Beckett & Beckett

[2008] FamCA 761

FAMILY COURT OF AUSTRALIA

BECKETT & BECKETT [2008] FamCA 761

FAMILY LAW – PROPERTY SETTLEMENT – Sale of property – Distribution of proceeds of sale – S 79 orders in an interim judgment – Pool of assets unclear

Family Law Act 1975 (Cth)

Coghlan (2005) FLC 93-220; (2005) 33 Fam LR 414
Harris and Harris (1993) FLC 92-378
Townsend (1995) FLC 92-569; (1994) 18 Fam LR 505

APPLICANT: MR BECKETT

RESPONDENT: MS BECKETT

FILE NUMBER: DGF 1042 of 2006

DATE DELIVERED: 26 August 2008

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: THE HONOURABLE JUSTICE CRONIN

HEARING DATE: 26 AUGUST 2008

REPRESENTATION

COUNSEL FOR THE APPLICANT: MR TESTART

SOLICITOR FOR THE APPLICANT: MCDONALD SLATER & LAY

COUNSEL FOR THE RESPONDENT: MS SMALLWOOD

SOLICITOR FOR THE RESPONDENT: RICHARD CALLEY FAMILY LAWYERS

Orders

1. That the application in a case filed by the husband on 13 August 2008 be dismissed.

2. That the wife do all things necessary to ensure that any caveat registered on the title to the property at M be withdrawn at the expense of the wife to enable the settlement of the sale of the said property on its due date.

3. That the proceeds of the sale of the said M property be applied as follows:

   (a)       First, to pay all costs, commissions and expenses of the sale;

   (b)Secondly, to pay any money outstanding pursuant to the mortgage registered on the title to the property; and

   (c)Thirdly, to pay the balance into an interest bearing account in the joint names of the parties, such account to be organised by the solicitors for the husband and under their control pending further order.

4. That forthwith, the husband do all acts and things and sign any necessary document that may be required to lodge any outstanding personal taxation return and the return for the Beckett partnership.

5. That the husband pay the wife’s costs fixed in the sum of $3435.  That there be a stay of the payment of such costs until the proceedings between the parties are concluded and any such costs be adjusted in the final settlement.

IT IS CERTIFIED:

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

IT IS NOTED that publication of this judgment under the pseudonym Beckett & Beckett is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: DGF 1042  of 2006

MR BECKETT

Applicant

And

MS BECKETT

Respondent

REASONS FOR JUDGMENT

1. These reasons arise out of an interim hearing.  The final trial is to commence on or about 10 November 2008.  That dispute relates to a property settlement. 

2. The parties are significantly apart on what is in the pool of assets and what should be in the pool.  There are arguments about premature distributions and also wastage.  The wife asserts that at the time of separation, the pool of assets was about $2.2 million but is now $1.1 million.  That is the nature of the substantive dispute but not the issue before me.

3. The parties married in 1998 and separated in 2006. 

4. The husband is a 47 year old accountant who is currently unemployed.  His trial affidavit, combined with what I have heard in court, indicates that he suffers from prostate cancer and the prognosis is as yet unknown. 

5. The wife is a 46 year old consultant who works on a casual basis.

6. There are two children aged 16 years and 13 years who predominantly live with the wife.

7. This application is about the advance of money or, more appropriately, its release upon the settlement of an impending sale of a unit.

8. The husband filed the application in a case on 13 August 2008.  He sought orders that the proceeds of sale of the property at M which is in his name alone be applied towards the cost of the sale, the discharge of the mortgage encumbering the title and then thirdly, paying the balance to him.  To give effect to that order, the husband sought that the wife withdraw a caveat over the property.

9. The wife filed a response to the husband’s application on 22 August 2008.  She sought orders that the husband execute all necessary documents to file personal taxation returns and also taxation returns for the Beckett partnership.  The issue concerning taxation returns revolves to some degree around the question of a large liability to the Australian Taxation Office which has been included in the balance sheet of both parties.  Although this was not a significant issue in the proceedings before me, it was asserted by counsel for the wife that without the returns being lodged, the Court in the final hearing in November would not be able to define the liability in the pool of assets with any certainty.

10. In responding to the husband’s application, the wife sought orders that from the proceeds of the sale of M, she be repaid the costs that she incurred in respect of the single expert but that otherwise the balance of funds over and above the discharge of the mortgage and the payment of the sale costs be deposited in a trust account in the hands of her solicitors.  In my view, the question of the repayment of the wife’s payment to the single expert witness can wait until trial.

11. In addition to the orders that I have just set out above, the husband sought an order for costs against the wife and the wife sought an order for costs against the husband on an indemnity basis.

