BALDWIN & BALDWIN
[2015] FCCA 3113
•23 November 2015
FEDERAL CIRCUIT COURT OF AUSTRALIA
| BALDWIN & BALDWIN | [2015] FCCA 3113 |
| Catchwords: FAMILY LAW – Application for spousal maintenance – application arises at interim stage – parties’ competing applications for settlement of property fixed for May 2016 – high conflict – nature of interim hearing – meaning of adequately – reasonableness in all the circumstances – what is proper – considerations of justice and equity. |
| Legislation: Family Law Act 1975, ss.72; 74; 75(2); 75(3) |
| See C & C (1996) FLC 92-651 Bevan & Bevan (1995) FLC 92-600 Redman v Redman (1987) FLC 91-805 |
| Applicant: | MR BALDWIN |
| Respondent: | MS BALDWIN |
| File Number: | ADC 4086 of 2013 |
| Judgment of: | Judge Brown |
| Hearing date: | 3 November 2015 |
| Date of Last Submission: | 3 November 2015 |
| Delivered at: | Adelaide |
| Delivered on: | 23 November 2015 |
REPRESENTATION
| Counsel for the Applicant: | In person |
| Solicitors for the Applicant: | Not Applicable |
| Counsel for the Respondent: | Ms Lewis |
| Solicitors for the Respondent: | Angela Ferdinandy |
ORDERS
The husband’s application for interim spousal maintenance filed on 15 June 2015 is dismissed.
IT IS NOTED that publication of this judgment under the pseudonym Baldwin & Baldwin is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT ADELAIDE |
ADC 4086 of 2013
| MR BALDWIN |
Applicant
And
| MS BALDWIN |
Respondent
REASONS FOR JUDGMENT
Introduction
These reasons for judgment relate to an interim application for spousal maintenance. The applicant for spousal maintenance is Mr Baldwin “the husband”. He seeks the sum of $500.00 per week, from the respondent, Ms Baldwin “the wife”.
Background
The parties married on (omitted) 2002. They finally separated in May of 2013. They are the parents of two children – X born (omitted) 2004 and Y born (omitted) 2005. A final parenting order was made on 13 November 2013, which resulted in a week about shared care arrangement for X and Y.
The wife commenced the current round of proceedings on 2 April 2015. She seeks orders which would result in the settlement of matrimonial property proceedings between the parties. The effect of the orders, which she seeks on a final basis, can be summarised as follows:
·The husband transfer to her all his interest in a business entitled (business omitted) “the business”. This is an (business omitted), which primarily provides (business omitted);
·The husband transfer to her three real properties, located at Property S, “the Property S property”; Property B, “the Property B” property; and Property H “the Property H property”. The Property H property has now been sold and moneys realised from its sale paid into credit facilities relating to the business. This is controversial;
·The husband retain a Porsche motor vehicle and the loan relating to it, together with two go-carts. The husband retain his superannuation and liability to pay credit card debts in his name;
·The husband pay to the wife the sum of $70,000.00;
·Otherwise each party retain other chattels and financial resources standing in their respective names.
The husband responded to this application on 15 June 2015. He has acted on his own behalf throughout the proceedings to date. The final orders, which he seeks, can be summarised as follows:
·Property S property, subject to a mortgage of $380,000.00, be transferred to him;
·He receive the sum of $80,000.00 to reflect his interest in the business;
·Credit card debts be divided equally between the parties;
·The wife pay him spousal maintenance in an amount of $500.00 per week for a period of approximately three months.
The parties competing applications have been fixed for final hearing, before myself, on 11, 12 and 13 May 2016. In the meantime, it is necessary for the court to determine Mr Baldwin’s application or spousal maintenance pending this final hearing.
As I understand matters, he now seeks an award of spousal maintenance for a period longer than three months or, in the alternative, the court make an order that the wife pay all recurrent mortgage payments in respect of both the Property B and the Property S property.
Given that the final hearing of the matter is comparatively imminent, I elected to hear the spousal maintenance application on the basis of a consideration of the affidavit material filed to date and submissions from each of the parties.
As such, I acknowledge that the material before me is incomplete and may be the subject of either complete or partial review, at the later substantive hearing. In so far as I reach any conclusions, I do so on the basis that this is an interlocutory proceeding and the relevant evidence will be subject to more exhaustive scrutiny at final hearing.
