Falk & Falk (No. 2)

[2021] FamCA 579

FAMILY COURT OF AUSTRALIA

Falk & Falk (No. 2) [2021] FamCA 579

File number(s):

SYC 4653 of 2019

Judgment of:

HENDERSON J

Date of judgment:

6 August 2021

Catchwords:

FAMILY LAW – PROPERTY – Interim property – Where the husband seeks access to his share of funds held in a self-managed superannuation fund – Where the wife opposes the application – Where the husband suffers from an ongoing medical condition and is no longer employed – Where access to the funds sought would not jeopardise the wife’s final property application – Discussion of relevant principles – Orders made as sought by the husband.   

Legislation:

Family Law Act 1975 (Cth) ss 74, 79, 80(1)(h), 114

Cases cited:

Strahan & Strahan (Interim Property Orders) (2011) FLC 93-466

Zschokke & Zschokke (1996) FLC 92-693

Number of paragraphs:

95

Date of hearing:

23 July 2021

Place:

Sydney

Counsel for the Applicant:

Mr Gould

Solicitor for the Applicant:

ATW Family Law

Counsel for the Respondent:

Mr Lloyd SC

Solicitor for the Respondent:

Dorter Family Lawyers and Mediators

ORDERS

SYC 4653 of 2019

BETWEEN:

MR FALK

Applicant

AND:

MS FALK

Respondent

ORDER MADE BY:	HENDERSON J
DATE OF ORDER:	6 AUGUST 2021

THE COURT ORDERS THAT:

1.That Order 4 of the Orders of 3 August 2020 be and is hereby discharged.

2.That within 7 days of the date of these Orders the parties, in their capacity as directors of L Pty Ltd as Trustee of the M Super Fund ("L Pty Ltd"), do all acts and things and sign all documents necessary to cause the Husband's entitlement in the M Super Fund ("Super Fund") to be paid to the Husband in full.

3.That for the purpose of Order 2 of these Orders the parties, in their capacity as directors of L Pty Ltd as Trustee of the Super Fund shall do all acts and things and sign all documents necessary to:-

(a)cause the balance of Commonwealth Bank Private Account #...47, less the value of the Wife's entitlements in the Super Fund to be paid to the Husband;

(b)cause the shares held by the Super Fund to be transferred to the Husband;

(c)cause the artwork held by the Super Fund to be transferred to the Husband.

4.Upon compliance with Orders 2 and 3:-

(a)the Husband will resign all offices, positions and/or employment in L Pty Ltd but shall first, if called upon to do so, vote at any meetings of members and directors thereof in favour of such resolutions as the Wife may direct to convert L Pty Ltd to a single shareholder/director company;

(b)the Husband will transfer to the Wife all of his shares and interests in L Pty Ltd;

(c)the Wife will assume from the Husband all debit loan accounts standing in her name and the parties' names jointly in L Pty Ltd;

(d)the Husband will release the Wife and L Pty Ltd from and against all and any actions, claims, suits and demands whatsoever that the Husband could otherwise bring against the Wife and/or L Pty Ltd including but not limited to any claims for income and/or profit distribution and/or repayment of loan accounts;

(e)the Wife will indemnify the Husband and shall keep him indemnified in respect of all liabilities in relation to L Pty Ltd whenever and however arising, including but not limited to all taxation liabilities of L Pty Ltd or either party personally arising in connection with any interest, loan account, office or employment in relation to L Pty Ltd;

(f)as between the parties and upon compliance with the previous subclauses of this order, the Wife shall be solely entitled to all interests in relation to the L Pty Ltd.

5.That in the event that either party refuses or neglects to execute any deed, document or instrument to give effect to the Orders made herein within fourteen (14) days of such document being tendered for signature, the Registrar of the Family Court of Australia, Sydney is hereby appointed pursuant to Section 106A of the Act to execute any such deed, document or instrument in the name of such party and to do all acts and things necessary to give validity to the operation of any such deed, document or instrument and for the purposes of this Order a party shall be deemed to have refused or neglected to execute any such deed, document or instrument if the said deed, document or instrument is not returned to the submitting party within fourteen (14) days of the said document being forwarded to the other party's solicitor by document exchange or to the other party by ordinary mail.

