Akbar and Akbar (No 3)

[2016] FamCA 638

FAMILY COURT OF AUSTRALIA

AKBAR & AKBAR (NO 3) [2016] FamCA 638

FAMILY LAW – Spousal maintenance.  Interim order. – Where there is no dispute other than respondent’s capacity to pay – Reasonableness of respondent’s expenditure – negative gearing.

Evidence Act 1995 (Cth)
Family Law Act 1975 (Cth)

Hall and Hall [2016] HCA 23
Redman and Redman [1987] FamCA 2; (1987) FLC 91-805; (1987) 11 Fam LR 411
Stein and Stein [2000] FamCA 102; (2000) FLC 93-004
Wilson and Wilson (1989) 13 Fam LR 205

APPLICANT: Ms Akbar

RESPONDENT: Mr Akbar

FILE NUMBER: MLC 1699 of 2015

DATE DELIVERED: 8 August 2016

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: Cronin J

HEARING DATE: 3 AUGUST 2016

REPRESENTATION

COUNSEL FOR THE APPLICANT: Ms Tulloch

SOLICITOR FOR THE APPLICANT: Dominic Esposito Solicitors

COUNSEL FOR THE RESPONDENT: In Person

SOLICITOR FOR THE RESPONDENT:

Orders

1. That the extant order for the husband to pay to the wife spousal maintenance be varied to the sum of $750 per week, the first payment to be made upon the day at which the next payment under the extant orders is due.

2. That all outstanding interim applications are otherwise dismissed.

IT IS CERTIFIED:

1. That pursuant to Order 19.50 of the Family Law Rules 2004 it was reasonable to engage counsel to attend.

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 Akbar & Akbar (No 3) 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 MELBOURNE

FILE NUMBER: MLC 1699  of 2015

Ms Akbar

Applicant

And

Mr Akbar

Respondent

REASONS FOR JUDGMENT

1. Ms Akbar (“the wife”) seeks to increase the amount of spousal maintenance that Mr Akbar (“the husband”) was ordered to pay by an order made in February 2016.  As set out at the commencement of these reasons, the amount should be fixed at $750 per week.  These are my reasons.

2. The husband and the wife were married and have three children.  Their relationship came to an end in September 2012 and they are now divorced.  The children live with the wife and there is currently no contact occurring between them and the husband.  The husband is a health professional and the wife is currently not in employment.

3. The wife filed her initiating application in February 2016 and sought an interim spousal maintenance order of $2500 per week.  The matter came before Bennett J where the parties apparently could not obtain any significant hearing time and, with both parties represented by counsel, a compromise relating to the maintenance issue was reached with the husband consenting to pay to the wife $500 per week until further order.  Importantly, the order was endorsed with a notation that the wife reserved her right to argue for more money when the Court could accommodate the case.  For reasons that do not matter, it has taken until August 2016 for that to occur and during the intervening period, the husband has become self-represented.

4. On opening the wife’s case, her counsel said the order now being pursued was $1500 per week not what she had sought in February 2016.

5. In reply, the husband said his position was that the order should be $750 per week.  That concession, along with the earlier consent order, meant that the wife did not have to prove the relevant threshold issue of her entitlement to maintenance.  Although the husband did not formally concede the wife’s “need” for $1500 per week, he acknowledged that if he had it, he would gladly give whatever he had to the wife and by inference, to his children.  All of this is important because it puts into context how the hearing was then conducted. 

6. At an earlier hearing before Thornton J, both parties had agreed to conduct the proceedings by submission but, because of the nature of the evidence before the Court, it quickly became apparent that it was not possible let alone practicable to do it that way.

7. The wife’s evidence was really contained in a financial statement filed 6 June 2016.  The husband chose not to cross-examine her about her financial position. 

8. The husband’s evidence was primarily contained in a financial statement filed 16 June 2016.  Counsel for the wife stated at the outset that her client did not accept its accuracy.  She required the husband for cross-examination in the course of which, various financial documents were put to him which related to the financial year ended June 2015.  I have relied upon those because the wife put them into evidence but they portray a picture much closer to the husband’s position than that which the wife would have the Court accept.  Unfortunately, the wife did not accept the husband’s position but was not in a position to prove her theory that he was not only capable of paying what she sought but that he had also sent large sums of money overseas. 

9. In this limited hearing, I have relied on the evidence about which there is some certainty.  I accept that the “financials” are a year old and that there may be very few significant changes but combined with the largely unchallenged evidence of the husband’s expenditure, I am satisfied that the Court has enough information to make the determination that follows.

