Fagan & Fagan

[2023] FedCFamC1F 681

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA

(DIVISION 1)

Fagan & Fagan [2023] FedCFamC1F 681

File number:

MLC 1377 of 2022

Judgment of:

AUSTIN J

Date of judgment:

16 August 2023

Catchwords:

FAMILY LAW – Practice and Procedure – Review of decision – Property – Where the wife seeks review of an interim order made by a Senior Judicial Registrar compelling the husband to pay her $300,000 – Where the wife is dissatisfied and seeks a lump sum payment totalling $1 million – Where the wife has so far received from the husband lump sum payments totalling $950,000 – Where the husband remains liable to the wife for spousal maintenance and child support payment – Where the application is not one for litigation funding – Where the wife wants the funds to use as her own property – Where the wife unilaterally entered into a building contract for $1.8 million – Where the wife is indebted to the builder – Where the parties previously agreed the wife would use the $300,000 payable by the husband to her to pay the outstanding money due to the builder – Where the $300,000 will be enough to discharge the wife’s liability to the builder – Where the husband does not have cash reserves to meet the payment of $1 million – Where the husband should not be compelled to restructure his own affairs to accommodate the wife’s plans – Application dismissed – Where the husband sought costs of and incidental to the review proceedings – Where the application was wholly unsuccessful – Costs ordered in a fixed sum.

Legislation:

Family Law Act 1975 (Cth) Pt VII and Pt VIII, ss 79, 80, 117

Income Tax Assessment Act 1936 (Cth) Pt III, Div 7A

Cases cited:

Gabel v Yardley (2008) FLC 93-386; [2008] FamCAFC 162

Hickey & Hickey & Attorney-General for the Commonwealth of Australia (Intervener) (2003) FLC 93-143; [2003] FamCA 395

Strahan & Strahan (Interim Property Orders) (2011) FLC 93-466; [2009] FamCAFC 166

Division:

Division 1 First Instance

Number of paragraphs:

40

Date of hearing:

15 August 2023

Place:

Sydney

Counsel for the Applicant:

Ms Vohra SC

Solicitor for the Applicant:

Kenna Teasdale Lawyers

Counsel for the Respondent:

Mr Dickson SC

Solicitor for the Respondent:

Sayer Jones

ORDERS

MLC 1377 of 2022

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)

BETWEEN:

MS FAGAN

Applicant

AND:

MR FAGAN

Respondent

ORDER MADE BY:	AUSTIN J
DATE OF ORDER:	16 AUGUST 2023

THE COURT ORDERS THAT:

1.The Application for Review filed on 28 July 2023 (as amended on 15 August 2023) is dismissed.

2.The applicant wife shall pay the respondent husband’s costs of and incidental to the review hearing, fixed in the sum of $12,000, payment of which will fall due upon the pronouncement of orders finally determining the cause of action between the parties under Pt VIII of the Family Law Act 1975 (Cth).

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

Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).

Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.

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

EX TEMPORE
REASONS FOR JUDGMENT

AUSTIN J:

1. Before the Court for determination is another interlocutory application brought by the wife for the husband’s provision of funds within a financial cause contested by the parties under Pt VIII of the Family Law Act 1975 (Cth) (“the Act”).

2. In an exercise of delegated power, the senior judicial registrar (“the registrar”) made an order on 20 July 2023 determining the wife’s interim application, compelling the husband to pay her $300,000, together with a further $75,000.

3. The wife was dissatisfied. She wanted much more. She filed an Application for Review on 28 July 2023, though she amended the form of remedial orders for which she applied at the start of the hearing. Her amended application is dismissed for the following reasons.

   Background

4. The parties separated in the latter part of 2021, though there is a dispute as to precisely when.

5. The wife commenced proceedings in February 2022, but only by then seeking relief in respect of the parties’ children under Pt VII of the Act. The financial cause was initiated by the wife filing an Amended Initiating Application in June 2022.

6. Several suites of interim orders have already been made.

7. On 5 July 2022, the registrar made interim orders with the parties’ consent. Relevantly, the orders required the husband to pay spousal maintenance for the benefit of the wife and child support for the benefit of those children living with the wife. The parties have six children. At that point in time, the four youngest lived with the wife and the two oldest with the husband.

8. On 31 August 2022, again with the parties’ consent, more interim orders were made. They included fresh spousal maintenance and child support orders. On this occasion, the husband was also ordered to pay the wife $225,000, part of which was designated as “part property settlement” and the balance to be characterised by the trial judge at final hearing.

9. On 27 January 2023, again with the parties’ consent, the husband was ordered to pay to the wife another $650,000. Of that sum, $500,000 was designated as “part property settlement” with the residue $150,000 to be characterised by the trial judge at final hearing.

10. In June 2023, the wife filed an Application in a Proceeding seeking more money. Relevantly, her application comprised claims for $1,222,520 (approximately) by way of “interim property distribution” (proposed Order 2) and another $300,000, the nature of which payment would be characterised by the trial judge at final hearing (proposed Order 3).

11. The husband filed a Response to the Application in a Proceeding by which he sought the dismissal of the wife’s claim for interim relief (proposed Order 6).

