Fre and Fre

[2010] FamCA 589

FAMILY COURT OF AUSTRALIA

FRE & FRE [2010] FamCA 589

FAMILY LAW – PROPERTY – interim financial orders – exclusive occupation – spousal maintenance – legal fees

Family Law Act 1975 (Cth)

APPLICANT: Mr Fre

RESPONDENT: Ms Fre

FILE NUMBER: SYC 2561 of 2010

DATE DELIVERED: 29 June 2010

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Judicial Registrar Loughnan

HEARING DATE: 29 June 2010

REPRESENTATION

SOLICITOR FOR THE APPLICANT: York Family Law

COUNSEL FOR THE RESPONDENT: Mr Todd

SOLICITOR FOR THE RESPONDENT: Whitfields Solicitors

Orders

1. Orders are made in terms of paragraphs 1, 2 and 4 of the Interim Orders sought by the husband in his Initiating Application filed 28 April 2010 as set out hereunder:

   “1.That the husband have exclusive occupation of the property known as [H] (“the [H] property”).

   2.        That the wife pay the following:-

   (a)Mortgage payments relating to the mortgage registered against the [H] property as and when they fall due;

   (b)    The sum of $1,204 per week.

   4.That the wife do all things necessary to continue to include the husband in the family health cover (MBF) at the same level as at the date of separation and continue to pay the said insurance.”

2. The Court noted that the order made in terms of paragraph 4 is made by consent.

3. Paragraph 2(b) is to read the sum of $1, 204.00 by way of interim spouse maintenance.

4. That upon the wife paying any further amounts to her solicitors in respect of her legal fees in relation to these proceedings or on account of those fees, she is within seven (7) days of that payment to cause a payment in the same sum to be made to the solicitors for the husband.

5. That until further order of the Court and unless the parties agree in writing, the wife is restrained from drawing any monies from the parties’ Off-Set Account with the National Australia Bank … Account No: ….

6. Leave is granted to either party to restore the proceedings to the list by arrangement with Judicial Registrar Loughnan’s associate on giving seven (7) days’ notice to the Court and to the other party.

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

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYC 2561 of 2010

MR FRE

Applicant

And

MS FRE

Respondent

REASONS FOR JUDGMENT

1. These are proceedings for interim financial orders.  The matter came before me yesterday, and at 5 o’clock, I indicated to the parties that I would reserve judgment.  I excused the parties and their representatives from attendance on delivery of judgment, and indicated that they would be given a short amount of notice, but that they would not be required to attend. That is something of a reflection of the Sydney duty list. This was one of three or four matters left in my list at lunch time yesterday.  Three matters were sent away, not reached.  This matter, I was told, would take one and a half hours, including reading.  I think I started reading before 3 o’clock yesterday, and I cut the advocates off in the course of their submissions, in an effort to have submissions concluded by about 5 o’clock. The problem is that the level of detail and the range of issues, in many matters in the Sydney duty list, are simply not amenable to treatment in a duty list.

2. These proceedings were commenced by the husband.  He filed an application on 28 April 2010, seeking interim and final orders.  The interim orders he seeks are, in summary, that he have exclusive occupation of a property at H;  that the wife pay instalments on the mortgage registered against the H property, as and when they fall due;  that she pay the sum of $2228 per week - I think he means pay that to him;  and that except for a payment to him, from an offset account, in the sum of $70,000 by way of interim costs, that the wife be restrained from drawing any moneys on that account.

3. He seeks that the wife continue to provide for the husband’s membership of a health fund, MBF. That last matter, I think, is the only matter which is the subject of agreement between the parties.  That is to say, the wife agrees to maintain the MBF membership. 

