Clement and Clement and Ors

[2015] FamCA 244

FAMILY COURT OF AUSTRALIA

CLEMENT & CLEMENT AND ORS [2015] FamCA 244

FAMILY LAW – PROPERTY – Interim property order – interim provision for legal costs – where wife seeks funds on interim basis – where unresolved claims by third parties – where unsafe to make interim property order – where husband controls virtually all  matrimonial property and income – where husband has been able notwithstanding assertions as to difficult financial circumstances to fund payment of significant legal expenses and his and his dependents living expenses – where appropriate to make “dollar for dollar” order.

Family Law Act 1975 (Cth) ss 79, 117

Harris & Harris (1993) FLC 92-378
Strahan & Strahan [2009] FamCAFC 166
Zschokke (1996) FamCA 79

APPLICANT: Ms Clement

1st RESPONDENT: Mr Clement

2nd RESPONDENT: Mr A Clement

3rd RESPONDENT: Ms B Clement

FILE NUMBER: DUC 49 of 2013

DATE DELIVERED: 13 April 2015

PLACE DELIVERED: Parramatta

PLACE HEARD: Parramatta

JUDGMENT OF: Foster J

HEARING DATE: 24 March 2015

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Campton SC

SOLICITOR FOR THE APPLICANT: Ks Williams Solicitors

COUNSEL FOR THE 1ST RESPONDENT: Mr Kenny

SOLICITOR FOR THE 1ST RESPONDENT: Campbell Paton & Taylor

COUNSEL FOR THE 2ND AND 3RD

RESPONDENTS:

Mr Giveny

SOLICITOR FOR THE 2ND AND 3RD

RESPONDENTS:

Michael Jokovic & Associates

Orders

1. That the husband in the event of any payment or payments by him as and from this date in relation to his legal fees and disbursements including Counsels fees pay concurrently the same amount of such payment or payments to the wife or as she may otherwise direct the husband in writing.

2. That costs of all parties be reserved.

BY CONSENT AND WITHOUT ADMISSION AND PENDING FURTHER ORDER:

1. The respondent husband be restrained from any act or thing which may interfere with or adversely affect the applicant wife’s occupation of her current residence with such residence to include the homestead, pool, aviaries, bore pump, horse yards and all grounds inside the ringlock and barbed wire fence on the property C being part of Lot … in DP … and the road which gives the wife access to this area which runs from the public road off D Street (“Residence”).

2. The second respondent be restrained from any act or thing which may interfere with or adversely affect the applicant wife’s occupation of her Residence as defined in order 3 above.

3. The third respondent be restrained from any act or thing which may interfere with or adversely affect the applicant wife’s occupation of her Residence as defined in order 3 above.

4. As against the respondent husband, the second respondent and the third respondent, the applicant wife has the right to the exclusive use and occupation of the Residence as defined in order 3 above.

5. That each of the first respondent, second respondent and third respondent within 21 days disclose estate planning instructions, advice and implementation of that advice as set out in correspondence to each of the respondents dated 4 February 2015.

6. That within 21 days the first respondent and second respondent disclose documents relating to loan agreements as sought in correspondence to the solicitors for the first respondent and second respondent dated 14 January 2015.

7. That the first respondent and second respondent within six weeks cause to be served on the applicant wife:

   (a)       The final 2014 Financial Statements for the Partnership trading as the M Pty Ltd;

   (b)       Management Accounts for the Partnership trading as the M Pty Ltd for the period from 1 July 2015 to 31 March 2015; and

   (c)       The first respondent husband’s tax returns for 2013 and 2014 as lodged, together with notices of assessment levied.

8. That the first respondent husband in the first instance meet the costs of updating the report from F Valuers dated 30 July 2014 in relation to the valuation of C, E and the water licence.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Clement & Clement 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: DUC 49  of 2013

Ms Clement

Applicant

And

Mr Clement and Mr A Clement and Ms B Clement

Respondents

REASONS FOR JUDGMENT

1. In her amended application in a case filed on 13 March 2015 the applicant wife relevantly seeks orders that in summary provide:

   a)For her to have continuing occupation of the rural homestead property at C, D Town, NSW as against the husband, his brother the second respondent and his mother the third respondent; and

   b)For the husband pay to her by way of interim property settlement or interim costs the sum of $150,000 within 14 days.

2. The wife brings her application in circumstances where her legal team has informed her that in the absence of payment on account of legal costs and disbursements they will no longer be able to act for her.

3. The wife receives a disability pension, family allowance payments in relation to the children in her care and a carer’s pension in relation to one of the children. The husband pays her $80 per week for child support for the four children. All of her income each week is expended on living expenses of herself and the children.

