DRUMMOND & CALDER

[2018] FamCA 718

FAMILY COURT OF AUSTRALIA

DRUMMOND & CALDER [2018] FamCA 718

FAMILY LAW – PROPERTY – interim property order – where the evidence is confusing – not satisfied it is just and equitable to exercise the discretion.

Family Law Act 1975 (Cth)

Stanford v Stanford (2012) 247 CLR 108

APPLICANT: Ms Drummond

RESPONDENT: Mr Calder

FILE NUMBER: MLC 7011 of 2018

DATE DELIVERED: 11 September 2018

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: Cronin J

HEARING DATE: 4 September 2018

REPRESENTATION

COUNSEL FOR THE APPLICANT: Ms Harris

SOLICITOR FOR THE APPLICANT: RB Flinders

COUNSEL FOR THE RESPONDENT: Dr Ingleby

SOLICITOR FOR THE RESPONDENT: Matthews Family Law

Orders

1. That the husband pay to the wife by way of interim property settlement the sum of $30,000 within 30 days.

2. That if the parties agree on paragraphs 1 to 5 of the minutes drawn by counsel for the husband at the hearing on 4 September 2018, they have liberty to forward those orders to be made by consent.  Absent the parties’ consent by 17 September 2018, they are required to attend the case assessment conference on that date.

3. That all interim applications are otherwise dismissed.

Note: The form of the order is subject to the entry of the order in the Court’s records.

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

Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLC 7011 of 2018

Ms Drummond

Applicant

And

Mr Calder

Respondent

REASONS FOR JUDGMENT

1. These reasons concern the interlocutory application of Ms Drummond (“the applicant”) seeking a partial or interim property settlement from Mr Calder (“the respondent”). 

2. For my purposes and because the parties’ counsel addressed the matters that way, I shall actually refer to the parties as husband and wife notwithstanding there was no formal marriage.  I mean no disrespect to the parties.

3. This was the second time the matter had been before the court.  The matter had been heard before Macmillan J on 4 July 2018 at which time the parties compromised a number of matters.  The only matter remaining was described by counsel for the wife as a partial property settlement.

4. The wife made clear that her intention was to obtain money for the purposes of funding this litigation and although a specific application for litigation funding could have been made, the head of power relied upon was s 79 of the Family Law Act 1975 (Cth) (“the Act”) in relation to the distribution of property.

5. The application sought $150,000 but counsel for the wife asked for an order that the husband provide to the wife the sum of $100,000.  The husband opposed the payment of any sum.  For the reasons that follow, I find there is substance to the husband’s argument but there is a justification for making an order for the sum of $30,000 (which the husband indeed suggested was an alternative proposition if the court rejected his primary position).

6. This is a long relationship with children some of whom are now adults.  Throughout the relationship, the wife has predominantly been engaged in the care of the family but has now obtained part-time employment in an administrative position.  The husband is a company director of a number of entities.

7. In addition to her personal evidence, the wife also relied upon an affidavit by her solicitor Mr B and an experienced forensic accountant Mr C.

8. Bearing in mind that the wife’s intention was to seek a fund for the purposes of the litigation but that it be deemed a partial property settlement, the evidence of Mr B is important. 

9. Mr B is the principal of the firm acting for the wife.  He made the affidavit in support of the wife’s application which he described as a litigation funding order so that she could meet her ongoing future legal, accounting and valuation expenses.  To date, the wife has incurred $14,000 and it seems that those expenses have been funded by a friend of the wife.  The wife provided $25,000 to the solicitor and he holds the balance in his trust account.

10. Mr B said that it was the usual policy to require money to be paid into trust before engaging in legal work and undoubtedly having regard to the fact that the money was paid into trust by the wife’s friend, he began undertaking the work.  He still holds money and therefore legal work goes on.  Importantly, as underpinning this application, Mr B said:

    In this matter, we offered to defer payment of (the wife’s) legal fees until she receives some of her property settlement entitlements, however this was on condition that we secure our interest by way of a caveat on her home and charge an uplift fee of 10 per cent on our professional fees.  (The wife) would also need to pay for disbursements such as barristers and forensic experts from her own resources prior to any settlement.

11. There is no doubt therefore that the wife wants to spend her own resources (as she sees them) for the purposes of paying her lawyers.  The prospect of having to pay a 10 per cent uplift for the privilege of having the solicitor act without a demand for immediate payment and at a rate beyond the court’s designated scale was apparently not daunting.

