ELEI & DODT - [2018] FamCAFC 92

FAMILY COURT OF AUSTRALIA

ELEI & DODT

[2018] FamCAFC 92

FAMILY LAW – APPEAL – DE FACTO SPOUSAL MAINTENANCE – Appeal against interim orders – Findings of fact – Whether the respondent is unable to support herself – Whether the respondent was obliged to prove unsuccessful applications for employment – Whether the appellant had capacity to pay spousal support – Where the appellant re-partnered and contributes to support of partner and partner’s children – Appeal allowed in part.

FAMILY LAW – APPEAL – DE FACTO PROPERTY – Partial property order – Where funds are available – Modest order – No error – Leave to appeal refused.

FAMILY LAW – APPEAL – LEAVE TO APPEAL – Leave to appeal granted in part.

FAMILY LAW – APPEAL – APPLICATION IN AN APPEAL – Application to adduce further evidence – Error established without it being necessary to consider the further evidence – Application dismissed.

FAMILY LAW – APPEAL – COSTS – Where each party had a measure of success – Application for costs by the appellant dismissed – Application for costs by the respondent dismissed – Costs certificates issued for the appeal.

Family Law Act 1975 (Cth) ss 72, 75(2), 90SE, 90SE(1), 90SE(4), 90SF, 90SF(1), 90SF(3), 90SM, 94AAA(3)

Axtell and Axtell (1982) FLC 91-208; [1982] FamCA 10
Maroney & Maroney [2009] FamCAFC 45
Medlow & Medlow (2016) FLC 93-692; [2016] FamCA 411
Saxena and Saxena (2006) FLC 93-268; [2006] FamCA 588
Soblusky and Soblusky (1976) FLC 90-124; [1976[ FamCA 90
Stein v Stein (2000) FLC 93-004; [2000] FamCA 102
Strahan & Strahan (Interim Property Orders) (2011) FLC 93-466; [2011] FamCAFC 126
Wilson and Wilson (1989) FLC 92-033; [1989] FamCA 34

APPELLANT:

Mr Elei

RESPONDENT:

Ms Dodt

FILE NUMBER:

SYC

6260

2016

APPEAL NUMBER:

2018

DATE DELIVERED:

17 May 2018

PLACE DELIVERED:

Sydney

PLACE HEARD:

Sydney

JUDGMENT OF:

Ryan J

HEARING DATE:

17 April 2018

LOWER COURT JURISDICTION:

Federal Circuit Court of Australia

LOWER COURT JUDGMENT DATE:

22 December 2017

LOWER COURT MNC:

[2017] FCCA 3348

REPRESENTATION

COUNSEL FOR THE APPELLANT:

Mr Livingstone

SOLICITOR FOR THE APPELLANT:

David H. Cohen & Co

COUNSEL FOR THE RESPONDENT:

Mr Avery-Williams

SOLICITOR FOR THE RESPONDENT:

Stacks Collins Thompson

Orders

That the appellant be granted leave to appeal Orders 2 and 3 dated 22 December 2017.
That the appeal against Orders 2 and 3 dated 22 December 2017 be allowed.
That Orders 2 and 3 dated 22 December 2017 be set aside.
That the application for leave to appeal against Orders 4 and 5 dated 22 December 2017 be dismissed.
The application filed by the appellant on 1 February 2018 be dismissed.
The application by the appellant for costs be dismissed.
The application by the respondent for costs be dismissed.
The Court grants to the appellant a costs certificate pursuant to the provisions of s 9 of the Federal Proceedings (Costs) Act 1981 (Cth) being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the appellant in respect of the costs incurred by him in relation to the appeal.
The Court grants to the respondent a costs certificate pursuant to the provisions of s 6 of the Federal Proceedings (Costs) Act1981 (Cth) being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the respondent in respect of the costs incurred by her in relation to the appeal.

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 Elei & Dodt 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).

