IANNELLO & IANNELLO (No.3)
[2018] FCCA 3752
•19 December 2018
FEDERAL CIRCUIT COURT OF AUSTRALIA
| IANNELLO & IANNELLO (No.3) | [2018] FCCA 3752 |
| Catchwords: FAMILY LAW – Property – interim orders – application by the Husband for part property settlement to be characterised at trial – application by the Husband for orders in relation to the Wife’s future bonus payments – order made for the Husband to retain his shares by way of partial property settlement – application in relation to the Wife’s future bonus payments dismissed – order made that the Husband pay the Wife’s costs for the interim hearing. |
| Legislation: Family Law Act 1975 (Cth), ss.4, 75, 79, 80, 117 Federal Circuit Court Rules 2001 (Cth), r.21.02 |
| Cases cited: Bevan & Bevan [2013] FamCAFC 116 Calderbank v Calderbank [1975] 3 All ER Colgate Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 Harris & Harris (1993) FLC 92-378 In the Marriage of I (No.2) (1995) 22 Fam LR 557 Marlowe-Dawson & Dawson (No.2) [2014] FamCA 599 Mullane v Mullane (1983) 158 CLR 436 Stanford v Stanford (2012) 247 CLR 108 Strahan & Strahan (2011) FLC 93-466 Vasek & Vasek [2012] FamCAFC 206 |
| Applicant: | MS IANNELLO |
| Respondent: | MR IANNELLO |
| File Number: | MLC 3008 of 2018 |
| Judgment of: | Judge C.E. Kirton QC |
| Hearing date: | 27 September 2018 |
| Date of Last Submission: | 27 September 2018 |
| Delivered at: | Melbourne |
| Delivered on: | 19 December 2018 |
REPRESENTATION
| Counsel for the Applicant: | Ms Smallwood |
| Solicitors for the Applicant: | Marshalls & Dent & Wilmoth Lawyers |
| Counsel for the Respondent: | Ms Byrnes |
| Solicitors for the Respondent: | KHQ Lawyers |
| Solicitors for the Independent Children's Lawyer: | Ms Kourtis of McKean Park Lawyers |
ORDERS
The Husband shall retain the shares referred to in Part I of his Financial Statement filed on 25 September 2018 for his sole use and benefit, by way of partial property settlement pursuant to ss.79 and 80(1)(h) of the Family Law Act 1975 (Cth).
Paragraph 2 of the Husband’s interim application for property orders in his Further Amended Response to Initiating Application, filed 25 September 2018, is dismissed.
The Husband pay the Wife’s costs of and incidental to the interim hearing on 27 September 2018 fixed in the sum of $3,619.38.
IT IS NOTED that publication of this judgment under the pseudonym Iannello & Iannello (No.3) is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLC 3008 of 2018
| MS IANNELLO |
Applicant
And
| MR IANNELLO |
Respondent
REASONS FOR JUDGMENT
Introduction
These are property and parenting proceedings between the applicant (Wife) and the respondent (Husband). This is the third occasion that the Court has been required to deliver an interim decision in relation to matters in dispute between the parties since the commencement of this proceeding on 20 March 2018. This is an interim decision in relation to the partial division of property.
Issues to be determined
The issues to be determined are set out in the Husband’s second Further Amended Response to Initiating Application[1] (Second Further Amended Response) and the Husband’s Affidavit in support, filed on 25 September 2018.
[1] Husband’s second Further Amended Response to Initiating Application, filed 25.9.18.
The Husband seeks the following orders in relation to property:
a)That the Husband shall retain his shareholdings for his sole use and benefit with such sum to be characterised at trial[2] (Shareholding Order).
b) That in the event that the Wife becomes eligible for an employment bonus from her current employment with the Employer (the employment bonus):
a)The wife shall do all acts and things and sign all documents necessary to receive the highest cash component payable by the Employer when the bonus is received;
b)Upon being notified of her entitlement to the employment bonus, she shall notify the husband’s solicitors of same forthwith, including the amount to be received and the timeframe for payment;
c)The Wife shall do all such acts and things as may be required to pay to the Husband via his solicitors 50% of the employment bonus, with the characterisation of such funds to be determined at trial[3] (Employment Bonus Order).
c) Costs.
[2] Second Further Amended Response, at [1].
[3] Ibid., at [2].
Synopsis
I have determined that the Husband shall retain his shares by way of part property settlement pursuant to ss.79 and 80(1)(h) of the Family Law Act 1975 (Cth) (Act).
I have dismissed the application for the Employment Bonus Order.
The Husband is to pay the Wife’s costs of and incidental to the interim hearing on 27 September 2018 fixed in the sum of $3,619.38.
Background
I have previously set out the history of the parties’ marriage and relationship in Iannello & Iannello[4] and shall not repeat it in this judgment.
[4] [2018] FCCA 3528, at [3]-[10].
Procedural History
The procedural history of this matter insofar as it is relevant to this dispute has been previously set out in Iannello & Iannello (No. 2)[5] and I shall not repeat it in this judgment.
[5] [2018] FCCA 3662, at [11]-[32].
On 27 September 2018, I heard the interim hearing in relation to the Husband’s amended property claims in his Second Further Amended Response and reserved my decision. As this was an interim hearing neither party gave oral evidence or was cross-examined. The Independent Children’s Lawyer appeared at the commencement of the interim hearing but was otherwise excused from further attendance as the interim hearing related to the property proceeding only.
