LABONTE & LABONTE
[2018] FamCA 755
•24 September 2018
FAMILY COURT OF AUSTRALIA
| LABONTE & LABONTE | [2018] FamCA 755 |
| FAMILY LAW – PROPERTY – INTERIM APPLICATION – Where the wife has been the primary carer for the parties’ children – Where one of the parties’ children was born with a serious medical condition and requires constant care – Where the husband’s parents are the director and shareholder of the Second Respondent – Where the husband has executed certain documents dealing with matrimonial property unknowingly in breach of Court orders – Where the husband’s parents have not yet lodged those documents – Where injunctive relief is sought by the wife to protect matrimonial property – Where spousal maintenance is sought by the wife – Where a partial property distribution is sought by both parties – Where a dollar for dollar order is sought by the wife –Orders for an injunction in relation to the repayment of an entitlement of the Second Respondent made – Orders for an injunction in relation to the assets of a trust made – Orders for periodic and other spousal maintenance made – Orders for an interim property distribution in the wife’s favour made. |
| Family Law Act 1975 (Cth) ss. 72, 74, 75, 79, 80, 114 Family Law Rules 2004 rr. 1.04, 12.07 |
| Ashton & Ashton (1986) FLC 91-777 Blue Seas Investments Pty Ltd v Mitchell and McGillivray (1999) FLC 92-856 Cardile v LED Builders Pty Limited (1999) 198 CLR 380 Curtis v NID Pty Limited [2010] FCA 1072 Davidson and Davidson (No 2) (1994) FLC 92-469 Drysdale & Drysdale [2011] FamCAFC 85 Gabel & Yardley (2008) FLC 93-386 Glover v Walters (1950) 80 CLR 172 Hall v Hall [2016] 257 CLR 490 Iphostrou & Iphostrou [2011] FamCA 20 Jefferson & Coulston [2014] FamCA 1083 Julstar Pty Ltd v Hart Trading Pty Ltd [2014] FCA 108 Kirk v Industrial Relations Commission of New South Wales (2010) 239 CLR 531 McCrossen & McCrossen (2006) FLC 93-283 Maroney & Maroney [2009] FamCAFC 45 Martiniello & Martiniello (1981) FLC 91-050 Medlow & Medlow (2016) FLC 93-692 Mijac Investments Pty Ltd v Graham [2013] FCA 296 Modra v Victoria (Department of Education and Early Childhood Development and Department of Human Services)(2012) 291 ALR 429 Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia(No 3) (1998) 195 CLR 1 Quayle and Perceval [2018] FamCA 664 Redman & Redman (1987) FLC 91-805 Sieling and Sieling (1979) FLC 90-627 Sklavos v Australasian College of Dermatologists [2013] FCA 1065 Stein & Stein (2000) FLC 93-004 Strahan & Strahan (Interim Property Orders) (2011) FLC 93-466 Wenz & Archer (2008) 40 Fam LR 212 Zadenev & Zadenev [2013] FamCA 838 |
| APPLICANT: | Ms Labonte |
| RESPONDENT: | Ms Labonte |
| INTERVENOR: | Labonte Holdings (B) Pty Ltd |
| FILE NUMBER: | SYC 3565 of 2018 |
| DATE DELIVERED: | 24 September 2018 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | McClelland J |
| HEARING DATE: | 11 September 2018 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Dickson QC |
| SOLICITOR FOR THE APPLICANT: | Pigdon Norgate Family Lawyers |
| COUNSEL FOR THE RESPONDENT: | Mr Richards |
| SOLICITOR FOR THE RESPONDENT: | York Law |
| COUNSEL FOR THE INTERVENOR: | Mr O'Ryan QC |
| SOLICITOR FOR THE INTERVENOR: | Sekel Grinberg Judd |
Orders
THE COURT ORDERS, PENDING FURTHER ORDER, THAT:
The husband be and is hereby restrained from paying or causing the payment of any money to his parents, The Second Respondent or any entity in which they have an interest in relation to the C Street development, without the written consent of the wife, which shall not be unreasonably withheld.
Other than in the ordinary course of business, including, for the purpose of paying taxation liabilities, in complying with orders made in these proceedings or in complying with his child support obligations, the husband, in his personal capacity and as director of any entity, be and is hereby restrained from disposing of or encumbering any interest that he holds either in his sole name or beneficially through any entity in a trust or dealing with the assets of a trust, including but not limited to the units held in the C Street development, without first obtaining the written consent of the wife, which consent shall not be unreasonably withheld.
The husband pay spousal maintenance to the wife in the sum of $1,265 per week, such payments to be made weekly, in advance, to the wife’s nominated bank account, with the first such payment to be made two days from the date of these orders and weekly thereafter.
The husband continue to pay, as he has been doing, the following payments as and when they fall due:
(a)The mortgage repayments in relation to the Suburb D mortgage; and
(b)The following expenses in relation to the motor vehicle driven by the wife:
(i)Registration and comprehensive third party insurance;
(ii)Servicing and repairs; and
(iii)Car lease.
Within 28 days of the date of these orders, or such other time as agreed between the parties in writing, the husband pay to the wife the sum of $96,567 by way of partial property distribution, with such payment to be made into the Pigdon Norgate Family Lawyers Trust Account.
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 Labonte & Labonte 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 3565 of 2018
| Ms Labonte |
Applicant
And
| Ms Labonte |
Respondent
REASONS FOR JUDGMENT
Introduction
This is an application for various interim orders, made by the wife, which impact upon the Respondent husband and an entity controlled by the husband’s parents, Labonte Holdings (B) Pty Ltd, being the Second Respondent in these proceedings.
The parties are to be commended for resolving a number of issues on the day of the hearing. The remaining matters to be adjudicated involve the following issues:
a)Whether interim injunctions should be issued with a view to protecting the property of the marriage;
b)In the context of the parties’ agreeing that the husband should pay spousal maintenance to the wife, what the quantum of that maintenance should be;
c)Whether there should be an order for a partial property distribution to enable the wife to fund her litigation expenses and if not, in the alternative, should there be a dollar for dollar costs order; and
d)Whether there should be an order for a partial property distribution to enable the husband to fund his taxation liability and litigation expenses.
On a without admissions basis, the husband agrees to the Court making orders of an injunctive nature with a view to protecting the property of the marriage, pending final hearing. However, he contends that the orders sought by the wife are overly restrictive and would adversely impact upon his ability to operate his businesses.
The husband also agrees that it is appropriate for the wife to receive payment by way of interim spousal maintenance, however he contends that the amount sought by the wife is excessive and, further, that he does not have the capacity to pay it.
The husband further agrees to an order for a partial property distribution, but only on the basis that the wife agrees to facilitate the sum of $300,000 being borrowed, against the former matrimonial home in Suburb D NSW (“the Suburb D property”), with each party receiving $150,000 from that amount so borrowed.
Background
I will note below the agreed relevant facts, as well as the parties’ contentions where there is a dispute. Given the interim nature of these proceedings, the Court is not able to make findings of fact in relation to those contentions.
The wife was born in 1973 and is currently aged 45 years.
The husband was born in 1974 and is currently aged 44 years.
Prior to the parties cohabiting, the Labonte Family Discretionary Trust was established. The husband’s father is the appointer of that trust and the shareholder of the trustee company. The husband and his mother are nominated beneficiaries of the trust. The original trustee was Labonte Holdings Pty Ltd, however in July 2015, the trustee was changed to Labonte Holdings (B) Pty Ltd. The husband is the director and secretary of that company. The husband’s father is the shareholder.
On 5 June 2000, F Pty Ltd was established. That company is the husband’s trading entity through which he works as a Designer. The husband is the sole director and shareholder of F Pty Ltd.
On 13 September 2002, Labonte Holdings Pty Ltd was established. The husband is the director of that company. The husband’s father is the shareholder.
