ADAMI & ADAMI
[2019] FamCA 162
•22 March 2019
FAMILY COURT OF AUSTRALIA
| ADAMI & ADAMI | [2019] FamCA 162 |
| FAMILY LAW – PROPERTY – Interim Orders – Interim property distribution – Whether it is just and equitable – Where there is enough equity in a property to provide for any “clawback” at final settlement if necessary. FAMILY LAW – SPOUSAL MAINTENANCE – Factors considered – Reasonable needs of the wife – Ability of the husband to meet the reasonable needs of the wife. |
| Family Law Act 1975 (Cth) ss 72(1), 74(1), 75(1), 75(2), 75(2)(b), 75(2)(o), 80(1)(h), 79, 117, 117(2A) |
| Brown & Brown (2007) FLC 93-316 Felice & Felice [2011] FamCA 162 Hall & Hall (2016) 257 CLR 490 Klearchos & Klearchos & Ors [2015] FamCAFC 217 Maroney & Maroney [2009] FamCAFC 45 McCrossen & McCrossen (2006) FLC 93-283 Medlow & Medlow (2016) FLC 93-692 Strahan v Strahan (Interim Property Orders) (2011) FLC 93-466 |
| APPLICANT: | Mr Adami |
| RESPONDENT: | Ms Adami |
| FILE NUMBER: | DNC | 521 | of | 2017 |
| DATE DELIVERED: | 22 March 2019 |
| PLACE DELIVERED: | Adelaide |
| PLACE HEARD: | Darwin |
| JUDGMENT OF: | Berman J |
| HEARING DATE: | 8 March 2019 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Ms Picker |
| SOLICITOR FOR THE APPLICANT: | Darwin Family Law |
| COUNSEL FOR THE RESPONDENT: | Mr Looney QC |
| SOLICITOR FOR THE RESPONDENT: | Withnalls Lawyers |
Orders
That the net proceeds of sale of B Street in or about the sum of THIRTY FIVE THOUSAND DOLLARS ($35,000) held in Bowden McCormack Lawyers and Advisors’ Trust Account be paid to Withnalls Lawyers Trust Account for and on behalf of the wife.
That paragraphs 1(a)(i) with respect to fuel expenses and (a) with respect to the wife’s mobile telephone expenses of orders made 12 February 2018 be discharged.
That the Application in a Case filed 27 February 2019 and the Response filed 7 March 2019 be dismissed.
Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Adami & Adami has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).
| FAMILY COURT OF AUSTRALIA AT ADELAIDE |
FILE NUMBER: DNC 521 of 2017
| Mr Adami |
Applicant
And
| Ms Adami |
Respondent
REASONS FOR JUDGMENT
Introduction
By Amended Initiating Application filed 11 December 2018, Ms Adami (“the wife”) seeks amended final orders for property settlement and spousal maintenance.
Mr Adami (“the husband”) relies upon his Response filed 7 February 2018.
The proceedings have been listed for hearing at 10.00 am on 19 August 2019 as a three day matter.
Orders were made by consent on 12 February 2018 that required the husband to pay spousal maintenance to the wife in the following terms:-
(a)All motor vehicle expenses for the motor vehicle driven by the Wife including but not limited to:-
(i)All fuel expenses;
(ii)Any loan obligations as and when they fall due;
(iii)Registration and insurances;
(iv)All services and maintenance expenses, including tyres.
(a) The Wife’s mobile telephone expenses;
(b) The Wife’s internet expenses for L Street, M Town, Victoria;
(c) The sum of $500.00 per week payable to the Wife’s Commonwealth Bank Account BSB … Account No. .. each Monday;
(d)All insurances, loans, rates, maintenance and expenses for the following real estates:
(i)T Street, Q Town, Northern Territory;
(ii) O Street, U Town Northern Territory;
(iii) L Street, M Town, Victoria; and
(iv) B Street, Northern Territory.
Following a hearing on 9 November 2018, orders were made on 16 November 2018 which set out how the anticipated net proceeds of the sale of the property situate at B Street would be dispersed.
