Josselyn and Josselyn (No 2)

[2014] FamCA 1237

FAMILY COURT OF AUSTRALIA

JOSSELYN & JOSSELYN (NO. 2) [2014] FamCA 1237

FAMILY LAW – PROPERTY – INTERIM PROCEEDINGS – Where the applicant seeks spousal maintenance and that the respondent pay her the sum of $25,000 to meet costs of litigation – Consideration of s 90SF (3) factors – Where the applicant does not have capacity for paid employment – Where the respondent has not made his financial circumstances clear – Order that the respondent pay the applicant spousal maintenance and $25,000 by way of interim property settlement.

Family Law Act 1975 (Cth) ss 90SE, 90SM, 90SS, 90SF

Harris & Harris (1993) FLC 92-378

APPLICANT: Ms Josselyn

RESPONDENT: Mr Josselyn

FILE NUMBER: SYC 4325 of 2014

DATE DELIVERED: 27 October 2014

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Loughnan J

HEARING DATE: 27 October 2014

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Lethbridge SC

SOLICITOR FOR THE APPLICANT: Mills Oakley Lawyers

COUNSEL FOR THE RESPONDENT: Mr Livingstone

SOLICITOR FOR THE RESPONDENT: Grech & Bannerman

Orders

1. Until further order pursuant to Section 90SE of the Family Law Act 1975 (Cth) the respondent pay:

   a.      to the applicant into a bank account nominated by the applicant the sum of $1,948 per week; and

   b.      the lease repayments to Esanda Finance with respect to the Holden … motor vehicle registration number …, as and when they fall due and the respondent shall indemnify the applicant and keep her indemnified with respect to all such repayments.

1. Within 14 days from today’s date or such other period as the parties agree on the respondent pay to the solicitors for the applicant $25,000 towards her legal costs and disbursements associated with these proceedings.

2. The Court notes the respondent’s undertaking to the Court given through his counsel today in terms of paragraphs 1 and 2 contained in the letter from Grech & Bannerman, Lawyers to the solicitors for the applicant dated 18 September 2014, as set out hereunder:

   1.      That in any business or property dealing our client will not take any action that will have an adverse impact on your clients’ interests in the matrimonial pool.

   2.      That he will not sell, further encumber or refinance the [Suburb K] property.

3. The question of the costs of and incidental to the proceedings today are reserved.

1. By consent, orders are made in the terms of paragraphs 1, 2 and 4 of the document titled “Valuation Orders”

1.      That Mr [B] of [C Accountants] be appointed pursuant to Chapter 15 of the Family Law Rules as a single expert to value the husband’s interest in all entities relevant to determining the parties assets, liabilities and financial resources for the purposes of these proceedings including those entities referred to in paragraphs 1(a)-(d) of the Husband’s Case Outline of 27 October 2014 (page 2).

2.      An order in accordance with paragraph 3 of the Husband’s Case Outline of 27 October 2014 (pages 2 and 3).

4.     That there be liberty to apply in the event that issue arises with respect to the joint instructions to be provided to Mr [B].

1. In the first instance the costs of the expert’s report be borne by the respondent.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Josselyn & Josselyn (No. 2) has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYC 4325 of 2014

Ms Josselyn

Applicant

And

Mr Josselyn

Respondent

REASONS FOR JUDGMENT

1. These are proceedings for spousal maintenance and interim property settlement or interim costs.  The orders sought are contained in interim orders sought in an initiating application that was filed on 14 July.  The matter came before the Court on 4 August 2014 and some orders were made on an urgent basis by way of urgent spousal maintenance and by way of interim property orders and the matter was adjourned to today’s date.  The parties are present and represented.

2. The wife seeks a payment of spousal maintenance in the form of $1,948 a week and lease payments on a motor vehicle.  For the purposes of today, she seeks an order for interim property settlement of $25,000.  She seeks that that payment be a matter for characterisation by the ultimate trial judge. 

