Zadenev & Zadenev
[2013] FamCA 838
•24 October 2013
FAMILY COURT OF AUSTRALIA
| ZADENEV & ZADENEV | [2013] FamCA 838 |
| FAMILY LAW – INTERIM PROPERTY SETTLEMENT FAMILY LAW – interim costs |
| Family Law Act 1975 (Cth) |
| Strahan & Strahan (2011) FLC 93-466 Stein & Stein (2000) FLC 93-004 |
| APPLICANT: | Ms Zadenev |
| RESPONDENT: | Mr Zadenev |
| FILE NUMBER: | SYC | 2142 | of | 2013 |
| DATE DELIVERED: | 24 October 2013 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Watts J |
| HEARING DATE: | 27 May 2013 and 5 June 2013 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Batey |
| SOLICITOR FOR THE APPLICANT: | Selvaggio Lawyers |
| COUNSEL FOR THE RESPONDENT: | Mr Kearney, SC |
| SOLICITOR FOR THE RESPONDENT: | Barkus Doolan Kelly |
Orders
PENDING FURTHER ORDER:
As soon as practicable after it is completed, the husband both personally and in his capacity as a director of any relevant corporate entity associated with the building services business, do all acts and things and sign all documents necessary and use his best endeavours to cause a copy of the valuation currently being prepared by B Accountants in respect of the business, to be made available to the wife.
The husband pay to the wife by way of spousal maintenance the sum of $1,914 per week.
I note that the wife is currently receiving a further amount of $1,500 per week from the husband or the entities he controls; $750 by way of spousal maintenance and $750 by way of child support.
The husband continue to pay or alternatively cause entities that he controls to continue to pay, those expenses which are identified in Part N of the wife’s financial statement filed 22 April 2013 and in the husband’s Amended Response filed 20 May 2013, namely:
4.1.all periodic mortgage repayments in relation to the mortgage to the National Australia Bank secured over the title of the Suburb C home;
4.2.Council and water rates of the Suburb C home;
4.3.land tax (if any) of the Suburb C home;
4.4.house and contents insurance of the Suburb C home;
4.5.house repairs of the Suburb C home;
4.6.gas;
4.7.electricity;
4.8.heating fuel;
4.9.telephone (land line and mobile) and the internet connection at the home;
4.10.motor vehicle repayments;
4.11.motor vehicle petrol card (to a maximum of $150 per week);
4.12.motor vehicle maintenance;
4.13.medical, dental and optical (not including health insurance premiums) for the wife;
4.14.gardening/lawn mowing;
4.15.cleaning house and pool;
4.16.pay television subscription;
4.17.Roam Express toll charges (to a maximum of $15 per week); and
4.18.private health insurance cover for the wife at the existing rate.
The husband gave the following undertaking; that the husband or entities he controls shall pay:
5.1.school fees for D;
5.2.textbooks and other schooling costs for D over and above the tuition fees;
5.3.occupational therapy for D,
5.4.singing lessons for D (to a maximum of $33 per week),
5.5.piano lessons for D (to a maximum of $33 per week),
5.6.football registration fees and associates expenses for D (to a maximum of $60 per week).
5.7.private health insurance cover for the children at the existing level.
The wife and children have exclusive occupancy of the Suburb C property with the husband paying outgoings on that property (as required by order 4) and for the husband to have the right to come to the property for the purposes of spending reasonable time with the two children.
The husband’s application for sale of the Suburb C property is dismissed.
This matter be listed for further mention before me on 25 November 2013 at 9.30am.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Zadenev & Zadenev 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 2142 of 2013
| Ms Zadenev |
Applicant
And
| Mr Zadenev |
Respondent
REASONS FOR JUDGMENT
INTRODUCTION
The wife makes an application for orders for interim occupancy of the matrimonial home, spousal maintenance, interim property settlement and interim costs.
The husband’s amended response filed 20 May 2013 seeks a sale of the matrimonial home.
There is no issue about the wife having occupancy of the property if the husband’s application to sell the property is unsuccessful subject to the husband being able to attend the property for the purposes of spending time with the children.
The wife in her written application sought a payment to her by way of spousal maintenance of an amount of $4,300 per week together with a payment of all other expenses in relation to the Suburb C property, her car and private health insurance. The wife wished that it be noted that this amount is in addition to any child support paid to the wife by the husband. In the wife’s case outline and in oral submissions, the wife amended the spousal maintenance order which she sought to $3,300 per week.
The wife seeks an order that the husband pay her $100,000 by way of interim provision of legal costs and $100,000 by way of interim property settlement.
The wife also had sought an order that the husband pay the costs of forensic accountants and real estate valuers who may be jointly appointed as single experts in the proceedings. That application was not pressed.
The husband makes an application that the wife’s applications be dismissed and that instead an order be made for the husband to pay to the wife:
7.1.An amount of $1,500 per week (I infer formally by way of spousal maintenance) on the basis that in the event the wife obtains any administrative assessment of child support in the interim then the amount of $1,500 per week would be reduced by an amount equal to the assessment of child support so obtained.
7.2.In respect of the motor vehicle in the wife’s possession, all lease or hire purchase repayments, petrol usage each week and maintenance, repairs and regularly services.
7.3.The wife and the children’s private health insurance at the existing level.