On 27 February 2019 the husband filed an Application in a Case seeking orders summarised as follows:-
(1)That the net proceeds from the sale of the B Street property be applied to pay down debt of A Pty Ltd.
(2)That the property at I Street, J Town, New South Wales be listed for sale and that any net proceeds be applied to pay down the debt of A Pty Ltd.
(3)That all previous maintenance orders be discharged and that there be no requirement for the husband to pay any spousal maintenance arrears.
(4)That the wife return to the husband the Motor Vehicle 1 conditional upon the husband providing the wife with a “new 4 cylinder 2 wheel drive vehicle such as a Toyota Corolla or similar”.
(5)That by way of spousal maintenance the husband pay the following:-
(a)All costs associated with the provision of the 4 cylinder motor vehicle including insurance, but not fuel or maintenance;
(b)Payment of insurance on the K property as and when these payments fall due.
The application is supported by the following documents:-
(1)Affidavit of the husband filed 27 February 2019.
(2)Affidavit of Mr V filed 27 February 2019.
(3)Financial Statement of the husband filed 27 February 2019.
(4)The AC Company report dated 5 November 2018.
By Response filed 7 March 2019 the wife seeks to dismiss paragraphs 3 to 7 inclusive of the husband’s application in a case. She seeks the sole use of the Motor Vehicle 1 and a continuation of the order for spousal maintenance.
In addition, the wife seeks enforcement of arrears of spousal maintenance and that the net proceeds of the sale of the Z Street property be dispersed as follows:-
(a)$54,930.79 to the wife on account of legal fees;
(b)$14,000 to the wife on account of the husband’s expenditure of the Motor vehicle 6 funds; and
(c)$10,869.02 to the wife on account of reimbursement for insurances, rates and maintenance expenses that were to have been paid by the husband to the wife pursuant to order 1(d)(iii) of the orders 12 February 2018, with this sum to be characterised as partial property settlement of funds paid to the husband.
Both parties seek the sale of the property at R Street, Town S, New South Wales (“the Town S property”), although they are not yet agreed as to the terms and conditions of sale and in particular the manner in which any net proceeds of sale are to be dispersed.
The Z Street property
The Z Street property was sold for $355,000. Settlement has been delayed, but at the date of the hearing was anticipated to occur in early 2019. The net proceeds of sale will be $35,428.87. The settlement statement reveals that the Commonwealth Bank holds a registered mortgage over the property of $303,538.73.
The wife anticipated that the extent of the bank’s liability was $207,390.14 and by reference to [21] of the wife’s affidavit, the wife asserts that she and the husband have been unable to agree on the distribution of proceeds which she understood to be $133,833.17.
The husband may have had a similar understanding given that the purpose of his application in respect to the anticipated net proceeds of sale of the Z Street Z Street property was to reduce what he considers is the onerous liabilities of A Pty Ltd.
Even on the most optimistic view, it is unlikely that $35,428.87 would have a significant beneficial impact on the financial position of A Pty Ltd.
The wife does not agree that the purported further funds to be paid to the Commonwealth Bank is required to discharge the loan. She argues that she did not receive any notice of the increase in payout to the Commonwealth Bank of $96,148 and contends that the husband has not made full and frank disclosure of his dealings with the bank. The wife is concerned that the husband is attempting to divert property of the parties into A Pty Ltd.
There is uncertainty as to the basis of the bank seeking further funds. What is not known is whether the payment of further funds is at the election of the husband or is a requirement of the bank.
Upon the application of the wife, but without opposition by the husband, the following order was made in Chambers on 8 March 2019:-
There be a mandatory injunction requiring the husband to direct the Commonwealth Bank of Australia to receive at settlement only those funds necessary to release the security for R Street, Town S and Z Street.
It is anticipated that the net proceeds of sale will be about $35,000.
Property at R Street, Town S
The husband is the sole registered proprietor of the Town S property.
Whilst both parties seek orders that the property be sold, the wife does not at present press that order because she considers that by reference to [12] of the husband’s Affidavit filed 27 February 2019, he asserts that the property is held on trust for Mr AA. The husband contends that the wife has been aware of the arrangement and relies on email communication between the parties and the Commonwealth Bank in support of his contention that the wife is aware of the interest held by Mr AA.