4. The wife owns no property in her own name except for a motor vehicle, having a value of about $7,000, with that vehicle essential to her day-to-day life as she resides about 30km from town and the children’s schools and activities, and an old utility necessary for use on the property on which she lives.

5. The wife is not in receipt of a grant of legal aid.

Background

1. The wife’s application is complicated by the involvement of the husband’s brother as second respondent and the husband’s mother as third respondent in circumstances where they both assert equitable interests in the assets owned by the husband.

2. The parties commenced to cohabit in about July 1998 and were married in 1998. They separated on 18 April 2012.

3. There are four children of the marriage, twins G and H born in 2000, J born in 2002 and K born in 2004.

4. At the commencement of cohabitation the husband had his rural interests as referred to below. The wife had no assets of any significant value.

5. During cohabitation the husband worked in the farming partnership and the wife worked until about 1998 until she was injured in a workplace accident. The wife commenced to receive a disability pension thereafter.

6. As a consequence of her workplace accident the wife alleges a compensation payment of about $50,000 in 1998. She asserts that these funds were used for improvements to the home including an aboveground pool, general household living expenses and the purchase of stock.

7. The husband asserts that the wife did not assist with the farm during cohabitation. A somewhat surprising criticism having regard to the fact that she had at one time four children under four years of age. The wife asserts that until her injury in 1998 she assisted on the farm undertaking irrigation, sheep work and driving tractors. The husband’s engagement with the children was subject to his farming obligations.

8. The wife during the parties’ cohabitation kept and bred birds. The nature and extent of this activity is a matter of significant dispute between the parties.

9. In 2005 the wife was injured in a motor vehicle accident and alleges a compensation payment received of about $150,000. She says that these funds were applied for household and living expenses and undertaking improvements to the home. She also asserts in 2005 a Lotto win of $22,000 with some funds applied to purchase of birds and the balance provided for household and living expenses.

10. The husband denies that the wife spent any more than $9,000 of her own funds on improvements to the home at “C”. He asserts that she spent any compensation monies received by her on her bird breeding interests to which she has made a substantial contribution in constructing aviaries and other facilities.

11. Following separation the wife and children have continued to reside in the homestead situated on the property known as “C”. The wife has remained the children’s primary carer since separation.

12. The wife asserts that the husband has requested her to vacate this property on a number of occasions since separation.

13. The husband resides in a cottage on an adjoining property “L” owned by the second respondent, his brother. The husband has re-partnered and lives with his new partner, her child and their new child.

Property dealings

1. In 1948 the husband’s father purchased from his father the property known as “M” at N Town. In 1953 the husband’s father purchased the “C” property comprising 69.67ha.

2. The husband’s parents conducted farming operations on both of these properties. In 1954 the family moved to reside in the homestead at “C”.

3. In 1974 the property “E” comprising 142.65ha was acquired by the husband’s father and his brother as tenants in common in equal shares. The family thereafter conducted a farming partnership on the three properties.

4. In 1977 the husband’s brother acquired in his name the property “L” that adjoined the “E” property.

5. In 1978 the husband’s father sold the “M” property to reduce farming debt at that time. The farming partnership continued on the three remaining properties.

6. Both the husband and his brother were active in the farming partnership, both commencing to work at a young age with their parents. In 1986 the husband became a member of the farming partnership known as “the M Pty Ltd”. The other partners being the husband’s parents and his brother.

7. The husband asserts that in 2003 there was an agreed arrangement in recognition of the husband’s contribution to the farming partnership and the properties. He says the family agreement was that the “E” property would be transferred to him by his father and brother and the “C” property would be transferred to him by his father together with the attached water licences upon condition that the real property assets remain together and the partnership continued in existence.

8. The husband asserts that it was a further condition of the family arrangement that he and his brother would purchase for their parents a cottage in town for their retirement and provide financial support by way of a retirement income after they retired from active farming. The husband says that he was agreeable to this arrangement.

9. The husband asserts that he and his brother agreed to make mutual wills that would leave the partnership interest, plant stock and equipment and water entitlements to each other in order to facilitate the ongoing conduct of the farming partnership to service debt and provide support in retirement for the parents. The husband made a will to this effect on 23 January 2004. The husband further asserts an agreement that he and his brother would purchase a home in town for the parents to live in and that house would pass on their death to their sisters as their inheritance. Otherwise he says there was an agreement that the husband would take out a life policy for $1 million with the beneficiaries being his wife and four children.

10. Nothing was done in relation to this family arrangement until the husband’s father became unwell in 2008. It was apparent at that time due to the financial position of the partnership that the husband and his brother would not be in a position to fund the purchase of a home in town for the parents. The husband asserts that there was an agreement between he, his brother and their parents that the parents would be able to live on “C” for life or until a home could be purchased for them in town or nursing home accommodation was acquired for them.

