KEHOE & SEDEN

[2019] FamCA 989

FAMILY COURT OF AUSTRALIA

KEHOE & SEDEN [2019] FamCA 989

FAMILY LAW – PROPERTY – Interim – Where the wife seeks a partial property settlement of $250,000 – Where the husband seeks to pay $50,000 – Where the wife has no independent resources to fund her litigation – Order made for the wife to receive $100,000 partial property settlement.

FAMILY LAW – SPOUSE MAINTENANCE – Where the husband pays the wife $3500 per month for financial support – Where the wife seeks an additional $2,600 per week – Where the wife lives overseas – Where the wife has primary care for the 17-month old child – Order for the husband to pay $1,000 per week spousal maintenance to the wife.

Family Law Act 1975 (Cth)

Strahan & Strahan (2009) FLC 93-466

APPLICANT: Ms Kehoe

RESPONDENT: Mr Seden

FILE NUMBER: SYC 7833 of 2018

DATE DELIVERED: 13 December 2019

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Stevenson J

HEARING DATE: 24 October 2019

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Kearney SC

SOLICITOR FOR THE APPLICANT: Pearson Emerson Meyer Family Lawyers

COUNSEL FOR THE RESPONDENT: Mr Roberts

SOLICITOR FOR THE RESPONDENT: Argyle Lawyers Pty Ltd

Orders

1. The husband pay to the wife, by way of interim spouse maintenance, a sum of $1,000 per week as she may direct in writing with the first such payment to be made within seven days of the date of these Orders.

2. The husband pay to the wife a sum of $100,000, by way of partial property settlement, within 21 days of the date of these Orders.

Note: The form of the order is subject to the entry of the order in the Court’s records.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Kehoe & Seden has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYC 7833 of 2018

Ms Kehoe

Applicant

And

Mr Seden

Respondent

REASONS FOR JUDGMENT

The proceedings

1. Ms Kehoe and Mr Seden are parties to litigation in relation to financial issues and parenting of their child X, born in 2018 and currently 17 months of age.

2. Upon the separation of the parties on 7 December 2017, the wife moved to State B in the United States and began to live in the home of her parents.  On 21 March 2018 she commenced proceedings in the District Court of C County ("the State B Court") in relation to parenting and child support issues.  On 6 December 2018 the wife filed an Initiating Application in the Family Court of Australia, by which she sought orders for alteration of property interests and spouse maintenance.  On 30 August 2019 the wife filed an Amended Application in a Case, by which she sought orders which may be summarised as follows:

   1.Pending further order, the husband pay to the wife a sum of $2,600 per week as interim spouse maintenance.

   2.Within 21 days the husband pay to the wife an amount of $250,000 by way of partial property settlement.

   3.In the alternative to Order 2, that there be a "dollar-for-dollar" order in relation to the wife's legal costs.

3. The wife filed an earlier Application in a Case on 15 April 2019, by which she sought orders for interim spouse maintenance of $2,600 per week and a partial property settlement of $200,000.  The husband filed a Response to Application in a Case on 24 June 2019 by which he sought an order that he cause payment to the wife of a sum of $50,000 on account of her legal costs, with these funds to “be taken into account in respect of any final property order made".  The husband sought a dismissal of the wife's application for interim spouse maintenance but indicated that he would continue to make a voluntary payment of a $3,500 per month to the wife by way of "financial support".

Background

1. The husband and the wife, both of whom are aged 35, commenced a relationship in 2008 and married in City D in 2009.  There was a dispute as to whether they cohabited prior to the marriage, but this issue is irrelevant for present purposes.  There was a dispute as to the time when the parties began to cohabit following the marriage, with the husband asserting that the wife moved into his apartment at Suburb E in 2010.  Again, this issue is not germane to the present dispute.

2. When the wife returned to the United States in 2017 she was pregnant with the parties' child X, who was born in 2018.  The husband travelled to the United States to spend time with X in 2018 and July 2019, apparently in accordance with interim orders made by the State B Court.  He plans to travel to the United States to spend time with X at Christmas 2019.

3. In March 2018 the husband began to pay to the wife a sum of A$3,500 per month.  The parties referred to these payments as "financial assistance" in emails which they exchanged in March 2018.

4. The husband is one of six siblings born to his parents, Mr F Seden and Ms G Seden.  By his Will dated in 2014, Mr F Seden created six testamentary trusts which include the H Seden Family Testamentary Trust.  The trustee is a company known as J Pty Ltd, of which the husband and his mother are directors.  Relevantly for present purposes and in order of priority, the beneficiaries of the H Seden Family Testamentary Trust are Ms G Seden, the husband and the children of the parties to these proceedings.

