Suvari &Suvari
[2022] FedCFamC1F 377
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Suvari &Suvari [2022] FedCFamC1F 377
File number(s): SYC 544 of 2019 Judgment of: CHRISTIE J Date of judgment: 30 May 2022 Catchwords: FAMILY LAW – INTERIM PROPERTY – where the wife seeks an injunction – where the wife alleges the husband has spent monies belonging to a company – where it is asserted that full and frank disclosure has not been given. Legislation: Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth), r 7.26.
Family Law Act 1975 (Cth) ss 79, 114(1).
Cases cited: Kartal & Templeman [2022] FedCFamC1A 46
Strahan & Strahan (Interim Property Orders) (2011) FLC 93-466.
Waugh & Waugh (2000) FLC 93-052.
Division: Division 1 First Instance Number of paragraphs: 61 Date of hearing: 13 May 2022 Place: Sydney Counsel for the Applicant: Ms McMahon Solicitor for the Applicant: Newnhams Solicitors Counsel for the Respondent: Mr Watkins Solicitor for the Respondent: MCK Lawyers ORDERS
SYC 544 of 2019 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS SUVARI
Applicant
AND: MR SUVARI
Respondent
ORDER MADE BY:
CHRISTIE J
DATE OF ORDER:
30 MAY 2022
THE COURT ORDERS, AND UNTIL FURTHER ORDER, THAT:
1.Mr Suvari (“the husband”) provide to the solicitors for Ms Suvari (“the wife”) monthly reports as to the income and expenditure relating to Suvari Pty Ltd as trustee of the Suvari Family Trust.
2.Within 14 days of the date of these orders the husband transfer to Suvari Pty Ltd as trustee of the Suvari Family Trust, the shares held by T Pty Ltd in E Pty Ltd.
3.Pursuant to r 7.26 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth), the time for asking questions of the single expert valuer, Mr F is extended.
4.The husband be restrained from dealing with the assets or income of the Suvari Family Trust except:
(a)In the ordinary course of business; or
(b)With the written consent of the wife.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Suvari & Suvari has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
CHRISTIE J:
This is an application for interim property orders.
Ms Suvari (“the wife”) filed an Application in a Proceeding on 26 April 2022. That application seeks a partial property settlement. The wife also seeks an injunction preventing Mr Suvari (“the husband”) from withdrawing monies from a shared bank account and selling or encumbering any real property in his possession.
The husband filed his Response on 3 May 2022. That response seeks that the wife’s application be dismissed and costs. At the hearing he agreed to some of the wife’s proposed orders.
The issues for determination are:
(a)Is it appropriate to exercise the power under s 79 of the Family Law Act 1975 (Cth) (“the Act”) and make an interim or partial order?
(b)Has the wife identified a risk to the assets such that Federal Circuit and Family Court of Australia (Division 1) (“the Court”) should act protectively to ensure justice and equity can be achieved on final distribution?
(c)How are issues of full and frank financial disclosure best addressed in this case?
The material relied upon by the wife at the interim hearing was identified as:
(a)An outline of case document filed 12 May 2022;
(b)A tender bundle (documents 11, 12 and 14 of the tender bundle became exhibit 1 and document 3 of the tender bundle became exhibit 2);
(c)An Initiating Application filed 31 January 2019;
(d)An Application in a Proceeding filed 26 April 2022 (the orders contained within which were superseded by those sought in the wife’s outline of case document);
(e)An affidavit filed 22 April 2022; and
(f)A financial statement filed 2 February 2021.
The wife amended the orders sought and those orders were set out in her Case Outline filed 12 May 2022. She further amended the orders which she sought orally at the hearing such that the amount she sought to be transferred to her solicitors in Order 1 was amended to $905,000 and correspondingly the amount sought in Order 2 was $452,500.
The material relied upon by the husband at the interim hearing was identified as:
(a)An outline of case document filed 12 May 2022;
(b)A Response to an Initiating Application filed 29 March 2019;
(c)A Response to an Application in a Proceeding filed 3 May 2022;
(d)An affidavit filed 3 May 2022;
(e)A financial statement filed 3 May 2022;
(f)A further affidavit filed with leave on 12 May 2022 (which included updated financial information); and
(g)A document entitled “Disclosure in relation to G Business and H Business”.
BACKGROUND
The husband was born in 1971.
The wife was born in 1974.
The husband and the wife (“the parties”) married in 2000 and separated in August 2018.
There are two children of the marriage: X (born in 2005) and Y (born in 2007) (“the children”).
