Garner and Garner
[2011] FMCAfam 900
•21 February 2011
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| GARNER & GARNER | [2011] FMCAfam 900 |
| FAMILY LAW – Interim spousal maintenance –referral to Australian Tax Office –costs – costs of expert’s report to be paid by one party. |
| Family Law Act 1975, ss.72, 74, 75(2), 117 Federal Magistrates Court Rules, Rule 15.11 |
| Bevan & Bevan (1995) FLC 92-600 Clauson & Clauson (1995) FLC 92-595 |
| Applicant: | MS GARNER |
| Respondent: | MR GARNER |
| File Number: | PAC 2550 of 2010 |
| Judgment of: | Harman FM |
| Hearing date: | 21 February 2011 |
| Date of Last Submission: | 21 February 2011 |
| Delivered at: | Parramatta |
| Delivered on: | 21 February 2011 |
REPRESENTATION
| Counsel for the Applicant: | Ms Snelling |
| Solicitors for the Applicant: | Liberty Lawyers |
| Solicitors for the Respondent: | Byles Anjos Lawyers |
THE COURT ORDERS, PENDING FURTHER ORDER THAT:
The husband shall pay to the wife by way of interim spouse maintenance a sum of $600 per week first payment within seven days, thereafter weekly.
In the event that the husband should be in default of payment for a continuous period of 14 days then liberty is granted to the wife to restore the matter to my list on seven days notice and by arrangement with my associate for the purpose of seeking further ancillary orders by way of enforcement or capitalisation.
Pending further order, the husband shall be, and is hereby, restrained from selling, transferring, or otherwise dealing with or disposing of any shares held by him in the company, [R] Proprietary Limited and/or in the business operated by that company trading as ‘[B]’ at premises [omitted], in the State of New South Wales.
These reasons for judgment are to be referred to the Deputy Commissioner of Taxation for the Australian Tax Office (“ATO”) to take such action as they wish in reviewing the affairs of the above company and business.
Grant leave to the Deputy Commissioner of Taxation or his agent or employee to attend at this Registry and inspect the court file should they so wish or desire.
The parties shall forthwith and within seven days, do all things, sign all documents and give all consents and authorities necessary to instruct Mr G of the Australian Institute of Business Brokers, as a single expert, for the purpose of inquiring into and reporting upon the value of the husband’s interest in the company, [R] Proprietary Limited and/or the business operated by that company, trading as ‘[B]’.
Each party shall give all consents and authorities, as are required, to allow, enable and permit the single expert to complete his valuation, as ordered above, including, but not limited to, providing such documents, information, authorities to obtain documents or information from any third party, and attending such interview for the provision of such written statement or information in respect to the above business, as is requested by the expert.
A joint letter of instruction is to be provided to the expert, within seven days, same to be drafted by the solicitors for the wife and so as to give clear and specific direction as to:
(a)The matters to be inquired into;
(b)The documents provided and to be considered at first instance; and,
(c)The general nature of the business, the places the business records are or may be held, the arrangements for inspection of such documents and/or written authority to third parties to allow access to those documents.
The husband shall pay to the single expert, within seven days of any request for payment, such sum as is required to meet the cost of such investigations and conclusion of same and preparation and filing of the expert’s report as to value.
Notwithstanding the above the issue as to payment of costs to the expert shall remain at large, to be determined at final hearing.
The proceedings are adjourned for further mention and directions and, if the matter is ready, trial directions to 9.30 am on 20 April 2011.
If it is suggested by either party that the matter would be listed for hearing, then both parties are to be present, whether legally represented or not and, in any event, both parties are to ensure that, subject to it having been completed, they have fully read and considered the expert valuer’s report.
General liberty is granted to re-list the matter on seven days notice in the event of difficulties or alleged difficulties, regarding preparation of the report, because, clearly, without that we are not going forward.
Leave is granted to the solicitors for the wife to make an application for costs.
The husband to pay the wife’s costs, assessed in the sum of $2000, being costs to follow the cause, with respect to the application for interim spousal maintenance, such costs to be paid by close of business 1 April 2011.
IT IS NOTED that publication of this judgment under the pseudonym Garner & Garner is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT PARRAMATTA |
PAC 2550 of 2010
| MS GARNER |
Applicant
And
| MR GARNER |
Respondent
REASONS FOR JUDGMENT
These are proceedings with respect to property adjustment and spousal maintenance.
