Herczog & Herczog
[2023] FedCFamC1A 219
•7 December 2023
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1) APPELLATE JURISDICTION
Herczog & Herczog [2023] FedCFamC1A 219
Appeal from: Herczog and Herczog [2023] FCWAM 150 Appeal number(s): NAA 238 of 2023 File number(s): PTW 10207 of 2022 Judgment of: ALDRIDGE J Date of judgment: 7 December 2023 Catchwords: FAMILY LAW – APPEAL – LEAVE TO APPEAL – Appeal from interim spousal maintenance order – Where the magistrate excluded expenses of holding real estate that does not generate income in calculating the applicant’s expenses – Where the applicant argues it is an error to exclude compulsory expenses – Where it is for the Court to determine what it regards as an unnecessary expense – No error established – No merit in the appeal – Application for leave to appeal refused – Applicant to pay the respondent’s costs of the appeal. Legislation: Family Law Act 1975 (Cth) ss 72, 73 (repealed), 74, 75
Federal Circuit and Family Court of Australia Act 2021 (Cth) s 28
Federal Court and Federal Circuit and Family Court Regulations 2022 (Cth) reg 4.02
Cases cited: Bodilly v Hand (2019) 59 Fam LR 425; [2019] FamCA 210
Brown and Brown (2007) FLC 93-316; [2007] FamCA 151
DJM v JLM (1998) FLC 92-816; [1998] FamCA 97
House v The King (1936) 55 CLR 499; [1936] HCA 40
Medlow & Medlow (2016) FLC 93-692; [2016] FamCAFC 34
Mee and Ferguson (1986) FLC 91-716; [1986] FamCA 3
Number of paragraphs: 35 Date of hearing: 27 November 2023 Place: Sydney (via video link) Counsel for the Applicant: Ms Anderson Solicitor for the Applicant: Beck Legal Group Counsel for the Respondent: Mr Hooper SC Solicitor for the Respondent: FMD Legal ORDERS
NAA 238 of 2023
PTW 10207 of 2022FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
DIVISION 1 APPELLATE JURISDICTIONBETWEEN: MR HERCZOG
Applicant
AND: MS HERCZOG
Respondent
ORDER MADE BY:
ALDRIDGE J
DATE OF ORDER:
7 DECEMBER 2023
THE COURT ORDERS THAT:
1.The Application in an Appeal filed on 10 November 2023 is dismissed.
2.Leave to appeal is refused.
3.The appeal is dismissed.
4.The applicant is to pay the respondent’s costs of the appeal as agreed, or absent agreement, as assessed.
5.The lawyers for the parties are not to charge their clients for the costs of implementing Order 4.
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).
IT IS NOTED that publication of this judgment by this Court under the pseudonym Herczog & Herczog has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
ALDRIDGE J:
INTRODUCTION
This is an appeal against a spousal maintenance order made by a magistrate of the Magistrates Court of Western Australia on 4 August 2023.
Mr Herczog (“the applicant”) was ordered to pay Ms Herczog (“the respondent”) $1,647 per week together with the maintenance and registration for her car, reasonable petrol expenses, streaming services, and the costs of current family health insurance, until further order.
The order is interlocutory so leave to appeal is required (s 28(1)(b) of the Federal Circuit and Family Court of Australia Act 2021 (Cth) and reg 4.02 of the Federal Court and Federal Circuit and Family Court Regulations2022 (Cth)). Whilst the discretion to grant leave is unfettered, it is generally exercised by looking to see whether the decision sought to be appealed is attended with sufficient doubt so as to warrant reconsideration and whether a substantial injustice would result from a refusal of leave if the decision is wrong (Medlow & Medlow (2016) FLC 93-692).
In this case the consideration of leave requires the Court to look at the merits of the appeal.
APPLICATION IN AN APPEAL
Before doing so, it is necessary to deal with the Application in an Appeal filed by the respondent seeking to adduce further evidence. At the same time as the order for spousal maintenance was made, the magistrate made an order requiring the applicant to pay to the respondent $60,000 as a partial property settlement. The proposed evidence was to the effect that the applicant had not complied with that order but had made payments to others, including his lawyers. That evidence was to be deployed to support a submission that the Court should not embark on the hearing of the appeal until the order was complied with and the payment made.