Contrary to [12] is the husband’s concession at [17] in the following terms:-
I accept that the Town S property forms part of the property pool.
There is no appearance by Mr AA, nor is there any indication as to whether the current proceedings and in particular the husband’s affidavit have been brought to his attention.
In the absence of either party seeking to press for the sale of the Town S property, I propose to make no order in that regard on the basis that the status of the Town S property will be a matter for trial. It is reasonable to assume that either or both of the parties will bring the proceedings to the attention of Mr AA.
C Pty Ltd and A Pty Ltd
There has been considerable focus as to the value of the husband’s interest in C Pty Ltd and A Pty Ltd. The AC Company report of 5 November 2018 appears as an annexure to the Affidavit of Mr BB filed 8 November 2018. In my judgment delivered 16 November 2018 I referred to the executive summary which determined that the appropriate methodology to be adopted was an asset backing valuation given that Mr BB did not consider that the business had a “goodwill” component.
The husband contends that the value of his interest is modest and limited to $137,960.
The wife does not accept the valuation outcome and amongst other considerations contends that Mr G is indebted to the husband and wife for the sum of $600,000. The husband argues that even if he is liable for that sum, Mr G has never had the capacity to pay.
In addition, the husband focuses on a formal demand that he has received from the P Bank in the sum of $448,587.35 for which he may be personally liable.
The husband confirms that he is attempting to negotiate a settlement with the P Bank.
The husband argues that the state of A Pty Ltd and C Pty Ltd is parlous and unless funds are injected into the business its financial survival is at risk. The wife does not accept the husband’s contention and in particular rejects the accuracy of the matters raised in the Affidavit of Mr V who is the outsourced Chief Financial Officer for A Pty Ltd.
Mr Edmunds summarises the financial position of A Pty Ltd in [5] as follows:-
As at 31 December 2018 A Pty Ltd’s overall cash position and trade debtors were approximately $223,000 and $1,153,000 respectively.
and further at [7]:-
In addition to this the business had liabilities of the following, also at 31 December 2018:
(a)Employee annual leave and sick leave entitlements totalling approximately $202,00 (sic);
(b)$459,577 owing on A Pty Ltd’s [Australian Taxation Office] integrated client account;
(c)$134,553 payable;
(d)$947,866 owed to creditors;
(e)Approximately $559,000 in plant and equipment finance;
(f)Credit card debt of $74,599.
Of particular significance is the assertion that there is an amount owing to the Australian Taxation Office consequent upon the lodgement of A Pty Ltd’s December Business Activity Statement of $103,742.
Mr V considers that unless additional cash is made available to pay the December BAS the company may not be solvent.
The wife rejects the dire predictions of Mr V.
Spousal maintenance
The husband summarises his weekly expenditure pursuant to the order for spousal maintenance and child support in the sum of $1,310 from his income and $990 paid from A Pty Ltd.
There is no explanation as to how any monies paid by A Pty Ltd to the wife are recorded, although it is assumed that the amounts as recorded in [42] of the husband’s affidavit are not business related expenses and accordingly, would appear as a debit to the loan account of the husband.
Since 27 November 2018 the husband has ceased paying the wife’s spousal maintenance, the $500 per week and also the payments as set out in [41] of his affidavit, not including the children’s school fees, child support, health and life insurance and extra-curricular activities.
The wife argues that the husband has breached the orders and his failure to comply has resulted in expenditure by the wife of $10,869.02. It is noted that [40] contains a number of items of expenditure that fall into the category of maintenance, in particular the following:-
·Shower door $80
·Crimsafe screen doors $1,470
·Car (scratched doors) $700
·Driveway, sandpit, clean up and remove garden bed $5,000
It is a matter of debate as to whether the husband is obligated to pay for the cost of maintenance of the M Town property in the absence of his consent that the works were necessary.
