Leal and O’Hegarty (No 2)

[2013] FamCA 987

FAMILY COURT OF AUSTRALIA

LEAL & O’HEGARTY (NO 2) [2013] FamCA 987

FAMILY LAW – PROPERTY –Where the wife sought a number of interim orders including spouse maintenance, partial property settlement and injunctions – Where the husband sought dismissal of the wife’s applications and a variation of an interim order for spouse maintenance –Where the husband failed to establish that there has been a change in his financial circumstances which would warrant a variation to the spouse maintenance order and a discharge of the provision for payment of the wife’s rent – Where the husband’s applications are dismissed – Where it was unclear at the conclusion of the interim hearing as to the quantum of any arrears of spouse maintenance and unpaid rent – Where the wife bore an onus to provide clear evidence of the quantum of the arrears and a calculation of that sum – Where the evidence presented to the court was insufficient and unclear to enable a calculation of the quantum of arrears with respect to of spouse maintenance and unpaid rent and as a consequence that part of the wife’s interim application is dismissed – Where the wife made no submission to justify the making of the injunctions sought within the parameters of Waugh & Waugh(2000) FLC 93-052 and as a consequence that part of the wife’s interim application is dismissed – Where order made with respect to partial property settlement for sale of the husband’s motor vehicle and payment of net proceeds into the trust account of the wife’s solicitor.

Family Law Act 1975 (Cth)
Waugh & Waugh (2000) FLC 93-052

APPLICANT: Ms Leal

RESPONDENT: Mr O’Hegarty

FILE NUMBER: SYC 3101 of 2012

DATE DELIVERED: 5 November 2013

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Stevenson J

HEARING DATE: 14, 15 October 2013

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Cook

SOLICITOR FOR THE APPLICANT:

COUNSEL FOR THE RESPONDENT: Mr Johnston

SOLICITOR FOR THE RESPONDENT: Titan Legal

Orders

1. That, with the exception of paragraph 7, all applications for interim orders contained in the Outline of Case Document submitted on behalf of the wife, and dated 15 October 2013, are dismissed.

2. That the husband forthwith do all things and execute all documents required to effect the sale of the [European motor vehicle 1] and to lodge the net proceeds of such sale in the trust account of a solicitor nominated by the wife.

3. That the husband’s applications for variation of order 16 made on 20 June 2012 and discharge of order 17(c) of the same date are dismissed.

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

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYC 3101 of 2012

Ms Leal

Applicant

And

Mr O’Hegarty

Respondent

REASONS FOR JUDGMENT

the proceedings

1. On 20 June 2012 Federal Magistrate Kemp (as his Honour then was) ordered as follows: 

   16.      From the date of these Orders the Respondent shall pay by way of periodic spouse maintenance to the Applicant the amount of $600.00 per week, with the first such payment subsequent to the making of these Orders to be made on 21 June 2012 and each payment on Thursday of every week thereafter.

   17.      In addition to the spouse maintenance otherwise payable pursuant to these Orders, the Respondent shall pay by way of spouse maintenance for the Applicant all costs of the following:

   a.Private Health Insurance for the Applicant of the highest available hospital and extras cover.”

   and

   c. Up to $600.00 per week directly to the landlord in respect of any accommodation obtained by the Applicant, as well as the amount reasonably required as a security bond, and any amount required by the landlord for advance rent as and when such payments.

2. On 7 September 2012 Ryan J ordered as follows: 

   4.No later than five (5) months from today’s date the husband is to pay a further $75,000.00 by way of partial property settlement in the wife’s favour to the trust account of the solicitor nominated by the wife.

3. On 15 October 2013 a number of interim applications were listed for hearing.  In a Minute of that date the applicant wife sought the following orders: 

   Spouse Maintenance

   1.The Respondent do all acts and things necessary to direct CommInsure forthwith to pay to the Applicant Wife’s nominated bank account the amount of $6,000.00 on or before the 1^st day of every month commencing 1 November 2013 and for each month thereafter up to and including May 2014 from his monthly total and permanent disability benefits (being part payment of unpaid spouse maintenance as at the date of these orders).

   2.The Respondent do all acts and things necessary to direct CommInsure forthwith to pay to the Applicant Wife’s nominated bank account the additional amount of $4,750.00 on or before 1 June 2014 from his monthly total and permanent disability benefits (being final payment of unpaid spouse maintenance as at the date of these orders).

