Birk & Farwell
[2020] FCCA 2732
•2 October 2020
FEDERAL CIRCUIT COURT OF AUSTRALIA
Birk & Farwell [2020] FCCA 2732
File number(s): MLC 14486 of 2019 Judgment of: JUDGE O'SHANNESSY Date of judgment: 2 October 2020 Catchwords: FAMILY LAW – Interim property order – part property dispute – characterisation not mandatory – hair follicle test – welfare of children – secure chain of custody. Legislation: Family Law Act 1975 (Cth), ss. 60CC, 75, 79, 80(1)(h), 90SM and 90SS Cases cited: Kyriakos & Kyriakos (2013) FLC 93-528
Marchant & Marchant (2012) FLC 93-520
Medlow & Medlow (2016) FLC 93-692
Strahan & Strahan (Interim Property Orders) (2011) FLC 93-466
Number of paragraphs: 77 Date of last submission: 1 October 2020 Date of hearing: 24 September 2020 Place: Melbourne Counsel for the Applicant: Mr Ham Solicitor for the Applicant: Lopes Family Law Counsel for the Respondent: Ms Dellidis Solicitor for the Respondent: Hargreaves Family Lawyers
MLC 14486 of 2019 BETWEEN: MR BIRK
ApplicantAND: MS FARWELL
RespondentIT IS NOTED that publication of this judgment under the pseudonym Birk & Farwell is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
JUDGE O’SHANNESSY
INTRODUCTION
This matter came before me on Thursday, 24 September 2020. The parties are 47 and 48 years old, they have two children aged 10 and six, they commenced to live together in 2005 and the relationship ended in February 2019. The Applicant De Facto Husband (Applicant), issued proceedings seeking property relief on 19 December 2019, filed an amended application for final orders on 14 May 2020 that particularised the property relief he sought and sought an alteration of the living arrangements for the two children.
The first return of the proceedings was before Registrar Kaur on 19 February 2020 when detailed orders as to payment of mortgages and disclosure were made and also an order was made that each of the parties:
“Do all things necessary to cause the sum of $50,000 to be paid to each of the Applicant and Respondent from the Commonwealth Bank account, ending in ..31 such sums to be characterised as partial property settlement to each of the parties.”
The matter was adjourned for mention on 18 May 2020. To the credit of the parties the matter did not need to be dealt with on this date as they had provided to the court detailed orders dealing with their properties and an interim defended hearing was fixed on 24 September 2020 at 9:30am. In addition to detailed orders as to the sale of two of the parties’ three properties there was an order that the Respondent De Facto Wife (Respondent) pay to the Applicant $10,000 and that the classification of such payment to be reserved until the final hearing.
I am grateful to the solicitors and counsel for the parties who have assisted me with careful and detailed written submissions. By the orders of 15 May 2020 the Respondent was required to file an amended response and any updated documents, which would include affidavits, within 14 days. The Respondent filed a detailed affidavit in reply on 16 September 2020 barely a week before the fixed interim hearing. The Applicant's solicitors then demonstrated their efficiency by filing a response to that affidavit six days later and two days prior to the hearing.
The Applicant relied upon the following documents:
(a)his affidavit filed 14 May 2020;
(b)his affidavit filed 22 September 2020;
(c)his amended application filed 10 September 2020;
(d)a summary of bank accounts provided on the eve of the hearing and marked A1;
(e)written submissions filed 23 September 2020 and marked A2;
(f)a detailed minute of proposed orders marked A3;
The Respondent relied upon the following documents:
(a)her amended response for final orders filed 16 September 2020;
(b)a detailed affidavit filed 22 September 2020;
(c)a financial statement filed 16 September 2020; and
(d)detailed written submissions marked R1 that contained a minute of the orders sought by her.
ISSUES IN DISPUTE
There were a number of issues in dispute at the time of the filing of the Respondent's written submissions. The parties and the lawyers undertook further discussions on the morning of the hearing and, by what was no doubt hard work, reached a compromise agreement about all of the matters in dispute, save for two of them. I note the assistance to the court that the parties’ lawyers have provided in undertaking that exercise.
