ZABARAC & ZABARAC
[2012] FamCA 971
•19 November 2012
FAMILY COURT OF AUSTRALIA
| ZABARAC & ZABARAC | [2012] FamCA 971 |
| FAMILY LAW – INTERIM PROPERTY – Where husband seeks interim property settlement being the sale of two of the parties’ properties – Where ss 79 and 75(2) of the Family Law Act 1975 were considered – Where preliminary assessment made – Where degree of caution exercised so as not to compromise the Court’s capacity to achieve a just and equitable final property settlement – Where interim property settlement order made, in part, to sell one of the parties’ properties in circumstances where neither party sought to retain that property – Where it is not just and equitable to order the sale of the former matrimonial home now – Where husband’s application for sale of the former matrimonial is dismissed. FAMILY LAW – SPOUSAL MAINTENANCE – Application by wife for periodic interim spousal maintenance– Where husband contended that the wife has not established that she is unable to adequately support herself – Where wife has tertiary qualifications but has not worked in an external corporate setting to that of the parties’ businesses which were closed some years earlier – Where the wife has had the full-time care of the children – Where wife commenced further tertiary study to enhance her employment prospects which were subsequently abandoned – Where wife established that she is presently unable to return to full-time work and that she is unable to secure part-time employment –Where wife established that she is unable to adequately support herself by reason of her care for the children and the manner which, prior to separation, the parties agreed she would spend her time – Whether husband has capacity to pay interim periodic spousal maintenance– Where it was determined that the husband has capacity to pay interim periodic spousal maintenance – Application for periodic spousal maintenance granted. FAMILY LAW– COSTS – Whether wife’s claim for legal fees can be made under s 117 of the Family Law Act 1975 (Cth) – Whether there are justifying circumstances – Where the wife lacks capacity to meet her own legal expenses – Where husband is in a position of relative financial strength and has a surplus of income even after interim spousal maintenance is paid – Where, although the wife’s circumstances justify circumstances for an order, the husband’s financial position is such that it is not proper that an order is made – Application under s 117(2) of the Family Law Act 1975 (Cth) dismissed. FAMILY LAW – CHILD SUPPORT DEPARTURE – Where the Court is satisfied that it would be in the interest of the liable parent and the parent entitled to child support for the court to consider whether an order should be made with respect to the children’s school fees – Where the Court gave consideration of ss 117(2)(b)(ii); 117(2)(c)(i)(a) and 117(2)(c)(i)(b) of the Child Support (Assessment) Act 1989 (Cth) as grounds for the making of a child support departure order – Where wife lacks the income to pay or contribute to the children’s private school fees – Where the husband is unable to afford school fees from income for children’s ongoing attendance at their private school – Where wife established whether it is just and equitable to make a departure order – Where unless wife willing to commit from property that she pays half school fees her application will be dismissed. FAMILY LAW – INJUNCTIONS – Where wife sought interim asset preservation orders – Whether wife established that it is just and convenient that such orders are made – Interim asset preservation orders made. |
| Child Support Assessment Act 1989 (Cth) ss 3, 4, 114, 117(2), 121, 123(1)(a) Family Law Act 1975 (Cth) ss 72, 75(2), 79, 79A, 80(1)(h), 117, 117AA, 118 |
| Black v Kellner (1992) FLC 92-287 Gabel v Yardley (2008) FLC 93-386 Lightfoot & Hampson (1996) FLC 92-663 M & DB (2006) FLC 93-293 Paris King Investments Pty Ltd v Rayhill [2006] NSWSC 578 Penfold v Penfold (1980) FLC 90-800 Strahan & Strahan (2011) FLC 93-466 Wild & Ballard (1997) FLC 92-771 Zschokke and Zschokke (1996) FLC 92-693 |
| APPLICANT: | Ms Zabarac |
| RESPONDENT: | Mr Zabarac |
| FILE NUMBER: | SYC | 3820 | of | 2012 |
| DATE DELIVERED: | 19 November 2012 |
| ORDERS MADE: | 21 November 2012 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Ryan J |
| HEARING DATE: | 5 November 2012 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Batey |
| SOLICITOR FOR THE APPLICANT: | McDonell Milne Toltz |
| COUNSEL FOR THE RESPONDENT: | Mr Dura |
| SOLICITOR FOR THE RESPONDENT: | Brown & Brown |
Orders made 21 november 2012
Pending further order
That Mr Zabarac (“the husband”) pay interim spousal maintenance to Ms Zabarac (“the wife”) an amount of one thousand and sixty three dollars ($1,063.00) per week the first payment to be made within seven (7) days of the date of this order and weekly thereafter by deposit to such bank account as the wife shall nominate in writing).
Pursuant to s 114 of the Family Law Act 1975 (Cth), the husband in his personal capacity, or as director, shareholder, partner or trustee or in any capacity whatsoever be and is hereby restrained:
(a)from receiving or causing to be distributed from “LBP Partnership” (“the Partnership”) any bonus payments, profit share or dividends due for the financial years ended 30 June 2011 and 2012, and any bonus payments, profit share or dividend from 1 July 2012 other than into the S Y Pty Ltd bank account with Westpac, being account No…, and for that purpose, the husband is to forthwith, but no later than 24 hours from the date of these orders, notify the Partnership in writing of this order;
(b)from doing any thing, signing any documents or authorising any person to change, encumber, assign or deal with his share of the Partnership or the share of the Partnership held by any corporate or trust entity in which he has an interest, without first giving the partnership and the wife 28 days notice in writing, and for that purpose the husband is to forthwith, but no later than 24 hours from the date of these orders, notify the Partnership in writing of this order;
(c)from doing any thing, signing any documents or authorising any person to distribute, dispose of or encumber any assets, howsoever described - in “SY Pty Ltd”;
(d)save and except that the husband is permitted to make the following drawings:
(i)$2,600.00 per week necessary for his reasonable personal expenses;
(ii)for the purpose of compliance with these orders;
(iii)in the ordinary course of business; and
(iv)to the Australian Taxation Office;
and the husband is to cause statements for the SY Pty Ltd bank account with Westpac, being account No … to be provided to the wife on the 1st and 15th of each month.
BY CONSENT that pursuant to s 114 of the Family Law Act 1975 (Cth), the husband in his personal capacity, or as director, shareholder, partner or trustee or in any capacity whatsoever be and is hereby restrained from:
(a)from doing any thing, signing any documents or authorising any person or entity from changing or dealing with any asset that comprises an asset of each of the husband and wife’s member entitlements in the “Zabarac Superannuation Fund”;
(b)from disposing of, dealing with or further encumbering shares in his Etrade share trading account No. …without first giving the wife seven (7) days notice; and
(c)from selling, assigning dealing or further encumbering his interest in the property O Street, R suburb.
That by way of preservation of property and pending further order, the husband pays or causes to be paid the following expenses on or before the due date for payment:
(a)the V suburb home loan being No….;
(b)the V suburb property and investment loan No….;
(c)the T Street, B suburb mortgage being No….;
(d)the investment loan secured on the J Street, B suburb property being No. …;
(e)the investment loan No. … secured over the J Street, B suburb property;
(f)the outgoings and management fees for the J Street, B suburb property;
(g)the lease payments due to A Finance, in respect of the motor vehicle registered number …in the possession of the wife; and
(h)the mortgage payments, rates and outgoings on O Street, R suburb.