   3.The Respondent do all acts and things necessary to direct CommInsure forthwith to pay to the Applicant wife’s nominated bank account the additional amount of $4,000.00 on or before the 1^st day of every month commencing 1 November 2013 and for each month thereafter pending further order by the court from his monthly total and permanent disability benefits (being ongoing spouse maintenance payments).

   4.The Applicant Wife inform the Child Support Agency of the payments received pursuant to order 1 above as and when they occur so as to reduce the debt accrued by Child Support for unpaid spouse maintenance.

   Child Support

   5.The Respondent do all acts and things necessary to inform the Child Support Agency forthwith of his annual taxable income amount being $192,000 from the period July 2009 to present and continuing.

   Partial Property Settlement

   6.Within 14 days of the date of these orders the Respondent do all things and sign all documents to cause the sale of the [European motor vehicle 2] to be sold and pay the total amount of the proceeds of sale to the trust account of the solicitor nominated by the Applicant.

   7.Within 14 days of the date of these orders the Respondent do all things and sign all documents to cause the sale of the [European motor vehicle 2] to be sold and pay the total amount of the proceeds of sale to the trust account of the solicitor nominated by the Applicant.

   8.No later than one (1) month from today’s date the husband is to pay the balance of up to $75,000.00 that has not been paid to the wife from the sale of motor vehicle(s) in orders 6 and 7 above.

   Injunctions

   9.The Respondent is restrained from using any funds in excess of $1,500.00 per week without the consent of the Applicant in writing pending further order of the court.

   10.…

   11.The Respondent is restrained from further encumbering any property which is the subject of these proceedings including but not limited to real estate, motor vehicles, shares, companies and trading accounts.

   Costs

   12.The Respondent pay the Applicant’s costs of and incidental to these proceedings.

4. In a Case Outline Document counsel for the respondent husband indicated that he sought dismissal of the wife’s applications and a discharge of the “existing maintenance orders”.   In written submissions counsel for the husband clarified that he sought:

   ·    dismissal of the wife’s application for enforcement of the order that the husband pay to the wife a sum of $75,000.  It was said that there exists no enforceable order for payment of that sum by the husband.

   ·    dismissal of the wife’s application for payment of an amount of $29,600 on account of arrears of spouse maintenance.  It was contended that there is no such outstanding debt.

   ·    dismissal of the wife’s application for an order that the husband direct CommInsure to pay the arrears and periodic sums of spouse maintenance.  It was submitted that such an order cannot be made because CommInsure is not a party to the proceedings.

   ·    variation of an interim order for spouse maintenance from $600 to $500 per week on the basis of “his financial circumstances”

   ·    discharge of the order for payment of an amount of “up to $600 per week” to the wife’s landlord.  This order was said to be warranted on the basis of the husband’s financial circumstances.

   ·    dismissal of the wife’s application for injunctions.  It was submitted that she failed to establish any basis for such orders, within the parameters of authorities such as Waugh and Waugh (2000) FLC 93-052.

5. In final submissions counsel for the wife indicated that she did not press her application for an interim child support departure order.  I was advised  that she proposes to approach the Child Support Agency for a Review when these interim applications are determined and there is greater clarity as to her current financial position.

Background

1. The husband was born in 1958 and is now 54 years of age.  He is a solicitor who receives income from an insurance policy with CommInsure, following a subarachnoid haemorrhage (“stroke”) which he suffered in 2009.  This policy is owned by a company known as E Pty Ltd.  That company, together with an entity known as F Legal and the O’Hegarty Family Trust all pay or have met recurring expenses for the benefit of the husband.

2. The wife was born in 1975 and is currently 37 years of age.  She contended that she presently has no paid employment and there was no evidence to the contrary.

3. The parties commenced cohabitation in 2001 and married in 2003.  They have three children:

   B born in 2003 (10)

   C born in 2006 (7)

   D born in 2009 (4).

   On 6 September 2013 interim orders were made which provided that the children live with each party on a week-about basis.  These orders also provided that the children spend Tuesday night with the parent who is not their primary carer in a particular week. 

4. The wife has two children of a previous marriage:

   G born in 1994 (18)   and

   H born in 1998 (15).

   The husband has a daughter of a previous relationship, namely J, born in 1995 and now 18 years of age.

5. The company E Pty Ltd was incorporated in 1988.  A number of people have acted as directors of the company during the last twenty-five years. The current directors are the husband and Mr K.  There are three issued shares in the company.  One share is held by the husband, apparently on trust for the O’Hegarty Family Trust.  The remaining two shares are held beneficially by Mr L and Mr M.