4. The wife filed a Response on 25 June 2010, and she seeks, in the interim, that a property at H, currently occupied by the husband, be sold, and that from the net proceeds of sale, three facilities with the National Australia Bank be discharged.  One loan is standing at $363,446, one at $465,000, and one at $25,910. She further seeks that there be a payment to the husband of $160,000.  She says that $60,000 of that is a rental component following sale – I don’t quite know what that means – and a payment of $100,000 to her. She seeks that the balance of the proceeds be invested, pending further order.  She seeks an injunction restraining the husband from dealing with his interest in a property at L, and that he execute the necessary documents for the finalisation of tax returns for a trust.  The actual order sought is:

   Husband to execute necessary documents for finalisation of [R] tax returns, and similar.

   And then she seeks costs.

5. The background has the husband at 44 years of age and the wife at 39 years of age.  The husband is a tradesman.  The wife is a partner with a professional firm, S Firm. The wife has a new partner, Mr C, who is also a partner at S Firm. It is asserted in the wife’s case that the husband has a new partner, Ms Y. It is the husband’s evidence that he is not in a relationship of financial significance or relevance, with Ms Y and that he doesn’t live with her. So there’s an issue about that.

6. The husband and wife started living together in January 1994, and were married in December 1994.  They have three children, K and J, who are nearly 12 years of age, and nine years and about 10 months of age, respectively. Their youngest son, M, was born in September 2005, and therefore, he’s about four years and 10 months of age.  The parties’ final separation occurred under one roof at the H property, I assume that was in April of 2009, and the wife left the premises in September 2009.  The parties have an arrangement in place whereby the children live something like week about with the parents - Sunday to Sunday. 

7. Turning to the easy matters first.  The wife seeks, and the husband opposes, the sale of the H property, and the husband wants exclusive occupation of the property until the final hearing.

8. Both parties seek the sale of the property on a final basis.  I indicated to the wife’s counsel yesterday, that I would not order the sale of the H property if that was controversial, simply because one would not interfere, on an interim basis, unless it was necessary to do so.  There is no suggestion that a mortgagee is moving on the property, or that the property is otherwise under threat.  So that’s a matter for another day.

9. As to the related issue; the husband seeks exclusive occupation of the property.  The wife and Mr C have acquired another property to live in. No submissions made on behalf of the wife against the husband having occupation of the property until sale. Therefore that issue requires no further exploration.

10. As to financial support;  it transpired in the course of submissions that there is an issue between the parties that is not the subject of any of the orders sought formally on behalf of either party, but which has been a topic of negotiations between them. That is about the disposal of the husband’s interest in a property at L.

11. The evidence is that the husband and his brother own a property at L, equally.  The representation made on behalf of the wife, for example, in her case outline document, is that that property has a value of $700,000.  In the course of oral submissions yesterday, the solicitor for the husband said that the husband was interested in selling his half interest in the L property to his brother. Further the husband’s brother is willing to buy the husband out at the figure that the wife has nominated for the value of the property;  in other words, $350,000, or if the wife had a different view about the valuation from the view she had when these documents were put together - at a figure identified by formal valuation.

12. It transpired in the course of submissions that the wife too was contemplating the sale of the husband’s half interest in this property. The only controversy between the parties was what would be done with the proceeds. The husband’s proposal is that in order to avoid a break fee in relation to the larger of the two encumbrances on the H property, the proceeds be applied to the lesser of the two substantial mortgages secured on the H property, which stands at $363,446.

13. The husband would seek that the wife be restrained from drawing further on that facility, and that he be able to draw on that facility. I said to the parties last night, out of frustration at the number of issues between the parties, in relation to their income and outgoings, that one option might be to accede to the husband’s request, to note his proposal in relation to the proceeds of sale.  The L property is his property alone. Unless he is restrained, he would be free to sell the property to his brother, or to whoever. In that way the husband would have some options, and to some extent, the parties would be in something of a more equal bargaining position.

14. On reflection overnight, calmer thoughts have prevailed, and I don’t think it is practicable to do that.  It became apparent during the course of submissions, that each of the parties seeks a forensic advantage out of the way in which the proceeds of the L property might be distributed.  The husband is keen to preserve his right for financial support from the wife herself, and the wife would prefer that the husband have access to matrimonial capital, and provide for his own support albeit that the trial judge could later characterise the advances made from that source.

