ELLIOTT & ARNOLD

[2017] FCCA 413

FEDERAL CIRCUIT COURT OF AUSTRALIA

ELLIOTT & ARNOLD [2017] FCCA 413

Catchwords:
FAMILY LAW – Interim property application – order made.

Legislation:

Family Law Act 1975, ss.75, 79

Cases cited:

Clement & Clement [2015] FamCA244
Strahan & Strahan [2009] FamCAFC 166
Harris & Harris [1993] FamCA 49, (1993) FLC 92-378

Applicant: MS ELLIOTT

Respondent: MR ARNOLD

File Number: PAC 631 of 2016

Judgment of: Judge Newbrun

Hearing date: 5 December 2016

Date of Last Submission: 20 February 2017

Delivered at: Parramatta

Delivered on: 9 March 2017

REPRESENTATION

Solicitors for the Applicant: Peter Mitchell Lawyers

Solicitors for the Respondent: Self-represented

ORDERS PENDING FURTHER ORDER

1. The husband shall forthwith direct his former solicitors, Zahr Partners, to forthwith pay to the (omitted) Bank, from monies held in Zahr Partners trust account on behalf of the parties, the sum of $26,000 in repayment of the (omitted) Bank unsecured personal loan ((omitted)) established 2 January 2014 in the name of Ms Elliott.

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

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT PARRAMATTA

PAC 631 of 2016

MS ELLIOTT

Applicant

And

MR ARNOLD

Respondent

REASONS FOR JUDGMENT

Introduction

1. This was the determination of one urgent aspect of the wife’s interim property application contained within her Application in a Case filed 28 October 2016, namely the seeking of interim property orders that:

   “An amount of $26,000 be released from the balance of trust monies held by the husband’s former solicitors ($86,719.85 as at 3 November 2016), in order to pay a “joint debt to the (omitted) Bank borrowed by the parties for the set up costs of the business currently owned by the husband.””

2. The husband opposes the making of this order sought in the wife’s above Application in a Case (see the husband’s affidavit filed 24 November 2016).

3. The wife sought additional interim property orders in her above Application in a Case, and the husband himself sought his own interim property orders, but the Court to date has only heard submissions from the parties in relation to the above urgent order sought by the wife relating to the (omitted) Bank debt.

Material relied upon

1. The wife relies upon:

   a)Her affidavits filed 12 February 2016, 28 October 2016, and Financial Statement filed 12 February 2016;

   b)Her solicitors’ written submissions dated 7 December 2016 and attached documents;

   c)Email letter communication from her solicitors dated 30 January 2017 plus attached documents (the circumstances in which those documents were forwarded to the Court by the wife’s solicitors are referred to below);

   d)Her solicitor’s written submissions and balance sheet of 17 February 2007. (The Court has not had regard to the documentary material forwarded to the Court by the wife’s former solicitors on 20 February 2017, as this material was not the subject of any previous Court direction).

2. The husband relies upon:

   a)His affidavits filed 4 May 2016, 24 November 2016 and 7 December 2016, and Financial Statement filed 4 May 2016.

   b)His email letter communication to the Court dated 30 January 2017 together with an attached 18 pages of paperwork and documents.

   c)His letter to the court undated providing a “Summary of Financial Contribution” together with attached balance sheet and other documents.

Legal principles

1. In Clement & Clement [2015] FamCA 244, Foster J stated at paragraphs 49 to 53 the following:

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

   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 s79 and s80(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 s79 is a once and for all order made after a final hearing.

   Secondly, the Court is to have regard to relevant matters in s79 of the Act.

   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.

   It is important to have regard to an overall caution. In Harris & Harris [1993] FamCA 49; (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 s79 proceedings. ...

   And in Strahan (supra), the Full Court said at [132]:

   ... regard should be had to the fact that the usual order pursuant to s79 is a once and for all order made after a final hearing.”

The wife’s proposed interim order that the sum of $26,000 be released from the husband’s former solicitors trust account to pay the (omitted) Bank debt

1. On the evidence before the Court, the circumstances relating to the existence of the (omitted) Bank debt appears to be as follows. During the fitting out of the (omitted business) the parties required further monies for this purpose and a personal loan of $30,000 was taken out with that bank, with the monthly repayments for the loan being deducted from the wife’s employment income. The total borrowed monies were applied towards completion of the renovations of the (omitted business), noting that the bank loan was in the sole name of the wife.