In 2003, the husband and his parents were offered the opportunity to participate in a property development project located in the suburb of B in Sydney (“the B development”). The Labonte Family Discretionary Trust owned 30% of the development, with the other 70% being owned by a third party. The husband’s parents contributed the sum of $300,000 towards the project and the husband contributed the sum of $240,000, which he contends he sourced by way of borrowings guaranteed by his mother. The husband further contends that despite the disproportionate contributions of him and his parents, they had a verbal agreement that they were equal partners in the joint venture through the Labonte Family Discretionary Trust.
Between 2003 and 2008, the B development was built. The husband contends that, during that period, the husband’s father worked on the building site full time for a period of 10 months. The husband contends that his father did not receive payment for those hours worked.
In early 2008, the parties commenced cohabitation. At that time, the wife was employed as a Director of Client Services at Company P, a human resources company. The husband was employed as a Director of his firm, F Pty Ltd.
In October 2008, the parties married.
Between late-2008 and early-2009, the B development was sold, with the exception of three shops. One shop was retained by the Labonte Family Discretionary Trust, but was subsequently sold in order to pay a taxation liability. Apart from that shop, the profits received by the Labonte Family Discretionary Trust were in the sum of approximately $1,000,000.
On 18 December 2008, the Mr Labonte Family Settlement was established. The husband is the appointer of that trust. The trustee is Labonte Holdings (E) Pty Ltd, which was also established on 18 December 2008. The husband is the sole director and shareholder of that company.
Further, on 18 December 2008, G Holdings Pty Ltd was established. The husband is a sole director and shareholder. G Holdings Pty Ltd is the corporate beneficiary of the Mr Labonte Family Settlement.
In 2008, the husband contends that he and his parents agreed to invest the profits and return of capital from the B development into the development of a property at C Street, Suburb E (“the E development”). That development comprised four towers of units and shops. The husband contends that he and his parents agreed that they would invest in the E development through the Mr Labonte Family Settlement on a 50/50 basis. There are three other investors in the E development. The husband contends that the proportion owned by the Mr Labonte Family Settlement was 12.5% of the total value of the development project.
In 2010, the husband sold a unit at Suburb H NSW for the sum of $570,000. He contends that he applied the proceeds of that sale to pay out a loan of $400,000, with the balance of $170,000 being contributed towards the purchase of the Suburb D property.
Also in 2010, the wife sold a unit at Suburb J NSW for the sum of $425,000. The husband contends that the wife applied the proceeds of that sale to pay out a loan of $300,000 and capital gains tax of approximately $35,000 and that the balance of $90,000 was contributed towards the purchase of the Suburb D property.
In March 2010, the parties’ son X was born. In May 2010, X was unfortunately diagnosed as suffering from a brain condition that results in him being severely disabled and requiring ongoing, around-the-clock medical care.
In June 2012, the parties’ son Y was born.
On 29 November 2013, M Holdings Pty Ltd, now known as K Pty Ltd, was established by the husband’s parents. They are that company’s directors and shareholders of the company. The company acts as trustee for the M Holdings Family Trust. The Trust Deed records the husband as the appointer of that trust. However, the husband contends that there is an error in the Trust Deed. The parties, including the Second Respondent, have agreed to orders restraining the husband from voluntarily removing himself as trustee of M Holdings Family Trust.
The husband contends that in May 2014, the parties separated on a final basis. The wife disputes that assertion and contends that the parties separated in August 2015.
In 2014, the E development was completed. The Mr Labonte Family Settlement became entitled to 27 units in the development, of which 15 were sold. The remaining 12 units are retained by the Mr Labonte Family Settlement.
In 2015, the husband made an application to the ANZ Bank for a loan secured over the units at the E development. The husband said that he raised those funds with the intention to repay his parents their share of the profits from the sale of the 15 units of the E development. The husband contends that he negotiated with his parents in respect to their share of the 12 remaining units at the E development, based on a valuation that was undertaken in February 2015.
In April 2015, the husband moved into a unit situated at C Street, E NSW, being a property registered in the name of the Mr Labonte Family Settlement.
On 14 July 2015, Labonte Holdings (B) Pty Ltd was established.
In November 2016, the husband advanced to his friend, Ms N the sum of $800,000. The husband contends that the source of the money is part of the ANZ loan obtained by the Mr Labonte Family Settlement.
The husband contends that in 2017, the ANZ bank required repayment of a loan owing by the Labonte Family Discretionary Trust in respect to a property at Suburb O NSW. The husband contends that this demand occurred as result of the trustee for the Labonte Family Discretionary Trust being changed from Labonte Holdings Pty Ltd to Labonte Holdings (B) Pty Ltd in July 2015.
The husband contends that from February 2017 to date, he has paid to the wife the sum of $5,000 per month as spousal maintenance ($3,705) and child support ($1,295). In addition, the husband continues to pay the wife’s motor vehicle maintenance expenses and the mortgage repayments for the Suburb D property, where the wife resides with X and Y.
In August 2017, a divorce order was made.
In 2018, the husband increased the ANZ loan secured over the E development by refinancing through the Q Church and the Commonwealth Bank. The total debt increased to $5,920,000.
In May 2018, Labonte Design Pty Ltd was established. The husband is the sole director and shareholder of that company, which is yet to commence trading.
On 6 June 2018, the wife filed her Initiating Application in this matter.
On 10 July 2018, during a time when X was receiving palliative care at Z Hospice, the husband was served with a letter of demand by his parents, together with accompanying documentation, with a view to securing their entitlement in relation to the E development. That letter is annexed to the wife’s Affidavit filed on 19 August 2018 and reads, as follows:
…
Our clients have provided you certain financial accommodation and have also co-invested funds with you into [G] Holdings Pty Limited. There can be no doubt whatsoever that you remain indebted to our clients and that despite demand on a number of occasions you have failed to make payment to your parents over the outstanding project profit from the [Suburb E] development.
This is not the first time that a demand has been made with a view to make good your obligation to our clients. Our clients are caught in a very precarious position given their age and whilst as your parents they do not wish to deal with you directly on this issue, they need to ensure that they received what is presently due to them without delay.
TAKE NOTE that you are presently indebted to our clients in the sum of $1,839,730. Despite demand you have refused to make payment to them in full. Accordingly, our clients’ willingness to compromise and accept a lesser sum than what was due is now revoked in our clients demand a full reconciliation and payment in full of the total entitlement of 50% of the E venture. Any prior offer to accept a lesser sum is revoked.
Payment in full is now due to our clients. We have attached a Standstill Agreement with relevant security documents for you to consider. Should you fail to deliver the attached documents in final form fully executed on or before close of business on 18 July 2018 then we will have no alternative but to take enforcement action without further notice to you.
It is common ground that as at 10 July 2018, the husband was on a short vacation with Y in southern New South Wales. It is agreed that the letter of demand was not disclosed to the wife until it was forwarded by the husband’s solicitors to her solicitors on 17 July 2018. The additional documentation that accompanied that letter of demand was provided to the wife’s solicitors on 25 July 2018. Consequent to her then solicitors receiving that correspondence on 25 July 2018, an Application in a Case was filed seeking that injunctive orders restraining the husband from executing the documents referred to in the letter of demand in relation to Labonte Holdings (B) Pty Ltd be made on an ex-parte basis. It is common ground that that application was not served on the husband until 31 July 2018.
On 27 July 2018, the wife’s solicitors wrote to the husband’s solicitors requesting that the husband provide undertakings in respect to the letter of demand. That correspondence did not disclose that the wife had filed the application, to which I have referred, two days earlier.
On 30 July 2018, the wife’s Application in a Case filed on 25 July 2018 was heard on an ex-parte basis by Loughnan J. Relevantly, his Honour made the following orders:
…
3. That the husband be and is hereby restrained from doing any act or signing any document or instructing any other person to do so, which has the effect of causing his removal as the appointer of the Trusts or having the effect of altering the terms of the Deeds of the Trusts.