7.4.A notation that the husband undertakes that he will continue to pay a list of outgoings on behalf of the wife and children. I have set out later in these reasons the full text of the notation the husband seeks.
The husband seeks that the home in which the wife and children live at Suburb C be sold and that:
8.1.the whole of the proceeds of sale be paid to the National Australia Bank (“NAB”);
8.2.pending the completion of the sale of the Suburb C property, the wife and the children would remain in the Suburb C property with the husband paying outgoings and with the right for the husband to come to the property for the purposes of spending reasonable time with the two children and for the purposes of any real estate agent marketing the home;
8.3.the husband would continue to pay all outgoings in respect of the Suburb C property pending the sale and upon completion of the sale pay the wife’s expenses in relation to moving to rented accommodation and to pay after the settlement of the sale all costs associated with the wife and children moving to new accommodation and rent on an ongoing basis up to the sum of $2,000 per week.
The husband sought an order that, pending the sale of the Suburb C home, he cause to be paid:
9.1.All periodic mortgage repayments in relation to the mortgage to the National Australia Bank secured over the title;
9.2.Council and water rates;
9.3.Land tax (if any);
9.4.House and contents insurance;
9.5.Such costs of reasonable repairs and maintenance as required to keep the Suburb C home in a state of good repair and such other repairs and maintenance as recommended by the real estate agent marketing the property for sale;
9.6.Electricity, gas and landline telephone expenses, and the mobile telephone account of the wife and the internet connection at the home;
9.7.Gardening service to perform gardening maintenance one day per week;
9.8.Pool maintenance costs on a weekly basis.
The husband consents to an order that he make available as soon as it is available, the valuation currently being prepared by B Accountants in respect of the building services business.
The husband did not rely upon his affidavit of 30 April 2013 nor Mr E’s first affidavit. However, the wife relied upon part of the first affidavit sworn by Mr E, being paragraphs 19 and 20 and the annexure referred to in those paragraphs (annexure D). The wife also relied upon paragraph 14 of the husband’s first affidavit filed 30 April 2013.
THE LAW TO BE APPLIED
Approach to an application for an interim property order
The Full Court in Strahan & Strahan (2011) FLC 93-466 revisited the principles applicable to applications for interim property orders. An interim property decision involves two steps.
The first step
First, it must be established that s 80(1)(h) Family Law Act 1975 (Cth) (“FLA”) was enlivened to allow an interim property settlement under s 79 FLA. The test for this was not confined to ‘compelling circumstances’. The Court in Strahan revisited the earlier well known statement made in Harris & Harris (1993) FLC 92-378 where the Full Court had said:
The exercise of the power should be confined to cases where the circumstances presented at that time are compelling. As a generality, the interests of the parties and the Court are better served by there being one final hearing of s 79 proceedings. However, circumstances may arise before there can be a final hearing which dictate that some part of the property of the parties should be the subject of orders. A common example is where both parties agree to the disposal of some assets pending the trial. However, we do not consider that it is confined to cases where the parties consent. Urgent situations may arise where it is necessary to exercise this power if injustice is to be avoided. Examples include cases where it is necessary to do so to avoid an asset being eroded or lost in the intervening period, and cases (beyond the maintenance power) where an order in favour of one party is necessary to preserve or obtain a home for or is otherwise necessary for the welfare of the children.
In Strahan, the Full Court said:
[132] In relation to the first stage, in our view, when considering whether to exercise the power under s 79 and s 80(1)(h) of the Act to make an interim property order the “overarching consideration” is the interests of justice. It is not necessary to establish compelling circumstances. All that is required is that in the circumstances it is appropriate to exercise the power. In exercising the wide and unfettered discretion conferred by the power to make such an order, regard should be had to the fact that the usual order pursuant to s 79 is a once and for all order made after a final hearing.
…
[139] We also emphasise that in order to establish an appropriate case for an interim property settlement order more is required than the mere fact that upon a final hearing the applicant would receive the property being sought (or an amount in excess of the funds being sought) from the other party.
As explained by the Full Court, s 80(1)(h) FLA is a wide enabling provision for interim property decisions, and there is no reason to limit it, by requiring a finding of ‘compelling circumstances’. All that is required before the power to make an interim property order is exercised, is an assessment of whether it would be “appropriate” to make an interim order, with the “overarching consideration” being the interests of justice. There may need to be evidence of the likely cost of litigation, but only if that is the reason or part of the reason that is propounded as to why it is appropriate that the order be made.
Considerations about making an interim property order in “the interests of justice”
The notion of a “level playing field” is one which almost axiomatically is in the interests of justice and an important matter to consider when deciding whether it would be appropriate to make an interim property order.
In In the Marriage of Poletti (1990) 15 FamLR 794, Ellis, Strauss and Butler JJ quoted Ngyh J with approval at [796]:
…It is rather, as it certainly was in Wilson and Wilson [(1989) 13 Fam LR 205], a situation where one party to the marriage controls almost exclusively what might be described as the patrimony of the parties and has control of the bulk of the assets and funds of the parties, where an order may be made to ensure that the other party, who does not have the fortune of controlling those funds, at least has an equal or near equal opportunity to present his or her case...