The matter comes before me today for the purpose of ascertaining the readiness of the proceedings to progress to final hearing and/or to address any issues that need attention to enable the matter to be ready so that it can be heard and determined on a final basis.
In addition, there is an application listed for determination today seeking interim and/or urgent spousal maintenance and as contained in the wife’s application filed 6 September 2010. Accordingly, there has been some substantial notice of that application which has been listed and adjourned on a number of occasions. A response has been filed, same being dated 6 October 2010.
The initiating application seeks interim relief in two categories.
a)Firstly, it seeks an order for interim or urgent spouse maintenance by payment of the sum of $1000 per week, but that has been orally amended today to seek payment of $600 per week. On the basis that the quantum of maintenance sought has reduced I have granted such leave to amend as same would not interfere in due process being afforded to the husband; and,
b)Secondly, the applicant seeks a restraint upon the husband from selling, transferring or otherwise dealing with his interest in a business trading under the name “[B]” being a [omitted].
The husband’s response seeks simply that the wife’s application for interim relief be dismissed.
The proceedings were last before the Court on 14 January 2011, after the parties had attended a Conciliation Conference but had been unable to resolve the matter. The proceedings had been adjourned to today to address the above applications and, specifically, to enable there to be some discussion and, hopefully, agreement regarding the appointment of a joint single expert to value the property.
I am told today that there is agreement that a joint expert will be appointed. There is neither consent nor opposition to the expert proposed by the wife and so that needs to be determined together with the issue of contribution towards the cost of that report.
The Federal Magistrates Court Rules 2001 at Rule15.11 address payment of such fees as follows:
“Remuneration and expenses of court expert:
Unless the Court otherwise directs, the parties are jointly liable to pay the reasonable remuneration and expenses of the court expert for preparing a report.”
Whilst ordinarily and absent any order to the contrary these parties would jointly and equally attend to payment of fees the Court retains the discretion to make contrary orders as a matter for each individual case to be determined on its facts.
I am satisfied that the husband, having control of all income producing assets and income produced there from, should, at least at first instance and subject to it being a live issue at final hearing, meet the cost incurred as clearly:
a)The wife has no reasonable capacity to do so or contribute in any way; and,
b)The evidence is necessary to allow the matter to proceed and preparation is likely to be frustrated by any other order.
In relation to the more substantial issue of interim or urgent spouse maintenance, it is trite, and is set out by the Full Court in Bevan & Bevan (1995)FLC 92-600, that there are a number of steps that are required to be undertaken by the Court and which the applicant must prove.
The first is a threshold finding under s.72 that one of the grounds exists. The grounds upon which a right for spouse maintenance arise, there being otherwise at law no entitlement, are:
a)Having the care and control of a child under the age of 18 years.
i)That ground cannot apply as neither party has the care of any child.
b)By reason of age or physical or mental incapacity for gainful employment; and
i)It is not suggested that this is the case, although capacity for employment, but not based upon physical or mental incapacity, is relevant.
c)Any other adequate reason.
The reason that is advanced by the applicant in this matter is that she has, throughout the somewhat lengthy marriage between these parties, been engaged entirely in employment within the [business] operated by these parties. There is substantial dispute, as there is, indeed, with respect to any factual issue that appears extant at present, as to the extent of the wife’s involvement in the business. That does not, in all reality, assist the husband however.
If I accept the wife’s evidence on face value, that she was previously substantially involved in operating the business but has, since July 2010, been excluded from the business and has other difficulties finding like employment in a somewhat limited industry, then the wife would probably make out her case that she has established a threshold.
If I accept the husband’s evidence as he sets out in his affidavit material, that the wife had very little, minimal and peripheral involvement in the business, then that probably still assists the wife more than the husband.
The wife is a Thai national, although there is no issue that she is validly and properly in Australia. She deposes to having some degree of difficulty with the English language. That, in itself, is in dispute between these parties. I note that her affidavit material is interpreted to her prior to swearing, and one can only assume that this is not done on the basis of trying to obtain some forensic advantage but reflects a real difficulty with the English language at least to the extent of written English. If the wife has, indeed, had little involvement, then she has no real job history and would have even greater difficulties now obtaining employment.
I find that the threshold issue is established.
Secondly, I am required to consider the factors set out in s.74 and s.75(2).
Turning to the s.75(2) considerations.
The age and state of health of both of the parties.