Note:   The form of the order is subject to the entry in the Court’s records.

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

IT IS NOTED that publication of this judgment by this Court under the pseudonym Falk & Falk has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

REASONS FOR JUDGMENT

HENDERSON J:

1. This was an application by Mr Falk (“the husband”) seeking an interim order to have his entitlement to superannuation in a self-managed superannuation fund (“SMSF”) of some $1,277,238 released to him in a property pool of net some $9.9 million and gross $11.2 million on the wife's figures.

2. The wife, Ms Falk (“the wife”), initially opposed the husband's application in her response to his application however by the time the matter came on for hearing had agreed to release $100,000 to the husband.

3. At the hearing on Friday, 23 July 2021, Mr Lloyd SC for the wife further submitted that the husband could have $2,000 a week from the superannuation pool if he asserts he cannot support himself or $100,000 in a lump sum from that same source.

4. Mr Gould of counsel acted for the husband and Mr Lloyd, senior counsel, acted for the wife at the interim hearing.  When the matter initially came before me on 19 July 2021 Mr Cummings of senior counsel acted for the husband and Dr Barnett of counsel for the wife and those counsel produced case outlines which were relied upon by counsel who represented the parties on Friday, 23 July 2021.

5. The material I read was as follows:

   (1)For the husband:

   (a)Application in a Case sealed 8 June 2021;

   (b)Financial Statement filed 5 May 2021;

   (c)Two affidavits filed 5 May 2021 and 15 July 2021 together with annexures to those affidavits.  The annexures to the husband's affidavits included a balance sheet of the assets he asserted were in the pool, at “F-2” of his affidavit filed 5 May 2021.  His assertion is the pool is $11,429,756 with $1.7 million in addbacks being a sum of $200,000 received by him and $1.5 million received by the wife;

   (d)Case outline prepared by Mr Cummings SC; and

   (e)Revised minute of order of the husband.

   (2)For the wife:

   (a)Amended Initiating Application filed 23 March 2020 seeking an equal division of the matrimonial pool;

   (b)Response to the husband's Application in a Case filed 16 July 2021 in which she sought his application be stood over to after a private mediation scheduled for 31 August 2021 with Mr N;

   (c)Affidavit of the wife filed 16 July 2021 together with annexures;

   (d)Case outline prepared by Dr Barnett which outline also included annexures relied upon at the hearing;

   (e)An Aide Memoir prepared by the wife's lawyers being effectively a critique of the husband's evidence and the wife's case countering his evidence; and

   (f)The wife also annexed her balance sheet to her material being annexure “A” to Dr Barnett's case outline.  The wife asserts that there are net assets of $9,962,403 and, together with addbacks, some $11,246,523.  The wife asserts the husband's share of those addbacks amounts to $1 million.

6. The wife further asserts in her affidavit at paragraph 29(m) that the husband has recklessly spent $1.2 million since separation.

7. The wife asserts in her Aide Memoire that the husband:

   (1)Had withdrawn AUD$866,215 in two tranches in 2019;

   (2)Had increased the mortgage over the property at Suburb D some $394,000 between the periods of 17 September 2019 to 18 August 2020;

   (3)Purchased jewellery amounting to $164,000 in September 2019;

   (4)Withdrew $750,000 from the SMSF in March 2020 which by order of 3 August 2020 he was ordered to repay which he did.

8. It is common ground the husband has retired and is able to access his funds in the SMSF.

9. On 27 August 2020 Justice Rees ordered the wife to pay to the husband $200,000 as an interim property distribution and that the husband have exclusive occupation of the wife's property in Suburb P.

10. It is common ground that at the commencement of cohabitation the wife owned a property Suburb P and some other assets such as superannuation and was working.