Position of the Parties – Shareholding Order
The parties agree that the Husband may sell his shareholding referred to in his Financial Statement[6] (Shares) and at the hearing the parties agreed to the value of the Shares as being $78,274[7]. Counsel for the Husband submitted that the application was proceeding on the basis of a part property settlement[8] and described the dispute as being:
[…] about the wording “characterised at trial”, or “part property settlement”[9].
[6] Husband’s Financial Statement, filed 25.9.18, at [38].
[7] Transcript T 12:39.
[8] Ibid., T 15:15-17.
[9] Ibid., T 35:9-10.
Husband’s Submissions
It was the Husband’s case that he retain the Shares, that he be able to sell them and that the proceeds of sale be characterised at the time of trial.
Counsel submitted that the Husband’s application for the Shareholding Order was proceeding on the basis of a part property settlement pursuant to ss.79 and 80 of the Act[10].
[10] Transcript T 16:16-19.
The Husband has not been in paid employment since April 2013. The Husband:
a)Received $161,221.20 from Super Fund 1 on 8 March 2018 as a total and permanent disability payment from his superannuation fund[11]. The Husband’s Financial Statement indicated that the sum of $64,239 remained[12]. At the hearing Counsel for the Husband said that $58,561 of this money remained[13]. Counsel also said that the Husband spent $45,000 of this money on legal fees and the balance on living expenses[14].
b)Receives child support from the Wife in the amount of $351 per week[15].
c)Owns the Shares at an agreed value of $78,274[16].
d)Has $248,395 in Super Fund 1[17].
e)Has outstanding legal fees owing to KHQ Lawyers in the sum of $108,315[18]. He also has unbilled work in progress with KHQ Lawyers in excess of $23,716[19].
f)Has anticipated legal fees of $52,150 (excluding GST) to the conclusion of the final hearing commencing on 20 May 2019, together with the costs of ongoing file work and other expenses[20].
g)Has outstanding bills totalling $3,764, which includes a $2,600 child support liability to his first wife Ms A[21].
h)Has a Commonwealth Bank credit card debt in the sum of $2,100[22].
[11] Husband’s Affidavit, filed 25.9.18, at [2.e].
[12] Husband’s Financial Statement, filed 25.9.18, at [37].
[13] Transcript T 13:7-8.
[14] Ibid., T 16:36-38.
[15] Husband’s Financial Statement, filed 25.9.18, at [13].
[16] Ibid., at [38].
[17] Ibid., at [45].
[18] Ibid., at [54].
[19] Husband’s Affidavit, filed 25.9.18, at [2.h] and Transcript T 16:4-6.
[20] Husband’s Affidavit, filed 25.9.18, at [5.e].
[21] Husband’s Financial Statement, filed 25.9.18, at [53].
[22] Ibid., at [51].
Counsel for the Husband submitted that when the Husband paid his solicitors his outstanding legal fees he would have no money whatsoever to live on[23]. Counsel said that she was instructed that the Husband needed to pay the legal fees immediately otherwise he would be likely to have to represent himself in these proceedings[24].
[23] Transcript T 6:21-22.
[24] Ibid., T 17:39-46.
It was noted by Counsel that there was no order restraining the Husband from selling the Shares. The Husband could have sold the Shares and the value of the Shares would have had to be characterised by the Court at trial[25]. The money from the Shares was going to be used for either legal fees or living expenses and therefore it was submitted that the matter needed to proceed as an interim property division to be characterised at trial[26]. If the Court was prepared to make the Shareholding Order it was submitted:
[…] then at trial, depending on the circumstances and the way in which your Honour sees the case, if it gets to that point, they can either be determined to be part property for the living expenses and therefore spousal maintenance, even though a spousal maintenance application was unsuccessful[27].
[25] Ibid., 18:6-8.
[26] Ibid., T 18:30-32.
[27] Ibid., T 19:37-41.
Counsel relied upon the decision of the Full Court of the Family Court in Vasek & Vasek[28] to demonstrate the use of add backs for legal fees at trial. In that case the wife had received a number of payments pursuant to interim orders, some of which were expressed to be “[…] characterised by the trial judge”[29].
[28] [2012] FamCAFC 206.
[29] Ibid., at [28].
It was further noted by Counsel for the Husband that the Wife had already sold shares worth $12,102.28[30].
[30] Wife’s Financial Statement, filed 20.9.18, at [59].
Counsel submitted that the parties held between them about $650,000 in non-superannuation assets and $450,000 in superannuation assets.[31]
[31] Transcript T 16:25-27.
It was submitted on behalf of the Husband that there were sufficient assets in the property pool for any adjustment if the money from the sale of the Husband’s shares needed to be added back as a property settlement to the Husband.
Wife’s Submissions
Counsel for the Wife submitted that on 3 August 2018 this interim hearing had been listed at the Husband’s request to hear the Husband’s spousal maintenance claim, which was made in his Further Amended Response to Initiating Application, filed on 31 July 2018 (Spousal Maintenance Claim).The Spousal Maintenance Claim included a claim for payment of $25,000, to be characterised at trial and the payment by the Wife of weekly periodic spousal maintenance of $1,000.
However, on 25 September 2018, the Husband’s solicitors had filed the Second Further Amended Response and supporting documents, wherein the Husband abandoned the Spousal Maintenance Claim and made the current application[32].
