Gilmour & Hofte
[2022] FedCFamC1A 111
•19 July 2022
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1) APPELLATE JURISDICTION
Gilmour & Hofte [2022] FedCFamC1A 111
Appeal from: Hofte & Gilmour [2022] FedCFamC2F 266 Appeal number(s): NAA 32 of 2022 File number(s): BRC 1692 of 2020 Judgment of: AUSTIN J Date of judgment: 19 July 2022 Catchwords: FAMILY LAW – APPEAL – LEAVE TO APPEAL – Interim maintenance – Whether the primary judge erred by finding the appellant had capacity to pay maintenance – Where it was not open to the primary judge to discount rental payments for which the appellant was legally liable – Where the notionally reduced expenditure still exceeded the appellant’s income – Leave to appeal granted – Error established – Re-hearing – Where the respondent is unable to support herself adequately – Where the appellant is no longer locked into the same residential lease payments – Where the appellant now has surplus income – Appealed orders set aside – Re-exercise of discretion – Order made requiring the appellant to pay the respondent weekly maintenance – Costs certificates granted in respect of the appeal. Legislation: Family Law Act 1975 (Cth) ss 44, 90SB, 90SD, 90SF
Federal Circuit and Family Court of Australia Act 2021 (Cth) s 28
Federal Proceedings (Costs) Act 1981 (Cth)
Federal Court and Federal Circuit and Family Court Regulations 2012 (Cth) reg 4.02
Cases cited: Allesch v Maunz (2000) 203 CLR 172; [2000] HCA 40
Bevan & Bevan (1995) FLC 92-600; [1993] FamCA 95
CDJ v VAJ (1998) 197 CLR 172; [1998] HCA 67
Medlow & Medlow (2016) FLC 93-692; [2016] FamCAFC 34
Mitchell & Mitchell (1995) FLC 92-601; [1995] FamCA 32
Rice & Rice [2020] FamCAFC 174
Number of paragraphs: 35 Date of hearing: 19 July 2022 Place: Newcastle (via video link) Counsel for the Appellant: Mr Wilson QC Solicitor for the Appellant: Ramsden Family Law Counsel for the Respondent: Mr Walsh Counsel for the Respondent: Turnbull Mylne ORDERS
NAA 32 of 2022
BRC 1692 of 2020FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
DIVISION 1 APPELLATE JURISDICTIONBETWEEN: MR GILMOUR
Appellant
AND: MS HOFTE
Respondent
ORDER MADE BY:
AUSTIN J
DATE OF ORDER:
19 JULY 2022
THE COURT ORDERS THAT:
1.The appeal is allowed.
2.Orders 1 and 2 made by the Federal Circuit and Family Court of Australia (Division 2) on 4 February 2022 (amended on 10 February 2022) are set aside.
3.The appellant shall pay to the respondent maintenance of $583 per week upon the following conditions:
(a)the first payment is due 7 days from the date of these orders; and
(b)payments shall be made by way of direct deposit to the respondent’s account held with the A Bank, being account number 32.
4.The appellant is granted a costs certificate pursuant to s 9 of the Federal Proceedings (Costs) Act 1981 (Cth), being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the appellant in respect of the costs incurred by him in relation to the appeal.
5.The respondent is granted a costs certificate pursuant to s 6 of the Federal Proceedings (Costs) Act 1981 (Cth), being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the respondent in respect of the costs incurred by her in relation to the appeal.
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 Gilmour & Hofte has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
EX TEMPORE
REASONS FOR JUDGMENTAUSTIN J:
This is an application for leave and, if granted, an appeal from interim maintenance orders made on 4 February 2022 by a judge of the Federal Circuit and Family Court of Australia (Division 2), requiring the appellant to pay maintenance of $1,100 per week to the respondent.
For the following reasons, leave to appeal is granted, the appeal is allowed, the appealed orders are set aside and, upon the re-exercise of discretion, orders are made for the appellant to instead pay maintenance to the respondent of $583 per week.
Background
The parties’ de facto relationship of some 10 years duration ended in June 2018, but they continued to live in the same home with their two children until September 2019.
The two children are now eight and nearly 12 years of age, both of whom live primarily with the respondent.
Proceedings between the parties under the Family Law Act 1975 (Cth) (“the Act”) were first commenced by the respondent in February 2020. The parties seek relief of multiple types, including parenting, property settlement, maintenance, and child support departure orders – all of which applications are yet to be determined on a final basis. The proceedings are apparently listed for trial next month.