4. That the husband in his personal capacity and as a director of any entity be and is hereby restrained from disposing of or encumbering any interest that he holds either in his sole name or beneficially through any entity in the Trusts or dealing with the assets of the Trusts, including but not limited to the units held in the [C] Street Development.
5. That the husband be and is hereby restrained from paying or causing the payment of any money to his parents or any entity in which they have an interest in relation to the [C] Street Development.
6. That the husband in his personal capacity and as a director of any entity in which he is a director or secretary or trustee be and is hereby restrained from signing or having someone sign on his behalf (including his attorney) any of the following documents/agreements:
1. Stand Still Agreement between [Mr Labonte], [Labonte] Holdings (E) Pty Ltd, [G] Holdings Pty Ltd and [Labonte] Holdings (B) Pty Ltd.
2. Deed of Guarantee and Indemnity between [Labonte] Holdings (E) Pty Ltd and [Labonte] Holdings (B) Pty Ltd.
3. Deed of Guarantee and Indemnity between [G] Holdings Pty Ltd and [Labonte] Holdings (B) Pty Ltd.
4. Deed of Guarantee and Indemnity between [Mr Labonte] and [Labonte] Holdings (B) Pty Ltd.
5. National Mortgage Form referrable to Certificate of Title Folio Identifier 4/SP…4 between [Labonte] Holdings (E) Pty Ltd and [Labonte] Holdings (B) Pty Ltd.
6. National Mortgage Form referrable to Certificate of Title Folio Identifier 8/SP…4 between [Labonte] Holdings (E) Pty Ltd and [Labonte] Holdings (B) Pty Ltd.
7. National Mortgage Form referrable to Certificate of Title Folio Identifier 13/SP…4 between [Labonte] Holdings (E) Pty Ltd and [Labonte] Holdings (B) Pty Ltd.
8. National Mortgage Form referrable to Certificate of Title Folio Identifier 16/SP…4 between [Labonte] Holdings (E) Pty Ltd and [Labonte] Holdings (B) Pty Ltd.
9. National Mortgage Form referrable to Certificate of Title Folio Identifier 23/SP…4 between [Labonte] Holdings (E) Pty Ltd and [Labonte] Holdings (B) Pty Ltd.
10. National Mortgage Form referrable to Certificate of Title Folio Identifier 30/SP…4 between [Labonte] Holdings (E) Pty Ltd and [Labonte] Holdings (B) Pty Ltd.
11. National Mortgage Form referrable to Certificate of Title Folio Identifier 31/SP…4 between [Labonte] Holdings (E) Pty Ltd and [Labonte] Holdings (B) Pty Ltd.
12. National Mortgage Form referrable to Certificate of Title Folio Identifier 34/SP…4 between [Labonte] Holdings (E) Pty Ltd and [Labonte] Holdings (B) Pty Ltd.
13. National Mortgage Form referrable to Certificate of Title Folio Identifier 37/SP…4 between Labonte Holdings (E) Pty Ltd and Labonte Holdings (B) Pty Ltd.
14. National Mortgage Form referrable to Certificate of Title Folio Identifier 40/SP…4 between Labonte Holdings (E) Pty Ltd and Labonte Holdings (B) Pty Ltd.
15. National Mortgage Form referrable to Certificate of Title Folio Identifier 43/SP…4 between Labonte Holdings (E) Pty Ltd and Labonte Holdings (B) Pty Ltd.
16. National Mortgage Form referrable to Certificate of Title Folio Identifier 65/SP…4 between [Labonte] Holdings (E) Pty Ltd and [Labonte] Holdings (B) Pty Ltd.
17. General Security Agreement between [Labonte] Holdings (E) Pty Ltd as Grantor and [Labonte] Holdings (B) Pty Ltd atf the [Labonte] Family Discretionary Trust as the Secured Parties for the priority amount of $1,839,730.
18. General Security Agreement between [Mr Labonte] as Grantor and [Labonte] Holdings (B) Pty Ltd atf the [Labonte] Family Discretionary Trust as the Secured Parties for the priority amount of $1,839,730.
19. General Security Agreement between [Labonte] Holdings (E) Pty Ltd as trustee for the [Mr Labonte] Family Settlement as Grantor and [Labonte] Holdings (B) Pty Ltd atf the [Labonte] Family Discretionary Trust as the Secured Parties for the priority amount of $1,839,730.
Those orders were made on the basis of the wife giving the usual undertaking that she would abide by any order made by the Court as to damages.
On 30 July 2018, subsequent to those orders being made by Loughnan J, the agreements and deeds referred to in the orders were executed by the husband and his parents. It is common ground that, at the time those documents were executed, the husband was not aware of the existence of the ex-parte orders that had been made earlier that day.
On 31 July 2018, the wife’s solicitors served on the husband’s solicitors the wife’s Application in a Case and Affidavit filed on 25 July 2018. Shortly thereafter, the wife’s solicitors served the husband’s solicitors with a copy of the ex-parte orders made on 30 July 2018.
In the period subsequent to 30 July 2018, the husband’s parents have not acted upon the letter of demand or the agreements and deeds signed by the husband on 30 July 2018, nor has the husband made any payment to his parents in respect to their demand.
At the hearing on 11 September 2018, the husband’s parents made the following undertaking to the Court (Exhibit “12-I”):
Without admissions, and until further order, and upon the Applicant giving an undertaking to [Labonte] Holdings as to damages noted below, [Labonte] Holdings undertakes to the Applicant not to enforce the security interests created by the documents referred to in paragraphs 2.1-2.21 of part 3 of the Amended Initiating Application without first giving 28 days' notice in writing to the Applicant.
That undertaking was conditional upon the wife providing an undertaking as to damages, which was given, as follows:
The Applicant, gives to [Labonte] Holdings an undertaking as to damages being an undertaking:
(a) to submit to such order (if any) as the Court may consider to be just for the payment of compensation, (to be assessed by the Court or as it may direct), to any person, (whether or not that person is a party), affected by the operation of the order or undertaking or any continuation (with or without variation) of the order or undertaking; and
(b) to pay the compensation referred to in (a) to the person affected by the operation of the order or undertaking.
Applications
The wife sought orders in accordance with a minute of order tendered as Exhibit “1-W” in the proceedings. The relevant orders requiring adjudication are as follows:
4. That the husband in his personal capacity and as director of any entity be and is hereby restrained from disposing of or encumbering any interest that he holds either in his sole name or beneficially through any entity in the trusts or dealing with the assets of the trust, including but not limited to the units held in the [C] Street development.
5. That the husband be and is hereby restrained from paying or causing the payment of any money to his parents, the second respondent or any entity in which they have an interest in relation to the [C] Street development.
…
Spouse Maintenance
9. That the husband pay spouse maintenance to the wife in the sum of $2,200 per week, such payments to be made weekly in advance into the wife’s nominated bank account, with the first such payment to be made 2 days from the date of these orders and weekly thereafter.
…
Interim Property Settlement
15. That within 7 days of the date of these orders the husband pay to the wife the sum of $150,000 by way of payment into the Pigdon Norgate Family Lawyers Trust Account, the nature of such payment to be characterised at the final hearing of this matter.
16. In the alternative to order 15 and pursuant to section 117 of the Family Law Act 1975 (Cth), from the date of these orders and within 14 days after the issue of any accounts rendered by the following to the husband: [thereafter followed a number of orders to give effect to what is commonly known as a dollar for dollar order, whereby the husband would be required to pay to the wife’s solicitors in respect to her legal fees an equivalent amount that he paid his solicitors in respect to his own legal fees].
The husband sought orders in accordance with his Second Amended Response filed on 16 August 2018, as follows:
1. That forthwith the Husband and the Wife make an application to the ANZ Banking Corporation for a further loan or an increase in the loan facility secured over the [Suburb D] mortgage for $300,000 and, to this end, each of the parties is to do all acts and things and sign all necessary documents to give effect to this order including preparing and executing any and all applications for finance and providing any and all supporting documents.
