Frost and Frost

[2018] FamCA 967

FAMILY COURT OF AUSTRALIA

FROST & FROST [2018] FamCA 967

FAMILY LAW – PROPERTY – Interim application – Where the husband seeks that orders be made for an interim property distribution to the parties – Where the majority of the net proceeds of sale of the former matrimonial home were distributed equally to the parties following its sale – Where the husband seeks orders that the balance of those net proceeds be equally distributed to the parties as a further interim property distribution – Where the husband says that he requires those funds to meet debts – Where the wife opposes that application – Where there is an issue in respect to adequacy of disclosure – Where there are valuation issues – Where, at this stage of the proceedings, Court unable to have sufficient degree of comfort that, at final hearing, and adjustment could be made to account for a further partial distribution of property – Application dismissed.

Family Law Act 1975 (Cth) ss. 79, 80

Family Law Rules 2004 (Cth) r. 1.04

Acton & Burton [2015] FamCA 469 at [26]
Davidson and Davidson (No 2) (1994) FLC 92-469
Gabel & Yardley (2008) FLC 93-386
Iphostrou & Iphostrou and Ors [2011] FamCA 20
Medlow & Medlow (2016) FLC 93-692
Stanford and Stanford (2012) 247 CLR 108
Strahan & Strahan (Interim Property Orders) (2011) FLC 93 466
Sully & Sully (No 2) [2016] FamCA 706
Wenz v Archer (2008) 40 FamLR 212

APPLICANT: Mr Frost

RESPONDENT: Ms Frost

FILE NUMBER: SYC 6281 of 2018

DATE DELIVERED: 23 November 2018

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: McClelland J

HEARING DATE: 12 November 2018

REPRESENTATION

COUNSEL FOR THE APPLICANT: Ms Reid

SOLICITOR FOR THE APPLICANT: Self-represented

COUNSEL FOR THE RESPONDENT: Ms Lioumis

SOLICITOR FOR THE RESPONDENT: Croker Edwards

Orders

THE COURT ORDERS THAT:

1. The balance of the husband’s Application in a Case filed on 2 October 2018 be dismissed.

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

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

Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYC 6281 of 2018

Mr Frost

Applicant

And

Ms Frost

Respondent

REASONS FOR JUDGMENT

Introduction

1. This matter concerns an application brought by Mr Frost (“the husband”) for interim property orders.  It is to the credit of the parties and their legal advisers that they were able to reach agreement in respect to most of the interim issues that were in dispute, at the interim hearing listed in the Court’s duty list on 12 November 2018.

2. The remaining issue requiring adjudication is whether there should be, at this point in time, a further partial property distribution to the parties.  The husband contends the balance of the net proceeds from the sale of the parties’ former matrimonial home, being approximately $197,000, should be distributed to the parties in equal sums.  He asserts that he requires those funds to meet pressing debts.

3. Ms Frost (“the wife”) opposes that occurring, at least, at this point in the litigation. 

Background

1. The husband was born in 1949 in Australia and is currently 69 years of age.  He is a health professional.

2. The wife was born in the United Kingdom in 1955 and is presently 63 years of age.  She is presently not in paid employment.

3. The parties commenced living together in March 1987 and were married in 1988.  The wife contends that the parties separated in 2013, while the husband contends that they separated in January 2016.  That difference is not material, at this stage of the proceedings.

4. The parties have three children, all of whom have reached their majority.

5. The parties agreed to sell the former matrimonial home in January 2016.  On 30 January 2016, each of the parties received $954,691.70 from the proceeds of sale of the former matrimonial home, by way of partial property distribution. 

6. The remaining balance of the proceeds of sale of the former matrimonial home is approximately $197,000.  The husband seeks that that sum be distributed to the parties in equal amounts.  The wife opposes that application.