The respondent sought interim maintenance orders against the appellant in both her Amended Initiating Application filed on 29 April 2020 and her Application in a Proceeding filed on 17 January 2022. The interim maintenance dispute was heard by the primary judge across two days, with ex tempore judgment delivered on 4 February 2022.
Leave to appeal
Being interlocutory financial orders, the appellant needs leave to appeal from the maintenance orders (s 28(1)(b) of the Federal Circuit and Family Court of Australia Act 2021 (Cth); reg 4.02 of the Federal Court and Federal Circuit and Family Court Regulations 2012 (Cth)).
The grant of leave ordinarily requires the applicant to show the decision at first instance is attended by sufficient doubt to warrant appellate scrutiny and, additionally, substantial injustice would result if leave were refused, supposing the decision at first instance to be wrong (Medlow & Medlow (2016) FLC 93-692 at [44]–[57]). The test is met in this instance. The primary judge fell into error and, if left uncorrected, the appellant will suffer financial prejudice.
The appeal
Although there were initially five grounds of appeal, the appellant abandoned three (Grounds 2, 4 and 5) and conceded that the remaining two (Grounds 1 and 3) contend for the same error, albeit in different ways.
The only point maintained in the appeal is that the primary judge erred by finding the appellant has the capacity to pay maintenance. The appellant correctly contended the only finding reasonably open on the evidence adduced before the primary judge was that he lacks reasonable capacity and so the respondent could not demonstrate an essential element of her claim for maintenance (s 90SF(1)(a)).
The appellant deposed to his financial circumstances in a financial statement filed on 25 January 2022. In summary, his claimed expenses ($6,306) exceeded his income ($4,615) by approximately $1,691 per week. In assessing the appellant’s capacity to pay maintenance, the primary judge notionally discounted his claimed expenses to save him approximately $1,100 each week (at [24]–[34]). While the discount of some claimed discretionary expenditure was legitimate, it was not open to the primary judge to discount unavoidable expenditure on legal liabilities. Her Honour impermissibly discounted the appellant’s rental payments from $1,450 to $800 per week when he was legally liable for rental payments of $1,450 per week until June 2022. Until then, it was an expense he could not avoid.
Her Honour, having wrongly determined the appellant had the capacity to pay the saved amount of $1,100 per week and being satisfied the respondent’s need exceeded $1,100 per week, settled on that sum as the quantum of the maintenance order (at [38]).
The appellant’s ultimate point in the appeal was simple: even if his weekly expenses were notionally reduced by $1,100 per week, his reduced expenditure still well exceeded his income and so he still had no capacity to pay maintenance.
The respondent could not sensibly counter those simple propositions, though she tried.
Re-hearing
This appeal is by way of re-hearing. Having demonstrated appealable error, the appeal can be concluded either by remitter of the dispute for re-hearing or by the re-exercise of discretion. The appellant opted for the latter course, which is the preferable option when it is reasonably available (CDJ v VAJ (1998) 197 CLR 172 at 199). As required, the parties were given the opportunity to adduce updated evidence (Allesch v Maunz (2000) 203 CLR 172 at 183), but neither saw the need to do so. They relied upon the evidence adduced before the primary judge and were content to rely upon the submissions they made to her Honour.
The respondent relied upon her:
(a)affidavit filed on 17 January 2022; and
(b)financial statement filed on 17 January 2022
The appellant relied upon his:
(a)affidavit filed on 12 January 2022;
(b)affidavit filed on 25 January 2022; and
(c)financial statement filed on 25 January 2022.
The respondent’s application for interim maintenance meets the jurisdictional pre-conditions imposed by ss 44, 90SB and 90SD of the Act. The appellant did not contend otherwise.
The respondent is unable to support herself adequately for several reasons: she has the primary care of the parties’ two children (s 90SF(1)(b)(i)); her employment skills are few and have not been meaningfully exercised for some years (s 90SF(1)(b)(iii)); and she is in the process of acquiring qualifications to re-enter the workforce in a different capacity to that in which she has worked in the past (s 90SF(1)(b)(iii)).
The respondent’s only income comprises welfare payments, which must be disregarded when assessing her need (s 90SF(4)). The child support payments she receives from the appellant are wholly attributable to the maintenance of the children.
The respondent was formerly employed within the business conducted by the appellant and paid about $1,600 per week in income and superannuation, but that employment ceased in March 2020. The respondent has about $82,000 in superannuation, which the appellant conceded she depleted by her withdrawal of $27,882. It is unlikely the respondent would have drawn down on her superannuation entitlements pursuant to hardship application unless she felt compelled to do so by her dire financial circumstances.
