SHARMA & SHARMA
[2013] FamCA 793
•16 October 2013
FAMILY COURT OF AUSTRALIA
| SHARMA & SHARMA | [2013] FamCA 793 |
| FAMILY LAW – ENFORCEMENT – Superannuation split – Application for receivers to be appointed to enforce orders in respect of wife’s entitlement to a superannuation split from a self-managed fund – Non-compliance with previous Orders in respect of the superannuation split to date by the Respondent – Respondent has not participated in proceedings – Respondent served at last know residential address, company address and by substituted service on the accountants FAMILY LAW – COSTS – Indemnity costs – Conduct of the Respondent – Proceedings necessitated by failure of the Respondent to comply with previous Orders |
| Family Law Act 1975 (Cth) Family Law (Superannuation) Regulations (2001) (Cth) Family Law Rules 2004 (Cth) |
| Colgate-Palmolive Company v Cussons Pty Limited (1993) 46 FCR 225 |
| APPLICANT: | Ms Sharma |
| RESPONDENT: | Dr Sharma |
| FILE NUMBER: | PAC | 522 | of | 2010 |
| DATE DELIVERED: | 16 October 2013 |
| PLACE DELIVERED: | Parramatta |
| PLACE HEARD: | Parramatta |
| JUDGMENT OF: | Hannam J |
| HEARING DATE: | 30 September 2013 |
REPRESENTATION
| SOLICITOR FOR THE APPLICANT: | Ms Grew of Matthews Folbigg Pty Ltd |
| SOLICITOR FOR THE RESPONDENT: | No appearance |
Orders
Pursuant to Rule 20.47 of the Family Law Rules 2004 (Cth) (“the Rules”), Mr B, Mr C and Mr D of E Chartered Accountants be appointed as Joint and Several Receivers (“the Receivers”) of:
1.1The property and income of the Sharma Pty Ltd Superannuation Fund (“the Fund”);
1.2The property and income of
(a) Sharma Pty Ltd (“the Company”); and/or
(b)Mr Sharma (“the husband”) and Ms Sharma (“the wife”)
in their capacity as trustee or trustees (“the Trustees”) of the Fund
so as to give effect to orders 14 to 18 of the Orders made in this Court on 4 October 2011, these orders, and any orders for costs payable by the husband.
In addition to the wife’s entitlements pursuant to Orders 14 to 18 of the Orders made in this Court on 4 October 2011, the wife shall be entitled to interest on the outstanding amount for the period from 15 November 2011 and to the date of payment such interest pursuant to Regulation 45D of the Family Law (Superannuation) Regulations 2001 (Cth).
Pursuant to Rule 20.47(3) of the Rules, the Receivers are authorised to do (in the Receiver’s name or otherwise) anything that the husband and/or the Trustees may do.
Pursuant to Rule 20.47(4) of the Rules, the Receivers’ powers operate to the exclusion of the powers of the Trustees during the receivership in relation to compliance with Orders 14 to 18 of the Orders made in this Court on 4 October 2011.
The Receivers’ remuneration to be paid from the Fund and such remuneration be calculated in accordance with the standard rates effective from time to time of E Chartered Accountants, Sydney.
There be no security given by the Receivers.
The husband and the Trustees co-operate with the Receivers and shall:
7.1Provide such documents, financial records, bank statements, tax records and any other financial document as required by the Receivers within twenty-four (24) hours of request by the Receivers;
7.2Provide any other information sought by the Receivers which relate to the income and/or property of the Fund and the Trustees (in their capacity as Trustees of the Fund).
The Receivers shall submit accounts to the following parties on a monthly basis:
8.1 The wife;
8.2The husband, by delivery by post to …;
8.3The Company, by delivery by post to …;
8.4The principal Registrar of the Parramatta Registry of the Family Court of Australia for placement on the Court file.
Pending compliance with Order 1 herein the Trustees are restrained from dealing with funds in the Fund to the extent that would defeat payment to the wife as set out in Order 1 above.