6. In 1999 the husband established a practice known as F Legal, which he caused to be incorporated in approximately 2001.  The husband is the managing director of F Legal.  Since 2001 the husband has provided legal services by F Legal pursuant to a contract with E Pty Ltd.

7. In approximately 2008 E Pty Ltd took out an income protection policy with CommInsure in relation to the husband.  As noted, the husband suffered a stroke in July 2009.  Apparently CommInsure disputed liability, for reasons which are irrelevant for present purposes, but ultimately agreed to honour the terms of the policy.

8. Pursuant to this insurance policy, E Pty Ltd receives $16,604 per month.  There was a dispute as to the amount which the husband receives from that money, which I will consider below in these reasons.

9. According to the husband, F Legal was placed in liquidation on 19 March 2013.  He maintained that there is no prospect of a dividend being paid to creditors and/or shareholders.  There was no evidence or submission to the contrary. 

10. There was some indication that the husband is in the process of establishing another legal practice known as O Legal.  The wife annexed to her affidavit of 2 May 2013 a copy of an email, which she asserted that the husband sent to Mr N.  This email read as follows:

    Hi [Mr N]

    I know you said you are interested in investing in the new firm when I got to it – well the time is here – I have the new structure in place and am in the final stages of moving the major client matters over to the new firm.  I am aiming to raise $200K over the next 3 months - $100K now and then another $100K in Feb or March.  Cash flow is pretty good so that will do it.  The offer to you is 15% of the firm for being the foundation investor with the first $100K.  As there is no big “upside” I have structured this to give you your money back in Y2 (2014) and you continue to receive 15% dividends ongoing with a “guaranteed” 10% preferred dividend.  I think it’s a pretty good offer.

    See attached an Information Memo for your consideration.

    I am keen to get this done so I can get a clean start after returning from my break so give me a call old son.

    Regards

    [Mr O’Hegarty]

11. In his submissions counsel for the husband said words to the effect “the [O Legal] and [Mr N] issue has been judicially determined and is subject to res judicata”.  This proposition was taken no further, which left me with no idea what judicial decision may have been made in respect of that issue.  I draw from this part of the evidence no more than an inference that the husband has the capacity and intention to engage in gainful employment in the future.  He gave his occupation as “solicitor” in his Financial Statement of 28 August 2012 and affidavits sworn on various dates.

12. On 9 September 2013 the National Australia Bank issued a Notice of Default in respect of its mortgage on the title to the former matrimonial home at P Road, Q Town.  The husband has now agreed to provide vacant possession to the mortgagee no later than 1 November 2013.  He deposed in his affidavit of 14 October 2013 that he and the children moved to rented premises in R Town on 27 September 2013.

13. These proceedings were rendered more complex and difficult to resolve by the plethora of written evidence submitted by the parties.  The pile of affidavits and annexures had a thickness of some eleven centimetres, although in fairness I acknowledge that the husband’s lawyers relied only on selected parts of this material.  I was not assisted, however, by the husband’s failure to file a Financial Statement more recently than 28 August 2012.

Consideration

Arrears of Spouse Maintenance and Unpaid Rent

1. The wife sought orders that the husband do all things necessary to direct CommInsure to pay certain amounts by way of arrears of and ongoing spouse maintenance.  On behalf of the wife it was submitted that “the husband has the power to direct that payments are made so that he could direct payments to the wife and he could alleviate the problems”.  On behalf of the husband, it was submitted that “an order directing payments by CommInsure would have no effect because there would be no certainty about the how the directors and shareholders will act”.  In reply, counsel for the wife submitted that “CommInsure accepts the husband as a person who directs payment”. 

2. The reality is that the husband is but one of two directors of E Pty Ltd.  There are two other shareholders in the company.  Nothing in the evidence suggested that the husband holds any kind of casting vote, by which he could compel the company to direct CommInsure to make payments to the wife.  It may be that the husband has entered into some arrangement with the other director and shareholders which enables him to direct CommInsure to make income protection payments to E Pty Ltd.  I cannot assume that these people would cooperate in allowing the husband similarly to direct payments to the wife.

3. The husband deposed that, on 20 August 2013, the Child Support Agency wrote to CommInsure and sought to garnishee the income protection benefit in order to pay an alleged debt to the wife.  On 27 August 2013 an officer of the insurance company replied to the Agency in the following terms: 

   We refer to your Notice to Pay Money Directly to the Child Support Registrar, dated 20 August 2013.