It is asserted in the husband’s material that he is 72 years of age and suffers some difficulty with his health, particularly in relation to liver function. That is not a difficulty that stops the husband travelling to areas such as Thailand that, in accordance with Australian Government travel advisories, would suggest that if one did indeed have a liver illness, one might best avoid, particularly as the potential to contract malaria, if nothing else, would cause some substantial disadvantage to this gentleman’s health.
In any event, there is no evidence before the Court to substantiate the allegation by the husband that he is in poor health and has liver disease or that he suffers from high blood pressure. Certainly there is no suggestion, in any event, that these impact upon his income, as it is suggested by the wife that until she was excluded from the business, she had managed it. The husband denies that, but indicates quite clearly that it is managed by someone other than him and, accordingly, income will continue to be produced by that enterprise without his active involvement.
Income property and financial resources of each of the parties
This is a very substantial issue as between these parties. For reasons that will become apparent, I propose today to make a referral of the file to the ATO. If there is to be any accrual of liability with respect to this enterprise, it should be ascertained prior to the final hearing of these proceedings and factored into any valuation of this enterprise. The Court cannot ignore evidence that so clearly suggests wrongdoing and the community has a reasonable expectation that such matters will not be ignored.
From what is led in the evidence of these parties, there are some real issues to be addressed, being:
a)The wife asserts that cash income is not and has rarely been accounted for in the income of the business for tax purposes; and,
b)The husband’s own evidence would suggest that his level of expenditure dramatically exceeds the income and assets that are disclosed by him, which goes without explanation. That is something that will, no doubt, at final hearing be the subject of some considerable comment as well as being a very relevant issue for the purpose of any valuation of the enterprise.
Whether any party has the care and control of a child under 18 is not relevant
Certainly the wife deposes that she assists in the care of her granddaughter but that child is clearly and ordinarily in the care of her mother. Accordingly, the factor cannot have great relevance.
Commitments of each party to support themselves
The wife alleges and sets out clearly in her financial statement that she has expenses of about $660 per week, comprising general expenses in maintaining herself of $460 per week plus very modest rent of $200 per week.
The wife, I am satisfied, has not inflated, exaggerated or in any way sought to assert expenses which are fanciful, unnecessary or of an entirely discretionary nature and the expenses as set out in the financial statement filed 3 February 2011 certainly represent a modest style of living.
The commitments that the husband has to support himself are less clear. Certainly his financial statement sets out that he receives an income of $800 per week from this enterprise. It is then suggested that there are expenses which leave an excess of about $270 per week from that $800, being expenses about $530 per week.
The husband has from a reading of his affidavit material, although it is not at all discernible from his financial statement, his daughter and her partner and three children of that relationship also living with him and they make some contribution towards the rental of the home. It is not otherwise apparent what sources of income or expenditure are germane to the husband at this point in time.
Interestingly, when these proceedings were last before the Court and were adjourned to today, the husband was present in the country but indicated that he was content for the matter to proceed today in his absence as he would, for today’s hearing, be overseas and in Thailand. It was suggested at that point in time that his fares were paid for by somebody else. However, a substantial affidavit has been filed in these proceedings annexing a number of financial documents on the husband’s behalf, to which I refer.
Part of the annexure to the husband’s material comprises some form of travel document in relation to the husband’s extensive travel from 2006 to date to both Thailand and Cambodia. That would suggest a level of travel consistent with the wife’s evidence, that at least two or three times per year the husband travels to those countries for periods of up to two to three months at a time and generally in excess of one month.
Whilst travelling and as set out in a number of bank statements showing EFTPOS and other transactions, the husband stays in accommodation that is anything but modest, preferring the Sofitel brand.
The husband is also somewhat silent as to a number of other matters with respect to his finances. The husband has a personal bank account with the [omitted] Credit Union the most recent statement for which shows a balance of $1294 at 16 September 2010.
That is a modest sum but it is not an amount that would appear to bear any relation to the husband’s evidence otherwise.
The husband’s income from the business, as I have indicated, is suggested to be about $800 per week. The husband’s tax returns are suggested to provide some corroboration for this allegation. However, there then remains the unexplained issue of the level of expenditure the husband alleges having regard to his income. That relates not only to overseas travel but the husband asserting that he has, throughout the relationship – and the only way that one can read his affidavit is as continuing until these parties separated although, like everything else, there is an issue about that – sent sums of money overseas, and referred to by the husband as “substantial sums”, for the benefit of the wife’s relatives.
