Clelland & Clelland

[2008] FamCA 904

FAMILY COURT OF AUSTRALIA

CLELLAND & CLELLAND [2008] FamCA 904

FAMILY LAW – PROPERTY – jurisdiction – parties divorced and later resumed cohabitation in a de facto relationship – whether the subsequent property division is a matrimonial cause - meaning of ‘out of the marital relationship’ –Kowalski & Kowalski is binding – not possible to distinguish Kowalski – Court does have jurisdiction to hear the property proceedings – parties to make submissions about granting of leave to apply out of time

FAMILY LAW – INTERIM SPOUSE MAINTENANCE – application to leave to apply out of time pursuant to s 44(3) – leave granted – interim spousal maintenance ordered

Family Law Act 1975 ss 4, 44(3), 44(4), 72, 74, 75, 77

Kowalski & Kowalski (1993) FLC ¶ 92-342

APPLICANT: Ms Clelland

RESPONDENT: Mr Clelland

FILE NUMBER: CAC 918 of 2007

DATE DELIVERED: 11 June 2008

PLACE DELIVERED: Canberra

PLACE HEARD: Canberra

JUDGMENT OF: Faulks DCJ

HEARING DATE: 15 May 2008

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Simpson

SOLICITOR FOR THE APPLICANT: Mr Gould

COUNSEL FOR THE RESPONDENT: Mr Miller

SOLICITOR FOR THE RESPONDENT: Mr Farrar

it is Ordered that

1. It is declared that the Family court of Australia has jurisdiction to determine the application for leave to apply out of time for property division and spouse maintenance between the applicant and the respondent. 

2. The applicant have leave to commence proceedings about spouse maintenance.

3. The husband will pay to the wife $750 per week as interim spousal maintenance.  The first of these payments will commence on 18 June 2008.

4. The husband will make all future mortgage repayments in regard to the mortgage over the property at B until further order of this Court. 

5. The parties have liberty to apply in relation to the precise figure of the payment referred to in Order (4) and to the payment of arrears if necessary.

6. The determination of whether the court should grant leave to apply out of time for property division is reserved for a date to be fixed by a Registrar.

7. The costs of both the husband and wife in relation to this application are reserved.

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

FAMILY COURT OF AUSTRALIA AT CANBERRA

FILE NUMBER: CAC 918 of 2007

MS CLELLAND

Applicant

And

MR CLELLAND

Respondent

REASONS FOR JUDGMENT

1. The wife,[1] the applicant, commenced proceedings in the Federal Magistrates Court and the matter was then transferred to the Family Court.  The proceedings directly before me were filed by the wife on 29 February 2008 in the Family Court.  The orders sought by the wife are contained in Endnote 1.

   [1]For the sake of convenience I will call the applicant the “wife” even though the parties have now been divorced for some time.  The respondent is similarly referred to as the “husband”.

2. In essence, the wife sought leave, pursuant to section 44(3) of the Family Law Act 1975 to commence proceedings for spouse maintenance and for orders dividing the property of the parties under the Family Law Act.

3. A preliminary point was whether the Court had jurisdiction to entertain the application about property. 

4. There is no argument that the Court could maintain an application about spouse maintenance and during the course of the proceedings before me on 15 May 2008, interim maintenance was sought.  It was acknowledged that the question of the determination of permanent spouse maintenance would depend in part upon the resolution of property matters between the parties - if indeed leave was granted for such proceedings to be undertaken. 

5. The question of jurisdiction was sensibly raised as a preliminary point on the basis that if it were determined against the wife, then the balance of the proceedings for leave about property division would be unnecessary.

Spouse maintenance

1. There is no doubt that the Court has jurisdiction to consider the question of spouse maintenance. The definition of “matrimonial cause” in section 4(1) of the Family Law Act1975 includes “proceedings between the parties to a marriage with respect to the maintenance of one of the parties to the marriage.”

2. Section 4(2) in the Family Law Act provides:

   “a reference in this Act, …..to a party to a marriage includes a reference to a person who was a party to a marriage that has been:

   (a)      terminated by divorce…”

3. Proceedings for spouse maintenance however, must be commenced within 12 months of the divorce unless leave is granted pursuant to section 44(3) as is sought in these proceedings. I will return to the question of spouse maintenance and interim spouse maintenance in due course.

Property division

1. More complicated is the question of whether the court has jurisdiction to grant leave to institute proceedings about property division. Such proceedings must fall within the definition set out in paragraph 4(c)(a) of the Family Law Act being:

   “proceedings between the parties to a marriage with respect to the property of the parties to the marriage or either of them, being proceedings:

   (i) arising out of the marital relationship….”

