LEAL & O’HEGARTY
[2015] FamCA 386
•25 May 2015
FAMILY COURT OF AUSTRALIA
| LEAL & O’HEGARTY | [2015] FamCA 386 |
| FAMILY LAW – CHILD SUPPORT – Application for child support departure by the wife – Where there was a significant disparity between the husband’s income upon which the child support assessment was based and his income as found by the Court – Finding that the disparity in income constituted ‘special circumstances’ for the purpose of s 117(2)(c)(ia) of the Child Support (Assessment) Act 1989 (Cth) – Finding that it is just and equitable and otherwise proper that a departure order be made. FAMILY LAW – APPLICATION TO ENFORCE – SPOUSAL MAINTENANCE – INTERIM PROPERTY SETTLEMENT – Where there were arrears in maintenance and unpaid interim property settlement owing by the husband – Where there was no property left to be divided between the parties by the time of the final hearing – Where the husband’s financial future was highly uncertain – Where it was the wife’s case that the husband’s income was procured through fraud – Where it was not appropriate to exercise the discretion to enforce the maintenance order. |
| Child Support (Assessment) Act 1989 (Cth) ss 4, 117, 118 |
| Best & Best (1993) FLC 92-418 Dwyer & McGuire (1993) FLC 92-420 Gyselman and Gyselman (1992) FLC 92-279 Lutzke and Lutzke (1979) FLC 90-714 Strahan and Strahan (2011) FLC 93-466 |
| APPLICANT: | Ms Leal |
| RESPONDENT: | Mr O’Hegarty |
| FILE NUMBER: | SYC | 3101 | of | 2012 |
| DATE DELIVERED: | 25 May 2015 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Rees J |
| HEARING DATE: | 7 May 2015 to 12 May 2015 |
REPRESENTATION
| THE APPLICANT: | In Person |
| THE RESPONDENT: | In Person |
| SOLICITOR FOR THE INDEPENDENT CHILDREN’S LAWYER: | Kathryn Renshall |
Orders
That by consent, pursuant to s 79 of the Family Law Act 1975 (Cth), each party shall be solely entitled to any asset in his or her possession at the date of these Orders, except as provided in Order 2.
That by consent the husband, Mr O’Hegarty, forthwith does all acts, including payment of any outstanding fees, required to give the wife, Ms Leal, access to the items stored in II Town by Q Town Storage and that the wife be entitled to sell those items and retain the proceeds of the sale.
That within 90 days the husband pay to the Child Support Agency the sum of $6,000 in satisfaction of all arrears of child support.
That the Orders for spousal maintenance made on 20 June 2012 be discharged as at the date to which they stand paid.
That the Orders for interim property settlement made on 7 September 2012 be vacated to the extent to which it is unpaid.
That pursuant to s 118(1) of the Child Support (Assessment) Act 1989 (Cth), the rate of child support payable by the husband be $66.66 per child per week.
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
Proceedings between Ms Leal (“the wife”) and Mr O’Hegarty (“the husband”), commenced by the wife’s filing an application on 29 May 2012. The proceedings have continued with increasing acrimony since that date.
The parties commenced co-habitation in September 2000 and separated in May 2012.
They have three children now aged almost 12 years, nine years and six years.
The wife has re-partnered. She and her partner, Mr X, do not live together but have regarded themselves as partners since about May 2012.
In the final hearing, relating to both property and parenting proceedings, which commenced on 7 May 2015, both parties were self-represented.
On the first day of the hearing, with the assistance of the Independent Children’s Lawyer, the parenting proceedings were settled. The Orders which were made by consent have the effect that the children will spend equal time with each parent.
The issues then remaining to be decided were financial.
Both parties sought orders in relation to property settlement to the effect that each would retain the assets currently in her or his possession. They also agreed that the items of personal property which are in storage should be made available to the wife and can be sold by her.
In relation to arrears of child support, both parties agreed that, for the purpose of these proceedings, the arrears should be quantified at $6,000 and that there should be an order that the arrears be paid.
The wife initially sought to rely on 13 affidavits and three financial statements sworn by her, together with affidavits of four supporting witnesses, all sworn in 2012.