That left two issues to be determined:
(a)The first was the Respondent's application, stating “that the Applicant forthwith submit to drug and alcohol testing by way of hair follicle testing every three months”. This was opposed by the Applicant.
(b)The second issue was that the further cash payment to be made to the Applicant in the short term, both the amount and the characterisation.
The Applicant ceased employment in August 2018 and he has not been in paid employment since. The Applicant asserts that he has made many applications and has genuinely attempted to find employment. The Respondent disputes that the Applicant has made genuine attempts at employment and infers that he has for strategic reasons and/or because of drug and alcohol abuse not pursued his earning capacity since separation. Each party alleges that the other has had the benefit of substantial funds since separation and has not properly accounted for those funds.
THE HAIR FOLLICLE TEST DISPUTE
Dealing with the application for the follicle test I have taken into account the substance of the Applicant's evidence and assertions on affidavit and detailed written submissions and oral submissions made by Mr Ham, his counsel. The Applicant said the hair follicle testing orders should not be made. In substance it was asserted that:
(a)he denied the allegations of taking illicit drugs or abusing pain medication or alcohol;
(b)that on the evidence before the court there was not a proper basis for the testing in the circumstances where testing was intrusive;
(c)the allegations of illicit drugs and abuse of medication and alcohol are raised late in the piece; and
(d)that the orders sought in the amended response filed 16 September 2020 are inconsistent with the current arrangements of substantial care being shared between the parties.
It was common ground that the parties had initially agreed (or acquiesced) that the children should be in the care of their father for five nights each fortnight and the remaining time with the Respondent. The Applicant's application, raised on 14 May 2020, was to change that arrangement to a different constellation but fundamentally to be an 8/6 arrangement of nights per fortnight.
At paragraphs 8 and 9 of the Applicant’s affidavit filed 22 September 2020 he asserted:
[8] “The main reason I left our relationship was that Ms Farwell would make such outlandish claims or demands of me in the relationship in other ways; and I would end up just managing her; and not in effect pushing back. These allegations are a continuation of this pattern and I am not prepared to just manage this sort of behaviour further.”
[9] “These claims are exaggerated, in part false and without foundation or any objective, substantive evidence to support them.”
The Respondent alleges that the Applicant has frequently cancelled his time that had been agreed to have with the children and asked the court to infer that this maybe because of his alleged illicit drug abuse prevented such contact or alternatively would cause it to be discovered. It was asserted by Mr Ham that on the Respondent’s own evidence even her allegations related to way back in 2009.
The Respondent had asserted at paragraph 3 (d) of her affidavit filed 16 September 2020 as follows:
“I have serious concerns about the Applicant's use of illicit drugs, abusing pain medication and alcohol and he has thus far refused to undertake alcohol and drug testing. I believe that his drug and alcohol abuse has been the reason behind in cancelling time with the children.”
The Respondent then set out a number of matters which she said raised in her mind the serious concern. This included that the Applicant had from 2004 to 2009 used party drugs including speed and ecstasy and that at her insistence he had undertaken drug and alcohol counselling in early 2009 and that at that time he had “for the most part stopped taking illicit drugs.”
She deposed to finding bottles of gin and vodka hidden around the house in 2017 and that her concerns were such that in late 2017 she had asked her GP for a mental health plan to cover additional counselling for herself to deal with these issues. She asserts that her concerns were discussed in couples counselling in October/November 2017. She also deposed that the fact that the Applicant had refused to undertake the drug and alcohol counselling was of concern to her. I put very little weight on that last circumstance.
In the face of the Applicant’s denial of any problem and his assertions of there not being any proper basis or evidence for such a testing to occur I have looked carefully at whether in all the circumstances I should make the orders sought. I agree with the thrust of the submissions of Mr Ham that drug and alcohol testing including hair follicle testing should not be made just for the asking.
I also take into account that the Respondent has proposed that she undertake the same testing. Initially the Respondent had proposed the testing be at the Applicant's expense. After I raised the issue of whether it should be in the first instance at her expense Mr Ham obtained instructions that she agreed to that if I were to make an order.
Ms Dellidis of counsel for the Respondent raised with me the issue that testing would require the sensible cooperation of the Applicant including the provision of a hair testing sample of at least 3cm in length.
