CARUTHERS & CHURCHILL

[2014] FamCA 298

FAMILY COURT OF AUSTRALIA

CARUTHERS & CHURCHILL [2014] FamCA 298

FAMILY LAW – PROPERTY – Interim property – De facto relationship – Where the jurisdictional bases in respect of the length of relationship and geographical requirements are met – Consideration of the Applicant’s entitlement at final hearing – Sum sought determined within the range of the Applicant’s entitlement – Application granted

FAMILY LAW – PROPERTY – Interim spousal maintenance – De facto relationship – Where the jurisdictional bases in respect of the length of relationship and geographical requirements are met – No dispute as to Applicant’s need for maintenance – Quantum as to Applicant’s needs – Respondent’s capacity to meet provision of maintenance – Application granted in accordance with periodic payment sought pending final hearing

Family Law Act 1975 (Cth) ss 90SE, 90SF, 90SM

Harris & Harris (1993) FLC 92-378
Strahan & Strahan (2011) FLC 93-466; [2009] FamCAFC 166

APPLICANT: Ms Caruthers

RESPONDENT: Ms Churchill

FILE NUMBER: PAC 3814 of 2013

DATE DELIVERED: 9 May 2014

PLACE DELIVERED: Parramatta

PLACE HEARD: Parramatta

JUDGMENT OF: Foster J

HEARING DATE: 28 April 2014

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Cairns

SOLICITOR FOR THE APPLICANT: Turner Freeman Lawyers

SOLICITOR FOR THE RESPONDENT: Mahony Family Lawyers

Orders

1. That pending further order, the Respondent pay by way of spousal maintenance for the Applicant the sum of $375 per week, the first payment within seven (7) days, with such payment to be made by bank transfer to an account nominated by the Applicant to the Respondent’s solicitors within two (2) business days of the making of these Orders.

2. That the Respondent pay to the Applicant within fourteen (14) days from this date the sum of $50,000, with the categorisation of that sum reserved to trial or as otherwise agreement between the parties.

3. That pending further order, the Respondent continue to pay private health insurance premiums in order to continue to provide to the Applicant private health insurance cover as was maintained immediately prior to the separation of the Applicant and Respondent.

4. That the Applicant’s costs of this application be reserved.

5. That in the event of an application for costs by the Applicant then the Applicant file and serve written submissions as to costs within twenty-one (21) days from this date and the Respondent written submissions in response within a further twenty-one (21) days, with submissions in reply to be filed and served by the Applicant within a further seven (7) days and that, thereafter, determination of costs be reserved to the Court in Chambers.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Caruthers & Churchill has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT PARRAMATTA

FILE NUMBER: PAC 3814  of 2013

Ms Caruthers

Applicant

And

Ms Churchill

Respondent

REASONS FOR JUDGMENT

1. The present financial interim applications for determination arise from a failed same-sex relationship.

2. The Applicant, birthmother of the parties’ three younger children, seeks orders for interim periodic spouse maintenance and interim property settlement as against her former partner, the Respondent, who is the birthmother of the parties’ oldest child. The application is brought in circumstances where the proceedings have been before the Court for some time as to parenting and issues as to property and ongoing spousal support have commenced.

3. To understand the context of the present applications it is necessary to consider a brief history of the parties’ relationship.

4. The parties commenced a same-sex relationship in early 1992. The parties separated in about June 2013. The parties had previously separated for a period in 1998.

5. The first child was born in 1998 with severe disabilities and was later diagnosed with Lissencephaly, requiring ongoing full-time care. The birthmother of this child was the Respondent.

6. In 2005 the Applicant gave birth to twins. In 2010 the Applicant gave birth to the youngest child of the relationship. These three younger children do not suffer from any disability.

7. Following interim parenting Orders made on 19 November 2013 by consent, all four children reside primarily with the Respondent to the present application and the Applicant spends time with those children on some midweek afternoons and alternate weekends. The Applicant’s overnight time is required to take place at her parents’ home and in the presence of either of her parents or her sister.