The husband shall pay:
10.1The wife’s costs of and incidental to this application on an indemnity basis as agreed or assessed; and
10.2The Receivers’ costs and expenses on an indemnity basis, to the extent that the amount of the Fund is insufficient.
That pending compliance with Orders 1 to 10 herein the husband is restrained from selling, assigning, transferring, encumbering or otherwise dealing with the properties at:
11.1F Street, Suburb G being the whole of land contained in Folio … and ...
11.2H Street, Suburb I being the whole of the land contained in Folio Identifier ...
11.3J Street, Suburb K being the whole of the land contained in Folio Identifier ...
and the wife and the Receivers shall be at liberty to lodge a caveat and a Request over those properties pending compliance with these orders.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Sharma & Sharma has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| FAMILY COURT OF AUSTRALIA AT PARRAMATTA |
FILE NUMBER: PAC 522 of 2010
| Ms Sharma |
Applicant
And
| Dr Sharma |
Respondent
REASONS FOR JUDGMENT
Introduction & Background
After 30 years of marriage, Dr and Mrs Sharma separated. They have not yet divorced. Property Orders were made by this Court on 4 October 2011 dealing with the extensive property interests of the parties (“the Orders”).
The relevant Orders, and those referred to in this Judgment, of 4 October 2011 are as follows:-
6)The husband shall vacate the [Suburb L] property on the earlier of the following two events:
a) The completion of the sale of the [Suburb M] property or
b) 31 December 2011
12)The wife shall forthwith resign as director of the company and transfer to the husband all of her right, title and interest in the company and the husband shall indemnify the wife and keep her indemnified in relation to any and all liability including taxation liability attaching or relating to the company.
14) These Orders have effect from the operative time.
15)In accordance with Section 90MT(1)(a) of the Family Law Act 1975, whenever a splittable payment becomes payable to the Respondent Husband from his interest in the Superannuation Fund, the Applicant Wife is entitled to be paid an amount calculated in accordance with Part 6 of the Family Law (Superannuation) Regulations 2001, using a base amount as follows:
The Base Amount shall be a sum equivalent to $491,665.16 less the value of the wife’s member account as at 5 September 2011.
and that there be a corresponding reduction in the entitlement that the Respondent Husband would have had but for these Orders.
16)The husband and the wife shall do all such acts and things and sign all such documents, including but not limited to the signing of trustee minutes, rollover requests and related documents that may be necessary to rollover or transfer:
a)the current entitlement of the wife and
b)her entitlement pursuant to Order 15
in the Superannuation Fund to another complying superannuation fund of the wife’s choosing.
17)That having been accorded procedural fairness in relation to the making of these Orders, these Orders bind the trustees of the Superannuation Fund.
All of the Orders have been complied with, other than Orders 15 and 16 under which Mrs Sharma (“the wife” or “the Applicant”) is entitled to receive a payment from Dr Sharma (“the husband” or “the Respondent”)’s interest in the Sharma Pty Ltd superannuation fund (“the superannuation fund”), and which require the parties to do all acts and sign all documents necessary to transfer the wife’s entitlements into a superannuation fund of the wife’s choosing.
The husband has failed to comply with these Orders and the wife asks the Court to order that receivers be appointed for the superannuation fund to give effect to the Orders. She also seeks an order in relation to interest on the outstanding money and costs in relation to these proceedings.
The husband has not participated in these proceedings in any way, but for the reasons given in this Judgment, I am satisfied that he is aware of the proceedings and of the orders sought.
History of the Enforcement Proceedings
The wife originally sought enforcement of the outstanding Orders in an Application in a Case filed 17 July 2013 (“the original application”). The husband did not appear on 27 August when that application was before a Registrar or on 29 August 2013 when it came before me, nor has he participated in any way in these proceedings.
According to the wife’s affidavit in support of the original application sworn 5 July 2013, at the date of swearing, N Accountants continued to act, as it had done for some time, for the husband in relation to the superannuation fund. In particular, Mr O of N Accountants (“the accountant”) had been working on the split from the fund and from at least early March 2012 the wife had contact with the accountant from time to time concerning the fund.