There is no suggestion that the Applicant would fail to cooperate with sensible hair testing. The advantage of the testing is notorious. Testing covers a significant period, and Ms Dellidis asserts three months, as opposed to a much shorter period with other means of testing. Were a party who has been ordered to undertake drug and alcohol here testing and that person failed to cooperate that lack of cooperation would be a significant matter to be taken into account in the factual matrix of determining whether or not the children were in any way at risk.
If in fact the Respondent’s pressing for testing of the Applicant’s hair is merely a continuation of a pattern of making outlandish claims then there is much force in the submission that the testing should not be made.
This is an interim hearing and of necessity must be heard on the papers. Both parties impressed me, on a preliminary view, as having worked long and hard over many years and have each achieved significant professional and family success. The proceedings concern the welfare of two children aged 10 and six. Were either parent to be abusing illicit drugs, pain medication or alcohol, not only when they are caring for the children, is likely to be significantly harmful to the children and very relevant to determining their best interests.
I note that despite making the allegations that she does, the Respondent, at first blush, appears to have at least been supportive of the Applicant's continuing relationship with the children. This is demonstrated by the circumstances that the parties, by agreement, have in place an arrangement whereby the children spend substantial time with each parent. I do not find that the Applicant is abusing illicit drugs, pain medication or alcohol. However I cannot find that the allegations are a mere continuation of a pattern of outlandish claims during the relationship.
I find that it is necessary to balance intrusion into the Applicant's life that the hair follicle test represents and the fact that he would be ordered to undertake it upon it being pressed by his former spouse. It is a serious matter and not to be ordered, against the will of a party lightly.
Against that I must balance the significant harm that may potentially fall to the children if unknown to the court and the parties’, one of the parents caring for the children is suffering the significant disadvantage of an illicit drug or pain medication or alcohol abuse. Although raised on an interim hearing these matters are sworn to although they are in denied by the Applicant. I note that it is notorious that some employers who operate heavy machinery undertake random drug testing for employees.
One of the primary considerations pursuant to section 60CC (2)(b) of the Family Law Act 1975 (Cth) (the Act) is:
“The need to protect the child from physical or psychological harm from being subjected to, or exposed to, abuse, neglect or family violence.”
Balancing all these matters I have determined that the parties should undertake the hair follicle test in regard to drug and alcohol testing.
However it may well be that the Applicant is right and it turns out there was no need for this test. In those circumstances I determine that he should undertake a test and as soon as practical at an appropriate facility in supervised circumstances and the parties can review the situation from that test. If the test is “clean” it may be the Respondent could not press for it to be undertaken again. If it is not “clean” that would speak of the need for regular testing.
I also take into account the circumstances that the Respondent will, in the first instance, bear the expense of the testing of both her test and the Applicant’s test.
The order sought by the Respondent was in simple terms. It is crucial to any drug testing that a secure chain of custody is maintained, i.e. the court must be certain that it is the subject’s hair or urine being tested.
I do not find, or even suspect, that either party would not fully and properly co-operate with my hair testing order but in my view the order should ensure a secure chain of custody is maintained. It is common place for the testing authority to require photo ID of the testing subject. To that end, attached to these reasons as Schedule A, merely as a draft for the parties consideration, is a detailed form of order providing for a hair follicle test.
THE PART PROPERTY DISPUTE
The second issue in the proceeding was whether a further cash payment was to be made to the Applicant in the short term and if it should be $10,000 as sought by the Respondent or $40,000 sought by the Applicant and whether it should be characterised as part property settlement or whether the characterisation should be left to the trial judge. The Applicant sought the payment within seven days and the Respondent sought the $10,000, not $40,000 and part property not payment to be characterised be made within 21 days not seven.
It is common ground between the parties that at the commencement of cohabitation the Respondent had equity in a property at A Street, Suburb B and also some shares. The extent of the equity and the shares is not agreed.
It is common ground that both parties worked in paid employment during the relationship and were involved in the care of the children, although the extent of the care shared between the parties is not agreed.