10. It must also be immediately said that discovery has been a disputed issue and there could be a finding of sloppiness on the part of the husband.  In very recent days, he has sent significant volumes of documents to the wife’s solicitor.  Much complaint was made about that but here, the income stream seems obvious.  What is not clear remains the question of what money is available and at the husband’s disposal.  Earlier interlocutory orders for the parties to borrow $100,000 to pay to the wife have not been implemented.  It may be that it is correct that the husband’s banker will not lend the money.  The order required an effort to be made to implement the payment.  I do not criticise the husband based on what seems to have been his efforts.

11. In addition to all of those problems, the parties agreed to sell various investment properties.  Those properties are owned by their family trust.  On a cursory view of their family trust and its balance sheet, there is an impending difficulty for them in getting that money out of the trust.  Counsel for the wife said that her client did not want any real property in specie.  There is therefore a tax issue looming.  All of these sorts of issues compounded the uncertainty about just what is available to the husband to pay spousal maintenance.  Despite being a health professional, whose main income stream comes from the government coffers, the parties have had the significant benefit of a negative gearing arrangement that both parties set up and from which, they enjoyed considerable affluence.  Now, the wife wants that ignored to some extent and for the maintenance to be paid from (effectively) the business income stream.  I accept that it is not that simple but the absence of legal representation for the husband made it difficult, in any evidentiary sense, in working out the “wood for the trees”.

12. I heard the husband cross-examined by counsel for the wife and he responded to her questions.  Nothing about his evidence suggested that he was hiding anything nor being untruthful.  He seemed to know his financial position thoroughly.  Thus, in respect of the present determination, as it is an interim arrangement, it can be revisited at trial if further and better evidence comes to light.

13. The structure used by the parties was modestly simple.  There is a partnership arranged between the health professionals with whom the husband works where some have their own corporate structures.  A service entity bills them and provides the necessary facilities and staff.  As will be seen, the profit from that is minimal.  There is an entity which provides the husband with a salary and a director’s fee and that reduces the entity’s profit but those two amounts are directly translated into the husband’s personal taxation return.  That leaves the non-business investments. 

14. The parties have acquired real properties which included both residential and vacant land.  Most of the residential property has been negatively geared.  Hence, the business income pays the relevant shortfall.  In an unusual twist, one property in the name of the wife alone houses her parents.  It is encumbered by a non-deductable (for tax purposes) mortgage and the husband pays the payments.  That must be so because the wife has no income.  Interestingly, the parents apparently make no contribution.  The husband also pays a personal loan relating to a car driven by the parents.  These two expenses are not easily recognisable in the husband’s financial statement or (obviously) the financials of the entities that were tendered to the Court but the wife’s counsel did not dispute that the husband makes at least the mortgage payment.  I see no reason to doubt his accuracy relating to the car loan. 

15. The juggling of the investment position has to be carefully considered.  The wife treated the trust profit as the husband’s but, as the records showed, there were distributions (albeit modest) to family and non-family members including children (although it is unclear who received those payments) but as the wife is a director of the trustee entity, her protestations of not being involved are not much help on this interim issue and the control of finances by the husband will be a matter for trial.  Thus clarifying just what is available enables the Court to work out on the best evidence available, what the husband can provide by way of spousal maintenance.

16. Before turning to those matters, the following matters guide this determination.

17. In Redman and Redman [1987] FamCA 2; (1987) FLC 91-805; (1987) 11 Fam LR 411, the Full Court in dealing with an interim hearing for spousal maintenance said it was not necessary at that stage to split off definitively the costs of the children. The Court went on to say that one should not lose sight of the fact that this was an interim arrangement which could be revisited at trial. Thus, the evidence did not need to be extensive and findings not so precise. However, in Stein and Stein [2000] FamCA 102; (2000) FLC 93-004, the Full Court concluded that it would be an error to determine a claim for interim spousal maintenance by reference to the expenses referable to the claimant and the children of the marriage in her care. However in that case, there was significant wealth.

18. The blurring of the boundary between the expenses of the wife and those of the children here is not so difficult to see.  Apart from the fact that the husband did not challenge the significant expenses of the wife’s household spent on the children, it was not disputed by him that his child support on the various payments that he made, did not cover all of those expenses.  The important thing to remember here is that the husband did not dispute the $1500 sought by the wife was an appropriate figure if he had the capacity to pay. 