According to the affidavit sworn 27 August 2013 of the wife’s solicitor, a letter and prepaid envelope enclosing the original application and affidavits in support and letter advising of the intention to ask the Court for the orders to be made in the husband’s absence and on an undefended basis were sent to the accountant on 31 July 2013 with a request to forward the letter containing these documents to Dr Sharma. A recent email from the accountant attached to the wife’s solicitor’s affidavit sworn 30 September 2013 indicates that the letter dated 31 July 2013 was forwarded to Dr Sharma, and that Doctor received it.
On 27 August 2013, a Registrar of this Court adjourned the original application for an undefended hearing on 29 August 2013. At that hearing, it was foreshadowed by the Applicant that an Amended Application in a Case was to be filed in relation to the matter.
On 29 August 2013, I ordered that personal service of the Amended Application in a Case be dispensed with and that service of the Amended Application in a Case, affidavit in support and sealed copy of the Court Orders of 29 August 2013 be effected by forwarding them to the Respondent care of the accountant, together with a letter informing the Respondent that in the event of there being no appearance by or on his behalf on the adjourned date, orders including final orders may be made in his absence.
According to the affidavit of the Applicant’s solicitor, the Amended Application in a Case (“the amended application”), affidavit in support and sealed copy of the Orders of 29 August 2013 were sent to the Respondent care of the accountants.
The Amended Application and associated documents were also posted to the Respondent’s last known residential address at PStreet, Suburb Q. This address, according to the Applicant’s affidavit filed 17 July 2013, was ascertained by a search of the Electoral Roll and said by a family member to be the current residential address for the Respondent. The Register of Practitioners held by the Australia Health Practitioner Regulation Agency dated 5 July also lists Suburb Q as the Respondent’s principal place of practice.
The Applicant had also previously attempted to have the Respondent served with the original application by a licensed process server, Mr R, at this address on 22 July 2013. In his affidavit, Mr R said that he observed in the letterbox for the Respondent’s unit other mail addressed to the Respondent when he attended this address on 22 and 23 July 2013. On 28 July 2013, the mailbox was cleared of mail.
The Respondent was also served with the Amended Application and associated documents at his last known residential address and through service on the company Sharma Pty Ltd (of which he is the sole director), care of the accountants, and at his last known professional address.
I am satisfied that the Applicant has taken reasonable measures to inform the Respondent about these proceedings and that he should be aware of these proceedings through mail having been forwarded to him via his accountant and having been served at the various addresses with which he and the Company are associated.
The Facts
Following the making of the Orders on 4 October 2011, the Applicant has experienced some difficulties with the Respondent complying with them. Pursuant to Order 6, the Respondent was to have vacated the former matrimonial home on the completion of the sale of a property in Suburb M, or 31 December 2011, whichever event occurred first. He did not vacate the former matrimonial home until April 2012.
Pursuant to Orders 15 and 16 of 4 October 2011, the Applicant was to receive total superannuation entitlements of $491,665.16 from the superannuation fund being the parties’ self-managed fund. Sealed copies of the Orders were sent to the trustee of the fund, care of N Accountants, on 5 October 2011, with particular attention being drawn to Orders 14 to 17 in relation to superannuation, and requesting that the Orders be implemented.
In November 2011, the whole of the Applicant’s entitlements in her own account in the fund were rolled over into her new superannuation fund. The Applicant’s own entitlements at the date of the rollover were $393,433.78 and pursuant to the Orders, the Applicant was to receive a further split from the Respondent’s entitlements in the sum of $98,231.38.
The Applicant was aware that the fund held shares and that it probably would be necessary for the shares to be sold so that her entitlements could be met. In about late February or early March 2012, the Applicant telephoned the accountant to check on progress of the split. A letter was also sent to the accountant by the Applicant’s solicitor on 5 March 2012 seeking confirmation that Orders 15 and 16 of 4 October 2011 had been complied with. The accountant contacted the Applicant about 10 days later and told her that he was working on the split.
On about 29 June 2012, the accountant provided the Applicant with a financial report from the fund for the period ending 31 December 2011, but she did not receive any further superannuation funds.