15. It sometimes pleases parties to settle interim interlocutory issues in that way. There are a number of problems with it.  Often the characterisation of the payment gets lost in the wash of a final hearing, and if such an order is to be made on a contested basis, the court needs to know the basis for the relief sought, so as to know what criteria to take into account in making the decision to facilitate that proposal. There are other potential problems. Might the sale be under value. At one point, counsel for the wife expressed a concern, notwithstanding that his own client had offered the figure of $700,000 as the value of the property, that a transaction between the husband and his brother might not be at arm’s length.

16. I could put in place a mechanism to identify a value of the property prior to the transfer, but the issue does complicate proceedings.  So for my part, I think the sale of the husband’s half interest in the L property would be eminently sensible. However, it is not something that I would impose on the parties, in circumstances where there is no formal proposal from either of the parties. Neither of them seeks an order in relation to the disposition of the L property, in the orders that they asked the court to make yesterday.

17. Having said that, I do not propose to restrain the husband in relation to the L property. He is accountable for what he does. However, he is on notice that the wife opposes the sale, except on certain conditions.

18. The wife seeks that the husband sign tax returns. She seeks:

    That the husband execute all financial documents relating to the 2008, 2009 and 2010 financial statements, tax returns, trustee resolutions and reasonably related documentation, in respect of the [R] Trust Number 2, upon the wife indemnifying the husband in respect of such liabilities, subject to:

    (a)The nature and character of such liabilities and indemnities, if any, being determined by the trial judge on a final hearing;  and

    (b)The wife being entitled to recoup such indemnification out of the trust assets in respect of any trust liability, as if she were a trustee with the usual right of recourse to trust assets for indemnification.

19. I was told, in the course of submission, that the husband would agree to execute documents, subject to three conditions, and they included the correction of what he saw as errors on the face of the statements that he was being asked to sign, and they included, also, a guarantee that the wife would meet the resultant income tax impost arising from those tax returns.  There is no evidence before me that enables me to determine the rights and wrongs of those propositions.  I understand the wife’s case to be that there will be costs incurred by the parties if there’s further delay.  I accept that but I cannot require a party to sign a document that is incorrect, and I don’t have the evidence before me – I might say, thank goodness – which would enable me to determine whether there are statements in documents that are sought to be executed, that are incorrect.

20. I’ll say something about the parties’ position generally later, but it must be in both their interests to promptly and efficiently discharge their responsibilities as office holders in relation to documents of the trust. Although there’s some capacity, if the court finds that one person uniquely has caused damage by not executing documents unreasonably, to visit the outcome on that party but it would be sensible, and it is the obligation of the parties, to mitigate their own losses. They are each responsible for acting sensibly and avoiding further financial cost. 

21. Coming then to the main issue between the parties, and that is financial support in relation to the outgoings secured on the property, and in relation to the husband’s household.

22. The husband claims $2228 per week.  He doesn’t say that he wants it paid to him, but the inference is, that’s what he wants.  He doesn’t say that it’s spousal maintenance, but the inference is that that’s what it is.  There’s an immediate problem in relation to it, because his claim wraps up costs associated with the parties’ children.  I cannot make the husband’s expenses identified in his Financial Statement, add up to $2228, without including the costs of the children. It is an agreed fact that there is a child support assessment. Therefore, as a general proposition, this court does not have jurisdiction in relation to the child support issue. No submissions were made to me in relation to child support. So there’s a problem in relation to the claim that’s made on behalf of the husband.

23. In the broad, the husband’s case is that the wife has an income of $10,706 a week, and he is trying to resurrect a business and as yet has little income, he is looking to the wife for financial support.  And indeed, up until not long ago, he was receiving financial support directly from the wife, and that was in addition to the wife meeting the substantial outgoings associated with extensive borrowings secured on the former matrimonial home.

