Zabarac and Zabarac & Ors

[2017] FamCA 466

FAMILY COURT OF AUSTRALIA

ZABARAC & ZABARAC AND ORS [2017] FamCA 466

FAMILY LAW – SPOUSAL MAINTENANCE – Interim – Where the wife seeks spousal maintenance of $800 per week – Consideration of the parties’ financial circumstances – Where the wife’s expenses exceed her income – Where it is appropriate that the husband pay spousal maintenance of $400 per week.

FAMILY LAW – PROPERTY – Interim – Proceedings remitted after successful appeal – Where the wife seeks transfer of funds from a controlled money account – Order made releasing a sum to the wife and for payment of liabilities

FAMILY LAW – PROPERTY – INJUNCTIONS – Where the wife seeks injunctions in relation to the sale or encumbrance of the husband’s interest in a business and a property – Where the wife seeks injunctions in relation to the husband’s income distributions – Order made restraining the husband from selling, transferring or encumbering or dealing with a business interest and a property.

Family Law Act 1975 (Cth) ss 79, 117

Harris and Harris (1993) FLC 92-378
Medlow & Medlow (2016) FLC 93-692

APPLICANT: Ms Zabarac

RESPONDENT: Mr Zabarac

SECOND RESPONDENT/INTERVENER: Commissioner of Taxation For Commonwealth of Australia

THIRD RESPONDENT: Ms AB

FOURTH RESPONDENT: Q Trust (by way of its Trustee Q Pty Limited and/or SY Pty Limited)

FILE NUMBER: SYC 3820 of 2012

DATE DELIVERED: 5 April 2017

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Loughnan J

HEARING DATE: 5 April 2017

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Campton SC

SOLICITOR FOR THE APPLICANT: Diana Perla & Associates

COUNSEL FOR THE RESPONDENT: Mr Livingstone

SOLICITOR FOR THE RESPONDENT: Doolan Wagner Family Lawyers

SOLICITOR FOR THE INTERVENER: Mr Shizas – ATO Review & Dispute Resolution

Orders

1. By consent, leave is granted to the Australian Taxation Office to withdraw from the proceedings.

1. The husband pay to the wife by way of interim spousal maintenance $400 per week, payments to be made weekly, the first payment to be made within seven days and payments are to be made to the wife direct or as she may direct.

1. Orders are made in terms of Order 2, 2.1 and 2.4 of the orders sought by the wife in her Further Amended Initiating Application filed 29 March 2017 as to the interim orders, as set out hereunder:

2.     That pursuant to Section 114 of the Family Law Act, the Husband, in his personal capacity or as a director/shareholder/partner or trustee of the [Q] Trust by way of its corporate Trustee, [Q] Pty Limited, be restrained from:

2.1selling, transferring, encumbering or dealing with the interest (including by way of Loan Account), held by or payable to the [Q] Trust, by way of its corporate Trustee, [Q] Pty Limited or to any other person or entity arising from either directly or indirectly the Husband and/or the Wife’s interest in the enterprise in partnership with others trading as [LBP Partnership];

…

2.4selling, transferring or further encumbering or dealing with his interest in the property at [O Street, Suburb R];

1. In each case those injunctions apply unless the wife gives her prior written consent.

1. The husband shall cause any repayments by his partner Ms AB pursuant to the loan agreement dated November 2015 to be paid into a controlled monies account in the names of the parties established by the parties’ solicitors for that purpose.

1. In the first instance the husband pay the costs of the single expert valuations by Mr BC and Ms CD.

1. The parties sign all documents and do all things to cause to be released to the wife from the controlled monies account held with the Commonwealth Bank BSB … Account No …32 the sum of $320,000 forthwith and upon advice received in writing from the solicitors for the wife to the solicitors for the husband an amount of not more than $107,000 to the Australian Taxation Office in respect of the wife’s taxation liabilities and an amount of not more than $67,100 to M College in respect of the wife’s liability to that College.

1. An order is made under s 106A that the Registrar sign instead of either of the parties in the event that a party fails or neglects to sign a document necessary to give effect to these Orders.

1. The husband file and serve an Amended Response to the wife’s Amended Initiating Application within 14 days from today’s date.