5. The appointor of the H Seden Family Testamentary Trust is J Pty Ltd, of which the husband and his mother are directors.  The Case Outline prepared by counsel for the husband asserted as follows:

   22.The appointor of the H Seden Testamentary Trust is the trustee being J Pty Ltd and given the husband's mother is also a director and shareholder of the corporate trustee it cannot be said that the husband is in absolute and unfettered control of the Trust. Thus an important aspect of the alter ego jurisprudence is absent ...

   There would appear to be substance to this submission.  Senior counsel for the wife's observed at the interim hearing that there is a dispute between the parties "as to the characterisation of the husband's interest in the Seden Group".

1. All of the testamentary trusts created by the will of the husband's late father are governed by the Seden Family Group Rules, which are administered and managed by the Seden Family Board.  The directors of the Seden Family Board are Ms G Seden and the husband's brothers Mr K, Mr L and Mr M.  The husband is not now and never has been a director of the Seden Family Board.

2. The N Family Trust was established by a deed dated in 2015.  The trustee is a company known as O Pty Ltd, of which the husband is sole director and shareholder.  The husband is the appointor of this trust.  The beneficiaries are the husband and his “lineal descendants".  This trust holds no assets and is a beneficiary of the Q Seden Family Trust, via its trustee J Pty Ltd.

3. The husband's late father established the Q Seden Family Trust in 1982.  The trustee of the Q Seden Family Trust is a company known as Z Pty Limited, the directors of which are the husband's mother and three of his four brothers.  This trust has multiple beneficiaries, including J Pty Ltd.  The Q Seden Family Trust is governed by the Seden Family Group Rules.

4. The husband is the sole registered proprietor of an apartment property at W Street, Suburb E ("the Suburb E property").  This property was purchased in 2009 for $1,100,000, all of which funds were provided by the husband's father.

5. At the time of the purchase of this property, the husband and his father entered into a mortgage agreement with a principal sum of $1,040,000.  This mortgage agreement provided for repayment by the husband of all outstanding principal and interest upon demand by the mortgagee.

6. The ANZ Bank holds a registered mortgage on the title to the Suburb E property.  Mr K deposed that the Suburb E apartment is one of two properties which constitute security for a line of credit of $6,200,000 for the benefit of a company known as P Pty Ltd.  This company is one of the entities within the Seden Family Group.  The directors of P Pty Ltd are Mr K, Mr M and Mr L.  The husband is not now or never has been a director of P Pty Ltd.  Six companies own shares in P Pty Ltd, including J Pty Ltd as trustee for the H Seden Family Testamentary Trust.

7. Mr K deposed that a line of credit of $1,700,000 was established in January 2014, when the only security was a property at Suburb R owned by P Pty Ltd.  The Suburb E property was added as security in 2015, when the credit facility was extended to $4,200,000.  Apparently this increase in the credit limit included a refinance of the original mortgage advance of $1,040,000 from Mr F Seden to the husband.

8. Mr K gave further evidence to the effect that this credit facility was extended to $6,200,000 in August 2016, for reasons associated with the business activities of P Pty Ltd.  Mr K deposed further that the credit limit was reduced to its current limit of $3,480,000 in December 2017.  At that time, Ms G Seden sold the family home and directed that a portion of the proceeds be applied for that purpose.

9. ANZ Bank documents exhibited to the affidavit of Mr K showed that the husband provided an individual guarantee and indemnity in the sum of $1,080,000, when the credit facility was extended to $6,200,000 in August 2016.  Other members of the Seden family also provided indemnities and guarantees in support of this credit facility.

10. On 26 June 2019 the husband and his mother held a meeting of directors of J Pty Ltd, as trustee for the H Seden Family Testamentary Trust.  They resolved to distribute 100% of the income of the trust to Ms G Seden (Exhibit 5), to the complete exclusion of the husband.  This resolution was in contrast to the position in 2015, 2016 and 2017, when the whole of the income of the trust was distributed to the husband.

11. The wife deposed that she has seen the husband's tax returns for the years 2015, 2016 and 2017, which revealed that he received trust distributions of $121,078, $200,000 and $500,000 in each of these years respectively.  In addition to these funds, the husband received income from his business known as "Salt Interiors".  In his Financial Statement of 8 July 2019 the husband deposed to a gross weekly income of $3,107.