8. Otherwise, the Applicant is required to continue attendance upon her health professionals and remain compliant with her prescribed medication regime for reasons referred to later.

9. On 19 November 2013 an order for the preparation of a single expert report by a child and family psychiatrist was made by consent and the subsequent report by Dr A was released to the parties on 28 April 2014.

10. On 28 April 2014 trial directions were made and leave was granted to approach the list clerk for allocation of trial dates. It is expected that trial dates will be allocated in the September/October 2014 period. In the intervening period, the parties have been ordered to attend the Court Ordered Mediation Program.

11. It is common ground that the present parenting arrangements arise as a consequence of concerns relating to the Applicant’s mental health, in respect of which she is receiving ongoing treatment. The Applicant at present resides in her parents’ home, whilst the Respondent continues to reside with the children in the jointly-owned home of the parties at Town B.

Issues for determination

1. The issues for determination in the present application are as follows:

   a)Whether there should be an order for interim property provision in favour of the Applicant?

   b)Whether, having regard to any order for interim property division, there should be an order for the payment of periodic support for the Applicant by the Respondent?

   c)If so, what are the Applicant’s reasonable needs and what is the Respondent’s capacity to meet any order for periodic payment?

Interim Property

1. It is common ground that the jurisdictional bases as a “de facto relationship” in this matter are present in terms of the length of the relationship and the geographical requirement.

2. The principles as to applications for interim property provision are well settled, (see Full Court decision of Strahan & Strahan (2011) FLC 93-466; [2009] FamCAFC 166) and require a two-step process.

3. Firstly, there must be circumstances enlivening the power to make an interim order. The test is not limited to “compelling circumstances” but whether it would be “appropriate” to make an interim order, with the “overarching consideration” being the interests of justice. In Strahan (supra), the Full Court said:

   132.In relation to the first stage, in our view, when considering whether to exercise the power under s 79 and s 80(1)(h) of the Act to make an interim property order the “overarching consideration” is the interests of justice. It is not necessary to establish compelling circumstances. All that is required is that in the circumstances it is appropriate to exercise the power. In exercising the wide and unfettered discretion conferred by the power to make such an order, regard should be had to the fact that the usual order pursuant to s 79 is a once and for all order made after a final hearing.

4. Secondly, the Court is to have regard to relevant matters in s 90SM of the Family Law Act 1975 (Cth) (“the Act”).

5. It needs to be kept in mind that the final outcome of property settlement should not be compromised by an interim property order. Either the remaining property needs to be adequate to meet the legitimate expectations of both parties at the final hearing or the order that is contemplated needs to be capable of being reversed or adjusted if it is subsequently considered necessary to do so.

6. It is important to have regard to an overall caution. In Harris & Harris (1993) FLC 92-378, the Full Court said:

   As a generality, the interests of the parties and the Court are better served by there being one final hearing of s 79 proceedings. …

7. In Strahan (supra), the Full Court said at [132]:

   … regard should be had to the fact that the usual order pursuant to s 79 is a once and for all order made after a final hearing.

Background

1. The parties commenced cohabitation in a rented property at Town C. In 1997 the parties jointly purchased a property at Suburb D for about $76,500. The purchase price comprised substantially mortgage borrowings. The property over a period was renovated by the parties.

2. Following the birth of the eldest child in 1998, the Respondent took 12 months maternity leave from her then full-time employment to help care for the child with the Applicant. On the Respondent returning to employment, the Applicant remained the primary caregiver for the children since about August 1999 until the date of separation.

3. In 1999 the Respondent commenced a healthcare business known as “Business E”. That business was incorporated in September 2004 as “F Pty Limited”. At the time of incorporation, the Applicant and Respondent were both directors of that company and they jointly held the shareholding in the company (Exhibit B).

4. In early 2002 the parties jointly purchased land at Suburb G. The purchase price was funded substantially by mortgage borrowings using the Suburb D property as collateral security. At about this time the parties also purchased the home presently occupied by the Respondent, being the property at Town B, for either about $647,000 as asserted by the Respondent or about $700,000 as asserted by the Applicant. Once again, the purchase price comprised substantially mortgage borrowings using the other two properties as collateral security.