24. The first step in a maintenance claim is a party demonstrating that he or she is unable to adequately support himself or herself from their own resources.  It is the husband’s evidence that he has no income.  His evidence is that he ran a trade business that employed a number of people; that in concert with the wife, when the children came, it was decided that he would wind that business down and become a full-time house husband. As I understand her case, the wife disagrees that it was a joint decision, or disagrees that it was the intention of both of them, that the husband would cease to earn an income. I can’t make a finding about that.

25. The husband has asserted that his income is nil. The detailed evidence about that is not to that effect. He deposed to an average income which was put by the counsel for the wife put at an average of about $200 a week. There was no objection to that estimate. It is conceded in the husband’s case that he did some trade work in May, on the 6^th and 18^th May but that he has not invoiced that work. It is the submission on behalf of the wife that I can visit him with an average income of about $209 a week. I have some sympathy with that submission in circumstances where the husband’s declaration in his Financial Statement puts his income at nil, and in circumstances where he has elected not to invoice a customer to receive income to which he is entitled.

26. In addition, the husband receives rental income from the L property.  I was told that the net rental, as at 31 May, was $1900;  as at 30 April, $434;  and going backwards,  as at 29 March, $854, which was totalled at $3188, or an average - a weekly average of $245. There is no liability secured on the L property. I understand that the husband might say that those rental returns have been contributed to an all moneys facility with the National Australia Bank, and so, don’t directly benefit him. Presumably they could. The wife cannot have this both ways. If she wants the husband credited with the rental income, she cannot also require it to be applied to a loan facility.

27. The submission on behalf of the wife is that there is $454 per week income available to the husband.  Turning to the husband’s expenses, he identifies fixed expenses and living expenses of $2005. That includes living expenses of $1871, which in turn, according to part N of his Financial Statement, includes $1047 in expenses associated with the children.  For the reason that I’ve indicated, those expenses must be excluded from my calculations.

28. In Stein and Stein[1] the Full Court confirmed that there needs to be a disaggregation between different claims for relief. The claim made here is a claim in relation to spousal maintenance. Therefore the husband’s claim is $2705 minus $1047, which is $1658 per week, made up of $824 in living expenses for the husband and $834 in fixed expenses.  There is nothing remarkable in the type and quantum of his expenses.  Each of the parties is critical of how much the other spends on petrol and other things.  The submission was that the husband cannot possibly spend $170 a week on medical, dental and optical expenses, because the wife’s paying the MBF fees. That submission is a triumph of hope over experience.  The idea that the only expenses associated with maintaining medical, dental and optical health are fully contained within the reimbursement available through a health fund is fanciful. The background of this case has both parties having quite serious psychological or psychiatric conditions. It is not as though the parties have enjoyed unqualified good health. For her part, for example, the wife says she spends $236 a week on “personal grooming and training – stress related”. The inference is that the training component is something she does to deal with an aspect of her psychological well-being. The wife says that she spends $100 a week on medical, dental and optical expenses, after receiving Medicare or MBF reimbursement.

    [1] [2000] FamCA 102, (2000) FLC 93-004

29. Coming back to the husband’s situation, it is entirely possible that he would be expending at that rate.  There is a necessary inaccuracy in identifying expenses.  In completing a Financial Statement, parties are asked to average expenses over a year, on a weekly basis.  They are asked to give estimates of what they spend on food, and household supplies.  And those estimates will be that and no more.  There is nothing in the quantum or categories of expenses, the husband’s identified, that seems to me to be out of order.  I accept, for the purposes of today, that his expenditure is $1658 a week.  He has $454 in income, and therefore, a shortfall of $1204 a week.

30. Nextly, in relation to spousal maintenance, one turns to the reasonable capacity of the other party to the marriage, to provide the support required.  The wife has an income of $10,706 a week.  That is made up of a salary of about $8000, some rent from a property at N, and income by way of distribution from S Firm of $2644 a week.  Her expenditure is $11,141 a week.  It includes some things that haven’t actually been paid yet, for example, it includes a child support assessment at $339 a week.  Those payments are not yet being made. I am told, on behalf of the wife, that the obligation falls due in the future, but the wife says, in her Financial Statement of 25 June 2010, that is what she is paying.  I accept that she may have that expense. The wife has lodged an objection to the assessment. Under her proposal her obligation for periodic child support will be entirely taken up by way of credit for non agency payments of fees for the children to attend a private School.  I had some things to say about that yesterday. I expressed a view that I didn’t think, in circumstances as they were presented in the case before me, that a court dealing with the child support issue would look favourably on a circumstance whereby all of the obligations of the person in a stronger financial position would be met by way of school fees. Children must be first properly housed and fed. There is a risk of embarrassment for the children if they are educated at a certain level, and yet cannot be provided with the necessities of life every alternate week.