1. The question of costs of and incidental to the proceedings today is reserved.

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 Zabarac & Zabarac and Ors 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:  SYC3820 of 2012

Ms Zabarac

Applicant

And

Mr Zabarac

Respondent

EX TEMPORE REASONS FOR JUDGMENT

1. These are interlocutory proceedings in the context of proceedings for property settlement and child support in a form other than periodic payment.  I think the wife is 45 years of age and that the husband is 47.  The wife works for her de facto partner’s business.  The husband works in a professional occupation.  He has a share in a number of businesses.  He has repartnered, and his partner works in the same field.  She too is 47 years of age.  She is also a party to the proceedings as is the Q Trust.  Those third parties do not appear today and I am told something to the effect that these proceedings do not affect them.  There are orders sought in the interim application that would affect them, but I will come to that later. 

2. The primary parties were married in 1996 and separated in 2011.  They have two children, C and E, who are 15 and 13 years of age, respectively.  Proceedings between the primary parties were determined by Stevenson J.  There was an appeal, that was determined by a decision made towards the end of last year.  The appeal was successful.  The orders were set aside, and the matter has been remitted for re-hearing.  I understand that the proceedings are in the docket of Johnston J and the first day before his Honour is to be a date in May 2017.  

3. In the substantive proceedings, the wife seeks that any balance of a controlled moneys account be paid to her, that she receive payments from the husband of $500,000, and a second payment of $460,000, which would arise after an order had been made setting aside a loan made between the husband and his partner in November of 2015 which was originally for $460,000.  The wife seeks that those payments be ultimately secured by the sale of real estate in the husband’s name at Suburb R. 

4. She seeks a 100 per cent split of the husband’s superannuation and she seeks that there be a payment in addition to the periodic sum for the school fees for the children.  They are both at M College. 

5. By way of interlocutory application the wife seeks a transfer to her of $500,000 from the controlled moneys account, an injunction in relation to any sale or encumbrance of the husband’s interest in a business, a similar injunction in relation to a property at Suburb R and then two injunctions; one that would prevent the distribution to the husband of income above a certain rate and one that would prevent, other than by way of payment to the husband within that same limit, any payment to the husband’s partner.  The wife also seeks payment of spousal maintenance at $800 a week and she seeks that the husband in the first instance at least, pay the cost of experts.  In the latter regard there is an estimate from Ms CD at $30,000 and from Mr BC in respect of the valuation of real estate, at $1,500.  There is a minor agreement about some payments being made from the joint fund. 

6. The husband’s case is that there should be no payment of spousal maintenance, that each of the parties should receive $85,000 or something like that, out of the controlled moneys account, that the Tax Commissioner be paid and he seeks some other payments.  The other payments do not matter so much because the Tax Commissioner is owed $725,000 and $106,000 and that would virtually consume the whole fund.

7. In the context of this case, spousal maintenance, is an obligation that arises because of marriage.  Parties who are married – whether the marriage is on foot or not – can be required to provide support one to the other, where one party is not able to adequately support themselves from their own resources, the other can be required to do so to a reasonable extent. 

8. An interim order for spousal maintenance was made in these proceedings by Ryan J sitting at first instance, for about $1,013 a week.  That order was brought to an end by the conclusion of the final proceedings.  In the earlier proceedings, an interim order was made for $800 a week.  The wife says, “my income is short of my expenses by more than $800 a week and therefore I have a need”, and she says that in circumstances that she complains about, the husband has had increasing distributions from business over these recent years since separation and he is well able to meet any proper order. 

9. For the husband, it is said, that it is not proper that somebody who is now in a new relationship should be being paid maintenance and that in any event the wife is not fully exercising her earning capacity.  There is no foundation for either of those propositions.  I understand that the wife had professional qualifications but her paid employment was interrupted by the marriage. 

10. At the time of the earlier trial the wife was not in paid employment.  She has since become employed, earning over $800 a week.  It is very difficult on an interim basis to make findings of fact on a disputed issue of fact, and in this case, it is difficult to make a finding that the wife is not fully exercising her earning capacity.  That is simply beyond the scope of interim proceedings.  Suffice it to say: there is no indication that since the date of the judgment, the wife has been malingering.  The wife made representations to the trial judge that she would have difficulty securing paid employment.  Nevertheless, she has managed to secure paid employment.  That is not an insignificant thing.  We do not live in times of full employment.  Albeit she is employed by her partner, it is a positive step that she has found a job.  Looking at her Financial Statement, the wife’s wages are $865 per week.  She has some money in the bank and earns $60 in interest.  The wife receives government benefits of $115, which I am required to ignore.  She receives $1,164 a week in child support and she spends more than that on the children.  She has the benefit of a mobile phone.  The wife’s partner earns $1,500 a week.