[32] Ibid., T 3:15-30.
Counsel for the Wife submitted that the interim hearing had been listed because the Husband had said on 3 August 2018 that he was “in “dire financial straits” and needed some money”[33]. Counsel for the Wife submitted that on that occasion:
That was at the time when he had $66,000 in his bank account, so that’s absolutely no different to today and he has now got 58. It’s conceded that he couldn’t get up on the spousal maintenance claim today because he has got $58,000 in the bank. Well, that was certainly the case when the matter was adjourned to today on his insistence when he had $66,000 in the bank. You might also recall, on that day you were told that he had to give that money to his solicitor, fifty-nine – or $52,000 of it…he didn’t give it to the solicitor at all…He has still got it[34].
[33] Ibid., T 20:19-20.
[34] Ibid., T 20:19-29.
In responding to the Second Further Amended Response and the Husband’s Application for the Shareholding Order, the Wife proposes that the Husband retain the Shares by way of partial property settlement pursuant to ss.79 and 80(1)(h) of the Act (Alternate Shareholding Order).
It was submitted that the Wife had already cashed in some shares that she owned and that the Wife had never contended that the Husband could not keep the Shares[35]. Counsel submitted that the Wife had always maintained that the Husband could keep the Shares, as long as he took them as a partial property settlement[36]. On 29 August 2018 the Wife’s solicitors sent an open letter to the Husband’s solicitors (Letter of Offer) in the following terms:
[35] Ibid., T 22:3-8 and Wife’s Financial Statement, filed 20.9.18, at [59].
[36] Transcript T 20:38-39.
Our client proposes to resolve your client’s applications for an interim payment and spousal maintenance as follows:
1. Pursuant to Sections 79 and 80 of the Family Law Act 1975 (the Act), your client’s listed shares be retained by him by way of partial property settlement with the value of same to be according to market value at the date of this letter.
2. Your client otherwise withdraw his application for an interim payment and spousal maintenance.
3. Each party bear his/her own costs in relation to your client’s application.
This offer will remain open for a period of 14 days[37].
[37] Exhibit A3 of the Interim Hearing on 27.9.18.
The Letter of Offer was stated to be an offer pursuant to s.117(2A)(f) of the Act and the principles set out in Calderbank v Calderbank[38]. Counsel for the Wife advised the Court that the Husband’s solicitors did not respond to the Letter of Offer until 20 September 2018[39].
[38] [1975] 3 All ER.
[39] Transcript T 37:33-34.
Counsel for the Wife submitted that the Husband’s application for the Shareholding Order was misconceived as there was no injunction preventing the Husband from keeping the Shares. Counsel said:
[…] the husband could have gone out tomorrow and just used those shares on whatever he liked. He would have to account for them at the end[40].
[40] Transcript T 23:4-5.
Counsel for the Wife relied upon the decision of the Full Court of the Family Court in Strahan & Strahan[41] in relation to the Court’s jurisdiction to make the interim orders sought[42].
[41] (2011) FLC 93-466; [2009] FamCAFC 166.
[42] Transcript T 23:13-16.
The Law
The law in relation to property settlements between married parties, whether partial or complete, is found in Part VIII of the Act.
Jurisdiction of Power to Make Order
Section 80 of the Act refers to the general powers that the Court has under Part VIII of the Act. Section 80(1)(h) gives the Court the power to:
make a permanent order, an order pending the disposal of proceedings or an order for a fixed term or for a life or during joint lives or until further order.
Section 79(1)(a) of the Act establishes the power of the Court to alter the property interests of married parties.
Section 79(2) of the Act provides:
The court shall not make an order under this section unless it is satisfied that, in all the circumstances, it is just and equitable to make the order.
In Strahan & Strahan[43] the Full Court of the Family Court considered the provision of funding for litigation expenses and the source of the jurisdiction under the Act to make interim orders for litigation costs. The Full Court said:
[43] (2011) FLC 93-466; [2009] FamCAFC 166.
In Paris King Investments Pty Ltd v Rayhill [2006] NSWSC 578 … Brereton J observed at [29], “[t]he juridical bases for an order for preliminary provision for litigation costs in matrimonial proceedings are diverse”. As Brereton J said, an order may be made as a maintenance order under ss 72 and 74 of the Act or a property settlement or order under s 79 and s 80(1)(h) or a costs order under s 117[44].
[44] Ibid., at [81].
…
The Full Court however was of the opinion that the decisions in Wilson[45] and Poletti[46] are authority for the proposition that where there are pending proceedings under s 79 for property settlement an order for the provision of funds may be made pursuant to s 80(1)(h) and independently of the power in s 117(2)[47].
Further considerations
[45] In the Marriage of Wilson (1989) FLC 92-033.
[46] In the Marriage of Polletti (1990) 15 Fam LR 794.
[47] (2011) FLC 93-466; [2009] FamCAFC 166, at [82].
If the source of jurisdiction is s.79 of the Act the Full Court in Strahan & Strahan[48]said that there was a two staged approach to an interim application as follows:
[48] (2011) FLC 93-466; [2009] FamCAFC 166.
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 section 79 is a once and for all order made after a final hearing[49].
[49] Ibid., at [132].