19. In Hall and Hall [2016] HCA 23 the High Court of Australia reminded courts that the relevant provisions in Part VIII of the Family Law Act 1975 (Cth) (“the Act”) had to be followed. That is, ss 72, 74 and in particular s 75(2) have to be considered but in this case, the husband’s concession in relation to the threshold issue of the wife’s entitlement overcomes some of the hurdles. Be that as it may, it is also important to point out that as the wife was the claimant, she bore the onus of proof and the ordinary standard of proof for a civil proceeding applies (see s 140 of the Evidence Act 1995 (Cth)).

20. As earlier set out, the evidence in such a case does not need to be extensive and the findings not precise because apart from anything else, the issues can be rectified at trial.

21. This case therefore is about the husband’s capacity to pay.

22. One of the considerations as earlier mentioned is s 75(2) of the Act. The particular provision in s 75(2)(n) requires the Court to consider the terms of any order made or proposed to be made under s 79 of the Act relating to property of the parties. As became apparent in discussion with counsel and indeed the husband, there is a significant taxation liability likely in this case because the balance sheet of the trust shows there are liabilities of nearly $1.4 million by way of “beneficiary loans”. In addition, there are significant mortgage loans to the National Australia Bank. Thus, significant money appears to be owed to certain beneficiaries and how the parties get that balance sheet rectified may be a problem but in this spousal maintenance hearing, I do not have a very clear understanding of just what is available to the parties. Accordingly, it would be unwise for the Court to look at anything other than the income stream available immediately to the husband.

23. In addition to property orders, s 75(2) also requires the Court to consider child support paid under any assessment and the wife through her counsel, indicated that the existing assessment was not satisfactory from the wife’s point of view and that she intends to bring a departure application. If indeed that is so, any significant increase in a child support obligation would also impact upon the capacity for the husband to pay spousal maintenance. In the course of his evidence, the husband said that he was paying his child support but he was also making payments to the children as and when they called for them and doing the best I can, it seems to be something in the vicinity of $150 per week. Whilst it was suggested to the husband that it might be more sensible for that money to be paid to the wife and for her to do deal with the children’s request, the husband did not seem at all comfortable with that idea. It would seem that the relationship between the husband and the children is already fraught with difficulty and such a concept might make it worse.

24. Section 80(1)(h) of the Act empowers the Court in exercising its powers under Part VIII of the Act to make any order pending the disposal of proceedings. Thus, there is a power to make more than one order. The initial order in February 2016 can therefore be altered pending the ultimate disposal of these proceedings. That is the power that I propose to rely upon in exercising jurisdiction under Part VIII of the Act.

25. It is also important to observe that in making any such determination, the Court has considerable discretion because of the very nature of the limited evidence available (see Wilson and Wilson (1989) 13 Fam LR 205). Albeit that the husband did not cross-examine the wife about her financial position, there was also very limited cross-examination of the husband about the expenses that he incurs. For example, he spends $300 per week on a cleaner and whilst that might be seen as unreasonable, having regard to the nature of his profession, the extensive property portfolio that the parties have and what appears to have been a significant requirement for discovery, I would not be prepared to say that such a claim was unreasonable not only because of the financial position but also because of the time available to the husband to undertake the tasks. It can certainly be reviewed at trial.

26. In the same way, the husband in previous years through his business has made significant donations to charity which have been allowed by the Australian Tax Office as deductions.  His evidence was that the 2016 year will not see those deductions because he has not been able to make the payments.  As such, counsel submitted that if the 2015 financials were being used to determine the husband’s income, that money would have to be added back.  It is not as simple as that because a reduction in the deductions increases the profit and thereby increases the tax.  This is an example of where the Court does the best it can with the evidence that it has available to it.  The wife tendered into evidence the financial statements of the primary company that deals with the business.  That showed gross revenue of $570,000 but after expenses were deducted, the profit after income tax was $2500.  Here, wages of $120,000 and director’s fees of $40,000 for the husband had been taken out and translated into his tax return which was also tendered into evidence.  Thus, I know the husband earns at least $160,000.

27. The wife also relied upon the financial statements of the family trust.  It is here that the negative gearing occurs and the distribution of entitlements from the business, as distinct from the husband’s efforts as a health professional, are balanced against the losses incurred from the negative gearing.