BY CONSENT that within twenty eight (28) days of the date of these orders should either party obtain an exchange of contract for the sale of J Street, B suburb at a sale price of $640,000.00 or greater then both parties shall do all things and sign all documents to facilitate and complete the sale. In the event the J Street, B suburb is not subject to an exchange of contracts within twenty eight (28) days of the date of these orders then the parties are to do all things to sell the property as follows:
(a)The parties shall agree upon the real estate agent that is to have the carriage of the sale of the property and in the event of disagreement between the parties then the President of the Real Estate Institute of NSW shall be requested to appoint such an agent;
(b)The parties shall agree on the manner in which the property is to be listed for sale and in the event of disagreement between the parties in accordance with recommendations of the agent appointed to manage the sale;
(c)The parties shall agree on the appointment of a solicitor to act on the sale of the property and in the event of disagreement between the parties then the President of the Law Society of NSW shall be requested to appoint such solicitor; and
(d)The parties shall agree on any reserve price should the property be listed for private sale or auction and shall agree on the acceptance of any offer and in the event of disagreement between the parties in accordance with recommendations of the Agent appointed to manage the sale.
In the event there is a shortfall from the J Street sale proceeds such that the parties are unable to fully discharge the mortgage to the wife’s parents, subject to the consent from the ANZ Bank, the shortfall shall be secured against H Street, V suburb. In the event the ANZ Bank (or the wife’s parents) do not agree with this arrangement the shortfall shall be paid by the husband.
That by way of preservation of property the wife shall give all necessary authorities to cause all income generated by T Street, B suburb is to be paid to the husband. Thereafter, in addition to the payments referred to in Order 4 the husband shall meet all mortgage payments outgoings, and any levies due and payable in relation to that property as and when they fall due.
That by way of preservation of property the wife shall give all necessary authorities to cause all income generated by J Street, B suburb is to be paid to the husband.
That within 28 days of the date of these orders the husband provide to the wife’s solicitors:
(a)financial statements, management accounts, balance sheets, profit and loss accounts and trial balance sheets of the:
(i)“LBP Partnership”;
(ii)“Zabarac Trust”;
(iii)“SY Pty Ltd”;
(iv)“Zabarac Superannuation Fund”;
(v)any notice given by the partnership of any bonus payments, profit share or dividends due to the husband in his personal capacity, or as director, shareholder, partner or trustee or in any capacity whatsoever
for the period 30 June 2011 to 30 June 2012;
(b)statements of earnings of the husband from the Partnership from 1 July 2010 to the date of these orders;
(c)records of salary, wages, bonuses, profit share and/or dividends paid to the husband and/or any corporate or trust entity nominated by him or that holds the 28% share of the Partnership on his behalf from 1 July 2010 to the date of these orders;
(d)all documents, records and writings evidencing the acquisition/s by the husband, Q Pty Ltd or any other corporate entity or trust nominated by the husband of its interest/s in the Partnership including but not limited to records of dates of payment, amounts paid and source of funds applied to the acquisition of each tranche;
(e)all statements and records of the husband's share trading account with Etrade being account no. … for the period 1 July 2010 and statement of current portfolio held to the date of these orders.
That pursuant to s 124 of the Child Support (Assessment) Act, and in addition to any current Child Support Assessment for the children the parties shall pay in equal shares all outstanding fees due to M College as set out in a letter from M College dated 12 November 2012 for the enrolment, tuition and any extra curricular activities for the children of the marriage:
(a)C, date of birth…2002; and
(b)E, date of birth…2004
attending at M College.
That pursuant to s 124 of the Child Support (Assessment) Act that the parties pay in equal shares the tuition fees, and any extra-curricular activities for the children’s attendance at M College until the end of 2013.
BY CONSENT that Mr K of KB be appointed as joint single expert to value the interests of:
i)the Zabarac Trust in LBP Partnership.
BY CONSENT that the husband pay the costs of the joint single expert in the first instance, and the payment to be made by the husband to be categorised by the trial Judge at the final hearing.
BY CONSENT that the joint single expert as part of the valuation determine the payments made by LBP Partnership to:
(a)Zabarac Trust;
(b)SY Pty Ltd ;
(c)the husband;
(d)the wife;
(e)U Pty Ltd;
(f)D Pty Ltd;
(g)C and E Zabarac (“the children”);
from 1 July 2010 to 31 December 2012.
That these proceedings be expedited in relation to which the parties have leave to approach the List Clerk.
That the wife’s costs of her applications filed 28 June 2012 and 5 October 2012 are reserved to the final hearing.
All outstanding applications for interim and interlocutory orders are otherwise dismissed.
NOTATION
A.That the husband has advised the Child Support Agency that he will be withdrawing any claim for N.A.P. payments to be credited against his child support liability.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Zabarac & Zabarac has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| FAMILY COURT OF AUSTRALIA AT SYDNEY |
FILE NUMBER: SYC 3820 of 2012
| Ms Zabarac |
Applicant
And
| Ms Zabarac |
Respondent
REASONS FOR JUDGMENT
Before the Court are claims for interim property settlement, spousal maintenance, child support departure, costs and injunction orders.
The proceedings were commenced by Ms Zabarac (“the wife”) when she filed her Initiating Application and application for interim orders on 28 June 2012. In that application she sought interim spousal maintenance in the amount of $5,000.00 per week, payment of the children’s private school fees, interim costs in the amount of $75,000.00, that the family home at H Street, V suburb (‘the family home”) and two investment properties, T Street, B suburb, and J Street, B suburb be sold and that she receive the net proceeds by way of interim settlement of property.
Further interim orders are sought by the wife as set out in her Application in a Case filed 5 October 2012. Essentially, in this application she seeks a series of asset preservation and disclosure orders; the former seeking to restrict the husband’s capacity to deal with monies received from his real estate partnership and that he pays a variety of personal and business loans secured against the three properties mentioned earlier, car leases and the Australian Taxation Office.
At the outset it is appropriate to record that as an asset preservation and taxation effective arrangement, the parties’ properties and associated mortgages are in the wife’s sole name. It follows that in the event of default (which in relation to all three properties has occurred) the adverse legal consequences fall upon her. That said a mortgagee sale is in neither parties interests. It also follows that in the event it is necessary to realise capital so as to pay living expenses, including school fees and liabilities, the capacity to do so is primarily under the wife’s control. Namely, by drawing down on the equity in the family home.
Contrary to the obligations imposed by the Family Law Rules 2004 (“the rules”) Mr Zabarac (“the husband”) did not file a Response to the wife’s Initiating Application until immediately prior to the hearing after the Court’s indicated that the wife’s applications may be heard undefended. He filed his Response to her Application in a Case, affidavit and Financial Statement at the same time.
In summary, the husband agrees that the family home and J Street, B suburb should be sold. It is common ground that J Street is highly unlikely to achieve sufficient funds to pay secured creditors. Thus, in reality nothing turns on the wife’s desire to receive its (non-existent) net proceeds.
