WALTERS & WALTERS

FAMILY COURT OF AUSTRALIA

WALTERS & WALTERS

[2017] FamCA 567

FAMILY LAW – SPOUSAL MAINTENANCE – Where wife seeks periodic order – Where no evidence to establish her incapacity to support herself by reason of the matters in s 72 of the Act – Where application dismissed.

FAMILY LAW – PROPERTY – Interim distribution – Consideration of applicable principles – Where inappropriate to make interim orders for realisation of assets of the parties where significant issues as to value and disclosure outstanding - Where order made in the circumstances facilitating discrete payments to the wife.

Family Law Act 1975 (Cth) ss 72, 75(2), 79, 79(4)

Harris & Harris (1993) FLC 92-378
Strahan & Strahan [2009] FamCAFC 166

APPLICANT:

Mr Walters

RESPONDENT:

Ms Walters

FILE NUMBER:

DUC

420

2014

DATE DELIVERED:

4 August 2017

PLACE DELIVERED:

Parramatta

PLACE HEARD:

Parramatta

JUDGMENT OF:

Foster J

HEARING DATE:

12 May 2017

REPRESENTATION

COUNSEL FOR THE APPLICANT:

Mr Givney

SOLICITOR FOR THE APPLICANT:

McPhee Kelshaw

COUNSEL FOR THE RESPONDENT:

Mr Lethbridge SC

SOLICITOR FOR THE RESPONDENT:

Campbell Paton & Taylor

Orders

That the wife’s application for spouse maintenance be dismissed.
That the husband do all acts and things necessary to authorise and direct that his solicitors pay to the wife or as she may otherwise direct in writing the sum of $50,000.00 presently held by those solicitors in their trust account.
That pending further order the husband do all acts and things necessary and use his best endeavours to cause loan account repayments from B Pty Ltd of $10,000.00 per month to C Pty Ltd and that the wife be permitted to account for the receipt of the said sum of $10,000.00 per month in the accounts of C as she is advised from time to time.
That, otherwise, all interim applications be dismissed.

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 Walters & Walters 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 PARRAMATTA