12. The application was heard and determined by the registrar on 20 July 2023. Relevantly, the registrar made these order:

    11.That within 45 days, the Respondent husband pay or cause to be paid to the [Wife] the sum of $300,000 into the trust account of [the Wife’s solicitors] to be characterised as a part property payment to the Wife.

    …

    15.That within 14 days the Husband cause to pay the sum of $75,000 into the trust account of [the Wife’s solicitors] to be characterised as a part property payments to the Wife on account of legal fees

13. As can be seen, the order made by the registrar granted the wife’s application for $300,000 (Order 11) and, aside from the additional payment of $75,000 (Order 15), dismissed her application for the extra $1,222,520.

14. The wife applied to review the registrar’s decision, though only in respect of Order 11. This being a review of the exercise of delegated power, the hearing entails the de novo consideration of the parties’ competing applications. However, both parties amended their position as the hearing began.

15. The wife sought the orders set out in the Minute of Orders she tendered (Exhibit A). The husband consented to the late amendment because, instead of seeking a total of $1,522,520, the wife sought lump sum payments totalling $1 million. When later pressed to nominate the statutory power for the proposed orders, the wife conceded the application was prosecuted as an interim property division application, specifically relying upon s 79 and s 80(1)(k) of the Act.

16. The husband was content to abide by Order 11 made by the registrar compelling him to pay the wife $300,000, which payment falls due in early September 2023. He opposed the wife’s application for the extra $700,000.

17. The parties contested the hearing in the context of these agreed facts:

    (a)the wife has so far received from the husband lump sum payments totalling $950,000, pursuant to the interim orders made in August 2022, January 2023 and July 2023;

    (b)the husband is shortly due to pay the wife another $300,000 pursuant to Order 11 made by the registrar in July 2023; and

    (c)the husband remains liable to the wife for the spousal maintenance and child support payments pursuant to the interim orders last made in August 2022.

    Evidence

18. To prosecute her application, the wife relied upon:

    (a)her affidavit filed on 11 August 2023; and

    (b)her financial statement filed on 2 December 2022.

19. To defend the wife’s application, the husband relied upon:

    (a)his affidavit filed on 29 June 2023; and

    (b)his financial statement filed on 23 August 2022.

    Legal principles

20. There is only one exercise of power under s 79 of the Act to adjust the parties’ property interests (Hickey & Hickey & Attorney-General for the Commonwealth of Australia (Intervener) (2003) FLC 93-143 at [40]–[48]; Strahan & Strahan (Interim Property Orders) (2011) FLC 93-466 at [105]-[113]).

21. The power may be exercised partially or on an interim basis until it is entirely spent or exhausted (Gabel v Yardley (2008) FLC 93-386 at 82,958; Strahan at [114]), though it is clearly preferential for there to be only a singular exercise of the power (Strahan at [115]–[118] and [225]–[228]).

22. There must be some principled reason for fragmenting the process, which reason would ordinarily be the need to cause one party to furnish the other with sufficient funds to enable the financial proceedings to be contested on a level litigious field (Strahan at [224]). The interests of justice is the lodestar and it is not necessary for the applicant to establish the existence of compelling circumstances for the power to be exercised but, to establish a case for an interim property settlement order, more is required than just that the applicant will likely receive the property being sought upon final hearing (Strahan at [120]–[141], [158] and [219]–[232]).

    The claim for the contested $700,000

23. In respect of the contested $700,000, the wife proposed that $420,000 be characterised as “part property payment” and the residual $280,000 to be characterised at trial.[1]

    [1] Exhibit A, Order 3

24. When the husband later asserted the absence of statutory power to make any order in respect of the residual $280,000 unless the wife expressed the statutory power relied upon, she conceded the point and confirmed the whole of the contested sum of $700,000 was sought in the guise of an interim distribution of property pursuant to the power reposing in s 79 and s 80(1)(k) of the Act.

25. So styled, the application is not one for litigation funding to enable the wife to pay legal fees to contest the financial cause on a reasonably level playing field. Rather, she wants the funds to use as her own property now, prior to the resolution of the financial dispute. That desire arises from these circumstances.

26. The wife (and now five of the six children) live in the former matrimonial home, which is a rural property, purchased in mid-2021 while the marriage was intact. The wife is the sole legal proprietor of the property, though the parties’ are joint and several debtors under the mortgage secured over the property. The mortgage balance approximates $2 million.

27. When the property was purchased, the parties jointly intended that they would build a new house upon the property and they would move out of the older homestead once the new home was constructed. After the parties separated and the husband vacated the property, acting upon her own initiative and knowing the husband disagreed, the wife unilaterally entered into a contract with a builder in early 2023 to build the new house. It is common ground that the building and miscellaneous works will cost about $1.8 million.

28. The builder commenced work on the new home under the contract and has so far constructed the slab foundation and the house frame, which represents effective completion of the first of eight stages in the building contract. The wife is still living in the old homestead presently.