7. At the hearing, the parties consented to the following orders being made:

   1. The Husband must within 28 days give the Wife a list of documents relevant to the following issues, indicating where and when the documents may be inspected:

   (a) Any and all mortgage or loan documents for the property situated at and known as B Street, Suburb C

   (b) Bank Statements from 30 June 2015 to date of all bank accounts held by the husband including but not limited to National Australia Bank; [D Bank]; ANZ.

   (c) Bank Statements from 30 June 2015 to date of all loan and credit accounts held by the husband including but not limited to National Australia Bank (#49; #50 and #07); [D Bank] (#53) and ANZ (#16); …Mastercard; …Storecard and [Company E]

   (d) Lease document and repayments from 30 June 2015 relating to leases held by F Finance

   (e) Any and all documents in relation to loans asserted to be owed to [Mr G]; [Ms H] and [Mr J] including documents relating to advancement of loans, contract(if any) and repayments (if any).

   (f) Details of how funds removed from [Frost] Self Managed Superannuation Fund in the financial years ending 30 June 2014 through to date have been utilised.

   (g) Details of how funds removed from [L] Trust have been utilised

   (h) All records of communication to and from the Australian Taxation Office from 2014 to date, including but not limited to taxation returns, assessments, notices from the Australian Taxation Office, representations made to the Australian Taxation Office.

   (i) Details of any vested or contingent interest in property

   (j) Details of any vested of contingent interest in property owned by a legal entity that is fully or partially controlled by the Husband

   (k) Any income earned by a legal entity fully or partially owned or controlled by the Husband, including income that is paid [or] assigned to any other party, person or legal entity.

   (l) Details of any trust

   (i) of which the husband is the appointer or trustee;

   (ii) of which the Husband has the direct or indirect power to remove or appoint a trustee

   (iii) of which the Husband is a beneficiary of.

   (m) Any disposal of property (whether by sale, transfer, assignment or gift) made by the party, a legal entity, a corporation or a trust mentioned in (l) that may affect, defeat or deplete a claim:

   (i) In the 12 months immediately before the separation of the parties or

   (ii) since the final separation of the parties and

   (n) All details of any liabilities and contingent liabilities.

   2. That within 14 days the Husband and the Wife shall provide to each other’s legal representative a list of antiques in their custody and control.

   3. That within 28 days the husband will nominate three valuers to the wife to value the property situated at and known as [B Street, Suburb C] and the wife shall within 14 days advise the husband of which valuer, she nominates will undertake the valuation.

   4. That within 28 days the wife will provide a letter of instruction for STA Accounting to value the parties entitlement in the “[L] Trust” and “[Frost] Self Managed Super Fund” and the husband shall within 14 days advise the wife’s solicitor of any amendments to the letter of instruction.

   5. Within 28 days (of the case assessment conference) the applicant:

   (a) prepare a balance sheet in the form available from the Family Court of Australia website or from each Registry by completing all items and values asserted by the applicant; and

   (b) send the balance sheet to the respondent(s).

   6. Within 21 days after receiving the balance sheet the respondent(s):

   (a) add the respondent’s estimated values for all items on the balance sheet prepared by the applicant;

   (b) add any items to the balance sheet the respondent(s) asserts have been omitted from the balance sheet and assert values for those items;

   (c) complete the notes relating to all disputed items and all disputed values for items; and

   (d) return the amended balance sheet to the applicant.

   7. Within 14 days after receiving the amended balance sheet, the applicant:

   (a) add the applicant’s estimated values for all items added to the balance sheet by the respondent;

   (b) complete the notes relating to all disputed items and all disputed values for items; and

   (c) file the balance sheet with the Court and serve it on the respondent(s).

   8. At least 28 days prior to the Conciliation Conference both parties must:

   (a) file and serve a Superannuation Information Form attached to an Affidavit

   (b) file and serve a Financial Statement

   (c) specify any orders sought in relation to any superannuation interest

   (d) provide procedural fairness to any superannuation fund trustee (by serving the relevant application/response)

   8. That within 28 days in relation to (2) the Wife will nominate three valuers to value any item of which value is in dispute and the Husband will chose within 14 days thereafter [one of] the nominated valuers to conduct the valuations.