There is no doubt that the relationship between the parties is currently extremely difficult. As such, each mistrusts the motives and behaviour of the other. Overall, it is the husband’s position that the wife is intent on excluding him from having a proper share of the marital estate.
In the main, this dispute revolves around the business. There is no dispute that the husband resigned as a director of (business omitted) , which operates the business, on 21 October 2014. At the same time, he transferred his shareholding, in the company, to the wife.
It is the husband’s position that the company produces a significant income, which the wife exclusively utilises for her own benefit. On the other hand, it is the wife’s position that the company is running at a loss and she is barely able to keep it afloat.
It is further the wife’s position that, during the parties’ marriage, they lived well beyond their means. It is her case that their extravagant lifestyle was essentially supplied through debt and unfunded borrowings from the business, which the husband primarily instigated.
The case first came before the court on 9 April 2015, some seven days after the wife’s application had been filed. She sought a number of urgent interim orders, including that she alone be able to instruct an estate agent, who had been appointed to sell the Property H property, at auction, which had been scheduled for 11 April 2015.
At this stage, it was the wife’s position that she feared that the husband would either sabotage the auction or would unreasonably reject any appropriate offer to purchase the property. It was also her case that the husband had recently destroyed her personal clothing and footwear out of malice for her. Essentially, the wife asserted that the husband was emotionally unstable at the time. It is her case that he continues to be so.
At this stage, the wife calculated that the parties’ various liabilities exceeded their assets by approximately $127,000.00. In these circumstances, she deposed as follows:
“The husband has failed to accept that there is a net deficit and continues to demand that I support his lifestyle without making any effort to obtain employment.
As a result of the husband’s complete disregard for my clothes and effects, I am concerned that he intends to act irrationally and damage or dispose of matrimonial property out of spite.”[1]
[1] See wife’s affidavit filed 2 April 2015 at paragraphs 27-28
The Property H property did not sell at the auction scheduled for 11 April 2015. However, a purchaser was subsequently found, with the settlement of the transaction occurring on or about 6 July 2015. The sale price was $785,000.00.
Documents provided by Mr Baldwin indicate that the sum of $321,932.78 was retained by the (omitted) Bank and debited to accounts relating to the business; with $432,833.20 going to other loan accounts, held by the bank.[2]
[2] See annexure C4 & C5 to the husband’s affidavit filed 26 October 2015
The solicitor for the wife has arranged for valuations of the Property S and Property B properties respectively. Property S property has been valued at $650,000.00; with the Property B property being valued at $330,000.00. As at 30 October 2015, it was the wife’s position that the sum of $716,000.00 was secured against these properties by way of mortgage.
On 24 August 2015, it was ordered that the wife have the sole use and occupation of the Property B property, whilst the husband had the sole use and occupation of the Property S property. The parties disagree about many evidentiary issues arising in the case. The husband asserts that the wife does not in fact live at the Property B property. In addition, the parties disagree in respect of care arrangements for the children.
On this date, it was also ordered that Mr M be appointed to value the business, at the wife’s expense, provided that the husband reimburses her one half of the cost of this expense, on the settlement of the parties’ property proceedings. However, at the present time, the business has not been valued. It is the wife’s position that she cannot afford the cost involved. Accordingly, there is no concluded expert evidence regarding the most significant issue of controversy between the parties, namely the value of the business.
I have however been provided with the business’ balance sheet and profit and loss statement, as at 30 June 2015. This showed that the business had an income of approximately $1.4 million, in respect of providing its services. The costs incurred in respect of these services amounted to approximately $750,000.00, creating a gross profit of $635,903.57.
The profit and loss statement indicates that further expenses of approximately $694,000.00 were incurred. At present, it is the wife’s evidence that she draws a sum of $1,120.00 per week from the business. Ms Baldwin has calculated her recurrent expenses. Ms Baldwin has calculated her recurrent expenses as follows:
Electricity $24.00 Water $15.00 Insurance $15.00 Property B mortgage $206.47 School fees $760.00 Motor vehicle expenses $508.00 Insurance, including private health $110.00 Minimum credit card payment $397.00 Total $2,035.47
Accordingly, it is the wife’s position that she has no surplus moneys available to pay spousal maintenance and her reasonable living expenses exceed her income by a significant degree. In any event, it is her position that the husband has the capacity to support himself financially, as he is a skilled person, who is capable of obtaining employment.