However, in light of the husband’s claim that the wife receive only a portion ($200,000.00) of the anticipated $1.3 - $1.5 million net proceeds of the family home which in lieu of spousal maintenance she should use to support herself, the wife withdrew that component of her application. Nonetheless, the application was pressed by the husband who increased the amount he said the wife should receive to $350,000.00. This would be categorised as an interim property settlement order. In addition, he proposed that by way of further interim property settlement the wife receive $60,000.00 (from his recent $107,000.00 profit share). This he said would give her a fund from which she could meet her living and other expenses (including legal expenses) pending the sale of the family home and J Street. He seeks to retain T Street, B suburb and will meet its outgoings. In relation to both J Street and T Street his proposal is predicated on him receiving rental income. So that it is clear, both properties are rented, albeit the T Street tenants are in occupation rent free until March 2013. It is noteworthy that a similar arrangement in relation to J Street and T Street was entered into earlier this year following which the husband failed to pay the mortgages and they went into default.
The husband does not agree to pay the children’s school fees, interim costs or spousal maintenance. It is his contention that the wife should return to paid employment. Notwithstanding that for the 2011 financial year the husband earned $842,199.00 (taxable income after dividends) and after the wife commenced these proceedings he entered into a contract to purchase a property at O Street, R suburb for $1.2 million ($960,000.00 of which he borrowed from ING), he says he lacks the capacity to pay interim spousal maintenance and the other amounts sought. If this means that the children should be withdrawn from the private schools they have always attended, according to him, so be it. If the husband’s income has fallen as dramatically as he claims, his attempts to rein in expenditure and discharge liabilities are understandable. Because his proposition that his income has fallen dramatically is contentious, that issue and whether he met his disclosure obligations were pivotal issues for this interim hearing.
At the outset, it is appropriate to record that an answer to the simple question about the amount of the husband’s income was met by avoidance and multiple different figures but no clear statement supported by evidence about what it might be. This observation is no criticism of counsel who appeared for the husband who was hampered by his client’s inadequate disclosure.
Background Facts
Unless it is stated otherwise, the following matters appear to be uncontentious.
The husband was born in 1969.
The wife was born in 1972.
They have two children; C aged 10 and E who is 8.
The husband has a 12 month old son to Ms N.
In the year preceding their marriage, the parties purchased an apartment at F Street, G suburb for $225,000.00. The wife paid the 10 per cent deposit and the balance was borrowed from the National Australia Bank (“NAB”).
In addition, the husband purchased an apartment at H Street, K suburb for $103,000.00. He paid the 10 per cent deposit and borrowed the balance from NAB.
The parties married and commenced cohabitation in December 1996.
In addition to the real estate interests outlined above, the wife says she had $25,000.00 savings. According to the husband, he had net assets worth between $350,000.00 and $400,000.00. He was employed as in a professional capacity earning approximately $200,000.00 per annum and the wife was employed as a certified accountant earning $50,000.00 per annum. According to him his greater initial contribution and income during cohabitation are factors which should result in him receiving more property than the wife.
In either 1997 or 1998 the husband commenced his own business which traded as ERE Pty Ltd. In order to do so, $330,000.00 was borrowed from NAB. At about the same time he established another business which the parties operated until approximately 2004/2005. The business proved unprofitable (and/or was the victim of embezzlement) and $300,000.00 capital investment was lost.
Settlement of the parties’ purchase of an apartment at I Street R suburb was completed in January 1999 for $1 million. There is an issue about whether the husband paid the $50,000.00 deposit but no issue that at least $950,000.00 was jointly borrowed. A further $200,000.00 was spent effecting repairs. Sometime during 1999 the parties made I Street their home.
The following month, the parties purchased an apartment at V Street, K suburb for $128,000.00. The 10 per cent deposit came from joint savings and the balance was borrowed from NAB. This style of highly geared property acquisition became their modus operandi.
ERE Pty Ltd was sold in 2000 for $330,000.00, with the entire proceeds applied to debt reduction and capital investment in the second business.
The husband’s H Street, K suburb apartment sold for $312,000.00 in early 2000. After payment of the mortgage attached thereto, about $200,000.00 was paid on to the I Street R suburb mortgage.
In July 2002, the parties sold F Street, G suburb for $525,000.00. The net proceeds were paid to support the bedding business and outstanding tax.
Having resigned her employment with Westpac in 1998, following which the wife worked with the husband at ERE Pty Ltd (until its sale in 2000), she then worked as the Financial Controller in the second business.
Following C’s birth in 2002, the wife worked in the business part-time until it collapsed (2004/2005) and went into receivership in 2006.
By then (2004/2005) the husband had returned to his previous profession. Through Q Pty Ltd as trustee for the Zabarac Trust the parties acquired an interest in LBP Partnership which is where the husband has worked ever since. Until separation these were the entities through which income was directed. After separation, the husband established SY Pty Ltd into which he directs commissions. The husband is the sole director and shareholder of this company and it is his alter ego. The point being that post separation he established a corporate structure designed to put this income beyond the wife’s reach.
The husband’s 28.5 per cent interest in LBP Partnership was acquired through a series of transactions, the most recent of which was a 4 per cent interest acquired in January 2012. It is not entirely clear how much was paid for the interest in LBP Partnership; albeit there is a $760,000.00 business loan which represents funds borrowed to do so. According to the husband, the Court should proceed on the basis that the interest in the business is worthless. The wife rejects this proposition and seeks the appointment of a single expert valuer which he opposes. The reasons for his opposition are twofold: first that it is premature and second as he intends to dispose of it, eventually the market will determine the price. There is some force to counsel for the wife’s submission that the husband’s January 2012 acquisition sits uncomfortably with his contention that his interest is worthless.
E was born in 2004.
In 2004, the parties purchased the family home for $2.915 million. They borrowed $2.6 million from NAB with the balance contributed by a silent partner. In 2006, they repaid the silent partner the $315,000.00 she contributed.
Also in 2004, the parties purchased an apartment at J Street, B suburb for $630,000.00. As was the case with the family home, J Street was purchased in the wife’s sole name. The funds to acquire J Street were borrowed, as to $450,000.00 from NAB and $230,000.00 from the wife’s parents.
I Street R suburb was sold in about 2006 following which the parties moved into H Street, V suburb. From this time, the wife remained at home on a full-time basis to care for their two children and manage their household. Since then she has not had paid employment.
The following year (2007), in the wife’s sole name, the parties purchased commercial premises at T Street, B suburb for $930,000.00. The purchase was funded with entirely borrowed money advanced by NAB. The husband seeks to retain this property.
The parties separated in May 2011, following which the husband vacated the family home where the wife and children now reside alone.
About one week after the parties separated the husband says the wife withdrew $100,000.00 from their joint account which almost emptied it. He says he does “not know precisely what the wife has done with the money she withdrew from the joint account”. The wife concedes that she withdrew $75,000.00 in relation to which mortgage statements demonstrate $68,056.00 was deposited therein. It is not accepted that the husband was unaware she had done so. On a number of occasions a call was made to the husband for production of documents which support his claim she withdrew the larger sum. No documents were produced and it is inferred that production of the bank statements would not support the husband’s contention.
At about the same time, the wife prepaid the children’s 2011 school fees using the husband’s credit card without his consent. While his concern the wife did this is understood, there can be no doubt that the 2011 school fees needed to be paid.
According to the husband, the wife’s withdrawal from the joint account was the catalyst for his decision to set up SY Pty Ltd and thus a separate account into which his income would be deposited. As will be discussed later the wife’s actions took place at a time when the husband was gambling heavily. There is also little doubt that her actions ensured the children’s continued attendance at school and put joint savings to good use.
After separation both J Street and T Street were listed for sale, obviously without success. It would appear the parties are close to agreement they should accept an offer to purchase J Street for $646,000.00. This property has secured creditors of $667,000.00 and thus provision must be made for the shortfall which including transaction costs are likely to be in the vicinity of $30,000.00. T Street was offered for sale at $1.12 million, apparently without buyer interest.