11. Subsequently the family engaged solicitors. A contract for the transfer of the “E” property to the husband by his brother and father was signed on 29 July 2008. Similarly a contract for the transfer of the “C” property to the husband by his father was signed on 29 July 2008.

12. Subsequently the husband’s parents retired from the partnership as at 30 June 2010 in consideration of the husband and his brother assuming liability for the partnership debts at that time. Thereafter the partnership has been conducted by the husband and his brother. Concurrently with the dissolution of the partnership the husband and his brother refinanced the then partnership debts of $975,342 to their own names with those borrowings secured against the three rural properties.

13. On 23 February 2010 the husband, his brother and parents signed an agreement that acknowledged in that in return for the transfer of real estate properties to the husband and “in return for the past benefits” that:

    a)The husband would provide rent-free accommodation of the “C” home to his father and mother or the survivor of them for as long as they wish to continue living there; and

    b)The husband and his brother would share equally the payment of $1,700 per month to the parents or the survivor of them during their lifetime, pay health fund fees and charges for health care expenses not covered by health care, an amount equivalent to any loss of pension as a consequence of any Centrelink reassessment and the cost of accommodation for the parents or the survivor of them after they choose to or were no longer able without care to reside at “C”.

14. This agreement is perplexing as the husband’s parents had not resided at “C” for many years and indeed resided in a cottage located on the “L” property owned by the husband’s brother.

15. The water licence transfers took place as agreed but not until September 2011 after an issue involving the husband’s sister was resolved.

16. In about September 2011 the husband and his brother effected a boundary adjustment as between the brother’s property at “L” and the husband’s property at “C” that affected a transfer of 21.86ha to “C” from the brother’s property.

17. It is the husband’s contention that for the ongoing economic conduct of the farming partnership the real estate properties should remain intact.

The husband’s mother

1. The husband’s surviving parent, his mother, the third respondent in these proceedings is 87 years of age. She presently resides in a cottage located on the “L” property owned by the husband’s brother. She and her late husband resided at this property throughout the period of the parties’ cohabitation with the wife alleging that the husband’s mother has not resided at “C” for more than 30 years.

2. The husband asserts that his mother has a wish to return to reside in the homestead property at “C”. It is the husband’s expectation that she will require nursing home accommodation into the foreseeable future as she is getting older and fragile. The husband’s enquiries reveal that the cost of nursing home accommodation would be either a payment of $300,000 as a capital payment or the payment of $150,000 as a capital payment plus $27.49 per day or in the absence of a capital payment $54.99 per day plus a daily charge in any event of $46.50 per day.

3. Otherwise the husband asserts that he has an ongoing obligation with his brother to pay his mother $1,700 per month and other expenses as provided for in the agreement referred to above.

The second respondent

1. The husband’s brother as second respondent seeks orders in his amended response filed on 9 October 2014 that in summary:

   a)Seek a declaration that he has an equitable interest in the land, water access licences and partnership interest of the husband;

   b)Injunctions to give effect to that asserted equitable interest by giving to the second respondent a licence to use and farm those assets owned by the husband during the second respondent’s lifetime and to restrain the husband from selling, transferring or divesting himself of his interest in land, water access licences and the partnership during the life of the second respondent.

2. Such a relief it appears arises from the paternal family arrangement referred to above. Clearly a determination of the second respondent’s asserted equitable entitlement awaits a final hearing.

The third respondent

1. The husband’s mother as third respondent seeks orders in her response filed on 24 March 2015 in summary:

   a)A declaration that the husband holds his interest in the “C” property subject to her right of exclusive residence in relation to the homestead property situate on “C”;

   b)An order that the wife pay to her compensation in relation to the “interference, use and occupation” of the residence or alternatively mesne profits or alternatively unjust enrichment;

   c)A declaration that the first and second respondents are jointly liable to pay to her during her lifetime $1,700 per month;

   d)A declaration that in the event of her election to no longer reside at “C” the first and second respondents are jointly liable to indemnify her for alternative accommodation costs including but not limited to the cost of living in a retirement home.

2. A resolution of the third respondent’s claim awaits determination at final hearing.

The asset pool and finances

1. The parties are in significant dispute as to the valuation of the matrimonial assets.

2. The wife for her part rejects the equitable claims made by the second and third respondents in relation to the real property, water licences and partnership interests of the husband and asserts that those assets should be valued at market value. In that case the valuation of assets as asserted by the wife would be approximately $1.89 million less liabilities, particularly the husband’s half share of the mortgage liability secured over real property in the sum of about $495,000.