   The Notice states that Colonial Mutual Life is obliged to pay money to [Mr O’Shannasy].  That is not the case.

   [Mr O’Shannasy] is the life insured under a policy of income protection cover issued by Colonial Mutual.  However he is not the owner of the policy.  The policy owner is [E Pty Ltd].

   Pursuant to the terms of the policy, in the event of [Mr O’Shannasy’s] disablement, certain benefits are payable by Colonial Mutual to the policy owner, but not to [Mr O’Shannasy].

   Accordingly it appears to us that the Notice is invalid and of no effect.  If you believe that we are mistaken in this regard, please advise the basis upon which you assert that Colonial Mutual is obliged to withhold and pay to the Registrar in the amount nominated in the Notice.”

4. There was an issue as to the quantum of any arrears of spouse maintenance.  The evidence on this topic remained convoluted and confusing at the end of the interim hearing.  In her affidavit of 14 January 2013 the wife deposed to arrears of spouse maintenance in an amount of $3,600 and unpaid rental of $5,400, making a total of $9,600.  In her affidavit of 19 February 2013 the wife deposed to arrears of rental amounting to $9,600.  In her affidavit of 2 May 2013 the wife deposed to arrears of spouse maintenance of $29,600 and unpaid rent of $17,000.  Insofar as I could comprehend her evidence, the wife deposed in her affidavit of 5 August 2013 that arrears of spouse maintenance and unpaid rental amounted to $44,200 and $12,181 respectively.

5. On behalf of the husband, it was contended that there are no arrears of spouse maintenance.  He conceded that he reduced spouse maintenance payments to $500 per week and annexed a Child Support Agency printout of payments which he made between 24 May 2013 and 10 October 2013.  He claimed that the spouse maintenance order stands paid to 7 October 2013.

6. In formulating this submission, the husband seemed to treat as payments of spouse maintenance a sum of $15,000 which the wife allegedly withdrew from the trust account of F Legal on 7 December 2012.  He asserted that he was required to borrow this sum in order to regularise the trust account.  He asserted further that the parties reached a private agreement whereby he paid to the wife an amount of $13,000, which would be credited against his spouse maintenance liability. 

7. At the end of the interim hearing I was left in a state of confusion as to the quantum of any arrears of spouse maintenance and unpaid rent.  I was provided with no calculation of the amount of alleged arrears.  It seems to me that the wife bore an onus to provide clear evidence of the quantum of these arrears and a calculation of that sum.  I consider that the evidence with which I was presented was insufficient and/or so confusing that I cannot calculate the quantum of arrears, if any, of spouse maintenance and unpaid rent.  Accordingly, I perceive that I have no option but to dismiss that part of the wife’s interim application.  Nothing prevents the wife from pursuing this matter at a later time, with the benefit of proper supporting evidence.

Ongoing Periodic Spouse Maintenance and Rental Payments

1. As noted, orders were made on 20 June 2012 that the husband pay spouse maintenance of $600 per week and a further sum of “up to $600 per week” on account of the wife’s rental.  The husband now seeks to vary the interim spouse maintenance payment from $600 to $500 per week.  He sought to discharge the order that he pay an amount of “up to $600 per week” on account of the wife’s rent.  The written submissions of the husband’s counsel identified his position in relation to these orders.

2. As noted, the husband chose not to file an updated Statement of Financial Circumstances although he asserted that there has been a significant deterioration in his position.  He gave limited evidence as to his current financial circumstances in his affidavit of 30 August 2013.

3. The husband deposed that he “expects to receive” an amount of $8,000 per month from E Pty Ltd and that he will have exclusive use of a motor vehicle “paid for by [E]”.  In his affidavit of 30 August 2013 the husband set out his monthly expenses as follows: 

Respondent Husband’s Financial Forecasts (as at August 2013)	Monthly
Income
E Pty Ltd	$8,000.00
TOTAL INCOME	$8,000.00
Expenditures
Rental accommodation	$2,365.00
Food and Consumables	$600.00
Occupancy costs (gas & electricity)	$200.00
Phones/Comms	$120.00
Health insurance	$380.00
School fees	$2,000.00
MV Operating	$200.00
Spousal Maintenance	$2,150.00
TOTAL EXPENDITURES	$8,015.00

I did not understand why the husband would be required to pay $200 per month on account of “motor vehicle expenses”, in light of his evidence in the same affidavit that these costs will be met by E Pty Ltd.