Shortly after the parties separated, agreement was reached that the husband would pay to the wife $13,303.00 per month, as well as the children’s school uniforms and household insurance. This figure included the family home mortgage of about $5,000.00 and the J Street mortgage of $2,500.00 per month. In other words, the wife was to receive about $5,800.00 per month for her and the children’s day to day living expenses. Because the children’s 2011 school fees had been attended to, this figure did not include future school fees. With this agreement the husband complied, albeit the payments were not necessarily regular.
Without reference to the wife, in January 2012, the husband decided he would reduce the monthly payments to $10,000.00 and direct that she receive surplus rent from T Street (approximately $1,000.00 per month). Again this coincides with a period during which he was gambling heavily.
In the period that followed, from the husband the wife received the following amounts:
·24 January 2012 - $10,000.00;
·13 February 2012 - $306.00 for E’s sports fees;
·29 February 2012 - $10,000.00;
·2 April 2012 - $9,000.00;
·3 April 2012 - $1,000.00;
·1 June 2012 - $10,000.00;
·17 July 2012 - $2,875.00.
In addition, the wife received $600.00 per week rental income for J Street and approximately $1,000.00 per month from R Street.
In the meantime, the wife applied to the Child Support Agency for an administrative assessment of child support. The husband was assessed, but has not paid, $2,262.17 per month. In this regard it may be that part of the payments he made in June and July 2012 could be categorised as non agency payments. Nonetheless no payment of any type has been made by the husband to the wife since 17 July 2012.
It is common ground that the parties reached an agreement in relation to an overall property settlement in mid 2012, albeit the terms of the agreement are in dispute. It would seem that part of the agreement involved the wife directing rental income on J Street and T Street to the husband and him paying the mortgages. For July and August 2012 the husband received these rentals (about $8,408.00). However, since July 2012, he made only the following payments in relation to the various mortgages and loans:
·H Street, V suburb property - $6,070.88
·Residential investment loan over H Street, V suburb - $705.50
·Equity manager loan – T Street - $5,000.00
·Residential investment loan over J Street - $2,164.23
·Residential investment loan secured over J Street (wife’s parents) - $1,584.96
Although the husband received the August rentals he failed to pay the August mortgage instalments and has paid nothing since. Thus, all mortgages fell into arrears and the wife refused to continue to direct rental income to the husband. In June 2012 the T Street tenants closed their shop and it would appear no rental was paid after August 2012. As a consequence, from August 2012 the wife’s income comprised J Street rental of $2,268.00 per month and Family Tax benefits of $102.97 per week. Self evidently this was insufficient to meet the $15,831.58 per month payable in respect of the loans attached to the properties. So as to get by, the wife borrowed about $7,000.00 from her father.
According to the husband, in reliance upon the agreement reached with the wife, he exchanged contracts in late August 2012 to purchase a property at O Street, R suburb for $1.2 million. In the event he is able to settle prior to the contract settlement date, the purchase price is reduced to $1.015 million. The husband deposed “I have secured borrowings from ING in the sum of $960,000.00 to complete the purchase. I have funded the balance of the purchase price together with legal costs, mortgage fees and stamp duty from my post separation income and distributions from [LBP Partnership]”. His capacity to do so was made easier by his lack of financial support of the wife and children in recent times. Settlement is due now. It was foolish of the husband to proceed before the agreement was finalised.
In October 2012, the wife received $32,078.08 rental arrears from T Street which she paid onto the mortgage. T Street is now tenanted which, following a rent free period, will produce $6,250.00 per month. When the mortgage ($5,056.00 per month) and outgoings are taken into account it will shortly produce a small monthly profit.
The parties’ property and liabilities
The formulation of the property pool is still a work in progress. For this hearing the evidence suggests their property and liabilities are set out in the table below.
Asset
Wife’s value
Husband’s value
H Street, V suburb
$3,200,000
$3,000,000
J Street
$660,000
$646,000
T Street
$1,000,000
$1,000,000
Wife’s car
$20,000
$38,000
Husband’s car
$60,000
Wife’s cash at bank
$2,000
Wife’s shares
$12,391
Wife’s household contents
$5,000
$10,000
Wife’s jewellery
$25,000
Husband’s Westpac Choice Account
$5,675
Husband’s Westpac Business Cash Reserve
$213
Husband’s Westpac E-Saver
$79,843
Husband’s Westpac Business One
$34
Husband’s share portfolio
$60,120
Husband’s shares in unlisted companies
$50,000
Husband’s interest in LBP Partnership
NK
NK (probably nil)
Liabilities
Mortgage #... – H Street
49. $895,000
50. $897,000
Mortgage #... – T Street
51. $983,000
$994,000
Mortgage #... – J Street
52. $458,474
$451,715
Account #...– J Street (wife’s parents)
53. $216,278
$216,711
Investment loan – H Street
$95,055
54.
Wife’s Visa Card
55. $9,544
56.
Wife’s ANZ Card
$16,333
57.
Wife’s Westpac Card
$1,073
58.
Wife’s car
59. $25,790
$31,070
Husband’s car
$127,658
M College
$34,840
$34,840
Special Levy – T Street
$16,791
$16,791
In addition, the wife has small personal loans identified at paragraph 53 of her Financial Statement. There is approximately $475,000.00 in the parties’ self-managed superannuation fund. Excluding superannuation and the husband’s interest in the real estate partnership, broadly speaking, the parties have property worth between $5 million and $5.2 million and liabilities of about $2.9 million. Upon settlement of O Street their net worth is effectively unchanged. Both parties owe their lawyers about $15,000.00.
As must be apparent, unless between them the parties have significant income which is applied to their loans and/or assets are sold, they are in financial trouble.
Application of the law to the facts
There is an obvious interplay between the outcomes of the wife’s claim for interim spousal maintenance and other orders and the husband’s application for interim property orders. However, both parties’ applications centre upon the wife’s claim that she is unable to adequately support herself and the children and the husband’s contention that he is unable to service the mortgages and loans whilst simultaneously contributing towards the wife’s maintenance and the children’s school fees. It follows that if the husband achieves a measure of success in relation to his proposal that at least two properties are sold, his outgoings will fall and his capacity to pay maintenance and school fees potentially increase.
Interim property settlement
Looming taxation liabilities and recent mortgage defaults bring into stark focus the husband’s application for interim property orders. The approach to an application for an interim property order is well settled and is as described in Strahan & Strahan (2011) FLC 93-466. Essentially this involves a two-step process. Firstly, it must be established that s 80(1)(h) of the Act is enlivened to allow an interim property settlement pursuant to s 79. In determining to depart from the usual approach that there is a once and for all order made after a final hearing, it is necessary that it is appropriate to make an interim order, with the overarching consideration being the interests of justice.
In determining what interim property might be in the interests of justice, a preliminary assessment of the application of s 79 and s 75(2) is required. The imprecise nature of this component of the exercise makes it appropriate to exercise a degree of caution so that the ability to achieve a just and equitable final property settlement is not compromised by the earlier order. In other words, as Bryant CJ and Coleman J observed in Gabel v Yardley (2008) FLC 93-386 the interim order must be amenable to variation or reversal without resort to s 79A or appeal.
