Engin and Engin & Anor
[2015] FamCA 743
•4 September 2015.
FAMILY COURT OF AUSTRALIA
| ENGIN & ENGIN AND ANOR | [2015] FamCA 743 |
| FAMILY LAW – PROPERTY - Interim distribution – Where both parties make applications for the release of funds from the matrimonial asset pool – Where the property pool will be insufficient to meet the liabilities – Where the interim property order would not be capable of reversal – Where there is very limited information regarding the parties’ contributions and s 75(2) factors – Where it inappropriate to make an interim property order FAMILY LAW – CONTRAVENTION – Parenting – Where contravention admitted and no reasonable excuse – Where contravention is a “less serious contravention” – Where compensatory time is appropriate. |
| Family Law Act 1975 (Cth) ss 70NAC, 70NAE, 70NEA, 70NEB, 75, 79, 80, 117. |
| Commissioner of Taxation & Wornop & Anor [2009] FamCAFC 4. Harris & Harris (1993) FLC 92-378. Paris King Investments Pty Ltd v Rayhill [2006] NSWSC 578. Poletti & Poletti (Unreported, Family Court of Australia, Nygh J, 2 March 1990). Strahan & Strahan [2009] FamCAFC 166. Wilson & Wilson (1989) FLC 92-033. Zschokke & Zschokke (1996) FLC 92-693. |
| APPLICANT: | Ms Engin |
| FIRST RESPONDENT: | Mr Engin |
| SECOND RESPONDENT: | B Pty Ltd |
| FILE NUMBER: | PAC | 1833 | of | 2011 |
| DATE DELIVERED: | 4 September 2015. |
| PLACE DELIVERED: | Parramatta |
| PLACE HEARD: | Parramatta |
| JUDGMENT OF: | Hannam J |
| HEARING DATE: | 17 June 2015 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Morley |
| SOLICITOR FOR THE APPLICANT: | Ghobrial Legal |
| SOLICITOR FOR THE RESPONDENT: | Mr West of Slater & Gordon Lawyers |
| SOLICITOR FOR THE SECOND RESPONDENT: | No appearance |
Orders
The wife’s Application in a Case filed 15 December 2014 is dismissed.
The husband’s Response to an Application in a Case filed 8 April 2015 is dismissed.
The alleged contravention of Order 3(c) of primary orders dated 19 December 2014 is proved.
The father shall have compensatory time of seven (7) days with the child the child with respect of the time he missed due to the contravention.
The compensatory time referred to in Order 4 shall occur in the school holidays after Term 4 2015, on a date agreed to between the parents.
That in the event the wife wishes to pursue her application for costs she is to file and serve any submissions in support thereof within 21 days from the date of these orders and the husband any submissions in response thereto within a further 14 days and that thereafter judgment as to costs to be reserved to a date to be fixed.
Pursuant to Section 65DA(2) of the Family Law Act 1975 (Cth), the particulars of the obligations these Orders create and the particulars of the consequences that may follow if a party contravenes these Orders are included in these Orders, annexed hereto.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Engin & Engin 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: PAC 1833 of 2011
| Ms Engin |
Applicant
And
| Mr Engin |
First Respondent
And
| B Pty Ltd |
Second Respondent
REASONS FOR JUDGMENT
Introduction
Ms Engin (“the wife”) and Mr Engin (“the husband”) were married in 2003. They have one child, C, who is eight years old. The date of final separation appears to be a matter in dispute. Property and parenting proceedings were commenced in this Court by the wife in February 2014.
The relevant applications for determination are the parties’ competing applications for interim property orders and penalty with respect to the wife’s admitted contravention of parenting orders.
In her Application in a Case filed on 15 December 2014, the wife seeks interim property orders, including the release to her of $50,000 from the parties’ funds. In his Response to an Application in a Case filed 8 April 2015, the husband opposes the wife’s application and seeks by way of interim property orders that $30,000 be released to him.