2. The resolution of this matter is complicated by the history of the parties’ relationship and whether in the circumstances the property proceedings could be said to arise “out of the marital relationship”.

Background

1. The relevant circumstances are these. The parties were married in February 1978 and separated on 1 August 1987. The parties entered into a deed pursuant to (what was then section 86) of the Family Law Act on 28 August 1987 (shortly after they had separated).

2. The parties were divorced on 20 May 1988 but subsequently reconciled.  The parties did not remarry.  There is some dispute about precisely when the reconciliation occurred but the wife asserts[2] that this was in 1990.  She further asserts in the same paragraph, that the parties were finally separated on 26 November 2006 under the one roof and physically separated on 16 March 2007.[3]  The parties had two children, a daughter who was born in March 1980 and a son who was born in May 1981.

   [2] Paragraph 12 of her affidavit filed 29 February 2008

   [3] It is not necessary for the purposes of determining the present issue to make conclusive findings about these dates.

3. As part of the arrangement between the parties on their first separation, what was the former matrimonial home was transferred into the wife’s name[4].  She subsequently contributed the proceeds from the sale of that property to the purchase of the property in which she is living at present at B in New South Wales. 

   [4] Pursuant to clause 2of the section 86 deed.

4. Shortly after the parties first separated, the husband became bankrupt and the bulk of the parties assets have been acquired since the parties divorced.

Arising from the marital relationship…

1. Put in the simplest terms therefore, the question is whether the property that is sought to be divided between the parties was property “arising from the marital relationship” or whether it was property arising from the de facto relationship of the parties.  If it were the latter, it was submitted that this court has no jurisdiction to deal with the matter and it should be dealt with in the Supreme Court of New South Wales under the Property (Relationships) Act 1984 (NSW).

2. It would be fair to say that the accumulation of the property now to be divided has been more particularly associated with the period after the divorce of the parties than before.  Both parties argue that the decision of the Full Court of the Family Court of Australia in Kowalski & Kowalski[5] provides guidance about the approach to be undertaken, although the decision was treated differently by each Counsel.

   [5] (1993) FLC ¶ 92-342

3. Kowalski & Kowalski considered a number of decisions: B & B[6], Leibinger & Leibinger (No 1)[7] and Leibinger & Leibinger (No 2)[8] and Skoflek & Baftrirovsky.[9]  Those decisions were not consistent in their approach to the relevant nexus between a marital relationship and property in circumstances where parties had separated, divorced and subsequently reconciled.

   [6] (1985) FLC ¶ 91-610

   [7] (1986) FLC ¶ 91-727

   [8] (1986) FLC ¶ 91-775

   [9] (1988) FLC ¶ 91-906

4. Their Honours[10] in Kowalski concluded as follows (at page 79,630):

   “A more logical and consistent approach is one which is based on the proposition that once a marriage has been celebrated between the parties, the entire relationship between the parties whether arising out of contributions before, during or after the formal tie of marriage was entered into or dissolved, falls with the ambit of Part VIII of the Family Law Act 1975.  This principle explains why contributions made between cohabitants who later marry are judged according to the criteria set out in the Family Law Act 1975 and not according to those set out in the Property Law Act 1958 (Vic) or the De Facto Relationships Act1984 (NSW). It is also consistent with the proposition that post-separation and post-divorce contributions continue to be taken into account. These parties are before the Family Court because they were once married and hence the proceedings can be said to arise out of the marital relationship, even if the property, the subject of such proceedings, does not. As Ross-Jones J remarked in Dadic at p 76,214: ‘A resumption of cohabitation after dissolution ... between parties who have previously been married to each other is clearly distinguishable from a de facto relationship as such where the parties have never been married to each other.”

   [10] Nicholson CJ, Nygh and Purdy JJ

5. As a consequence, their Honours determined (at page 79,631):

   “…the reasoning, although not the actual decision, in B and B can no longer stand and must be regarded as overruled. The decision in Leibinger (No 1) in so far as it rested on the remarks of Murray J has already been distinguished by the Full Court in Leibinger (No 2)…The decision and the reasoning of the Full Court in Skoflek and Baftirovsky is inconsistent with the principle we have arrived at in this case and must be regarded as overruled.”

Does the making of orders make a difference?

1. Counsel for the husband sought to distinguish Kowalski from the present matter and to derive a golden thread of principle from the cases that had been decided.  He pointed out that B & B was the only case in which property orders had been made.  In Leibinger (No 1) there was no settlement and Leibinger (No 2) related to injunctive relief rather than division of property.  In Skoflek there was no division of property.  He argued that in this case the parties had reached a final and concluded agreement after their marriage had come to an end which was reflected in the section 86 agreement and that they had therefore, by their own actions and by the procedures of the court in accordance with the Act, brought to an end any property division “arising out of the marital relationship”.  He submitted that the property subsequently acquired was property arising out of the de facto relationship of the parties and that the distinction between this case and the others referred to was contained in that proposition.