The controversial order sought by the Applicant is as follows:
“That the Wife pay the Husband, within seven days, the sum of $40,000 with the classification of such sum to be reserved to the Final Hearing.”
Instead of that order the Respondent sought:
“That the Wife pay the Husband $10,000 within 21 days as part property.”
A reasonable indication of the property of the parties at the time of the hearing sufficient for an interim hearing is conveniently set out at part D of the exhibit R1 being the written submissions of the Respondent.
JOINT PROPERTY C Street, Suburb D
Mortgage1,6000,000
(495,600)
1,104,400Wife resides here. Mortgage repayments of $600 p/w resume from Feb 2021.
E Street, Suburb F
Mortgage
Estimated sales expenses740,000
(632,000)
E(20,000)
88,000On the market to be sold first.
Mortgage repayments resume from Feb 2021.G Road, Suburb D
Mortgage
Selling costs800,000
(735,000)
E(20,000)
45,000Husband resides here. To be sold 2 months after settlement of sale of Suburb F. Mortgage repayments $600 p/w resume Feb 2021. CGT re sale of Suburb F E(140,000) Due May 2022 H Pty Ltd Nominal CBA #..31, #..55, #..21 Nominal TOTAL JOINT PROPERTY 1,097,400 RESPONDENT WIFE’S PROPERTY Part property payments 79,193 Used to purchase 2020 automobile2020 automobile Tiguan NAB #..78 2,894 NAB #..64 19,528 ANZ #..48 NIL ANZ #..46 8,547 Shares 140,673 Wife proposes H receive $10,000 from sale I Pty Ltd account #..69 29,924 Earmarked for FYE 2019 tax Unpaid income tax E(20,000) FYE2019 estimated tax liability Funds held on trust to be repaid N/A $73,000 advanced from wife’s mother NAB credit card debt (10,000) TOTAL WIFE’S PROPERTY 250,759 APPLICANT HUSBAND’S PROPERTY Part property payments 89,193 Part-property Cash at bank 9,000 Screen shot Shares Nominal N Pty Ltd 2017 automobile 7,225 Financial statement CBA credit card debt (11,000) Screen shot TOTAL HUSBANDS PROPERTY 94,418 TOTAL PARTIES’ PROPERTY 1,442,577 SUPERANNUATION Wife’s Superannuation J & K 292,500 Husband’s Superannuation L 210,343 TOTAL SUPERANNUATION 502,843
It was pointed out to me by Ms Dellidis that some minor adjustments need to be made to that table. Conceptually, she said there is double counting as item 8, Part Property Payments, overlaps with, and is the source, of at least part of items 9-10. Hence it is convenient to simply remove the Part Property Payments from the table but add the value of the 2020 automobile (item 40 of the Respondent's filed 16 September 2020 financial statement puts the 2020 automobile at $52,000) that was otherwise not separately included. I suspect that there will be in that list, described as Applicant's Property and items 19-20, a similar amount of conceptual double counting, but this was sensibly not argued at an interim hearing.
Hence it is convenient to identify the non-superannuation property pool, as asserted by the Respondent as being $1,442,577 (item 25) but less $79,193 plus $52,000, a total of $1,415,384. The parties have the advantage of having jointly retained an expert valuer to value the three real estate properties at items one, two and three of the Respondent's table of assets and hence having a common ground position as to realistic, although not necessarily precisely accurate, values. In addition the parties currently have between them $502,843 superannuation, with the Respondent having an entitlement to $292,500 and the Applicant to $210,343.
The effect of the orders that the parties have agreed, but are yet to be made, is that when sold the Suburb F property will raise approximately $88,000 after sales expenses, but not including any capital gains tax, and that sum is to be paid to the Applicant, as part property settlement. Due to the current COVID-19 environment there is substantial uncertainty as to when that property will sell and when the proceeds of sale will be received.
Hence as the Respondent’s counsel asserted, the quantum of the part property settlement or the payment to be characterised dispute, is not a contest between $10,000 and $40,000, but rather between $88,000 plus $10,000, that is $98,000 but in two tranches at different times or $88,000 plus $40,000, that is $128,000 but in two tranches at different times.