…
In relation to the second matter, as the jurisdiction under s 79 of the Act is being exercised the provisions of that section must be considered and applied but with limitations given that it is not the final hearing. There was also no requirement of compelling circumstances in relation to the substantive step[50].
[50] Ibid., at [135].
The Full Court in Strahan & Strahan[51] also considered the “adjustment issue” or “claw-back issue” that was discussed in Harris & Harris[52]. The Full Court said in Strahan & Strahan:
[…] the discretion conferred by the power in s 79 is to make such order as the Court considers appropriate provided it is just and equitable to make the order in circumstances where the power will not be exhausted by the interim order. As Bryant CJ and Coleman J observed in Gabel v Yardley[53] at [69] and [72] the interim order must be capable of variation or reversal without resort to s 79A of the Act or appeal. As Finn J said at [126] the interim order must be “capable of alteration at any time prior to, or as part of, the final exercise of the s 79 power”.
Once the court proceeds to exercise the power in s 79 of the Act, being in the substantive phase, a court is required to undertake consideration of the matters in s 79 (4) including by reference to s 79(4)(e) the matters in s 75(2) so far as they are relevant. However consideration of such matters may be brief and if it is established that “it seems likely to the court that…the applicant… will be likely [to] receive by way of property settlement a sum sufficient to cover the advance, that would seem to be sufficient to enable the orders sought to be made”: Zschokke[54]; Polletti and Polletti[55] per Nygh J and Wenz v Archer[56]… In other words, in such circumstances the applicant would only be receiving what he or she was entitled to receive when the power was exhausted[57].
[51] (2011) FLC 93-466; [2009] FamCAFC 166.
[52] (1993) FLC 92-378, at 79, 930.
[53] (2008) 40 Fam LR 66.
[54] (1996) FLC 92-693.
[55] (Unreported, Family Court of Australia, Nygh J, 2 March 1990).
[56] (2008) 40 Fam LR 212.
[57] (2011) FLC 93-466; [2009] FamCAFC 166, at [136]-[137].
It was submitted by Counsel for the Husband that the property pool could well accommodate the payment sought by the husband without prejudicing the Wife’s claim. The Full Court in Strahan & Strahan[58] said the following:
We also emphasis that in order to establish an appropriate case for an interim property settlement order more is required than the mere fact that upon a final hearing the applicant would receive the property being sought (or an amount in excess of the funds being sought) from the other party[59].
Property Adjustment Section 79(1)
[58] (2011) FLC 93-466; [2009] FamCAFC 166.
[59] Ibid., at [139].
In Stanford v Stanford[60] the High Court said that before making any orders for the adjustment of the parties’ property interests, the Court must first determine whether it is just and equitable to make any property orders, or to alter the parties’ interests in property. The High Court stated:
First, it is necessary to begin consideration of whether it is just and equitable to make a property settlement order by identifying, according to ordinary common law and equitable principles, the existing legal and equitable interests of the parties in the property…. The question posed by s 79(2) is thus whether, having regard to those existing interests, the court is satisfied that it is just and equitable to make a property settlement order[61].
[60] (2012) 247 CLR 108.
[61] Ibid., at [37].
The High Court further stated:
In many cases where an application is made for a property settlement order, the just and equitable requirement is readily satisfied by observing that, as the result of a choice made by one or both of the parties, the husband and wife are no longer living in a marital relationship. It will be just and equitable to make a property settlement order in such a case because there is not and will not thereafter be the common use of property by the husband and wife. No less importantly, the express and implicit assumptions that underpinned the existing property arrangements have been brought to an end by the voluntary severance of the mutuality of the marital relationship. That is, any express or implicit assumption that the parties may have made to the effect that existing arrangements of marital property interests were sufficient or appropriate during the continuance of their marital relationship is brought to an end with the ending of the marital relationship. And the assumption that any adjustment to those interests could be effected consensually as needed or desired is also brought to an end. Hence it will be just and equitable that the court make a property settlement order. What order, if any, should then be made is determined by applying s 79(4)[62].
[62] Ibid., at [42].
In Bevan & Bevan[63] the Full Court said that the circumstances described in the above passage of the Stanford v Stanford judgment “encapsulate the vast majority of cases”[64] . There is nothing in the present case to distinguish it from “the vast majority of cases”[65].
[63] Bevan & Bevan [2013] FamCAFC 116.
[64] Ibid., at [70].
[65] Loc.Cit.
Therefore in most proceedings for the alteration of matrimonial property interests, the decision as to whether or not it is just and equitable for the Court to make property orders is resolved by the breakdown of the marital relationship and the mutual applications of the parties to the Court for orders altering their respective property interests.
Consideration
In Strahan & Strahan[66] the Full Court said that when considering to exercise the power under ss.79 and 80(1)(h) of the Act to make an interim property order, that the “overarching consideration” is the interests of justice[67]. The Full Court accepted that:
[…] an inability on the part of an applicant for an interim property order to defray the costs of litigation to meet his or her litigation costs would be a relevant matter to take into account at the procedural or first stage[68].
[66] (2011) FLC 934-66; [2009] FamCAFC 166.
[67] Ibid., at [132].
[68] Ibid.,at [138].
