Her role is entirely limited to holding the legal title to the shares, she says.

9. The wife deposes that her parents owned a property.  They sold that property and bought another property.  They put that property in her name, for reasons that do not quite become apparent in the evidence.  The wife says that none of her funds went into that property.  It is a property, I think, at Suburb E, and although she lives there with her parents and the parties’ children, and has done so since separation, she says she has no beneficial interest in that property.

10. The law about that is not entirely straightforward.  Normally, the law would look to the source of the funds to purchase a property.  On the wife’s case, that was entirely her parents.  However, there is also a principle of advancement, whereby the Court may assume that the wife’s parents intended to benefit her when they asked that the property be held in her name.

11. The presumption of advancement can be rebutted.  It is not clear, on the wife’s evidence, that there are any documents that will record why we are in the current situation.  It may be that there will be evidence available to the trial that will clarify all of that, but from the husband’s point of view it means that potentially the pool consists of the two businesses the parties are running, a property at Suburb E, the H Pty Ltd business and the moneys held in the controlled moneys accounts of the two solicitors.  From the wife’s point of view, the property pool will be the two businesses and the moneys held in those controlled moneys accounts. 

12. In relation to the businesses, the parties ran business G Pty Ltd which, according to the wife, had a commercial aspect and a domestic aspect.  She had carriage of the domestic part of the business and the husband, the commercial part.  She says on separation the husband started a new business, but based on the clients and equipment, including a van, of the family business.  The husband has a different view.  I understand from the evidence that the wife took possession of the van and equipment.  The husband has paid the wife for the equipment and has since leased another van.  The parties are also at issue about other motor vehicles.

13. Dealing with the particular claims, the wife wants some tax debts paid.  The husband agrees to have those payments made.  He seeks and I will order, that in the first instance the payment be made from the wife’s share of the controlled moneys account – the moneys held by her solicitor.  However, the husband is on notice that a claim will be made against him in the substantive proceedings for a contribution to those payments. 

14. Then there are a series of payments sought in relation to debts owing for superannuation and in relation to personal tax returns for years after the 2017 year.  In the course of submissions I said that I would defer those arguments.  The husband wants an opportunity to put the relevant records to his accountant, to obtain advice.  The proceedings are going to be adjourned in part in any event and there will be an opportunity on another day to resolve issues that have not been resolved today.  It might be that, once the husband has spoken to his accountant, he will agree to the payments. 

15. As to the orders sought at paragraphs 4.1.5 and 4.1.6 and 4.1.7.  Paragraph 4.1.5 is another tax obligation, and it falls into the category that I have identified.  Paragraphs 4.1.6 and 4.1.7 relate to motor vehicles.  Apparently there were two Van 1 & 2, a Motor Vehicle 1, and there might be a Van 3 as well.  The wife seeks an order allowing the lease to be paid out in the sum of $51,600.  The husband is concerned that the net cost to the parties should be less than $51,600.  He is aggrieved about what happened to the van since it was removed from his possession by the wife. 

16. Apparently the van was involved in a motor vehicle accident.  I am not sure that the van was insured.  Apparently the damaged van found its way into the H Pty Ltd business owned by the wife.  I understand the wife’s case to be that the van has no value.  The husband is entitled to establish that for himself.  There is no evidence from the smash repairer.  Today the wife says that the husband can have the damaged vehicle and can sell it, if he wants.  Even though the debt on the lease is likely to be growing, this is not a matter that I can resolve today. 

17. The same problem arises in relation to the claim for lease payments on the other vehicle, which is a family car.  The husband says he needs time to examine that issue and I will provide that opportunity. 

18. Then there are a series of credit card payments, which are listed at 4.1.8 to 4.1.12 inclusive.  I have indicated to the parties that I will make an order that, in the first instance, the accounts be paid out of the wife’s share of the net proceeds of sale of the Suburb B property.  However, the husband is on notice that the wife is going to claim that he indemnify her for, at least, part of those debts. 

19. The husband says that he wants copies of the accounts so that he can satisfy himself that the debts are matrimonial debts.  He says that in the past he has been given access to some credit card statements that show an endorsement from the wife’s brother.  The husband understands that some of the payments on the parties’ credit cards were payments for the wife’s brother, in circumstances where he was a bankrupt.  I will make the order I have foreshadowed.  The wife says that she does not have all of the accounts from 1 July 2016 to date.  I will order that she do her best to provide those statements.  Ultimately, these are arguments that the wife seeks to make at trial.  The trial judge may consider it relevant that the husband has seen some or all of the statements.  In any event the issue of the husband’s contributions will be a matter before the trial judge.

20. Then there are two claims by way of interim costs. There is a claim for $100,000 as a bare interim property settlement claim, not allocated to anything. The wife also claims $90,000 by way of interim costs to take the matter up to a conciliation conference. I have already indicated that I will make some orders for interim property settlement. The legal position is that, just because the parties are caught up in litigation does not mean they cannot have access to their own funds. It happens, at the moment, that at least some of their money is tied up in two controlled moneys accounts. There needs to a reason for an interim property order to be made. It does not have to be a compelling reason. An application for interim property settlement involves an exercise of power under s 79 of the Family Law Act 1975 (Cth). That in turn, involves some preliminary assessment about the pool of assets, about the parties’ contributions and about any adjustments that might be made by reason of paragraphs s 79(4)(d), (e), (f) and (g). The Court must consider whether it would be just and equitable to make any distribution of property, and if so the particular distribution must itself be just and equitable. Because these decisions are made without the ability to test any evidence, the interim order must either be conservatively within the property settlement claims of the parties, and / or an order that can be adjusted or reversed on a final hearing.