The evidence presented by both parties demonstrates that each made significant contributions of the types referred to in s 79(4). Excluding initial contributions, there would appear to be little to distinguish between them. The husband’s greater initial contribution suggests an adjustment in his favour should be made. Section 75(2) factors suggest a not insignificant adjustment in the wife’s favour. Notably, the husband’s greater income and earning capacity, as well as the wife’s primary care of the children.
These matters contribute to my comfortable satisfaction that as neither party seeks to retain J Street an order for its sale is appropriate. Because there will almost certainly be a shortfall, the shortfall will need to be paid or secured against another property. The family home is the only property with sufficient equity to represent genuine security. Provided the existing mortgagee is agreeable to the shortfall being secured, this the wife must do. In the event the mortgagee does not agree, the shortfall will be paid from the husband’s recent profit share; that being the most readily realisable property.
Because neither seeks to retain the family home and its holding costs are considerable, there is logic to the husband’s claim that it is just and equitable to order its sale now. However, it is not just and equitable to provide that the wife receives $350,000.00 from the sale proceeds from which she must rehouse and thereafter support herself. That amount is insufficient to enable her to purchase a property, the effect of which is that she would be required to use capital in order to meet her day to day expenses. On the other hand, the husband would continue to earn a considerable income and have the benefit of O Street, R suburb. In these circumstances, it is reasonable that before the wife is required to rehouse with the children, she receives her entire property settlement. Thus, an order for the sale of the family home on an interim basis will not be made. This means the mortgage on the family home must be paid along with its other expenses. It also means that absent other asset realisation there is no obvious fund from which the husband’s 2011 and, if necessary, 2012 taxation liability can be paid.
As has already been mentioned the husband seeks to retain T Street. Attempts to sell it have thus far been unproductive and a sale at its agreed value would appear unlikely. Once transaction costs are taken into account it would seem likely that it would also not cover its total liabilities. In circumstances where the parties recently agreed to a further lease which, once the occupation free period is finished will result in a modest profit, a sale at this time makes little sense. Thus, the husband’s desire to retain T Street pending further order will be accommodated. It follows that he will be required to pay its outgoings. Whether he should also receive its rental income will be discussed later.
Interim spousal maintenance
Because it is the husband’s contention that the wife has not established that she is unable to adequately support herself and thus the threshold requirement for an entitlement to spousal maintenance (s 72) has not been made out, it is appropriate to consider that issue first. In the event that her entitlement and the husband’s capacity to pay are established, the duration of the marriage and findings made when considering interim property issues makes it proper the husband pays interim spousal maintenance.
The wife has a Bachelor’ degree which was conferred in 1993. She also acquired a professional practising certificate in 1999. However, since 1998, she has worked in the parties’ businesses but not an external corporate setting. It will be recalled that she has cared for the children full time since 2006. To enhance her employment prospects, in 2010, the wife commenced a degree. However, following separation in 2011 she found she was unable to afford the course fees (which is not accepted) and meet the study workload, as well as the children’s needs. Hence, at the end of 2011 she discontinued.
At paragraph 45(b) of her affidavit filed 29 June 2012, the wife set out the children’s routines and the extent of the husband’s involvement in their care. In short, he sees the children most Sundays from 11.00 am until 6.00 pm beyond which they are at school or with the wife. So that it is clear, (other than one night overnight) the husband has not made arrangements to spend time with the children during school holidays, on public or religious holidays. He failed to see the children during most of August 2012. Outside of school hours the children have extra curricular activities which, given their ages, means they must be managed and transported by an adult.
Both children have been distressed by their parents’ separation for which they required counselling and support. Reports from the children’s therapists support the mother’s contention that it is desirable that she is “available to the children to assist them through this difficult time and to ensure stability and security for them”. To this end, the mother has sought to obtain part-time employment limited to school hours. Having updated her resume she has approached a number of recruitment agencies but as yet has not secured a suitable position.
As was mentioned earlier, it is the husband’s contention that the mother’s earning capacity is such that she is able to adequately support herself. As this proposition was teased out, it was proposed that he could have a greater role in the children’s care after school and, if necessary, the children could attend long day care. It follows, according to the husband, that the wife should seek full-time work. No evidence was presented by the husband about how his care of the children after school might affect his earning capacity and thus ability to service the parties’ debts or that his offer to care for the children is something he can be relied on to fulfil.
The wife has established that by reason of her care of the children she is presently unable to return to full-time work and that she is unable to secure part time employment. Thus her earning capacity is limited to rental income from J Street and in the future, T Street. When liabilities are taken into account J Street provides no income and once the T Street tenants start to pay rent, the net return is likely to be in the vicinity of no more that $100.00 - $200.00 per week. If the approach is taken that the rental income is directed to the husband who, in turn, pays those properties’ outgoings the wife has no income.
An analysis of the wife’s Financial Statement establishes that excluding the investment properties and the mortgage attached to the family home, her reasonable needs require $1,063.00 per week. Her credit card liabilities exceed her savings. It follows that the wife has established that she is unable to adequately support herself by reason of her care of the children and the manner which, prior to separation, the parties agreed she would spend her time.
In relation to the husband’s financial circumstances, as was earlier mentioned, these are not as easily discerned as his disclosure obligations suggest should be the case. He established that for 2011 he received taxable income after distributions from his real estate agency of $842,199.00. On this income, $303,132.00 tax is likely to be levied. According to the husband’s Financial Statement, it is his estimate that for the 2012 taxation year, taxation in the amount of $300,000.00 will be payable. It follows, according to counsel for the wife, that on the basis of his accountant’s advice (see Note 1 Financial Statement) and the husband’s knowledge of income actually received, he anticipates that his 2012 income will be similar to 2011.
The husband rejected this proposition which resulted in an invitation his counsel address what the evidence demonstrated was the husband’s 2012 income and his income at the date of hearing. The exchanges which followed demonstrated how deficit was his disclosure. The husband’s affidavit is silent on the point and there is no figure included in his Financial Statement. It is not accepted that the husband was unable to calculate his actual income received from the partnership. There was then tendered in the husband’s case a document prepared by his accountant called “Account Transactions Accrual for the period 1 July 2010 to 4 October 2012” (Exhibit “D”). It was initially suggested that this recorded the husband’s partnership income (to which a recent profit share of $107,000.00 should be added). On that basis, for the current financial year, the husband asserted he received $141,323.15. So that it is clear, the profit share payment related to the preceding financial year but was recently received.
In response to further documents tendered by counsel for the wife, it was then conceded that the husband had received $31,539.77 on 9 October 2012, which resulted in the husband’s submission that his income for the current financial year was $172,862.92. Further documents tendered by counsel for the wife, showed a deposit into the husband’s… account of $6,400.00 on 30 July 2012 which went unexplained. Nor did he disclose or proffer sufficient evidence in relation to share sales. Tendered in the wife’s case (Exhibit “B”) are documents produced under subpoena by Etrade. These disclose that at 30 June 2012 the husband had shares worth $258,444.55. According to his Financial Statement he has shares worth $60,120.00. Although question 59 of a Financial Statement requires a party to specify property disposed of since separation, the husband answered “nil”. Exhibit “B” and the husband’s Financial Statement makes it plain that his answer is wrong. Exhibit “B” also shows the husband sold one tranche of shares on 28 June 2012 and a further three tranches on 29 June 2012. The Etrade balance as at 30 June 2012 is the shareholding that remained after completion of the sales just mentioned. Again, no reference is made to these transactions in question 59.
