SANDERSON & SANDERSON

[2017] FamCA 135

FAMILY COURT OF AUSTRALIA

SANDERSON & SANDERSON [2017] FamCA 135

FAMILY LAW – PROPERTY ORDERS - pending final orders

Family Law Act 1975

Sections s 79, 79(6)(a)

APPLICANT: Mr Sanderson

RESPONDENT:	Ms Sanderson
INDEPENDENT CHILDREN’S LAWYER	Ms Ferreira

FILE NUMBER: NCC 1455 of 2015

DATE DELIVERED: 10 March 2017

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Gill J

HEARING DATE: 9 December 2016

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Lloyd

SOLICITOR FOR THE APPLICANT: Carson & Associates

COUNSEL FOR THE RESPONDENT: Mr Batey

SOLICITOR FOR THE RESPONDENT:	Barkus Doolan
SOLICITOR FOR THE INDEPENDENT CHILDREN’S LAWYER:	Legal Aid NSW, Gosford

Orders

1. Orders 1 and 2 of the orders made in the Federal Circuit Court at Newcastle on 28 July 2015 are discharged.

2. Until further order, the husband and wife are to do all acts necessary to cause Company A (APL) to:

   (a)Pay, on the third day of each month or the next working day thereafter, $10,000 into the account nominated by the wife.

   (b)Pay, on the third day of each month or the next working day thereafter, $10,000 into the account nominated by the husband.

   (c)Classify the payments as wages, director fees and / or dividends in accordance with accounting advice so received by APL to best achieve the most optimal tax outcome and maintain the viability of APL.

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 Sanderson & Sanderson 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: NCC 1455 of 2015

Mr Sanderson

Applicant

And

Ms Sanderson

Respondent

REASONS FOR JUDGMENT

1. Mr Sanderson, the applicant husband and Ms Sanderson, the respondent wife, separated in 2014.  They are the two shareholders and directors of APL.  APL is both the source of their income and the bulk of their property.

2. The initiating application filed by the husband in June 2015 sought payment from APL of $10,000 per month to each of the parties.  The response filed by the wife in July 2015 sought, by s 79(6)(a), the payment of $10,000 per month from APL to her.

3. Consent orders filed in the Federal Circuit Court on 28 July 2015 provided for APL to pay each of the parties $20,000 per month. The orders also provided for restraints regarding funds otherwise sourced from APL.

4. Although it was not addressed by the parties, it appears that these orders were entered into pursuant to s 79.  They were described within the orders as pending further interim property proceedings.  They did not reflect the part of the wife’s application relating to maintenance, but closely reflected that part relating to property orders.  The husband’s current application in a case appears to accept that they were property orders.

5. The husband asks to change the orders to remove the restraint and to change the amount paid to each to $10,000 per month.  The wife seeks to retain the orders.

Should a change to the orders be considered?

1. The wife says that a change should not be considered unless a change in circumstances can be identified.  The wife concedes that the orders were in place pending further determination by the Court.  She says that APL is capable of continuing the payments, and that the husband is manipulating APL to benefit his litigation in this Court.

2. The husband says that the previous orders were a stop gap measure that was expected to return to the Court for further determination.  He says that the continuing obligation on APL to make the $20,000 per month payments to each of the parties threatens the ability of APL to meet its obligations to creditors.

3. The terms of the interim orders were expressed to be pending determination of the interim property proceedings.  This means that the current orders do not preclude consideration of the matter now.  Where the parties considered and expressed that the orders were pending an interim determination, no change in circumstances is required in order to consider the matter now.  Consideration is also justified in the context of a risk that APL may be unable to sustain the payments

4. The second dispute relates to other restraints on the use of funds from APL.  This aspect received little attention in the hearing of the matter.

Appropriateness of the exercise of power

1. Accepting that ordinarily there should be a single exercise of the s 79 power, it is appropriate to partially exercise the power in advance of a final hearing where it will avoid injustice.  A court must answer two questions. Firstly, should it take the step of exercising the power in a partial manner, and secondly, how it should exercise that power.

2. Due to the fact that there is already an order in place those two questions are closely connected. Here there are open ended orders.  They have the ongoing effect of distributing $40,000 per month to the parties, under circumstances where the extent of the pool is uncertain.  The distribution has now been in place for in excess of 18 months, despite being put in place pending further interim determination.

3. This leads to the question of whether there will be a compromise of the pool, affecting what will be available for distribution.  This question goes both to whether and how the discretion should be exercised.

4. The question of whether the pool will be compromised takes its answer from the parties’ contentions regarding the capacity of APL to continue to make the payments at the current rate.