On 27 March 2015 the husband filed an application with respect to contravention of parenting orders made by this Court on 19 December 2014. The allegation of contravention relates to the wife not allowing the husband to spend time with the child from 5 to 12 January 2015. As the mother has indicated that she admits the contravention and does not proffer a reasonable excuse, the relevant issue to be determined is the penalty.
The competing applications for interim property orders and the application for contravention are each considered in turn.
Interim property applications
Background
The husband and wife were married in 2003 and the date of separation is unclear. I understand that there is no dispute that the marriage lasted in the order of 10 years.
The only child of the marriage, the child, who is eight, currently lives with the mother and spends alternate weekends, one night in the alternate week and half school holidays with the father. The husband seeks final orders that the child live between himself and the wife on a week-about basis.
The husband is the sole director and shareholder of a company B Pty Ltd (‘the company’). As I understand it, there is no dispute that the assets and liabilities of the company should be treated as those of the husband for the purposes of the property settlement.
The assets that each party brought the relationship and their financial and non-financial contributions throughout the relationship are unknown. The wife’s contentions concerning the matrimonial asset pool are not entirely clear.
The wife relies upon a Financial Statement of 27 May 2014 and the husband relies on a Financial Statement dated 8 April 2015. These financial statements contain the following evidence of the property, superannuation interests and liabilities of the parties which are set out in the following table:
LIST OF ASSETS AND LIABILITIES
ASSET HUSBAND WIFE JOINT Japanese Motor Vehicle $11,000 B Pty Ltd unknown Vehicle owned by B Pty Ltd $35,000 Household contents $2000 Funds held in D Trust account $159,167.90 Subtotal Assets $48,000 - $159,167.90 Total Assets $207,167.90 LIABILITIES HUSBAND WIFE JOINT Unpaid income tax $62,347.47 Personal loan to Westpac $36,875.47 Overdraft loan to CBA $1984.86 Visa credit card $1942.80 Mastercard $2031.51 Liabilities of B Pty Ltd $174,756.39 Hire purchase Lease $17,107.35 Debt to E Pty Ltd $8200 Subtotal Liabilities $297,045.85 $8200 - Total Liabilities $305,245.85 Subtotal Net Assets Total Net Assets (excluding superannuation) -$98,077.95 SUPERANNUATION HUSBAND WIFE JOINT nil nil Total superannuation Subtotal Net Assets (including superannuation) Total Net Assets (including superannuation) -$98,077.95
The wife also asserts, as I understand it, that the proceeds of a business known as F Pty Ltd of $50 000 (itemised in the husband’s financial statement as property sold in 12 months prior to separation and since separation) should be ‘added back’ as part of the matrimonial asset pool available for distribution. If this were to be accepted by the Court then the total assets for distribution would be -$48,078. However, the husband says that this money has been spent.
As I also understand it, the wife may contend that at the time the property proceedings were commenced a further asset available for distribution was a business trading as G Pty Ltd. The value of the business is unknown and the husband says it has since been sold.
The funds held in an account (it is not clear whether they are held in a D Trust account or a solicitor’s trust account) are the net proceeds of sale of the former matrimonial home which was owned by the company. It seems to be common ground between the parties that the proceeds $159,167.90 are a joint asset of the parties. Indeed, this is the parties’ only significant asset.
The wife seeks a final property settlement that would have the effect of dividing the only significant joint asset (the proceeds of sale of the former matrimonial home) between them so that she is to receive 80 per cent and the husband is to receive 20 per cent. She seeks orders that the husband be responsible for all debts owed by himself or the company to the Australian Taxation Office, that he transfer ownership of his Japanese vehicle to her and as I understand it, seeks that the Court regard all the husband’s current liabilities as his own and not matrimonial liabilities. The effect of the orders she seeks in total percentage terms is unknown but it suffices to say it is greater than 80 per cent of the total asset pool. It is not clear from the affidavit the wife relies upon in this application the basis upon which she asserts her 80 per cent plus entitlement or the treatment of liabilities.