The husband sought to rely on 16 affidavits sworn by him and two financial statements, together with one supporting witness. He also sought to call two witnesses who had not sworn affidavits or provided proofs of evidence and the transcript of previous evidence given by one of those witnesses. In all, the husband sought to rely on 36 documents.
Some of those documents became irrelevant after the parenting proceedings were resolved.
At the commencement of the proceedings, the parties were told that, in accordance with Rule 15.06 of the Family Law Rules 2004 (Cth), they would not be permitted to rely on any affidavit which was filed for the purpose of an application other than the final application and, further, that no regard would be had to any annexure to an affidavit unless the Court’s attention was drawn specifically to that document in the course of the evidence or of submissions.
Although the wife had filed an application seeking the adjournment of the hearing, she did not pursue that application.
THE COMPETING APPLICATIONS
On 20 June 2012 Orders were made by consent which included, relevantly, the following Orders:
·that the husband pay periodic spousal maintenance of $600 per week commencing on 21 June 2012 (“the maintenance order”);
·that the husband pay up to $600 per week directly to the landlord in respect of the wife’s accommodation (“the rent order”); and
·that the wife have exclusive use of the hatchback motor vehicle and that the husband be responsible for the lease payments, insurance and maintenance of that vehicle.
It is not disputed that the husband complied with those Orders for a time and then ceased to pay.
The Orders were not varied although applications were made by the husband to vary and by the wife to enforce.
On 7 September 2012, Orders were made by Ryan J that the husband pay to the wife, by way of partial property settlement, the sum of $100,000. $25,000 was to be paid within 14 days from the sale of a motor vehicle. That sum was paid. A further $75,000 was to be paid within five months. That sum was not paid and the wife seeks to enforce that order.
The wife seeks a Child Support Departure order in relation to the three children who are in her care for alternate weeks.
The husband opposes all of the wife’s applications.
All of the outstanding applications require that I determine what the parties’ respective incomes are and what their property is.
THE WIFE’S INCOME
At the time of the hearing in May 2015, the wife was recovering from surgery on her ankle and was not able to work. She had worked for three weeks in March 2015 and had been paid $600 per week cash in hand.
The wife relied on a Financial Statement sworn by her on 5 May 2015 where she deposed to a total weekly income of $747 consisting of $210 by way of a Family Assistance payment, $330 by way of pension and $207 per week maintenance for an older child of a previous relationship. For the purposes of these proceedings, therefore, she has no income which can be taken into account.
However, in her oral evidence, she said that when she recovers from her surgery, she will return to work and receive $600 per week net.
Whether that income will be reported by her to Centrelink was not explored. If it were reported, there is no evidence of the effect it would have on her entitlements.
I propose, for the purpose of these proceedings, to assume that within a short period of time, the wife will have a net income of $600 per week from exertion.
The husband asserts that the wife has a capacity to earn income well in excess of that to which she deposes.
Mr X participated in the interviews with Dr Y in November 2013. He told Dr Y that his business was going extremely well, operated six days a week, then employed 12 staff and was bringing in over a million dollars a year. Mr X told Dr Y that he was diversifying his business and negotiating with major retailers to stock his product.
The wife denied in cross examination that she worked in the business but said that she had taught Mr X how to set up book-keeping systems and how to source materials. As will be discussed later in these reasons, prior to the separation of the parties the wife had been the practice manager at the husband’s legal practice, F Legal.
Mr X lent money to the wife in 2012 for her legal fees.
Mr X’ parents each attended at Court to support the wife.
On 15 January 2013 the wife and Mr X executed a loan agreement annexing schedules of sums advanced to the wife by Mr X and recording her obligation to repay those sums. The agreement recites that it is a written expression of an oral agreement between them on about 24 May 2012. The agreement contains a clause that permits the schedules to be updated and the wife gave evidence that the schedules are regularly updated. The wife said that money spent on her behalf by Mr X is recorded in the schedules. The total amount recorded is $54,457.48. The schedules have not been updated since October 2013.