The businesses balance sheet indicates that it has a GST liability of approximately $70,000.00 and unpaid tax and superannuation payments of around $360,000.00. The parties are indicated as owing the business the sum of around $300,000.00.
The wife also relies on an affidavit of Ms A.[3] She is the financial controller of the business, a position she has held for the past four and a half years. She deposes the business made a loss in the 2015 financial year and is under significant pressure from the Australian Taxation Office and its financier. She confirms the wife’s evidence that the parties owe the business approximately $312,000.00.
[3] See affidavit of Ms A filed 30 October 2015
The husband describes himself as “a new age stay at home father”. It is his evidence that he is currently in receipt of a Newstart allowance and cannot afford to pay the mortgage payments, as they fall due, on the Property S property. These amount to $487.50 per week. As best I can understand his case, the husband seeks maintenance in respect of the mortgage payments due.
In his statement of financial circumstances, the husband indicates that he owes credit card debts of $170,000.00 and has higher purchase/lease debts of $160,000.00. He deposes owning a (omitted) Porsche motor vehicle, which he values at $70,000.00.
It is the husband’s case that, due to his parenting responsibilities, it is reasonable that the wife pay him spousal maintenance, particularly as she controls the business and the income which it produces. It is his position that the wife is not being frank about its profitability.
In this regard, Mr Baldwin relies on the profit summary, for the business, for the financial years between 2012 and 2015. These have been provided by the accountants for the business, (omitted), on 17 July 2015.[4] These reveal that the business had a turnover of $2.1 million in 2013, creating a net profit of $138,786.00, but by 2014/2015 the turnover had reduced to $1.4 million, creating a net loss of $108,000.00.
[4] See annexure C to the wife’s affidavit filed 30 October 2015
As I understand his position, the husband asserts that these figures do not add up and there is something suspicious about them. Essentially, he asserts that the wife has been running down the business or concealing its profits in some way from him. In addition, it seems to be his position that the wife enjoys a luxurious lifestyle, which is not in keeping with her current claims of impecuniosity.
The husband also relies on a recent child support assessment, which arose when he sought to review the relevant administrative assessment. In this decision, the decision maker concerned concluded that the wife’s income, for child support purposes, should be assessed as being $120,000.00, whilst Mr Baldwin’s child support income should be assessed as being $6,000.00.
Clearly, if this is factually correct, it would equate to a gross weekly income, for Ms Baldwin, of around $2,307.00, which is significantly more than she asserts that she currently draws from the business.
As a consequence of this child support assessment, the wife has been assessed to pay child support to the husband at a monthly rate of $906.67. It is unclear to me the degree of involvement of the wife in the child support determination in question. In his decision, the relevant delegate of the child support registrar, Mr N said as follows:
“Ms Baldwin did not provide any information in relation to her financial circumstances despite the response form asking her to do so. In Weir v Weir (1993) FLC 92-338 it was found, among other things, that disclosure is an absolute necessity, therefore I am therefore entitled to make an assessment of Ms Baldwin’s financial circumstances adverse to her and in favour of Mr Baldwin.
In the context of determining what the actual personal finance resources of Ms Baldwin are, I looked at the whole of the available financial information of Ms Baldwin, namely the “(omitted)” valuation/financial statement. A careful analysis of the statement’s profit summary shows the personal benefits Ms Baldwin actually has available to her (such as wages, commissions, car, telephone, and so on) shows that she has income, financial resources and property available to her of at least $120,000.”
With the greatest respect to Mr N, I cannot see with his degree of clarity, that the (omitted) documents indicate that the wife has income, financial resources and property available to her of at least $120,000. In my view, this is an assertion rather than a conclusion, which is not obviously supported by evidence.
In addition, Ms Baldwin is critical of the child support determination because it fails to take account of the children’s private school fees, which she currently pays. It is her evidence that these fees amount to $768.00 per week, which equates to approximately $40,000.00 per annum. On any view, this is a significant sum.