2. Attractive though the logic of this may be, it seems to me that the plain meaning of their Honours in Kowalski & Kowalski is at variance with this proposition.  The quotation set out above, in my opinion, does not permit the distinction sought to be applied by Mr Simpson.  Their Honours point out that there is significant authority that property acquired by the parties before a marriage and indeed after a marriage is properly to be taken into account and is property the subject of which an order of this court could be made.[11]

   [11] At page 79,630

3. In the circumstances, it seems to me that I am bound by the determination of their Honours in Kowalski & Kowalski and that in this matter it is appropriate to hold that the Court does have jurisdiction to entertain an application in relation to the division of the property of the parties, subject of course, to the Court’s giving leave for such proceedings to be commenced pursuant to section 44(3).

Leave to commence property proceedings to be determined subsequently

1. The parties did not seek to agitate in full in the proceedings before me the issue of leave.  I will accordingly allow, if they should seek it, an opportunity for the parties to make further submissions to me about that matter once I have delivered this particular decision.

Interim spouse maintenance

1. Nevertheless, the issue of interim spouse maintenance necessarily involves some consideration of some of the matters which will be the subject of further submissions in due course. 

2. Section 77 of the Family LawAct provides that the court may in proceedings with respect to the maintenance of a party, if it appears that the party is in immediate need of financial assistance, order the payment pending the disposal of the proceedings of such periodic sum or other sums as the court considers reasonable.  In this case the maintenance sought seems to be “interim” rather than “urgent” and accordingly falls under the general power of the court pursuant to section 74 to order spouse maintenance. 

3. However, prior to making any determination in relation thereto, it is necessary for me to determine if leave should be granted. Section 44(3) provides that (relevantly) proceedings for maintenance

   “shall not be instituted, except by leave of the court in which the proceedings are to be instituted or with the consent of both of the parties to the marriage, after the expiration of 12 months after: (c) in a case referred to in paragraph (a) [where a divorce order has taken effect] – the date on which the divorce order took effect;…”

4. The preliminary matters properly to be taken into account in determining whether leave should be granted are identified in s 44(4), namely hardship to the applicant if leave were refused or the applicant’s inability to support him or herself without an income-tested pension, allowance or benefit at the expiration of the time for instituting proceedings without requiring leave.  Once either of those factors is established, the court may choose to exercise its discretion.  Matters that the court may consider include a reasonable explanation for the delay in bringing the proceedings and that the applicant would have a reasonable chance of success in the proceedings if the leave were granted.[12]  This has been referred to in some cases as an arguable case and falls short of establishing that the applicant must succeed.

   [12] Hall & Hall (1979) FLC 90-679

5. In this matter the reason for the delay in bringing the proceedings is satisfactorily established in my opinion, by the fact of the parties’ reconciliation and the comparative promptness with which the wife commenced proceedings in the Federal Magistrates Court after their second separation.  Prior to the second separation of the parties it would have been absurd for the wife to commence proceedings when the parties were living together.

6. The criteria for the granting of spouse maintenance are set out in section 72.  That section provides:

   (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:…

   (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 section 75(2).

7. The wife’s affidavit material deals substantially with matters relating to her health and ability to support herself.  She has deposed (untested by cross examination it is to be conceded) in paragraph 97 of her affidavit of 29 February 2008 that she has weekly expenses of about $741.00.  She seeks in her primary application that other sums of money be paid as well.  She deposed to the fact that the husband had been paying the whole of the mortgage in respect of the B property but had reduced that amount by at least one half.

8. At the time of the writing of this judgment I am uncertain what the situation is in relation to the mortgage or whether the bank has begun any proceedings in relation to the mortgage.  It has not been proved however, that the husband was incapable of making the mortgage repayments prior to his reduction of the payment.  This appears, from his letter to the bank, to be at least in some measure, a retaliation for the wife’s withdrawal of her guarantee in relation to the overdraft on the business.

9. The question of the capacity of each of the parties to earn are dealt with in different parts of the affidavits and in submissions.  In paragraph 85, the wife sets out circumstances relating to her earning capacity and in paragraph 90 she deposes to the state of her health.  This is corroborated by her medical practitioner in a separate affidavit.