2. That in the event that the loan application referred to in Order 1 herein is approved in full or in part, then each of the parties is to receive 50% of the advance that the ANZ Banking Corporation approves with such payment to be paid as follows:-
2.1. The sum of money required to meet the shortfall referrable to the changeover cost for the [Motor vehicle 1] as per Order 4.3 below;
2.2. The balance be divided as follows:-
2.2.1. 50% of the balance remaining from the loan advance to be paid by way of a payment into the Barkus Doolan Trust Account, the nature of such payment to be characterised at the Final Hearing of this matter, and
2.2.2 50% of the balance remaining from the loan advance to be paid by way of a payment into the York Law Trust Account, the nature of such payment to be characterised at the Final Hearing of this matter.
Meeting of Mortgage repayments re Suburb D property and motor vehicle expenses
3. That the Husband continue to pay, as he has been doing, the following payments as and when they fall due:-
3.1. the mortgage repayments in relation to the Suburb D mortgage;
3.2. the motor vehicle expenses in relation to the motor vehicle driven by the Wife [be it the [Motor vehicle 2] or any new motor vehicle to be purchased (see below)] with such payments being:-
3.2.1. registration and Third Party CTP costs;
3.2.2. servicing and repair costs, and
3.2.3. comprehensive insurance.
…
Spouse Maintenance
5. That the Husband pay to the Wife, by way of interim spouse maintenance, the sum of $3,705 per month.
Dismissal of Interim Orders sought by Wife
6. That otherwise the Orders sought by the Wife in the Initiating Application - Interim Orders sought filed 7 June 2018 be dismissed.
Evidence
The wife relied upon the following documents:
a)Financial Statement filed on 6 June 2018;
b)Her Affidavit filed on 6 June 2018;
c)Her Affidavit filed on 19 August 2018; and
d)Her Affidavit filed on 10 September 2018.
The husband relied upon the following documents:
a)Financial Statement filed on 20 August 2018;
b)His Affidavit filed on 26 July 2018; and
c)His Affidavit filed on 10 September 2018.
Injunctive relief
Section 114(3) of the Family Law Act 1975 (Cth) (“the Act”) provides:
A court exercising jurisdiction under this Act in proceedings other than proceedings to which subsection (1) applies may grant an injunction, by interlocutory order or otherwise (including an injunction in aid of the enforcement of a decree), in any case in which it appears to the court to be just or convenient to do so and either unconditionally or upon such terms and conditions as the court considers appropriate.
The plurality in Cardile v LED Builders Pty Limited (1999) 198 CLR 380 (“Cardile”) at [31] said:
… that the court may grant an injunction in all cases in which it appears to the court to be just and convenient to do so – does not confer an unlimited power to grant injunctive relief. Regard must still be had to the existence of a legal or equitable right which the injunction protects against invasion or threatened invasion, or other unconscientious conduct or exercise of legal or equitable rights. [References omitted].
Their Honours referred to the joint judgment of Brennan CJ, McHugh, Gummow, Kirby and Hayne JJ in Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia(No 3) (1998) 195 CLR 1, where the following was stated at [35]:
The general principle which informs the exercise of the power to grant interlocutory relief is that the court may make such orders, at least against the parties to the proceeding against whom final relief might be granted, as are needed to ensure the effective exercise of the jurisdiction invoked. The … Court had jurisdiction to make interlocutory orders to prevent frustration of its process in the present proceeding. [References omitted].
To similar effect, in his judgment in Cardile at [116], Kirby J stated that:
…such orders have been developed as much to protect and defend the court's process from abuse as to protect and defend the interests of the potential judgment creditor. This point was made in the Canadian case of Grenzservice Speditions GesmbH v Jans where Huddart J observed:
“The Mareva and Anton Piller orders were conceived not so much to protect plaintiffs as to protect the Court’s jurisdiction against defendants bent on dissipating or secreting their assets or evidence in order to render inconsequential the judicial process against them”. [References omitted].
It is unnecessary for an applicant for interlocutory orders to establish “all of the propositions that would be necessary” to obtain the final relief they are seeking: Cardile at [127]. However, the applicant for such an order must establish:
a)That there is a real risk of assets being disposed of (Cardile at [122]); and
b)That, as a result of that risk, there is a real ground for believing that the applicant will be prejudiced in the remedy he or she is seeking (Glover v Walters (1950) 80 CLR 172 at 176).
In that respect, in Curtis v NID Pty Limited [2010] FCA 1072, Edmonds J said at [8] to [10]:
8. The test in Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319 is in similar terms to O 25A r 5(4). In that case, Gleeson CJ, with whom Meagher JA broadly agreed, said, at 321 – 322, as follows:
[A] plaintiff will need to establish … a danger that, by reason of the defendant absconding, or of assets being removed from the jurisdiction or disposed of within the jurisdiction or otherwise dealt with in some fashion, the plaintiff, if he succeeds, will not be able to have his judgment satisfied.
9. ‘Danger’, however, is not defined. In some cases, judges have employed the phrase ‘real risk’ to identify the degree to which a plaintiff must demonstrate that a prospective judgment will go unsatisfied: see, for example, Cardile at [122] per Kirby J; Ninemia [1983] 1 WLR 1412 at 1422 per Kerr LJ. In others, it has been said that an applicant must establish ‘a sufficient likelihood of risk which in the circumstances of a particular case justifies an asset preservation order’: Lifetime Investments Ltd v Commercial (Worldwide) Financial Services Pty Ltd [2005] FCA 226 at [14] per Kiefel J, approving Victoria University of Technology v Wilson [2003] VSC 299 at [36] per Redlich J. There is even a third view, namely, that the plaintiff establishes ‘a sufficient apprehension of dissipation of the … assets’: Vaughan v Duncan [2007] NSWSC 811 at [5] per Hamilton J.
10. What is settled, however, is that solid evidence of a danger of dissipation or disposal of assets be produced. The relevant test was enunciated by Brereton J in Finn v Carelli [2007] NSWSC 261 at [4], where his Honour referred to the NSW Court of Appeal’s decision in Frigo v Culhaci [1998] NSWCA 88:
It is not necessary for an applicant to show that the respondent has a positive intention of evading a judgment, and it is sufficient to show that the course on which the respondent proposes to embark is, objectively speaking, calculated to have that effect. But as the Court of Appeal made clear in Frigo v Culhaci, an applicant must establish, by evidence and not mere assertion, that there is a real danger that by reason of the respondent absconding or otherwise dealing with assets, the applicant will not be able to have its judgment satisfied. While acknowledging that there has been much debate as to the precise degree to which that has to be shown, the Court emphasised that mere assertion that the defendant was likely to put assets beyond the plaintiff’s reach was inadequate, for which the Court cited Ninemia Maritime Corp v Trave GmbH & Co Kg (The Niedersachsen) [1984] 1 All ER 298 as well as Patterson v BTR Engineering.
The wife contends that the Court should be suspicious of the husband’s conduct in executing documents that had been provided to him under cover of the letter from his parents’ solicitors dated 10 July 2018 on 30 July 2018. Those documents are set out in the orders made by Loughnan J on 30 July 2018. Specifically, it was contended that the Court should have regard to the following:
a)There has been no evidence provided of any document entered into between the husband and his parents, predating the commencement of these proceedings, indicating that the husband’s parents and/or an entity controlled by them had lent money to the husband or an entity controlled by him;
b)In fact, the financial records of entities controlled by the husband and his parents indicate that entities controlled by the husband’s parents are indebted to entities controlled by the husband;
c)It is implausible that at a time of great emotional strain confronting the parties and in circumstances where the paternal grandparents clearly had a caring and loving relationship with X, they would, in circumstances where X was receiving end of life care, serve a letter of demand upon the husband demanding monies and requiring the execution of documents in order to avoid them commencing legal proceedings against the husband; and
d)There is a coincidence in the fact that, despite the circumstances of X, the husband decided to take Y on a holiday to the Snowy Mountains when the relevant documents were forwarded to him by his parents’ solicitors.