FILE NUMBER: DUC 420 of 2014

Mr Walters

Applicant

And

Ms Walters

Respondent

REASONS FOR JUDGMENT

The present interim application for determination was filed by the wife in the context of ongoing final proceedings as to parenting and financial issues. Proceedings were originally commenced in the L Town Local Court in 2014, later transferred to the Federal Circuit Court of Australia and then on 2 September 2015 transferred to this Court.
The wife’s interim application filed on 8 March 2017 seeks interim orders as to spousal maintenance, interim property settlement, disclosure and injunctive relief. In summary, the wife seeks interim orders (Exh “A”) that provide for the following:
a)that within 24 hours from the date of orders the husband pay such funds as are necessary to satisfy the whole of arrears and any interest accruing thereon relating to the parties’ home loan, business loan and overdraft;
b)that pending further order the husband do all acts and things necessary to cause a payment from B Pty Ltd of $10,000.00 per month to the parties’ company C Pty Ltd;
c)that the wife be permitted to account for the receipt of the said sum of $10,000.00 per month in the accounts of C Pty Ltd as she is advised from time to time;
d)that it be noted that the payment from B Pty Ltd to C Pty Ltd is by way of loan repayment between the companies and constitutes capital in C Pty Ltd;
e)that pending further order the husband pay to the wife the sum of $1,500.00 per week by way of spousal maintenance first payment within seven days to be made to an account nominated by the wife;
f)that the husband pending further order be solely responsible for repayment of the parties’ home loan, business loan and overdraft and in default the wife may in her discretion pay such sums from the capital fund in C Pty Ltd and be permitted to account for such payments as she is advised from time to time;
g)that within seven days the husband do all acts and things necessary to cause the proceeds of sale of a boat in the sum of $50,000.00 currently held in the trust account of the husband’s solicitors to the wife or she may otherwise direct in writing in her capacity as director of C Pty Ltd;
h)that the husband provide to the wife documents describing correspondence from the wife’s solicitors to the husband’s solicitors dated 2 May 2017;
i)that pursuant to Chapter 15 of the Family Law Rules 2004 a single handwriting expert be appointed to examine the signature that purports to be that of the wife appearing on the B Pty Ltd shareholders’ agreement dated 30 April 2013 and that for the purpose of implementing this order the wife within 14 days nominate to the husband the names of three suitably qualified experts together with a copy of their CVs and estimate of costs and within a further 14 days thereafter the husband shall select the expert from those nominated in default the wife may select the expert;
j)that the husband and wife do all things necessary to cooperate with the single expert including without limitation the husband whether in his personal capacity or as a director of B Pty Ltd producing the original 2013 shareholder agreement to the expert and in the case of the wife such sample signatures and handwriting examples as the expert requires;
k)that the husband shall be liable for the costs of the expert in the first instance with ultimate liability to be determined by the trial judge or by agreement between the parties.
For the purposes of her interim application the wife relied upon the following documents:
a)her Further Amended Application in a Case filed 8 March 2017;
b)her updated financial statement filed 19 January 2017;
c)her affidavit filed 12 January 2017;
d)her affidavit sworn 7 March 2017;
e)her affidavit filed 2 May 2017.
For his part, the husband relied upon the following documents:
a)his Response to the wife’s Application in a Case filed 31 January 2017;
b)his financial statement filed 31 January 2017;
c)his affidavit filed 31 January 2017;
d)the affidavit of Ms M filed 2 February 2017.
In his Response the husband sought orders that in summary provided for:
a)A sale of the matrimonial home at N Street, L Town.
b)That the proceeds of sale be applied in payment of agent’s commission, legal costs on sale, contract adjustments and discharge of secured ANZ bank liabilities with the balance then remaining to be divided equally.
c)That the husband sell the leasehold and improvements at O Lake and the boat and after reimbursement to himself of any payments made by him in relation to those assets since January 2015 and reimbursement to himself of any costs of sale and a payment of any sale costs the balance be paid to him by way of partial property settlement.
d)That the wife do all necessary things to:
i)appoint the husband as director of C Pty Ltd; and
ii)appoint the husband as signatory on all ANZ accounts of C Pty Ltd;
iii)deliver up to the husband all records and seals of C Pty Ltd;
iv)sign an authority directing C Pty Ltd’s current and former accountants to supply to the husband all documents and information as he may request in relation to C Pty Ltd.
e)That the wife be restrained from withdrawing or transferring any funds from C Pty Ltd’s ANZ account …11 other than in accordance with the husband’s written consent or court order.
f)That within 24 hours of the husband being appointed as a director of C Pty Ltd the wife resign as director and secretary and thereafter be restrained from seeking or accepting appointment as a director or office bearer of C Pty Ltd other than in accordance with the husband’s written consent or further court order.
g)That within seven days of being appointed as director of C Pty Ltd the husband request B Pty Ltd to commence repayment of the loan owing to C Pty Ltd at the rate of $10,000.00 per month to be deposited to ANZ account …01 and that the husband shall apply such repayments as follows:
i)in respect of each $10,000.00 repayments within seven days the husband shall declare a fully franked dividend to the wife in the sum of $8,000.00;
ii)that after declaring the dividend the husband shall pay the proceeds of such a dividend as to $5,000.00 to P School for the children’s school expenses and as to $3,000.00 to the parties’ home loan accounts with the ANZ bank and that upon sale of the home such sum be paid to the wife by way of partial property settlement.
h)That the husband provide to the wife monthly copies of ANZ bank statements for the accounts conducted by C Pty Ltd.
i)That the wife be restrained in her capacity as director of C Pty Ltd from withdrawing or transferring funds from the ANZ accounts other than for the purpose of paying taxation liabilities of the company including income tax and GST, paying accountancy fees relating to the preparation and lodgement of BAS, financial statements and tax returns or in accordance with the husband’s written consent or further court order.
j)That the parties do all things necessary to list C Pty Ltd’s shares in B Pty Ltd for sale in accordance with the shareholders’ agreement dated 30 April 2013 at a price agreed in writing between the parties and applied the proceeds of sale in payment of legal and accountancy costs of the sale of the shares and the balance to be held in a controlled monies account pending calculation of taxation liabilities and pending further order or written agreement between the parties.
k)That upon sale of the shares that each party do all things necessary to obtain advice about C Pty Ltd’s taxation liabilities arising from the sale of its shareholding in B with such advice to be obtained from solicitors and accountants agreed in writing between the parties.
Otherwise, the husband sought various orders as to disclosure that were not pressed at interim hearing.