Motor Vehicle 1
The Motor Vehicle 1 was purchased in February 2018 and has remained in the wife’s possession since that date.
The husband now seeks the return of the vehicle and offers the wife a smaller motor vehicle of lesser value.
The wife does not accept the husband’s proposal and alleges that of relatively recent date the husband has:-
(a)purchased a new motor vehicle for his parents with the expenses being met from the business;
(b)the business records record a Motor Vehicle 2 and two Motor Vehicle 3’s having been purchased and not used for the business;
(c)that since the purchase of the wife’s Motor Vehicle 1 the husband has purchased a Motor Vehicle 4 for $93,233; and
(d)the balance sheet of A Pty Ltd records that the business owns an Motor Vehicle 5 which has been used by Mr G.
The husband does not set out the financial comparison of the costs currently associated with the wife’s retention of the Motor Vehicle 1 and the potential saving to the business of the husband causing a new motor vehicle to be purchased for the wife.
The husband concedes that his proposal is for the business to purchase a new vehicle with all of the attendant costs.
In the absence of any detailed information, whilst it is likely that the loan repayments would be less, there remains uncertainty as to the other expenses. In any event, the husband does not indicate what he intends to do with the Motor Vehicle 1 were it to be returned to A Pty Ltd.
I was not able to determine whether A Pty Ltd currently claims the Motor Vehicle 1 as a business expense.
The wife seeks to retain the vehicle and understands that as part of her settlement of property she will finance the purchase of the Motor Vehicle 1 from PCG.
The financial arrangements in respect of the Motor Vehicle 1 being retained by the wife and the husband’s proposal to purchase a smaller vehicle of lesser value are of such uncertainty that I decline to make the order that the husband seeks.
Legal fees
The husband has paid $66,852 in legal fees and $26,400 for the single expert report.
On 16 January 2019 he obtained a loan of $46,775 from AB Pty Ltd and transferred those funds to his solicitor.
The payment of legal fees has been a matter of contention between the parties. On 15 August 2018 the wife filed an Application in a Case seeking a partial property settlement to assist her in the payment of her legal fees in circumstances where at that time the husband had paid his solicitors $41,824.
The wife has significant legal fees outstanding and anticipated that her fees would be assisted by the “dollar for dollar order” made on 16 November 2018.
The husband relies upon the exception to the order in that he has borrowed money from a third party credit provider to enable his legal fees to be paid.
It is a reasonable finding that the wife does not have the capacity to pay her legal fees either from her own resources or by borrowing funds.
The property pool
Whilst the wife does not accept the husband’s summary of the assets and liabilities of the parties, the schedule as set out in [5] of the husband’s affidavit is at least of assistance in highlighting that there is modest equity in the M Town property. For reasons best known to the parties, neither pressed for the sale of the Town S property notwithstanding that it is common ground that the property is to be sold. The husband did not pursue his application in circumstances where it appears to be the property that holds the greatest level of equity.
The Z Street property has now been sold and to that extent the level of obligation on the husband to maintain the properties of the parties is limited to M Town and to a lesser extent Town S.
Subject to the assessment of value of the husband’s interest in C Pty Ltd and A Pty Ltd, it is likely that the pool of property available for division is modest.
Legal principles
In the recent case of Hall & Hall (2016) 257 CLR 490 the High Court set out the appropriate approach in considering an application for interim spousal maintenance as follows:-
3.… The gateway to the operation of Pt VIII in relation to spousal maintenance is in s 72(1). That sub-section provides that “[a] party to a marriage is liable to maintain the other party, to the extent that the first-mentioned party is reasonably able to do so, if, and only if, that other party is unable to support herself or himself adequately … having regard to any relevant matter referred to in [s] 75(2)”.
4.The liability of a party to a marriage to maintain the other party that is imposed by s 72(1) is crystallised by the making of an order under s 74(1). That sub-section provides that, “[i]n proceedings with respect to the maintenance of a party to a marriage, the court may make such order as it considers proper for the provision of maintenance in accordance with this Part”.