3. An injunction was sought in relation to a property at Suburb K.  In that latter regard, there is some correspondence dated 18 September from the respondent’s solicitors to the applicant’s solicitors offering an undertaking inter partes, in effect, that he will not take any action adverse to the interests of the applicant in relation to the pool of assets and that he will not sell, further encumber or refinance the Suburb K property.  The point made about that is that that would not prevent him seeking to be relieved of the undertaking or some aspect of it, and that is no doubt true.  It is offered as an undertaking to the Court through the respondent’s counsel and I will note that undertaking.

4. Now, coming back to the other relief, the response of the respondent is that there be an order for maintenance in the sum of $300 a week.  I think it is in the nature of maintenance, and he seeks that there be no other order and that the urgent maintenance order made on 12 August be discharged from 9.30 am on 21 October.  I am not quite sure about the relevance of 21 October.  That is the range of dispute.

Background Facts

1. The applicant is 57 years of age and the respondent is 55.  They started to live together in 1997 and separated on 27 May 2014.  They have no children together, but each has adult children from a previous relationship.  It is common ground that the applicant came into the relationship with no substantial assets.  She was earning about $55,000 a year and she did that until about 2001, she performed part-time work until 2003, and after 2003 had no paid employment.  

2. It appears from the income tax returns that there was an income splitting arrangement between the parties.  Certainly in the respondent’s income tax returns, he refers to his spouse earning a certain figure and that seems to tally with his representations about payments made for housekeeping.  Now, I suppose one has to be careful about this.  Those facts are not explained fully and I do not mean to imply that the tax office was misled by those documents.

3. It is the applicant’s case that she does not presently have capacity for paid employment.  She has been out of the full time workforce for the period that I have identified – since 2003.  She says that at one point at least, she had some assistance from a psychologist.  She refers in her affidavit to being sad in relation to a particular matter.  She says her time is taken up, in part, with babysitting.

4. The legislation has it that – this is s 90SE of the Family Law Act1975 (Cth) – that on the breakdown of a de facto relationship, the Court may make a proper order for the maintenance of one of the parties to the relationship. I was told that there was no jurisdictional issue in the proceedings. I note that there were previously orders made for urgent maintenance and the wording used in the response seems to concede that some support is required from the respondent to the applicant.

5. Section 90SS of the legislation makes provision for the Court to make an order until further order.  Section 90SF says in practical terms the Court is to apply a principle that a party to a de facto relationship must maintain the other party only to the extent that the first-mentioned party – in this case, the respondent – is reasonably able to do so and only if the second-mentioned party – that is the applicant in this case – is unable to support herself adequately for any adequate reason.  Examples of reasons nominated are the care and control of a child or because of age or physical or mental incapacity of the payee for appropriate gainful employment.

6. In deciding these issues, the Court must take into account matters referred to in ss 90SF (3) and some of those matters are in evidence before me.  As to the age and state of health of each of the parties – I have said what I know about that.

7. The income, property and financial resources of each of the parties:  The applicant’s current income is the payments made by the respondent, which include lease payments on a motor vehicle.  Her outgoings total $1,948 a week.  That includes living expenses of $1,158 a week, which are itemised in part N of her financial statement dated 14 July 2014, as they are required to be in proceedings of this type.  The applicant has $5,000 worth of property, which comprises money in two Westpac accounts.  She has $25,000 in superannuation and she owes $601 in the form of a Westpac Visa card account.

8. The applicant demonstrates that she does not have a capacity for adequate self-support from her own resources.  There was some discussion about this during the course of submissions and, as I said to counsel, there is nothing about the breakdown of a relationship that makes a party better fit for paid employment than during a relationship – quite the contrary.  We do not have full employment and I do not mean to be disrespectful, but the applicant is in an age group that has a high rate of unemployment or underemployment.

9. These are interim proceedings and do not determine what might happen on a final basis.  The pattern during most of the parties’ relationship was, for whatever reason, that the applicant was not in paid employment.  It seems to me that in those circumstances, I should be satisfied that she does not have a meaningful capacity for adequate self-support.  Some reference was made to the applicant diverting her grandmotherly obligations for profit.  Those are arrangements that might be made in the medium term, but it would call for the cooperation of somebody who is not here to cause that to happen, and it seems to me in the circumstances that I should be happy that the threshold is made out.  There was an attempt made on behalf of the respondent to be critical of the applicant’s expenditure, but nothing in the categories of expenditure seems remarkable or out of proportion. 