The assets of the parties (based on the evidence available at the date of hearing) appear to be as follows:
Property Ownership Wife’s Value Husband’s Value ASSETS J Street, Suburb K Joint $1,200,000 $1,300,000 ANZ account ending #…85 Wife $8,180 NK ANZ account ending #…27 Joint NK NK ANZ account ending #…39 Joint NK NK Husband’s bank accounts Husband NK $335,606 Motor vehicle 1 Wife $46,000 NK B Pty Ltd Wife NK NIL Suvari Pty Ltd as trustee of the Suvari Family Trust Joint NK $851,000 Household contents Wife $5,000 NK U Shares Husband NK $40,000 Motor vehicle 2 Husband NK $55,000 Total: $1,259,180 +NK $2,581,606 + NK SUPERANNUATION Commonwealth Bank of Australia Wife $41,683 $41,683 Husband’s super Husband NK $119,676 Total: $41,683 $161,359 LIABILITIES Mortgage Joint $37,515 (as at 25 November 2020) $116,000 L Company credit card Husband NK NK L Company charge card Husband NK NK Total: $37,515 $116,000 Net assets: $1,338,378 + NK $2,626,965 +NK
According to the parties’ financial statements, the wife has an estimated average weekly income of $800 and the husband has an estimated average weekly income of $11,000.
THE LAW: INTERIM PROPERTY ADJUSTMENT
It is well established that as a general rule, parties to family law proceedings are best served by one exercise of the power in s 79 of the Act: Strahan & Strahan (Interim Property Orders) (2011) FLC 93-466 (“Strahan”) and see also Kartal & Templeman [2022] FedCFamC1A 46.
In an appropriate case it is recognised that one or both of the parties may seek an order under s 79 of the Act at an interlocutory stage of the proceedings.
A party does not have to demonstrate special circumstances in order to seek an interim order. However, it is necessary to demonstrate that:
(a)Such an order would be just and equitable;
(b)Such an order would not prejudice the relief of another party; and
(c)There are assets available to satisfy the order.
The Court is not required to undertake a detailed analysis of the matter but should understand (on the basis of the evidence) the contentions each party makes about issues relating to contributions and their respective future financial needs.
The Court has the power to issue an injunction. The power derives from s 114(1) of the Act: “…the court may make such order or grant such injunction as it considers proper with respect to the matter to which the proceedings relate”.
An injunction will issue where there is evidence to support the submission that, absent an injunction, there is a risk to the assets such as may undermine the Court’s capacity to do justice and equity as between the parties: Waugh & Waugh (2000) FLC 93-052.
CONSIDERATION
The issues which require determination are:
(a)Should an interim property order be made?
(b)Should injunctions issue restraining the husband from dealing with assets other than in the ordinary course of business?
(c)Should the husband provide regular reports to the wife in respect of the Suvari Family Trust?
The husband consented to providing monthly reports for the Suvari Family Trust and I will make that order.
Interim property order
The wife seeks an order for payment of funds to her equivalent to all amounts advanced by Suvari Pty Ltd to E Pty Ltd. In the alternative, she seeks an order for payment of funds to her, equivalent to half of all amounts advanced by Suvari Pty Ltd to E Pty Ltd. In the alternative to that, she seeks an order for the husband to transfer shares in E Pty Ltd (held by him through T Pty Ltd) to Suvari Pty Ltd. The husband consents to the share transfer.
The balance sheet is not settled. Adopting a conservative approach the net assets of the parties would appear to be at least $2,626,965. This figure does not take into account the fact that Suvari Pty Ltd is owed $905,000 by E Pty Ltd. It also attributes no value to any of the other businesses established by the husband after separation.
The parties have operated businesses together. They previously operated a business called M Business. The entity Suvari Pty Ltd operates N Business. The husband is about to operate two further businesses: G Business and H Business. The husband would appear to have other business interests in Country O, including perhaps a business called M Business.
The wife raises a concern that the husband has not complied with his duty to make full and frank financial disclosure in respect of assets (and perhaps income). On the husband’s own material, the concern the wife raises about disclosure appears to be made out.
On 5 April 2022 the husband’s lawyers wrote to the lawyers acting for the wife answering specific questions about the financial aspect of the proceedings, which had been raised in a letter dated 18 March 2022. In that letter the husband said by way of explanation of the transfers from the account of Suvari Pty Ltd to E Pty Ltd:
[t]he funds transferred were profits from 2020 which our client was entitled to 50% of and [Mr P] was entitled to the remaining 50%. Our client and [Mr P] each decided to invest their share of the profits into [E Pty Ltd].