11. There is nothing that leaps out of the wife’s Financial Statement in terms of excessive expenditure.  She spends $136 on income tax, $713 a week, being half of the rental on the premises that she occupies, $8 in water rates, $65 in private health insurance, $20 on car insurance, $15 on green slip and motor vehicle registration at $15.  She says that she makes no credit card payments.  Her fixed expenses total $3,243 a week, of which she spends $1,947 on the children. 

12. The wife breaks up her living expenses as to $758 for her own benefit, $2,175 for the children and $310 for another adult, and I am told that that is her partner.  She says that she does not have any electricity or gas expenses because they are paid by her partner, and earlier in the form, she tells us that her partner pays $100 a week for her benefit, for entertainment.  The wife’s expenses are the fixed expenses plus $758 a week living expenses, made up of $200 for food, $40 for household supplies, $25 for repairs, $35 for petrol, $20 for maintenance, $50 for clothing and shoes, $10 for car parking and fares, $50 on medical expenses, $34 on entertainment, $67 on holidays, $10 – pharmaceuticals, $60 on cleaning, $30 on repairs, $50 on gifts, pet expenses – $40, hairdressing and toiletries – $17, books/magazines – $10, dry cleaning – $10. 

13. I was taken to none of those items as being excessive.  I think there was maybe a rumbling somewhere about the rental she pays, but it is hard to imagine that the wife, left to her own devices, would be renting somewhere for less than $713 a week, which is the rent she pays, albeit that that is half the rent.  There is no complaint in relation to her specific expenses.  The wife has a weekly deficit of more than the amount she is claiming. 

14. It is the husband’s case that he would be better off, working for commission rather than being an owner.  As his counsel expressed it, he is buying himself a job.  I take that to mean that he is applying his own capital to provide himself with an income.  It is difficult to assess what his real income has been.  He says his income is $6,651 a week.  Of that he characterises $882 a week as wages and $5,769 as coming from the business partnership.  The note in his financial statement says that:

    The deponent estimates that his total income of $500,000 less expenses of $155,000 comprising a commission-only salesperson where he receives between 50 and 60 per cent of the gross commission he earns, and a dividend of 30 per cent of the yearly profit of the [Suburb K business] and nearly a third of the yearly profit of the [Suburb B business]. 

15. Reflective of the comment I made earlier, he notes that the firm operated at a loss in 2016 of $318,000.  He estimates that he earns $6,651 a week.  The drawings distributions make it very hard to assess what his real income is.  That question is one for another day.  Learned counsel for the wife expressed the chilling words about an analysis of the application of funds.  If the parties continue in this madness, that is what they will be put to.  They will be seeking to account for how income has been attributed, and then accounting for its application.  I am not confident that the income of the husband is $6,651 a week.

16. The husband’s partner earns $1,457 a week.  The husband says he spends $8,098 a week, that that is made up of $2,789 in tax, $947 in mortgage payments (presumably that is in relation to the Suburb R property), income protection insurance of $85, car insurance for a motor vehicle at $33 and for a sports car at $50, private health insurance at $57, registration at $15 and $15 for each of the vehicles, a lease on the sports car of $315 a week, on the motor vehicle $123 a week, a payment on a Coles credit card of $42 a week (when the minimum payment is $180 a week), a payment to the wife of spousal maintenance which he says is $800 a week.  I do not think that last figure is correct.  I do not think he is actually paying that.  He says he pays $595 a week in periodic assessments for the children and $482 a week for school fees.  The husband pays $247 a week in relation to a child, X, who I was not told about.

17. As to his living expenses he spends $1,476 a week, made up of a $918 associated with his own expenses and $420 a week for the children.  I think I was told that the children spend one to three weeks with him at the Christmas holidays, and every alternate weekend from Saturday afternoon to Sunday afternoon.  The husband spends $138 a week on another adult, presumably Ms AB.  Ms AB does not pay any moneys towards expenses from which the husband benefits. 