11. That the husband owned a property at Suburb D, a property at Suburb E, a share portfolio, savings and the SMSF which is in existence today and was earning a significant income and continued to earn a significant income throughout the relationship. 

    SHORT, RELEVANT CHRONOLOGY

12. The husband is 57 and the wife is 62.

13. The parties commenced cohabitation in 2008, married in 2010 and separated in 2019, a relationship of 11 years.

14. The husband suffered a serious life-threatening incident in early 2020 of liver failure from which he has recovered however there is a spectre of a liver transplant in the future and he must not consume alcohol.

15. The husband has retired.

16. The husband's income is rent from the properties at Suburb D and Suburb E.

17. The wife is in good health and is working.

18. There are no children of the marriage.

19. The SMSF consists of cash of $944,802 and artworks and other such valuables which total in the vicinity of $1,227,238.

    FACTUAL CHRONOLOGY RELEVANT FOR THESE PROCEEDINGS

20. In 2018 the husband asserts he retired.

21. In May 2019 the wife withdrew HKD$3,500,000 from a Q Bank account and AUD$400,000 and deposited those funds into her sole name.[1] The wife says the bulk of these monies remains.

    [1] Affidavit of the husband filed 5 May 2021 at [31].

22. On 17 July 2019 the wife commenced proceedings in this Court.

23. On 5 November 2019 the wife commenced proceedings in the Supreme Court of New South Wales for vacant possession of her unit at Suburb P.

24. On 17 January 2020 the husband was admitted to hospital suffering from acute liver failure and lacked capacity to continue proceedings and remained in hospital until 7 April 2020.

25. On 30 January 2020 the husband’s then solicitors commenced proceedings in the Supreme Court seeking to remove the wife as the husband's enduring guardian and attorney.

26. On 6 February 2020 the wife consented to this removal and the husband’s sister Ms R was appointed the husband's power of attorney.

27. The husband made a miraculous recovery from his near death event and his sister’s guardianship was discharged on 1 June 2020.

28. There is a serious dispute between the husband and his prior solicitors in relation to their extraordinary costs billed to him between 25 July 2019 and 26 March 2020 and their attempts to claim those fees from him is still ongoing and will continue once these family law proceedings have been resolved.

29. From April 2020 there was a serious dispute between the wife and Mr S, the husband's son, in relation to his occupation of her property at Suburb P.

30. The husband occupied the wife's Suburb P property when he was discharged from hospital on 24 April 2020.

31. On 23 June 2020 in the Supreme Court proceedings the wife was given vacant possession of her property at T Street, Suburb P.

32. On 3 August 2020 an order was made restraining the husband from accessing the funds held in his SMSF.

33. On 3 August 2020 the wife changed the locks to her Suburb P property.

34. On 27 August 2020 Justice Rees ordered that the husband be entitled to exclusive occupation of the wife's property with the wife to pay him $200,000 by way of partial property settlement.

    PARTIES’ FINAL APPLICATIONS

35. The wife seeks an equal division of the matrimonial property. 

36. The husband seeks the wife receive 17.5 per cent of the matrimonial property and that he retain all three properties including the wife's property at Suburb P.

    HUSBAND’S CASE

37. The husband's case was as follows.

38. The husband is not working and is supported by rental income from his Suburb D and Suburb E properties which is, net, $798 per week to him. The husband also receives $576 a week which is a repayment of a loan he gave to Mr K, which loan the husband funded by borrowing from the National Australia Bank.  The money received from Mr K was used in its entirety to repay the National Australia Bank loan.[2]

    [2] Affidavit of the husband filed 5 May 2021 at [16].

39. His living expenses amount to approximately $1,272 per week, a shortfall of about $500 per week.[3]

    [3] Affidavit of the husband filed 5 May 2021 at [17].

40. He has $84,840 in the bank and $17,063 in his solicitors’ trust account.

41. The husband has used his capital to pay his shortfall of income over expenses which income and expenses are supported in his financial statement wherein he says his gross income is $3,187 weekly with expenditure of $3,700 weekly.