10. Put briefly, she has skills (potentially) as a sports instructor but has no other relevant clerical skills and she is of an age where it would be reasonable to infer that she would not find it easy to obtain employment.  Even if such an inference was not readily able to be drawn, she deposes to her attempts to obtain employment and the (negative) responses that she received. 

11. I am satisfied that the combination of her health, age and lack of recent and relevant skills means that she is unable to obtain satisfactory employment at the present point and possibly in the future.  She is in receipt of a Centrelink payment, but I am obliged to disregard that payment under the terms of the Act, section 75(3). 

12. For his part, the husband has filed material which demonstrates that he has a number of commitments which would suggest, (at least on a superficial assessment), that he does not have any surplus to make payments of the sort claimed by the wife.  It was submitted that notwithstanding the lack of apparent connexion of some of these payments with the requirements of the husband’s business, there had been no evidence to demonstrate whether the nexus existed or did not and that accordingly I should not infer that such a nexus did not exist.  Notwithstanding that submission, in the context of interim proceedings, I am prepared to infer that the payments for the plane(s) and the gliders are not essential to the operation of the husband’s sales business.

13. These involve payments of some thousands of dollars per month.  The figures are set out in his material and can properly be regarded, in this context, as admissions against interest. 

14. It was submitted on behalf of the wife that in the context of these matters, at least at this point, it is reasonable that the husband should not be able to elevate the meeting of these payments for what would not ordinarily as essentials above the reasonable and proper needs for maintenance of the wife.  I am conscious moreover, that this is an interim determination only and the ability of the husband to continue to make these payments is a matter that will no doubt be explored in the final hearing.

15. I reiterate that the wife’s needs were not the subject of testing by cross-examination and again this is a matter which may be refined in final proceedings between the parties. 

16. Nevertheless, it has been demonstrated to my satisfaction that taking account of the matters under section 72 and section 75(2) of the Family Law Act, particularly the age, state of health and capacity to earn for each of the parties (most elements of which for these purposes are not contested in these proceedings at this point) and further taking account of a standard of living which in all the circumstances is reasonable,[13] I should accept that the wife has reasonable prospects of success, grant leave and on the evidence, make orders for interim maintenance in favour of the wife.  

    [13] 75(2)(g)

17. I will make orders as she seeks on a weekly basis at a rate of $750 per week.  I will order further that the husband would continue to make such payments to the bank as may be required in relation to the mortgage on the B property until the final hearing between the parties or further order of the court.

1. In this regard, I make no specific order for the amount involved in payment to the bank, although I am happy to prescribe a figure if the parties wish me to do so.  This may be appropriate if interest rates have changed significantly or if there is some form of penalty interest applicable if no payments have been made in recent times.

2. It seems to me that the maintenance payments should commence one week from the date of these orders because this is the first time that the liability has been determined. 

3. I do not propose at this point to make an order about the payment of arrears of the mortgage.  The parties can make an application if they need to in relation to that issue before trial. 

4. The circumstances relating to the bank account of M Business (the husband’s business) are far from clear to me and I am not prepared to find on the evidence before me that the husband has the capacity to make lump sum payments.  I should add perhaps that I am not at this stage prepared to find the reverse, namely that he has not such a capacity.

Garnishee

1. The wife also sought orders in relation to maintenance that the weekly payments for her and for the mortgage should be garnisheed from the bank account of the husband in the name of M Business.  The husband operates as a sole trader and hence it may be reasonable for that account to be the target of a garnishee order if such an order were justified.  However, in my opinion, at this point, there is no reason to believe that the husband will fail to comply with an order of this court.  If he does so, enforcement proceedings can be taken and will, if appropriate, be accompanied by orders for costs.  As such, I do not think it necessary to order a garnishee on his “wages” or his business bank account.

Pre-emptive order for sale

1. The comments I have made about the inappropriateness of garnishee orders at this point is equally applicable to a pre-emptive order for the sale of property of the husband to meet his obligations.

Receiver

1. The wife also sought that Mr K be appointed as a receiver to liquidate the husband’s business and the assets of the husband’s business known as M Business.  As I pointed out to Counsel during the course of the proceedings before me, in my opinion, this application is premature.  The relevant issue between the parties relates primarily to the valuation of the business and in those circumstances there would seem to be something perverse in the appointment of a receiver.  This may in fact bring about a serious reduction in the value of the business if not its termination.  There are alternatives which include the appropriate undertaking of an evaluation with whatever qualification the valuer may need to put upon it.[14]

   [14] For example, relating to the value and disposability of stock or about income projections.

2. The rest of the orders sought are in the nature of annual payments and might reasonably be determined at the final proceedings between the parties.