   9. That the Husband within 28 days provide to the wife’s solicitors all documents and trust deeds relating to the Frost Family Trust or any other trust which operates or controls the Husbands’ rooms at [K Practice].

   10. That the Husband provide all details, sales documents, contracts, deposits relating to the sale of Items post separation including but not limited to shares, motor vehicles.

Evidence

1. At the hearing, the husband relied upon the following documents:

   a)Financial Statement filed on 2 October 2018; and

   b)His Affidavit filed on 2 October 2018.

2. The wife relied upon the following documents:

   a)Financial Statement filed on 11 November 2018; and

   b)Her Affidavit filed on 11 November 2018.

The parties’ contentions

1. Each of the parties’ Affidavits details a number of financial transactions that have occurred, both prior and subsequent to, their separation.  For the purpose of considering this application, it is unnecessary to detail each and every one of those transactions.  I will, however, refer to the most significant issues in dispute between the parties, concerning the management of their financial affairs, to which my attention was drawn during the course of the hearing.

2. The husband contends that the matrimonial property pool available for distribution at final hearing totals approximately $4,850,000.  Accordingly, the husband contends that orders can be made in accordance with his application, without impeding the Court’s ability to do justice between the parties at final hearing.  Comparatively, the wife contends that the Court cannot be comfortably satisfied that the matrimonial pool is such that it would be possible to account for that interim distribution at final hearing.  She asserts that this is for reasons which include the fact that there is a major asset of the parties, being the property of a trust (“the L Trust”), which is yet to be valued.

3. The wife further contends that there has been inadequate disclosure on the part of the husband in respect to funds that he has already received from the matrimonial property pool.  In that respect, Counsel for the wife submitted that, towards the end of the parties’ relationship, the husband removed “almost $4,000,000 from the trust”.  At the hearing, Counsel for the wife subsequently asserted that the amount borrowed from the L Trust by the husband was $2,400,000.  The wife contends there will be a significant dispute as to whether those funds were taken in the period prior to, or following, separation.

4. The wife further contends that there is a dispute as to how much money has been withdrawn by the husband from a self-managed superannuation fund.  The wife contends that $669,000 was withdrawn from that superannuation fund by the end of June 2015 and that there was a further amount of approximately $298,000 withdrawn by June 2017.  The fund is called the “Frost Self-Managed Superannuation Fund” (“the FSMF”) and the trustee company is M Pty Ltd. 

5. The wife contends that those matters cannot be clarified until the L Trust is valued and further disclosure occurs.  It did not appear to be disputed that the L Trust was established in May 2004 and that the trustee company, at that time, was M Pty Ltd.  The wife contends that in October 2014, in her capacity as appointer of the L Trust, she changed the trustee to N Pty Ltd. That change in trustee does not impact upon my decision at this stage of the proceedings. 

6. As stated above, at the hearing, the parties agreed to various orders in respect to valuations and further disclosure.

7. The wife further contends that disclosure is also required to clarify whether the husband has expended the interim distribution received by him of $954,691.70.  The wife asserts that disclosure is required in order to identify the creditors to whom the husband states he owes money and what those debts relate to.  In the absence of that information, the wife contends that the Court cannot be satisfied that there is sufficient matrimonial property available to make any required adjustment for the distribution sought by the husband, at final hearing.

8. The wife further asserted that the husband has not explained why he requires a further interim distribution in circumstances where, as she understands, he receives and annual income of approximately $264,000.

9. Finally, the wife contends that there is a significant dispute between the parties in respect to their contributions.  In that respect, the wife contends that, in addition to her contribution as a homemaker, recognition needs to be given to her financial contribution of her income and a significant inheritance.  