29. The wife is currently indebted to the builder for approximately $143,860 (plus accrued interest) as the payment due for the completed first stage of work. She has defaulted in payment and so the builder has given notice to her under the contract of his suspension of work. The builder has vacated the building site and is working elsewhere. According to Notation C endorsed upon the orders made by the registrar on 20 July 2023, the parties agreed the wife would use the $300,000 payable by the husband to pay the outstanding money due to the builder and she would apply the balance to meet the mortgage payments as and when they fall due. The mortgage payments apparently amount to approximately $13,500 per month.

30. As articulated during the review hearing, the wife seeks $1 million for use as follows:

    (a)the sum of $280,000 to meet ongoing mortgage costs and expenses related to the children (even though her application was pitched as an interim property application and neither as a spousal maintenance claim nor as a child support claim); and

    (b)the sum of $720,000 to cover the costs of the first four stages of the building contract to “get the house to lock-up”.

31. During submissions, the wife referred to her dedication to caring for five of the parties’ six children, which precludes her from maximising her income-earning potential, and the financial difficulties she is therefore experiencing in running her household. So much may be true, but it is must be emphasised that her application for the whole $1 million was eventually made exclusively as an application for an interim adjustment of property – not as a spousal maintenance application, nor as a child support application. That is important because the test for each form of relief engages different heads of power.

32. The parties are in dispute about the value of their assets and superannuation interests. The wife asserts an overall value approximating $16 million, whereas the husband asserts an overall value approximating $11 million.

33. The wife contends that, even on the husband’s case, the alienable assets are worth $9.5 million and she is entitled to no less than 30 per cent. Mathematically, she calculates her entitlement at around $2.85 million and so contends that the payment to her now of the extra $1 million (in addition to the lump sums she has already received) means the property allocated to her on an interim basis falls “within her entitlements”. The submission founders on the principle that she must do more than merely demonstrate it is likely she will ultimately receive at the final hearing more property than is allocated to her by interim distribution. Some persuasive reason must be advanced for fragmenting the exercise of discretion under Pt VIII of the Act. None was.

34. The wife chose to enter into the building contract, knowing it was opposed by the husband. She did so within weeks of securing the husband’s agreement to pay her $650,000 in January 2023, knowing that sum would never be enough to complete the building project. She kept the contractual commitment secret from the husband for some time. As the husband contended, the $300,000 the wife is already due to receive under the orders made in July 2023 will be enough to discharge her current liability to the builder. The residue will be enough to meet mortgage repayments for many more months, if not nearly another year.

35. There is no undue prejudice to the wife by having to occupy the current homestead until the finalisation of the financial cause. She can then apply her ultimate share of the assets how she pleases. The wife complained that some repairs are required to the homestead, which may be so, but the cost of repairs may be easily met from the $300,000 she will shortly receive, which is to say nothing of the $950,000 she has already received.

36. Another problem confronting the wife’s application is the source of funds to enable the husband to meet the payment due to her. It is accepted the husband does not have cash reserves. The husband applied unsuccessfully for a bank loan of $400,000, so he will need to meet the agreed payment of $300,000 due within the next few weeks by liquidating some asset. The submission advanced by the wife was that, if the husband has to find $300,000 to pay her by liquidating an asset, it is just as easy for him to find $1 million in the same way. The submission is rejected.

37. The solution suggested by the wife was the sale of either of two real properties – one commercial, the other residential. Both properties are used in business, owned by a trust, controlled by a corporate trustee, controlled in turn by the husband. Although the entities may be the husband’s “alter ego”, as he conceded, the sale of either property would likely hamper the manner in which the husband conducts business via those entities and trigger capital gains tax liabilities. The sale of either asset and the accrual of any taxation liability would then feed into the overall value of the business structure. Then, any subsequent distribution of funds by those entities, either directly to the wife or to her through the husband, is liable to cause either the creation of loan accounts and/or personal liability under Pt III, Div 7A of the Income Tax Assessment Act 1936 (Cth).

38. The husband resists having to restructure his affairs at this juncture just to accommodate the wife’s plans. He should not be compelled to create more debt than he is willing merely to alleviate the consequences of the wife’s own choices. No sufficient reason is advanced by the wife for why the exercise of power under s 79 of the Act should be fragmented any more than it already has been by the interim orders made with the parties’ consent.

    Costs

39. The wife’s application is dismissed. There is no need to disturb Order 11 made by the registrar on 20 July 2023, requiring the husband to pay her $300,000 within the next few weeks.

40. The review application having been wholly unsuccessful, the husband sought his costs of the review hearing, assessed in the sum of $12,000, payment of which he agreed should be deferred until the financial cause is concluded. The wife took no issue with the assessment, but opposed any costs order on the basis that her financial circumstances should reasonably preclude it, thereby calling to aid s 117(2A)(a) of the Act. The submission is rejected. The wife’s share of the parties’ assets is likely to be well sufficient to enable her to meet costs of $12,000 in respect of a review application which should never have been brought.

I certify that the preceding forty (40) numbered paragraphs are a true copy of the Ex Tempore Reasons for Judgment of the Honourable Justice Austin.

Associate:

Dated:       23 August 2023