18. Ms AB earns $1,457 a week.  She does not pay any expenses for the husband’s benefit.  The husband does not pay any expenses for her benefit except for $138 a week.

19. As to the living expenses, they are not remarkable.  He allows $100 for holidays and he spends a bit more on clothing than the wife.  He also outspends her on cleaning and on gifts.  There is nothing much in it.  Certainly holidays would give way to the need to support his wife.  It is one of those cases where it is said, “Well, the husband can make arrangements to make a payment.”  This is a case where payments have been ordered on two previous occasions. 

20. The things that have changed since the earlier orders were made are that the wife has paid employment.  She has not received a property settlement.  That was going to be one of the triggering events for the earlier order for maintenance to cease.  The wife’s income has not accommodated all of her expenses.  In my view, in this period it is appropriate that there be a payment.  There is no precision about it.  I am going to order $400 a week. 

21. Happily any problem caused by an interim order can be addressed to some extent in the substantive proceedings.  Weary counsel will say they are not always addressed, but they can be addressed in terms of contributions in the ultimate property settlement between the parties if the Court finds that there has been an imbalance in subsidy between one household and another.  As to the payment out of the fund, various decisions have been made. 

22. I am asked to make an order for a payment of $500,000 from the controlled moneys account. The possible heads of jurisdiction are maintenance. I will come back to that. The payment is not solely sought for legal fees and so only part of it is by way of interim costs. The wife wants to pay some debts and some other expenses. One available head of jurisdiction is s 79 of the Family Law Act 1975 (Cth) (“the Act”). I accept that s 117 is also available. In the main, over the recent years interim distributions have generally been awarded under s 79. Section 79 calls for an equitable settlement of property if that is appropriate. If there is to be a change of property interests, the details of the order should be just and equitable.

23. The exercise of discretion is built on assembling and valuing a pool of assets, assessing contributions of various sorts, weighing the non-contribution factors in s 79(4), and deciding on what would be a just and equitable distribution. In general terms, the authorities have it that this exercise on an interlocutory basis has to be conservatively done. There is an authority of Harris and Harris (1993) FLC 92-378 which says the Court is reluctant to do something on an interim basis that cannot be undone on a final basis. That has some sense to it. To take an extreme example, you would not sell on an interim basis, a property that one of the parties wants to keep on a final basis, where that could be feasible. There is a decision of Medlow & Medlow (2016) FLC 93-692 (“Medlow”) where the Full Court overturned a decision of mine where I made a distribution to a husband from a fund which represented the proceeds of sale of a property which encroached on the legal interests of the wife in that property.  The parallel here is that controlled moneys account contains funds of the wife.

24. The Full Court found that not only should the Court not do something that cannot be undone on a final basis, but the Court should not take from one party’s assets, something that ultimately belongs to them and should remain with them, even though that it could possibly be adjusted at a later time out of other funds.  I might not have done justice to the latter authority but it is something like that.  In my view, for the purposes of today, that boils down to not a dollar coming out of that fund other than to the wife, if that dollar is hers. 

25. I am bound by the Full Court and I do not want to expose the parties to further appellate action.  I did not hear any demur about that approach from the bar table.  It is of critical importance to identify the arguments that will be made in the wife’s case.  Learned counsel for the husband has the opposite argument – that if I order the payments sought by the wife, it might not be possible to do justice to the husband’s claim out of the remaining assets. 

1. In other words, if you accept the husband’s arguments on the pool, and made a distribution to the wife of 60 per cent then she might only receive another $409-odd thousand dollars and if she receives $500,000 now, it might not be possible to satisfy the proper claims of the husband. That said there is no suggestion that in that example, the wife would not have the wherewithal to make a payment of $90,000.

2. The parties have a lot more debts than they have money in this fund.  The husband seeks a payment of $85,000 to each of the parties and that certain other debts be paid.  The wife seeks and I do not think it is strongly opposed - to compromise at least part of the debt that is owing to the children’s school.  The parties have somehow ended up with similar debts to M College.  The wife thinks that she will be able to negotiate with the school.  She owes about $67,000.  The husband owes about $55,000.  The wife wants to be able to pay the compromised debt out of the fund.  I have indicated already today that I would order that the parties do all things to cause a payment to the wife for the purposes only of paying to the school such amount as is compromised in relation to her debt to the school. 

