Smith and Dinci

[2010] FamCA 505

FAMILY COURT OF AUSTRALIA

SMITH & DINCI [2010] FamCA 505

FAMILY LAW – PROPERTY – Application for urgent spouse maintenance and for security for costs – Conflicting evidence – Application for injunction not warranted – Application for property valuation to be restricted to real property held in personal names dismissed – Interim orders made pursuant to section 77 – Wife ordered to pay $120,000 by way of security for costs – Property to be sold if security not paid

APPLICANT: Ms Smith

RESPONDENT: Mr Dinci

FILE NUMBER: BRC 10762 Of 2008

DATE DELIVERED: 23 June 2010

PLACE DELIVERED: Brisbane

PLACE HEARD: Brisbane

JUDGMENT OF: Barry J

HEARING DATE: 7 December 2009

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Page of Senior Counsel appearing for the Applicant Wife

SOLICITORS FOR THE APPLICANT: J Wilson Lawyers

COUNSEL FOR THE RESPONDENT: Mr Williams of Counsel appearing for the Respondent Husband

SOLICITORS FOR THE RESPONDENT: Lehns Lawyers

Orders

IT IS ORDERED UNTIL FURTHER ORDER THAT:

Spouse Maintenance

1. Pursuant to s77 of the Family Law Act the Wife pay the Husband the sum of FIVE HUNDRED DOLLARS ($500) per week, each week, commencing the 30 June 2010 for a period of twenty-six (26) weeks.

IT IS ORDERED THAT:

Security for Costs

1. The Wife pay to the trust account of the Husband’s solicitors within fourteen (14) days of the date of this Order the sum of ONE HUNDRED AND       TWENTY THOUSAND DOLLARS ($120,000) by way of security for costs.

2. The determination of the treatment of such payment is to be made by the trial            Judge.

3. The Husband’s solicitors are at liberty to use the said payment to pay    outstanding legal fees including disbursements together with future legal fees      and disbursements of and incidental to the property settlement application.

4. In the event the Wife is unable or unwilling to pay the said sum of ONE           HUNDRED AND TWENTY THOUSAND DOLLARS ($120,000) within     fourteen (14) days or such further time as the parties may mutually agree, the       property situated at T being the land more particularly described as Lot … on Registered Plan …, Parish of …, be sold on such terms as agreed between the parties and failing agreement as determined by the Court.

5. The nett proceeds of the sale of the property after the repayment of the           mortgage debt, the costs of sale and any other debts secured by the T         property be paid to the trust account of the solicitors for the Husband, Lehns        Lawyers.

6. From the said sum the Husband’s solicitors are to deduct the sum of ONE      HUNDRED AND TWENTY THOUSAND DOLLARS ($120,000) to be paid         as a credit to the Husband’s trust account by way of security for costs as            provided for in paragraph (2) hereof.

7. The balance is to be held in an interest bearing trust account by the solicitors for the Husband on trust for the Husband and Wife pending settlement of this       matter or further order of the Court.

8. The Husband’s application for injunctions as set out in paragraphs 11 and 12 of          the application dated 12 November 2009 be dismissed.

9. The Husband’s application for particulars as set out in paragraph 7 of the         application dated 12 November 2009 be   adjourned for further mention.

10. The Husband’s application for the Wife to provide disclosure of documents as           particularised in paragraphs 8 and 9 of his application be adjourned for further     mention.

11. The order sought by the Wife in paragraph 4 of the response dated 27 August   2009 is dismissed.

12. BY CONSENT Mr M of L Valuers be appointed to carry out valuations on a fair market price basis of all interest in real estate held          by the parties and any associated entity of the parties.

IT IS FURTHER ORDERED THAT:

1. The proceedings be adjourned for case management review to 9.30 am on
   2 September 2010 at the Brisbane Registry of the Family Court.

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

FAMILY COURT OF AUSTRALIA AT BRISBANE

FILE NUMBER: BRC 10762 of 2008

MS SMITH

Applicant

And

MR DINCI

Respondent

REASONS FOR JUDGMENT

1. Ms Smith filed an application for final orders for property settlement on 25 November 2008.  In that application she seeks orders that the nett assets of the parties be divided 90 per cent/10 per cent in her favour.