Not surprisingly, in a letter dated 12 April 2022, the wife’s solicitors questioned why the husband would be transferring monies from Suvari Pty Ltd to E Pty Ltd, a company in which he did not have an interest.
The letter from the husband’s lawyers to the wife’s lawyers dated 22 April 2022 clarified the position and confirmed that the monies paid by Suvari Pty Ltd to E Pty Ltd were paid by way of loan from one entity to the other and were repayable and paid pursuant to a loan agreement. The letter enclosed an unsigned loan agreement dated 17 August 2021 which referred to N Business lending E Pty Ltd $150,000.
On 3 May 2022 the husband swore a Financial Statement. On oath he informed the Court of his assets, liabilities, income, expenses, financial resources and superannuation. The husband did not refer to the entity known as T Pty Ltd.
The husband swore an affidavit on 3 May 2022. In that affidavit the husband said on oath:
[N Business] has lent the sum of $620,000 to [E Pty Ltd], on the condition that [E Pty Ltd] will obtain finance from a bank after it commences to trade and the money will be repaid with interest
It became apparent that the funds were for the establishment of the two new businesses including the fit out of those businesses.
The husband’s affidavit referred to an agreement between the husband and the (then) sole shareholder of E Pty Ltd Mr P, that Mr P would transfer half of the shareholding in E Pty Ltd to the husband.
The husband filed a further affidavit on 12 May 2022. Counsel who appeared for the wife did not object to the affidavit being received into evidence. That affidavit contained the statement: “I also own 50% of the shares in E Pty Ltd”.
It also contained this evidence:
the fit outs have cost more than what was anticipated, and [N Business] has lent the sum of $905,000 to [E Pty Ltd], on the condition that [E Pty Ltd] will obtain finance from a bank after it commences to trade and the money will be repaid with interest.
The husband confirmed in his 12 May 2022 affidavit that the foreshadowed share transfer had occurred and Mr P had transferred six shares in E Pty Ltd (owned by Q Pty Ltd) to T Pty Ltd (the trustee of the Mr Suvari Trust). The husband is the appointer and sole beneficiary of the Mr Suvari Trust.
This case was run by the parties explicitly as though the assets of the trusts are the assets of the parties and I will proceed accordingly.
The husband gave evidence of the specific transfers said to constitute the loan from Suvari Pty Ltd to E Pty Ltd. In the financial year ended 30 June 2021 the funds advanced were $100,000.
By 17 August 2021 (the date of the loan agreement), $150,000 had been transferred as described in the agreement.
The loan bears interest and, according to its terms, was due to be repaid in monthly instalments commencing 17 January 2022. That is tied to when the husband anticipated the new businesses would commence operation.
The loan agreement contains this clause:
From time to time the borrower and the lender may agree in writing to the making of further advances on such terms as to interest and repayments as are agreed. Such writing shall form part of this deed and all rights and obligations relating to such further advances shall be the same as contained in this deed.
I was not provided with any further documentation of the advances.
The husband’s affidavit of 12 May 2022 indicates that the new businesses are both expected to start trading in May 2022. Accordingly, it would be expected that repayments will have commenced this month.
Attached to the wife’s affidavit was an application which E Pty Ltd made to the ANZ Bank for finance of $750,000. It is not apparent whether those loan funds were received. Given that the monies advanced to E Pty Ltd were advanced on the basis that they would be repaid when commercial lending funds became available, I infer that the monies have not been made available.
At the hearing the husband agreed to the wife’s proposed order that the shares in E Pty Ltd held by T Pty Ltd be transferred to Suvari Pty Ltd. I will make that order.
The wife was seeking as her first order the transfer of $905,000 by the husband to her solicitor’s trust account. There is no evidence that the husband, in his personal capacity, has available to him anymore than about $400,000 in liquid assets.
The wife did not appear to be explicitly seeking the payment of the funds into her solicitor’s trust fund on account of legal fees. In fact, the way the case was run, it was more in the order of seeking this transfer as a positive injunction to protect the subject matter of the litigation.
I therefore raised with the wife’s counsel whether or not there was any merit in that application, if Suvari Pty Ltd held that asset - namely the right to recover $905,000 and interest. In those circumstances the asset would be part of the joint balance sheet. The husband’s counsel accepted this was so.
If that is the case then it is unnecessary for me to order the husband to pay funds to the wife’s solicitors trust account even if I could be satisfied that he had access to sufficient personal funds (which I am not).
The position is complicated by the husband’s ownership (through Suvari Pty Ltd) of shares in E Pty Ltd since he is therefore also liable for the indebtedness. I accept that it is more likely that the husband and Mr P together (as opposed to Mr P alone) may be able to secure commercial finance.