12. The solicitor said that he anticipated legal work which he set out but there was no indication as to when that would arise or how much those tasks would cost the wife.  If, as anticipated, she would pay the $100,000 sought into his trust account, it would sit there as a security for the payment.  He anticipated that the costs up to the beginning of a trial would be between $100,000 and $150,000.  Notwithstanding the wife’s counsel’s view that the wife had no knowledge of the financial position of the husband, she had already engaged forensic accountant Mr C and some discovery has already been provided and seen by Mr C.  Having regard to the nature of the assets in this case, it is hard to see why those sorts of expenses might be necessary in what otherwise seems to be a relatively straightforward case.

13. Mr B said:

    I cannot give a precise estimate of the likely further costs to my client for valuation and accounting services until the (husband) has provided proper disclosure but given the complexity of the matters which are known I estimate they will be at least $30,000.

14. Notwithstanding the valiant attempt by counsel for the wife to explain that there was some complexity and it is not apparent from the affidavit material, it is clear that the investigation anticipated by the solicitor for the wife will cost her about $30,000.  Just how that is calculated remains unclear bearing in mind Mr C’s report has already been provided.

15. Mr C’s evidence was in the form of an affidavit to which his report was attached.  He set out the documents that were missing but he seemed to have little doubt as to what the corporate entities were.  His interest was in the descriptions in the financial statements which he wants now to corroborate by other documents.  He drew certain assumptions from the profit and loss statement of one of the main companies but even there it is hard to see how corroboration by other documents will radically affect the values. 

16. Mr C said that the “available family income” was $300,058 for the period ending June 2017.  However, that is the income prior to tax.  At first blush, the husband appears to have access to substantial funds but after the taxation implications are considered along with his child support obligations and the obligations to the wife, I can understand how the husband says that he has been complaining that the parties have been living beyond their means.  Counsel for the wife pointed to the husband’s apparent discretionary expenditure including on alcohol, travel and clothing but the existing orders of the court to which both parties consented on 4 July 2018 include a payment of $6500 per month to the wife by way of cash, $1500 per month for her credit card, all of the mortgage payments, insurances and the like on the property in which the wife resides, private health insurance, her mobile telephone and the like.

17. I did not have the opportunity to test the evidence because the matter was dealt with on the papers and on submissions but it is clear that if Mr C is right about the gross income available to the family and I understand that is not necessarily accepted by the wife, the income position is not all that attractive. But that is relevant to the issue of whether or not the husband is affluent such that for the purposes of s 90SM of the Act some significant adjustment is going to be made in favour of the wife. On the preliminary evidence, the picture is not as attractive as it first looks.

18. Mr C’s evidence therefore is of considerable value because much of the work towards assessing the value of the corporate structure has already been undertaken. 

19. The starting point is to look at the respective substantive positions of the parties.  Both parties have failed to plead with particularity.  The wife’s position is that she does not know what her entitlement is because she does not know what the assets are.  I do not accept that.  The husband’s position is that he will put his position but again, there is no logical reason why that has not been done to date.  The absence of that particularity on both sides means ostensibly, that neither knows (and nor does the court) the parameters of the dispute.  That issue creates a problem when I come to the question of whether or not the discretion to make an order should be made in favour of the wife.

20. In determining a property dispute between parties, the first step is to identify the property of the parties (see Stanford v Stanford (2012) 247 CLR 108). In this case, it is not difficult to discern the property but it is not all clear about values.

21. The husband made an attempt to set out the assets (paragraph 18 of the affidavit filed 3 July 2018) but his counsel conceded that there were errors.  That is almost self-evident when one looks at the values of various items and the absence of reference to mortgages and corporate interests. 

22. One of the difficulties for the parties (and which they will have to face) is that when the relationship commenced, the wife brought to it a property at D Street, Suburb E which was a unit.  During the relationship, the adjoining unit was acquired and it is common ground that there are two titles.  However, the adjoining wall has been removed and although the wife obfuscated the issue, it is in reality, the house in which she and the children are living.  It is encumbered by debt and seems to be used as security for commercial activities of the husband.  Its value is substantial depending upon the level of debt.  It was submitted by counsel for the husband that it is the most valuable asset that the parties have.  That depends very much upon the value of the corporate entities and whether there is some other valuation than what appears to be the net asset backing.  It is the net asset backing that Mr C seems to have assumed having regard to the reference to the income streams.