In those circumstances, it was contended that there is a real issue to be finally determined in terms of whether the transactions entered into by the husband on 30 July 2018 were made in order to defeat an anticipated order in favour of the wife in these proceedings or, irrespective of any such intention, are likely to have that effect.
In this matter, I am satisfied that irrespective of his intentions, the husband’s conduct on 30 July 2018, in executing the documents referred to in the orders made by Loughnan J, would, if acted upon, defeat the final orders sought by the wife for the Suburb D property to be transferred unencumbered to her.
In that respect, at paragraph 45 of the draft balance sheet prepared by the husband (Exhibit “9-H”), he contends that he has a liability payable to his parents or, more specifically, the Labonte Family Discretionary Trust, in terms of the E development, in the amount of $1,839,730. The husband further contends that with the deduction of other liabilities listed, the net total assets available for distribution from the matrimonial pool are $368,433. Clearly, this is less than the husband’s proposed valuation of the Suburb D property, which is valued, according to the husband’s draft balance sheet, at $1,350,000.
In other words, if not for the inclusion, in the balance sheet, of the alleged liability of $1,839,730 to the husband’s parents, there would be sufficient funds available such that, at final hearing, the Court could make orders as sought by the wife.
Further, the wife contends that the husband has depleted assets of the matrimonial pool by borrowing monies and through his business F PTY LTD and paying legal fees attributable to these proceedings in the sum of approximately $162,000 (Exhibit “5-H”).
Having regard to the husband’s conduct on 30 July 2018, and accepting the evidence contained in the documents to which I have referred above, together with the husband’s unilateral decision to expend the property of the marriage on his own legal fees, it is, in my view, appropriate for appropriately worded injunctions to be issued restraining the husband from further inappropriately depleting the property of the marriage prior to final hearing. The question becomes, however, as to what form those restraints should take.
In considering what orders are appropriate, it is important to apply the principle that any orders that are made must go no further than that which is necessary “to limit the disturbance of the property and other assets of the [respondent to the Application] to the potential recovery of [the applicant] and nothing more”: Cardile at [129]. The reason for this was explained in Cardile at [50] as being the fact that an order of this nature:
… is bound to have a significant impact on the property of the person against whom it is made: in a practical sense it operates as a very tight "negative pledge" species of security over property, to which the contempt sanction is attached. It requires a high degree of caution on the part of a court invited to make an order of that kind.
In the context of family law proceedings, in Sieling and Sieling (1979) FLC 90-627 at 78,264, the Full Court said:
The power to grant injunctions is, of course, a discretionary power, not to be exercised lightly. The Court must balance the hardship to each party of granting or refusing an order and frame its order in such a way to impose no further restriction than is necessary to achieve the protection of the applicant’s interest. It will not lightly interfere with the rights of an owner of property on the basis of a vague or uncertain claim.
In Martiniello & Martiniello (1981) FLC 91-050 at 76,416, it was suggested that a party should not be restrained from using their money for ordinary business purposes unless “it could be shown that there was a fear that [the party] would dissipate [the] funds”.
In this matter, it can reasonably be inferred that the orders sought by the wife would be “bound to have a significant impact on the property” of the husband and, as the applicant for the orders, the wife carries the onus of establishing that the restraint she seeks is reasonable and appropriate and, specifically, goes no further than is reasonably necessary to protect her interests.
For reasons set out above, I am satisfied that, if acted upon, the obligations created by the husband pursuant to documents he executed on 30 July 2018 would impede the Court from considering the wife’s final claim, including for the Suburb D property to be transferred into her name unencumbered. Accordingly, I am satisfied that order 5 sought by the wife is appropriate and is no more than is necessary to protect the judicial process to properly consider, at final hearing, the wife’s application for an adjustment of the parties’ matrimonial property pursuant to s 79(4) of the Act, such that the Suburb D property is transferred, unencumbered, into her name. I will, therefore, make order 5 as sought in the wife’s application, save so far as I will add the words “without the written consent of the wife, which shall not be unreasonably withheld”.
I note that order 4 of the wife’s application seeks that the husband “in his personal capacity and as a director of any entity” be restrained from disposing of or encumbering “any interest he holds either in his sole name or beneficially through any entity in the trusts or dealing with the assets of the trusts” [emphasis added]. In my view, that order goes beyond that which is reasonably necessary to protect the wife’s interests and the judicial process. In that respect, Senior Counsel for the wife contended that, in the circumstances of this matter, the husband carries the onus of establishing the extent to which his business interests would be adversely impacted by the orders sought by the wife. I respectfully disagree with that contention. The applicant for an injunction bears the onus of satisfying the Court that the circumstances justify the making of the order: Sieling and Sieling (1979) FLC 90-627 at 78,262.
I accept the argument of Counsel for the husband that it is appropriate for the order to be reframed such that the husband is capable of engaging in transactions in the ordinary course of business. Counsel for the husband further contended that the proposed order should be reframed such that it only restrains the husband from engaging in the specified conduct for a period of 28 days after he had provided notice of his intended dealings to the wife. This, it was contended, would enable the wife to seek such relief as she deemed fit to restrain any conduct on the part of the husband which she believed adversely impacted upon her interests.
Senior Counsel for the wife acknowledged that it would be appropriate to reframe the order to permit the husband to engage in transactions in the ordinary course of his business however, contended that, in the circumstances, the wife should not confront the burden of having to reinitiate proceedings in the event that she receives notice of intended dealing or disposition from the husband but rather, the burden should be upon the husband to commence such proceedings in the event that he is of the view that the wife has unreasonably withheld her consent to a request by the husband.
I note that a precondition to the exercise of power pursuant to s 114(3) of the Act is that the Court must be satisfied that in circumstances of the case, it would appear just or convenient for the Court to do so. As such, I am required to have regard to the balance of convenience in terms of its impact upon the respective parties: Blue Seas Investments Pty Ltd v Mitchell and McGillivray (1999) FLC 92-856 at 86,128. Clearly, the dissipation of funds, including those of the magnitude contemplated by the documentation executed by the husband on 30 July 2018, would adversely impact upon the wife’s interests, including her ability to seek the relief set out in her Amended Initiating Application.
While order 4 as sought by the wife would pose a significant restraint on the husband, that restraint would be eased considerably if conduct in the ordinary course of business were exempted. The consequence of the restraint would be further eased if the order made clear that the husband is entitled to seek the wife’s permission to dispose of or encumber any relevant interest and in the event of him seeking that permission, she is not to withhold her consent unreasonably. I accept such an order would impose a burden on the husband of commencing proceedings in the event that the wife does unreasonably withhold her consent. However, that inconvenience is relatively minor in the context of the potential impact upon the wife if the restraint is not made. That impact would be permanent, insofar as it would result in a situation where there would be a real possibility of the marital property being depleted such that the Court would be unable to do justice between the parties at final hearing.
Accordingly, I will amend proposed order 4 to clarify that it does not restrain the husband’s conduct in engaging in the ordinary course of business, including in terms of meeting his taxation responsibilities, and that the husband is able to obtain the wife’s consent to engage in conduct otherwise relevant to the order. I will also clarify the order to make it clear that it does not apply to the husband’s conduct in complying with the orders made in these proceedings or with his child support obligations.
Spousal maintenance
It is to the husband’s credit that he acknowledges that, as result of the responsibilities that the wife has to care for the parties’ children, she is unable to support herself adequately, as contemplated by s 72(1) of the Act. Accordingly, the task is to determine the quantum of spousal maintenance that should be paid by the husband to the wife. The parties agree that the Court must consider the wife’s reasonable needs, the capacity of the husband to meet those needs and the matters set out in s 75(2) of the Act.