42. The husband asserts at paragraph 18 of his affidavit that friends and family have helped him out.

43. At paragraph 55 the husband asserts he has ongoing medical expenses amounting to hundreds of dollars each month as a consequence of his acute liver failure in January 2020 and, at paragraph 56, that he must keep on hand $20,000 cash for a liver transplant in the future.

44. That he is no longer covered by medical insurance and cannot obtain such insurance with his chronic disease.

45. At paragraph 23 of his affidavit the husband asserts that on 6 April 2021 he borrowed $107,000 to pay legal fees at a rate of 12 per cent interest per annum.

46. The husband has a car in Sydney which he uses, a motor vehicle 1, and a motor vehicle 2 which he is endeavouring to import from the United Kingdom which has been valued at $600,000.

47. That releasing his superannuation to him of $1.227 million which he can now access as he is retired will not affect, defeat or interfere with the wife's application for an equal division of the property pool which net of addbacks is approaching $9.5 million on the wife's balance sheet.

    WIFE’S CASE

48. The wife’s case is as follows.

49. That the husband has failed to disclose to her satisfaction his expenditure of monies in the parties’ bank account at separation and expenditure of money post-separation.

50. That his medical needs are not as he asserts.

51. That he cannot merely ask for money but must establish his need for these funds.

52. That, given his failure to disclose, it is not just or equitable or otherwise proper to make the order he seeks.

53. That he has failed to establish the head of power he is relying upon for the Court to make this payment to him.

54. I disagree with the wife's position in this matter for the following reasons.

55. The parties led a lavish lifestyle during the marriage and the husband, on the wife's own evidence, was earning $1.7 million and received similar payment when he left work in Asia.

56. The husband does suffer from a lifelong chronic disease being cirrhosis of the liver from which he has recovered provided he does not consume alcohol and takes care of his health.

57. His specialist Professor V prepared a report dated 11 March 2021, found at annexure “F-19” of the husband’s affidavit filed 5 May 2021, in which he says the following:

    I saw [the husband] for review on 1^st October 2020 where the diagnosis I made was that of the post alcoholic cirrhosis with portal hypertension.

    …

    His history is that he first ran into trouble in January 2020 whilst in W Town…a diagnosis of hepatic encephalopathy, spontaneous bacterial peritonitis and hyponatraemia was diagnosed…all these are features of end-stage liver failure due to cirrhosis and portal hypertension.

    …

    When I saw him, he was eating well, he was exercising, he was walking daily and had made a full recovery…His medications include a small dose of Aldactone and Rifaximin…he was not jaundiced…had recovered well from his disastrous medical condition in early first half of 2020 where he could easily have died.

    ...

    He is now not in liver failure. His cirrhosis is well compensated and he has recovered well following cessation of alcohol…he just requires regular review now.

    …

    [The husband] is used to working at a high level executive position. Although, from a strict medical point of view, he has improved considerably since January 2020 his ability to think critically and decisively is likely to be greatly impaired thus making a return to his former level of function unrealistic…Although [the husband] was on death’s door…in early 2020, he has made a remarkable recovery and he now, as mentioned, has cirrhosis Child A with controlled portal hypertension with TIPS in place. I would expect that he will have reduced life expectancy because of this but his mortality over the next five years would only be in the vicinity of 5 to 10% provided he remains alcohol free.

58. It is clear from this report that the husband does take medications and I reject the assertion by the wife that there is no proof of this or that he is not required to spend considerable sums on the medications as set out in his affidavit filed 5 May 2021 at paragraph 54(g) and that he incurs other medical expenses as set out at paragraph 54 of that affidavit.  Given he is without  medical insurance and is not on a government means tested pension his medical cost would be high given his chronic disease.

59. I accept the husband's evidence he has a life-threatening serious medical condition which is currently well-controlled. That he is unable to work or critically think as he had done in the past.

60. I accept he has a shortfall of income over necessary expenditures including an inability to pay for necessary medical expenses and costs together with paying ongoing legal fees for this litigation and the upcoming mediation.