28. Accordingly, I find that the husband’s income stream is:

    Wage  $120,000

    Director’s fees  40,000

    The Trust  18,855

    Dividends  2,505

    The approximate amount of

    
    

    donation not made in 2016  33,800

    Sub-total  $215,160

29. Some of the payments just mentioned are self-evident.  The trust needs explanation.  The husband’s income tax return for 2015 showed that he had income of $38,084 from trust resources but I have been unable to work out how that figure was calculated because the profit in the trust was $20,935.  That sum was not distributed to the husband according to the return submitted in evidence.  Five payments of $416 went to people other than the husband, leaving him with $18,855.

30. The dividends of $2505 appear to be the net profit in the primary business entity.  That too does not appear entirely clear from the husband’s own tax return but that is the best that I can determine on the limited evidence available bearing in mind that these figures are 12 months old and the husband was unable to be very clear as to what the current figures are. 

31. As earlier mentioned, I have added back the donation issue because there has been a consistent pattern up until the end of the financial year ended 30 June 2015 of making donations but the husband was emphatic that it was not occurring this current year.  He said that the income stream for the business may have gone up because they have employed two new people but that may not necessarily make much difference in the end.  I think it is reasonable in the circumstances to add back the donations to get a picture of just what money is coming in.

32. When assessed on a weekly basis, the husband has available to him a gross sum of $4138.  That is not consistent with his own financial statement sworn in June 2016 showing that he earned an estimated $4864 but I am unable to assess how he arrived at that figure and as earlier mentioned, the wife said that his financial statement was not accurate.  The primary source documents which were tendered in evidence seem to be more likely.  It cannot be suggested that the figure used by the husband came from the 2016 financial year because it was common ground that those returns had not been completed.  Accordingly, I accept that the primary money coming into the husband’s hands is $4138 per week. 

33. Against those sums, the following must be deducted:

    Taxation  $1,329

    Current spousal maintenance  500

    Current child support  150

    Medical and school expenses

    
    

    for the children  330

    Approximate extras for the children            150

    The mortgage payment on the wife’s

    
    

    parents’ residence  300

    The personal loan on the car  120

    Total  $2,879

34. One then has to contemplate the expenses that the husband incurs by way of living expenses.  Many of these figures were not challenged other than those that I have earlier mentioned.  In my view it is reasonable to allow the following:

    Food, household supplies, utilities etc     $442

    Household repairs  150

    Clothing and dry cleaning   90

    Health insurance  50

    Chemist  4

    Gardening/cleaner  338

    Total  $1,074

1. I propose to allow the house repairs albeit high because in this case, the husband’s evidence was that he has been required to do a number of capital improvements which may or may not have been allowed as deductions.  The evidence is unclear and the wife has not established that the husband is not making those payments.

2. As earlier mentioned, I propose to allow the cleaning expenses.

3. When the living expenses are added to the $2,879, it totals $3,953 and the difference between that and the income stream is $185 per week.  The wife already has $500 per week and the further $185 would take it to $685 per week but as the husband has offered $750 per week, that seems to be a reasonable sum in all of the circumstances.

4. Accordingly, I propose to make an order that the husband immediately commence making a payment of $750 per week.

5. As I earlier mentioned, the Court is obliged to consider the matters in s 75(2) of the Act as they apply to both parties. It is unnecessary to consider that in relation to the wife because of the husband’s concessions as I have outlined. In respect of the husband, I have taken into account all of those matters as set out in s 75(2) as should be evident from the financials that I have made about both his income stream and the expenses that he has incurred which were largely unchallenged. For example, I accept that there is no impediment to the husband’s earning capacity. I accept he has child support obligations but also commitments to his children which he is meeting. I accept the parties he property but that does not currently affect the spousal maintenance entitlement or commitment.

6. There were two other issues before the Court to be briefly mentioned.  The wife initially sought valuations of the various real properties but in the circumstances, that may no longer be a good idea if they are to be sold but it may be more important to look at the taxation consequences of any such sales.

7. The second matter related to the question of discovery.  I was not asked to make an order for specific discovery but the husband is now on notice that he has to provide documents on an ongoing basis and recalcitrance (by either party) will delay this hearing because I would not be prepared to commence it until such time as the parties have obtained all of their evidence.  To the extent that the parties do complete all of those necessary tasks and have not reached agreement, they can make an approach to the registrar to have the matter listed with some priority.

8. Accordingly, I make orders in terms of the matters set out including a dismissal of all outstanding interim applications.

I certify that the preceding Forty Two (42) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin delivered on 8 August 2016.

Associate: 

Date:  8 August 2016