On 6 July 2012, the Applicant’s solicitor wrote to the accountant seeking advice as to when the Applicant could receive the balance payable, together with interest that had now accrued. The accountant responded by letter dated 10 July 2012 that the accountants had completed the calculation of the splittable amount and notified the Respondent as trustee for the fund on 15 June 2012.
At about this time, the Applicant’s solicitors began experiencing difficulties with contacting the Respondent directly. An email from the Applicant’s solicitor to the Respondent on 18 July 2012 “bounced back” so letters were sent to the Respondent’s workplace and also to the former matrimonial home, as the Applicant was aware that the Respondent was having mail in his name redirected from that address.
Since this point in time, the Applicant or her solicitors have been unable to make contact with the Respondent. The remaining superannuation entitlements have still not been paid.
Upon receiving the original application and associated documents, the Respondent told the accountant that he was no longer a client of the firm.
At the time the Orders were made in October 2011, the Applicant understood that she and the Respondent were natural trustees of the fund. This understanding came from a deed of variation dated 1995.
Pursuant to Order 12 of the Orders, the Applicant resigned as a director of the company Sharma Pty Ltd.
During the process of attempting to obtain the remaining superannuation entitlements, in about April 2013, the Applicant became aware of a document dated 18 June 2010 which appointed Sharma Pty Ltd as corporate trustee for the superannuation fund.
Pursuant to the Orders, the Respondent has retained ownership of properties in Suburb G, Suburb I and Suburb K.
The Law & Discussion
The Applicant seeks an order appointing a receiver, being an order to enforce an obligation to pay money under rule 20.05(d) of the Family Law Rules 2004 (Cth) (“the Rules”). Under section 80(1)(k) of the Family Law Act 1975 (Cth) (“the Act”) in exercising its powers under Part VII, the Court may make any other order which it thinks is necessary to make to do justice.
An application for an enforcement order appointing a receiver of the payer’s property is made under rule 20.46 and the affidavit must comply with rule 20.46. This rule has been complied with.
Pursuant to rule 20.47, in considering an application, the Court must have regard to the amount of the debt, the amount likely to be obtained by the receiver and the probable costs of appointing and paying a receiver.
The amount of the debt as at the date of this Judgment is $112,094.88. This is the sum of $111,791.52 as identified as at the date of hearing on 30 September 2013, together with a daily interest of $18.96 up to and including the date of Judgment on 16 October 2013 ($303.36).
So far as the likely amount to be obtained by the receiver is concerned, it is anticipated that the entire amount outstanding will be obtained from the fund, though it is conceded by the Applicant that there is some prospect that the Respondent may have accessed the superannuation monies and withdrawn the same.
The Court must also consider the probable cost of appointing and paying a receiver. The hourly rates charged by the proposed receivers are attached to their consent to act as receivers (Court’s Exhibit A) and the Applicant’s solicitor submitted this has been estimated to be between $20 000 and $40 000.
Costello & Anor & Condi & Anor[1] discusses the role of a Court appointed receiver. O’Reilly J stated at [170]:
… a court appointed receiver derives no title or estate from the order which appoints him. He is simply an officer of the court responsible for collecting and dealing with the property and assets covered by his appointment on behalf of the parties to the proceedings in which he was appointed and the rightful owners. As an officer of the court, although he is considered to be appointed on behalf of all persons interested in the property, and is presumed to act for the benefit of all parties according to their entitlements, he is not the agent of the party who applied for his appointment. Only the court which appointed him can direct him, but nor is he an agent of the court. … Nor is he (unlike a receiver appointed by a secured creditor) an agent of the creditors. Nor is he a trustee. Thus, any property he receives is “technically” in the possession of the court, held for the person or persons who may ultimately proved entitled … (original emphasis)
[1] [2012] FamCA 355
In the matter of Henley & Garrett and Garrett & Henley[2], Federal Magistrate Coates, as he then was, appointed a receiver pursuant to Rule 20.46. His Honour noted at [161] that “(t)he application is not common but is anticipated for cases including where a party is entitled to receive money under orders and the other party not only does everything possible to avoid paying, but also fails to disclose financial matters.”