The Husband deposes that he owes his lawyers KHQ Lawyers the sum of $108,315[69] and also that he has unbilled work in excess of $23,716[70]. This is an amount of at least $132,031 that the Husband owes to KHQ Lawyers. This is a significant amount of money. The Husband also has anticipated legal fees in the sum of at least $52,150 (excluding GST) to the conclusion of the final hearing[71]. The Husband deposed that a pay at the end arrangement is not available to him with KHQ Lawyers[72]. The Husband contends that if he is not able to sell the Shares he may be facing the remainder of the proceeding without lawyers. The Husband also contends that he requires the funds from the sale of the Shares as he has no other source of income. I note that the Wife consents to the Husband retaining the Shares.
[69] Husband’s Financial Statement, filed 25.9.18, at [54].
[70] Husband’s Affidavit, filed 25.9.18, at [2.h] and Transcript T 16:4-6.
[71] Husband’s Affidavit, filed 25.9.18, at [5.e].
[72] Ibid., at [6].
In all the circumstances of this case, where the Husband has no access to funds with which to conduct these proceedings, I find that it is in the interests of justice to exercise the power under ss.79 and 80(1)(h) of the Act to make the orders for an interim property settlement between the parties pending final orders.
I turn now to the second stage of the consideration and consider the provisions of s.79 of the Act.
Section 79
Section 79 of the Act regulates the alteration of property interests of parties to a marriage. Section 79(1)(a) of the Act provides that the Court may make such orders as it considers appropriate altering the interests of the parties in the property. Section 79(2) provides that the Court may not make an order pursuant to s.79 unless in all the circumstances “it is just and equitable”.
In this matter the parties have separated and both parties have made an application to the Court seeking orders altering their respective property interests. The parties are no longer living in a marital relationship and consequently there will not “thereafter be the common use of property by the husband and the wife”[73].
[73] Stanford v Stanford (2012) 247 CLR 108, at [42].
I am therefore satisfied that it would be just and equitable to alter the parties’ property interests under s.79(2). I will now consider the law in relation to the alteration of property interests under s.79.
Section 79(4) sets out the matters that the Court must take into account when deciding which orders (if any) should be made.
Section 79(4) provides:
In considering what order (if any) should be made under this section in property settlement proceedings, the court shall take into account:
(a) the financial contribution made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them, or otherwise in relation to any of that last-mentioned property, whether or not that last-mentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them; and
(b)the contribution (other than a financial contribution) made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them, or otherwise in relation to any of that last-mentioned property, whether or not that last-mentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them; and
(c)the contribution made by a party to the marriage to the welfare of the family constituted by the parties to the marriage and any children of the marriage, including any contribution made in the capacity of homemaker or parent; and
(d)the effect of any proposed order upon the earning capacity of either party to the marriage; and
(e)the matters referred to in subsection 75(2) so far as they are relevant; and
(f)any other order made under this Act affecting a party to the marriage or a child of the marriage; and
(g)any child support under the Child Support (Assessment) Act 1989 that a party to the marriage has provided, is to provide, or might be liable to provide in the future, for a child of the marriage.
The Wife[74] and the Husband[75] have both filed Financial Statements and affidavits in support of their property claims. Both the Wife and the Husband say that they have made direct and indirect contributions to the assets of the marriage. The Husband owned the former matrimonial home at Property A (“the Property A”) property at the commencement of cohabitation in October 2004. The Husband has deposed that in mid-2003 the Property A Property was worth approximately $375,000 and that in August 2004 it had a mortgage of $200,000[76].
[74] Wife’s Financial Statements, filed 30.5.18 and 20.9.18.
[75] Husband’s Financial Statements, filed 28.6.18 and 25.9.18.
[76] Husband’s Affidavit, filed 28.6.18, at [8.c].
The Husband has deposed that he contributed to the improvement of the Property A Property in 2005 by undertaking significant renovation works himself to the property and by also undertaking ongoing maintenance works[77].
[77] Ibid., at [16].
Both parties say they have contributed to the welfare of the family by caring for their children [X] born on …2005 and [Y] born on …2008 (Children), both during the marriage and after separation.
The Shareholding Order or the Wife’s Shareholding Order will not affect the earning capacity of the parties.
The Wife is paying to the Husband child support of $351 a week.
The Court must also consider the matters referred to in s.75(2) so far as they are relevant. Section 75(2) sets out the matters the Court must take into account when deciding to make any order for spousal maintenance. I now consider the matters referred to in s.75(2).
The Husband was born on …1964 and is aged 54. The Wife was born on …1981 and is aged 37. The Husband has a cognitive impairment and has been diagnosed as suffering from a major depressive disorder[78].
[78] Affidavit Mr B, filed 23.10.18, Exhibit “-3”, Report Dr C, dated 13.6.17, at p.7.
The Husband suffered a workplace accident on …2012. Following the accident, the Husband received Workcover payments for approximately two years and a redundancy payment of $160,000 in April 2013[79]. The Husband has not been in paid employment since April 2013. On 8 March 2018 the Husband received $161,221.20 as a result of a total and permanent disability claim through his Super Fund 1 (TPD Payment)[80].
[79] Husband’s Affidavit, filed 28.6.18, at [18.a] and [19].
[80] Ibid, at [23].
The Husband deposes that he is “currently unable to return to paid employment”[81]. The Wife questions the Husband’s incapacity to work[82].
[81] Ibid., at [29].
[82] Wife’s Affidavit, filed 20.9.18, at [23]-[31].
The Wife is employed by the Employer as a professional. Her income is $3,661 per week plus superannuation and a discretionary bonus[83].