1. That is an issue for somebody else, of course.

2. There are some inaccuracies identified and conceded in the wife’s evidence. It was conceded, for example, that the wife’s claim for school fees were exaggerated by $400.  There is an issue about the fact that the wife has drawn on the NAB facility - presumably for the purposes of establishing new premises and acquiring equity in new premises for herself and Mr C.  Here claims for rates are likely to be exaggerated; there is a concern that her claims in relation to the D Unit Trust include a cost of $548 in rent, but also a further $530 in other outgoings, which are not enumerated anywhere;  there is a concern about item 23 – in respect of half the interest in the NAB loan for the H property. The submission is that that amount is not being paid. It is submitted that the wife has double counted some of the costs at item 25 - insurance policies. It is noted that it pleases the wife to pay $630 a week for the lease of a motor vehicle and that there would be no significant shortfall if that lease was paid out. It is submitted that that expense is out of all proportion to the benefit of a motor vehicle provided for it, and that would give way to an obligation to provide reasonable support to the husband. There is a claim for $339 for child support that is not paid. Turning to $4420 in living expenses - the submission on behalf of the husband is that the wife’s claim for $300 for her own food, sits uncomfortably with the husband’s claim for $150 per week for food. It is submitted that $185 is a generous allowance for clothing and shoes; entertainment and hobbies at $100 a week seems a generous allowance when the husband claims $30 a week. The submission is that holidays at $130 a week, compared unfavourably with the $20 provision made by the husband.  There is a general complaint that although the wife lives with Mr C, she doesn’t declare that in her Financial Statement. At Item 17, “other income earners in her household” she makes no disclosure. The wife addresses some of those matters. She says that she is in a job which requires something of a profile, and the submission on her behalf is that a reasonable expenditure on clothing is appropriate.

3. Despite the lack of disclosure in her Financial Statement on this issue, in her affidavit the wife makes a disclosure in relation to the financial incidence of her cohabitation with Mr C.  She says:

   I’m in a relationship with [Mr C], and living with him at an address at [D].  We maintain separate finances, and do not have a joint account.

   She says:

   Furniture and other items within the household were individually purchased by each of us, to approximately equal value.  Through our respective trust structures, we contribute equally to the repayment of the mortgage, and the other outgoings secured on the [D] property.  [D property] was purchased by the [D] Unit Trust.  I am a director of the company with [Mr C], and have one class A discretionary share.

4. She is the appointor of the owner of that share.  She has a loan account, and owes $146,000, representing the moneys paid to the trust from her salary, and she has contributed to the purchase by deferring payment of some debts.  From her discussions with Mr C, she knows that he is a partner in S Firm, who is separated from his spouse.

   He has two children, aged nine and six, who spend time with [Mr C] at [D] during my children’s off week.  [Mr C] has stated to me that he has no assets of any substance.  He informed me that he separated from his wife in mid 2009, and set up a separate residence at [E].

5. The wife has avoided making any disclosure about Mr C’s remuneration.  What she included in her affidavit is not what is required of her, from her knowledge in her Financial Statement. It seems to me, inherently unlikely that Mr C has no assets. Now, I might be wrong about that, of course. It is possible that somebody can go through life and acquire no assets, but it would be a remarkable thing - a surprising thing, if Mr C has no assets. But that is her evidence. 