From the husband’s bank statements (tendered by the wife) one sees a deposit of $25,320.00 on 28 June 2012 and another the day after in the amount of $46,000.00. Timing suggests these relate to share sales. It is not possible to discern from the husband’s evidence and bank records where the approximate $137,000.00 difference in share value has gone. So that it is clear, movements in the share price from that date to the date of hearing go nowhere near explaining the difference. For this reason alone, it is clear that the principles in Black v Kellner (1992) FLC 92-287are applicable to the husband.
Nor does the husband’s evidence address expenditure gambling. Documents produced by internet gambling providers (Exhibit “H”) demonstrate heavy betting on horses between 13 December 2009 and 10 April 2012 at which time he imposed a self-exclusion regime which expired on 10 October 2012. The Betfair documents alone record some 57,000 betting transactions on horses with bets of between $200.00 and $2,000.00 most days. While it is accepted that these funds were not necessarily lost they demonstrate that at the same time as the husband reduced financial support for the wife and children he had sufficient discretionary funds to gamble heavily.
Before any attempt is made to assess the husband’s income, it is appropriate to record that from the partnership since the financial year ended 30 June 2007 he earned (via Zabarac Trust):
·2007 - $827,701.00;
·2008 - $683,302.00;
·2009 - $514,716.00;
·2010 - $613,933.00;
·2011 - $842,199.00.
Thus, it can be seen that the husband’s income varies significantly in relation to which it is also appropriate to record the profit share component:
·2010 - $335,000.00;
·2011 - $420,000.00;
·2012 - $107,000.00.
It is apparent from these two sets of figures that profit share constitutes a significant component of the husband’s income which year to year varies significantly. Also that while 2011 was his best year in recent times, it was only marginally better than 2007. Later in these reasons the parties and children’s expenses are discussed. It is sufficient to note here that excluding 2007 and 2011 their current expenses would have been unaffordable (from income) in the other years set out above.
However, the question that remains is what is the husband’s income? Excluding share sales and including his recently received $107,000.00 he has received about $178,000.00 this financial year. From the exhibits mentioned and including share sales, from 20 June 2012 the husband has received about $290,000.00 which equates to $14,500.00 per week (pre-tax). As a working guide, the 2012/2013 income ($178,000.00) would translate to about $460,000.00 whereas $14,500.00 per week would be about $754,000.00. Because that figure includes share sales a safer working guide is about $684,000.00. Although it is accepted that if the husband’s income has fallen to something along the lines of the lower range ($460,000.00) which would represent a significant downturn in income, it is not accepted that income produced in the first quarter provides a reliable guide to his annual income. An unduly cautious approach to assessment of the husband’s income is not warranted and thus it is assessed his annual income this year is in the vicinity of about $684,000.00. It follows that although the husband’s evidence he is likely to pay about $300,000.00 in taxation is a little high, it is not far off the mark. Assuming taxation at about $280,000.00 his disposal income will be in the vicinity of $403,000.00 or $7,750.00 per week.
Because the husband is self-employed he has not paid taxation weekly or, for 2011 and 2012, paid anything to the ATO nor made provision for it. In relation to the husband’s disposable income the significance of this is that he has a degree of flexibility about how he prioritises payment of his liabilities including taxation. It follows that although his 2011 and 2012 taxation liabilities must be taken into account in determining his overall financial circumstances, provision may be made for payment through asset realisation and/or at a later date.
In his Financial Statement the husband claims average weekly expenses in the amount of $1,090.00. This is considerably more than the wife’s, with the difference essentially appearing to be one of lifestyle. With little effort, the husband’s average weekly expenses should be capable of adjustment equivalent to the wife’s; that is, $722.00 per week. His personal expenditure (excluding taxation) is $1,825.00 per week. This is calculated on the basis that he has taken up occupation of O Street and is no longer paying $650.00 per week rent. Of course, he will then incur rates and other utility expenses which must be paid. The husband’s personal expenditure includes $250.00 child support for X.
As a working guide, therefore, the husband has reasonable average weekly expenses of about $2,600.00. It is apparent that even if J Street is not sold immediately, he may not have the capacity to pay interim spousal maintenance in the amount sought as well as the mortgages. Whether it is proper to order him to pay interim spousal maintenance as well as the other expenses the wife seeks is another issue. Orders along the lines proposed by the wife would make it impossible for the husband to address outstanding taxation issues in relation to 2011 and 2012. Such an approach would not be proper.
Asset preservation orders and other injunctions
The wife applied for a series of asset preservation orders designed to preserve assets pending the final hearing and ensure that the husband’s income received from the partnership is appropriately applied.
The relevant principles are set out in M & DB (2006) FLC 93-293. In this regard, the issue is whether the wife has established on balance that it is just and convenient that the orders are made. In support of her application she proffers an undertaking as to damages. As she has clearly established an entitlement to property settlement, her undertaking is not illusory.
It has already been established that the husband has the capacity to pay the family home mortgage and his application for its sale will be dismissed. The parties’ comparative circumstances make it just and convenient that he is ordered to pay its mortgage. As part of her interim spousal maintenance claim the wife indicated that she would be able to pay rates, which, if she achieves a modicum of success she will be ordered to do.
Although the husband’s proposal that he pays the T Street loans was made in the context of his proposal that family home is sold, it is apparent he has the capacity to pay it and in circumstances where it is his desire to retain T Street it is just and convenient he does so. In relation to J Street, similar asset preservation orders are warranted.
The husband’s lack of adequate disclosure, use of income post separation on gambling, failure to make mortgage payments, unilateral decisions in relation to earlier agreements for spousal support and acquisition of O Street, R suburb in the manner described makes it just and convenient for injunction orders along the lines sought by the wife. This means that the husband will be required to pay mortgages as and when they fall due on all three properties which equates to $3,700.00 per week. He lacks the capacity to pay 2011 taxation from income. Thus unless the wife agrees that they use the equity in the family home to do so, her proposed order in relation to the payment of taxation will not be made.
It is not accepted that an order should be made in relation to loan repayments for the husband’s car. The wife’s car loan is separate to her reasonable expenses and is a loan apparently established prior to separation. In these circumstances is it just and convenient an order is made as sought.
In the light of this outcome, it is appropriate to returning to assessment of the husband’s capacity to pay interim spousal maintenance. The effect of these asset preservation orders is that the husband will pay per week:
·$3,700.00 mortgages,
·$2,600.00 his expenses,
·$175.00 for the wife’s car,
·$522.00 periodic child support.
This leaves him with about $745.00 per week and would enable him to make provision for taxation on current income (but not for 2011 or 2012). One approach he might adopt is to ask the wife to offer the family home as security and for him to borrow for at least a significant portion of his outstanding taxation liability. Curiously neither party sought orders in relation to outgoings for either J Street T Street, an issue that must be addressed sooner rather than later.
An issue which then arises is who should receive the income from the investment properties. Because the wife is the registered proprietor of J Street and the husband is able to service the mortgage without its income, for the short period pending its sale the wife should continue to receive its rental income. During that period the husband has the capacity to pay the shortfall she needs; namely $463.00 per week. Once J Street is sold, his weekly expenses will fall by about $575.00 and thus his available income will increase to about $1,320.00. From that time he has the capacity to pay the wife spousal support as sought which he will be ordered to do. At that point he has $267.00 remaining.