[2] [2010] FMCAfam 314
It is submitted that the appointment of a receiver in this case is appropriate as the Respondent is a party to an order made by consent and is well aware of his obligations under the Orders of 4 October 2011, having complied with all other Orders made.
Further, it is submitted that the Applicant has made exhaustive enquiries and efforts to enforce the superannuation splitting Orders, and there has not been at any time a response from the Respondent. It is submitted that the Respondent appears to have a cavalier attitude to his financial affairs, evidenced by his failure to comply in a timely fashion with earlier directions of this Court, his failure to authorise relevant authorities of changes to his business details and his failure to comply with these Orders.
Finally, it is submitted that the wife does not have the funds, knowledge or experience to enforce the Orders herself.
The Respondent’s current financial circumstances are unknown except that he continues to hold three properties and is an experienced professional.
The Court has broad powers to do justice in the proceedings. The payment of a substantial amount of money has been outstanding for almost two years. Although the Respondent appears to be well aware of his obligation to comply with Court Orders, it appears he is doing everything possible to avoid his final obligation.
The Respondent has disengaged from any contact with his wife, her solicitors and his previous accountant, even though maintaining contact is essential to completing his final obligation.
It appears that the Applicant has little alternative other than to seek the appointment of receivers. Although it may be an uncommon remedy, in all the circumstances of this case, making such an order will appropriately do justice in these proceedings.
In relation to the orders sought for the wife to be entitled to interest on the outstanding amount from the date the final payment should have been made to the date of the payment, the wife is entitled to this sum under Regulation 45D of the Family Law (Superannuation) Regulations (2001) (Cth) (“the Regulations”). The amount claimed has been calculated by a qualified expert in accordance with that Regulation. The expert’s calculations are set out in an affidavit filed in these proceedings.
The balance of the Orders sought in relation to the enforcement appear appropriate, other than order 8.4 requiring the receivers to submit accounts to my Associate. In my view, a more appropriate order is that the accounts be submitted to the principal Registrar of the Parramatta Registry for filing with the Court file.
Application for indemnity costs
The wife’s costs of and incidental to the application are sought on an indemnity basis, and the Applicant also seeks an order that the receivers costs and expenses be paid on an indemnity basis, to the extent that the amount of the fund is insufficient.
The law in respect of indemnity costs is well settled, and the relevant principles are those set out in the Federal Court case of Colgate-Palmolive Company v Cussons Pty Limited[3] where Sheppard J provided examples where indemnity costs would be warranted.
[3] (1993) 46 FCR 225
As recently stated by Bryant CJ in the Full Court decision of Joyce & Fante[4] dealing with the issue of indemnity costs “(i)n short, it is beyond doubt that in order to justify an award of indemnity costs, it must be demonstrated there are exceptional circumstances such that the usual order of party-party costs should be departed from.”[5]
[4] [2013] FamCAFC 141
[5] Op cit at [11]
Section 117 of the Act provides that each party to proceedings under the Act shall bear his or her own costs, but that section is subject to subsection (2) which provides that if the Court is of the opinion that there are circumstances that justify it in doing so, the Court may make an order to costs as it considers just.
Section 117(2A) sets out matters to which the Court is to have regard in considering what order, if any, should be made under subsection (2). Firstly, the Court must consider the financial circumstances of each of the parties to the proceedings. Each of the parties in this matter is a person of considerable means and neither is in receipt of assistance by way of legal aid.
The conduct of the Respondent in relation to the proceedings does not reflect well upon him, nor does the fact that the proceedings were necessitated by his failure to comply with previous Orders of the Court.
Even though the Orders were made by consent, and most were complied with, the Respondent has demonstrated an attitude of non-compliance to others. The Respondent vacated the former matrimonial home many months after he was required to under the Orders, and most relevantly, has failed to pay a significant sum of money required to be paid under the Orders.
The Respondent has severed all contact with the Applicant, her solicitors and his accountant and shown a persistent disregard for his obligations under the Orders for a period of almost two years. The Respondent has made it difficult for the Applicant to serve documents upon him and has not participated in the proceedings.