IN THE APPELLATE JURISDICTION OF THE FAMILY COURT OF AUSTRALIA AT SYDNEY

Appeal Number: EA 16 of 2018
File Number: SYC 6260 of 2016

Mr Elei

Appellant

And

Ms Dodt

Respondent

REASONS FOR JUDGMENT

Introduction

By Notice of Appeal filed on 18 January 2018, Mr Elei (“the appellant”) seeks leave to appeal interim maintenance and property orders (Orders 2, 3, 4 and 5) made by Judge Boyle on 22 December 2017. The application for leave to appeal and the appeal were heard together.
Ms Dodt (“the respondent”) is the appellant’s former de facto spouse and the respondent to the application for leave and associated appeal. The respondent seeks to uphold the decision of the primary judge and resists the application for leave to appeal.
In accordance with s 94AAA(3) of the Family Law Act 1975 (Cth) (“the Act”), the Chief Justice directed that this appeal be determined by a single judge.
An applicant for leave to appeal must satisfy the Court that in all of the circumstances, the decision is attended by sufficient doubt to warrant it being reconsidered by the Full Court and that substantial injustice would result if leave were refused (Medlow & Medlow (2016) FLC 93-692).

The orders under appeal

Pursuant to s 90SE(1) of the Act, the appellant was ordered to pay interim spousal maintenance as follows:
·Weekly payment in the amount of $1,450 (Order 2);
·Private health insurance for the respondent at the same level of coverage as was held during the relationship (Order 3); and
·An amount of $2,000 towards medical treatment payable no later than 15 January 2018 (Order 4).
As to the medical expenses order, this arose from a hand injury the respondent suffered at the time of separation for which she required surgery. The respondent sought that the appellant pay her out-of-pocket medical expenses and the primary judge ordered accordingly.
Pursuant to s 90SM of the Act and by way of partial property settlement, the appellant was ordered to pay the respondent $20,000 no later than 15 January 2018 (Order 5). At trial, the respondent sought $40,000 by way of partial property settlement for the payment of legal fees however the primary judge found there was no clear evidence of the source of funds to enable this payment, and considered that it was appropriate in the circumstances that the appellant pays the sum ordered towards the respondent’s costs.

De facto spousal maintenance

There is no challenge to the primary judge’s statement of the principles which apply to an application for maintenance by a former de facto spouse. As the trial reasons demonstrate, such an application is made pursuant to s 90E of the Act. However, the right of a de facto spouse to maintenance is determined by reference to s 90SF(1) of the Act and it is the application of this provision which is central to the challenges raised in the application for leave and the associated appeal.
Section 90SF(1) provides:
(1) In exercising jurisdiction under section 90SE (after being satisfied of the matters in subsections 44(5) and (6) and sections 90SB and 90SD), the court must apply the principle that a party to a de facto relationship must maintain the other party to the de facto relationship:
(a)only to the extent that the first‑mentioned party is reasonably able to do so; and
(b)only if the second‑mentioned 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; or
(ii)by reason of age or physical or mental incapacity for appropriate gainful employment; or
(iii)for any other adequate reason.
(Notes omitted)
The matters to be taken into consideration in relation to a claim by a party to a de facto relationship for spousal maintenance pursuant to s 90SF mirror those which, pursuant to s 72 of the Act, apply to a claim for spousal maintenance by a party to a marriage. In relation to the operation of s 72, in Saxena and Saxena (2006) FLC 93-268 Coleman J explained that whether an order for spousal maintenance should be made requires a four step process as follows:
·Can the applicant support himself or herself adequately?
·If not, what are the applicant’s reasonable needs?
·What capacity does the respondent have to meet those needs?
·What order is reasonable having regard to s 75(2)?
The same questions arise in an application relating to a de facto relationship, albeit the matters to be taken into account are found in s 90SF(3) rather than s 75(2).
Thus, there can be no liability to pay de facto spousal maintenance unless an applicant has first established that he/she “is unable to support herself or himself adequately” because of the matters identified in s 90SF(1)(b)(i)-(iii). In determining whether the respondent was unable to support herself adequately, the primary judge was required to disregard the income the respondent received from Centrelink (s 90SE(4)).
In relation to this threshold question, the primary judge found the respondent:
·Receives Centrelink benefits in the amount of $550 per fortnight;
·Has been out of the paid workforce since September 2012;
·Sold a car some 12 months prior to the hearing and applied the sale proceeds to her living expenses;
·Had $286 in the bank and was impecunious;
·Cannot afford many essentials including the cost of necessary medical treatment and medical insurance;
·Now lived with her parents and wished to but could not afford to establish a home of her own; and
·Has been required to borrow money from friends and family to assist her.
This resulted in the primary judge’s conclusion that:
21. Looking at the material filed by both parties, there cannot be a dispute that the [respondent] is a person in need of financial support. She is presently in receipt of a Centrelink benefit. She is intending to return to the workforce, which would clearly be in everybody’s interests. She seeks to be able to house herself, and meet reasonable expenses.