[83] Ibid., at [4].
The Husband estimates the value of the Property A Property to be $1,100,000[84] and the Wife estimates the value to be $1,200,000[85]. The Wife in her Financial Statement estimates the balance for the mortgage for the Property A Property to be $732,672[86]. This leaves an equity in the Property A Property of potentially between $367,328 to $467,328, if a sale of between $1,100,000 and $1,200,000 is achieved.
[84] Husband’s Financial Statement, filed 25.9.18, at [35].
[85] Wife’s Financial Statement, filed 20.9.18, at [35].
[86] Ibid., at [46].
The other assets held by the parties are:
a)A caravan. This is valued by the Husband at $17,000 and by the Wife at $35,000.
b)Funds in Bank account … of $27,799[87].
c)Funds in joint account … of $49,598.43.
d)Funds in Commonwealth Bank account in the name of the Husband, ending … of $64,239[88]. At the hearing Counsel for the Husband said that only $58,561 of this money remained[89]. The Husband deposes that these funds are all that remain of the TPD Payment.
e)The Shares with an agreed value of $78,274.
f)Wife’s motor vehicle M with an estimated value by the Wife of $27,500.
[87] Ibid., at [37] (as at 10.9.18).
[88] Husband’s Financial Statement, filed 25.9.18, at [37] and Part O.
[89] Transcript T 13:7-8.
The Husband has superannuation of $248,395[90] in Super Fund 1 and the Wife has a total amount of $202,524 in superannuation with Super Fund 2 and Super Fund 3[91]. This yields a total superannuation pool of $450,919.
[90] Husband’s Financial Statement, filed 25.9.18 at [45].
[91] Wife’s Financial Statement, filed 20.9.18, at [45].
The parties have equal shared parental responsibility for the Children, subject to Orders that I made on 12 December 2018. Those orders provided that the Wife have sole parental responsibility for [X] in relation to [X]’s attendance upon a counsellor in accordance with the interim consent orders made on 26 October 2018. The Children live with the parties on a week about basis, with changeover occurring at the conclusion of school each Friday or 4.00 pm.
Neither party has disclosed a commitment to support any other child or person.
Having reviewed the evidence, it is apparent that the Husband will receive by way of a property settlement a sum sufficient to cover the orders proposed by both the Husband and the Wife[92]. In arriving at this conclusion, I have taken into account the fact that the Husband has also received the TPD Payment and may also need to account for the amount that has been expended to date by way of that money.
[92] Cf. Strahan & Strahan (2011) FLC 93-466; [2009] FamCAFC 166, at [136]-[137].
Having dealt with the law and considered the evidence under s.79 in the context of this hearing, being an interim hearing and not a final hearing, I now must decide whether to make the Shareholding Order, the Alternate Shareholding Order or no order at all.
Conclusion – Shareholding Order
I have determined to make the Alternate Shareholding Order. An order for litigation costs may be made as a maintenance order under ss.72 and 74 of the Act or a property settlement or order under ss.79 and 80(1)(h) or a costs order under s.117[93]. In this case the Husband seeks an order by way of part property settlement under ss.79 and 80(1)(h) of the Act. The Shareholding Order will enable the Husband to retain his shareholdings for his sole use and benefit. It will be a matter for the Husband whether he chooses to sell them. I prefer to characterise the order as a partial property settlement and not to defer consideration of this issue until the final hearing.
[93] Ibid., at [81].
I have therefore made orders in accordance with the Alternate Shareholding Order.
Employment Bonus
Position of the Parties
Husband’s Submissions
The juridical basis for the application for the Employment Bonus Order was made as a part property settlement pursuant to ss.79 and 80(1)(h) of the Act[94].
[94] Transcript T 18:25.
Counsel submitted:
In relation to the bonus, that is a – in a sense, a hypothetical, and the submission that would be made in respect of that is if the wife receives it – last year she received about $54,000 by way of a bonus in the 2017/18 year…it’s discretionary whether she will receive that. She’s under a new employment contract which says that her base salary is $190,000, and if she’s to get a short-term incentive payment, which is the bonus, it’s dependent on her achieving certain criteria[95].
Wife’s Submissions
[95] Ibid., T 18:13-18.
In relation to paragraph (a) of the proposed Employment Bonus Order, Counsel submitted that it may be financially detrimental to the Wife to be required to take a cash component rather than shares. It was submitted that there was no evidence that receiving the highest cash component would be a better course to adopt.
Counsel submitted the fundamental problem with the proposed Employment Bonus Order was that it did not address any of the sections of the Act under which a partial property distribution could be made. It could not be made pursuant to s.79 of the Act because the property does not exist at this point in time. Counsel referred to the definition of “property” in the Act as being “any property in the possession of either party, either vested or in remainder”[96]. As the property doesn’t exist, an order could not be made under ss.79 and 80.
[96] Transcript T 24:23-24.
Counsel said further in relation to paragraph (b) of the proposed Employment Bonus Order, that the Wife was at all times obliged to make discovery. If the Wife receives a bonus she would be obliged to make discovery. It was submitted that there had been no suggestion in the application for the Employment Bonus Order that the Wife would not comply with her discovery obligations[97].
[97] Ibid., T 24:30-40.