12. Mr K deposed on 26 September 2019 that the Seden Family Board resolved to advance funds to the husband, by way of loan, "to assist him in relation to defending the two court proceedings that Ms Kehoe filed being these proceedings and the parenting proceedings in a District Court in State B United States ..., as Mr H Seden could not afford to do so from his business income alone."  Mr K deposed that there is no written agreement and that the husband "At present is not receiving any distributions from either the Q Seden Family Trust or the H Seden Family Testamentary Trust as determined by the Seden Family Board."

13. The wife, or those who represent her, conducted an extensive analysis of drawings from the husband's business account and invited an inference that he improperly used some of these funds for personal purposes (affidavit of the wife sworn 29 August 2019 paragraphs 32, 33 and 34).  The husband's accountant, Ms T, deposed on 29 August 2019 that she received one document entitled "Expenditure of Funds by Mr Seden since December 2017" and that she completed her analysis of these figures on 27 August 2019.  Ms T deposed further that she received a second "Expenditure Document" on 29 August 2019, which ran to some 45 pages and differed in content from the first statement. 

14. In his affidavit of 3 October 2019 the husband deposed that he received a "Third Expenditure Document" on 19 September 2019.  I accept the assertion of the husband that "it would be very time consuming and expensive to go through and double check each amount."

15. In the context of a hearing of competing interim financial applications, I am not prepared to carry out my own detailed analysis of these figures nor to draw any conclusions as to the husband's level of income or the propriety of any of his expenditure on the basis of this purported evidence.

16. The wife submitted emails from a real estate agent in State B (Exhibit 8 and 9 to the wife's affidavit of 29 August 2019), in an attempt to support her assertion that she requires some $978 per week to rent a suitable apartment for herself and the parties' child in City Y.  The husband disputed this suggestion and purported to rely upon an affidavit of a family lawyer in State B, Ms U, as to the cost of appropriate rental accommodation.  Neither of these purported pieces of evidence was of much assistance.  Ultimately, I found it difficult to draw any reasonable conclusions as to the wife's proper accommodation costs.

17. I accept that the wife's parents intend to sell their home in State B, where she and the child currently live, and move to State S in the near future.  The husband conceded that he has been aware of this plan on the part of the wife's parents for some time.

Evidence

1. A large volume of material, being affidavits and exhibits, was relied upon by each of the parties and identified in the Outline of Case documents filed by their respective counsel.  I would observe that the preparation of this material must have caused a heavy level of expenditure.

Consideration

Interim spouse maintenance

1. The wife is required to demonstrate that she "is unable to support herself adequately" within the meaning of section 72 of the Family Law Act1975 (Cth) (“the Act”) if she is to succeed in obtaining an order for spouse maintenance. I accept that she satisfies this threshold test, by reason of her responsibility for the sole care of the parties' 17-month old child. I make this finding despite the opinion of Mr L to the effect that she "could work remotely" as a professional. With respect to Mr L, the wife has the onerous responsibility of sole care for a very young child.

2. In my view the husband's voluntary provision of a $3,500 per month to the wife, by way of "financial support", could reasonably be construed as an acknowledgement on his part that she is unable to support herself adequately by reason of responsibility for the care of their child.  This voluntary provision of financial assistance by the husband does him credit.  The issue essentially is a determination of the quantum of funds which the husband should properly provide to the wife but this exercise is complicated somewhat by the ongoing proceedings in relation to child support in State B.

3. The true level of the husband's actual and potential income is difficult, if not impossible, to determine in the circumscribed context of an interim hearing.  In my view, however, a safe inference can be drawn that the husband and his family have elected to take steps to ensure that he received no trust income in the 2019 financial year and, apparently, a markedly reduced amount in 2018.

4. The accountant for the husband and the H Seden Family Testamentary Trust, Mr V, annexed to his affidavit copies of the 2017 and 2018 financial statements of the H Seden Family Testamentary Trust.  In 2017 this trust received income of $361,545, which consisted of franked dividends and "distributions from trusts."  In 2018 this trust received income of $74,382, being $60,622 from franked dividends and $5,133 as a trust distribution.  In 2017 the husband received a distribution of $344,583 from this trust, in comparison to $65,494 in 2018.

5. Mr V deposed that the husband held "an unpaid present entitlement" in this trust of $319,724 in 2017 but this amount had reduced to nil in 2018.  He deposed that the husband has not actually received this amount of $319,724 and gave an accounting explanation for these entries in the financial statements of the trust.  Mr V pointed out that his firm relies upon "the information that is provided to us by the internal accountant of the Seden Group.  We do not prepare an audit of the transactions prepared by the internal accountant".