The capacity of APL to continue payments

1. The positions adopted by the parties mean that each accepts that it is within the capacity of APL to continue the payments to each at $10,000 per month.  The true dispute is whether there should be a reduction from $20,000 to that amount.

2. The husband points to debt issues for APL.  He says that there have been difficulties in paying suppliers due to the payments to the parties, and that there is an outstanding liability to the Australian Taxation Office.  The wife accepts that the ATO is pursuing APL for debt. Primarily the husband points to a jointly commissioned assessment completed by C accountants (CA) into the ability of APL to make the payments.

3. The summary of the report from CA was annexed at GS 27 (p125) of the husband’s affidavit.  Noting that the summary expressed that it should not be read in isolation from the Appendices to the report which were not annexed, the opinion expressed was that the drawings could not be sustained at $20,000 per month for each of the parties.  This was based upon the assumption that the operating result for the current financial year would be the same as the 2016 financial year (with the caution noted that the 2016 result may be exceptional and did not reflect the results of the previous financial years).  Projecting cash flows from the 2016 year would mean that the maximum drawings taken by each of the parties would be $8,000 per month.  This was not expressed to be exclusive of tax.

4. Further, at [199] the husband sets out APL’s financial situation as at 31 October 2016.  He asserted debts of about $1.3M, and bank accounts of about $20,000. In isolation I do not know what this means for the capacity of APL to make the payments.

5. The wife asserts that there are significant limitations in the CA report as a result of the husband failing to provide material to the authors.   Absent the Appendices it is impossible to determine this issue. I was asked to have reference to a portion of the report prepared by Mr D as indicating a weakness in the CA report.  I was unable to find this material in the evidence either tendered or annexed.  The lack of Appendices means that the report should be treated with some caution, particularly in the context of interim proceedings where it cannot be tested.

6. Primarily the wife relies upon assessment of APL’s position by the former company accountants.  At [33(d)], the wife sets out correspondence from the former company accountant complaining that the husband hindered her ability to provide advice as to the viability of the payments to the parties.  The accountant asserted that she could not provide the advice as to viability, but noted that there was a current profit for the 9 months to 31 March 2016 of about $750,000.  The wife took from this an indication that APL has capacity to make the payments of $20,000 per month.

7. The wife also relies upon previous assertions made by the husband in order to obtain a loan as to APL’s gross monthly profit.  Annexed at X (p128ff) was a loan application completed by the husband in April 2016, where he asserted a monthly gross company profit before tax of $160,000.  He asserted a net monthly income of $88,000.  This appears to directly conflict with his assertions as to the capacity of APL.  It conflicts with the payments he was able to receive through the interim orders.

8. The wife raises concerns regarding the husband spending for his own benefit through the APL accounts.  Such spending would indicate a capacity on the part of APL.  She did this by reference to annexures N, O, P and Q to her affidavit.  I was unable to discern from those annexures what the expenditure was or how it could be established to be an improper use of APL accounts.

9. The two key parts of the evidence that go to the question of capacity, the material from the former company accountant and the CA summary need to be treated with significant caution.  Each, on its own terms, calls for caution.  The former company accountant says that an opinion cannot be expressed due to the absence of material.  The wife points to the husband as being responsible for the absence of information.  The husband denies that he has withheld the information from the wife that would have enabled further consideration to take place.  I cannot resolve whether or not information has been withheld by the husband at this stage of the proceedings.

10. The CA summary report says that it is to be read in conjunction with Appendices that were not provided.  Given that the report was prepared at the request of both parties either of the parties could have provided the Appendices if they were thought to be important to qualify the summary.  This common ability to qualify the report gives me some confidence to rely upon it even though the Appendices were not provided.

11. As it stands, I am left in significant doubt as to the capacity of APL to make the ongoing payments beyond what is otherwise indicated by the positions of the parties.  That is, I am not satisfied beyond a capacity to pay $10,000 (gross) per month.

12. An order beyond this amount carries with it an unjustifiable risk to the pool of property the subject of these proceedings due to the risk to the central item within the pool.  It jeopardizes each party’s legitimate expectations.

Ongoing restraints regarding APL

1. As indicated previously, the ongoing operation of the restraints put in place in the temporary orders was not the subject of significant attention at the hearing.  In the context of competing assertions as to impropriety in dealings with APL, and absent an indication that the current restraints are inconvenient to the operation of the company I am not prepared to discharge the restraints.

I certify that the preceding twenty-six (26) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Gill delivered on 10 March 2017.

Associate: 

Date:  10 March 2017