3. Secondly, the wife owes $106,000 to the tax office.  That is based on GST and periodic payments.  The husband wants the tax debts paid, so there is no controversy about that.  It is just that the husband wants all of the tax debts paid, not just those of the wife.  This fund is formally the wife’s money and there is some logic in satisfying her debts therefrom.  In any event, the fund will not pay all of the existing debts.  Further, there is a real issue between the parties as to whether the wife should be responsible for any or all of the husband’s income tax obligations.  There is some precedent for that approach. 

4. I am told that Stevenson J took that approach; isolating three lots of tax, one that would be paid out of the joint funds, one that would be the responsibility of the husband going forward - the greater one - and the lesser part being the responsibility of the wife.  A similar approach might be identified in the rehearing.

5. Nextly, there is an issue about the payment of the expert’s fees.  If the payment is made of this fund, the wife pays it under the logic of Medlow and then she will be looking to the husband for a contribution later.  She says, as is consistent with her entire case, that husband has some flexibility in his finances.  For example, he was able to find $460,000 of matrimonial funds to lend to his partner in circumstances that did not involve commercial terms.  I will not repeat what I said during submissions, save to say the conditions of the advance and the circumstance of the advance have not been borne out.  It was the wife’s case that there would be payments of $50,000 from each of her parents. 

6. She did not say what period that would be made over, but perhaps that would be annually.  I am not sure.  It would be an unusual law that said a person could only make one payment of $50,000 from China in a lifetime.  In any event more than 12 months has passed and their $100,000 has not been repaid.  There has been a payment of $30,000, which makes no sense of the evidence. 

7. The evidence suggests that the husband is able to make arrangements when he needs to or when he is motivated to.

8. In the first instance, it would be expected that the wife would be equally responsible for those debts, at least in the first instance and before a decision is made about one party contributing to the costs of the other.

9. Some injunctions are sought.  They are in the style of Mareva injunctions, which would seek to preserve the subject matter of the proceedings or to preserve a fund of a respondent to abide the outcome of the proceedings in aid of the Court’s jurisdiction.  The situation is a bit different in family law because almost invariably the fund restrained is arguably joint or matrimonial moneys.  An injunction is sought restraining the company from making payments to the husband’s partner apart from through him.  I will not grant injunctions against a third party.  The third parties are not present today.  They would be affected by those orders, in my view. 

10. Many hundreds of thousands of dollars have been distributed and perhaps they have not all be adequately explained in terms of the husband’s disclosure.  However, I am very reluctant to artificially limit the income he receives.  He and the third party are accountable for his income.  The parties are accountable for what they do with joint funds.  If the husband has lived out of the parties’ capital, then he is accountable for that, but I am anxious about making an order of that sort, even with an undertaking as to damages.

11. The second category of injunction seeks to restrain the husband from encumbering or alienating assets.  Firstly, the husband is not permitted to do that without the wife’s agreement.  In this instance he has done that very thing without the wife’s agreement, and therefore her fears are not unrealistic.  I could qualify the injunction with “without the prior written agreement of the wife”.  Sometimes these things are done in reverse an order might be made that something cannot be done without giving 21 days prior written notice.  Given that the husband has already defrayed the parties’ assets, the onus should be on the husband to bring the matter back.  I will bind the third party by that order.  The real interest is that of the husband and if somebody else is aggrieved about it, then they can bring the matter back to court.

12. In relation to the Suburb R property, it has already been further encumbered.  That has had the effect of diminishing the pool of matrimonial assets.  The wife’s agreement should have been secured to that encumbrance.  I will make those orders, but with the device:  “without the prior written agreement of the wife”. 

13. Finally, an order sought by way of mandatory injunction that any repayments of the loan be paid into the controlled moneys account.  I will make that order.  I doubt that there will be many such payments but it is a proper order to make.  It will make the arithmetic easier and would sensibly be a way of accounting for such payments.  

I certify that the preceding thirty eight (38) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Loughnan delivered on 5 April 2017.

Associate: 

Date:  5 July 2017