The final orders sought by the husband with respect to property would see him receive the entire balance of funds held in the trust account from the sale of the former matrimonial home, that he be responsible for all of the liabilities of the company and be entitled to the benefit of all income from that company to the exclusion of the wife. He also proposes that he be responsible for all liabilities in his name.
According to the husband’s draft balance sheet which is annexed to his affidavit, he proposes, as I understand it, that the Court treat his personal liabilities and the liabilities of the company as joint matrimonial liabilities. According to his balance sheet the parties’ assets are valued $210,167.90 and the liabilities are $297,045.85 and the total pool is -$86,878.
Both parties indicate in their Financial Statements that they have little income and are currently not meeting their respective financial obligations. The husband proposes that if orders are made for him to receive $30,000 he will use these funds to meet his current personal and company liabilities including debts and tax liabilities. The wife, as I understand it, proposes to use the $50,000 she proposes under these orders for living expenses and legal fees. In oral submissions it was said that the wife needed access to these funds to make investigations about assets which she asserts should form part of the asset pool.
The Law
It was observed in Paris King Investments Pty Ltd v Rayhill[1] that there are a number of juridical bases for orders of the type sought by the parties. The Full Court in Zschokke & Zschokke[2] had observed that there was some uncertainty as to the source of jurisdiction to make the orders of the type sought but was of the opinion that the decisions in Wilson & Wilson[3] and Poletti & Poletti[4] established that where there are pending proceedings under s 79 of the Family Law Act 1975 (Cth) (‘the Act’) for property settlement, such an order for funds may be made pursuant to s 80(1)(h) or s 117(2).
[1] [2006] NSWSC 578
[2] (1996) FLC 92-693
[3] (1989) FLC 92-033
[4] (Unreported, Family Court of Australia, Nygh J, 2 March 1990)
In Strahan & Strahan[5] at [84] the Full Court said:
In Paris King Investments Brereton J, with whom on this point we agree, at [30] said that Zschokke “establishes that it is important, when contemplating an order for interim provision for litigation expenses, to identify the relevant source of power because it is the source of power that determines the necessary preconditions and relevant considerations for making the order”.
The Full Court went on to say at [86]:
… If the source of jurisdiction is s 117(2) of the Act then the court may make such order as it considers just provided there are justifying circumstances. If the order is sought under s 79 of the Act then the court may make such an order as it considers appropriate provided it is satisfied that it is just and equitable to make the order. …
[5] [2009] FamCAFC 166
As I understand it, both parties bring their application based upon s 80(1)(h) utilising s 79.
At two-step process
According to Strahan (supra) where the power is to be exercised pursuant to s 80(1)(h) a two-stage approach is to be taken to the hearing of an application. The Full Court said at [118]:
… This is recognised by the fact that although the power under s 79 should ordinarily be exercised on a once only basis, “circumstances may arise before there can be a final hearing” where the power is exercised. Thus the first step is to resolve whether to exercise the power before a final hearing and if it is resolved to do so then the second step involves the exercise of that power.
So far as the first step is concerned, it is settled in Strahan (supra) that the Applicant is not required to establish that there are compelling circumstances at the time for making an order for interim property settlement. The test so far as the exercise of the power is concerned is that it be an appropriate case in order to do justice.
So far as the first step is concerned, neither party submits that this is not an appropriate matter to exercise the power to make an interim property settlement as each of the parties is seeking orders that involve the power being exercised. However, it is the husband’s case that the order that the wife seeks (that she receive $50,000) would result in her receiving more than he contends she should receive on a final hearing as it is his position that the wife should receive none of the matrimonial asset pool. Although the wife sought to have the husband’s application dismissed, it was conceded on her behalf that the husband would be entitled the amount he seeks on her case on a final basis.