2. One week after filing this application Baumann FM delivered a decision on the 2 December 2008 making orders for property settlement in relation to an earlier marriage of the wife to a Mr C.  Those proceedings were commenced in March 2003 when Mr C filed an application seeking orders for property settlement.

3. In paragraph 17(a) of his determination his Honour makes reference to a report prepared by Mr H a chartered accountant with a major accounting firm in Brisbane, dated May 2003, where he noted that:

   “The companies controlled by the wife were “nearly insolvent””.

4. At paragraph 53 of the determination his Honour notes:

   “53.Not surprisingly Counsel for the Wife relies upon the evidence of Mr [H] to support a submission that the Wife’s post separation contributions to the pool of assets as I have found it to be, are overwhelming – and represents a turn around of the financial position of the entities controlled by the Wife from a deficit of over $1.2 M to the current agreed position of $3.858 M.  Even if I were to remove the company [2 Pty Ltd’s] passive interest in the 25 per cent share of the [P] property ($357,500), then the Wife’s corporate interests have a value of around $3,500,000.”

5. At paragraph 65 of his determination his Honour noted:

   “65.On the analysis that has been undertaken, a division of the available pool as to 64.5 per cent to the Wife ($4,246,938) and 35.5 per cent to the Husband ($2,337,462) may, depending on the effect of the final order do justice and equity to both parties.”

6. At paragraph 66 his Honour calculates that the Wife needed to make a cash adjustment to Mr C in the sum of $153,291 and orders issued accordingly.

Present Application

1. On the 12 November 2009 Mr Dinci filed a further further further amended application in a case (“the application”).  In summary form in that document he seeks an order that a Mr M be appointed to carry out valuations of all properties held by the Wife personally or by any associated entity of the Wife.  By paragraph (3) he seeks an order that the Wife pay spouse maintenance on an urgent basis of $750 per week.  He seeks various other orders for disclosure and orders restraining the Wife from disposing of certain assets.

2. By paragraphs (13) and (14) of this application in a case the Husband seeks an order that two properties held in the joint names of the parties be sold (the T and N properties) and that the proceeds of sale be held in an interest bearing trust account by his solicitors on trust for the Husband and Wife save that he receive $200,000 by way of a Hogan Order to cover the ongoing costs of the litigation.  One of the properties he proposes be sold is the former matrimonial home in which the Wife currently resides with her two children from a previous marriage.

Orders Sought By Wife

1. The Wife opposes any order for urgent spouse maintenance and any order for security for costs.  She seeks orders in the following terms (refer response document to application in a case filed 27 August 2009):

   “1.The Wife be given leave to inspect the Court file in the proceedings between Child Support Agency and the Husband being [File no.…].

   2.That the Husband file and serve an updated financial statement disclosing what his assets and liabilities are.

   3.That the Husband provide copies to the Wife of all Court applications or claims filed on behalf of third party creditors and served on the Husband or his entities since separation and copies of any defence filed by the Husband or details of settlements reached in relation to the applications or claims to the wife.

   4.That any real property valuations sought by the parties be restricted to real property held in personal names and the costs of any valuations be shared equally by the parties.

   5.That the Husband pay the Wife’s costs and incidental to this application.”

2. The material relied on by the Husband is set out on page 2 of the outline of argument prepared by his Counsel.  That material consists of:

   ·The application in a case filed 12 November 2009.

   ·Response filed 20 March 2009.

   ·Husband’s response to application in a case dated October 2009.

   [There is no response document filed by the Husband at that time.  There is an amended application in a case filed 14 October 2009 and a further amended application in a case filed 22 October 2009.  No reference was made to either of those documents.]

   ·Affidavits of Husband filed 17 March 2009, 23 June 2009, 22 July 2009, 13 October 2009, 27 November 2009 and 7 December 2009.

   ·Husband’s financial statement dated 15 October 2009.

   ·Affidavits of Murray Colin Bucknall (Husband’s solicitor) sworn 14 October 2009 and 2 November 2009.