1. The husband’s asserted monthly expenses included an amount of $2,000 on account of school fees.  The contents of exhibit 7, however, suggested strongly that he does not make these payments on a regular basis.  He paid a total of $136,300 between 7 March 2010 and 26 September 2013.  As at 26 September 2013, the school fees were in arrears in an amount of $149,716.

2. The wife relied upon the contents of the husband’s application for finance from Nissan Financial Services dated 20 March 2012 (page 62 of annexures to the wife’s affidavit of 22 May 2013).  In that application the husband represented that he had a total income of $15,900 and that his employer was F Legal.  As noted, however, it appears that F Legal is in the process of liquidation.  In my view, this evidence does not assist the wife’s case.

3. My conclusion is that the husband failed to establish that there has been a change in his financial circumstances which would warrant a variation to the spouse maintenance order and a discharge of the provision for payment of her rental.  He could have assisted his case by filing an undated Statement of Financial Circumstances, for example, but he chose not to do so.  I will dismiss these applications of the husband.

Partial Property Settlement

1. The wife sought orders to the effect that the husband cause the sale of two European motor vehicles, so to facilitate compliance with the orders of 7 September 2012 that he pay a sum of $75,000 into the trust account of her solicitor.  On behalf of the husband it was contended that this order “was contingent upon the husband making a successful application to NAB.  The application was made on 21 September 2012 and was rejected”. 

2. I was at a loss to understand how this submission could be made, having regard to the transcript of proceedings before Ryan J on 7 September 2012 (exhibit 1). Her Honour said: 

   HER HONOUR:  ---with Mr Moylan.  This is conditional upon your client being able to secure a further $75,000.  He has got millions of dollars at his disposal or under his control, Mr Moylan.  I’m quite prepared to accommodate order 1, order 2 but not have the ultimate payment of the balance of $75,000 contingent upon success of that loan application.  It’s for your client to organise his financial affairs.  Maybe has to sell the [European motor vehicle], I don’t know.” (emphasis added)

3. It is thus abundantly clear that this order was in no way contingent upon the husband obtaining a loan from the National Australia Bank.  Accordingly it is not the case that there is no enforceable order for the payment of that amount of $75,000, as contended on behalf of the husband.

4. It seems to me, however, that there is a fundamental difficulty with this application of the wife.  It seems that the husband owns only the European motor vehicle 1.  The undated Joint Balance Sheet annexed to the husband’s affidavit of 5 March 2013 showed that both parties accepted that the European motor vehicle 2 was the property of E Pty Ltd.  The same document stated that the husband was the owner of the European motor vehicle 1.  The latter motor vehicle had an estimated value of $130,000 or $160,000 and was encumbered to the extent of $120,000 or $130,000.

5. I have referred above to the directorship and shareholding structure of E Pty Ltd.  I repeat that I cannot assume that the husband’s co-director and the other two shareholders would act so as to permit the sale of the European motor vehicle 2.  Accordingly, I cannot see my way clear to making that order sought by the wife.

6. I was informed by the husband’s counsel that the European motor vehicle 1was “sold for no profit” in August 2013.  No evidence to that effect was adduced in the case for the husband.  Accordingly I propose to order that the husband effect the sale of that motor vehicle and pay the net proceeds into the trust account of the wife’s solicitor.

Injunctions

1. The wife sought an order that the husband be restrained from “using any funds in excess of $1,500 per week without the consent of the applicant in writing pending further order of the court”.  I was taken to no specific evidence in support of this application.  I was provided with no submission which would justify the making of this order within the parameters of the authority Waugh & Waugh 2000 FLC 93-052.

2. The wife also sought an order that “the respondent is restrained from encumbering any further property which is the subject of these proceedings including but not limited to real estate, motor vehicles, shares, companies and trading accounts”.  Similarly, I was taken to no specific evidence in support of this application.  I was given no submission to justify the making thereof within the parameters of Waugh & Waugh. 

3. The wife proffered no undertaking as to damages as part of her evidence in support of these injunctive orders.  A further difficulty with this application, in my view, is the breadth and non-specificity of the proposed restraint in respect of encumbrance of “property”.  I am not prepared to make an order in such vague terms.  I am likewise not prepared to make an order which restrains the husband from “using any funds in excess of $1,500 per week” without specific evidence and submissions in support thereof.

I certify that the preceding forty (40) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Stevenson delivered on 5 November 2013.

Associate:     

Date:              5 November 2013