At the hearing of the appeal, I was informed that the payment had now been made and that all that was outstanding was a couple of months of accrued interest. That is not sufficient non-compliance to justify the appeal being stayed. Counsel for the respondent did not suggest that it was.
It follows that the evidence is now unnecessary. The Application in an Appeal will be dismissed.
LEAVE TO APPEAL
The magistrate found that the respondent’s reasonable expenses exceeded her income by $1,669 (at [132]).
As to the assets of the parties, her Honour said:
31.Consequently, the total net assets and superannuation available have an approximate total value of $2,329,688, as follows:
(a) [the applicant’s] net assets and superannuation of $154,822;
(b) the Family Trust worth $2,051,869;
(c) [the respondent’s] assets and superannuation worth $102,997; and
(d) the joint assets worth $20,000
(Footnote omitted)
The magistrate also made the following findings, none of which was challenged:
· The applicant had the control of the family trust and all relevant business entities and various real estate (he owned a number of properties) (at [94]);
· The applicant controlled how much he was paid as income (including dividends) (at [95]);
· The applicant’s disposable income was not clear (at [95]);
· His non-rental income was “at least” $6,942 per week (at [101]);
· The applicant had a rental income of $2,770 per week (at [101]).
The magistrate had also noted that the companies under the control of the applicant earned profits of approximately $1.6 million in the 2022 financial year and $800,000 to May 2023 (at [96]).
The appeal focused on the expenses of the applicant which her Honour found to be $11,299 (at [134]). However, the magistrate decided not to include the expenses of holding real estate ($7,198) because:
143.I do not find [the applicant’s] desire to hold onto investment properties, which do not generate an income, or which run at a weekly loss each week, should be prioritised over his obligation to pay spousal maintenance. This was a matter raised with the parties during the hearing.
Three of the properties owned by the applicant did not generate any income. One was said to be a vacant block of land, another was a derelict and condemned house. The third was a property in which the paternal grandmother lived and who held a 75 per cent registered interest. She made, as far as can be seen, no contribution to its outgoings.
As explained in submissions, written and oral, it was submitted that her Honour erred in that:
· The property expenses were contractual and not discretionary and it was an error of law to exclude them (Ground 1), and
· The decision was unjust (Ground 2).
This is an appeal from the exercise of a discretion and therefore the following principles from House v The King (1936) 55 CLR 499 apply (at 504–505):
… The manner in which an appeal against an exercise of discretion should be determined is governed by established principles. It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so. It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance. In such a case, although the nature of the error may not be discoverable, the exercise of the discretion is reviewed on the ground that a substantial wrong has in fact occurred. …
The applicant relied upon Mee and Ferguson (1986) FLC 91-716 (“Mee”) where the Full Court considered the then relatively new provisions dealing with child maintenance. There it was said (at 75,198):
… In determining the financial capacity of the respondent to meet the claim for child maintenance, there is to be deducted from his income unavoidable or compulsory expenses together with necessary living expenses.
The applicant’s point, essentially, is that the expenses for the properties were compulsory and therefore should not have been excluded. Yet unreasonable discretionary expenses may also be compulsory, if they are the subject of a contract. It is clear from the reasons in Mee that what is meant to be included are unavoidable commitments such as taxation, Medibank levy, compulsory superannuation, and the like and necessary living expenses, but not all expenses the subject of a contractual obligation.
The principle to be drawn from Mee is that when considering an application for child maintenance the Court may determine to exclude what it regards as unnecessary expense even though such expenses might fall short of being described as clearly unreasonable, extravagant or inappropriate.
So, understood, it does not assist the applicant unless the expenses of the properties could be categorised as necessary living expenses.
That decision was in relation to child maintenance pursuant to the then s 73 of the Family Law Act 1975 (Cth) (“the Act”) which required parties to a marriage to maintain their children “according to their respective financial resources”.