It was observed to be relevant in the matter of Strahan (supra), that orders sought ought not result in a party receiving more than they would be “undubitably entitled to on a final hearing”.[6] The Court said at [136]:
… We accept the submission and observe that this matter is relevant because the discretion conferred by the power in s 79 is to make such order as the Court considers appropriate provided it is just and equitable to make the order in circumstances where the power will not be exhausted by the interim order. As Bryant CJ and Coleman J observed in Gabel v Yardley at [69] and [72] the interim order must be capable of variation or reversal without resort to s 79A of the Act or appeal. …
[6] Strahan (supra) at [136], as considered by the Full Court in Harris & Harris (1993) FLC 92-378.
There is, in my view, a real risk that if both orders are made as sought by the parties this may compromise the final outcome of the property settlement. While the husband argues that if the interim property settlement he seeks is ordered the remaining pool will still satisfy the 80 per cent distribution sought by the wife on a final basis, I must consider the effect of both orders being made where seems to be no greater merit in either party’s claim. If orders are made as sought by both parties, totalling $80,000, the funds in the trust account would be reduced to $79,167.90. Both parties intend to spend the funds if they are made available so the interim order would not be capable of reversal.
It is also to be remembered that the current liabilities of the parties are just over $305,000.
It was submitted on behalf of the wife that the Court should not be concerned about the depletion of the asset pool with the result that the liabilities will exceed the assets to an even greater degree than is currently the case. In particular, it was submitted that it is open for a court to divide the matrimonial pool between the parties even where the property pool will be insufficient to meet the liabilities.[7] However, the Full Court in Commissioner of Taxation & Wornop & Anor[8] was dealing with the final hearing of property settlement proceedings where findings had been made about all matters including whether one party’s tax liability should be treated as a matrimonial liability and the impact this finding would have on the distribution of assets. In this case, issues central to each party’s position such as the basis of each party’s entitlement and whether liabilities should form part of the balance sheet have not yet been determined. There is a risk that once the asset pool is further diminished it may not be sufficient to satisfy appropriate final orders once findings on all matters have been made. Given the parties’ financial positions, such orders would not be able to be reversed.
[7]Commissioner of Taxation & Wornop & Anor [2009] FamCAFC 4.
[8] Ibid.
In the circumstances of this matter, where it appears that the relationship lasted a number of years and one child was born, final orders will depend upon the findings about financial and non-financial contributions pursuant to s 79 of the Act and relevant s 75(2) factors.
In circumstances where virtually nothing is known about the matters that the Court must consider pursuant to s 79 and where there is a negative asset pool which will further diminished by the competing claims I am of the view that it is not an appropriate case in which to exercise the power to make an interim property order in order to do justice between the parties.
In his Response to an Application in a Case the husband also sought that the proceeds from the sale of the matrimonial home be transferred to his current solicitor’s account. It is unclear whether the monies are currently held in D Trust account or his former solicitor’s trust account. However, no submissions were made as to why the balance or entire funds should be moved to the husband’s current solicitor’s account and there does not appear to be any advantage to doing so. In these circumstances, I decline to make this order sought by the husband.
Costs
In her Application in a Case the wife also sought her costs of this application. However, the wife made no submissions in relation to this issue. If the wife still seeks to pursue costs for her application, she must file submissions in support of that application. Orders will also be made for submissions in reply on this issue.
Contravention: Parenting
On 19 December 2014, parenting orders were made by consent for the parents to have equal shared parental responsibility for the child, for the child to live with the mother and spend defined time with the father. In particular the following order was made:
3. That the child spend time with the father as follows:
…
(c)From 9.00am on 5 January to 6.00pm on 12 January and 9.00am on 19 January to 6.00pm on 25 January.
On 27 March 2015, the husband filed an application for contravention alleging several contraventions by the wife. In particular, he alleged that the wife had contravened order 3(c) of the orders of 19 December by refusing to allow him to spend time with the child commencing from 5 January 2015 through to 12 January 2015, without reasonable excuse.
On 20 April 2015, the mother indicated through her legal representative that she admitted the contravention without reasonable excuse, and the balance of the contraventions were withdrawn. The issue of penalty was adjourned and it was noted that the issue would be determined on affidavits filed.