The respondent has about $10,000 saved in the bank, but she need not exhaust the last of her meagre capital before her entitlement to maintenance is triggered (Rice & Rice [2020] FamCAFC 174 at [111]; Bevan & Bevan (1995) FLC 92-600 at [40]; Mitchell & Mitchell (1995) FLC 92-601 at 81,995).
Of course, the respondent would have no need for any maintenance if the parties agreed to equally divide the trust funds held in escrow for them. Those funds, which amount to around $270,000, represent the residual net sale proceeds of the jointly-owned former matrimonial home. If the respondent took her one-half share of around $135,000, she would have no need to call upon the appellant for financial support. However, the appellant objects to any further diminution of that capital sum, other than by regular withdrawals to meet the outgoings on the home now occupied by the respondent and the children. There is no injunction restraining the respondent from lawfully demanding the trustee to pay out her one-half share of the trust funds, but both parties have so far agreed to preserve those funds pending the determination of their property settlement dispute.
Disregarding the respondent’s credit debts, her weekly expenses are claimed to approximate $1,730. The respondent was cross-examined below about the quantum of her discretionary expenditure and, though her counsel did not make any formal concessions about the reasonable amount of such expenditure in final submissions, he did reasonably concede:
[COUNSEL FOR THE RESPONDENT]: …[Y]our Honour would apply the tightening of the belt concept. …
(Transcript 4 February 2022, p.26 line 10)
While somewhat arbitrary, absent further cross-examination, the respondent’s financial need can be roughly assessed at $800 by paring back such expenditure on house repairs, gardening, lawn mowing, cleaning, repairs, clothing, shoes, medical and pharmaceutical needs, entertainment, holidays, books, gifts, hairdressing, and other unspecified expenditure. Such discounted expenditure still amounts to some $40,000 per annum. Any more would be unreasonable, given she incurs no expense for her accommodation.
The respondent’s need is therefore quantified at $800 per week.
By comparison, the appellant only has the reasonable capacity to pay maintenance of $583 per week (s 90SF(1)(a)).
The appellant’s gross weekly income is $4,615, which attracts automatic weekly income tax deductions of $1,605, leaving him with net weekly income of $3,010.
The appellant was formerly locked into residential lease payments of $1,450 per week, but his counsel conceded the lease ended in June 2022, after which time his reasonable rent should be reduced to $800 per week. The appellant’s counsel also conceded to the primary judge that other regular discretionary expenditure claimed to total $1,258 in the appellant’s Financial Statement could be pared back to $660. Combining the appellant’s concessions with his unchallenged evidence means his weekly expenditure can now be computed at $2,427. Against net weekly income of $3,010, he has weekly surplus of $583, which can be attributed to the respondent’s weekly maintenance.
There are no assets to which the appellant can conveniently resort to pay more maintenance.
The appellant owns the home in which the respondent and children currently live, which is encumbered by mortgage. The recurring mortgage payments, insurance and rates in respect of the property are met from funds held in escrow pending final determination of the proceedings. Those trust funds have already been diminished by equal payments made to both parties during the proceedings. The residue is earmarked for expenditure upon debts owed by the appellant in respect of tax ($19,600), prospective tax ($35,368), to his employer in repayment of a loan ($44,061), to his former vehicle financier ($92,970), and to the corporation which owns the business he formerly operated ($658,767). His shares in the corporation are now said to be worthless. The appellant has an expensive car, but it is leased and the capitalised lease payments exceed the car’s likely value. The appellant had some $25,000 in bank savings in January 2022, but he deposed the savings would cover his cashflow deficit over the next few months so the funds are presumably now spent.
The appealed orders are therefore set aside and replaced with an order requiring the appellant to pay to the respondent weekly maintenance of $583.
Costs
The appellant sought an order that the respondent pay his costs of the appeal, but the application is dismissed. Although the appeal was successful, the appellant is nonetheless still required to pay maintenance when he sought to escape all liability. The respondent’s entitlement to maintenance inexorably means she can ill-afford to pay the appellant’s costs.
The respondent sought an order that the appellant pay her costs of the appeal, but the application is dismissed. She sought to defend orders which were plainly infected by error.
Since the appeal succeeds for error of law, the parties should both have costs certificates for the appeal pursuant to the provisions of the Federal Proceedings (Costs) Act 1981 (Cth).
I certify that the preceding thirty-five (35) numbered paragraphs are a true copy of the ex tempore Reasons for Judgment of the Honourable Justice Austin. Associate:
Dated: 19 July 2022
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