Discovery issues

1. Both parties annexed substantial correspondence passing between their solicitors about questions of discovery.  It is distressing to consider how much money has already been spent in seeking information that by law the parties ought properly to be providing.  I accept that until the question of jurisdiction was determined, the obligation may not have technically arisen, but common-sense would have suggested that on both sides a full and frank disclosure at the earliest possible moment could have and will provide the best opportunity for the parties to reach some sensible solution.

Conclusion

1. I propose to indicate that the court has jurisdiction to entertain the application for leave to institute property proceedings out of time.  I reserve to the parties the right to make the submissions as to whether such leave should be granted.  If I subsequently were to determine that leave should be granted or (the parties concede that is the case), I propose that the final hearing between the parties should take place as quickly as possible.  I will make such directions as may be appropriate to ensure that can occur at the earliest possible moment on a day suitable to the parties and their Counsel.

2. I will order that there be interim spouse maintenance.  The issue of permanent spouse maintenance awaits the determination of the issues in relation to property. 

3. The interim matter is removed from the pending cases inventory.

I certify that the preceding fifty-two (52) paragraphs are a true copy of the reasons for judgment of the Honourable Deputy Chief Justice Faulks.

Associate: 

Date:  11 June 2008

Endnote 1

Orders sought by the applicant wife:

1. That leave be granted pursuant to Section 44(3) of the Family Law Act for the Applicant to institute proceedings for Spousal Maintenance and Property Orders.

2. That in the event that leave is granted pursuant to Section 44(3):

   a.That the respondent pay to the Applicant by way of maintenance for the Applicant:

   i.$750 per week periodic spousal maintenance to be due and payable from the date of the filing of this Applicant and thereafter fortnightly.  The $750 per week be garnisheed from the Respondent’s National Australia Bank account in the name of [M Business].

   ii.The NRMA building insurance premium for the year 2008/2009 regarding the former matrimonial home known as [B property] in the amount of $478.24.

   iii.The rates outstanding to […] Council regarding the property situated at [B].

   iv.The arrears of the National Australia Bank debt secured over the property [at B].

   v.Any and all National Australia Bank mortgage instalments as they become due.  This amount to be garnisheed from the Respondent’s account in the name [M Business].

   vi.The amount of $306 for annual servicing of the septic system by […] Plumbing.

   b.That to facilitate Order 2(a):

   i.The wife be at liberty to sell the two ultralite planes in her possession and apply the proceeds of the sale towards the husband’s spousal maintenance obligations under these orders;

   ii.Within 7 days the husband cause to be delivered to the wife the [Italian] motor vehicle and the [Alfa Romeo] motor vehicle;

   iii.The wife be at liberty to sell those vehicles and apply the proceeds of the sale towards compliance with the husband’s spousal maintenance obligations under these orders.

   c.That [Mr K] of [S Partners] be appointed as Receiver to liquidate the business and assets of the husband’s business known as [M Business].

   d.The said Receiver have the following powers:

   i.Power to exercise all or any of the powers of the proprietor as if he were that person;

   ii.Power to demand and call up one or more or all of the book debts;

   iii.Power to take such steps and proceedings as may be necessary to realise the assets of the business into monies and to pay creditors such monies as they may be lawfully due;

   iv.All powers given to a Receiver under Section 420 of the Corporations Act 2001;

   v.Power to carry on and conduct any of the business;

   vi.Power to employ or otherwise engage any person or persons for the purpose of carrying on or conducting the business;

   vii.Power to pay the expenses and costs of performing the Receiver’s duties or exercising the Receiver’s powers as they fall due from the income or for the time being of the business; and

   viii.Power to make any arrangements or compromise on behalf of the business.

   e.Within 7 days of this date the husband shall notify the Receiver of any asset of the business known as [M Business] as is in his custody or control and deliver to the Receiver all assets of the business as are in his possession, custody or control.

   f.The Receiver is appointed to inquire into and report back to the Court on the following:

   i.The outstanding financial statements of the business;

   ii.The profits of the business for the last three financial years and for the current financial year to date;

   iii.The assets and liabilities of the business;

   iv.The amount, if any, of the residue from the sale of the assets of the business;

   v.Recommendations to the Court on such matters as the Receiver considers appropriate following his investigation.

   g.The Receiver is empowered to draw remuneration for his services as Receiver in an amount equal to the costs of the time actually spent in the performance of such services by the Receiver or any partner in or employee of the firm [S Partners] calculated at the firm’s standard rates from time to time for work of that nature, such amount to be drawn by the Receiver at the end of each calendar month from bank accounts maintained by him for the receivership provided that the Receiver shall provide to the Court as part of his report particulars of his fees and drawings.