10. In reply, the husband contended that the wife is well aware that he has spent the earlier interim distribution advanced to him on the purchase and renovation of a property in Tasmania.  The husband asserts that he has accumulated some debt as a result of that project, which forms the basis for his application.

11. Further, the husband contends that monies taken by him from the L Trust were borrowed on the advice of his financial advisers, with a view to minimising his tax liability and that those borrowings occurred during the parties’ relationship.

12. In terms of the value of the matrimonial asset pool, the husband contends that the FSMF has assets of $1,521,681.37, that M Pty Ltd has assets of $170,000 and that the L Trust has assets of $2,282,891.79.  Those figures total $3,974,573.16.  In that way, the husband asserts that there is sufficient property available for any adjustment at a final hearing of the distribution that he seeks of $197,000 equally between the parties. 

Consideration

1. In the case of parties to a marriage, the legislative foundation for an order for partial property distribution is ss 79 and 80(1)(h) of the Family Law Act 1975 (Cth) (“the Act”). In combination, those provisions confer power to the Court to make orders for an interim property settlement. Section 80 is not, in itself, a source of jurisdiction for an order for the partial distribution of property to be made in the course of interim proceedings. Rather, that section is an “enabling provision”, which provides various ways in which the general power set out in s 79 may be exercised in individual cases. In that respect, in Davidson and Davidson (No 2) (1994) FLC 92-469 at 80,874, the Full Court stated:

   Section 80(1) is limited by its introductory words, namely that “The court, in exercising its powers under this Part, may do any or all of the following ...”. That is, s. 80(1) is activated by the exercise by the court of some other of the powers in Part VIII.

2. It is clear that the power to make orders pursuant to s 79 of the Act can be exercised prior to final hearing, including through “a succession of orders until the power ... is exhausted” or until a final order dealing with all the known property of the parties is made: Gabel & Yardley (2008) FLC 93-386, cited in Strahan & Strahan (Interim Property Orders) (2011) FLC 93 466 (“Strahan & Strahan”) at 85,640.

3. However, as noted by Thackray J in Strahan & Strahan at 85,656:

   …it is important to note that s 80(1) is couched in the permissive. Hence, although the Court must give consideration to the matters set out in s 79(4) when hearing an application for an interim payment, it has no obligation to make an interim order. The Court “may” do so if it considers that it should in the exercise of its discretion.  [Emphasis added].

4. In that decision, the Full Court held that there are two steps to considering an application for a partial property distribution, prior to final hearing. The first step is to resolve whether to exercise the Court’s power, in that regard, prior to final hearing. This is a “procedural step” which requires an analysis of whether the circumstances of the case trigger the Court’s power to invoke s 80(1)(h) of the Act to make an order for interim property settlement, prior to final hearing.

5. In approaching that first step, in Strahan & Strahan at 85,645, the Full Court said:

   In relation to the first stage, in our view, when considering whether to exercise the power under s 79 and s 80(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 s 79 is a once and for all order made after a final hearing.

6. However, in Stanford and Stanford (2012) 247 CLR 108 at [40], the High Court held that consideration as to whether there should be an order for the adjustment of legal and equitable interests in matrimonial property should not be commenced with the assumption “that one or other party has the right to have the property of the parties divided between them” (see also Medlow & Medlow (2016) FLC 93-692 (“Medlow & Medlow”) at 81,089). That principle applies to an application for a partial distribution of property in interim proceedings, as much as it does to an application for the adjustment of property at the final hearing of the matter.

7. In other words, an applicant for an interim partial property distribution carries the onus of satisfying the Court as to why it is in the interests of justice for such an order to be made, rather than for there to be a “once and for all” order made at final hearing.

8. The second step identified in Strahan & Strahan involves the exercise of the Court’s power pursuant to s 79 of the Act. In turn, insofar as it is possible in interim proceedings, this step requires the Court:

   a)To identify “the parties’ property and of their interests in it” (Medlow & Medlow at 81,088); and

   b)To consider and apply the provisions of s 79 of the Act (Strahan & Strahan at 85,645 to 85,646).