In relation to paragraph (c) of the proposed Employment Bonus Order, Counsel submitted that the Wife receives the bonus as part of her income. The bonus was therefore assessed as part of the Wife’s income before she pays child support. It was submitted that the Wife pays income tax on the bonus payment and it is therefore not property pursuant to which an order could be made under s.79(1) of the Act.
Consideration
The application for the Employment Bonus Order is made pursuant to ss.79 and 80(1)(h) of the Act. The interests of the property of the parties to the marriage may be altered under s. 79(1)(a) of the Act.
Section 4(1) of the Act defines “property” in the following terms:
(a) in relation to the parties to a marriage or either of them - means property to which those parties are, or that party is, as the case may be, entitled, whether in possession or reversion;
The High Court said in Mullane v Mullane[98]:
In our opinion, therefore, s. 79 on its proper construction refers only to orders which work an alteration of the legal or equitable interests in the property of the parties or either of them. An interest in property is a right of a proprietary nature, not a mere personal right: Stowe v Mineral Holdings (Aust) Pty Ltd[99]; Reg v Toohey; Ex parte Meneling Station Pty Ltd[100].
[98] (1983) 158 CLR 436 at 445.
[99] (1977) 51 ALJR 672, at p.679.
[100] (1982) 158 CLR 327, at pp.343, 350-351.
In Marlow-Dawson & Dawson (No.2)[101] the wife sought an order for 25 per cent of the husband’s net monthly income derived over a future 10 year period. Kent J considered the issue of whether the husband’s income derived from a partnership constituted property. His Honour said:
It would seem to follow that for a right (as distinct from an object) to constitute “property” the right must be recognised by, and be enforceable at, law; be legally capable of ownership; and have a value not personal to the individual (see also Doodeward v Spence[102]; Commissioner of Stamp Duties (Qld) v Donaldson[103]; Milirrpum v Nabalco Pty Ltd (Gove Land Rights Case)[104]). Earning capacity, per se, or the right to its exercise (even if the right derives from registration or certification in the chosen profession) does not meet these criteria[105].
[101] [2014] FamCA 599.
[102] (1908) 6 CLR 406 at p.411-12.
[103] (1927) 39 CLR 539, at p.550.
[104] (1971) 17 FLR 141.
[105] [2014] FamCA 599, at [67].
His Honour concluded that the husband’s income did not constitute property under the Act in the following:
In my judgment the husband’s income alone, separate from any underlying partnership interest which generates it, cannot constitute property for the purposes of the Act. In Federal Commissioner of Taxation v Everett[106] Barwick CJ and Stephen, Mason and Wilson JJ observed at 450:
The fundamental consideration, as we see it, is that the partner’s fractional interest is an entire chose in action; it is capable of division by assignment into further fractions, but it is not capable of division by assignment so that the right to participate in partnership profits which is inherent in the interest is hived off from the rest of that interest. Consequently, a partner’s entitlement to participate in profits is not separate and severable from the interest of the partner.
In my judgment “the 25 per cent orders” are directed to the husband’s earning capacity and his personal right of exercise of his earning capacity which is not a right constituting “property” within the meaning of s 79. Consequently there is no jurisdictional basis under s 79 to make “the 25 per cent orders” sought by the wife[107].
[106] (1980) 143 CLR 440, at p. 450.
[107] [2014] FamCA 599, at [71]-[72].
The case of Marlowe-Dawson & Dawson (No.2)[108] demonstrates that income itself cannot constitute property for the purposes of the Act. The High Court in Mullane v Mullane[109] has held that s.79 of the Act refers only to orders which facilitate an alteration of the legal or equitable interests in the property of the parties or either of them and not to mere personal rights. The Wife’s bonus does not constitute property within the definition of “property” in s.4 in the Act.
[108] [2014] FamCA 599.
[109] (1983) 158 CLR 436 at 445; [1983] HCA 4.
The Employment Bonus Order seeks to make orders in relation to the Wife’s bonus. The Wife’s bonus is a personal right and is therefore not property subject to the provisions of s.79 of the Act.
The application for the Employment Bonus Order is fundamentally misconceived and I agree with the submissions made by Counsel for the Wife in this regard.
Further, I now turn to the individual paragraphs of the proposed Employment Bonus Order. As a preliminary observation I note that the application was made without the Wife’s employment contract being in evidence. The Wife has deposed that she was promoted to her new role with the Employer on …2018 when she signed a contract detailing the terms of her new employment. The Wife deposed that she disclosed her new employment contract to the Husband the following business day[110].
[110] Wife’s Affidavit, filed 20.9.18, at [4].
In relation to paragraph (a) of the proposed Employment Bonus Order, the Court has no evidence as to the terms of the Wife’s employment contract. I agree with the submissions of counsel for the Wife.
In relation to paragraph (b) of the proposed Employment Bonus Order, the Wife is required at all times to make discovery. I accept Counsel for the Wife’s submissions in relation to this paragraph.
In relation to paragraph (c) of the proposed Employment Bonus Order, I refer to the previous discussion that the Employment Bonus is not “property” for the purposes of ss.4 and 79 of the Act. I otherwise agree with the submissions of Counsel for the Wife.
Conclusion – Employment Bonus
For the reasons discussed I have determined to dismiss the application for the Employment Bonus Order.
Costs
Both the Husband the Wife sought an order for costs of the interim hearing.
The Husband has failed in his application for both the Shareholding Order and the Employment Bonus Order. Accordingly I will now consider the Wife’s application for costs.