In McCrossen & McCrossen (2006) FLC 93-283 at 80,838, the Full Court, after referring to a number of earlier authorities, said that the question as to whether or not a person is able to support themselves “adequately” is:
… not to be determined upon a “subsistence level” but upon consideration of whether the applicant can support himself or herself “adequately” importing a standard of living reasonable in the circumstances. [References omitted].
Once the applicant crosses the evidentiary threshold of establishing the requisite financial need, it is necessary to then establish that the respondent has a capacity to provide for it: Zadenev & Zadenev [2013] FamCA 838 at [25].
The evidentiary requirements in respect to interim applications for spousal maintenance were considered by the Full Court in Redman & Redman (1987) FLC 91-805. In that case, at 76,081, the Full Court said that it was appropriate to maintain some flexibility in approach. Consistent with that decision, in Drysdale & Drysdale [2011] FamCAFC 85 at [40], Coleman J, in exercising the appellate jurisdiction of the Full Court, said:
It is the nature of an interim spousal maintenance order that, as here, it is made after a circumscribed hearing, in reliance upon evidence which is incomplete and/or unable to be fully tested. Whilst different to urgent spousal maintenance pursuant to s 77 of the Act, orders for interim maintenance are as their title implies. The Court hearing and determining financial proceedings between the parties on a final basis, as clearly will occur in this case in the absence of any intervening settlement, has abundant power to accommodate within its final orders, whether by way of settlement of property or spousal maintenance, any anomalies which full agitation of disputed issues of fact may reveal to have resulted from an earlier interim spousal maintenance order.
In an application for spousal maintenance, it is necessary to distinguish between the expenses of the applicant and the expenses of the children of the parties’ relationship: Stein & Stein (2000) FLC 93-004.
Further, trust assets may be a financial resource for the purpose of satisfying a spousal maintenance order where a party has the “capacity to control and deal with the Trust property and to borrow from it”: Ashton & Ashton (1986) FLC 91-777 at 75,661.
In determining the “reasonable ability” of a party to satisfy an order for interim spousal maintenance, the Court is not confined to consideration of that party’s income only, but rather, as stated in Maroney & Maroney [2009] FamCAFC 45 at [56]:
Once a party, …establishes an entitlement to interim spousal maintenance, and such entitlement is quantified in accordance with that spouse’s reasonable needs, an order may be made notwithstanding that the liable spouse could only satisfy the order out of capital or borrowings against capital assets.
The wife’s reasonable needs
The husband contends that despite a request being made by his solicitors for the wife to provide evidence substantiating her claimed expenses, as set out in her Financial Statement, she has failed to do so.
The husband nevertheless concedes that the wife is unable to properly support herself. He says that the best evidence of the wife’s need is that, subsequent to February 2017, he paid to her the sum of $5,000 per month as spousal maintenance ($3,705) and child support ($1,295) and the wife was able to support herself adequately on that amount. That amount is in addition to the mortgage payments that the husband has made and continues to make with respect to the Suburb D property, as well as his payment of expenses in respect to the running and maintenance of the motor vehicle utilised by the wife.
The wife seeks orders for the weekly payment of $2,200 to her by the husband by way of spousal maintenance. The wife contends that her reasonable needs are as set out in her Financial Statement and include the following:
Food and household expenses
a)Food and household supplies at $200;
b)Dry cleaning at $6;
c)Gardening, lawn mowing, roof gutters at $96;
d)Cleaning (house/pool) at $20;
e)Repair of furnishings/appliances at $58;
f)Replacements at $58;
Health expenses
g)Health insurance at $44;
h)Pharmacy Incidentals at $3;
i)Chemist/pharmaceutical at $6;
j)Medical at $21;
k)Dental/orthodontics at $10;
l)Optical at $5;
m)Physio & Osteopath at $28;
n)Naturopath at $20;
o)Counsellor at $70;
Accommodation expenses
p)Mortgage at $365;
q)Municipal/council rates at $43;
r)Water/sewerage rates at $32;
s)Deck maintenance at $39;
t)Replacement of furniture at $39;
u)Plumber/Electrician/Handyman at $15;
v)Air Conditioning Servicing & Cleaning at $5;
w)Firewood at $10;
x)House maintenance/repairs at $39;
y)Carpet and Rug Cleaning at $14;
z)Pest Control at $14;
Utilities
aa)Electricity at $26;
bb)Mobile at $23;
cc)Computer and mobile services at $18;
dd)Telephone/Internet at $33;
Insurance premiums
ee)House contents at $67;
Child care and education
ff)Sport and activities at $5;
gg)Entertainment and outings at $80;
Borrowing expenses
hh)Credit cards repayments (interest only) at $42;
ii)Clothing and footwear at $100;
Transportation
jj)Registration at $17;
kk)Comprehensive insurance/third party insurance at $57;
ll)Petrol at $20;
mm)Service and repairs at $250;
nn)Parking at $10;
oo)Licence at $6;
pp)Car wash at $4;
qq)Car lease at $21;
rr)Road service association/NRMA at $8;
ss)Fares and taxis/Opal card at $7;
Sundry personal expenses
tt)Entertainment at $70;
uu)Travel and Holidays at $192;
vv)Subscriptions and memberships at $3;
ww)Self-education at $5;
xx)Books, papers, periodicals at $10;
yy)Gifts & Christmas at $86;
zz)Hobbies at $10;
aaa)Hairdresser/toiletry at $67;
bbb)Donations at $2;
ccc)Beautician at $33;
ddd)Cosmetics at $8;
eee)Shoe repairs at $4;
fff)Pet food/vet/kennel at $60;
ggg)Apple TV at $5; and
hhh)Foxtel at $9.
In that way, the wife calculates her average weekly expenses as totalling $2,618.
The husband contends, however, that the items of expenditure underlined above are unjustified and/or excessive.
In Hall v Hall [2016] 257 CLR 490, the plurality referred to the relevant extract from Redman & Redman (supra) and said:
No doubt, on an application for an interim order "[t]he evidence need not be so extensive and the findings not so precise" as on an application for a final order. But there is nothing to displace the applicability to an exercise of the power conferred by s 74(1) of the ordinary standard of proof in a civil proceeding now set out in s 140 of the Evidence Act 1995 (Cth).
In that context, the wife’s Financial Statement filed on 6 June 2018 is evidence of her expenditure. However, in circumstances where items of expenditure have been challenged by the husband and no documentary evidence has been produced to support that expenditure, in exercising my discretion pursuant to s 74 of the Act, it is appropriate to consider the reasonableness of the wife’s claims. Taking that approach, I modify the wife’s schedule of claimed weekly expenditure by reducing or deleting the following items:
a)Gardening, lawn mowing, roof gutters reduced to $24 per week;
b)Repair of furnishing/appliances deleted, as covered by items referred to as “Replacement of furniture” and “House maintenance/repairs”;
c)Replacements deleted, as covered by item referred to as “Replacement of furniture”;
d)Mortgage deleted;
e)Deck maintenance deleted, as covered by item referred to as “House maintenance/repairs”;
f)Plumber/electrician/handyman deleted, as covered by item referred to as “House maintenance/repairs”;
g)Carpet and rug cleaning deleted, as covered by item referred to as “House maintenance/repairs”;
h)Pest control deleted, as no evidence provided of infestation or costs incurred;
i)Entertainment and outgoings deleted, as this item is duplicated;
j)Clothing and footwear reduced to $25 per week, which is equivalent to $1,300 per year;
k)Travel and holidays reduced to $40 per week, which is the equivalent to $2,080 per year; and
l)Gifts and Christmas reduced to $20 per week, which is equivalent to $1,040 per year.
At the hearing, it was agreed that the husband will continue to meet the expenses in respect to the wife’s motor vehicle, as follows:
a)Registration at $17;
b)Comprehensive third-party insurance at $57;
c)Service and repairs at $250; and
d)Car lease at $21.