12. Each party relied upon one affidavit and each put comprehensive submissions through counsel.

13. The evidence upon which I am determining the matter is as I shall now set out.

14. The husband said that the parties separated in January 2006 and then signed what he described as a property agreement under which the wife was to retain one unit and he was to retain another.  To some degree, I suspect that colours the husband’s view about being prevented from spending the proceeds of the sale of what he sees as his property under the agreement.  The remaining units which the parties themselves had developed, were then to be sold under the agreement. 

15. The husband said that the funds from the sale of these remaining units, a former matrimonial home at D and some shares were to be used to reduce the joint indebtedness of the parties to the National Australia Bank and Heritage Building Society.  In respect of this issue, the wife denies that the money was used as the husband asserts.  She said that he unilaterally applied the proceeds of the sale of the shares to a failed business venture.  She conceded that some money was used to reduce a National Australia Bank liability and that $73,000 or thereabouts was paid into the husband’s personal bank account from the sale of one unit.

16. Of another unit, the wife said that whilst the sale proceeds netted $586,000 or thereabouts, only $550,000 was paid to reduce the National Australia Bank liability.  The balance of just over $36,000 was paid into the husband’s personal bank account.

17. There was clearly a significant dispute just on those facts which does not seem to have been resolved by any discovery process.  Looking briefly at the parties’ trial documents, it is an issue that will need to be determined but I shall return to that.

18. The husband went on to say in his affidavit that all funds from his income and savings since separation had been used to pay ongoing joint debts, child support and his own financial support.  The wife did not accept that.  She said that his expenditure was sourced from joint funds or earnings derived from those funds.  She pointed to the fact that the husband had taken a number of overseas trips since separation including to London, Paris and New York.

19. The husband then went on to say that in April 2005 he sold his business and contracted with the purchaser to an arrangement under which for a period for three years he was restrained from being involved in financial planning investment advice over a ten kilometre radius.  The wife does not dispute the fact that the business was so sold but asserts that the restriction has had no impact upon the husband’s ability to work as an accountant.  It is a very significant issue in this case that the husband says he does not have any funds for the future and that is in part, why he has spent the money the way he has in the past.  It is why he now wants the proceeds of the sale of the unit.

20. The husband made reference in his affidavit to the fact that after separation, he began a new business which had to be sold within months of its acquisition because of problems with the co-owners.  The wife’s response to that was that the husband did all of this without her knowledge or consent using money from the self-managed superannuation fund of the parties and the proceeds of shares held in trust.  She pointed to the fact that just after the sale of the business, not all of the monies drawn from the self-managed superannuation fund were put back and the balance was otherwise paid into the husband’s personal bank account.  The dispute about just how much was drawn from the superannuation fund and how much was put back is not significant.  However, in this case with the enormous dispute between the parties over what money should ultimately be added into the pool and how it should be divided, it is part of a significant conflict.

21. The husband made reference to the fact that since approximately October 2007 he has been unemployed and met what he described as joint obligations including a commercial bill to the National Australia Bank without any assistance from the wife.  The wife denies the last assertion because of the fact that she says the husband had not only used joint funds for the payment of joint outgoings but that he had similarly spent joint funds for his own personal expenditure.  She said she had been required to work since separation to meet her personal obligations but the husband had not.

22. All of that was the background to the interim dispute before me. 

23. What has now occurred is that the husband has sold his home and it is due to settle on 19 September 2008.  He said he had sought the wife’s consent to withdraw the caveat registered over the property to allow him to pay out the commercial bill to the National Australia Bank as well as release all the funds to him.  He then said that the wife had not only refused his request but had gone further and written to the conveyancing solicitor to ensure that those solicitors did not release any funds without her consent.  He made clear in his affidavit that he desired to repay the National Australia Bank regardless of who may ultimately be responsible for it at trial along with the tax liability to which I have already referred.  That tax liability is almost $182,000.

24. Contrary to the assertions of the husband, the wife made very clear that she has not thwarted the sale.  She has made clear at all times that she has no objections to the sale.  Her complaint relates to the disposal of the funds in the hands of the husband.

25. The husband went on in his affidavit to say that as far as he was concerned, the net pool of assets was approximately $764,800 after taking into account the anticipated tax liability to which I have referred.  In that pool of assets, he included the assets that the wife was either retaining or wanted to retain and his own superannuation which he said was worth $130,707.  What that pool did not include however was the net proceeds of the sale of the home to which I have just referred and after payment of all expenses and the mortgage, there will be approximately $390,000 left.