Context

The wife is presently 45 years of age and the husband 40 years of age.
The wife has a child from a previous relationship. That child is now aged 24. The husband has a child from a previous relationship. That child is now about 17 years of age.
The parties commenced cohabitation in 2001.
There are four children of the parties’ relationship, Q born in 2003, R born in 2005, S born in 2007 and T born in 2008. Final parenting orders were made in March 2017 that see the children living primarily with the wife and spending time with the husband.
The parties separated in June 2013 and were divorced in October 2015.

C Pty Ltd and B Pty Ltd

During cohabitation and in 2004 the parties incorporated C Pty Ltd. The wife is the sole director of the company and shares are held by the husband and wife and the children. The wife’s shareholding gives her voting control, the right to receive dividends and the right to receive assets of the company on winding up.
The wife asserts that the company was incorporated on the suggestion of the husband so as to reduce his visible income and thus reduce his child support for his child of his previous relationship. The husband was paid a PAYE salary with profits paid to the wife by way of dividend that thus did not form part of the husband’s assessable income.
In October 2004 he began to subcontract his services as a tradesman through C Pty Ltd. The wife was sole director and primary shareholder.
In October 2006 C Pty Ltd entered into a partnership with two other companies D Pty Ltd and G company (later H company) and the partnership traded as B2 Pty Ltd. The parties borrowed $110,000.00 on the security of their home in L Town NSW to contribute to the setup of the business and for working capital.
In 2007 the B Pty Ltd partnership purchased a franchise business that traded as J company in addition to the normal business of the partnership. The business was later conducted by E Pty Ltd with the shareholders being the partners in the partnership.
In 2008 the partners incorporated E Pty Ltd as equal shareholders and E Pty Ltd commenced to trade as J company. The husband was appointed a director of E Pty Ltd, notwithstanding that the wife was the sole director of C Pty Ltd, the parties’ E Pty Ltd shareholder company. In 2012 F Pty Ltd was incorporated.
In June 2011 the partnership was incorporated as B Pty Ltd with the primary shareholders as to 95 per cent being C Pty Ltd, D Pty Ltd and H company equally. Each of the shareholder companies were paid consultancy fees of $13,750.00 inclusive of GST per month and dividends from time to time.
At the time of the corporate restructure the partnership assets including goodwill acquired by B Pty Ltd were valued at $9,406,492.00 (including goodwill valued at $7,566,476.00) by the group accountant in February 2012 with the value ascribed to the shareholder loan accounts in the accounts of B Pty Ltd as at 30 June 2012. The loan account of C Pty Ltd at that time was $3,865,796.00.
In late 2012 B Pty Ltd acquired the K business so as to expand into manufacturing and in consideration K business acquired 20 per cent shareholding in B Pty Ltd. The shareholding of C Pty Ltd was reduced to 25.33 per cent.
The parties’ income continued to be received through the C Pty Ltd shareholding in B Pty Ltd. The income through C Pty Ltd was applied by the parties for the household and living expenses and mortgage and loan commitments and they continued to do so after separation.