The Wife seeks that the Husband pay to her an amount of $3,619.38 on account of party/party costs for preparation and appearance at the interim hearing.
Legal Principles Applicable to Costs
Section 117(1) of the Act states, subject to the provisions of s.117(2), that the general rule in proceedings in this Court, is that each party to proceedings, shall each bear his or her own costs.
Section 117(2) of the Act provides as follows:
If, in proceedings under this act, the court is of the opinion that there are circumstances that justify it in doing so, the court may subject to subsections (2A), (4), (4A), (5) and (6) and the applicable Rules of Court, make such order as to costs and security for costs, whether by way of interlocutory order or otherwise, as the court considers just.
Section 117(2A) of the Act provides, that in considering what order (if any) should be made for the payment of costs, the Court shall have regard to the following matters:
(a) the financial circumstances of each of the parties to the proceedings;
(b) whether any party to the proceedings is in receipt of assistance by way of legal aid and, if so, the terms of the grant of that assistance to that party;
(c) the conduct of the parties to the proceedings in relation to the proceedings including, without limiting the generality of the foregoing, the conduct of the parties in relation to pleadings, particulars, discovery, inspection, directions to answer questions, admissions of facts, production of documents and similar matters;
(d) whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the court;
(e) whether any party to the proceedings has been wholly unsuccessful in the proceedings;
(f) whether either party to the proceedings has made an offer in writing to the other party to the proceedings to settle the proceedings and the terms of any such offer; and
(g) such other matters as the court considers relevant.
In the Marriage of I (No.2)[111], the Full Court said that the relevant matters in s.117(2A):
[…] must all be taken into account and all balanced in order to determine whether the overall circumstances justify the making of an order for costs[112].
[111] (1995) 22 Fam LR 557.
[112] Ibid., at 558.
Section 117(2A) (a) the financial circumstances of each of the parties
The respective financial circumstances of each of the parties is referred to extensively at paragraphs 49 to 62, in the context of the Husband’s application for the Shareholding Order, when considering ss.79(4) and 75(2).
Section 117(2A)(b) whether any party is in receipt of legal aid
There is no evidence before me that either party is in receipt of legal aid.
Section 117(2A)(c) The conduct of the parties to the proceedings in relation to the proceedings
The Wife’s Counsel submitted that the Husband’s conduct in relation to the interim application warranted an order for costs being made against him. It was submitted by Counsel for the Wife that that the relevant circumstances are as follows:
a)The application for the Shareholding Order was unnecessary and the Husband did not need this order prior to the final hearing.
b)The Further Amended Response to Initiating Application[113] was amended on 25 September 2018 by the Second Further Amended Response. This was effectively one business day before the interim hearing.
c)The Wife’s preparation for the Spousal Maintenance Claim had been thrown away as this claim was abandoned in the Second Further Amended Response.
d)The application for the Employment Bonus Order was misconceived and bound to fail.
e)The Wife’s costs on an indemnity basis, including the costs thrown away in preparing for the Spousal Maintenance Application, in accordance with the principles in Colgate Palmolive Co v Cussons Pty Ltd[114] were approximately $20,000[115].
Section 117(2A) (d) whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the court
[113] Husband’s Further Amended Response to Initiating Application, filed 31.7.18.
[114] (1993) 46 FCR 225.
[115] Transcript T 32:32-40.
This is not a relevant consideration.
Section 117 (2A) (e) whether a party to the proceedings has been wholly unsuccessful
The Husband has been unsuccessful in relation to the two matters the subject of the interim hearing, being the application for the Shareholding Order and the Employment Bonus Order.
Section 117 (2A) (f) whether either party to the proceedings has made an offer in writing to the other party to the proceedings to settle the proceedings and the terms of any such offer
The Wife’s solicitors sent to the Husband’s solicitors the Letter of Offer on 29 August 2018. I refer to the discussion in paragraphs 24 and 25. The Letter of Offer proposed the Alternate Shareholding Order, avoided the cost of an interim hearing and provided that the parties each bear their own costs.
The Husband did not accept the terms of the Letter of Offer and proceeded with the interim hearing. This has caused the Wife to incur unnecessary costs.
Section 117 (2A) (g) any other matters the court considers relevant
Any other relevant matters are set out in this judgment.
Quantum of costs
Rule 21.02 of the Federal Circuit Court Rules 2001 (Cth) provides:
In making an order for costs in a proceeding, the court may:
(a) set the amount of costs; or
(b) set the method by which the costs are to be calculated; or
(c) refer the costs for taxation under Part 40 of the Federal Court Rules or under Chapter 19 of the Family Law Rules; or
(d) set a time for payment of the costs, which may be before the proceeding is concluded.
An itemised list of the Wife’s party/party cost has been prepared by the Wife’s solicitors and produced to the Court.
Conclusion as to costs
I am satisfied that the factual circumstances of this interim matter justify a departure from the general rule that each party should bear his or her own costs.
Having considered the Wife’s submissions in relation to the application for costs, the relevant factors which I am required to consider pursuant to s.117(2A) of the Act and having regard to the available evidence of the financial circumstances of both parties, I intend to make an order that the Husband pay the costs claimed by the Wife.
I certify that the preceding one hundred and five (105) paragraphs are a true copy of the reasons for judgment of Judge Kirton
Date: 19 December 2018
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