Is the respondent unable to support herself?

By grounds 1, 2 and 4 the appellant challenges the primary judge’s findings that the respondent had established that she was unable to support herself adequately. It is said that the reasons of the primary judge for so finding were inadequate (ground 1) and not available on the evidence (grounds 2 and 4).
The essence of these three challenges is that the primary judge did not consider the respondent’s failure to adduce evidence of any attempt by her to secure paid employment.
By way of context, the respondent had for years worked as a real estate agent. However, some four years after the parties’ commenced cohabitation she stopped paid work and, supported by the appellant, undertook IVF treatment which was ultimately unsuccessful. It was uncontroverted that at the time of trial the respondent had not had paid work for five years. It was also uncontroversial that following separation the respondent had not sought employment in the real estate industry or at all. According to the appellant, pursuant to s 90SF(1)(b)(ii) of the Act, this ought to have resulted in the application for maintenance being dismissed.
This submission ignores that s 90SF(1)(b) is tripartite and that the use of the word “or” enabled the primary judge to be satisfied that the respondent was unable to support herself adequately “for any other reason” (s 90SF(1)(b)(iii)). On a fair reading of the trial reasons, which, it is noted, were delivered ex tempore, the primary judge determined the question of whether the respondent established that she was unable to support herself adequately by reference to the totality of the respondent’s circumstances (s 90SF(1)(b)(iii)) and not the narrower ground upon which the appellant sought to rely. These “other reasons” included the respondent’s absence from the paid workforce for five years, that she had been attending a psychologist and had the personal difficulties outlined in [8] and [9] of the reasons and required further surgery to her hand [13]. Further, the primary judge accepted that the respondent was impecunious, wished to return to work but required funds in order to renew her real estate license [5] however needed to “get her life in order, so that she is able to re-enter the workforce and deal with the matters ahead of her” [25].
It can be inferred that the primary judge proceeded on the basis that the respondent’s evidence that she would need assistance to secure employment was not unreasonable. On this basis, with the assistance of financial support from the appellant, as counsel for the respondent said to the primary judge, the respondent would be “ready, willing and able to work.”
It is thus apparent that the primary judge was not persuaded that at this stage the respondent needed to put herself through the stress of applying for work in a field in which she had considerable experience but which the respondent knew she would not secure. Similarly, it is evident that the primary judge accepted that in an application for interim maintenance, it was reasonable for the respondent to attempt to place herself in a position to obtain work in her chosen field and to not be required to look for work that bore no relationship to the type of work and standard of living she engaged in while the parties lived together. Such an approach was entirely reasonable.
The effect of this is that the reasons challenge concerning the respondent’s ability to support herself is not made out and the findings as to the respondent’s inability to adequately support herself were available to the primary judge.

Does the appellant have the capacity to pay interim maintenance?