61. The continued assertion by the wife that the husband has not provided full disclosure is inconsistent with her position that the mediation can take place in that the disclosure made is satisfactory for that purpose.

62. The wife asserts the husband has recklessly spent $1.2 million.  The wife may be correct, however that is not a factor that is relevant in this matter for the following reasons.

63. The wife knows he spent this money and it is for the husband to satisfy the Court it was appropriate for him to do so otherwise the expenditure of this money may be reflected in a diminished sum to him ultimately.

64. Secondly, spending of money recklessly is not necessarily the enquiry in an application for one party to receive matrimonial funds in advance. This is particularly so where, as here, advancing funds to one party will not in any way impact upon or place at risk the ultimate application the other party seeks by way of division of property.

65. Accepting the wife's case that the husband has recklessly spent $1.2 million and the Court adds that money back to the pool, that there are additional addbacks to be deducted from his share of the property totalling $1 million as set out in annexure “A” to the wife's case outline and if he receives a further $1.227 million, being the value of his share of the SMSF, these assets amount total $3.4 million of a net asset pool that the wife asserts is $9,962,403.50 which figure is to be found at page 7 of annexure “A” to Dr Barnett's case outline.

66. 50 percent of that net pool is $4,981,202.  Even on the wife's case, and assuming the Court accepted every single addback the wife asserts should be deducted from the husband’s share of property, the husband would still be entitled to receive $1.5 million by way of property division.

67. Doing a similar calculation on the gross pool. The wife asserts the gross pool including addbacks to the husband and no addbacks to her is $11 million and this is found at annexure “A” to Dr Barnett's case outline.

1. 50 percent of that sum is $5,500,000.  Deducting $3.4 million from that figure would still entitle the husband to receive approximately $2.1 million by way of property division.

2. On any scenario and accepting every aspect of the wife's case as to addbacks and how the Court should regard the allegation of the husband's reckless spending, her claim for an equal division of the gross pool will not be impacted upon or nullified in any way if the Court determines the husband should receive the entirety of his share of the SMSF now.

3. Further, I am satisfied that the husband’s legal fees to prosecute his claim will amount to no less than $250,000, which evidence is found at annexure “F-25” of the husband’s affidavit of 5 May 2021, and that he does not have this sum available to him and has borrowed monies in the amount of $107,000 to pay his current legal fees and will be required to repay the loan.  Adding together his future legal fees with the monies he has borrowed amounts to approximately $360,000 in potential legal fees.

4. Having so determined these factual matters I must now determine the source and head of power permitting me to make the order the husband seeks.

5. The decision of Strahan & Strahan (Interim Property Orders) (2011) FLC 93-466 (“Strahan”) is still good law.  That decision requires that a court must establish the source of power for the making of the order as the source of power determines the necessary preconditions, relevant considerations, factors or matters the court must take into account in the making of such an order.

6. When pressed to clearly tell the Court the head of power the husband was relying upon Mr Gould was somewhat coy on this issue. He submitted there were three heads of power.

7. First, the husband is seeking to discharge the injunctive order restraining him from accessing his superannuation fund and if that is granted he can just access the fund as he has now retired and thus the injunctive power under s 114 of the Family Law Act 1975 (Cth) (“the Act”) is a head of power.

8. Or secondly, the Court can make an order by way of an interim property settlement as per section 79 of the Act.

9. Thirdly, the Court can make an order as an interim maintenance application as per section 74 of the Act.

10. When pressed on which option the husband relied upon he submitted this was more in the nature of an interim maintenance application and not an interim property distribution, or that the head of power was section 114 of the Act or the Court exercising its power under section 80(1)(h) of the Act.

11. The wife's own submissions by Mr Lloyd SC that the husband receive $2,000 a week from his SMSF supports the husband's position that the power I am exercising is the maintenance power under section 74 of the Act.