One method sometimes adopted is to provide a disadvantaged spouse with a “dollar for dollar” order. That is, an order that the advantaged spouse has to pay the disadvantaged spouse one dollar for each dollar the advantaged spouse pays his or her own lawyer. There has been previous discussion in cases as to whether or not an application of this nature relies upon s 79 and s 80(1)(h) or s 74 or s 117 FLA.
In Farnell & Farnell (1996) FLC 92-681, Kay J said:
In the Marriage of Gould, (Appeal EA 37 of 1994, judgment of 29 June 1994), the Full Court coram Fogarty, Kay and Graham JJ[1], overturned an order of the trial Judge wherein her Honour had ordered that pending trial, for every dollar that the husband had spent on his lawyers, he should provide the wife with a similar amount for costs. The trial Judge had ought to make that order to create what she saw as ''a level playing field''. The Full Court disallowed the orders on the basis that the wife had adequate finances to provide for her own costs by reason of a substantial recent inheritance. In the course of my reasons for judgment I said this:
I wish to make comment on ... the general philosophical views expressed by her Honour about endeavouring to achieve a level playing field by providing the wife with a dollar for dollar basis for costs. Whilst I agree with his Honour's [Fogarty J's] observations that this may not be an appropriate approach to these cases, I would also like to make reference to an article from the Chicago Daily Law Bulletin of 20 April 1992 which indicated that wives in these circumstances often have to spend much more than dollar for dollar to achieve a level playing field, particularly, and I quote - this is in reference to a survey of the American Bar Association Family Law Section:
‘Most of the lawyers agree that women will face higher legal bills in a divorce. Accordingly to 91 per cent of those surveyed women splitting from their husbands will have to pay more for discovery. Husbands traditionally have had full control over the family finances and economic information. This means the wife's attorney must often engage in discovery to gain equal knowledge about assets and income. The lawyer has an obligation to undertake discovery to find out if there are assets in just the husband's name, or if the wife has no knowledge of them.’
[1] The published report incorrectly states the constitution of this Full Court which was actually Fogarty, Kay and Renaud JJ.
Putting the sexist language to one side, nearly twenty years later the position of a former spouse, now in highly conflicted litigation, who has not played a significant role in controlling the finances of the parties, has not much changed.
The second step
As was discussed in Harris and confirmed in Strahan, the second step in making an interim property order is to have regard to the usual matters in a section 79 order (ss 79(2) and 79(4) FLA). A detailed inquiry is not required, but there must be some assessment of section 79 factors. Given it is an imprecise exercise, the interim property order has to be “conservative” so that the final outcome of property settlement will not be compromised by the interim property order. Either the remaining property needs to be sufficient to meet the legitimate expectations of both parties at the final hearing, or the order that is contemplated needs to be capable of being reversed or adjusted if it is subsequently considered necessary to do so.
In Harris, the Full Court said:
As a generality, the interests of the parties and the Court are better served by there being one final hearing of sec 79 proceedings.
In Strahan, the Full Court said in exercising the wide and unfettered discretion conferred by s 79 and s 80(1)(h) FLA:
Regard should be had to the fact that the usual order pursuant to s 79 is a once and for all order made after a final hearing.
A corollary of these statements made by the Full Court in both Harris and in Strahan is the proposition that as a generality, the interests of the parties and the court are better served by there being as few interim property applications under s 79 as possible.
Interim spousal maintenance
Section 72 FLA requires a party to a marriage to maintain the other party, to the extent that they are reasonably able to do so, if, and only if, that other party is unable to support herself or himself adequately because of certain reasons and having regard to factors set out in s 75(2) FLA. If the applicant establishes a need and it is shown that the respondent has a capacity to pay, then the court may make such order as it considers proper for the provision of maintenance (s 74 FLA).
In interim proceedings, the Full Court in Redman & Redman (1987) FLC 91-805 endorsed a statement made by Fogarty J in Williamson & Williamson (1978) FLC 90-505 as follows:
Another consequence is that on an application for interim maintenance, the court conducts ‘not as final or exhaustive a hearing as would be the case if one were hearing the matter finally’ ... the evidence need not be so extensive and the findings not so precise.
So, upon an application for interim maintenance, an approach can be taken with a broader brush.
Any proposed interim property order must be taken into account when interim spousal maintenance is considered (see Bevan & Bevan (1995) FLC 92-600 and Oates & Crest (2008) FLC 93-365).
The husband’s application for an order for spousal maintenance to be offset by any administrative assessment of child support
The husband asks the court to make a spousal maintenance order which has attached to it a condition that any weekly sum payable be reduced by any child support assessment which is ultimately made and therefore implicitly the husband seeks that spousal maintenance be set at a level that would take into account the fact that the wife is not making an application for child support but has the responsibility to support the children.
It might be thought that given the manner in which the parties have organised their affairs to date and the manner in which the husband presented his application, I am at liberty to make a spousal maintenance order that further takes into account the wife’s financial responsibilities in caring for the children (s 75(2)(c) of the Act and the fact that no child support application has been made by the wife (s 75(2)(na) of the Act).
However, it is clear from the Full Court’s decision in Stein & Stein (2000) FLC 93-004, that it would be an error to make a spousal maintenance order that takes into account the expenses of the children.
DISCLOSURE
Part of the wife’s case was that there are properties owned by entities controlled by the husband which the husband had not disclosed. The alleged non disclosed properties were a series of commercial units belonging to the F Group at Suburb G. The property in respect of which counsel for the wife asserted the husband had not made disclosure is a construction called “H”. In exhibit 3 that property attracts the following detail:
Construction Period: Commenced January 2006 - Completed February 2007.