By ground 3, it is asserted that the primary judge erred in making an order for maintenance with which the appellant could not reasonably comply. The use of the word “reasonably” is instructive, as the threshold provision permits an order for maintenance “only to the extent that the first-mentioned [payer] party is reasonably able to do so” (s 90SF(1)(a)).
In essence, this challenge distilled into two propositions. First, that the primary judge’s findings in relation to the appellant’s income were not available and secondly, that the approach taken to the appellant’s reasonable expenses (including those of his de facto partner and her children) was erroneous.
As to the appellant’s income the key findings were:
14. The [appellant] is self-employed in the building industry. He has contracts for work through a corporate entity known as [T Proprietary Limited]. I understand he relies on a limited number of significant clients who provide the bulk of his work.
15. For the tax year ended 30 June 2016, the [appellant] sets out a gross income of $250,777. There is no tax return filed for the tax year ended 30 June 2017. The [appellant] alleges a slowdown in work from about August 2016 and anticipates lower income for that tax year. It is very difficult to comment on that without having the details of the [appellant’s] tax return, which he is under an obligation to file and no doubt will attend to shortly.
…
23. The [appellant] had a net income on the last tax return available of $158,631. Having regard to his financial statement there are payments of $100 per week each for entertainment, hobbies and cleaning. He has $20,000 in an account. The [appellant] has a significant capacity to generate income.
In relation to the appellant’s property, the primary judge recorded that the appellant lived in a home acquired during the relationship which was valued at the date of separation at about $2.8 million, had sold a property in which he had a half share, as did his late mother, of which $20,000 remained and some $385,206 had been invested in a building project, and he had recently inherited a factory unit at Suburb B. Other than passing reference to potential capital gains tax payable on the sale of the property the appellant owned with his late mother, no reference was made to the appellant’s liabilities, including significant liabilities secured against the home.
The finding that for the 2015/2016 tax year the appellant had a net taxable income of $158,631 is correct. That is, a taxable income of $250,770 on which he paid $92,139.30 income tax. However, this was not the end of the issue, for as the primary judge said at [15], the appellant gave evidence that since then he had suffered a slowdown in work and anticipated a lower income for subsequent and current tax years. The primary judge said this was “very difficult to comment on” and thus proceeded to determine the appellant’s capacity to pay interim maintenance on the basis he “has a significant capacity to generate income” [23]. It is argued that the primary judge in fact proceeded on the basis that the appellant’s income was somewhere in the vicinity that it had been in 2015/2016.
The appellant argues that this approach failed to take into account evidence:
1.That his 2015/2016 income tax return included rental income from the property he owned with his late mother and which was sold and was thus no longer generating income; and
2.That as a result of a slowdown in work and to remain competitive, from August 2016, he had reduced his daily rate from $1,250 plus GST to $625 plus GST.
Although this point is accepted, for the error to be material, consideration must be given to the approach taken in relation to the appellant’s expenses when determining his capacity to pay. The point being that an error as to income could be rendered immaterial if, having considered expenses, the appellant nonetheless had an obvious capacity to pay interim de facto spousal maintenance to the respondent.
The appellant’s expenses were calculated by reference to his financial statement filed on 13 December 2017 [23]. This evidenced total weekly personal expenditure of $5,660.23. Of this amount, the primary judge rejected $450 which was claimed for expenses met by the appellant for his de facto partner and her two children and $100 per week for each of entertainment, hobbies (sic) and cleaning. It is appropriate to pause at this juncture and observe that the respondent also claimed $100 per week for entertainment which the primary judge accepted as reasonable. The primary judge does not explain why the amount claimed by the respondent for entertainment was reasonable but an identical claim by the appellant was not.
Although the primary judge did not state the effect that disregarding these items had on the respondent’s expenses, the effect was to reduce his total weekly personal expenditure by $750 to $4,910.23. And, by way of inference, to also disregard the amount of tax he paid on that income which was in the vicinity of $1,769.23 per week. Thus, in terms of capacity to pay periodic maintenance from income, the primary judge was satisfied that the appellant had a total weekly post tax income in the vicinity of $3,050 which his total weekly personal expenditure exceeded by approximately $91. It is illustrative to note that of this amount, mortgage repayments, rates and necessary insurances (excluding superannuation and health insurance) amounted to $1,882 per week. Considered in this fashion, the appellant had $1,168 on which to support himself. It will be immediately apparent that this is less than the $1,450 per week he was ordered to pay in periodic maintenance.
On appeal, counsel for the respondent sought to establish that as a consequence of his inheritance, the appellant would also receive $95,000 by way of rental income from the factory unit at Suburb B. Although this possibility was raised at trial, it was not discussed in the reasons for judgment. It should have been.