2. The husband expressly states that the money used to set up the (omitted business) was obtained, inter-alia, through a personal loan from the (omitted) Bank in the amount of $30,000 in the name of the wife, and an amount of $30,000 from the wife’s brother.

3. The Court will now deal with the husband’s contention that the sum of $25,400 released to the wife on 3 November 2016 was for the sole purpose of the wife repaying the debt to the bank. Again, the wife disputes this contention.

4. The Court notes that in the affidavit of the husband filed 7 December 2016, he had annexed a copy of his former solicitor’s trust account statements which indicated that on 3 November 2016, those solicitors had released the following amounts from the trust account:

   a)(omitted) Real Estate: $32,000;

   b)The wife, “Ms Elliott”: $25,400; (the trust account statement stated, in relation to this payment to the wife of $25,400, the following: “Paid to: EFT BSB –Ac: (omitted) Ms Elliott. Reason: Release of Funds to Ms Elliott in accordance with instructions/correspondence dated 3.11.16.”)

   c)Child Support Agency: $6600.

5. Following an email request from the Court, dated 23 January 2017, to the husband and the wife’s solicitors to produce, in relation to the husband’s contention that an amount of $25,400 was released to the wife on 3 November 2016, from his former solicitor’s trust account, allegedly for the purpose of the wife paying off the (omitted) Bank debt, the following documents:

   “All documents relating to the reference, “Paid to: EFT BSB –Ac: (omitted) Ms Elliott.” Reason:     instructions/correspondence dated 3 November 2016: $25,400, relating to the sum of $25,400 paid to the wife on 3 November 2016, and referred to in the husband’s former solicitor’s trust account statement (page 3) dated 16 and the 21  November 2016”.

6. The parties, as referred to above, then each provided to the Court a separate set of documents, which essentially evidenced email communications passing between the husband’s former solicitors and the wife’s solicitors, from about October 2016 up to and including 3 November 2016, in respect to the parties’ separate requests for release of monies from the former solicitor’s trust account, including, importantly, for the purpose of determining the wife’s application that the sum of $26,000 be released from the balance of trust monies to pay the (omitted) Bank joint debt, email communications relevantly passing between the husband’s former solicitors in the wife’s solicitors, including instructions given by the husband on 3 November 2016 to his former solicitors relating to the payment of $25,400 to the wife which was made on 3 November 2016.

7. The documentary material forwarded by the husband to the Court on 30 January 2017 included email correspondence passing between the husband’s former solicitors and the wife’s solicitors from 21 October 2016 up to 3 November 2016, relating to negotiations between the parties in respect to competing requests by each party for certain amounts to be released from the husband’s former solicitor’s trust account, for various purposes.

8. There is contained within the above documentary material copies of discrete email communications passing between the husband’s former solicitors and the wife’s solicitors from 2 November 2016 to 3 November 2016, relating to the release to the wife on 3 November 2016 of the amount of $25,400. This material also includes email instructions given by the husband to his former solicitors on 3 November 2016 relating to the release of that amount to the wife.

9. There was a discrete counteroffer made by the wife’s solicitors on 2 November 2016 at 4:21 PM to the husband’s former solicitors which provided as follows:

   “We are instructed to reject your offer and we once again ask that your client consider our previous offer to you which would provide our respective clients with the appropriate relief or in the alternate, we are instructed to offer a release of approximately $31,000 for rental arrears and our client to receive the same amount.”

   It is important to emphasise that the wife’s solicitor’s offer, in bold, represented a new and separate offer by the wife’s solicitors to the husband’s former solicitors.

10. Following the above discrete counteroffer by the wife’s solicitors, there is an email letter from the husband’s former solicitors to the husband on 3 November 2016 10:47 AM stating:

    “Hi Mr Arnold,

    Further to our telephone conversation this morning please confirm whether you agree to release the following monies from our trust account:

    1. $32,000 to (omitted) Real Estate;

    2. $6600 to Child Support; and

    3. $25,400 to Ms Elliott.

    I await your urgent response.”

11. There then follows an email communication from the husband to his former solicitors on 3 November 2016 10:50 AM which states: “Yes I agree to this… Thanks Mr B.”

12. There then follows an email communication from the husband’s former solicitors to the wife’s solicitors on 3 November 2016 11:06 AM stating:

    “We refer to your email below (this is a reference to the wife’s solicitors email to the husband’s former solicitors dated 2 November 2016 at 4:21 PM) and are instructed that in the interest of the parties and so as to preserve the business our client agrees to your client’s proposal, subject to your client providing authority to our office to release trust monies as follows:

    1. $32,000 to (omitted) Real estate in payment of rental arrears;

    2. $6600 to Child Support Agency (omitted) ACC: (omitted) in payment of outstanding child support; and

    3. $25,400 to Ms Elliott.