6. The wife identifies $475 a week of expenditure directly for the benefit of the husband. That is for electricity for the H property, telephone, council rates, water rates, insurances. She spends $100 a week on the husband’s holidays.  She spends $48 a week on the husband in the form of a rental for the parties’ on-site caravan - I think that might be on the central coast. She pays his MBF, and so on. Overall, only the wife has any real flexibility about managing her finances. 

7. There was some criticism in the course of submissions about the husband’s not exercising his capacity to earn. Both parties give significant detail about their psychological and mental health problems, and the wife, herself, gives some significant detail about the things that have befallen the husband, and I think, coming back to a matter that I raised earlier, the problems the parties have in settling things, their approach to this issue about the disposition of the L property. That all suggests that the parties are not thinking as clearly as they might.  The husband says that he is being treated for Major Depression.  He had 25 sessions of Electro-Convulsive Therapy.  For four months, up until Christmas 2008, he had four admissions to Hospital.  His memory is diminished. He gained weight.  He says that his progress has been slow, but he thinks he has steadily improved.  His last hospital admission was December 2008. The wife talks about personality problems, and some drug use by the husband. The fact is, that the husband was not running a business at the time of separation.  There’s nothing about separation that makes it easier to run a business.  He has the children with him half the time. To his credit he says that he is setting up the business again. As I said to the wife’s counsel, it seems to me that that is enough in relation to this issue, for the purposes of interim proceedings. Things will change in the future, and indeed, it is not as though the husband says, “Well, I’m not fit for any paid employment.”

8. He has bought a truck; he fitted it out and repaired his tools. He has undertaken some work. I accept that he is exercising his capacity at the moment. 

9. It is not possible for me to point to available funds in the wife’s balance sheet.  There are some things that need explanation. I am permitted to take a broad brush approach in interim financial proceedings, on the basis that there is a home for any adjustments in the exercise of power under section 79. The wife can have credit for payments that are made beyond those that were needed, in the form a finding that the husband had a preliminary advance of funds, or in form of an argument that the wife’s contributions were greater than those of the husband over a period.

10. To the extent to which I make a mistake about this, those things can be corrected.  Coming back to the calculation;  there is a shortfall of the nominal income of the husband over his expenses of $1204 a week.  As I say, although I can’t point to $1204 in the wife’s budget, there are things there that could be trimmed, and it would be reasonable for those to be trimmed, in the circumstances.  She has made some elections, and while they are matters for her, it seems to me that there is a capacity there.  The only substantial financial capacity is, of course, hers.  And I think to the extent that the obligations cause some restrictions on her, she might look again at the husband’s proposal for the disposition of the L property. That would reduce her outgoings by a considerable amount each week.

11. The door is presumably left open in relation to those proposals. The parties should give active thought to consummating those settlement discussions.  The parties do not have a huge pool of assets. Every dollar is important to them and their children. I strongly invite them to get the best advice they can from their lawyers, swallow their pride about matters, forget the idea of obtaining forensic advantage through one tactic or another, and just focus on making a business-like decision to ensure that they both live, and the children live, in decent circumstances until the parents are in a position to settle their property, or until they qualify the court to make a decision about it.

12. There is an issue about interim costs.  Because there is now no facility left on the NAB loan, the husband’s application made orally yesterday, was for a dollar for dollar interim costs order.  That is an order whereby in the event that the wife pays any money towards her legal fees, she is required to pay the same amount to the husband’s solicitors. 

13. The idea of interim costs is firstly that the court not be put in a position where a case cannot be properly argued on behalf of both parties.

14. There is the risk of an unfortunate outcome if the parties are not in a position to properly litigate their case. There is also the unfortunate appearance of unfairness if one party exclusively has the use of financial resources of the marriage and the other party is unable to pay or secure their legal fees. There is evidence that the husband is out of pocket, and his solicitor is out of pocket, in relation to fees already incurred. The wife is in a far stronger financial position than the husband and she has not made full disclosure. I will make the order sought.

I certify that the preceding forty-four (44) paragraphs are a true copy of the reasons for judgment of Judicial Registrar Loughnan

Associate: 

Date:  15 July 2010