The evidence before the primary judge established that the factory unit at Suburb B is rented in the amount of $95,000 per annum and, as the primary judge found, the appellant and his two sisters had entered into a deed of family arrangement in relation to his late mother’s estate so as to ensure the three of them received their intended one third share each. The effect of this deed of arrangement was that the appellant would receive the factory unit at Suburb B and one sister would receive a cash adjustment equal to his and his other sister’s entitlements. It was possible some funds would be left over which would then be divided equally between the three beneficiaries. In the meantime, the rental income from the factory unit was retained in an account operated by one of his sisters on behalf of the estate. In other words, on the evidence adduced at trial the respondent did not establish that the appellant was currently entitled to the rental income produced by the factory unit.
Of course, the capacity to meet an order to pay periodic maintenance is not confined to income (Maroney & Maroney [2009] FamCAFC 45 at [56] (“Maroney”)). But in order to determine capacity to pay by reference to property it was incumbent upon the primary judge to consider the appellant’s liabilities and not just his assets. This was not done and, for example, the primary judge did not consider that the home in which the appellant lived was subject to a mortgage in the amount of $1.28 million, that capital gains tax estimated in the amount of $169,000 was due on 30 April 2018 and he carried a business loan in the amount of $273,953.
In Maroney it was apparent that the payer had assets under his control which could be realised and an obvious ability to service additional borrowings. Here, if the primary judge intended to rely on the appellant’s capacity to produce funds by realising capital it was necessary to consider, even briefly, how this might be possible. The fact that this exercise was not undertaken reinforces the notion that the finding as to capacity to pay is based on income and not realisation of capital.
It is accepted that in an application for interim de facto spousal maintenance it is permissible to take a reasonably broad brush approach and it is unnecessary to address each and every item of expense claimed by an applicant or respondent (Wilson and Wilson (1989) FLC 92-033). However, where that approach is adopted (as occurred here) the reasons need to demonstrate the basis upon which the court was satisfied capacity to pay has been established.
Furthermore, it is accepted that the primary judge’s approach to the question of the appellant’s support of his partner and her children was erroneous. This expense was disregarded on the basis that the appellant provides support “to people he has no obligation to support”. The primary judge’s expression suggests that she may have mistakenly blurred s 90SF(3)(d) and (e). These provisions provide that the matters to be taken into account in determining a maintenance application include the:
(d)commitments of each of the parties that are necessary to enable the party to support:
(i)himself or herself; and
(ii)a child or another person that the party has a duty to maintain; and
(e)the responsibilities of either party to support any other person
The words “obligation to support” used in the trial reasons resonate with s 90SF(3)(d)(ii) and the “duty to maintain”. However, s 90SF(3)(e) is not so limited and is a provision expressed in the broadest terms. Section 90SF(3)(e) is the equivalent of s 75(2)(e) of the Act which has been interpreted as requiring the court to consider, in a realistic way, the fact that a party has assumed responsibility to support another person: see Soblusky and Soblusky (1976) FLC 90-124; Axtell and Axtell (1982) FLC 91-208 (“Axtell”).
As was explained in Axtell, the proper approach to s 75(2)(e) and, by analogy to s 90SF(3)(e), is that there is no principle of general application that financial support given to a subsequent partner must be subjugated to the responsibility of the partner to his or her spouse [or de facto spouse]. The point being, as stated in Axtell at 77,107:
…The facts of individual cases vary a great deal. It is generally a question of balancing differing factors and according proper weight to each of them. It is unrealistic to ignore the fact that a man sharing a household with a woman and her children from a former marriage may need to make some contribution to their support. If there are grounds for believing that some other person (e.g. the children's father) can and should be called on to contribute to the support of the children, this may affect the weight given to that matter. This is quite different from attempting to determine the issue by assigning priorities to one obligation or responsibility over another, or by putting an onus on one party to justify why a preconceived proportion should not be paid. In our view, the principle stated in Soblusky should be affirmed as a general principle, capable of application to a multitude of different circumstances.
Although it was open to the primary judge to give greater weight to the respondent’s claim to financial support by the appellant than to the appellant’s financial contribution to his partner and her children (see also Stein v Stein (2000) FLC 93-004), this issue could not be approached on the basis that when determining the respondent’s capacity to pay, s 90SF(3) operated so as to require that those expenses be disregarded.
Ground 3 is established.
It follows that the appellant has established that the primary judge’s decision as to periodic maintenance (including health insurance) is attended by sufficient doubt to warrant it being reconsidered and that a substantial injustice would result if leave to appeal were refused. Leave will thus be given, and those orders will be set aside.
However, in relation to the $2,000 payable towards medical treatment, the appellant had that amount immediately available him and there is no doubt that he had the capacity to pay this amount. Error in relation to that payment has not been established and leave to appeal that aspect of the maintenance orders will be refused.