I also note that given the Respondent's allegations of the Applicant wasting, or at least frittering away, funds post separation that there may be an issue as to the parties' respective post separation contributions.
It was not conceded by the Respondent that contribution during the relationship should be regarded as equal. She points to her initial contribution of bringing in equity in the Suburb M property and in shares. However in submissions her counsel said that her position as to the overall division of assets was that it should be in the region of 35% to the Applicant and 65% to the Respondent and I understood this to be to the non-superannuation assets, or at least there was no mention that she was seeking a superannuation split in her favour.
It is common ground that the Respondent occupies and has the benefit of the former matrimonial home at Suburb D valued by jointly retained valuer at $1.6 million. The parties currently enjoy a mortgage holiday on that property until February 2021. The equity in that property makes up the bulk, about 77%, of the parties non-superannuation assets. The other property that the Respondent retains, adjusted consistently as described above, ($250,759 less $79,193 plus $52,000 for the 2020 automobile) means that the Respondent’s separate property at this point in time has a net value of approximately $223,563 and taken together with the equity in the former matrimonial home means that the Respondent currently has the benefit of about 92% of the total equity in the parties non-superannuation assets.
It must be noted that on the Respondent's case after receipt of the equity from the Suburb F property as part property payment of $88,000 plus the $10,000 part property she proposes the Applicant will have the benefit of approximately $192,418, ignoring any double counting in items 19 - 20, which will be about 13.3% of the non-superannuation property pool. On the Respondent's position of a 35/65 non-superannuation assets split, if successful at final hearing, the Applicant would receive the benefit of assets to the approximate value of a further approximately $300,000 (35% of $1.415m =$495,250 but less $192,418 = $302,800).
Using the Respondent's characterisation of the parties' assets and her contention as to the just and equitable final result in accordance with the Act, the slightly different result of the above calculation using the Applicant's figures of the part property settlement sought of $88,000 plus $40,000 that is, $128,000 as the Respondent proposes is as follows. The Applicant will have the benefit of approximately $222,418 ($94,418 plus $88,000 plus $40,000), again ignoring any possible double counting in items 19 - 20, will be about 15.7% of the non-superannuation property pool. The Respondent's position of a 35/65 non-superannuation assets split, if successful at final hearing, will see the Applicant receiving the benefit of assets to the approximate value of a further approximately $273,000 (35% of $1.415m =$495,250 but less $222,418 = $272,832).
There is nothing in this analysis that should be taken as my approval of, or finding about, whether or not the Respondent's case will be successful at final hearing. But the above analysis demonstrates two matters.
(a)Firstly, it is patently clear that regardless of my decision as to the $10,000 or $40,000 payment that the further payment is not at any realistic risk of being required to be clawed back, that is on any view at final hearing the Applicant will receive substantially more than he is seeking at this interim hearing.
(b)Secondly, that after a long relationship of 13.5 years where two children have been raised and where, perhaps with the direct or indirect assistance of the Respondent's initial contribution from her shares and the Suburb M property, the three real properties constituting the great bulk of the asset pool were acquired during the relationship, and at this point one party occupies and has the benefit of the great bulk of the asset pool pending final hearing.
So why should the payment be $40,000 and not $10,000? The Respondent has pressed that it should be the $10,000 in substance for reasons that include the following:
(a)the Applicant has over the last 18 months had the benefit of $225,000 of funds and has only $9,000 left. In other words do not give him anymore because he will only waste or fritter it away and in any event the court cannot find that he only has $9,000 left;
(b)the Applicant has a substantial earning capacity as a professional and that he is not making proper efforts to exercise this earning capacity; and
(c)the Respondent has substantial needs in the circumstances where the children currently reside with her on a 9/5 arrangement, her current employment contract ends in February 2021 and her employment after that is uncertain and she will have, from the end of the mortgage payment holiday in February 2021, the substantial obligation of servicing the $495,600 mortgage over the former matrimonial home; and
(d)that the funds she holds include the obligation that she has to repay to her mother or expend upon her mother, some $73,000; and
(e)if the Applicant’s financial statement filed in December 2019 can be regarded as accurate then apart from his fixed expenditure, which does not include mortgages or rates as recited therein, he should be regarded as only needing about $796 per week to get by on and if a generous period of approximately five months was allowed until either trial or the receipt of the approximate $88,000 from the Suburb F property sale proceeds, the Applicant only needed, on a generous estimate, the $10,000 and so as a consequence of all these matters the cash she has managed to save needs to be retained for a "rainy day."