9. Section 79 of the Act should be applied in the context of the interim proceedings and, in particular, in considering whether it is just and equitable to make the order, it is necessary to have regard to the impact of the order upon the respective parties at the point in time that it is made: Sully & Sully (No 2) [2016] FamCA 706 at [33] – [36].

Is it in the interests of justice for an order for the partial distribution of property to be made prior to final hearing?

1. The determination of this issue involves a consideration of, not only the parties’ interests, but also the public interest.  In that respect, in Strahan & Strahan at 85,645, the Full Court said:

   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 s 79 is a once and for all order made after a final hearing.

1. In a similar context, at 85,657, Thackray J said:

   The Court must first identify circumstances that make it appropriate to give consideration to exercising its power to make an interim order. It is at this stage that the Court has regard to the policy consideration that it is generally in the interest of the parties and the Court for there to be only one exercise of the s 79 power.

2. Further to the policy consideration referred to by Thackray J, it is also important to note the obligation on the parties and the Court to further the main purpose of the Family Law Rules 2004 (Cth), which is set out in rule 1.04, as follows:

   Main purpose of Rules

   The main purpose of these Rules is to ensure that each case is resolved in a just and timely manner at a cost to the parties and the court that is reasonable in the circumstances of the case.  [Emphasis added].

3. Unless satisfied that it is in the interests of justice, the Court should avoid hearing a multiplicity of interim applications that traverse matters that will ultimately be considered in an orderly and considered manner at final hearing.

4. As noted, the husband states that he has sought a partial property distribution because he requires those funds to meet pressing debts.  In that regard, authorities confirm that it may be appropriate for a partial property distribution to be ordered prior to final hearing, in situations where a party requires access to resources “to meet debts which may result in the party being pursued by creditors”: Strahan & Strahan at 85,643, quoting Wenz v Archer (2008) 40 FamLR 212. As such, the husband has satisfied one aspect of the first step set out in Strahan & Strahan, that is, that he has established a legitimate reason for seeking the funds.

5. The difficulty I have in this matter is that there is a significant difference between the parties’ contentions in respect to both the value of the matrimonial asset pool and the nature of each of their respective contributions.  Final determination of these issues cannot occur without additional evidence as to the nature of the trust arrangements and the benefit of detailed submissions.  That level of analysis is simply not possible in interim proceedings.  In that respect, in Iphostrou & Iphostrou and Ors [2011] FamCA 20 at [44], Cronin J said:

   In any situation of an interlocutory nature where the facts are controversial and in dispute, a court cannot make findings of fact. Findings of fact form the basis upon which orders are made within jurisdiction.

6. Similarly in Acton & Burton [2015] FamCA 469, which also involved an application for child support departure orders in the context of interim proceedings, Hogan J said at [26]:

   The nature of the interim hearing process is such that parties are afforded a truncated process in which it is not possible to make findings about matters that are significantly in contest between them.

7. Further, in Medlow & Medlow at 81,090, in circumstances where the husband, in that case, was seeking an interim property distribution in his favour, the Full Court stated:

   The onus was clearly upon the husband to establish that there were sufficient assets available for the interim distribution and that the effect of any interim order was capable of being reversed as part of the final hearing or at least would not defeat the wife’s property claims. The onus was not on the wife to adduce such evidence.

8. Based on the evidence available at this stage of the proceedings, including the fact that there are outstanding issues of disclosure and valuation, the husband has failed to discharge the onus that is upon him to satisfy the Court it will be possible to make any necessary adjustment at final hearing to accommodate the partial property distribution sought by him.

9. On that basis, I dismiss the husband’s application.

I certify that the preceding forty-three (43) paragraphs are a true copy of the reasons for judgment of the Honourable Justice McClelland delivered on 23 November 2018.

Associate: 

Date:              23 November 2018