    Please provide us with your client’s bank account details so that we may proceed to transfer the funds today.”

13. The wife’s solicitors, in the material forwarded to the Court by them on 30 January 2017, refer to the following email letter sent by the wife’s solicitors to the husband’s former solicitors on 3 November 2016 at 1:39 AM:

    “Dear Mr B

    We refer to your email of even date and confirmed that we have instructions to accept your offer to release of funds as specified in your email at 11.06 this morning.”

14. It is apparent from the above email correspondence passing between the wife’s solicitors and the husband’s former solicitors that the sum of $25,400 released from the husband’s former solicitors trust account on 3 November 2016 was a payment to the wife personally, and did not relate to the (omitted) Bank debt.

15. Again, the wife’s solicitor’s discrete offer made to the husband’s former solicitors on 2 November 2016 at 4:21 PM, referred to above, did not refer to the (omitted) Bank debt. For the sake of repetition and clarity, that offer by the wife’s solicitors stated, “We are instructed to offer a release of approximately $31,000 for rental arrears and our client to receive the same amount.”

16. Accordingly, there has been, on the evidence presently before the Court, no payment from the husband’s former solicitors trust account for the purpose of paying the (omitted) Bank debt of $26,000.

17. The Court notes that the husband, in his affidavit filed 7 December 2016, asserts that his instructions to his former solicitors “was to keep or to agree to release funds only for debt or child support.” Whether or not that asserted fact is accurate, the fact is that the documented email agreement between the husband’s former solicitors and the wife’s solicitors provided for the $25,400 to be released from the husband’s former solicitors trust account to the wife herself, and made no reference to the wife being required to discharge the (omitted) Bank debt with those monies. What is relevant in relation to the above assertion by the husband in his affidavit filed 7 December 2016 is the fact that he was prepared to release funds for the payment of the parties’ joint (omitted) Bank debt (although this had not been communicated, on the evidence before the Court, to his former solicitors).

18. On the evidence before the Court, the Court is satisfied that the agreement between the parties’ respective solicitors on 3 November 2016 was for the sum of $25,400 to be released to the wife personally and did not relate to the (omitted) Bank debt, nor did it require her to discharge that debt with such monies.

19. The (omitted) Bank loan of $30,000 was agreed to be taken out by the parties to enable the fitting out of the (omitted) business operated by the husband to be completed. The $30,000 loan monies was utilised for this purpose, and the wife made repayments from her employment income. The current debt of $26,000 owing to the bank is clearly a joint matrimonial debt, which was expressly acknowledged by the husband to be so in his affidavit filed 24 November 2016, wherein the husband referred to the debt as “the joint debt to the (omitted) Bank”.

20. The parties’ affidavit material indicates that there is an urgent need for the (omitted) Bank debt to be discharged, and that the wife’s present financial circumstances do not enable her to pay out the debt in the sum of $26,000. In this context, The court refers to the evidence before the court, in particular:

    a)The email from the husband’s former solicitors dated 25 August 2016 to the wife’s solicitors referring to the (omitted) Bank loan;

    b)Email from the wife’s solicitors to the husband’s former solicitors dated 9 August 2016, referring to the (omitted) Bank loan and Notice of Default received by the wife;

    c)Notice of Default dated 2 August 2016 from the (omitted) Bank;

    d)Email from the husband’s solicitors to the wife’s solicitors dated 27 October 2016, stating, inter-alia, that the (omitted) Bank debt requires urgent attention, and, in the context of the husband solicitors making an offer for the “Payment of the (omitted) Bank debt in its entirety”, states that the payment of that debt will ensure, “That the (omitted) Bank will not take action against our respective clients saving further interest and costs as well as safeguarding credit rating”;

    e)Paragraphs 12, 17, 25, 27, 39, 42, 43, of the affidavit of the wife filed 28 October 2016, and annexure M to that affidavit;

    f)The wife’s Financial Statement indicates the wife does not have funds available to pay out the (omitted) Bank debt of $26,000.

21. By reference to section 79 of the Family Law Act 1975, and the evidence before the Court, payment of the (omitted) Bank debt of some $26,000 will not prejudice the husband’s property adjustment case under section 79 at a final property hearing (see the discussion immediately below) but in any event, again, this debt is a joint debt of the parties in relation to the (omitted) business of which the husband has control, and again the Court notes the preparedness of the husband to discharge this joint debt in his affidavit filed 7 December 2016.