The C Loan account reduction in B and thereafter

In the 2013 financial year the C Pty Ltd loan account was reduced to the sum of $1,179,179.00. The husband’s solicitors represented in October 2013 that the figure was “an accounting error” notwithstanding the loan account figure has been carried forward thereafter to 20 June 2016. The husband informed the wife that the reduction in the loan account was related to the K business transaction and the 30 April 2013 shareholders’ loan agreement. The husband now asserts that the reduction in the loan account was a consequence of the K business owners taking issue with the way in which the acquisition of assets by B Pty Ltd was accounted for in the books of B Pty Ltd particularly the figure attributed to goodwill. The shareholders’ loan accounts were accordingly reduced by the goodwill component of about $2.5 million in each case.
In March 2013 B paid the sum of $163,257.00 to C Pty Ltd in reduction of the loan account reducing the outstanding loan to about $1.777 million. Funds were deposited to the C Pty Ltd account and later paid to meet ATO liabilities of the company.
This reduction in the loan account owed to C Pty Ltd by B Pty Ltd is now a significant issue between the parties as it most significantly reduces the value of C Pty Ltd. The husband now concedes that the signature purporting to be her signature on this shareholders’ loan agreement is not the wife’s signature but he makes no admission as yet as to who purportedly endorsed the wife’s signature on the agreement. The concession resolved the issue as to the appointment of a handwriting expert.
B Pty Ltd thereafter substantially expanded its operations and acquired additional premises in L Town and DD Town NSW. The parties and C Pty Ltd provided guarantees for the corporate borrowings.
By June 2016 B Pty Ltd had gross revenue of over $30 million with cash at bank of over $4.42 million.
Subsequent to separation the parties by late 2014 were in conflict as to financial issues. The husband had proposed a settlement that the wife asserts if not accepted would result in her getting nothing. The wife sought a valuation of C Pty Ltd and its interest in B Pty Ltd. The husband, she asserts, responded in November 2014 by cutting off the income stream from B Pty Ltd and its entities to C Pty Ltd but not before the wife was able to withdraw $13,000.00 from the C Pty Ltd ANZ bank account. The husband asserts that he had concerns as to how the wife was utilising funds from the company.
The husband in December 2014 asserts that he ceased to provide through C Pty Ltd “consultancy” services to B Pty Ltd with consultancy payments to C Pty Ltd thus ceasing. He unilaterally resigned from C Pty Ltd and commenced to subcontract himself directly to B Pty Ltd at a salary of $121,000.00 per annum. The wife asserts he also receives income from E Pty Ltd. The result was that the wife was left bereft of access to funds. The wife asserts that the husband said to her “if you resign as a director of C Pty Ltd everything will be back to where it was”.
The wife asserts that the husband in April 2015 cancelled the wife’s health insurance and the home insurances. He redirected household accounts and let them accumulate in arrears and redirected C Pty Ltd bank statements to himself. School fees fell into arrears as did mortgage and loan payments. The husband withdrew funds in the children’s bank accounts totalling over $8,000.00 transferring funds to his name and then purchasing small share portfolios for each child. He has not dealt otherwise with those shares.
The parties remain in dispute as to the ongoing operation of C Pty Ltd.
Difficulties have arisen in relation to the valuation of C Pty Ltd’s interest in B Pty Ltd not the least of which have been the reluctance of B Pty Ltd (of which the husband is a director) and its entities to provide financial information for the Single Expert valuation, its demands for payment of costs of about $20,000.00 for such disclosure and the failure of B Pty Ltd to provide asset valuations.
Otherwise, the wife asserts that the husband and his solicitors have been obstructive in relation to the single expert valuation including the updating of the report.

Funds in C: Interim Orders April 2015

On 16 April 2015 interim orders as to property were made by consent that provided relevantly in summary:
a)That the parties do all things necessary to complete the sale of the property at U Street, V Town.
b)That upon sale monies be paid in payment of legal costs and agents commission, in repayment of monies owed by the husband and wife to C Pty Ltd with the remaining balance to be paid equally to the husband and wife.
c)That upon repayment of the secured loan to C Pty Ltd, the husband and wife do all things necessary to loan the money repaid less $60,000.00 to the husband and wife who shall execute all necessary Division 7A loan agreements with the company.
d)That upon receipt of loan funds from the company, the husband and wife apply those funds as follows:
i)an amount be set aside, if any, in the joint names of the parties to meet any taxation liability as assessed in relation to a mortgage to C Pty Ltd;
ii)that an amount of $60,000.00 be set aside pending further order until it is determined whether Ms W is to intervene in the proceedings;
iii)that an amount be set aside in a controlled money account to meet mortgage arrears due to the ANZ bank estimated at $5,000.00 on the property at 28 N Street, L Town;
iv)that an amount of $54,000.00 be set aside in a controlled money account to meet mortgage payments to ANZ bank on N Street, L Town estimated $3,000.00 per month and that the parties do all things necessary to ensure that mortgage payments are paid from the account;
v)that the balance be divided equally between the husband and wife;
vi)that from the husband’s share he cause to be paid to the wife the sum of $56,000.00 by way of lump-sum maintenance calculated at the rate of $4,000.00 per month for 14 months;
vii)that the payment to the wife be characterised as part property settlement;
viii)that the payment to the husband be characterised as part property settlement.
e)That all dividends received by C Pty Ltd be utilised solely in relation to business debts including accountant’s fees and payment of tax.
f)That otherwise the husband and wife be restrained from exercising any powers as a director or shareholder of C Pty Ltd save and except pending further order or by written agreement.