In relation to T Street, because the husband’s income is irregular whereas the mortgages must be paid monthly, he should receive its income. It is accepted he will need to use savings and probably realise assets to do so in the short term and to fund the shortfall on J Street and pay something towards taxation.
Although the husband does not oppose each of the orders sought by the wife, it is contended that a number of the injunctions are too broad. The wife conceded they were so broad that the husband would not even be able to pay a modicum of his reasonable expenses and proposed a less onerous order would be appropriate. The form of order, however, was not provided. Because of the complexity of the issues and orders to be made, it is appropriate they are provided in draft form before they are entered. Thus, informed by these reasons, the parties will be afforded an opportunity to contribute to the ultimate orders.
Child Support
Turning then to the wife’s application for a non-periodic child support order pursuant to s 123(1)(a) of the Child Support Assessment Act 1989 (Cth) (“CSAA”). As was mentioned earlier, based on the wife’s application to the child support agency on 29 May 2012 an administrative assessment for child support issued.
The obligation to pay child support is created by the provisions of the CSAA. Section 3 contains the obligation that parents maintain their children. The objects of the Act are found in s 4. Each of the objects needs to be borne in mind when deciding an application under the CSAA. Sections 114 and 121 CSAA identify the further objects of Divisions 4 and 5 of Part VII.
Counsel for the wife did not identify the grounds for departure relied upon by her. However, it is clear that s 117(2)(b)(ii) CSAA (because the children are being cared for, educated or trained in a manner that was expected by their parents), s 117(2)(c)(i)(a) CSAA (because of the income, property and financial resources of either parent) and s 117(2)(c)(i)(b) CSAA (because of the earning capacity of either parent) have application.
As was mentioned earlier, the children have always attended M College, which decision was made and implemented before the parties separated. It is well settled, that where a parent has agreed to his or her child attending a private school, that person is liable to contribute to the fees involved so long as and to the extent that he or she has a reasonable financial capacity to do so. Lightfoot & Hampson (1996) FLC 92-663; Wild & Ballard (1997) FLC 92-771. An administrative assessment has issued which is a necessary pre-condition for jurisdiction. However, it does not appear that a non-periodic order can be made in relation to a period which precedes the commencement of the child support period. Because this issue did not arise during the hearing the parties will be given the opportunity to make submissions on the point.
The wife lacks the income to pay or contribute to the children’s school fees. The husband’s financial circumstances have already been discussed and it is clear that from his recent profit share, he has funds from which the 2012 fees can be paid. Although this is the wife’s contention it ignores other calls on these funds, some of which arise as a consequence of her change of heart in relation to asset realisation and debt reduction. In short it is not accepted that the husband has the capacity from income to support the children’s ongoing attendance at M College as well as continue to pay assessed periodic child support.
None of the children has an income, earning capacity, property or financial resource.
It follows the wife has established two of the three possible grounds for departure referred to earlier.
The next question then, having established special circumstances, is whether it is just and equitable to make a departure order?
If the children are to continue to attend M College this can only be paid for out of property. Justice and equity would require that both parties make an equivalent provision for this. As no such proposal is made by the wife, before this aspect of her application is finalised (by dismissal) she will be given the opportunity to address the Court on this point.
The wife’s claim for legal expenses
Section 117(1) of the Act is the basic provision concerning costs and provides the general rule that subject to s 117(2), s 117AA and s 118, each party to proceedings under the Act shall bear his or her own costs. Section 117(2) requires a finding of justifying circumstances as an essential precursor to the making of an order for costs (Penfold v Penfold (1980) FLC 90-800). If there are circumstances that justify it in so doing, the Court may make an order for costs pursuant to s 117(2) as the Court considers just. In considering what order, if any, should be made regard must be had to the provisions of s 117(2A) to the extent each is relevant.
Here, the justifying circumstances are said to be the wife’s incapacity to meet her own legal expenses compared to the husband’s capacity to meet his as well as his position of relative financial strength, including that he has a surfeit of income over expenses even after the interim spousal maintenance order is addressed.
In relation to future legal expenses, whether pursuant to s 74 or s 117(2), in Strahan & Strahan (2011) FLC 93-466 per Boland and O’Ryan JJ at [96] the Full Court referred with approval to remarks made by Brereton J in Paris King Investments Pty Ltd v Rayhill [2006] NSWSC 578 as follows:
…in addition to the three matters described in Zschokke, where the order was made pursuant to either s 74 or s 117 of the Act:
·an applicant should have “at least an arguable case for substantive relief which deserves to be heard”: Chester v Chester (1995) FLC 92-612 (“Chester”) at 82,107 per Moss J;
·there should be evidence of the applicant’s “likely costs of the litigation”: see Wilson and Chester;
·“it is not an essential precondition” that the applicant’s legal representatives will not continue to act unless the costs are paid or secured on an ongoing basis: Columb and Columb (unreported, Family Court of Australia, Fogarty J, 27 November 1987); see however Coomes and Coomes (1995) FLC 92-558 per Cohen J;
·an order may “make a provision for litigation expenses at a rate that appears reasonable in all the circumstances”;
·an order can be made “in respect of costs already incurred as well as of future costs”;
·“whether the order is to be in respect of costs already incurred or costs to be incurred, and whether the applicant’s lawyers will continue to act in the absence of provision for costs to be incurred, may be relevant to the discretion to make an order, and its’ quantum”;
·“any such order should be framed to protect the parties from any risk of injustice arising from the manner in which the funds are expended” and this may be done “by requiring that the funds be administered solely by the applicant's solicitors and applied only to meet the expenses referred to in the order, with detailed records being maintained to permit review by the Court at the time of the exercise of its discretion in the substantive property proceedings or on the final determination of the issue of costs”: Breen.
We observe that Brereton J at [33] also said that “many of the foregoing considerations [he described] are less important, though not necessarily irrelevant, where what is relied on as a source of power” is an interim property order under s 79 and s 80(1)(h).
Reference to the three matters referred to in Zschokke and Zschokke (1996) FLC 92-693, is to:
·a position of relative financial strength on the part of the respondent;
·a capacity on the part of the respondent to meet his or her own litigation costs;
·an inability on the part of the applicant to meet his or her litigation costs.
These are not preconditions but, where they exist, add considerable weight to the case for an order of this type. Strahan [90].
Findings in relation to the wife’s financial circumstances have already been made. In short, she has established that she has no obvious capacity to pay from income or assets the further $75,000.00 in legal fees which she will require if she is to be represented until completion of the final hearing. Payment of interim spousal maintenance as orders does not change this situation.
As a consequence of the orders which will be made the husband’s financial circumstances change materially. It must be anticipated that he will shortly be required to pay a not inconsiderable amount to the Australian Taxation Office. This is likely to require him to realise his shareholding and deplete, if not exhaust, the balance of his profit share. It is not accepted that it would be just to require him to borrow so as to satisfy an order with respect to payment of her legal expenses. Thus, although the wife’s circumstances establish justifying circumstances for an order, the husband’s financial position is such that it is not proper that an order is made.
Single Expert
At the wife’s behest a Registrar made an order for a single expert to be appointed in relation to the value of the parties’ business interests. Since then they have been unable to agree upon who should be appointed. Thus the wife seeks an order in accordance with Exhibit G. The first order proposes the appointment of a nominated expert. The second requires that the husband pays the single experts costs in the first instance and the final order proposes in effect an audit of payments from the business to the husband and named persons from 1 July 2010 to 31 December 2012.
