Webster and Webster

[2016] FamCA 803

FAMILY COURT OF AUSTRALIA

WEBSTER & WEBSTER [2016] FamCA 803

FAMILY LAW – PROPERTY– INTERIM PROCEEDINGS – Where the husband has not paid tax in the United Kingdom for approximately fifteen years – Where the husband intends to utilise the Liechtenstein Disclosure Facility to declare his non-payment – Where the husband seeks orders to facilitate payment of his taxation liability from the proceeds of sale of real property which are being held in Australia – Where the liability is estimated to be over one million Australian dollars – Where the Court finds that such a distribution could not be accommodated at final hearing – Application dismissed  –  Where the husband made an oral application for expedition of a hearing as to whether the taxation liability is a joint liability of the parties in whole or in part – Oral application dismissed.

Family Law Act 1975 (Cth) ss 79, 80

Medlow & Medlow (2016) FLC 93-692
Petruski & Balewa (2013) 49 Fam LR 116
Strahan & Strahan (Interim Property Orders) (2011) FLC 93-466

APPLICANT: Mr Webster

RESPONDENT: Ms Webster

FILE NUMBER: SYC 5182 of 2015

DATE DELIVERED: 21 September 2016

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: McClelland J

HEARING DATE: 12 September 2016

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Bunning

SOLICITOR FOR THE APPLICANT: Simonidis Steel Lawyers

COUNSEL FOR THE RESPONDENT: Mr Simpson (direct brief)

Orders

1. Proposed orders 1 to 6 of the husband’s Amended Application in a Case filed 11 August 2016 are dismissed.

2. The husband’s oral application for expedition is dismissed.

3. The husband’s Application in a Case filed 31 August 2016 is withdrawn and dismissed.

4. The wife’s Response to an Application in a Case filed 9 September 2016 is withdrawn and dismissed.

5. Proposed orders 7 to 10 of the husband’s Amended Application in a Case filed 11 August 2016 are withdrawn and dismissed.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 Webster & Webster has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYC 5182 of 2015

Mr Webster

Applicant

And

Ms Webster

Respondent

REASONS FOR JUDGMENT

Introduction

1. This matter concerns an application for an interim property distribution pursuant to ss 80 and 79 of the Family Law Act 1975 (Cth) (“the Act”). The distribution is sought to enable Mr Webster (“the husband”) to pay a taxation debt to HM Customs and Revenue in the United Kingdom. HM Customs and Revenue is the United Kingdom’s tax and customs authority. The debt arises from the husband’s failure to pay tax on his earnings for the period between 6 April 1999 and 5 April 2014. The application is opposed by Ms Webster (“the wife”).

Background

1. The wife is 50 years of age and the husband is 54 years of age. There are two children of the marriage, B currently aged twelve and C currently aged ten.

2. The parties were married in London in 1998. In 2008 the wife returned to Australia with the children. Thereafter, the husband spent approximately half of the year working in the United Kingdom and the other half of the year working in Australia. According to the husband, the parties’ separated on 8 April 2015.

3. During the period from 6 April 1999 to 5 April 2014 the husband did not pay tax as required under the relevant laws of the United Kingdom. The Court was advised that as at 12 September 2016, the estimated taxation liability was £747 995 (British pounds) or, as at the exchange rate on 12 September 2016, an amount equivalent to $1 316 471.20 (Australian dollars). The husband asserts that there was an agreement between him and the wife that the husband would not pay tax. This is denied by the wife.

4. The application is made in the context where, aside from a business that the husband owns in the United Kingdom known as “COMPANY G”, the matrimonial property pool primarily consists of funds which, as at 5 April 2016, totalled the sum of $1 722 008.05. Those funds are the net proceeds of the sale of three properties located in London. The proceeds of these sales are held in a controlled monies account with D Lawyers. Pursuant to consent orders made 17 February 2016, the parties are currently withdrawing $4500 per week each, on a monthly basis, from the controlled monies account in order to pay for their respective living expenses.