In my view, the conduct of the Respondent and the fact that the proceedings were necessitated by the failure of the Respondent to comply with previous Orders of the Court, do amount to exceptional circumstances.
The Full Court in Kohan & Kohan[6] recognises the Family Law Act 1975 (Cth) provides that the exercise by the Court of its discretion to award costs on an indemnity basis is a “very great departure from the normal standard”. It was said in that case that “the Judge should know what the terms of the agreement are, to what extent it exceeds the parameters set by the scale and what its likely impact will be on the financial position of each of the parties … The degree to which a costs agreement departs from the established norm and the actual financial significance of such a departure may itself be a reason for not ordering costs on an indemnity basis”.
[6] (1993) FLC 92-340
At the time of Kohan (supra), there was no mention of indemnity costs in the Rules. This is no longer the case. Rule 19.34(2) provides that if a Court orders costs be paid on an indemnity basis, those costs must be “reasonably incurred” and of a “reasonable amount” having regard to the scale of costs set out in Schedule 3, any costs agreement between the party to whom costs are payable and that party’s lawyer, and charges ordinarily payable by a client to a lawyer for work.
Rule 19.08(3) also provides that a party seeking costs on an indemnity basis must inform the Court if the party is bound by a costs agreement in relation to those costs, and if so, the terms of the agreement.
These Rules are also captured in the definition of “indemnity basis” set out in the Explanatory Guide of the Family Law Rules 2004 (Cth), which the Full Court in the recent decision of Prantage & Prantage[7] accepted as accurate, being:-
an entitlement to costs, including costs under a costs agreement, for all costs incurred, other than costs that are unreasonable in amount or that have been incurred unreasonably.
[7] [2013] FamCAFC 105 at [17]
The wife’s costs agreement with her solicitors is annexure G to her affidavit sworn 13 September 2013. The costs agreement was dated 12 October 2009, and the wife noted in her affidavit that the hourly rate of her solicitor had increased in May 2013 to $379.50 per hour inclusive of GST. Annexure H to the wife’s affidavit sets out three tax invoices her solicitors have issued to her for services incurred in these proceedings.
Both the wife and her solicitor set out the wife’s total costs in respect of the proceedings in their respective affidavits. The total costs were said to be in the vicinity of $9,650 – being a total of $8,852.89 as at 27 September 2013 plus approximately $800 for the hearing on 30 September 2013. This includes costs incurred in respect of appointing a receiver in the vicinity of $5,940.
I am satisfied that the costs the wife has incurred in these proceedings, both as to her legal costs and disbursements and additional costs in respect of the appointment of receivers, are proper and reasonable in light of the husband’s failure to comply with Orders of 4 October 2011 and his conduct in relation to these proceedings.
The cost agreement between the wife and her solicitor appears to be reasonable having regard to Schedule 3 of the Rules and her solicitor being a Senior Associate of the firm.
If the parties are unable to reach agreement on the sum of costs payable by the husband to the wife on an indemnity basis, which I suspect will be the case in this matter, it is a matter for the Assessing Officer to determine what costs are reasonably incurred and payable to the wife.
But for the husband’s failure to comply with previous Orders and his conduct throughout these proceedings, the wife would not have had to incur the costs of receivers to recover her superannuation entitlements pursuant to the Orders.
An outline of the receiver’s hourly rate for “Business Recovery & Insolvency Services” is set out in annexure E to the wife’s affidavit sworn 13 September 2013. It was submitted that the total costs of the work the receivers will be undertaking in carrying out their limited duties in this matter are not insignificant and could be between $20,000 to $40,000. However, I am satisfied that, to the extent that the fund is insufficient to cover the costs and expenses of the receivers, their costs should also be borne by the husband on an indemnity basis for the reasons already set out.
I therefore make the Orders as set out at the forefront of these Reasons for Judgment.
I certify that the sixty-six (66) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Hannam delivered on 16 October 2013.
Associate:
Date: 16 October 2013
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