Section 72(1) of the Act, dealing with spousal maintenance, states that a party to a marriage is liable to maintain the other “to the extent that the first-mentioned party is reasonably able to do so”. If s 72 is engaged the Court may “make such an order as it considers proper” (s 74). In doing so, the Court must take into account “the income, property and financial resources of each of the parties” (s 75(2)(b)).
Thus, whilst spousal maintenance applications are often determined by looking at income only, the remit of the Court is not so limited.
The use of the word “reasonably” incorporates concepts similar to those identified in Mee. As the statute directs, the Court is not limited to looking at income. In DJM v JLM (1998) FLC 92-816 the Full Court confirmed that what is reasonable depends on the circumstances (at 85,272–85,273). As to what is adequate, see Brown and Brown (2007) FLC 93-316.
In Bodilly v Hand (2019) 59 Fam LR 425, to which both parties (and the magistrate) referred, Cronin J decided to omit expenses which could not be described as indispensable. His Honour said:
240.The repairs claimed by the husband were largely historical and as he now seems to have settled into the new home, they are unlikely to be necessary to enable his family to live comfortably. Such things as entertainment and holidays are all relative but I cannot see how the sorts of holiday that the husband has enjoyed should be given priority over an obligation to pay spousal maintenance. Whilst there are also significant costs associated with running a large garden and in this case, the photographs showed that it was very large, the husband may need to consider some alternative to that of having paid employees. It seems to me that the affluent lifestyle brings those sorts of necessities but the reality is that they cannot be given priority ahead of a spousal maintenance obligation. The same issue applies to cleaning. Whilst there was an inference suggested by senior counsel for the wife that Ms Hand should be engaged in those activities, my view is that they are expenses that are not indispensable and indeed, cannot be put ahead of a spousal maintenance obligation. If the husband cannot afford the expenses (as he clearly states) even ignoring maintenance, then the property causing that financial stress should logically be sold. The other matters such as accounting and the like are all matters that would no doubt be the subject of the husband’s own task of reducing his own expenditure.
As the applicant points out, the circumstances in that case are quite different to the present, but it remains as a useful example of the application of the principle just identified.
Indeed, in the present case, acting on the same principle without demur, the magistrate declined to take into account particular expenses (see [119]–[121]).
Her Honour applied the above principles and found that it was not reasonable to include the property expenses which included significant amounts for properties which were not earning an income, so that they should not be prioritised over the obligation to support one’s spouse.
The applicant’s identification of the test, namely that all expenses that are contractual, unavoidable, compulsory or longstanding must be taken into account ignores the statutory requirement of reasonableness and the obligation to make such order as is proper.
I consider that the magistrate did not err by applying the incorrect test. The findings were open on the evidence. Ground 1 does not succeed.
In the circumstances where it was found without challenge that the exact amount of the applicant’s income was not clear and that he had the capacity to control his income and that it was not reasonable, in the circumstances, for the applicant to prioritise the retention of non-income earning properties the outcome cannot be described as unreasonable or plainly unjust. Ground 2 also fails.
As there is no merit in the appeal, leave to appeal is refused.
COSTS
Neither party complied with the registrar’s direction to file a Schedule of Costs in the event that a costs order was sought, yet each sought a costs order notwithstanding the absence of a schedule.
The point of the direction is to enable the Court that dealt with the appeal to make a fixed order for costs, thereby saving the delay and expense of assessing costs. This has been the practice of the Court for many years and parties and their lawyers should understand that failing to comply with the direction can have serious consequences – as it will here.
The applicant has been wholly unsuccessful. He raised no submissions against making a costs order. Accordingly, the applicant should pay the respondent’s costs of the appeal.
The costs must, the absence of a Costs Schedule, be assessed or agreed. As conceded by the parties’ lawyers at the hearing such agreement or assessment will be without any costs to their clients.
I certify that the preceding thirty-five (35) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Aldridge. Associate:
Dated: 7 December 2023
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