In addition the Respondent points to the circumstances that in liquid assets, provided the $140,000 share portfolio is not taken into account, she only has items 9, 10, 12, & 14 that total roughly $60,000 but less her estimated FYE 2019 income tax liability of $20,000 and her credit card liability of $10,000.
Hence it is clear to me that it well may be necessary for the Respondent to sell some of the share portfolio to fund either the income tax liability or the payment to the Applicant if it is greater than $10,000 or part of the payment to the Applicant if it is greater than $10,000. Further the sale of some of the share portfolio may trigger a future capital gains tax liability that would have to be paid in FYE 2021.
I take all of those matters into account. But the most significant aspects of the dispute are that the Respondent occupies the great bulk of the matrimonial assets, that the Applicant is not working (for whatever reason), he cares for the children (currently) on a 5/9 basis and that apart from the cash resource available to her the Respondent has $140,000 in shares available.
Balancing all of those matters I find:
(a)it is just and equitable that I exercise the section 79 jurisdiction, that is it is just and equitable that I make an order for a payment;
(b)that the Applicant and the Respondent have each made substantial, but not necessarily equal, contributions to the assets and the financial resources of the parties over many years;
(c)that each has the substantial commitment to care for, and house, the children of the parties;
(d)the Applicant is without income from employment, but I am unable to determine on an interim hearing whether he is making a proper and vigorous effort to exercise his earning capacity;
(e)the Respondent is currently in employment, after a period of unemployment, and her current contract of employment will end in February 2021;
(f)the parties have available to them, from assets in the Respondent's name and controlled by her, sufficient liquid assets of cash and shares to make the payment as conceded by the Respondent or as pressed by the Applicant; and
(g)on any view of the result at final hearing the Applicant will likely receive, or will be entitled to, a sum substantially more than that sought by him at this point; and
(h)when the funds from the sale of the Suburb F property will be received is not certain.
I also take into account the principles set out in Strahan & Strahan (Interim Property Orders) (2011) FLC 93-466 (Strahan Interim Property) being the leading authority that the parties referred me to. Those principles are well known to the parties' lawyers and do not warrant repetition or elaborate address here but I will acknowledge that those principles include the following:
(a)it is preferable and the usual order that there be one final hearing of section 79 proceedings: see [114] & [132];
(b)when considering whether to exercise the power under section 79 and section 80(1)(h) the overarching consideration is the interests of justice and all that is required is that in the circumstances it is appropriate to exercise the power: see [132];
(c)a court is required to undertake consideration of matters relevant to section 79 (4) and section 75 (2) but a consideration of such matters may be brief and if it seems likely that the applicant will receive a property settlement of more than that sought that would be sufficient to enable the part property orders to be made: see [137];
(d)for an interim property settlement order more is required than the mere fact that upon final hearing the applicant would receive the property being sought or an amount in excess of that [139];
I also acknowledge that the Respondent feels it is an imposition on her that her cash savings and shares are to be applied in payment to the Applicant in circumstances where she believes, or alleges, that his need for funds arises, at least in part, from his poor use of the funds available to him and his refusal to properly exercise his substantial earning capacity, in contrast to her demonstrated determination to do the hard yards to obtain and keep employment as best she is able.
Taking into account all of the submissions and evidence of both parties, and without making a finding as to the contentious factual matters, I find that it is appropriate that the payment be in the sum of $40,000. I also find that the time for the payment should be sought by the Respondent, noting that she was seeking the time of 21 days in regard to a payment of $10,000. I do not think it is reasonable to compel the Respondent to make the many decisions about the parties' finances and her shares, which best to hold, which best to sell now, how best to balance the certainty of future capital gains tax, how much cash to keep available to her, in any less than 21 days.