   ·Affidavit of Emma Jane Ludeke – Husband’s solicitor filed 2 December 2009.

3. The material relied upon by the Wife is to be found in a handwritten document produced at the hearing:

   ·Financial statement of Wife filed 29 September 2009.

   ·Affidavit of Wife filed 27 August 2009.

   ·Affidavit of Wife filed 2 December 2009.

   ·Affidavit of Ms D (Wife’s bookkeeper/office manager) filed 3 December 2009.

   ·Affidavit of Mr G (private investigator) filed 4 December 2009.

   ·Response to application in a case filed 27August 2009.

4. I record there was an absurd amount of material relied on by each party in circumstances where the matter was previously listed and not reached and the adjourned hearing was to be confined to two hours.

Application for Urgent Spouse Maintenance

1. Section 77 of the Family Law Act is in the following terms:

   “77.Where, in proceedings with respect to the maintenance of a party to a marriage, it appears to the court that the party is in immediate need of financial assistance, but it is not practicable in the circumstances to determine immediately what order, if any, should be made, the court may order the payment, pending the disposal of the proceedings, of such periodic sum or other sums as the court considers reasonable.”

2. I accept the force of paragraph 71 of the written submissions by Counsel for the Husband that on an application for urgent spousal maintenance, the Court must be satisfied there is an immediate need of financial assistance and any order made is to be of a relatively short duration.

3. At page 20 of those submissions Counsel particularises why the Husband is able to qualify for urgent spouse maintenance.  Inter alia, it is submitted:

   ·The Husband is unemployed notwithstanding he has applied for in excess of fifty advertised positions. 

   ·His work as a consultant on a commission basis is not producing any income.

   ·He has no property or financial resources at his disposal.

   ·The Wife has significant income and significant property and financial resources at her disposal.

   ·The Husband is not entitled to any Commonwealth benefits.

   ·The Wife remains residing in the former matrimonial home.

   ·The Husband is dependent on the good will of a friend to provide rent free accommodation.

4. The Husband says the former matrimonial home at N is valued at $2.5million (paragraph (10) of his affidavit filed 17 March 2009).  The Wife in her financial statement filed 17 March 2009 says it is worth $1.4million.

5. No doubt in the fullness of time a valuation will be obtained which will reflect who had been more accurate in the estimate given to the Court.

6. The Husband shares an interest with the Wife in an adjoining property which he values at $600,000.

7. In November 2008, presumably around the time of separation, the Husband drew down $189,450 from a joint line of credit available to the parties.  He was subsequently ordered to repay $50,000 to cover the interest on the advance that he had taken.  The Husband in his affidavit material sets out how this money has been expended.  A significant portion has been expended on legal fees.  The evidence would indicate his total legal fees to date are $104,000.  He has paid $31,000 and has an existing liability of approximately $72,000.  Other amounts were expended on a payout on his motor vehicle and for living expenses.

8. There is something of a disconnect in the Husband’s evidence where he says at paragraph (45) of his affidavit of 17 March 2009 that when cohabitation commenced in late 2002:

   “I was running my own […] business and was making approximately $4,000 a week.  The Wife’s situation was so bad that she could not afford to pay rent.”

9. For a person who some eight years ago earned $4,000 a week it is astonishing that:

   a.he cannot find employment;

   b.he cannot manage to be self employed; and

   c.has a commission only job but is unable to derive any commission other than a recent sum of $800.00.

10. In paragraph 5(d) of her affidavit filed 2 February 2009 the Wife purports to give details of the tax returns of the Husband for the years 2001, 2002 and 2003.  For the year ended 30 June 2003 his taxable income was $94,286.  This equates to an income of about $2,000 per week.  Presumably some explanation will be forthcoming for the conflict in the evidence.