5. The husband has received advice from accountants, F Accountants (“FA”), that there is a facility available for an overseas taxpayer who owes taxation arrears to HM Customs and Revenue to make voluntary disclosure of the non-payment and thereby minimise some of the potential consequences of such non-payment. At paragraphs 5 and 6 of his affidavit filed 9 September 2016,  Mr E, who is a partner at FA London, described the facility, which is called the Liechtenstein Disclosure Facility (“the facility”), in the following terms:

   5. The purpose of the facility is to assist UK taxpayers with undeclared investments in Liechtenstein or any other foreign jurisdiction to come forward and get their past and future tax affairs on the right footing.

   6. The facility has the advantage that:

   a. The assessment period is limited to tax years on or after 6 April 1999,

   b. By coming forward a person disclosing under the facility is afforded:

   i. A 10% fixed penalty on the unpaid liabilities for periods until April 2009,

   ii. The assessment period is limited to tax years on or after 6 April 1999,

   iii. There is an option to choose whether to use a single or composite rate of 40% or to calculate actual liability on an actual basis,

   iv. There is an assurance that there will be no criminal prosecution.

6. By letter dated 25 November 2015 from FA,[1] the husband was advised that, pursuant to the facility, he would be assessed “on income and gains from 6 April 1999 to 5 April 2014”.

   [1] Annexure “SC2” to the affidavit of Mr E filed 9 September 2016.

7. While acknowledging some discrepancy in figures, counsel for the husband noted that the amount payable to HM Customs and Revenue included approximately £178 957.67 in interest.[2]

   [2] Annexure “SC5” to the affidavit of Mr E filed 9 September 2016.

8. The orders proposed by the husband are to the effect that, upon being advised by HM Custom and Revenue as to the precise amount payable, the husband will notify the solicitors holding the proceeds of sale what that amount is. The husbands proposed orders also facilitate a “further payment” if requested by the HM Custom and Revenue. It is unclear whether the ten per cent penalty referred to in paragraph 6 of Mr E’s affidavit applies only to the tax payable or also to the interest component of the liability. This uncertainty of outcome adds to the difficulty in identifying a precise amount that would be the subject of an order for the interim distribution of property.

The Law

1. In Medlow & Medlow (2016) FLC 93-692 at 81,088 the Full Court confirmed that the starting point in respect to any property application, including an application for interim property orders, is “the identification of the parties’ property and of their interests in it”.

2. In circumstances where a party seeks interim property orders, the Full Court said at 81,090:

   86. The onus was clearly upon [the applicant] to establish that there were sufficient assets available for the interim distribution and that the effect of any interim order was capable of being reversed as part of the final hearing or at least would not defeat [the respondent]’s property claim. The onus was not on the [respondent] to adduce such evidence.

3. In that context, the Full Court in Medlow (supra) referred to Strahan & Strahan (Interim Property Orders) (2011) FLC 93-466 at 85,646, and the authorities referred to therein, in confirming that an interim order for the distribution of property must be “amenable to adjustment on a final hearing”.

4. The very nature of an interim hearing is such the Court is not in a position to properly evaluate the evidence and, accordingly, the Court should take a conservative approach, including in respect to determining whether there is likely to be sufficient resources of the parties available at final hearing to accommodate any “adjustment issue”.

Consideration

1. In this matter I am not satisfied that the Court would be in a position to make an appropriate adjustment at final hearing if the Court was to make the interim orders sought by the husband. Leaving aside the uncertainty to which I have earlier referred, the orders sought would result in an interim property distribution to the husband of approximately $1 316 471.20 (Australian dollars). This is in circumstances where it is acknowledged that, aside from the husband’s business interest in Company G, the substantial portion of the matrimonial property consists of those monies held in the controlled monies account. As at 5 April 2016, those monies totalled a sum of $1 722 008.05.

2. As noted, that amount is being further depleted by the amount of $4500 per week which each of the parties is drawing down to meet their respective living expenses.

3. Moreover, as acknowledged by counsel for the husband, the sale of Company G may return a nominal amount.

4. To demonstrate my concern as to why there may not be sufficient funds available for distribution at final hearing if I made the interim orders sought by the husband, I note that in the period of approximately five months since 5 April 2016, at the rate of $4500 per week, approximately $90 000 has been withdrawn by the parties from the controlled monies account. This would leave the sum of approximately $1 632 008 remaining in the controlled monies account at the current time.