In May 2015 the parties sold the V Town land for about $700,000.00. After repayment of a loan back to C of $601,442.00 including interest the parties received about $35,750.00 each. Arrears in school fees were paid from the C account and after certain agreed transactions the balance in the company account as at 26 May 2015 was $557,592.00.
The husband applied funds received by him in payment of legal fees.
On 16 November 2015 the wife signed the requisite Division 7A loan agreement. She asserts that the husband has failed to do so.
Notwithstanding court orders as to the disposition of funds in the C account, the wife has failed to account to the husband for the funds he was entitled to.
The wife asserts that, otherwise, funds received by C Pty Ltd were applied by her as follows:
a)$59,000.00 as agreed on 26 May 2015 to a joint account to meet ongoing mortgage liabilities on the N Street property;
b)$56,000.00 on 1 July 2015 withdrawn by the wife and deposited to her personal account being the spouse maintenance amount;
c)$22,660.00 paid for the single expert’s valuations;
d)$79,539.00 in total paid for the children’s school fees;
e)$6,741.00 in payment of outstanding Council, water rates in home insurances;
f)$37,822.00 paid in respect of company tax and various accountancy fees;
g)$495.00 paid for company ASIC fees;
h)$7,000.00 lent by the wife to Ms W on 17 June 2015;
i)$4,803.00 reimbursed to the wife for monies paid by her on behalf of C Pty Ltd;
j)$128,700.00 for her legal costs;
k)$80,000.00 paid by the wife to meet rates, insurances, repayment of loans to family members, and living general expenses for herself and the children.
The total of the above payments is $482,760.00 leaving a balance of $118,682.00 of which $71,000.00 remained in the C Pty Ltd account as at December 2016. At the same time she had funds available to her of about $80,000.00. By May 2017 the wife’s funds had been reduced to about $12,000.00.
The husband complains that the wife has failed to provide documents evidencing her proper expenditure of the C Pty Ltd funds. The issue will no doubt be fully ventilated at final hearing.
As at 2 May 2017 the parties were indebted to the ANZ bank in relation to the following secured liabilities:
a)overdraft account (72) $319,119.00;
b)business loan (76) $88,298.00;
c)home loan (78) $216,672.00 and in arrears.
The wife complains that at the time of the interim orders in April 2015 it was not contemplated by her that the husband would procure a cessation of payments from B Pty Ltd and its entities to the company.

Assets of C

Apart from the company shareholding and interests in B Pty Ltd and its entities the wife asserts that the assets of the company comprise only a boat (purchased for $64,635.00), excavator, tractor and leasehold and improvements (transportable home) on a site at O Lake. The wife has requested on behalf of the company that the husband return assets to her in order that she may sell them on behalf of the company to meet liabilities.
The Single Expert (Exh “C”) has valued the parties’ interest in C Pty Ltd at about $4.25 million as at 30 June 2015 including the loan account owed by B Pty Ltd at the lesser value (see above). That valuation by effluxion of time is now outdated.
The wife asserts that the husband has sold the tractor and excavator and the husband acknowledges that he has sold the boat with those funds representing the $50,000.00 presently in his solicitor’s trust account. The husband’s solicitors advised in March 2017 that in addition to funds relating to the sale of the boat they had received other funds totalling $100,000.00 from the husband in the period from 23 February 2017 to 6 March 2017 with these funds mostly borrowed by the husband.
At hearing it was disclosed that the husband had in fact sold the leasehold and improvements (transportable home) on a site at O Lake (being assets of C Pty Ltd) under contract dated 19 January 2017 for $50,000.00. Funds were received by his solicitors on or about 26 April 2016 and notwithstanding the pending hearing, the orders sought by the wife in her Further Amended Application in a Case and without notice to the wife or her solicitors the husband’s solicitors instructed on the transaction X Lawyers the disposition of those funds presumably at the direction of the husband. The day before the interim hearing solicitors instructed by the husband in the family law proceedings McPhee Kelshaw by email disclosed the transaction and the disposition of funds from the sale. Such conduct reeks of sharp practice.