Having considered all of the arguments and submissions on behalf the Respondent and those of the Applicant I have determined that it is just and equitable, and the least worst outcome that is often inherent in an interim hearing where substantial facts are in dispute, for the payment to be characterised at final hearing.
I acknowledge the legitimate concern and fear of the Respondent that in any negotiations or even at final hearing the $40,000 from her cash or share resources paid to the Applicant will be "lost in the wash", with the result that the part property settlement or payment that the Applicant will receive whether or not she is able to maintain the former matrimonial home is greater than otherwise.
I make this decision because, as set out hereafter, I conclude that the court does have the power when utilising the jurisdiction under section 79 and section 80 (1)(h) of the Act, to order that the payment is characterised by the trial judge.
In this case there are substantial advantages of characterisation or classification being reserved to final hearing and I refer to and adopt the submissions at paragraph 3 on page 11 of 15 of the Applicant's written submissions.
I raised in discussion with the parties at hearing that if I were to order that the payment be characterised as part property that such payment being an interim property payment would be, "capable of alteration at any time prior to, or as part of the final exercise section 79 power”: see Strahan Interim Property at [113] and counsel for both parties said that in their view that was so.
Counsel for the Respondent orally and in written submission pressed the importance of identifying the relevant source of power and referred to in Strahan Interim Property at [84] and the Full Court in Kyriakos & Kyriakos (2013) FLC 93-528 (Kyriakos) generally and, I infer, at [34] to [44] of the joint judgement in particular, noting that Forrest J agreed with the joint judgement on this point. It is now settled law that "the source of power that determines the necessary preconditions and relevant considerations for making the order:” see Kyriakos at [37]-[38] and Strahan Interim Property at [84] and [86].
However, as the interim hearing unfolded in the oral addresses of counsel I indicated that I had some circumspection as to whether I could, when exercising the ss 79 and 80(1)(h) power, leave the characterisation of the payment to final hearing or whether I must characterise the payment as part property. I understood the thrust of the submissions for the Respondent to be that I must characterise the payment as part property and irrespective of whether I must do so, I should do so.
Counsel for the Applicant pressed that I need not and that I could in the exercise of my discretion leave the characterisation to final hearing.
On the Applicant's case, he was going to use the payment, whether part property settlement or to be characterised, to support himself on day-to-day expenses which were likely to include rent following the hoped-for sale of the Suburb D property where he was residing. He pleaded a needs-based case although he had not sought maintenance or a lump sum maintenance power and clearly relied upon ss 90 SM and 90 SS(1)(h) of the Act. Although throughout discussion I adopted, without protest from counsel, the nomenclature of the like, if married, ss 79 and 80(1)(h). The parties should note that for all practical purposes at hand, a reference to the law applicable to either pair of those provisions is entirely applicable to the other pair of those provisions, i.e. the effect of the law is the same whether the parties were married or cohabiting in a de facto relationship.
I have now had the benefit of looking at further Full Court authority. It is notorious that part property orders are frequently made by consent without the head of power being identified and frequently without the characterisation sought being identified. No doubt this is, at least at times and in part, because being an interim order it can be varied or reversed at final hearing.
In Medlow & Medlow (2016) FLC 93-692 (Medlow) the court had made consent orders that payments be made and the head of power (nor the characterisation of the payment) was not identified. One party appealed those consent orders and one ground of appeal was that the primary judge had erred in failing to determine the nature of, or source of, the power supporting that (consent) order: see [59].
However at [62] the court unanimously observed:
"It was clear….the Court was being asked to make an order for interim property settlement pursuant to ss 79 and 80(1)(h) of the Act and each party sought such an order. In those circumstances we do need not see why it was necessary for the primary judge to identify the head of power the parties invoked for the… orders. It was not necessary to the exercise of power in the case before him. There were either the facts and circumstances then existing that justified an order under ss 79 and 80(1)(h) or there were not."
Hence the head of power may need not be identified in an interim order, provided the order is within power, in a consent matter, but it appears it should be identified in contested proceedings, and certainly in proceedings involving a payment from a third party. But the head of power is not the same thing as the characterisation of the payment.