11. The Husband has significant liabilities.  He has not lodged a tax return since 2005.  This must impact on his bona fides somewhat.  He has a debt to the Australian Taxation Office in the sum of $45,000 (refer JD1 to Husband’s affidavit dated 22 July 2009).  He has a significant debt to the Child Support Agency in an amount of some $25,000.  The child the subject of this assessment is now twenty-four years of age.  One could readily infer that the debt has been subsisting for many years.  The rhetorical question might be asked why didn’t he attend to payment of this liability during the period when he was earning $4,000 a week.

12. I have had regard to the submissions set out on page 20 of the Husband’s Counsel’s document as summarised above and I accept the force of those submissions.

13. For the Wife it was submitted the Husband’s evidence is not credible.  Reference was made to paragraph (2(c)) of the Husband’s latest affidavit where he deposes in the following terms:

    “I have not received any monies during the above mentioned arrangements with [J Company], as the owner of that company is the person that has provided me with my current accommodation.  I am aware that [Y Company] will invoice [J Company] for approximately $800 in relation to the work performed by me.  However, I will not receive any of this money as it will be credited towards the amount I owe to the owner of [J Company] for unpaid rent.”

14. Counsel for the Wife noted that the Husband had previously deposed to the fact that he was residing rent free.

15. In the circumstances where the Wife has access to assets of significant value including late model motor vehicles, a valuable home and a significant number of expensive horses, it is somewhat pedantic to suggest that the Husband should not be making some sort of contribution to the living expenses where he is residing.  I would be prepared to interpret the fact that when he said he was living rent free, in an earlier affidavit, he was referring to the fact that so long as he has no income he was not required to make any contribution to his rent. 

16. The evidence was not challenged that he has no entitlement to Centrelink benefits.  The major reason for this is because of property holdings he has jointly with the Wife and those assets are under her control at the present time.

17. The orders that I propose to make are based on the premise that the Husband’s evidence that he is not earning any income may be correct. 

18. I note that the Wife has gone to the expense of hiring a private investigator whose affidavit raises suggestions that the Husband has been working.

19. I am unable to make findings of disputed fact at an interim hearing such as the present case. 

20. I am satisfied pursuant to s77 I can make an order for a limited period of time and I propose to do so. I determine that that period of time will, in the first instance, be for a period of six months. I assess that the sum of $500 would be a reasonable amount.

21. I propose to adjourn this matter to a further date at which time the Court can consider the further progress of this matter to a final resolution.

22. If ultimately the evidence in this matter favours the position adopted by the Wife namely, the Husband is not in need of spouse maintenance, an adjustment can be made in any property settlement orders.

23. I note that in the Wife’s application she concedes the Husband has an entitlement to 10 per cent of the assets.

24. Having regard to the valuations set out in the financial statements, I am satisfied that the Husband would have an entitlement to property settlement that would more than cover the liability generated by any orders made as a result of this determination.

25. I am satisfied the Wife has the capacity to meet any obligation arising from the making of these orders, if necessary, by extension of an existing loan arrangement or by the sale of assets.

26. The situation can be reviewed at the next Court mention.

Application For Security For Costs

1. The Husband’s application for security for costs appears to be couched in terms of an application pursuant to the terms of s117.

2. In the decision of Strahan v Strahan [2009] FAM CAFC 225 the Full Court (Boland, Thackray and O’Ryan JJ) reaffirm that an order for litigation costs can be made as a property settlement order, a maintenance order or a costs order.  The Full Court emphasised the importance of identifying the relevant source of power when contemplating an order for interim provision for litigation expenses since it is the source of power that determines the necessary

   
   

   pre-conditions, relevant considerations, factors or matters for making the order.

3. The Full Court also observed that it would be necessary to undertake an assessment of the amount required if an order was being sought pursuant to s117 of the Act.

4. The Husband’s solicitor with the conduct of this matter swore an affidavit filed on 27 November 2009 though his name does not appear on the document.  In that document he says at paragraph (3):

   “3.In my experience the cost of solicitors and barristers to take this matter to trial, assuming the proper valuation evidence can be obtained shall be approximately a further $100,000.

5. At paragraph (6) of the affidavit reference is made to the costs agreement which the Husband has entered into with the firm.  The terms of this costs agreement have not been disclosed.