10. As to the respondent’s circumstances, they are quite remarkable.  His disclosure is that he earns $3,940 a week, made up of salary of $1,340 and trust distributions of $2,600.  His outgoings are $4,522 a week.  The document is literally wrong because it does not seem to address his living expenses.  It is possible, I suppose, that in making a payment of $500 a week on Visa cards, the respondent thereby meets his living expenses.  He does not say that.  That payment is less than the minimum payment required on his Visa card, so that something more would need to be said before I could make that assumption. 

11. The respondent has failed to complete part N of the financial statement, which he is required to do.  In this regard and in other regards, it is not for me to struggle with this.  It is the respondent’s job to enable the Court to understand his financial circumstances.  I cannot find any adequate explanation in the document.  The respondent lives with a son, a daughter and a son-in-law.  They earn income but according to the financial statement they are not providing any payments for his benefit.  As I say, he does not show any living expenses and that cannot be right or it is unlikely to be right.  The respondent’s other expenditure is all expenditure paid to the applicant pursuant to the orders of 4 August, which is presumably the car lease and the recurrent maintenance. 

12. In terms of property, the respondent says that the total value of the property owned by him is $2,137,500, made up of $1.8 million in a property at Suburb K, $2,500 in a bank and a loan owed to him by a partnership, Josselyn & D Partnership in the sum of $110,000.  He has an interest in a business, E Proprietary Limited, which has a value of $140,000, and some contents.  His superannuation stands at $93,000. 

13. The respondent’s liabilities total $7.6 million.  There is a mortgage, presumably on the Suburb K property, of $300,000.  He owes to F and G Josselyn, who may well be his parents, $3 million.  He owes $25,000 in a family loan to the applicant.  I am not sure what that is about.  He owes $4.275 million by way of a director’s indemnity in relation to an enterprise known as H Proprietary Limited. 

14. The respondent has financial resources at $2.6 million arising out of the Josselyn Family Trust and the L Family Trust. 

15. The orders that the respondent seeks on a final basis are that he be required to pay to the applicant a sum representing 10 per cent of the net pool of assets.  The Family Court does not have any jurisdiction if there is no property.  The Court’s power, under s 90SM is to alter interests in property.  If there is no property, there is no jurisdiction.

16. The respondent’s proposal is that a series of orders be made to put an expert, a Mr B, in possession of funds and instructions to prepare valuation evidence about the circumstances of the assets and liabilities of the parties to find, in other words, something about the net property pool.  There is a bit of a controversy between the parties as to whether that will be done in two bites:  Mr B providing a preliminary report about the shape of things or just doing the job, and I have indicated to the parties that I am not much fussed about that one way or the other.  I will leave it to them to draw the letter of instruction.  If they cannot, then the matter can come back.

17. I cannot make head nor tail of the respondent’s case.  If there is no pool of assets, then his response would be to dismiss the Application.  His evidence suggests that there is a substantial shortfall, perhaps of the order of $2 million, if the financial resources are taken to be assets.  If they are not, then less than that.  It would be an end to the matter if that is the case.  It is difficult to see how it can be terribly controversial.  The evidence is not fulsome because it does not address the problem of what is happening. 

18. On the face of the documents, there could be a level of insolvent trading for any entity that is trading and there is a shortfall of income over outgoings.  As I said to the parties during the course of submissions, they are problems for another jurisdiction, not for this one.  Even then there would be problems and they are not addressed in the respondent’s case.  For example, on the respondent’s case, notice would have to be given to all of the creditors of the husband, of the respondent, and all of the creditors of the relevant entities if orders of this Court could affect them.  There is no suggestion that anybody has been put on notice.  There is nothing in his affidavit about what happens now.  It is as if he is the captain of the Titanic and simply intends to go under.  There is no reference to a plan to trade out of the problems or what is to happen next, seeking insolvency advice or winding up or rationalising assets or anything.  The respondent’s case is “I’ve got a shortfall of somewhere between $2 and $4 million and therefore the Court should not make an interim order”. 