12. Further, the wife's alternative position that the husband receive $100,000 supports the proposition that the head of power being exercised could be either section 117 of the Act for payment of future legal costs and/or section 79 of the Act, an interim property distribution for the payment of future legal fees.

13. The ratio of Strahan is that an order of the type being sought by the husband may be made under section 74 of the Act, section 79 of the act, section 117 of the Act or section 80(1)(h) of the Act. At paragraph 86 their Honours say:

    …If the source of jurisdiction is s 117(2) of the Act then the court may make such order as it considers just provided there are justifying circumstances. If the order is sought under s 79 of the Act then the court may make such an order as it considers appropriate provided it is satisfied that it is just and equitable to make the order. If the order is sought under s 74 of the Act then the court may make such order as is proper.

14. In exercising the power under section 74 of the Act I must make such order as is proper and that includes having regard to the relevant matters under section 75(2) of the Act.

15. Having regard to those factors on the evidence I am satisfied:

    (1)The husband does not have sufficient funds to support himself to a reasonable level having regard to the standard of living the parties enjoyed during the marriage; 

    (2)That he is unable to support himself adequately by reason of his age and state of health;

    (3)That the husband made a significant contribution to the current asset pool;

    (4)The making of the order sought by the husband will not defeat or have any negative impact upon the wife's ultimate claim to the property of the parties’;

    (5)That he has insufficient funds to meet his ongoing legal fees and this is a relevant factor under section 75(2)(o) of the Act.

16. In light of the above I find it is proper to make the order sought by the husband under section 74 of the Act should I determine so to do.

17. In exercising the power under section 79 of the Act I must be satisfied that the order I propose to make is just and equitable and proper in all the circumstances. In making an order under section 79 of the Act I must have regard, briefly, to the matters under section 79(4) and 75(2) of the Act. I have already had regard to the relevant factors under section 75(2) of the Act as above.

18. Going to a brief consideration of the matters under section 79(4) of the Act.

19. The wife's assertion that as the husband will be receiving the parties’ superannuation she is in some way prejudiced because such an asset is different to cash and has a tax benefit can, if determined relevant by a trial judge, be rectified given the value of the assets held as between the parties.

20. The husband's contribution to the parties’ asset pool is a significant direct financial contribution in that he owned the properties at Suburb D and Suburb E, a cash share portfolio interest in a self-managed superannuation fund and earnt a significant income during the relationship.

21. This is a relationship and marriage of some 11 years with no children.

22. Both parties have made non-financial contributions to the marriage which I am unable to assess.

23. The parties’ contribution of homemaker will form a part of the Court’s ultimate determination.

24. There will be no effect on either parties’ earning capacity by an order that the husband’s entitlement to his interest in the current self-managed superannuation fund be provided to him.

25. There will be no negative impact upon the wife's ultimate claim for 50 per cent of the matrimonial pool if I make the orders sought today.

26. Paraphrasing the decision in Zschokke & Zschokke (1996) FLC 92-693 which was adopted by their Honours in Strahan at [87], if an order is to be made under section 79 of the Act:

    …it would seem that regard should be had to the requirement in s 79 that the orders be just and equitable and this would require the Court to undertake at least some brief consideration of the matters in s 79(4) including those referred to in a 75(2). If on a brief consideration of those matters, it seems likely to the Court that the party who is the applicant for the interim order for an advance of funds from the other party will be likely to receive by way of property settlement a sum sufficient to cover the advance, that would seem to be sufficient to enable the order sought to be made…

27. In light of the above I find it is both just and equitable and proper in all the circumstances to make the orders sought by the husband under section 79 of the Act should I determine so to do.

28. I will make the orders sought by the husband and exercise my power under section 74 of the Act so to do, noting that the trial judge will take into account the provision to the husband of monies to support himself, and to pay legal fees from the matrimonial pool in their ultimate determination to do justice and equity as between the parties. Therefore I make the orders sought by the husband in his application being orders 1, 2, 3, 4, 5.

I certify that the preceding ninety-five (95) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Henderson.

Associate:

Dated:       6 August 2021