In due course the assets which have benefitted from these borrowings (the new business entities), if they are profitable, will be reflected in the balance sheet.
The second order sought by the wife in the alternative was an order explicitly by way of partial property settlement in the sum of half the funds loaned to E Pty Ltd ($452,500). The husband does not have those funds available from his personal resources according to the evidence. Again, while the order is framed as an order for interim or partial property settlement, the arguments advanced in support of it were predominantly focused on asset preservation.
The third alternate position of the wife was ultimately acceded to by the wife namely that the husband would transfer the E Pty Ltd shares held by T Pty Ltd to Suvari Pty Ltd as trustee for the Suvari Family Trust. This is appropriate as the evidence establishes both the husband and wife are beneficiaries of that trust and there will be an order for provision of monthly statements in respect of the corporate trustee.
In order to make an interim property order I would need to have regard as “the overarching consideration”, the interests of justice: Strahan.
In circumstances where:
(a)The monies ($905,000) have been loaned by one entity to another;
(b)The loan remains an asset of Suvari Pty Ltd;
(c)The husband does not currently have the necessary funds to comply with an order that the monies be paid to the credit of the wife’s solicitor’s trust account; and
(d)The wife explicitly seeks the funds be paid by the husband as an asset preservation strategy.
I conclude that it is not in the interests of justice to order the husband to make the payment as sought. That does not mean that the matters raised by the wife are irrelevant in so far as they relate to disclosure.
I accept that the wife is concerned about the recoverability of the $905,000. The husband should furnish to the wife details of:
(a)Any loan applications for commercial lending by E Pty Ltd;
(b)Any loan statements for loans made to E Pty Ltd;
(c)Any documents relating to repayments made in compliance with the loan agreement entered into between Suvari Pty Ltd and E Pty Ltd;
(d)Incentive deed between E Pty Ltd and the landlord of V Street, Suburb W; and
(e)Incentive deed between E Pty Ltd and the landlord of Building R, Suburb S.
The provision of the above documents should provide the wife with information about repayment of the $905,000.
The wife was seeking an order that she be provided with monthly income and expenditure reports for Suvari Pty Ltd. This was an appropriate request in light of the lack of information which had been forthcoming. The existence of the loan was material and should have been disclosed. The advances of funds from one entity to the other and their nature and quantum should have been disclosed.
One of the other issues that was agitated at the interim hearing was the apparent disjuncture between the operating profit of N Business (as operated through Suvari Pty Ltd) namely $218,630 in the year ended 30 June 2021 and the company’s capacity to advance $905,000 to E Pty Ltd in an 11 month period. There is no evidence to assist the Court to resolve that issue. The husband’s counsel pointed to the significant turnover of the entity but against that there are significant expenses such that the company does not appear to have adequate funds to make the loan advances. Counsel for the husband submitted that it may be explained by increased revenue in the financial year ended 30 June 2022. There was no evidence that this is the case but I cannot, at this stage, discount that explanation.
Injunctions
The wife also has concerns that the husband is making withdrawals from the bank accounts of Suvari Pty Ltd and applying the funds to personal (as opposed to company) expenses.
The husband through his lawyers, appropriately, consented to the order for provision of monthly reports.
The wife sought an order that the husband be restrained from making withdrawals from Suvari Pty Ltd except in the ordinary course of business. The husband opposed that order. The primary submission made by counsel for the husband was that if the order were to be made, this may lead to the wife’s lawyers asking questions about individual transactions. In the circumstances of this case, the husband’s counsel may be correct that the making of such an order will result in questions being asked. However, given the failure by the husband to identify with any precision the nature and character of withdrawals until asked by the wife’s solicitors, and given that his sworn evidence on 3 May 2022 understated the total of the advances by $285,000 on the very day a further $30,000 was being transferred, the wife has reason to want reassurance that the company’s funds are being used for company purposes alone. In addition, there can be little prejudice to a party in being bound by an order that he deal with the assets of a company only in the ordinary course of business since such an order is consistent with his duties as a director.
To the extent that the wife sought more extensive injunctions, I was not taken to evidence of a deliberate dissipation of assets or an identifiable risk to the wife’s final relief. In fact, the husband’s counsel submitted, and I accept, that the husband has, it would appear, increased the pool of assets since separation.
Questions to single expert
The wife sought an order pursuant to r 7.26 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) that the time for asking questions of the single expert valuer, Mr F be extended. Given the changes to the operations of the various corporate entities this request is appropriate and I intend to grant leave accordingly.
I certify that the preceding sixty-one (61) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Christie. Associate:
Dated: 30 May 2022