The parties’ superannuation fund: PNL Superannuation Fund

In June 2011 the parties set up this self-managed superannuation fund. The parties are the only members of the fund and are the directors and shareholders of the corporate trustee of the fund Y Pty Ltd.
The assets of the fund included shares in listed companies traded through Z Ltd, two ANZ accounts and cash funds held in a wealth management account by Z Ltd.
In July 2016 the husband requested that his accumulated entitlement in the fund be rolled over to another fund nominated by him and that he be removed as a director and shareholder of the fund corporate trustee.
The wife asserts that the accounts with Z Ltd required two joint signatures of herself and the husband but that the husband on 24 June 2016 procured a sale of the funds listed shares and thereafter a transfer of $158,841.00 from the share sale to a new superannuation fund Walters Family Superannuation Fund and the payment of $63,545.00 to the account of Y Pty Ltd.

The present circumstances

The wife asserts that mortgage payments have fallen into arrears since late 2016.
School fees and costs for the children are approximately in total $50,000.00 per annum. Consequent upon the wife communicating her intention to withdraw the children from their present school by reason of her inability to meet ongoing school fees, the husband on 22 December 2016 agreed to pay the children’s school fees if they remained at the present school. Subsequently, he resiled from that position agreeing only to pay school fees for Term 1 2017. As at 7 March 2017 school fees were in arrears for Term 1 by about $4,000.00.
The husband’s present child support liability pursuant to an assessment dated 1 October 2016 is $615.58 per month on a provisional income of $81,887.00. The wife complains that the husband has not filed tax returns for the 2015 and 2016 financial years. The husband asserts he cannot as the wife provided him with an incorrect PAYG summary for 2015. He offers no reason for not filing his 2016 return.
He says that now that he pays child support he cannot afford to pay school fees and costs. This notwithstanding that the parties were well able to meet such fees and costs previously from the financial resource available through C Pty Ltd, a resource stopped unilaterally by the husband.
The wife is presently contemplating her HSC studies through TAFE online and otherwise is not in paid employment. The only source of income is such funds that are available to her through C Pty Ltd.
The wife complains that the payment of $13,500.00 from B Pty Ltd to C Pty Ltd for December 2016 was not paid but credited against the C Pty Ltd loan account with B Pty Ltd. Previously a primary source of income for C Pty Ltd was payments from B Pty Ltd in periodic reduction of the loan account debt owed to C Pty Ltd. The wife asserts that the husband has facilitated the cessation of payments to C Pty Ltd in his capacity as director of B Pty Ltd.
In October 2016 the wife through C Pty Ltd requested that the loan balance owed to the company be paid by B Pty Ltd. The husband asserts that such would cause B Pty Ltd to be liquidated. On 19 October 2016 B Pty Ltd through its solicitors offered to pay the loan by instalments of $10,000.00 per month. It is the husband’s understanding that C Pty Ltd has not accepted the offer. It is open to C Pty Ltd to implement such a payment plan with the funds being available to the wife.
On 27 January 2017 the wife was informed through the husband’s solicitors that in February 2016 the husband had set up the Walters Family Trust of which he is the appointor and of which AA Pty Ltd is the trustee with the husband being the director and secretary of the trustee company. Otherwise, the husband incorporated BB Pty Ltd. No disclosure had been made by the husband of his actions in the period from February 2016 to late January 2017.
In the period from October 2016 to January 2017 AA Pty Ltd received various payments for consultancy work done by the husband for E Pty Ltd at J company totalling $22,413.00. He asserts those funds were in part used to pay legal fees.
The husband asserts that he is now paid a salary of $100,000.00 per annum by E Pty Ltd as and from 1 October 2016. Yet previously C Pty Ltd was paid by B Pty Ltd consultancy fees for the husband of about $162,000.00 per annum inclusive of GST until November 2014 when the husband commenced as an employee of B Pty Ltd at a salary of $120,000.00 plus super. His salary for the 2016 financial year from B Pty Ltd was $159,510.00. There is some circumspection as to the husband’s true income circumstances absent objective documents.
Otherwise, C Pty Ltd has continued to receive dividends from E Pty Ltd since separation. In 2014 franked dividends of $140,000.00 were received, then in 2015 $105,000.00. No dividend has been paid since notwithstanding E Pty Ltd having retained profits as at June 2016 of $1.68 million and cash and loans owed to it totalling about $475,000.00 (Exh “F”).
The husband complains that the wife failed to pay BAS payments due on C Pty Ltd consulting fees up to November 2014 and that he caused a payment to be made by B Pty Ltd of $10,618.00 that was offset against consultancy fees payable for that month of $13,750.00 (that were not paid to C Pty Ltd) resulting in a small increase in the C Pty Ltd loan account balance $1.179 million.