I am uncertain as to what the wife intends to do about this determination of child support. In my view, the decision is emblematic of the degree of disconnect between the parties regarding their financial affairs. In my view, the most appropriate forum to resolve the very many issues in dispute between the parties is at the final hearing, which is scheduled to take place relatively soon.
At this stage, it is my view, that there is a considerable degree of uncertainty surrounding the financial position of the parties, other than that they are each significantly in debt. In addition, there is a lack of clarity surrounding Mr Baldwin’s own employment situation, particularly in respect of his capacity to obtain paid work.
In his affidavit filed on 15 June 2015, the husband conceded twenty five years’ experience in (occupation omitted) and more recently seven years’ experience in (occupation omitted). As such, he indicated that he was optimistic that he would be able to secure employment for himself.
Given these circumstances, the wife does not accept that the husband is not able to provide for his own financial support. In addition, given the ages of the children concerned and the fact that they are in shared care, she does not accept that the husband’s responsibility to care for them is an adequate reason for her to be obligated to pay spousal maintenance to Mr Baldwin, even if she had the financial capacity to do so.
During the hearing, Mr Baldwin stated that he borrowed money from his mother to pay mortgage payments due on the Property S property. The wife is critical of him for engaging a private bus service, to take the children to and from school, at an annual fee of $2,000.00. Like the husband of her, the wife asserts that Mr Baldwin’s financial affairs, as disclosed to the court, do not add up.
The legal principles applicable
As outlined above, this case is replete with controversy. The most significant area of dispute concern the value of the business and its potential to generate income both now and in the future. Notwithstanding orders regarding the preparation of an expert valuation of the business, it is not yet to hand.
However, notwithstanding the various areas of controversy, there can be no doubt that the parties are currently encumbered with a significant level of debt. It is also clear that they have access to a limited amount of equity in the Property S and Property B properties with which to service that debt.
Notwithstanding the moment of these issues in dispute, the resulting hearing, before me, took place in a truncated or shortened form, where the only evidence available to me was in the form of the parties’ respective written affidavits and the statements of their financial circumstances.
In C & C[5] the Full Court of the Family Court indicated that the logistical issues, arising as a result of the court having to determine an ever increasing number of contentious matters, precluded it from being able to embark on lengthy hearings at the interim stage. The court said as follows:
“This court has finite resources and a limited number of judicial officers coupled with an ever increasing work load. If it was required to embark upon lengthy examinations of interlocutory issues, such as interim custody, important though they may to the parties, this would inevitably lead to an inability to provide hearings of final determinations of custody and property within a reasonable time. In addition, other persons requiring a determination of these and similar issues would be impossibly inconvenienced.”
[5] See C & C (1996) FLC 92-651 at 82,675-6
These comments, in my view, apply with equal force to this court. Accordingly, at the interim hearing stage, for these cogent logistical reasons, there is insufficient time to allow additional oral evidence, particularly in the form of cross examination. As a consequence, it is difficult, if not impossible, for the court to resolve the very many significant issues in factual dispute, between the parties, at this stage.
In this regard, I note that the wife commenced the proceedings in early April of 2015 and they have been allocated a final hearing date in May 2016. This final hearing will provide a forum for the final resolution of these factual issues.
Pursuant to section 74 of the Family Law Act 1975, the court may make such order as it considers “proper” for the provision of maintenance to the wife in accordance with the provisions of Part VIII of the Act.
In particular, section 72 deals with the right of a spouse to maintenance and reads as follows:
“S.72(1) 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 whether:
(a)by reason of having the care and control of a child of the marriage who has not attained the age of 18 years;
(b)by reason of age or physical or mental incapacity for appropriate gainful employment; or
(c) for any other adequate reason;
having regard to any relevant matter referred to in subsection 75(2).”
Given the factual basis of this case, the relevant matters referred to in sub-s.75(2) are likely to be the following:
a)the age and state of health of each of the parties;
b)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;
c)whether either party has the care and control of a child of the marriage who is under the age of eighteen years;
d)commitments of each of the parties that are necessary to enable the party to support:
i)himself or herself;
e) the responsibility of either party to support another person;
g)where the parties have separated or divorced, a standard of living that in all the circumstances is reasonable;
k)the duration of the marriage and the extent to which it has affected the earning capacity of the party whose maintenance is under consideration;
na) child support issues.