3. For his part the husband asserts a significant diminution in the value of assets owned by him as a consequence of the asserted “life interest” of his brother, the second respondent, in those assets. On the husband’s case as a consequence of that diminution in the asset pool would be approximately $695,000 less liabilities of approximately $495,000 secured over real property together with additional liabilities asserted by the husband, including deferred taxation liabilities, totalling $686,692. Thus leaving, in his contention, little or no assets for distribution.

4. The 2014 financial statements for the partnership show an operating loss of $15,997 distributed to the husband and his brother equally. Notwithstanding the husband has been able to borrow funds totalling just over $80,000 to meet his legal fees to date with those funds being sourced from the mortgage facility secured over the real property of himself and his brother.

5. The husband’s taxable income for the 2013 financial year was only $16,170 with his average taxable income since the 2009 financial year being about $20,000 per annum from which he asserts an obligation to pay his half of the $1,700 payable to his mother. There is a strong inference that the husband receives other benefits that assist him in his day to day living expenses as a consequence of his rural enterprise.

6. In August 2014 the husband and the second respondent made application to their bank for an increase in the existing loan facility by increasing the limit from $770,000 to $810,000 and to extend the time for a $40,000 reduction in that facility from 22 August 2014 to March 2015. The bank documents reveal that since November 2012 the partnership has increased its borrowings by $160,000. Current financial statements for the financial year ended 30 June 2014 provide little hope that the partnership will meet the capital reduction due in March 2015 and indeed into the immediate future be able to make any capital reduction in the loan facility.

Discussion

1. The principles as to applications for interim property provision are well settled, (Strahan & Strahan [2009] FamCAFC 166) and require a two-step process.

2. 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.

1. Secondly, the Court is to have regard to relevant matters in s 79 of the Act.

2. 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.

3. 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. …

   and 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.

4. It is readily apparent that a determination of any interim property provision for the wife is fraught with difficulty by reason of the interposition of the relief sought by the second and third respondents. If successful the outcome may well be that there is little property immediately available for the purposes of division. If not, a sale of the husband’s real estate interests would appear inevitable.

5. In such a circumstance the wife’s remedy may well be limited to relief by way of spouse maintenance and long-term occupation of the property presently occupied by her.

6. Counsel for the wife fairly submitted that the only source of funds that may be available by way of interim property would be any additional borrowing capacity available to the husband and the second respondent on their bank facility that has been drawn against by the husband to meet some of his legal expenses to date. However such drawings create a debt as between the husband and his brother requiring adjustment in the partnership accounts subject to his brother’s own drawings which as at 17 March 2005 total $17,600 for legal expenses in relation to these proceedings.

7. There is no evidence before the court that the second respondent would consent to the finance facility being drawn to its limit particularly in the context of what appears to be the current poor trading circumstances of the partnership necessitating significant additional capital borrowings over the last three years.

8. In the context of interim property under s 79 of the Act having regard to the principles to be applied it is inappropriate for an order to be made.

9. Otherwise the wife seeks relief by way of an order for interim costs under s 117 of the Act. The relevant principles are set out by the Full Court in Zschokke (1996) FamCA 79 where three factors were seen as being relevant to the making of orders for interim property settlement or interim costs, namely:

   a)A position of relative financial strength on the part of the respondent;

   b)The respondent’s capacity to meet his own litigation costs; and

   c)An inability on the part of the applicant to pay her costs.

10. Ultimately and in any event an order for the provision of interim costs is in reality an order for interim property and the characterisation of that payment should be reserved to final trial.

11. As to the matter at hand it is clear from the circumstances set out above that the husband is effectively in control of all of the matrimonial assets and is in a far superior position of financial strength to that of the wife. Reflective of that position is that notwithstanding seemingly poor trading circumstances of the partnership that partnership has been able over a relatively short period of time to fund not only $80,000 towards the husband’s legal expenses and $17,600 for his brother’s, but drawings for the husband that support him, his new partner and the children in their household while paying minimal child support for the four children in the wife’s care.

12. The husband has thus demonstrated a capacity to meet his own legal expenses on an ongoing basis. It is readily apparent that the wife has no capacity to meet her legal expenses that have accumulated to date to over $100,000. It is clear that a significant proportion of any property verdict, if any, will not remain in her hands but be paid to her legal team.

13. It is appropriate in all the circumstances to make an order that hereafter the husband should he pay any funds to his solicitor or by way of disbursements in the proceedings pay a similar sum to the wife on account of her legal expenses and disbursements. The characterisation of those payments will be reserved to trial.

14. Orders will be made accordingly.

15. Otherwise other orders are to be made by consent.

I certify that the preceding sixty-five (65) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Foster delivered on 13 April 2015.

Associate: 

Date:  13 April 2015