22. The Court notes the following relevant facts relating to the husband’s contentions in the property proceedings.

23. The parties were married in 2000.

24. The parties separated in August 2013 and lived separately under one roof until final separation in October 2015. There are two children of the marriage, twins, born (omitted) 2007. The children reside with the wife in the former matrimonial home at (omitted).

25. It appears that neither party had significant assets in 2000.

26. The husband is aged 42 years. The wife is aged about 42 years.

27. The husband, during the relationship, worked as a (occupation omitted). At one stage during the relationship, for about five years, the husband and a colleague operated their own (omitted) company or companies.

28. Both parties contributed their earnings towards the various household expenses and to the maintenance of the parties assets during the relationship, subject to the wife’s contention, discussed later in these Reasons, that, inter alia, the husband diverted (omitted business) income for his personal benefit.

29. The parties purchased a property at Property H in 2005 utilising both parties’ incomes.

30. During the relationship, both parties purchased luxury BMW motor vehicles, and obtained car finance.

31. In 2007 the parties purchased their home in Property L. The property was registered in the wife’s name. The husband paid the mortgage on this home and the wife paid the loan on the Personal property.

32. In 2012, utilising the equity from the Property H property, the parties established a (business omitted).

33. The parties went on a holiday to the (country omitted) with the husband paying all the expenses together with mortgage repayments.

34. The parties borrowed monies from the (omitted) Bank, $30,000, to renovate the (business omitted). The wife paid monthly repayments for this loan. The wife borrowed monies her brother, $30,000, which she used to complete the (business omitted).

35. The parties sold the investment property in Property H which settled in November 2015. The net proceeds of sale were placed into the trust account of the husband’s former solicitors.

36. In November 2015 there was some $325,000 in the trust account of the husband’s former solicitors.

37. In the husband’s affidavit filed 4 May 2016, the husband asserts that the wife has not made full financial disclosure, in relation to, inter alia, loans from her brother, and in relation to the sum of $77,000 asserted by the wife to have been an inheritance which she received. He asserts that the wife has not made full disclosure in relation to an alleged interest of the wife in her late mother’s estate. He asserts that he has provided financial disclosure as requested by the wife.

38. In the husband’s draft balance sheet, he contends there are total assets in the sum of $1,435, 000, add backs in the sum of $87,005, liabilities of $716,000, a superannuation interest of the husband for an amount that is unclear, and further liabilities (referred to in attached documents of the husband) being outstanding rental for the (omitted) business of $26,043, a car mortgage debt of $93,230, a (omitted business) equipment debt of $7240, a further (omitted business) equipment debt of $3595, an ATO debt relating to the (omitted) business of $24,513, and electricity account for the (omitted) business of $12,254.

1. Doing the best it can from the husband’s filed affidavit evidence, and considering the further material that he has presented to the Court, taking the husband’s property proceedings case at its highest, the husband may be entitled to a sum between about 40-45% of the net matrimonial assets, noting that the wife will have primary care of the children, but noting the husband’s assertions as to non-disclosure by the wife.

2. Importantly, in the context of the wife’s application that the sum of $26,000 be released from the trust funds of the husband’s former solicitors to pay the (omitted) Bank debt, the husband’s draft balance sheet indicates (and this is largely consistent with the wife’s draft balance sheet) that there is a current equity in the former matrimonial home of about $400,000. At this interim stage, the Court’s proposed interim order that the sum of $26,000 be released to allow the (omitted) Bank debt to be repaid should not prejudice the husband’s property proceedings case taken at its highest, but in any event the Court notes that the (omitted) Bank debt was a joint matrimonial debt of the parties, with the (omitted) Bank loan initially taken out to enable the (omitted) business to be fitted out.

3. In the view of the Court, the evidence presently before the Court indicates that it is appropriate and in the interests of justice for the Court to make an interim property order that the sum of $26,000 be forthwith paid from the husband’s former solicitor’s trust account to discharge that (omitted) Bank debt and an order will be made accordingly.

4. The Court should state, for the husband’s consideration, that the sum of $25,400 released to the wife on 3 November 2016 for her personal use, may well be taken into account in the husband’s favour at final property adjustment proceedings, by reference to section 75(2)(o) of the Family Law Act1975.

5. The Court makes orders accordingly.

I certify that the preceding forty-nine (49) paragraphs are a true copy of the reasons for judgment of Judge Newbrun

Date:  9 March 2017