Pursuant to s.75(3) of the Act, the court is directed to disregard any entitlement of a party to the proceedings to an income tested pension, allowance or benefit.
The Full Court of the Family Court in Bevan & Bevan[6] determined that the approach to be taken in respect of applications for spousal maintenance involved a four step process as follows:
·a threshold finding under s.72;
·consideration of s.74 and s.75(2);
·no fettering principle that a pre-separation standard of living must automatically be awarded where the respondent’s means permit;
·the discretion exercised in accordance with the provisions of s.74 with “reasonableness in the circumstances” as the guiding principle.
[6] Bevan & Bevan (1995) FLC 92-600 at 81,981-2
In Redman v Redman[7] the Full Court of the Family Court considered the procedural and evidentiary requirements which attach to interim spousal maintenance proceedings. The Full Court said as follows:
“…the very fact that the order is limited in time imports certain different considerations. One of these is that such an order is intended to be reconsidered, quite apart from a variation under section 83. …the most common purpose of an interim order is to make provision for the spouse and children pending the determination of the property settlement. …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. Having regard to those factors, and the general injunction of section 97(3), the court should in such matters have a greater degree of flexibility than it possesses in applications for maintenance which are intended to last for an indefinite period and can only be varied under section 83.”
[7] Redman v Redman (1987) FLC 91-805 at 76,081
Discussion
The wife is only legally obliged to maintain the husband financially, if he himself is unable to maintain himself for an adequate reason. If this condition precedent is satisfied, he is then only entitled to be maintained by her to an adequate degree.
On the basis of the evidence currently available to me, I do not accept that the husband has no capacity to obtain appropriate gainful employment for himself as a consequence of his having the partial care and control of the parties’ two children X, currently aged 11 and Y, currently aged 10. The two children concerned attend school and, ostensibly, at least their care is shared equally.
The husband has provided no evidence as to his efforts to obtain employment nor indicated why he is unable to obtain a job, notwithstanding his concession that he has extensive workplace experience and qualifications. In all these circumstances, I am left with the impression that his application is tactically or emotionally motivated rather than based on any factor relating to need.
In all these circumstances, I have come to the view that the husband has sufficient capabilities, particularly in respect of his income earning capacity, to support himself adequately. In any event, notwithstanding this finding, I do not consider that there is any cogent evidence, which indicates that the wife has any reasonable capacity to provide financial support to the husband.
Apart from inchoate assertions that the business produces a significant level of income, the husband is not in a position to produce evidence refuting the wife’s claim that she draws only a modest income from the business, which is significantly overdrawn and facing many calls from its creditors, particularly in respect of taxation liabilities.
It is the wife’s case that the parties are currently facing a very uncertain financial future, given the level of their indebtedness, when balanced against the extent of their asset backing. She refutes any suggestion that she is not living in the Property B property. It is her position that she is preserving this property, as best she can, in difficult circumstances.
The husband has indicated that he has borrowed money from his mother to pay mortgage payments in respect of the Property S property. He has not otherwise indicated how he has managed to discharge other liabilities, notwithstanding the fact that he has declared his income to be “nil”. In all these circumstances, the wife is suspicious that the husband has failed to disclose his true financial position.
The court’s discretion to make the order for maintenance is founded on what is proper in all the circumstances. The concept of propriety is not specifically defined in the Family Law Act 1975. But in my view, the word “proper” has connotations of what is suitable or correct or in conformity with social conventions. The Full Court, in Bevan spoke of “reasonableness in the circumstances” as the guiding principal or yardstick for determining what is proper. This denotes some degree of objectivity.
In this case, given the uncertainty surrounding the parties’ financial circumstances and the comparative imminence of the final hearing, I do not consider that it would be proper to make an order for spousal maintenance, in Mr Baldwin’s favour, in the current matter. For that reason, the application is dismissed.
For all these reasons, the orders of the court will be as set out at the commencement of these reasons for judgment.
I certify that the preceding sixty two (62) paragraphs are a true copy of the reasons for judgment of Judge Brown
Associate:
Date: 23 November 2015
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