5.A court exercising the power conferred by s 74(1) is obliged by s 75(1) to take into account the matters referred to in s 75(2) and only those matters. Those matters are presented as a comprehensive checklist. They include what s 75(2)(b) refers to as “the income, property and financial resources of each of the parties and the physical and mental capacity of each of them for appropriate gainful employment”. They also include, by virtue of s 75(2)(o), “any fact or circumstance which, in the opinion of the court, the justice of the case requires to be taken into account”.
(footnotes omitted).
As noted in Hall & Hall (supra), the High Court confirmed that an applicant seeking orders for spousal maintenance carries the evidentiary burden as set out in s 140 of the Evidence Act 1995 (Cth).
In Maroney & Maroney [2009] FamCAFC 45 the Full Court said at [56]:-
Once a party … establishes an entitlement to interim spousal maintenance, and such entitlement is quantified in accordance with that spouse’s reasonable needs, an order may be made notwithstanding that the liable spouse could only satisfy the order out of capital or borrowings against capital assets.
In McCrossen & McCrossen (2006) FLC 93-283 at 80,838 [32] the Full Court after referring to a number of earlier authorities, said that the question as to whether a person is able to support themselves “adequately” is:-
not to be determined upon a “subsistence level” but upon consideration of whether the applicant can support himself or herself “adequately” importing a standard of living reasonable in the circumstances.
(citations omitted).
In an application for spousal maintenance it is necessary to distinguish between the expenses of the spouse seeking an order for spousal maintenance and the expenses of the children of the marriage.
In Brown & Brown (2007) FLC 93-316 at 81,455-81,456 [161] the Full Court summarised the principles to be applied as follows:-
(i)The word “adequately” is not to be determined according to any fixed or absolute standard.
(ii)The idea that “adequate” means a subsistence level has been firmly rejected.
(iii)Where possible both spouses should continue to live after separation at the level which they previously enjoyed if this is reasonable, although the parties’ standard of living may have to be lower if financial resources are insufficient to maintain that standard.
(iv)In some circumstances it may be reasonable for the parties to live at a higher standard than previously enjoyed.
(v)It is not necessary for an applicant for maintenance to use up all capital in order to satisfy the requirement that he/she is unable to support himself/herself adequately.
(vi)However, an applicant is not entitled to live at a level of considerable luxury or comfort merely because the other party is very wealthy.
The husband does not contest the wife is entitled to an award of spousal maintenance, but considers that she has skills which could assist in obtaining employment thereby defraying some of her costs. He considers it is unreasonable that he continue to pay the range of expenses where his income and his ability to source money from A Pty Ltd is now severely compromised.
The wife argues that the order for spousal maintenance was made relatively recently and that circumstances today are not dissimilar to those that promoted a consent order. To the extent that the husband contends both he and A Pty Ltd are no longer in a position to comply with the order, the wife counters by her assertion that the husband has not made full and frank disclosure.
The focus therefore is upon the extent of the wife’s reasonable needs and the husband’s ability to meet them.
It is noted that the husband is now only responsible for the M Town and Town S properties in terms of their expenditure.
The husband’s Financial Statement filed 27 February 2019 sets out his average weekly income as $2,822, with total personal expenditure of $2,800.
The husband’s fixed expenditure is in the sum of $1,715 and $1,085 for Part N discretionary expenditure. Included in the husband’s average weekly expenses is an amount of $320 for the children’s education expenses, fees and levies. I am not told of the husband’s Child Support Assessment, but assume that he is obliged to pay child support in the amount of the assessment fixed at $360 per week, but his expenditure on their school fees is discretionary. That is a matter for the husband.
It seems reasonable therefore that the expenditure as set out in [41] of the husband’s affidavit is within his financial capacity, again noting that he pays school fees and other related expenses for the children that may not be required.
In terms of the weekly expenditure that the business has paid, I consider it reasonable that the wife be responsible for her fuel costs and her mobile phone. The husband should cause the Motor Vehicle 1 loan repayments and registration and insurance to continue to be paid. I do not propose to interfere with the periodic payment of spousal maintenance in the sum of $500 per week.