The purpose of the single expert valuation and audit is said to enable the parties to make best use of a forthcoming conciliation conference. It was properly conceded by counsel for the wife that the Family Law Rules 2004 (“the Rules”) do not require valuation’s for conciliation conferences. To impose such an obligation would materially add to the costs of litigation and almost certainly result in series of valuations being required before a case reached a final hearing. Such an approach is inconsistent with the main purpose of the Rules. For these reasons the order for the appointment of a single expert should not have been made. In light of the husband’s objection to a further order to give effect to this erroneously made order, orders one and two of Exhibit G will not be made.
As to her proposed order 3, this requires no more than review of business records and accounts. Whilst it might be tedious it is an exercise within the wife’s experience and qualifications. In short, at this stage an order along those lines is not warranted.
The various financial orders that will be made impose a heavy financial burden on the husband. If it transpires that his income is closer to his claimed amount than the amount which underpins these findings, clearly assets will need to be realised. The wife will need to exercise careful judgment if she receives a reasonable request to vary or discharge injunctions in order to do so. These are all matters that can be taken into account at the final hearing. In the meantime the wife would be wise to remember that although the husband will be making these payments, that he does so is relevant to the outcome of the property proceedings. These orders have been without evidence being tested and with critical facts in issue. This situation should not endure longer than is necessary to prepare for an orderly final hearing. Provided the case could be prepared in a timely way, an order for expedition would be appropriate. Of course absent valuation evidence this is unlikely. Nonetheless submissions will be sought about whether expedition should be implemented.
For these reasons the following orders are proposed:
PENDING FURTHER ORDER
1.That Mr Zabarac (“the husband”) pay interim spousal maintenance to Ms Zabarac (“the wife”) as follows:
(a) pending the sale of J Street, in the amount of four hundred and sixty three ($463.00) per week; and
(b) thereafter, in the amount of one thousand and sixty three dollars ($1,063.00) per week (the first payment to be made within seven (7) days of the date of this order and thereafter weekly by deposit to such bank account as the wife shall nominate in writing).
2.Pursuant to s 114 of the Family Law Act 1975 (Cth), the husband in his personal capacity, or as director, shareholder, partner or trustee or in any capacity whatsoever be and is hereby restrained from:
(a) receiving or causing to be distributed from “LBP Partnership” (“the Partnership”) any bonus payments, profit share or dividends due for the financial years ended 30 June 2011 and 2012, and any bonus payments, profit share or dividend from 1 July 2012 and for that purpose, the husband is to forthwith, but no later than 24 hours from the date of these orders, notify the Partnership in writing of this order;
(b) from doing any thing, signing any documents or authorising any person to change, encumber, assign or deal with his share of the Partnership or the share of the Partnership held by any corporate or trust entity in which he has an interest, without first giving the wife 28 days notice in writing, and for that purpose the husband is to forthwith, but no later than 24 hours from the date of these orders, notify the Partnership in writing of this order;
(c) from doing any thing, signing any documents or authorising any person to distribute, dispose of or encumber any assets, howsoever described – in “SY Pty Ltd” save and except that the husband is permitted to make the following drawings:
(i)$2,600.00 per week necessary for his reasonable personal expenses;
(ii)for the purpose of compliance with these orders;
(iii)in the ordinary course of business;
(iv)to the Australian Taxation Office; and
(v)his legal expenses.
3.BY CONSENT that pursuant to s 114 of the Family Law Act 1975 (Cth), the husband in his personal capacity, or as director, shareholder, partner or trustee or in any capacity whatsoever be and is hereby restrained from:
(a) from doing any thing, signing any documents or authorising any person or entity from changing or dealing with any asset that comprises an asset of each of the husband and wife’s member entitlements in the “Zabarac Superannuation Fund”; and
(b) from disposing of, dealing with or further encumbering shares in his Etrade share trading account No. …without first giving the wife seven (7) days notice.
4.That by way of preservation of property and pending further order, the husband pays or causes to be paid the following expenses on or before the due date for payment:
(a) the H Street, V Suburb home loan being No….;
(b) the H Street, V Suburb property and investment loan No….;
(c) the T Street, B Suburb mortgage being No.…;
(d) the investment loan secured on the J Street, B Suburb property being No….;
(e) the investment loan No.…secured over the J Street, B Suburb property;
(f) the lease payments due to A Finance, in respect of the motor vehicle registered number …in the possession of the wife.
5.Unless within fourteen (14) days the parties have agreed to sell J Street, B Suburb to the putative purchaser who, shortly prior to these orders, offered to purchase the property at $646,000.00 the wife shall forthwith do all things and execute all documents to place J Street on the market for sale and sell the property as follows:
(a) The parties shall agree upon the real estate agent that is to have the carriage of the sale of the J Street property and in the event of disagreement between the parties then the President of the Real Estate Institute of NSW shall be requested to appoint such an agent;
(b) The parties shall agree on the manner in which the property is to be listed for sale and in the event of disagreement between the parties in accordance with recommendations of the agent appointed to manage the sale;
(c) The parties shall agree on the appointment of a solicitor to act on the sale of the property and in the event of disagreement between the parties then the President of the Law Society of NSW shall be requested to appoint such solicitor; and
(d) The parties shall agree on any reserve price should the property be listed for private sale or auction and shall agree on the acceptance of any offer and in the event of disagreement between the parties in accordance with recommendations of the Agent appointed to manage the sale.
6.In the event there is a shortfall from the J Street sale proceeds such that the parties are unable to fully discharge the mortgage to the wife’s parents, subject to the consent from the ANZ Bank, the shortfall shall be secured against the family home. In the event the ANZ Bank (or the wife’s parents) do not agree with this arrangement the shortfall shall be paid by the husband.
7.That by way of preservation of property the wife shall direct income generated by T Street, B Suburb is to be paid to the husband. Thereafter, in addition to the payments referred to in Order 6 the husband shall meet mortgage outgoings payable in relation to that property as and when they fall due.
8.That within 28 days of the date of these orders the husband provide to the wife’s solicitors:
(a) financial statements, management accounts, balance sheets, profit and loss accounts and trial balance sheets of the:
(i)“LBP Partnership”;
(ii)“Zabarac Trust”;
(iii)“SY Pty Ltd”;
(iv)“Zabarac Superannuation Fund”
for the period 30 June 2011 to 30 June 2012;
(b) statements of earnings of the husband from the Partnership from 1 July 2010 to the date of these orders;
(c) records of salary, wages, bonuses, profit share and/or dividends paid to the husband and/or any corporate or trust entity nominated by him or that holds the 28% share of the Partnership on his behalf from 1 July 2010 to the date of these orders;
(d) all documents, records and writings evidencing the acquisition/s by the husband, Q Pty Ltd or any other corporate entity or trust nominated by the husband of its interest/s in the Partnership including but not limited to records of dates of payment, amounts paid and source of funds applied to the acquisition of each tranche;
(e) all statements and records of the husband’s share trading account with Etrade being account no. …for the period 1 July 2010 and statement of current portfolio held to the date of these orders.
9.All outstanding applications for interim and interlocutory orders are otherwise dismissed.
I certify that the preceding one hundred and nineteen (119) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Ryan delivered on 19 November 2012.
Associate:
Date: 21 November 2012
Key Legal Topics
Areas of Law
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Family Law
Legal Concepts
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Injunction
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Costs
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