I do not intend to make any reduction in respect to the item “Pet food/vet/kennel” in respect to the family’s pet dog, which is also a comfort dog for X. It is not clear that Counsel for the father had the opportunity to obtain specific instructions in respect of that matter, however it is my view that the submission to the effect that that item of expenditure should be attributed to X, rather than the wife, was, in the circumstances of this case, perhaps a little severe.
Accordingly, that revision of the items contained in Part N of the wife’s Financial Statement leads to a total figure of $1,265 per week.
The husband’s capacity
The husband accepts that he has the capacity to pay spousal maintenance to the wife in the sum of $855 per week. In my view, he has the capacity to pay an additional $410 per week. This is evidenced by the following discretionary payments made by the husband:
a)$5,479 paid to V Lodge at Town W on 31 December 2017; and
b)Various payments made to Ms N in the period subsequent to 30 November 2015, which are set out in pages 221 to 236 of the wife’s tender bundle.
However, even if I am wrong in making that assessment, I note that, consistent with the authority of Maroney & Maroney (supra), the husband has, according to his own evidence, a joint interest in the 12 unsold units at the E development. In his draft balance sheet, the husband contends that the value of the 50% interest retained by his parents in the E development is $1,839,730. As I understand, the husband contends that, after deduction of the increased indebtedness and income tax liability associated with interest and penalties, his interest in the E development, through the Mr Labonte Family Settlement, is $1,595,369.
In addition, in his Financial Statement, the husband acknowledges that he is owed the following monies:
a)Loan to Labonte Family Discretionary Trust at $378,929;
b)Loan to Labonte Holdings Pty Ltd at $33,121; and
c)Loan to Ms N at $750,000.
Accordingly, I am of the view that the husband has the capacity to pay spousal maintenance to meet the reasonable needs of the wife, which I have determined to be $1,265 per week. For reasons which I set out below, having regard to those matters set out in s 75(2) of the Act, I am satisfied that it is reasonable to make an order requiring the husband to pay that total amount to the wife by way of spousal maintenance.
What order is reasonable having regard to section 75(2) of the Act?
Section 75(2) of the Act sets out various matters that the Court is required to consider in determining what order for spousal maintenance is appropriate.
I have had regard to all of the matters set out in s 75(2). Most relevantly, however, for the purpose of this interim application, is the fact that the wife is 44 years of age and while she is in relatively good health, she has been out of the workforce since the birth of the parties’ child X on 30 March 2010. As I have indicated, a tragic aspect of these proceedings is the fact that X suffers from a very serious illness and requires constant around-the-clock care. While the mother receives some assistance in providing that care, it is a burden that falls substantially upon her. In those circumstances, it is not possible for the wife to obtain an independent source of remuneration.
During the course of the proceedings, Counsel for the husband submitted that evidence of the wife’s parents assisting her in respect to the legal fees she has incurred indicates that the wife has an alternative financial resource. In circumstances where the wife’s parents have contributed a relatively small amount towards the wife’s legal fees and in circumstances where there is no other evidence regarding the financial circumstances of the wife’s parents, I do not find that the wife has an alternative financial resource in the form of support from her parents.
Accordingly, in those circumstances, it is appropriate for an order to be made for the husband to pay $1,265 per week to the wife by way of spousal maintenance, being the total quantum of her reasonable weekly needs.
Partial property distribution
As noted above, the wife is seeking orders that the husband pay to her solicitor’s trust account the sum of $150,000. It is acknowledged that that interim distribution is sought in respect to payment of the wife’s legal fees. The orders sought would require “the nature of such payment to be characterised at the final hearing of this matter”.
In Quayle and Perceval [2018] FamCA 664 at [51], I noted that:
The difficulty with such an order is, however, that it requests the judicial officer to delegate to perhaps another judicial officer, at a subsequent point in time, the task of categorising the basis upon which the order is made. This effectively prevents the opportunity for review by the party who is adversely impacted by any such order. To make such an order would be inconsistent with the obligation placed on a judicial officer to act judicially and, specifically, to act in accordance with the principles of procedural fairness.
In Kirk v Industrial Relations Commission of New South Wales (2010) 239 CLR 531 at [122], Hayden J cautioned that it was important for specialist courts not to lose touch with “traditions, standards and mores of the wider profession and judiciary”. The obligation for a judicial officer to provide reasons for the exercise of discretion is a fundamental legal principle. It is a principle that applies in interim proceedings, as much as it does at a final hearing.
In Jefferson & Coulston [2014] FamCA 1083 at [31] to [32], Tree J voiced doubt as to whether a trial judge “can, in effect, undo the juridical basis for a previous order”, which his Honour described as seeming to involve “some curious form of judicial alchemy”.
During the course of the hearing, the argument advanced by Senior Counsel for the wife in support of such an order being made was presented in terms of ss 79 and 80(1)(h) of the Act. In combination, those sections confer power on the Court to make orders for interim property distributions. Section 80 of the Act is not, in itself, a source of jurisdiction for the making of an order for the partial distribution of property in interim proceedings. Rather, that section is an “enabling provision” that provides various ways in which the general power contained in s 79 may be exercised in individual cases. In that respect, in Davidson and Davidson (No 2) (1994) FLC 92-469 at 80,874, the Full Court stated:
Section 80(1) is limited by its introductory words, namely that “The court, in exercising its powers under this Part, may do any or all of the following ...” That is, s. 80(1) is activated by the exercise by the court of some other of the powers in Part VIII.
As noted, in this matter, both parties have sought orders for a partial property distribution prior to a final hearing. No issue was taken regarding the Court’s power to make such orders: Gabel & Yardley (2008) FLC 93-386, as cited in Strahan & Strahan (Interim Property Orders) (2011) FLC 93-466 at 85,640.
In Strahan at 85,656, Thackray J said:
…it is important to note that s 80(1) is couched in the permissive. Hence, although the Court must give consideration to the matters set out in s 79(4) when hearing an application for an interim payment, it has no obligation to make an interim order. The Court “may” do so if it considers that it should in the exercise of its discretion.
In Strahan, the Full Court held that there are two steps to considering an application for an order for partial property distribution prior to final hearing:
a)The first step is to resolve whether to exercise the power before a final hearing. This is a “procedural step” which requires an analysis of whether the circumstances of the case trigger the Court’s power to invoke s 80(1)(h) of the Act to make an order for an interim property settlement. At this stage, the “overarching consideration” is the interests of justice; and
b)The second step involves a consideration of whether it is just and equitable to make such an order, having regard to the matters set out in s 79(4) of the Act.
In approaching the determination of the first issue, the Full Court said at [132]:
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 s 79 is a once and for all order made after a final hearing.
There is no issue that an order for partial property distribution to provide funding for litigation expenses is a legitimate purpose, in terms of the application of the first test adumbrated in Strahan. In that respect, in Blueseas Investments Pty Ltd & Mitchell (supra) at 86,128, the Full Court said that:
...highly relevant matter that distinguishes litigation under the Family Law Act from ordinary civil litigation ... is the fact that very often the wealth of the parties is controlled by one rather than both of them.
In those circumstances, it has been observed that “[i]t is important that if possible, an attempt is made to level that field”: Iphostrou & Iphostrou [2011] FamCA 20 at [60].
In Wenz & Archer (2008) 40 Fam LR 212 at [52], Riethmuller FM (as he then was) said that the second step, as subsequently confirmed in Strahan:
… requires a consideration of the matters relevant to making a final order under s.79, not the least of which is that the order be ‘just and equitable’: s.79(2). In order to determine whether or not to exercise, on an interim basis, the power under s.79, the case must be first analysed in terms of s.79 to identify the range of outcomes that may flow in final orders. Whether it is just and equitable to make interim orders will require a balancing of the risks of unduly limiting the final orders that can be made (or even potentially defeating parties’ claims or legitimate expectations) against the circumstances said to show that it is just and equitable to make interim orders.
In this matter, both parties contend that it is just and equitable to make an order for the partial distribution of property, albeit, in the wife’s application, only for there to be an adjustment in her favour, at this time.