The payment of mobile phones for the children cannot be strictly considered as spousal maintenance, but I assume that the husband is keen to ensure that the children have the ability to communicate with him independent of the wife and accordingly I do not propose to interfere with that expense.
Accordingly, the order of 12 February 2018 will be amended to require the wife to meet the expense of her mobile phone and fuel for the Motor Vehicle 1.
Interim property distribution
In Strahan v Strahan (Interim Property Orders) (2011) FLC 93-466 the Full Court considered that there were two stages to an application for interim property orders:-
(1)The first stage is a “procedural step” which requires an analysis of whether the circumstances of the case trigger the Court’s power to invoke s 80(1)(h) to make an order for interim property settlement before a final hearing. At this stage, “the overarching consideration” is the interests of justice.
(2)The second stage is the “substantive step” where the provisions of s 79 must be considered and applied but with limitations, given that it is not the final hearing.
In circumstances where a party seeks interim property orders, the Full Court in Medlow & Medlow (2016) FLC 93-692 said at 81,090:-
86.The onus was clearly upon [the applicant] to establish that there were sufficient assets available for the interim distribution and that the effect of any interim order was capable of being reversed as part of the final hearing or would at least not defeat [the respondent’s] property claims. The onus was not on [the respondent] to adduce such evidence.
In that context, the Full Court in Medlow (supra) referred to Strahan and the authorities referred to therein, in confirming that an interim order for the distribution of property must be “amenable to adjustment on a final hearing”.
In terms of the second consideration, an order for interim property settlement should not be made unless it is “just and equitable” to do so.
Given that an applicant in an application for interim property settlement is effectively seeking access to their own funds, it is unnecessary for a “detailed enquiry as to the purposes for which the funds are to be used”. (Felice & Felice [2011] FamCA 162 at [12]).
Sufficient particulars must nonetheless be provided to enable the Court to determine:-
(i)that the application is genuine;
(ii)to identify the circumstances that make it appropriate to give consideration to exercising its power; and
(iii)to sufficiently weigh the identified needs against the benefit of having only one exercise of a s 79 power.
A further consideration is whether an order should be made to cover interim legal costs.
The power to make an order for costs on an interim or final basis is set out in s 117 of the Act.
In Klearchos & Klearchos & Ors [2015] FamCAFC 217 the Court confirmed that a trial Judge in considering an interim application for costs is required to consider the matters as set out in s 117 and, specifically, s 117(2A) of the Act.
Conclusion
The husband is in a position to fund his legal fees, initially from his own resources (or via A Pty Ltd), but more latterly, by being able to borrow money from a third party credit provider. The wife does not have that capacity.
Whilst at present the wife is represented, it is a relevant consideration that there is not a level playing field in terms of the ability of the parties to meet their legal fees as and when they are incurred.
It is not required that before an order for interim property settlement or interim costs can be made, that a parties’ solicitor must declare that they will cease to act unless they are paid.
The proceedings are complex and will involve significant factual dispute and a detailed forensic consideration of the valuation issues pertaining to the husband’s interest in C Pty Ltd and A Pty Ltd.
Whilst I accept that the husband considers the property pool to be modest and therefore the significant expenditure by each of the parties on the litigation to be a waste of diminishing resources, I am not able to determine the wife’s claim that the husband has failed to make full and frank disclosure and that there are significant business opportunities that the husband will be able to utilise once the proceedings are concluded.
I propose to order that the anticipated net proceeds of sale of the Z Street property in or about the sum of $35,000 be paid to the wife’s solicitors by way of interim settlement of property.
If it should transpire that the wife should not have been entitled to receive further funds, then the equity in her M Town property is sufficient to restore the money back into the pool.
It is a matter for the wife to determine whether and how much of her interim settlement she will retain for her own personal expenses, or utilise to defray some of her outstanding legal fees.
I make orders as appear at the commencement of these reasons.
I certify that the preceding ninety (90) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Berman delivered on 22 March 2019.
Associate:
Date: 22 March 2019
Key Legal Topics
Areas of Law
-
Family Law
Legal Concepts
-
Remedies
4
1