5. In January 2003 the parties jointly purchased premises at I Street, Suburb H for about $2,000,000 as asserted by the Respondent or for about $1,600,000 as asserted by the Applicant. The parties operated their businesses from these premises. The purchase price of this property substantially comprised of mortgage borrowing, using the other properties again as collateral security and a vendor-financed interest only loan. The vendor-financed loan was subsequently refinanced on a commercial basis in 2004.

6. Over the years, the Applicant maintained her role as homemaker and carer for the parties’ children and the Respondent devoted more and more of her time to the business and the financial management of the parties’ affairs, but assisted the Applicant in parenting and home duties.

7. The Applicant over the years received dividend payments from the parties’ business, with those dividends being her primary source of income.

8. The properties at Suburb D and Suburb G were later sold for a total of about $800,000. The proceeds of the sales were used to pay down the then mortgage commitments of the parties to $1,900,000, secured over the remaining two properties.

9. The Applicant complains that from about March 2012 she ceased to receive dividends or any other financial income from the company. In March 2012 the name of the parties’ company changed to “J Pty Ltd” with directors and shareholders remaining the same. The Applicant complains that, without her knowledge and on or about 17 January 2014, the Respondent purported to remove her as a director from the company and acquire the shares in the company previously held by the Applicant and Respondent jointly.

10. Following the parties’ separation in July 2013, the Applicant commenced receiving a Centrelink Newstart allowance of $225 per week. However, the payment of that benefit ceased in late November 2013 as a consequence of the Applicant being disentitled to benefits by reason of the assets and properties owned by her and resulting in an outstanding debt owed by her to Centrelink of about $6,000.

11. The Applicant asserts that she has met her own and the children’s expenses when they are with her on her credit card in respect of which she has incurred some $20,000 on her own and the children’s living and medical expenses. The present debit balance of that card is approximately $24,000. The Applicant is presently dependent upon her family for financial support, living in her parents’ home at Suburb G. She estimates that it would cost to some $500 per week to obtain suitable rental accommodation should she be able to do so.

12. The Applicant is presently undertaking ongoing treatment with a psychiatrist and psychologist at a cost of $455 per week with this cost substantially met by the parties’ current private health insurance, which is paid for by the Respondent. It is conceded that the Respondent will continue to make payments of private health insurance that will provide to the Applicant ongoing cover.

13. The business pays rent to the parties of $145,000 per annum in respect of the premises at I Street, Suburb H. The parties, for taxation purposes, hold those premises in a partnership and the income from rent is applied to meet the parties’ mortgage obligations secured over both of their properties. In the 2013 financial year a loss of $13,590 was distributed as to half to each of the parties from the partnership.

14. As best as can be determined, the asset pool available for distribution is as follows:

    a)Joint property at Town B (as asserted by each party in their financial statement)              $   950,000

    b)Joint property at Suburb H (lower purchase price as asserted by the Applicant)  E$1,600,000

    c)Joint household contents   $          NK

    d)J Pty Ltd*   $          NK

    e)Respondent’s  Mercedes car   E $  110,000 

    f)Nominal bank accounts     $          NK            

    E $2,666,000

15. As best as can be determined, the liabilities of the parties are as follows:

    a)Joint mortgage borrowings  E $1,600,000

    b)Respondent’s Mercedes lease   E $     90,000

    c)Applicant’s various personal loans  E $     52,000

    E $1,742,000

J Pty Ltd*

1. The Applicant filed an affidavit in support of the present orders sought on 29 November 2013. Attached to that affidavit was the partnership return for the parties for the financial year ended 30 June 2013, the Respondent’s personal tax return for the financial year ended 30 June 2013 and the tax return for the company for the financial year ended 30 June 2013.