In Marchant & Marchant (2012) FLC 93-520 (Marchant) the primary judge had ordered a number of substantial payments be made to the wife on an interim basis and had ordered "that the categorisation of the payments received pursuant to these orders be an issue for trial." In substance the same as the Applicant seeks in this case.
The husband appealed and asserted, among other grounds, that order recited above, leaving the characterisation for trial, was an error of the law The unanimous Full Court dismissed this ground of appeal and the discussion at [39]-[45] is referred to and given the current controversy [44] bears repeating:
“We cannot see how it can be contented that it was appealable error for the Federal Magistrate to make order three and not characterise the payment provided for in order one, given that no such characterisation could, even if made, limit the discretion of the trial judge ultimately determining final orders.”
Marchant had not been referred to by me or the parties and so following the hearing my associate emailed the parties drawing their attention to Marchant at [40]-[45]. The email read as follows:
“Marchant & Marchant (2012) FLC 93-520 at [40] to [45], Full Court, deals with whether the Court must characterise any payment. If either of the parties wish to address this point (only) by further short written dot point submission (1 page) they are at liberty to do (so) …”
Both parties filed largely helpful submissions within the week. The Applicant, who as requested filed second, relied upon [41] to [45] of Marchant as the basis of the courts “ability….to reserve classification”. To the extent that each of those two page submissions then went further to again press why the payment should not be characterised at this point, I have not had regard to those further submissions as the Respondent’s counsel has not, and will not get the chance to respond to the Applicant’s and I provided the opportunity (not compulsion) for a further one page submissions only as to Marchant.
The Respondents submissions at [5] conceded, and correctly in my view as between parties to a de facto relationship or marriage, as follows;
“[5] …the net effect of Marchant and Kyriakos is twofold.
(a) an interim characterisation does not bind the trial judge who will ultimately determine the orders to be made; and
(b) where there is a contest about payments to be made by one party to another and the payments being sought are capable of being made under more than one head of power, it is not impermissible, after identifying the head of power, to also make provision that the ultimate characterisation be reserved to the trial judge or alternately that liberty be reserved to all parties to argue the ultimate disposition of the moneys at the trial.”
In the rare case where the payment order is being made against a third party and to be used for litigation funding, as in Kyriakos, further considerations may apply and as that is not part of this dispute I will not deal with it.
The parties had indicated upon my making decisions about the two disputed orders that they would bring in minutes about those matters and the matters agreed upon. I am grateful to them.
For the reasons I have indicated I determine that both parties should undertake drug and alcohol hair follicle tests, at the Respondent's expense at first instance, and pursuant to ss 90SM and 90SS there should be a $40,000 payment within 21 days and characterisation of that payment should be reserved to the trial Judge. The parties are directed to bring in orders to this effect by settling same and emailing them to my associate. If there is any difficulty in drafting those orders I will determine that.
I ask the parties to consider that I would be able to list the matter for final hearing in February 2021.
I certify that the preceding seventy-seven (77) numbered paragraphs are a true copy of the Reasons for Judgment of Judge O'Shannessy. Associate:
Dated: 2 October 2020
SCHEDULE A
1.The Applicant and Respondent shall no later than … do all acts and things and sign all documents necessary to facilitate a supervised chain of custody hair follicle testing by (insert facility) as follows:
(a)provide a sample of hair preferably at least 3.9cm in length.
(b)The purpose of the hair follicle testing shall be to test for:
(i)Amphetamine, methamphetamine, MDMA, ecstasy;
(ii)Marijuana and its metabolites;
(iii)Cocaine and its metabolites;
(iv)Opiates; and
(v)Alcohol/EtG.
2.To facilitate the Applicant and Respondent undertaking hair follicle testing in accordance with order 2 the Applicant and Respondent shall contact (insert facility) to arrange a locality for the supervised hair follicle test to take place.
3.Until completion of the hair follicle testing the Applicant and Respondent shall refrain from taking any step which may interfere with the provision of hair samples or to interfere with the test results including taking any step to shave, cut, shorten, colour, bleach any scalp or body hair and the Applicant and Respondent shall be restrained from cutting their head and body hair shorter than 3.9cm in length.
4.The Applicant and Respondent are directed to provide a copy of these orders to (insert facility).
2
0
1