Development value: $44 million
Given a completion date of February 2007, I am prepared to accept the assertion by the husband that none of the units in that development are currently in his hands. Certainly that position would be consistent with material that he has provided on his oath.
Counsel for the wife attempts to draw some inferences from the fact that particular units are not the subject of mention in the material before the court. For example, in one development, sales are listed as units 101 and 104 but it is asserted that there is no accounting for unit 102 or 103. It is almost impossible in the context of an interim hearing to put any weight on that submission, particularly in the absence of any indication that the husband has been specifically requested to explain any asserted gap in the wife’s knowledge.
The wife more generally complains that the husband has not put before the court proper evidence of the actual value of his portfolio of real estate. I accept that the wife does not have the capacity to analyse the husband’s financial position. I do take the general point that it has been difficult for the wife to attempt to reconcile the sales activity of the husband’s property development operations. I am satisfied however that the husband within the time frame that this case was brought before the court, has done the best that he can to provide the wife with as much financial disclosure as he has been able. The wife has also had the ability to subpoena the husband’s bank and as I understand it, that bank has produced a large number of documents for the wife to look at including documents produced upon a CD. At the time of the hearing the wife had not had an opportunity to fully look at the material on the CD. It did not appear however at the time of the hearing that the wife had had access to any valuation that the bank might have done in respect of any of the properties in the husband’s portfolio of properties.
The court has no market appraisals from any valuer or agent and has no bank valuations. Nonetheless, I accept the husband has an expertise in the area and the court does have his estimates of value.
Exhibit 7 indicates that the husband has, at the time of the hearing, provided the wife’s lawyers with current financial statements by the husband’s entities until 31 March 2013.
The wife has not made out the assertion that the husband has failed in his duty of financial disclosure.
VALUATION OF PROPERTIES AND LEVEL OF DEBT
As at 29 April 2013, the value suggested by the husband in respect of the properties was $17,645,000 and that the debt to the bank significantly exceeded that amount. The elephant in the room is the husband’s assertion that the liabilities of the parties exceed their assets by about $7.7 million.
Exhibit 4 is a bundle of documents comprising a series of correspondence between the NAB and the companies controlled by the husband. In part of one of those documents there is an indication that the percentage by which properties have been discounted by the husband is 7 per cent. Counsel for the wife asserted that the husband’s calculation of a deficit in excess of $7 million was based upon a discounting of the value of the properties in the group by approximately 13 per cent.
Counsel for the wife also pointed to the fact that at one point the husband indicated the debt was about $4 million but on the other hand said it was about $7 million. As counsel for the husband pointed out, the two figures refer to different things. The first figure quoted by the husband is the secured debt to the NAB. The second figure is the overall indebtedness by the entities he controls as asserted by him, including unsecured debt.
The husband asserts that what he has set out in his evidence is his opinion of the value of the properties informed by advice from various real estate agents as to selling price. Counsel for the husband however conceded that there were no market appraisals in relation to each of the properties from particular agents.
There are considerable uncertainties and the numbers involved are large.
Counsel for the husband submits that the lack of availability of valuations in the NAB material is probably because of the ongoing sale process.
In relation to Erect Safe Building services, annexure C to Mr E’s affidavit does set out the position in relation to that company (a circumstance not particularly recognised by counsel for the wife during submissions in reply or myself).
Note 30 to the husband’s financial statement indicates that the entire American Express debt of $115,127 is immediately payable.
UNIT J
Counsel for the wife put some considerable weight on the fact that the husband’s accountant’s calculation of the total value of real estate could not be relied upon because of how unit J had been treated in that calculation. The husband’s accountant had included unit J at a value of $1.1 million. Other evidence indicated that that unit was “awaiting exchange, sales contract price” at $1.65 million. That is, the actual value of that property was 33 per cent more than what the husband’s accountant had used as a value for calculating the overall value of the portfolio of real estate.
Counsel for the husband makes the following points about unit J:
47.1.The $1,650,000 is a sales contract price but it had not been exchanged at the time the husband swore his affidavit;
47.2.Even if the increase in value was extrapolated against the real estate assets of the whole group, it still would not wipe out the deficit of the group.
In these interim proceedings, it would be unsafe to extrapolate the result in one sale across all the other assessments of value by the husband.
INTERIM PROPERTY
The wife seeks $100,000 by way of interim property settlement.
Put simply, the question in this case is whether or not the court, adopting a conservative approach, could comfortably make an order in circumstances where the husband asserts that there is a $7.7 million shortfall of assets over liabilities.
I am unable at this stage to be confident that there are net assets from which an adjustment can be made in the wife’s favour.
Had there been the ability to find that the wife’s claim was within a comfortable range of what on balance could be found to be a likely result in her favour at a final hearing in relation to the alteration of property, then the reasons that she gave for seeking the lump sum of $100,000 in my view would have been reasonable enough but I do not have to dwell on that given that I am not comfortably sure that the wife will get an award at the end of the day.
SPOUSAL MAINTENANCE
The wife’s inability to adequately support herself
Counsel for the husband did not assert that the wife had an earning capacity. She is the person primarily responsible for caring for two children, one of whom is very young. The wife does disclose an income of $20 per week for the sale of Disney items.