He also suggests having purchased motor vehicles for them and deposes in his affidavit that the last motor vehicle purchased by him for this purpose was in 2007 for $30,000.
There is no suggestion in his affidavit material as to the source of those funds although, clearly, his income would appear, from the material that is produced in the form of income tax returns and assessment notices both for the business enterprise and the husband personally, to be incapable of supporting that level of expenditure and, accordingly, I am satisfied that there must be some form of income or access to funds, whether capital or income, available.
The business also has cash retained at bank as at 30 September 2010 of $18,293.27. The husband is the sole shareholder and director and, accordingly, controls those funds.
I am conscious that some portion of those monies, no doubt, relates to collected Goods and Services Tax and that there would be tax liabilities, but the business certainly seems to be producing a level of income that is inconsistent with its tax returns suggesting a total income for the business of about $12,000 per year net after payment of expenses.
The wife’s evidence is most concerning in that she alleges that the business, in a period leading up to Christmas and being a period of four to six months each year, would receive cash or about $120,000 which has not been accounted for in the company’s records. It reminds one of the lyric from an Arctic Monkey song that “She don’t do major credit cards, I doubt she does receipts, It's all not quite legitimate”
It will be a matter for final hearing and a matter for the Australian Commissioner of Taxation to determine whether, indeed, all income has been accounted for and, if it has not, there may be a tax liability.
This enterprise has had difficulties with the ATO in the past and, indeed, the company that used to operate the [business] was wound up at the instigation of the ATO although there is no other evidence other than the mere fact and assertion that that was the case.
The husband also has cash retained in a self-managed superannuation fund of $32,505. The husband is 72 years of age and, accordingly, is able to access those funds whenever he wishes. Those funds would not appear to be fully disclosed in his financial statement but are certainly disclosed in bank statements with the Macquarie Bank as held in a cash management trust account which holds those funds.
Eligibility of either party to a pension or allowance
It is not suggested by the husband that he receives nor is eligible to receive any sort of pension.
He is entitled to receive the entirety of the sum of $32,000 from the superannuation fund immediately.
The wife is in receipt of an income-tested pension. Sub-s.75(3) requires that I disregard an entitlement to an income-tested pension, allowance or benefit for the purpose of considering what quantum of spouse maintenance order should be ordered and the logic behind that is to protect the taxpayer when parties have, through their marital resources, the ability to support themselves and/or each other.
Maintaining a standard of living that in all the circumstances is reasonable
If I accept the wife’s allegation that her only income, at present, is from an income-tested pension then clearly her standard of living has declined significantly since separation.
These parties were used to both travelling together and extensively to Thailand and having a level of income that I am perfectly satisfied, from the evidence of both parties, was and is far greater than disclosed in their tax returns.
The husband continues to enjoy a lifestyle equal or at least comparable to that pre-separation and there is an issue as to justice and equity in that regard.
The extent to which payment of maintenance would assist in increasing earning capacity
I am satisfied this factor is not relevant. The wife may need retraining but it is not suggested that the purpose of payment of spouse maintenance is anything other than support.
The effect of any proposed order on the ability of a creditor to recover money
Other than the ATO, who may become a creditor of these parties, I am not informed of any such issue.
The extent to which the party whose maintenance is under consideration has contributed to the income earning capacity, property and resources of the other party
The [omitted] business is operated by a company the shares in which are owned entirely by the husband and as disclosed by his evidence.
The wife suggests that she has made a substantial contribution to that enterprise although there is no dispute that prior to the relationship the husband had operated a [omitted] business albeit of smaller size than the present. The husband, of course, disputes all of that evidence and that is a matter for final hearing but there is certainly the assertion that there has been a contribution and clearly both of these parties have had, during their marriage, the benefit of the income produced.
The duration of the marriage and the extent to which it has affected the earning capacity of either party
This matter is dealt with having regard to sub-s.75(2)(b) above.
The marriage is not brief. The wife has either been engaged in this business, which she is now excluded from, or has not being engaged in any meaningful employment at all during the marriage (depending upon whose evidence is correct) and I am satisfied that the marriage has, on either version of events, affected her income earning capacity at the present.
The need to protect a party who wishes to continue in a role as parent
This factor is not relevant.
If either party is cohabiting
Neither party suggests that they are save to the extent that each has relatives who live with them and contribute to household expenses in an unspecified manner.
The terms of orders proposed to be made under s.79
These are interim proceedings and that is not relevant.
The balance of provisions in s.75(2) are not relevant.