26. The husband wants some of the $390,000 because he says that he is living with the use of his credit card facility and because of his inability to obtain employment, he is in desperate need of money.  The employment situation is made more difficult having regard to the uncertainty around the treatment that he will require for the prostate cancer. 

27. The nub of the husband’s evidence is set out as follows:

    I therefore have no funds with which to obtain alternative accommodation, pay day-to-day living expenses, regular medical treatment expenses, legal expenses, and child support for my children.

28. In relation to child support, the husband refers to the fact that he has been negotiating with the Child Support Agency and notwithstanding he has a child support agreement obligation of $1000 per month, they have made some interim arrangement with him under which he will pay $100 per month until he has regular income.  That is a source of considerable contention with the wife.  I must say it puzzles me as to how the Child Support Agency has the capacity to vary obligations in circumstances where the parties have contracted out of the system but that no doubt will be an issue for trial.

29. There is clearly a factual dispute about which I need not be concerned.  The wife complains she has not had a response to a number of issues relating to information gathering.  In his affidavit for final hearing, the husband says the wife has not made full and frank disclosure.  Each party therefore has a significant factual dispute which will need to be determined by the trial judge.  That point affects substantially what I am now obliged to consider. 

30. The wife’s position is that if I accepted the asset and liability position set out in the husband’s affidavit, the net assets are now about $1.154 million.  If the husband was to retain the assets in his possession together with the money that will be left over from the sale of the home in dispute, it will give him 48 per cent of the known pool.  If however, there is an add-back relating to the disputed expenditure which I have already mentioned, a substantially different picture would emerge.  On the wife’s position, one view is that the add-backs amount to about $300,000 and Mr Testart on behalf of the husband said they could be around $240,000.

31. On one view therefore the pool could increase to between $1.394 million and $1.454 million.

32. In her final hearing affidavit, the wife refers to her amended response as to the orders she seeks but when I turn to that document, it simply says that the Court make such adjustment as the Court sees appropriate.  That statement does not help me.

33. In his final hearing affidavit, the husband does not refer to the orders that he is seeking.  In his application filed on 19 December 2006, he said that he wanted the Court to make an order that was just and equitable but otherwise he left it undefined. 

34. The husband’s trial affidavit makes reference to the fact that at the commencement of the relationship, he owned property at T which was developed into townhouses.  These townhouses were ultimately sold and used to acquire a property which became the first matrimonial home.  He said that he also had a vehicle and a complete house of furniture and chattels whereas the wife had a motor vehicle of very little value and substantial credit card debts.  This was all in 1987.  There is no evidence that I can see indicating how significant those items were in terms of value.

35. In respect of the husband’s evidence about non-financial contributions, he makes reference to the fact that he was equally responsible for the care of the children but otherwise acknowledges the wife’s contribution as a homemaker. 

36. When I turn to the trial affidavit of the wife filed 16 July 2008, she makes the concession that contributions up to separation were equal. I have concluded however that she has a significant argument in relation to the factors set out in s 75(2) of the Family Law Act 1975 (Cth) (“the Act”) because she makes reference to the fact that not only does she have the care of the children but there is also a significant disparity between the earning capacity of the parties.

37. Ms Smallwood of counsel on behalf of the wife says that on the calculations to which I have earlier referred, the wife receiving 52 per cent of the pool is not sufficient.

38. Mr Testart responded by saying that the argument presupposes that the husband will retain all of his superannuation.  That also gives rise to the question of whether or not the superannuation is treated as an asset in the pool as the husband had described in his affidavit rather than in the form of a different type of property as contemplated in the Full Court decision in Coghlan (2005) FLC 93-220; (2005) 33 Fam LR 414. Mr Testart said that his client may be seeking a splitting order rather than retaining the superannuation but at this stage, there is no indication in the material that I have found to give me any confidence about exactly what the husband is pursuing.

39. What I am asked to do, although it was not specifically so stated, is to make an order under s 79 of the Act. That provision is usually only made in final orders. There has been some debate over the years as to whether it is appropriate to make it in interim orders. It was not clear to me whether the husband was seeking a partial distribution of property but that is what I have presumed.

40. In Harris and Harris (1993) FLC 92-378 the Full Court referred to partial orders and said that the exercise of the power should be confined to cases where the circumstances presented at that time were compelling. The Full Court made the observation that it was better for there to be one hearing of a s 79 proceedings and that is predominately because of the fact that whether the application is interim or final, the same steps have to be followed. The Full Court saw that there could be circumstances under which orders other than on a final basis could be made. As I said however, the provisions of s 79 have to be carefully followed.