In her financial statement, the wife claims that her overall weekly expenses for herself and the children are in the sum of $9,012 (item 33). These are broken down as to:
For the wife (item 30 plus total “for you” in Part N)
$6,259
For the children
$2,253
For others (this is an amount the wife records as her estimate of the cost to K Pty Ltd of expenses relating to the Suburb C property)
$500
Total
$9,012
As I have already commented, I must disregard the expenses of the children (Stein & Stein (2000) FLC 93-004). In respect of the wife’s expenses, the wife concedes that there are a significant number for which the husband has organised direct payments and those items are marked (*) in the wife’s financial statement. The wife says the total of these expenses paid by the husband on her behalf is $3,240 per week ($300 + $600 + $200 + $50 + $150 + $100 + $40 + $700 + $600 + ($500 in relation to the Suburb C property)).
The husband estimates the sum he pays on behalf of the wife to be $4,466.50. The wife says she is in no position to challenge that assertion. He calculates that amount as follows:
Rates
$ 104.00
Land tax
$ 769.00
Electricity
$ 556.00
Gas – at the house
$ 10.00
Water
$ 58.00
Telephone/internet (connected to F Group office Server & Support)
$ 10.00
Mobile phone
$ 150.00
Security
$ 50.00
Gardening
$ 650.00
Pool
$ 60.00
Household maintenance – cleaners
$ 400.00
Household maintenance – window
$ 75.00
Pay TV
$ 37.00
Petrol card with sundries
$ 273.00
Roam Express tolls
$ 11.50
Insurance – house & contents
$ 100.00
Insurance – car
$ 120.00
Car lease
$ 847.00
Car service
$ 66.00
Car tyres
$ 45.00
Car cleaning
$ 75.00
Total
$ 4,466.50
The husband pays the following payments for the children to third parties:
School fees
$ 261.20
School fees – extras
$ 28.00
Occupational therapy
$ 77.00
After school activities – singing
$ 33.00
After school activities – piano lessons
$ 32.72
After school activities – football/donations
$ 57.00
Total
$ 488.92
In addition to the direct payments which the husband organises on behalf of the wife and children, the wife currently receives from the husband a cash amount of $1,500 per week. In two documents, sworn the same day and filed the same day, the wife makes statements which are diametrically different about the nature of these payments. At paragraph 56 of the wife’s affidavit, she says, “I will not apply for child support because [the husband] currently pays me $1,500 per week for the children”. At item 13 of the wife’s financial statement, she characterises the husband’s payment to her of $1500 as $750 by way of child support and $750 by way of spousal maintenance. The husband says the payment is to cover expenses for both the wife and the children.
Annexure U to the wife’s affidavit filed 22 April 2013 is an open letter written by the wife’s lawyers to the husband dated 28 February 2013 which contains the following:
We are instructed that the following is a list of the expenses usually paid by you on behalf of our client and the children and which our client requires your commitment to continue to pay (or cause to be paid) pending final resolution of this matter:
1.To our client the sum of $1,500.00 per week for food and incidentals.
2.Our client’s vehicle (which is a … 4WD registered number …) and all costs for same including petrol, registration fees, insurance fees, maintenance and lease/hire purchase payments for same.
3.The periodic mortgage repayments over the former matrimonial home at [L Street, Suburb C].
4.All outgoings and repairs in relation to the [Suburb C] home.
5.[D’s] school fees and costs for extracurricular activities.
6.Private health insurance for our client and the children at the current level and with the current provider.
7.The weekly gardener’s fees and pool maintenance fees.
The husband has been paying and will continue to pay the amounts referred to in subparagraphs 2 to 7 of the previous paragraph as requested.
When one compares what the wife was asking in the letter dated 28 February 2013 with what she says she now needs in her financial statement, there is a significant increase in what the wife says she now needs. Given the wife’s initial request in February, there is some justification in the claim by counsel for the husband that the wife’s current application is an ambit claim.
Turning then to the wife’s claim for spousal maintenance which is for a sum of $3,300 per week (in addition to the $1,500 that is being paid), the first point to make is that the wife’s asserted need in her financial statement for herself is in the sum of $3,519.
As counsel for the husband submitted, the list of items that total $3,519 includes items which should not be included at all or should not be included at the amount asserted by the wife:
63.1.“Repairs – furnishings and appliances” of $1,000 per week to the Suburb C property. I accept this item should be removed because the husband has agreed that he will make any payment necessary to attend to the repairs of the Suburb C property which is a relatively new building;
63.2.The following amounts, whilst asserted, lack justification notwithstanding the high living standards the parties enjoyed:
Holidays $500 per week
Entertainment and hobbies $300 per week
Hairdressing, toiletries and makeup $435 per week
Clothing and shoes $200 per week
Gifts $150 per week
Dry cleaning $100 per week
Total $1,685 per week
I will discount that amount to a figure of $1,100.
As already noted, the wife declares income of $20 per week. Consequently, I assess the wife’s need, not associated with her responsibility to care for the children, at $1,914 per week ($3,519 – $20 –$1,000 – ($1,685 – $1,100)).