21. The problem here is that I do not know whether the pool is $700,000 plus two business that are worth little more than the value of the equipment they have, or whether the pool is more than a million dollars – two million, or whatever.  That makes it very hard to identify a conservative exercise of power.  However, there is some comfort for the husband in his own case.  If as he contends, the wife is the beneficial owner of another business and related assets then any adjustment or reversal for an excessive distribution to the wife from the controlled moneys account can come from those other assets.  On the other hand if the husband is wrong about those other assets, and the pool is limited to the controlled moneys accounts and the two G Pty Ltd businesses, on the bare facts it is likely that the wife would receive, as a minimum, the total of the amounts that I have foreshadowed to be paid out.  Putting aside the tax debt, it is likely that she would receive what I have foreshadowed by way of interim property settlement - $150,000, say, as a minimum.

22. The husband does not agree with my assessment about the wife’s claims.  He said something to the effect that the wife should get nothing out of the property settlement because she made no contribution.  That is possibly true although I have not seen any evidence that would support that argument.  For example, the husband does not say it in his affidavit.  It is also unlikely to be true.  In a marriage that spanned 20 years, where the parties shared in the work of a business and where they had children, it is likely that the parties shared the work of the marriage.  The Court is required to give the same value to non-financial work, to parent and homemaker contributions as it does to work in a business.

23. If the husband was serious about what he said to me and not just given to exaggeration, it is likely that he is wrong and that when he obtains some legal advice, somebody will correct him.  It is not uncommon in long marriages (20 years being a long marriage) that the court finds that the parties’ contributions were equal.  As to adjustments that will really depend on the circumstances of each of the parties, including what sort of income the parties will have, and about their earning capacities.  That will depend a bit on some other issues.  At the moment the husband says that his income is three times that of the wife.  If that continued there would likely to be an adjustment in her favour.  But they are matters for another day.

24. The final order sought by the wife relates to a half-share of the costs of a real estate valuer.  I am going to order that that half-share - it is the husband’s share, come out of the wife’s controlled moneys account in the first instance.  Again an argument is to be made that it should come out of the husband’s share.  The prior orders are not entirely clear.  On the face of the orders, they are consistent with the wife having the lion’s share of the Suburb B proceeds, and therefore any expenses should in the first instance come out of that fund.  It is also possible that Judge Kemp had something different in mind.

25. And a letter is going to go to Mr F, the valuer for the corporate entities, which includes an assertion by the wife that the legal title to the H Pty Ltd is beneficially held for the wife’s parents.  That means that Mr F will take that into account, and he will know the husband has the opposite contention, and he will be able to do his work on that basis.

1. As to the orders sought by the husband, he seeks that there be an administrator or a provisional liquidator appointed to the company that he left the wife running, and to the H Pty Ltd business.  The husband has not submitted a workable order.  For example there is no indication of who the administrator would be.  More fundamentally, however, there are some problems with ordering such a thing.  As to the H Pty Ltd business, on the wife’s case the beneficial ownership of the business is held by others.  They would need to be given notice before an order was made that could adversely impact on their interests.  More generally, it is a very serious step to appoint an administrator to a business, particularly where the business is arguably a modest business.

2. Small businesses are often only viable because the people who work in them, own the business.  If the parties were to employ an administrator, the cost could well destroy the business or leave the party without income.  It is my concern that the domestic business run by the wife could not support an administrator, let alone providing that support as well as an income for the wife.

3. The husband wants an administrator appointed because he is suspicious about the way in which the businesses have traded.  He is suspicious about the beneficial ownership of H Pty Ltd.  I do not propose to order an administrator to either business.  It is such a serious step, would cause such cost that in my view it is not the Court’s role to do these things.  If Mr F raises something, and if the parties think it is relevant that this issue should be pursued then the matter can be raised again.  If the trial judge, in preparing the matter for trial, thinks that would be a good thing to do, it could be ordered at that time.  I will not order administrators at this stage.

4. As I said to the parties during submissions, it is not the Court’s role to understand how or why things are. The task is to identify the assets and if appropriate to change legal interests to meet the requirements of s 79 for a just and equitable settlement. The husband does not press for his proposed order 3. I do not understand order 4. It may be about the wife’s interim costs claim. I am not going to make that order today. Order 5 has the same problem. The husband wants the gravesites at Suburb J to be valued. The wife says they are held in her name but again, on behalf of her brother. She says she understands there is a value of something like $14,000 associated with them, when they are paid fully off. The wife does not oppose the sites being valued and the husband says in the first instance he is happy to make the payment from his own funds. The husband is happy for the wife choose a single valuer for that purpose, and I will make that order.

5. Paragraph 7 relates to the valuation fees for the Suburb E property, and I have said something about that already. 

6. Paragraph 8 relates to engaging Mr F.  He is already engaged to value H Pty Ltd and other shares. 

7. The husband wants a valuation of the Van 3 and a Motorbike 1.  That can be done closer to trial.  They are not going to make a huge difference to settlement discussions, and if the trial is more than a year away the valuations would need to be updated.  As to Mr F, an updating of his valuations, if that is needed, can be done and will not be an extensive exercise, but it is silly to spend money now on valuing minor assets.

8. Order 12, the husband wants the wife to obtain an audit of the financial statements for the years 30 June 2016 to 30 June 2019 for the company that she and he ran together.  As I said during the course of submissions, I am not sure that the husband would be happy if the wife did that, and would accept an audit opinion.  The Court does not require such an audit.  It would be, in my experience, vanishingly rare that such an order would be made in a small pool case.  However, if the trial judge feels as though it is necessary, it can be ordered closer to the trial.  I will not make that order.

I certify that the preceding thirty three (33) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Loughnan delivered on 2 December 2019.

Associate:

Date:  18 December 2019