Partial property settlement

The essence of the challenge made against the order for partial property settlement (ground 5) is that the primary judge erred in seeming to accept the submission of counsel for the respondent that the respondent was entitled to a sizeable property settlement. The primary judge did no such thing, and accepted that this was a relationship of some seven to eight years duration in which the overwhelming financial contributions had been made by the appellant. The respondent’s asserted claim to 60 per cent of the parties’ property was rejected and there can be no doubt that the fall-back position of 40 per cent also did not find favour. However, on balance, the primary judge was satisfied that in her preliminary assessment of the respondent’s claim for property settlement, the respondent had made out a case for an adjustment of at least $20,000 and that it was appropriate that she have that modest sum. This finding was available on the evidence. As is not in doubt, the appellant had access to that amount and thus, consistent with the principles discussed in Strahan & Strahan (Interim Property Orders) (2011) FLC 93-466, an order for partial property settlement in the amount ordered was available.
The appellant has failed to establish that this decision is attended by sufficient doubt to warrant it being reconsidered and that substantial injustice would result if leave to appeal against that order was refused. Leave will be refused.

Conclusion and Costs

It was common ground that the court would receive evidence that the appellant’s current partner is expecting his child. This evidence was said to be relevant to the question of periodic maintenance and the approach adopted by the primary judge to the appellant’s responsibility to contribute to her support. As error has been established without it being necessary to consider that further evidence, it is thus immaterial other than on a redetermination. Although I indicated that this was an appropriate case for the Full Court to re-exercise rather than remit for hearing, both parties wished to consider their position and address the court once judgment had been delivered. Further submissions will be taken on the point and it would seem, consideration given to whether or not further evidence is required on the rehearing.
In the event the appellant was successful, he sought costs against the respondent. If the appeal was dismissed, the respondent sought costs against the appellant. In the event, each of the parties have secured a measure of success and it is not appropriate that an order for costs should be made in favour of either party. However, it is appropriate that certificates issue for the appeal in accordance with the Federal Proceedings (Costs) Act 1981 (Cth). Orders will be made accordingly.

I certify that the preceding forty-six (46) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Ryan delivered on 17 May 2018.

Associate:

Date: 17 May 2018