23. If there was a need to sell property, D Street would be difficult because, as counsel for the wife observed, local authorities do not know of the removal of the internal wall to enable the parties to use both units as one house.  Based on what I earlier observed about the income stream, it is hard to see how the parties would have sufficient funds readily available to do any substantial renovation.

24. The wife’s answer to that problem was that she wanted to retain D Street at this stage and her solution to the provision of money was for the husband to sell four motor cars.  She conceded in her affidavit (paragraph 15) that the husband brought into the relationship two luxury motor vehicles and it is his evidence that he wants to now retain them.  They are apparently unencumbered and all four of them in total amount to just over $100,000.  Whilst there may be some justification for ordering the sale of personal property such as motor vehicles in a litigation funding application, I am conscious that this is a property division (as identified by the wife) and the husband has indicated that he wants to retain those personal items.  It would not be just in my view at an interim hearing to make an order for the sale of the husband’s personal items in circumstances where the wife wants to retain property which is of substantially more value.

25. The confusing picture of the financial position is such that I am not able to identify what property value there is for division.  That becomes critical if the issue of whether the discretion to make an order should be exercised.

26. Even if that problem could be overcome, and assuming that the court does not face an argument that there is no basis to alter the legal interests of the parties in property, the next question for the court is the identification of evidence as to the respective contributions of the parties.  The wife’s evidence is that when the relationship began in 1999, she had one of the apartments at D Street, savings, a small share portfolio and a motor vehicle subject to finance.  I am ignoring superannuation for the moment.  For his part, the husband owned a house in Suburb F, had a part interest in a holiday home at G Town which has now become the second most significant real property that the parties currently have, a business, a share portfolio and the two motor vehicles to which I have already referred.  I have no indication as to the respective values of those items nor what impact, if any, they have made on the parties’ financial position and whether those contributions are more or less significant 18 years after they were originally made.  Therein lies the problem of the parties not having pleaded with any particularity at all the nature and extent of their respective substantive claims.

27. This is not a case in which I would be concerned about the court being able to “claw back” money but rather, whether it is proper, as well as just and equitable, to make any order at all when I do not know what the parameters of the dispute are, the extent of the property, how the parties are assessing their respective contributions and how their future economic circumstances will have an impact upon their respective financial positions after any particular form of settlement is made.  In those circumstances, I could not find that it is just and equitable to make an interim order at this stage of the nature and extent sought by the wife.

28. Dr Ingleby for the husband however conceded that if the court rejected his argument that there should be no payment, the proposed expenses that the wife will incur as identified by her solicitor could justify an order for that sum to be made.  Although that was not a concession, it is plausible that the wife will at least receive $30,000 even if it is in the form of the capital assets that she wishes to retain and to the extent that the ultimate valuations show that what she wishes to retain exceeds her entitlement, a sale of property would be inevitable and the amount of money that the husband proffered or was ordered to pay now, could then be paid back. 

29. In my view in the circumstances, to enable the wife to use her own property for the purposes of litigation funding, it is just and equitable at this stage, to make an order that the husband provide her by way of interim property settlement, a cash sum of $30,000 within 30 days.  There will be orders accordingly. 

30. Dr Ingleby for the husband tendered a proposal that would (as he saw it) move the negotiations along and there are significant advantages in that.  I do not propose to make the orders because they were not consented to by the wife but the parties face a case assessment conference on 17 September.  That is another expense that they will incur perhaps unnecessarily having regard to the fact that they have already been to court twice now and expended significant sums on legal fees.  If the wife accepts the proposed orders of the husband immediately, they can be made and the necessity to attend the case assessment conference can be obviated.  I can see little point in the conference but I am not prepared to vacate it in circumstances where the wife and the husband have not particularised their claims.  A registrar needs to get control of the management of this file as the solicitors do not seem to have a set plan as to how it is to be managed.  In my view, it is important in the financial circumstances of these parties that the bleeding stops as quickly as possible and the best way for that to occur is for the exercise as suggested by Dr Ingleby to be undertaken.

I certify that the preceding thirty (30) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin delivered on 11 September 2018.

Associate: 

Date:  11 September 2018