6. Rule 19.05 is in the following terms:

   “Application for security for costs

   19.05(1)      A respondent may apply for an order that the applicant in the case give security for the respondent’s costs.

   (2)In deciding whether to make an order the Court may consider any of the following matters:

   a.        the applicant’s financial means;

   b.the prospects of success or merits of the application;

   c.        the genuineness of the application;

   d.whether the applicant’s lack of financial means was caused by the respondent’s conduct;

   e.whether an order for security for costs would be oppressive and would stifle the case;

   f.whether the case involves a matter of public importance;

   g.whether the party has an order, in the same or another case including a case in another Court against the other party for costs that remains unpaid;

   h.whether the applicant ordinarily resides outside Australia;

   i.         the likely costs of the case;

   j.         whether the applicant is a corporation;

   k.        whether a party is receiving Legal Aid.”

1. In an affidavit sworn 14 October 2009 the Husband’s legal representative deposes at paragraph 4 that he anticipates accountant’s fees to be in the range of $20,000 and the valuer’s fee for Mr M to be a further $20,000 and $7,500 for a further valuation.

2. It was not made clear but I proceed on the basis that the above estimates are for the Husband’s one half share of the experts’ fees.

3. At paragraph 56 of his submissions Counsel for the Husband notes that the Wife is in receipt of the rental income from the two properties she owns with the Husband.  I accept that this would appear to be the case at the present time.  What is not acknowledged is the Wife is currently responsible or all outgoings relating to the properties including mortgage payments and rates.

4. I note that in his response document filed 20 March 2009 to the Wife’s application for final orders, the Husband seeks that the property of the parties be divided 55 per cent/45 per cent in his favour.  The relationship was only for a period of five years and there were no children.

5. As I understand the Husband’s case he points to the evidence of Mr H that around the time the relationship commenced the Wife was “nearly insolvent”.  He seeks to be credited with the turn around of the Wife’s fortunes in the ensuing five years.

6. For her part, the Wife adamantly denies the Husband played any such role.

7. Clearly, this will be the subject of further evidence in the event the matter proceeds to trial.

8. All that can be said at this point in time is that the Husband is likely to receive not less than 10 per cent as proposed in the orders sought by the Wife.  It would be a rare case indeed when a Judge made an order outside the ambit set by the parties’ competing applications.

9. Much will depend on the value to be attributable to the entities controlled by the Wife for which to date no valuation has been ascribed in her financial statement filed 29 September 2009.

10. For the present, I am prepared to find the matter is complex.  I propose to accede to the application for security for costs.  To my mind the amount of money the Husband will receive would be such that it would more than cover any amount ordered by way of security for costs and the Husband accordingly may have such sum bought into account as an add back figure.

11. The Husband has an interest in two properties of considerable value.  In the event the Wife does not have the capacity to provide security for costs, or is unwilling to do so, I propose to make an order that the property adjoining the former matrimonial home be sold.

12. I understand from the Wife’s affidavit that there is a caveat over this property lodged by the Child Support Agency.  It would seem that they are also tenants and much will depend upon whether the property is to be sold subject to the existing tenancy or notice given to the tenants to vacate.

13. I would be prepared to accept an undertaking from the Wife or in the alternative make an order precluding either party from extending any tenancy currently in existence.

14. If the security for costs amount ordered is not paid, then the property is to be sold forthwith.  An application can be made to the Court for appropriate orders for sale as foreshadowed in paragraph 13 of the application in a case of the Husband currently before the Court.  At the very least the Court would need to appoint an independent individual to be vested with powers as trustee for sale.

15. I note the Husband has valued the investment property held in joint names at $600,000.  From the Wife’s statement of financial circumstances it would appear that this property has a mortgage of $200,000.  It may be that there are interconnecting mortgage commitments but there is no evidence to that effect before the Court.  The Wife seemingly values the investment property held jointly with the Husband at $25,000 which I assume is a typographical error.