The third step I am required to consider is what amount of money would be necessary to enable both parties to maintain a reasonable standard of living.
It is again clear from the Full Court’s past authorities including Bevan& Bevan and Clauson & Clauson (1995) FLC 92-595 and others that the standard of living post-separation need not be equal to or, indeed, comparable to, the pre-separation standard of living. In the majority of cases it is unlikely that moving from a one-income household to two households reliant upon one income is likely to achieve that outcome.
The wife has borne the brunt of financial detriment post separation with exclusion for both the source of income production and income.
I am otherwise required to then consider the reasonableness of all of the circumstances as the guiding principle.
I am satisfied, as I have indicated, that the amount alleged to be expended or required to be expended by the wife to support herself is far from extreme and, indeed, is entirely modest and would represent a somewhat frugal standard of living.
I am satisfied that there is, in all probability, income, resources or assets available which would enable the husband, for the limited period until these proceedings can be concluded on a final basis. I hasten to add at this point that if there was already evidence or agreement as to the value of this business I could accommodate a hearing of the proceedings within weeks and as soon as this Thursday and Friday.
At the conclusion of the matter an application is made by the wife for payment of her costs.
Under sub-s.117(1), the general principles establish that each party to proceedings under this Act should bear their own costs.
Sub-s.117(2) reserves a discretion within the Court to make an order for costs, in circumstances that are considered appropriate, whether by interlocutory order or otherwise. There is a requirement that any order for costs be dealt with on the basis of it being just.
Sub-s.117(2a) sets out the matters that are relevant for the Court to consider. It is not an exhaustive list, but provides a useful checklist in circumstances where the Court’s time is pressured such as today.
The financial circumstances of the parties is the first consideration. As indicated in the substantive reasons for judgment in the substantive proceedings I have less than precise information in relation to the financial circumstances of either party. In any event, there is certainly an asset, which on one version of events is worth $100,000 and possibly as much as $600,000, and which value should, by the next occasion, be clear.
Next I must consider whether any party is in receipt of grant of legal aid. I am not instructed so and having regard to the nature of the proceedings and relief sought I would assume not.
The conduct of the parties to the proceedings is relevant. It is not suggested that there has been any lack of diligence by either party in relation to filing material, providing particulars, discovery, inspection of documents, or the like. However, I do have a residual concern in relation to the veracity of each party as regards the material that has been produced by them and produced to third parties, not only to the Court, but the ATO.
I must consider whether the proceedings were necessitated by a failure of a party to comply with a previous order. This is not relevant.
Whether a party has been wholly unsuccessful is a relevant consideration. I am urged in the wife’s case to accept that the husband has been wholly unsuccessful in this matter. Clearly, the orders that I have made are, by and large, in accordance with the wife’s application and, accordingly, and consequentially, the husband could be described as having been wholly unsuccessful in resisting the application, in that he sought dismissal of the wife’s application, which has found no favour.
I must consider whether either party to the proceedings has made an offer in writing. I am not advised there is any and none are relied upon.
I am entitled to consider such other matter as appears relevant. The wife’s financial position is such that if she is required to pay costs due to her solicitors, that will deprive her, essentially, of the fruits of her litigation, particularly in circumstances whereby the expenses that she alludes to in her material are frugal.
I am satisfied, based on the present information that is available to the Court, or perhaps more correctly, the holes in the evidence that are apparent to the Court, regarding each party’s financial circumstances, that an order for costs may well, on that basis alone, be appropriate.
The Federal Magistrates Court has an indicative scale of costs, set out in schedule 1 of the Rules. It is entirely that, indicative, and it is not intended to be prescriptive in any fashion. It does, however, provide a useful yardstick by which the Court can make decisions.
It would provide that for a matter such as this, that has been dealt with at an interim or summary hearing, that a preparation component of $1,465 would be appropriate in the family law jurisdiction, as well as a daily hearing fee and to that extent I would be prepared to certify as to Counsel and that would increase the half day hearing fee by a 50% advocacy loading, and, accordingly, would get it to an amount of about $1,300.
Accordingly, the costs that are sought are about two-thirds of the amount which, under the scale, are directed as potentially orderable. I am satisfied that the amount that would be sought as to costs, would not represent the totality of the costs occasioned to the wife in preparing for and conducting this interlocutory application and I so order.
I certify that the preceding seventy-nine (79) paragraphs are a true copy of the reasons for judgment of Harman FM
Date: 16 September 2011
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