In interim proceedings, it is not necessary for me to give detailed consideration to the issues set out in s 79(4) of the Act. Nevertheless, having regard to those considerations, I am satisfied that the husband made a greater initial contribution to the property of the marriage. During the course of the parties’ relationship, they both made a significant contribution. The husband’s contribution was primarily financial in nature and the wife acted as homemaker and primary carer for the parties’ children. This included, as I have discussed above, the challenges of caring for X virtually on an around-the-clock basis.
It is to be noted that, in his Second Amended Response to the wife’s Initiating Application filed on 16 August 2018, the husband acknowledges that, on a final basis, there will likely be an adjustment of the parties’ interests in the matrimonial property such that the Suburb D property should be transferred to the wife. The draft balance sheet proposed by the husband contends that that property is valued at $1,350,000 and is presently encumbered by a mortgage of $591,727. On the basis of that proposed final order, the wife would receive equity in the Suburb D property of $758,273. In those circumstances, it is difficult to understand the basis of the husband’s contention, as set out in the draft balance sheet, that the net assets available for distribution between the parties, excluding superannuation, are in the sum of $356,433. Nevertheless, in circumstances where orders will be made that are adverse to the interests of the husband, I accept the husband’s evidence regarding the valuation of the Suburb D property.
Even accepting that net figure as proposed by the husband, I am satisfied that the order for partial property distribution sought by the wife could be accommodated within any reasonably likely range of orders providing for the adjustment of the parties’ property at final hearing. Based on his own contentions, I am not, however, satisfied that the order proposed by the husband for a partial property distribution of $150,000 to both the husband and the wife could be so accommodated.
In Medlow & Medlow (2016) FLC 93-692 at 81,090, the Full Court said:
The onus was clearly upon [the applicant for relief] to establish that there were sufficient assets available for the interim distribution and that the effect of any interim order was capable of being reversed as part of the final hearing or at least would not defeat [the respondent]’s property claim. The onus was not on the [respondent] to adduce such evidence.
Based on the figures provided in the husband’s balance sheet, the relief sought by him in these interim proceedings would result in there being assets worth $56,433 available for distribution between the parties at final hearing. That amount would be insufficient to accommodate a likely adjustment of property such that the wife received the equity that the husband proposes in order 1 of the final property orders that he seeks in his Second Amended Response filed on 16 August 2018.
As previously noted, the question as to whether an order is made for a partial property distribution, at a point in time prior to final hearing, is discretionary. In circumstances where there are, on the husband’s case, insufficient funds to accommodate a distribution to both parties, I must determine whether it is appropriate to make an order for there to be a partial property distribution in favour of the wife only.
I am satisfied that it is appropriate to make such an order, having regard to the desirability of attempting to “even out” the litigation playing field in accordance with the authorities to which I have earlier referred. In that respect, the costs disclosure statement provided by the husband (Exhibit “5-H”) indicates that he has paid the sum of $162,601.68 in respect to his legal fees to date. While it was accepted that the husband has borrowed funds in order to meet those legal fees, his capacity to borrow against his property in order to raise those funds is a relevant consideration.
No similar capability was suggested in respect to the wife although, as I have noted, the husband contends that the wife’s parents are a potential financial resource for her. In that respect, the costs notice provided by the wife (annexed to her Affidavit filed on 10 September 2018) confirms that her mother has paid $20,000 and her father has paid $36,915.23 in respect to those legal fees. The fact that the wife’s parents have assisted her in conducting this litigation does not, for the reasons I have previously set out, establish that they are a financial resource for the wife. In those circumstances, I am satisfied that it is just and equitable for there to be an order for the partial distribution of property to the wife in order for her to properly prepare her case.
The question, therefore, becomes what that amount should be. It is to be noted that the wife seeks the sum of $150,000. For reasons which I will explain, I am not satisfied that it is appropriate for the Court, at this stage, to make orders that would fund the wife’s litigation beyond the point of the Conciliation Conference that the parties are required to attend before this matter is set down for hearing.
Relevantly, Rule 12.07(2) of the Family Law Rules 2004 (“the Rules”) provides that:
Each party at a conciliation conference must make a genuine effort to reach agreement on the matters in issue between them. [Emphasis added].
That obligation also needs to be seen in the context of the main purpose of the Rules, which is described in Rule 1.04 as being “to ensure that each case is resolved in a just and timely manner at a cost of the parties and the court that is reasonable in the circumstances”.
It is to be noted that Rule 1.04 is consistent with the obligation of parties and practitioners under ss 37M and 37N of the Federal Court of Australia Act 1976 (Cth) (“the Federal Court Act”). Specifically, s 37M(1) of the Federal Court Act provides:
The overarching purpose of the civil practice and procedure provisions is to facilitate the just resolution of disputes:
(a) according to law; and
(b) as quickly, inexpensively and efficiently as possible.
Significantly, both the Federal Court Act and the Rules refer to the resolution of disputes and do not exist simply to facilitate matters being prepared for and presented in Court. While in no way suggesting that the legal practitioners involved in these proceedings would do other than comply with their professional obligations, there is a concern regarding the potential for orders for funds to be deposited into a solicitor’s trust account to create a perception of conflict of interest as against the practitioners’ obligation to act consistently with the main purpose of the Rules.
In other words, the parties, the Court and the public are entitled to assume that legal practitioners will comply with their obligations under the Rules, which includes, as described by Tracy J in Mijac Investments Pty Ltd v Graham [2013] FCA 296 at [49]:
…. a practitioner offering objective and considered advice to a client. This includes advice as to matters such as whether a proper basis in law exists for the making and pursuit of a particular application and the contents of any affidavits sworn in support of such an application. Without such advice, the just resolution of disputes according to law and as quickly and inexpensively as possible may well be hampered, if not frustrated
There is similarly an obligation to not unreasonably fail to accept an offer. This is made clear by Greenwood J in Julstar Pty Ltd v Hart Trading Pty Ltd [2014] FCA 108, where his Honour said at [94] that achieving the overarching purpose of a just resolution involved parties “not unreasonably failing to accept an offer” and “required the applicant is to carefully assess all the material, including the discovered material, to determine and confront the strengths and weaknesses of their case”.
As stated by Jagot J in Sklavos v Australasian College of Dermatologists [2013] FCA 1065 at [35]:
These provisions are not merely exhortatory. The duty is real and can be enforced, if necessary, by appropriate costs orders.
That obligation applies to both parties and practitioners. Indeed, as Gray J observed in Modra v Victoria (Department of Education and Early Childhood Development and Department of Human Services)(2012) 291 ALR 429 at [31]:
… the impact of those sections on the obligations of legal practitioners practising in this Court is significant.
In summary and by way of conclusion, on this point, this Court similarly takes seriously the obligations placed on practitioners and parties attending a Conciliation Conference to “make a genuine effort to reach agreement”.
For those reasons, I am not satisfied that it is appropriate for the Court to make an order that will provide litigation funding for the wife beyond the Conciliation Conference. Such an order would assume that the parties will be unable to resolve the matter at the Conciliation Conference. I am not satisfied that is the case.
Accordingly, the amount that I will require the husband to pay to the wife by way of a partial property distribution will be in respect to the wife’s outstanding legal fees totalling $39,166.99, anticipated legal fees up to and including the interim hearing on 11 September 2018 of $31,600 and anticipated legal fees up to and including the Conciliation Conference of $30,800, being a total of $96,567.
Dollar for dollar order
As previously noted, the wife sought a dollar for dollar costs order in the alternative to an order for a partial distribution of property. As I have made an order for partial distribution of property, I do not consider that aspect of the wife’s application.
Orders
For all of these reasons I make the orders set out at the commencement of these reasons for judgment.
I certify that the preceding one hundred and thirty-four (134) paragraphs are a true copy of the reasons for judgment of the Honourable Justice McClelland delivered on 24 September 2018.
Associate:
Date: 24 September 2018
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