6. In all of these circumstances it seems to me that an inference reasonably can be drawn that financial benefits which traditionally have flowed to the husband from the Seden Group have become unavailable since his separation from the wife. I infer that this previous pattern of income distribution to the husband, together with recent changes in 2018 and 2019 to bring about a converse result, provide convincing indications that financial resources are available to the husband within the Seden Group. Accordingly, I find that the husband "is reasonably able” to maintain the wife for the purposes of section 72 of the Act.

7. It seems to me that the wife's alleged level of necessary expenditure is somewhat inflated and open to question, even on an untested basis.  I have referred above to the difficulties with the evidence in relation to reasonable rental costs in City Y.  A cursory examination of Part N of the wife's Financial Statement suggest an inflation or exaggeration of reasonable expenses.  Examples include $155 for "clothing and shoes", $195 for "entertainment/hobbies" and $180 for "holidays" per week.

8. As is often the case in determination of the quantum of orders for interim spouse maintenance, an element of arbitrariness enters into the exercise.  As noted, the present situation is complicated by the unresolved proceedings in relation to child support in the State B Court and the lack of characterisation of the husband's voluntary payment to the wife of A$3,500 per month.

9. I will order that the husband pay to the wife a sum of A$1,000 per week by way of interim spouse maintenance, on the basis that he will continue to provide an amount of A$3,500 per month.  I would observe that it is the responsibility not of the wife's parents but that of the husband, to the extent that he is reasonably able to do so, to provide financial support for the wife and the parties' child.

Partial property settlement

1. By way of final orders for alteration of property interests the husband proposed that he pay to the wife a sum of $250,000.  This sum would include an amount of $125,000 which she received pursuant to Orders made on 10 July 2019.  The wife deposed that she received $25,000 directly and that a sum of $100,000 was deposited into the trust account of her solicitors pursuant to these Orders.

2. The wife deposed further that the balance of these funds held in the trust account of her solicitors was approximately $40,000 on 29 August 2019.  The wife's solicitors provided an estimate of the cost of preparation for and conduct of a five day trial in a sum of $252, 600 (exhibit 1).

3. I note that the parties attended a mediation in August 2019 but failed to reach an agreement.  Regrettably it thus seems more likely than not that additional work will need to be carried out by their lawyers, at least to the point of preparation for trial.

4. I accept that the wife was required to expend a substantial portion of this sum of $100,000 on the costs of the unsuccessful mediation and the interim hearing.  There was no explanation as to how she expended the sum of $25,000 which she received directly pursuant to the Orders of July 2019.

5. It is desirable that there be "a level playing field" between the parties, in terms of their capacity to conduct their litigation.  There was no evidence that the wife has independent resources to fund her litigation, other than that she has received some loan funds from her father.

6. I am mindful of the remarks of Boland and O'Ryan JJ in Strahan and Strahan (2009) FLC 93-466, where their Honours said:

   [132] ... 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 s 79 is a once and for all order made after a final hearing.

   [133] In Harris ... the Full Court gave some examples of circumstances where it may be appropriate to exercise the power being "where both parties agree to the disposal of some assets pending the trial" and "[u]rgent situations" to avoid injustice.  Another example is where, as in this case, one party requires funds to assist in defraying the costs of litigation without which funds an injustice may be caused.

1. In my view, it is reasonable to conclude that the wife has made contributions and has the benefit of section 75(2) factors which would ground an order for alteration of property interests in her favour.  Inter alia, the parties engaged in a cohabitation relationship of at least seven years duration and are the parents of a 17-month old child.  It is most likely that the wife will retain almost sole responsibility for the care of the parties' very young daughter for the foreseeable future.

2. As observed by senior counsel for the wife at the interim hearing, there is a dispute as to the characterisation of the husband's interests in the various entities within the Seden Group.  A known fact, however, is that the husband holds equity of approximately $720,000 in the Suburb E property.  Additionally, the pool of matrimonial property includes tangible assets such as motor vehicles and bank credit balances.

3. In these circumstances, it seems to me to be just and equitable that there be a further order for partial property settlement in favour of the wife.  Additionally, I have indicated that I am of the view that financial resources are available to the husband from the Seden Group.

4. I am not prepared to make an order for partial property settlement of the quantum sought by the wife.  It may be that the matter will not proceed to a five-day trial and I am not prepared to place the wife in funds for that purpose at this early stage of the proceedings.  I will make an order that the wife receive a sum of $100,000 by way of partial property settlement.

I certify that the preceding forty-five (45) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Stevenson delivered on 13 December 2019.

Associate:

Date:  13 December 2019