Discussion

Spouse maintenance

Section 72 of the Act sets out the relevant provisions in relation to the right to spouse maintenance and provides that a party to a marriage is liable to maintain the other party, to the extent that the first mentioned party is reasonably able to do so, if, and only if, that other party is unable to support herself or himself adequately whether:
a)by reason of having the care and control of a child of the marriage who has not attained the age of 18 years;
b)by reason of age or a physical or mental incapacity for appropriate gainful employment; or
c)for any other adequate reason;
having regard to any relevant matter referred to in subsection 75(2) of the Act.
It was submitted on behalf of the wife in the context of her application for a spouse maintenance order of $1,500.00 per week that her reasonable expenses extrapolated from her updated financial statement were $1,006.00 per week. It was contended that it would be inappropriate for the wife to rely on access to capital, presumably a reference to the loan repayments that may well be made to C Pty Ltd by B Pty Ltd should the wife accept the offer of capital repayments at the rate of $10,000.00 per month.
There is no issue that the wife has the substantial care and control of the four children of the marriage who are aged 13, 12, 10 and nine. All children are at school. She gives evidence that she is studying to complete her higher school certificate qualifications by correspondence through TAFE.
She gives no evidence as to the nature and extent of her obligations as to the care of the children each day nor the nature and extent of the time required by her to be expended on her studies. She gives no evidence as to any attempt to seek some employment or any circumstance that would prevent her from doing so.
She has had access to significant funds through C Pty Ltd in circumstances where she has otherwise wilfully ignored orders of this Court.
In the circumstances of this matter she has not satisfied the Court that she is unable to support herself adequately by reason of the matters set out in a), b) or c) above.
Her application for spouse maintenance is to be dismissed.