2. The Respondent’s Response to the Application in a Case seeking financial provision and her affidavit in support of that response were filed on 14 January 2014. The Respondent in her affidavit in response takes no issue with the financial documents attached to the Applicant’s affidavit.

3. The Respondent’s personal tax return for the year ended 30 June 2013 discloses a gross taxable income of $125,924 for that year and, after allowing for her proportion of the partnership loss referred to above and a claim for motor vehicle expenses, her net taxable income was $100,868, with an estimated taxation liability of $27,546. The Respondent does not contend that the taxation liability for 2013 has not been paid.

4. The company financial statements for the year ended 30 June 2013 (Exhibit A) reveal that directors fees were paid to the Respondent in the same amount as disclosed in her personal tax return. The payment of those directors fees carry with them no prepaid tax credits as would a dividend payable to the Respondent.

5. The financial statements of the company reveals an operating profit before tax of $123,565, after payment to the Respondent of directors fees. Cash on hand held by the company as at 30 June 2012 was $101,796 and, by reason of the 2013 profit, cash on hand as at 30 June 2013 was $185,156. After allowing for other receivables and current liabilities, the equity in the company is reported at $185,914. This equity is substantially represented by cash at bank.

6. The Respondent represents that she is now the sole director and shareholder of the company and, as such, is able, should she wish, to declare a dividend which would be payable from the cash reserves of the company. That dividend representing accumulated profits would carry with it tax credits at the relevant company tax rate.

An interim property provision?

1. The Applicant seeks an interim property provision of $50,000. Leaving aside the company, the net assets of the parties are, as best can be determined, in the vicinity of about $1 million.

2. The provision sought by the Applicant is equivalent to 5% of that approximated pool.

3. Having regard to the s 90SM factors, the Applicant has made significant contributions over the period of the relationship to separation, which would be indicative of her contribution-based entitlement being well in excess of 5%.

4. Otherwise, the Applicant is in significantly poor financial circumstances when compared to the Respondent, who has the ability to continue a business which has demonstrated an ability to pay her a significant sum by way of directors fees and accumulate cash reserves over the last two completed financial years.

5. It is not contended by the Respondent that she is unable to access those cash reserves of the company so as to meet an order for a capital provision to the Respondent.

6. The provision sought by the Applicant is significantly in the lower end of the range of what may be her prospective entitlement, notwithstanding the care of the children by the Respondent. Whilst the Applicant’s financial circumstances are such to suggest that she would be unable to repay that sum in the event that her ultimate entitlement was less, that likelihood in relation to her ultimate entitlement is an extremely remote possibility.

7. The Respondent remains in control of the totality of the relationship assets.

8. In the circumstances referred to above, it is appropriate that an order be made for an interim property provision for the Applicant as sought by her. It is appropriate that the categorisation of that sum be reserved to trial and be depended upon the way in which those funds are dispersed by the Applicant.

Spousal maintenance

1. It is common ground that the jurisdictional bases as a “de facto relationship” in this matter is present in terms of the length of the relationship and geographical requirement that would facilitate the Court considering a spousal maintenance order.

2. The Court is able to make such order as it considers proper for the maintenance of one of the parties to a de facto relationship (s 90SE). By reason of s 90SF a party to a de facto relationship must maintain the other party to the de facto relationship:

   a)only to the extent that that party is reasonably able to do so; and

   b)only if the other party is unable to support himself or herself adequately whether:

   i)by reason of having the care and control of a child of the de facto relationship who has not attained the age of 18 years;

   ii)by reason of age or physical or mental incapacity for appropriate gainful employment; or

   iii)for any other adequate reason.

3. It is conceded by the Respondent that the threshold consideration in (b) above is not in issue and that the questions for determination are the reasonable needs of the Applicant and the Respondent’s capacity to pay.

4. The matters referred to in s 90SF(3) must be taken into account. Relevantly, they are referred to below.

5. The Applicant is of 41 years of age and the Respondent 51 years of age. The Applicant is in poor mental health. The Respondent does not assert any adverse health circumstances.