The husband’s capacity to maintain the wife
The husband’s case is that he is committing to $6,455 ($4,466.50 + $488.92 + $1,500) per week for the wife and the children and that is before any account is taken as to the servicing of the various facilities and that he has no capacity to meet an additional claim by the wife.
The husband’s financial statement sets out that the husband is receiving income at a higher level than that indicated in his 2012 tax return and is based upon the first three quarters of trading in the 2012/2013 financial year. The husband’s financial statement says that he has salary of $2,307 per week and receives dividend payments from the company of $6,865 per week (the total at item 16 of his financial statement filed 20 May 2013 is conceded to be a mathematical error). Consequently it is the husband’s case that he currently receives dividends from the corporate structure at an annual rate of $356,980 (that is to be compared with $150,000 in the 2012 tax year). His salary of $120,000 is the same as the 2012 tax year. His declared weekly income is $9,172.
The husband asserts that his personal weekly expenditure is in the sum of $11,171 per week (which sum includes an allowance for a payment to the wife and children of $1,596). As part of the husband’s weekly expenses, the husband records that he incurs a weekly debt to M Pty Ltd, a company controlled by the husband’s accountant in the sum of $3,000 per week. At the date of the hearing, that company is paying the rent on the property in which the husband resides at Suburb N.
In addition to the income set out in his financial statement, counsel for the wife asserts that the husband’s use of credit cards (see Exhibit 5) demonstrates that he uses those cards to regularly fund payments of personal expenses.
Counsel for the husband suggests that credit card payments are accounted for in the records of the entities of the group by declaring a dividend to the husband to cover that personal expenditure. Counsel for the husband did not highlight the mechanism by which that dividend was declared. That dividend in turn has been disclosed by the husband as part of his income on his financial statement. It is said that there would consequently be a double counting if the husband’s expenditure of a private nature on his credit cards was counted as part of his income in addition to what he has already disclosed. There is no specific allowance on the husband’s financial statement for the repayment of credit cards and counsel for the wife submitted that overall it seemed that the husband had a significant source of funds in respect of which he was not making any regular repayment. The husband’s financial statement provides no allowance in relation to any regular repayment in respect of which the husband has a current liability of about 25 to 50 percent of the sum of $148,270. The husband’s financial statement says that the majority of the current credit card debt is due to be paid forthwith. The husband’s material does not disclose whether or not an additional dividend will be paid to cover the use of the cards (as has happened in recent times). I infer however that that would happen, to use the husband’s words, “when cash flow permits”. If an additional dividend was declared, it would increase the husband’s disclosed income and would eliminate the ability for counsel for the husband to assert that there would be double counting if the availability of the use of the cards by the husband was taken into account in assessing his capacity to pay. In the context of this interim hearing, I can only take a broad brush approach and look in a general way at the business operations in which the husband is involved.
The building services company is said to have had a turnover of between $15 and $20 million in the last financial year. The wife asserts that the building services company is a fountain of money. The husband denies that that is so. The NAB has recently required that the assets of that enterprise be valued (and that valuation may have now taken place). For the purposes of this interim hearing and acknowledging turnover is not profit and not knowing what the true situation is in respect of this enterprise, I accept that the building services company provides an opportunity to the husband, at least in the short term, to fund expenditure.
At page 7 of the NAB letter of corporate offer, the group total facility is $53 million but there has been a significant reduction in the portfolio of real estate and it would be unsafe to make a finding that the facility is still intact at an amount of $53 million.
Counsel for the wife pointed to a payment by the husband to O Lawyers in the sum of $34,000 which was particularised with the word “[health services]”. I accept the explanation that that payment related to a dispute between a husband and a health practitioner in respect of a debt.
As part of the husband’s expenses there is a sum of $2,050 as the “for you” expenses in Part N of his financial statement. By way of comparison with the wife in relation to some of those expenses, the husband claims $250 a week for food (the wife $300); the husband $50 for household supplies (the wife $100); the husband $250 per week on clothing and shoes (the wife $200 per week); the husband $250 on entertainment and hobbies (the wife $300); the husband $400 per week on holidays (the wife $500 per week); the husband $100 on gifts (the wife $150). It can be seen from these figures that the parties are not all that far apart on what they claim by way of weekly expenses on those items. I accept that both parties have been used to living a lifestyle at a particular level. Counsel for the wife pointed to a recent trip by the husband to Country P which it was asserted cost in the vicinity of $24,000. The wife asserts that was a trip to the car races. The husband says it was for business. The husband drives a British sports motor vehicle which he estimates has a value of $325,000 (although there is no equity in the vehicle as the residual owing on it is $483,000).
Counsel for the wife argued that in relation to expenses, the two totals that should be taken into account is the amount of personal taxation of $3,700 and the amount in the husband’s Part N of $2,050, together they add to $5,750. If you subtract that from $9,172, there are sufficient funds to pay the wife’s claim.
Counsel for the wife points to the husband having the continuing ability to lead a luxurious lifestyle by drawing on credit cards which are then covered by dividend payments to the husband. Counsel for the wife points to the fact on an annualised basis, the dividends paid by the corporate structure to the husband in the first three quarters of the 2013 financial year had increased from $150,000 per annum to $356,980 per annum.
I am unable to accept the husband’s submission that he does not have the capacity to pay the wife’s weekly need on an interim basis and I find that he does.
Consequently, an order will be made for spousal maintenance in the sum of $1,914.