Quantum of Costs

1. As to the quantum of security for costs:

   currently owed to solicitors   $  72,000

   estimated accountant’s fees   $  20,000

   valuer’s fees   $  20,000

   additional valuer’s fees   $    7,500

   Total  $119,500

2. The Husband has already paid $30,000 towards his costs.

3. If the Wife is ordered to pay $120,000 or the property is sold and $120,000 is made available to the Husband, this will bring the total of costs secured to $150,000.  If the Husband’s solicitors are not prepared to continue to act on the basis of carrying future costs, it is a matter for them to take up with their client.

4. For the reasons given I will make an order that the Wife is to pay to the trust account of the Husband’s solicitors the amount of $120,000 within thirty days of the date of this Order.  Such payment is to be taken into account in such manner as the trial Judge may determine.

5. In the event the money is not paid within thirty days the property at

   
   

   T being that land more particularly described as lot …, be sold on such terms as agreed between the parties and failing agreement as may be determined by the Court.  The nett proceeds after the repayment of the mortgage debt, costs of sale and any other liability secured by the subject property be paid to the trust account of the solicitors for the Husband, Messrs Lehns Lawyers.

6. The sum of $120,000 is to be paid to the trust account of solicitors for the Husband, Messrs Lehns Lawyers to be used as security for costs.  The Husband’s solicitors are authorised to deduct outstanding legal fees from such sum and to pay any ongoing disbursements of and incidental to the conduct of this litigation.

7. The balance of the sale proceeds is to be held in an interest bearing account by the solicitors for the Husband on trust for the Husband and Wife pending settlement of this matter or further Order of the Court.

Application for Injunction

1. The Husband’s solicitor swore an earlier affidavit filed on 3 November 2009.  In that document in paragraphs 14 and 15 he deposes that he sighted an account with the National Australia Bank in the name of 19 Pty Ltd with a credit balance of $917,000 as at 21 May 2009.

2. He noted on 21 September 2009 that the Wife had withdrawn $742,620 from this account.  The transaction was done by Internet transfer but there was no indication of the destination of the funds. 

3. The Husband seeks injunctions in various forms restraining the Wife from dealing with this money.  There was no explanation forthcoming in the submissions made on behalf of the Wife or in her affidavit material as to why such a large sum of money had to be transferred at that particular time or to whom it was transferred.  The only submission made was that the 19 Pty Ltd account was a working account for the business operations of the Wife.  The Wife refers to a large scale development which may well involve payment of considerable sums of money.

4. The parties have an interest in a valuable home with substantial equity

   
   

   - whether the home is valued at $1.4 M or $2.5 M.  The Wife is said to have a considerable number of investment properties together with property development ventures on two fronts.

5. To order the freezing of any cash sum withdrawn by the Wife is, in the circumstances, not warranted.  On the evidence currently available I could not be satisfied the failure to make any such order would in any way defeat any aspect of the Husband’s claim.  I do not in the circumstances propose to grant an injunction in terms of the orders sought.

Disclosure

1. I do not propose to make specific orders in relation to the issue of disclosure.  It would appear that proper disclosure of documents has not taken place to date but the rules are quite specific on the obligations of the parties to ensure that this is done.  Much will depend in the progress of this case on the contents of the report by Mr H and the valuation reports.  The parties can raise specific disclosure issues at a later point in time.

Appointment of Valuers

1. As I understand the submissions there was no objection to Mr M of L Valuers to carry out the necessary valuations.  Where the parties are in agreement on this, why an order is required to this effect must remain one of life’s mysteries.

2. There was a concession made that the Wife would pay for the valuations.  The preferable course in my view is for the Husband to be liable for half the costs of the valuations to be paid out of the monies lodged as security for costs.

Order Sought By The Wife

1. The Wife in her response document sought an order as earlier noted:

   “That any property valuation sought by the parties be restricted to real property held in personal names and the costs of any valuations be shared equally by the parties.”

2. No satisfactory reason was put forward why the Court should make an order in such terms.  All assets of the parties should be valued which includes the valuation of any entity in which the Wife has an interest.  The law on this aspect could not be clearer.  The Wife’s application in paragraph 4 of the response filed 27 August 2009 is dismissed.

I certify that the preceding seventy-six (76) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Barry

Associate: 

Date: 23 June 2010