19. Mr Lethbridge has pointed out that there are some things that might require answers.  The balance sheet has a debt owed to the respondent in the sum of $110,000.  The accounts of that entity suggest that as at 30 June last the entity owed the husband a bit over $1 million.  The fact that that asset does not appear in his financial statement could be true, but it means that since 30 June last year, more than $1 million has been paid to him.

20. Parties have an absolute obligation of disclosure.  For example they are required to disclose the disposition of significant assets.  If their financial statement does not reflect their financial circumstances on the day of the Court, they are required to file the new financial statement if it is significant or at least tell the Court about the change if it is not significant.  On his evidence the respondent cannot afford the payments that he is making, the payments he is proposing to continue to make.  Arguably those payments could be transactions to defeat creditors, voidable payments and there is no explanation. 

21. He says in his affidavit that in order to meet the 4 August obligations, he had to borrow some money from relatives.  There is no mention about a problem caused by the recurrent payment. 

22. In terms of spousal maintenance, there is a case made for a recurrent payment of $1,948 a week and for payments on a lease.  The respondent proposes to make a smaller payment.  The applicant has made her case on an interim basis.  There may be a change of circumstances but for the purposes of today, the case is made out and the responding case makes no sense.  And, as I say, it is not for me to struggle with it more than I have, so I will make those orders.

23. In terms of interim property settlement, the Court has power to make an order under s 90SM, as I have indicated – and an order can be made in the interim.  The same jurisdictional hurdles apply to the proceedings and they are overcome.  As I say, an order has already been made.

24. Again, the Court can make an order.  The relevant provisions are the provisions for property settlement.  The applicant has pointed to her case.  She has talked about contributions made by way of homemaker.  There were not any children of the marriage.  However, there could be an issue about whether the children are children of the de facto relationship, but the contributions can still be taken into account.  Perhaps not the contributions to the parties’ own child, but certainly contributions to others, if not under the contributions heading, then under the catch-all provision in relation to the other factors to be taken into account in property settlement proceedings.

25. There is going to be some dispute, it appears, as to the extent and level of contributions made.  This was a relationship of 17 years, a substantial period, and it seems to me that a case has been made for some property settlement.  Indeed, again, there is a concession in the respondent’s material that there should be a property settlement.  He thinks that 10 per cent of the property pool should be paid to the respondent. 

26. The Court on an interim basis has been counselled – in Harris & Harris (1993) FLC 92-378 and many cases since – not to do something on an interim basis that cannot be undone on a final basis. The order that I am being asked to make, even at $25,000, probably could not be undone if there are no net assets. That having been said, that problem has already occurred. There has been an order made on 4 August 2014 for such a payment. I have not been told that there was any appeal in relation to that decision. This is not a case where I can be comfortable about what the pool of assets is. I just have no way of understanding the case that the respondent puts before the Court, to the point where it seems to me that I should be satisfied that what is a relatively modest payment can be made.

27. It has been said on a number of occasions, and I have been provided with aide-memoire and charts which tell me how the company structure is laid out, and there is some complexity to it.  There is no requirement for payments of maintenance to be made out of income or out of property.  They could be made out of borrowings or financial resources and, indeed, in relation to this interim payment, it seems to me that provided I am satisfied that the payment can ultimately be afforded, there is no requirement for there to be any particular source for the payment of $25,000.  The respondent has identified that the particular source for the $25,000 already ordered was a borrowing. 

28. This is a case where millions of dollars, year by year, have moved from having one character – a debt owed, for example, to the respondent – to another character and then back again over the 2011/12/13 financial years, a debt of in excess of $1 million was owing to him, then nothing, and then again, a debt owing to him, and in those circumstances, without being able to get to the bottom of it, there is obviously the capacity to move funds around.  There has been a failure of disclosure on behalf of the respondent.  His case is a very strange one, as I have identified.  It is not for me to struggle with it.  The applicant has made a case.  It seems to me that a payment should be made. 

I certify that the preceding thirty two (32) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Loughnan delivered on 27 October 2015.

Associate: 

Date:  20 May 2015