5. If a sum of $1 316 471 were to be deducted from the controlled monies account to pay the tax liability then this would leave a balance of approximately $315 537. Further, if the matter were to proceed to a final hearing, this may not take place for some time, in which case the parties may potentially continue to draw down on the controlled monies account at a rate of $4500 per week. This would deplete the controlled monies account even further. In those circumstances, it is simply not possible to identify the funds that would be available for distribution at final hearing.

6. Further even if, alternatively, the parties were to agree that no further weekly deductions would be made from the controlled monies account, there would nonetheless be insufficient funds to facilitate an adjustment at final hearing in the wife’s favour if the wife succeeded in an argument that all, or some, of the taxation liability should not be regarded as a joint liability of the parties.

7. Counsel for the husband submitted that the Court should take note of the fact that the wife has not made her own position clear in respect to the taxation debt. This included, it was submitted, seeking independent advice should she dispute the debt.

8. With respect, that submission overlooks the fact that the husband, being the party seeking the orders for the interim property distribution, carries the onus of satisfying the Court that any interim distribution of matrimonial property can be accommodated at final hearing. This was made clear in the passage referred to above in Medlow & Medlow.

9. Accordingly, the husband’s application for an interim property distribution to enable him to meet the taxation liability to HRM Customs and Revenue in the United Kingdom is dismissed.

Oral application for expedition

1. Counsel for the husband noted that the facility requires the outstanding tax to be paid at the time of the taxpayer’s declaration to HM Customs and Revenue. The Court was advised by the husband’s counsel that that declaration must be made in the next few weeks. It was argued that time is therefore critical in this matter.

2. Accordingly, an oral application was made for an urgent hearing in the event of the Court being unable to conclude that there would be sufficient funds available at final hearing to accommodate any orders for the interim property distribution. The urgent hearing was sought in respect to whether the taxation liability of the husband, or a portion of it, should be treated as a joint liability of the parties.

3. That application is, with respect, without merit in circumstances where the husband has effectively waited until the eleventh hour before attempting to resolve his outstanding taxation issues. The unexplained delay does not justify this Court giving priority to this matter ahead of the significant number of other cases awaiting judicial hearing time.

4. Further, as submitted by counsel for the wife, the wife is entitled to have the opportunity to properly consider the matter after the husband provides her with full and frank disclosure of all relevant financial documentation. It was submitted that this has not occurred.

5. Moreover, the submission made by counsel for the husband that resolving the issue as to whether the taxation liability is a personal or joint liability would effectively determine the issue as to what adjustment might be made in favour of the wife at final hearing ignores the broad discretion that the Court has pursuant to s 79 of the Act. The Court’s exercise of that discretion in determining whether it would be just and equitable to make an order for the adjustment of property is not simply a mathematical exercise. As was said by the Full Court in Petruski & Balewa (2013) 49 Fam LR 116 at [49]:

   The task of assessing contributions under s 79 of the Act is an holistic one; what is required is to evaluate the extent of the contributions of all types made by each of the parties in the context of their particular relationship (Dickons & Dickons [2012] FamCAFC 154). As was also said by the Full Court in Lovine & Connor [2012] FamCAFC 168 at [40] and [41] such an evaluation “inevitably involves value judgments and matters of impression”, and accordingly it cannot be treated as “a mathematical exercise”.

6. Accordingly, the husband’s oral application for expedition of the hearing in respect to his taxation liability is also dismissed.

Other issues

1. During the course of the proceedings the husband indicated that he did not wish to pursue his application for the children to travel with him to Europe during the forthcoming school holidays. The wife also indicated that, at this point in time, she did not wish to proceed with her application for orders pursuant to ss 116, 117 and 118 of the Child Support (Assessment) Act 1989 (Cth).

2. Both parties agree that the business, Company G, should be sold but were unable to agree on the orders that would best achieve that outcome. In the circumstances, the parties sensibly proposed further discussion in respect to that matter.

3. Accordingly, without prejudice to the parties pursuing those issues at a later time, the orders will reflect that those matters have been withdrawn and dismissed.

I certify that the preceding thirty-one (31) paragraphs are a true copy of the reasons for judgment of the Honourable Justice McClelland delivered on 21 September 2016.

Associate: 

Date:  21 September 2016