The facts of the contravention are that on 5 January 2015, the husband arrived at the changeover point where he was to receive the child to spend time with her for a week in the school holidays. The wife failed to make the child available and did not respond to the husband’s text message about his whereabouts. The child missed out on spending a week with the father.
It was submitted on behalf of the wife that the Court should find the contravention is a “less serious contravention” within subdivision E of division 13A of Part VII of the Act and that the Court should record the conviction without making any of the orders in s 70NEB(1) of the Act. The husband also submitted that it was appropriate to deal with the matter as a less serious contravention and he sought the equivalent amount of time lost as compensatory time by way of penalty
The Law
Contraventions are dealt with under Part VII, Division 13A of the Act. Section 70NAC defines the meaning of “contravened” an order affecting children if, and only if:
a)where the person is bound by the order – he or she has:
i)intentionally failed to comply with the order; or
ii)made no reasonable attempt to comply with the order; or
b)otherwise – he or she has:
i)intentionally prevented compliance with the order by a person who is bound by it; or
ii)aided or abetted a contravention of the order by a person who is bound by it.
The mother admits that she contravened the order from 5-12 January 2015 by not making the child available as required under the order.
Section 70NAE defines the meaning of “reasonable excuse” for “contravening” an order. Subsection (5) deals with the respondent having a reasonable excuse for contravening a parenting order which deals with whom a child is to spend time which has resulted in a person and a child not spending time together. The mother did not bring any evidence concerning her having a reasonable excuse and concedes that she did not have one. I find that she did not have such a reasonable excuse for the contravention.
Contravention without a reasonable excuse (less serious contravention)
Instances of less serious contraventions of parenting orders are dealt with under subdivision E of Part VII, Division 13A of the Act. Section 70NEA(1) provides that this subdivision applies if the primary order has been made (whether before or after the commencement of this Division) and a court having jurisdiction under this Act is satisfied that a person has, whether before or after that commencement, committed a contravention (the current contravention) of the primary order, and the person does not provide that he or she had a reasonable excuse for the current contravention, and either subsection (2) or (3) of this section applies
Section 70NEA(2) states: for the purposes of paragraph (1)(d), this subsection applies if no court has previously:
a)made an order imposing a sanction or taking an action in respect of a contravention by the person of the primary order; or
a)under paragraph 70NEB(1)(c), adjourned proceedings in respect of a contravention by the person of the primary order.
There is no evidence to suggest that the mother has previously been dealt with in respect of a contravention. It is possible that the mother may be dealt with under alternate provisions (that is Division F) for more serious contraventions if a court is satisfied that the person has behaved in a way that showed a serious disregard of her obligations under the primary orders. I am not satisfied that the mother in this case has behaved in such a way to indicate such a disregard of her obligations.
Accordingly the matter will be dealt with under Division E.
Powers of the Court
Section 70NEB(1) deals with powers of the Court, if subdivision E applies. Under this section the Court has power to make various orders including orders directing the party to attend a parenting program, compensating a person for the time the person did not spend with the child, requiring the party to enter into a bond, and/or pay the costs of the other party.
In this matter it is submitted on behalf of the mother that simply recording a conviction is sufficient. However, the father submitted that it would be appropriate for compensatory time with the child to be ordered. I am of the view that none of the alternatives orders are appropriate as the contravention is not serious enough to warrant a bond or fine. Further, this is not a case for a post-separation parenting program, given that the contravention was not, in my view, due to a lack of knowledge regarding parenting.
In circumstances where the child missed out on spending time with her father, in my view it is appropriate for compensatory time to be ordered and for that time to occur in the holidays after Term 4, 2015 in addition to the time provided for in the primary orders. This should occur at a time agreed to between the parents. The parents appear to be are sufficiently cooperative to agree on the date compensatory time should occur in the December 2015/January 2016 school holidays.
For the foregoing reasons, the orders that I make are as set out at the forefront of these Reasons for Judgment.
I certify that the preceding forty-seven (47) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Hannam delivered on 4 September 2015.
Legal Associate:
Date: 2 September 2015
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