Interim Property

The principles as to applications for interim property provision are well settled, (Strahan & Strahan [2009] FamCAFC 166) and require a two-step process.
Firstly, there must be circumstances enlivening the power to make an interim order. The test is not limited to “compelling circumstances” but whether it would be “appropriate” to make an interim order, with the “overarching consideration” being the interests of justice.
In Strahan (supra), the Full Court said:
132. In relation to the first stage, in our view, when considering whether to exercise the power under s 79 and s 80(1) (h) of the Act to make an interim property order the “overarching consideration” is the interests of justice. It is not necessary to establish compelling circumstances. All that is required is that in the circumstances it is appropriate to exercise the power. In exercising the wide and unfettered discretion conferred by the power to make such an order, regard should be had to the fact that the usual order pursuant to s 79 is a once and for all order made after a final hearing.
Secondly, the Court is to have regard to relevant matters in s 79 of the Family Law Act 1975 (Cth).
It needs to be kept in mind that the final outcome of property settlement should not be compromised by an interim property order. Either the remaining property needs to be adequate to meet the legitimate expectations of both parties at the final hearing or the order that is contemplated needs to be capable of being reversed or adjusted if it is subsequently considered necessary to do so.
It is important to have regard to an overall caution. In Harris & Harris (1993) FLC 92-378, the Full Court said (at 79929-79930):
As a generality, the interests of the parties and the Court are better served by there being one final hearing of s 79 proceedings.
In Strahan (supra), the Full Court said at [132]:
… regard should be had to the fact that the usual order pursuant to s 79 is a once and for all order made after a final hearing.
It is now well settled that in property cases the Court must identify the existing legal and equitable interests of the parties in the property, the liabilities and financial resources of the parties at the time of the hearing and then whether it is just and equitable to make a property settlement order. Such a consideration should not be guided by an assumption that the parties’ rights to, or interests in, property are, or should be, different from those that then exist. The question is whether those rights and interests should be altered.
There is no presumption that one or other party has the right to have the property of the parties divided between them or a right to an interest in marital property that is fixed by reference to the various matters in s 79(4). The Court needs to conclude that it would be unjust or unfair to leave property rights intact.
In many cases this requirement is readily satisfied where the parties are no longer in a marital or de facto relationship and, thus, for example, the common ownership or use of property by husband and wife will no longer be possible or the express or implicit assumptions that underpinned existing property arrangements such as the accumulation of assets or financial resources by one for the benefit of both have been brought to an end with the relationship.
Both parties in this matter in any event seek that the Court makes final adjustive orders.
As best can be determined the asset pool of the parties comprises (Exh “L”):
a)The parties’ interests and shareholdings in C Pty Ltd having a preliminary value of about $4.529 million;
b)The home at L Town asserted by the husband to have a value of about $800,000.00;
c)Motor vehicles;
d)Some funds at bank;
e)Household contents.
The primary liabilities are the secured mortgages on the L Town property totalling about $620,000.00.
The parties started from modest beginnings with the relationship to date being about 16 years from which there are four children. The children are primarily in the care of the wife with the husband spending substantial time with them.
There is little evidence to differentiate the contributions of both parties and likely there will be an adjustment in favour of the wife arising from s 75(2) factors.
The wife has the capacity on behalf of C Pty Ltd to procure payments of $10,000.00 per month in reduction of the C Pty Ltd loan account. Those capital repayments would in turn be available to the wife. In default the wife could cause C Pty Ltd to demand repayment of the loan in full from B Pty Ltd.
In circumstance where it is expected that the matter will be the subject of trial directions shortly with anticipated hearing dates within six months, any diminution of the C Pty Ltd loan balance over that period will not be significant in the context of that company’s overall valuation as it presently stands including the asserted loan account debt.
Otherwise, C Pty Ltd may receive dividend payments from B Pty Ltd or E Pty Ltd to which the wife would have access to by reason of her shareholding.
Otherwise, the husband has had the use and benefit of $50,000.00 from the sale of the O Lake assets of C Pty Ltd that will be brought to account at hearing. Funds from the sale of the boat are available in the trust account of the husband’s solicitor.
The husband, otherwise, has income from his salaried employment (that has been questionably reduced) and there is a suggestion otherwise from any consulting work undertaken by him in his personal capacity where previously and unilaterally withdrew his services from C Pty Ltd leaving that company (and thus the wife) reliant on discretionary dividend payments or capital repayments, save for modest child support. The extent of benefits available to the husband from the various corporate entities will no doubt be canvassed at trial.
The Court needs to be mindful that any interim order can in effect be reversed at final hearing if necessary. Such is the case here by reason of the C Pty Ltd loan account representing the overwhelming value of the parties’ assets.
Yet the asset pool of the parties is substantially enmeshed in the C Pty Ltd loan account issue and the C Pty Ltd shareholding in B Pty Ltd and associated entities. A realisation of those assets at present is problematic. The matrimonial home is substantially encumbered and subject to funds being available to meet the mortgage commitments may well need in due course to be sold.
The $10,000.00 loan repayments to C Pty Ltd and thus the wife could fund the mortgage commitments of about $3,000.00 per month leaving as a balance of about $7,000.00 per month ($1,615.00 per week) available to the wife to apply as she sees fit. It is thus inappropriate that the husband be given control over C Pty Ltd as he seeks.
It is thus not appropriate to order an interim sale of the home and cause the dislocation of the wife and children pending final hearing.
It is also inappropriate to consider the realisation of the C Pty Ltd shareholding in the B Pty Ltd and its associated entities until Single Expert valuations are completed especially as to the C Pty Ltd loan account issue and the efficacy or otherwise of the importuned shareholders’ agreement that bears a forgery of the wife’s signature is resolved at final trial.
The Court is satisfied that in all the circumstances it is appropriate that further funds be released to the wife as discussed where the husband has unilaterally sold assets of C Pty Ltd and appropriated those funds to himself.
Orders will be made that funds held by the husband’s solicitors be paid to the wife by way of interim distribution. Whether such funds are ultimately characterised as property will depend on evidence as to the application by the wife.

Orders will be made accordingly.

I certify that the preceding ninety-seven (97) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Foster delivered on 4 August 2017.

Associate:

Date: 4 August 2017

[2017] FamCA 567

4 August 2017

Key Legal Topics

Areas of Law

Family Law

Legal Concepts

Remedies

Injunction

Jurisdiction