6. The income, property and financial resources of the parties have been referred to above. The Respondent does not assert that she is not capable of continuing in her present business. It is common ground that the Applicant is in poor health and does not have the capacity for appropriate gainful employment.

7. The Respondent has the care of the four children of the de facto relationship, with the Applicant having time with the children as referred to above.

1. The commitments of each of the parties to support themselves and the children are discussed below. Neither party has a responsibility to support any other person.

2. Neither party is eligible for a relevant pension allowance or benefit.

3. During cohabitation, the parties resided in comfortable accommodation that is now occupied by the Respondent and the children, to the exclusion of the Applicant.

4. The payment of maintenance to the Applicant would not increase her earning capacity by reason of her present incapacity for appropriate employment.

5. The Applicant, during cohabitation, contributed to the income, earning capacity, property and financial resources of the Respondent, as discussed above.

6. The de facto relationship of the parties was of some 21 years in duration. During that time, the Applicant undertook various forms of employment, but primarily devoted herself within the household and to the care of the children. It is to be inferred that her long-term absence from the workforce would, if she had been capable of seeking employment, have diminished her prospects of employment.

7. The Applicant has no capacity to provide child support for the children in the care of the Respondent for the reasons referred to above.

8. The Applicant seeks an order for the sum of $375 per week, to be paid fortnightly pending further order. She has no means of support, being disentitled to government benefits as referred to above.

9. The Applicant asserts that overall her weekly needs are in the sum of $661, as set out in her financial statement filed on 28 April 2014. Those expenses include her credit card payments of $200 per week, with her credit card liability arising from the need to meet living expenses for herself, the children and her medical expenses. Otherwise, expenses relating to herself are set out in Part N of her financial statement and total $391, with other expenses relating to the children at $70 per week.

10. The order sought by the Applicant is not an order that meets her asserted weekly expenses. Even if there was argument as to the fairly modest expenses set out in Part N of her financial statement, her claim in the sum of $375 is a significantly moderated request for financial support.

11. The Respondent, in her financial statement, asserts that her weekly income is $2,205 per week. The sum of $450 per week is set out as expenses in relation to the lease on her Mercedes vehicle, however she discloses that that lease is paid for by the company. Otherwise, in Part N of her financial statement filed on 14 January 2014, she discloses expenses for herself in the sum of $727.50, together with expenses for the children in her care of $1,237.

12. The Respondent had significant time after receiving the Applicant’s Application in a Case and affidavit to consider her response to the application for interim financial provision. Indeed, her affidavit is said to be in support of her reply to the application for spousal maintenance. The Respondent has not sought to justify any of her expenses set out in Part N of her financial statement. The Court treats, with some circumspection in the context of an interim financial matter, the following weekly expenses claimed by the Respondent:

    a)House repairs  E$37.50

    b)Her medical, dental and optical expenses  $140

    c)Cleaning  $175

13. The Respondent’s evidence is that she has a surplus of income over expenditure of $241 per week. In addition, it is apparent that the Respondent, now being in sole control of the company, has the ability to draw as against the profits an income from that company. Such funds may be drawn as she may elect either by way of salary, directors fees or franked dividends. The company has a significant ongoing revenue stream and accumulated financial resources, upon which the Respondent can have call.

14. It is clear on the evidence that the Respondent would have the capacity to meet a modest periodic payment to the Applicant over the period of time up until final determination of these proceedings. It is expected that, as a consequence of the release of the single expert report and subject to the parties are being able to consolidate the financial issues with the parenting issues, trial dates in this Registry on all issues will be well before the end of this calendar year. On that basis, it is expected that the interim order for periodic support would continue for about six months pending final determination.

15. It is proper that there be an order for periodic spousal support in favour of the Applicant in the sum of $375 per week pending further order.

16. It is conceded that the Respondent will continue to meet private health insurance payments at the family rate so as to continue to cover the Applicant pending further order.

17. Orders will be made accordingly.

I certify that the preceding seventy-two (72) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Foster delivered on 9 May 2014.

Legal Associate:      

Date:    9 May 2014