41. If as here, that pathway is uncertain, my view is that it has to be exercised cautiously.  The test must be that whatever is left after the partial distribution, has to be adequate to meet the legitimate expectations of all parties at the final hearing.  The Full Court in Harris made clear that what must be contemplated is whether the proposed order was capable of being reversed or adjusted in some way if it was necessary to make just and equitable orders on a final basis. 

42. Section 79(2) says that a court shall not make an order unless it is satisfied that in all the circumstances, it is just and equitable to make that order. When I asked Ms Smallwood for the wife whether I could work within a range of what the parties’ respective positions were, she conceded that I could but urged me not to do so.

43. The difficulty with all of this material is that I do not have enough information to be confident about what is ultimately going to be in the pool of assets for division.  I do not know what each party is seeking by way of final orders.  I do not have a clear understanding of how each party puts their respective case relating to the assessment and weight to be given to each of the parties’ contributions.  I do not understand how each puts the disputed use of the capital by the husband.  In other words, I do not understand whether it is to be seen as a partial distribution in the Townsend (1995) FLC 92-569; (1994) 18 Fam LR 505 premature distribution sense or whether it is money that could justifiably be used for living expenses and therefore not added back to the pool for division. I do not know what the impact will be on the pool of assets of a final agreement in relation to the tax debt. I am not confident that if I distributed some or all of the cash from the proceeds of the sale of this property, the residuary property would be sufficient not to hamper the trial judge in meeting the legitimate entitlements and expectations of the parties. I say that particularly having regard to paragraphs 15 and 16 of the affidavit of the husband in the proceedings before me.

44. Accordingly, because of the provisions of s 79(2), it would not be appropriate for me to make an order distributing any of the money in this case.

45. I have already expressed concern about the readiness of this case for trial.  It seems to me that the order sought by the wife in relation to taxation returns is important whether they are arising out of a partnership or a joint venture.  They will become necessary to assist the trial judge.  Accordingly, it seems to me appropriate to make an order in relation to the husband completing his personal taxation returns forthwith.  I would have thought that as he has qualifications and is not working, that order would not be onerous.

1. The money from the proceeds of the sale of the disputed property can otherwise remain in an interest bearing account in the joint names of the parties to be held by the solicitor for the husband.

2. To avoid the parties returning to court, I indicated that I would release these reasons and make the orders available without further attendance.  I asked each party to commit themselves in respect of the issue of any costs application.  I received figures from the wife.

3. Section 117 of the Act says that each party shall bear their own costs except where the Court feels that there are circumstances which justify a departure from that rule. If the Court does decide that there is a justifiable reason to depart from that principle, the Court must take into account the matters set out in s 117(2A).

4. In her application, the wife sought indemnity costs.  Because of all of the authorities in a variety of jurisdictions, an order should only be made where the circumstances are special or exceptional.  I do not see anything unusual or special in this case that would justify me finding that there are exceptional circumstances.  However, that is not to say that the wife is not entitled to her costs for the reasons to which I shall now return.

5. In this case, the wife’s position seems to have been clear and there is correspondence between the respective solicitors prior to the documentation being filed.  Having regard to the complexities of an application for a partial distribution of property, an application of the nature brought by the husband needs to be carefully considered before it is issued.  In my view, having regard to the matters to which I have earlier referred, that did not occur in this case.  This is a case therefore in which I am justified in departing from the principle that each party bears their own costs.  Costs are not intended as a punishment but rather to compensate the party or ameliorate their loss as a result of having to participate in litigation proceedings.

6. In determining what if any order to be made for costs, I take into account the fact that neither party is in a strong financial position but on any view, each will share in a pool of assets that exceeds $1 million.  That means they are hardly impecunious.

7. I have not been told that either of the parties is in receipt of legal aid funding.

8. There are no reasons in this case to consider that the conduct of the husband has been inappropriate in terms of the matters set out in s 117(2A)(c). However, it is clear that the husband has been wholly unsuccessful for the reasons I have outlined. The wife’s position has also been made very clear from the outset and in particular, her offer to settle the proceedings on the basis that the proceeds of sale be held on trust pending final order. That is particularly relevant in a case where there is considerable dispute as to the level of expenditure that has occurred until now.

9. An order for costs is a discretionary issue.  It seems to me that it is appropriate in these circumstances to make an order that the husband pay the costs of the wife thrown away as a result of these proceedings.  However, having regard to the fact that the trial of the hearing is not far away, I propose to order that the husband pay the wife’s costs fixed at $3435 and that that sum be paid as part of the adjustment in the final proceedings at the time that the financial matters as been the parties are concluded.

I certify that the preceding Fifty Four (54) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin

Associate: …

Date:  3 September 2008