The husband’s undertaking in relation to the expenses of the children
I note the column in Part N of the wife’s financial statement entitled “For children” totals $2,253. She conceded that of those expenses, the husband pays $368 per week. The wife says the husband does not pay the following expenses on behalf of the children:
Food, including family and pet food for family pets
$ 300.00
Household supplies including baby products
$ 100.00
Clothing and shoes
$ 100.00
Child minding – paid to the husband’s oldest daughter [Q] for babysitting
$ 200.00
Entertainment/hobbies
$ 100.00
Holidays
$ 500.00
Chemist/pharmaceutical
$ 20.00
Gifts
$ 100.00
Hairdressing
$ 10.00
Other necessary commitments (specified) vets
$ 24.00
Speech therapy
$ 50.00
Occupational therapy
$ 58.00
Child psychologist
$ 90.00
Flights for cousin to visit [D]
$ 115.00
[D’s] extracurricular activities at various times throughout the year including sailing lessons, dancing lessons, judizu [sic], nippers, athletics, piano lessons, singing lessons, tennis lessons, rugby registration fees and lunch time basketball; one half of the figure of $236.05
$ 118.02
Total
$1,885.02
This is at odds with the husband’s assertion (outlined above) that he pays for “occupational therapy, after school activities – singing, after school activities – piano lessons, after school activities – football donations”.
The husband provided an undertaking to the Court in the following terms:
10.That pending further order or release from the undertaking that he will pay or cause to be paid on a without admissions basis the following expenses for the benefit of the wife and the children:
10.1Pay television subscription (at the existing rate);
10.2School fees for [D];
10.3Textbooks and other schooling costs for [D] over and above the tuition fees;
10.4Occupational therapy for [D],
10.5Singing lessons for [D] to a maximum of $33 per week,
10.6Piano lessons for [D] to a maximum of $33 per week,
10.7Football registration fees and associates expenses for [D] to a maximum of $60 per week;
10.8Roam express tolls charges to a maximum of $15 per week
10.9Petrol card for the wife to a maximum of $100 per week (the card to be used for petrol only).
The Court accepts these undertakings apart from the pay television subscription, the Roam express tolls and the petrol card which will be the subject of a separate order. Although the husband’s undertaking was for $100 maximum on the petrol card, he asserts he has been paying $273 per week for petrol and sundries on the wife’s behalf. The wife asserts she needs $150 for petrol each week. I accept the wife’s assertion and will make an order accordingly.
I am prepared to accept that the wife needs $1,500 per week to support the children. However I am not prepared to accept that the amount of $1,500 per week currently being paid on a voluntary basis has been paid and accepted all as child support. I accept what the wife says at item 13 of her financial statement; namely $750 is child support. In the event the wife wants an increase in that sum if the parties cannot otherwise agree she needs to apply for an assessment and if she is not satisfied with that assessment apply for a departure from that assessment.
LUMP SUM COSTS
In relation to the wife’s application for interim costs in the sum of $100,000, counsel for the wife submitted that the wife does not have the ability to conduct her proceedings with the same financial support which the husband commands.
In respect of the question of interim costs, counsel for the wife complained that there was not a level playing field and said the best the wife had been able to do is borrow $20,000 from her parents and pointed to the fact that the husband had control of the purse strings of a complex group of companies that had a significant cash flow.
In relation to the wife’s claim for interim costs, the provisions of s 117 apply generally to that application. Both parties have used borrowed funds to secure legal representation for the interim hearing. It may well be that the husband will have the ability in the future to borrow monies or rely on credit facilities through his entities but in my view there is no basis upon which, on the current evidence, which allows me to find that the husband’s financial position is such that he can make a lump sum payment to the wife for her costs.
If others are prepared to lend him unsecured funds that is a matter for them. It is a circumstance that could be controlled by a “dollar for dollar order” but although invited, no such written application was made at this interim hearing.
DOLLAR FOR DOLLAR ORDER
During discussions in respect of costs and the lack of a level playing field, I inquired of counsel for the wife as to whether or not the wife wished to make an application for “a dollar for dollar order”. Counsel for the wife indicated that his instructions were to make an oral application. Counsel for the husband was asked what his attitude was to the oral application for a dollar for dollar order and he indicated that he opposed the wife amending her application in that way. Given the matter did not conclude on the first day it was before me in a duty list, I indicated to counsel for the husband at the conclusion of the first day of the proceedings that he should put any application for a dollar for dollar order in writing. At the commencement of the second day of the proceedings I inquired of counsel for the wife whether or not he had filed any new application or additional application. Counsel for the wife indicted that he had not. During submissions, counsel for the husband inquired as to whether or not he should make submissions on this issue. I indicated that given that no written application had been filed, that was not necessary. At the conclusion of the submissions, counsel for the wife suggested that I could make such an order on my own motion. I indicated that given no written application had been made and that there had been no submissions made about any such application, I would not be considering doing that in the course of these proceedings. However, given the fact that the husband seemingly has the ability to borrow money on an unsecured basis from third parties to fund his own costs in this litigation, I do not preclude the wife from at some point in the future bringing such an application if she is advised to do so. I of course do not in any way prejudge what the result of any such application might be. The result of any such application would very much turn on the state of the evidence of the financial position of the entities controlled by the husband and the husband’s financial position at the time that application was considered.
SALE OF MATRIMONIAL HOME
The Suburb C home is owned by F Investments as trustee for the Zadenev Family Trust. The Suburb C property is part of the real estate portfolio which the husband says has a value of about $17 million.
The husband relies in part, upon a letter from NAB to him dated 24 April 2013 which is in the following terms:
Further to our recent conversation we wish to confirm that extension of your loan facilities is subject to your confirmation that property [L Street] has been placed on the market and that 100 per cent of full net sales proceeds will be used as permanent debt reduction.
This is consistent with existing loan conditions that all sales proceeds historically have been applied to permanent loan repayment.
If you have any questions please do not hesitate to contact us.
This letter was a product of a request from the husband’s chief financial officer in the following terms:
Further to office and mobile VM.
Please confirm that [Mr R] has requested that you draft a letter to [Mr Zadenev] in relation to various matters as they relate to the bank and to [Mr Zadenev’s] current divorce proceedings.
Please call me on mobile to confirm status or otherwise forward letter to [Mr Zadenev] in the first instance.
The weight to be placed upon this letter of 24 April 2013 is diminished somewhat given the circumstances in which it has been produced.
The communication between the husband and the bank is one that does not suggest any urgent situation currently exists. It is unclear as to what “extension of your loan facilities” actually means. The bank has allowed the husband to trade his way out of any current difficulties by selling down his trading stock on a discounted basis (although it is conceded that on the face of it, part of that arrangement now seems to be a preference by the bank that the matrimonial home be sold).
Counsel for the husband referred to annexure Y of the wife’s affidavit filed 22 April 2013 and an NAB corporate letter of offer of 24 February 2012. At page 7 the facilities are broadly set out. At page 20 the following words appear, “the constraint at all times” – “maintain a maximum property finance loan, the value ratio of 75 [per cent] for the group”.
The husband gives evidence that he is subject to requirements of the NAB to sell down properties and to bring the group back within the 75 per cent ratio set out in the finance loan. The husband asserts that he needs to sell the Suburb C property in order to achieve that.
Both parties relied upon the fact that between 1 January 2012 and 22 April 2013 entities associated with the husband disposed of $58 million worth of property.
Some sales seemed heavily discounted and I do infer that the husband has been under some pressure from his bank (that is also evidenced by documents which seem to be a regular reporting to the bank in respect of sales).
In relation to the husband’s application for a sale of the Suburb C property, counsel for the husband relies firstly upon the platform of what he says is the financial position of the group. He next points to the NAB security and facility documentation and the requirements in that documentation. He also relies upon the letter of 24 April 2013; that the requirement of the NAB is consistent with the loan to value ratio in the security documents if one accepts the husband’s assertion as to the valuation of the real estate portfolio of the husband’s entities. Counsel for the husband also points to a sell down of real property of the group over a lengthy period commencing from about 1 January 2012.
Counsel for the husband attempted to reality test the wife’s application. He submitted that if she was to get 65 per cent of the pool which is her primary application (and he notes in passing that she does not in the terms of the application actually seek to retain the Suburb C property as part of the overall adjustment of property), in order to retain the Suburb C property at $7 million, the overall pool of assets would have to be close to $11 million dollars. This is to be compared to a circumstance where the husband asserts he is currently over $7 million in deficit.
In relation to the husband’s ability to comply with an order that he pay $2,000 per week by way of rent for the wife if the Suburb C property is liquidated, the saving in interest seems to be $7 million x 9 per cent per annum (the facility is an interest only facility). This is an equivalent of $12,115 per week.
Counsel for the wife submitted that I would be comforted by the knowledge that the bank had received a repayment of about $58 million as a result of sale of assets within the last two years.
There is no indication by the bank that they are about to commence proceedings against the entity that owns the Suburb C property to liquidate that property or to generally liquidate all of the properties in the husband’s group.
There is an insufficient basis at the current time to force the wife and children to leave the matrimonial home.
CONCLUSION
The price of real estate fluctuates from time to time. It might be that when the court receives proper evidence of the current value of the portfolio of real estate that it may be worth significantly more than the husband is asserting on the face of the documents at the current time. I am unable to say. It is appropriate however, as discussed during final submissions, for this matter to be case managed so that if some urgent development occurs, then the husband’s application for the sale of the matrimonial home can be looked at afresh. Otherwise it is important to get to a point in this litigation where the parties are able to either agree or otherwise be confident in asserting what they respectively say is the value of the building services business and the portfolio of real estate. In order for that to happen, there may need to be management of the gathering and sharing of information.
As already noted, counsel for the husband agreed to make the valuation which the bank is requiring the husband to carry out in relation to the building services business available to the wife as soon as it becomes available to husband.
The husband can come back to court if in fact things change and the bank takes a more aggressive position in relation to the sale of the Suburb C property.
Both parties seemed to agree that this matter should be listed for mention shortly after the delivery of these reasons. I will relist the matter before myself. The purpose of the relisting will be to focus upon valuation issues, both in relation to the building services company and in relation to real estate.
In the event the financial position of the husband’s group of companies becomes clearer in the future, then the wife is not precluded from making a further appropriate application for interim financial relief.
I certify that the preceding one hundred and seven (107) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Watts delivered on 24 October 2013
Associate:
Date: 24.10.13
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