The amounts are referrable to every day expenses such as groceries, rent, farrier’s bills, petrol, tolls, PayPal, insurance and the like.
In her Financial Statement sworn 5 May 2015, the wife claimed a debt to Mr X of $75,000. She also claimed that she had credit card liabilities of $50,000. It is likely that the wife’s living expenses have been funded by a combination of her Centrelink payments, money from Mr X and borrowings from her credit cards.
The fact that there are no updated schedules suggests that there is no expectation that Mr X will be repaid.
The husband submits that the wife would be able to find employment in a capacity similar to that of a legal practice manager earning in the vicinity of $120,000 per annum. There is no evidence to support that submission. While the wife was a legal practice manager, her actions in transferring money from the trust account of the practice which she had previously managed, together with the husband’s refusal to give her a reference arising out of the termination of her employment, might suggest that she would find difficulty in that course.
The wife is an intelligent and resourceful woman. I have no doubt that she is capable of earning income by her own exertion, either on her own or in consort with Mr X but I am not able, on the evidence before me, to say what income she might be able to generate.
THE HUSBAND’S INCOME
The husband is a solicitor. His business at all relevant times has been conducted through a service company, E Pty Limited (“E”). The beneficial ownership of E will be explored later in these reasons. E took out income protection insurance with CommInsure in relation to the husband.
The husband’s legal practice was conducted through a corporate entity, F Legal Pty Limited (“F Legal”).
In 2009 the husband suffered a brain aneurysm. A claim was made against the CommInsure policy and CommInsure commenced to pay E $16,000 per month.
The husband asserted in the proceedings that this was E’s sole source of income.
The wife asserted that the husband had carried on work as a solicitor from the former matrimonial home and earned income, which activity he concealed from CommInsure so as to defraud the insurer. If this occurred, it occurred with the assistance and knowledge of the wife as will be later explained.
After the parties separated in May 2012, a number of documents were filed by the husband in the proceedings, or prepared by him and forwarded to the wife, which purported to set out his financial position.
In a Financial Statement sworn on 28 August 2012 he deposed to receiving income of $961 per week ($4,164 per month). In the notes to that document the husband stated:
The husband suffered an aneurysm in June/July 2009. Prior to this time, [E] received $24,000 per month from F Legal pursuant to a consulting agreement for (amongst other things) the husband’s services between F Legal and E. Since about July 2009, E has received a monthly income protection benefit of (approximately) $16,000 per month. The husband draws upon E and this benefit and uses the funds to pay/benefit OFT, his family and himself.
The reference to “OFT” is a reference to the O’Hegarty Family Trust which is controlled by the husband and of which the wife and the children are beneficiaries.
The husband, in the notes to his Financial Statement relating to Item 18, “Expenses paid by others for your benefit”, disclosed that F Legal paid $800 per week in motor vehicle expenses and private health insurance; E paid a further $1,500 per week in motor vehicle expenses and OFT paid $1,000 in motor vehicle expenses.
The husband was unable to explain why he disclosed his income as $961 per week.
The husband filed an updated Financial Statement sworn on 5 May 2015. In that document he deposed that his income was $1,860 per week ($8,060 per month). Because that income is paid to him by E as a repayment of his loans to the company, he pays no tax. At Part D of the Financial Statement the husband stated:
Paid by [E Pty Ltd] & subsidiary (“the Company”) from its own resources pending the recommencement/reinstatement of the Company’s income stream from its CommInsure income protection (IP) policy benefits.
The circumstances in which the CommInsure payments ceased will be discussed later in these reasons.
At Part F the husband disclosed that “the Company” paid an estimated $140 per week for mobile and office phones; $300 per week for motor vehicle running expenses and $206 per week for his life insurance policy, a further $646 per week.
In addition to the European motor vehicle 2 provided to the husband by E, he has the use of two other motor vehicles, one provided by a business acquaintance. The existence of that latter arrangement was not disclosed in his Financial Statement.
In cross examination, the husband revealed further benefits paid by E which were not disclosed in his Financial Statement. The lessee of the premises he currently occupies in the Southern Highlands is E and E pays $1,000 per week towards the rent, in addition to the sum of $800 per week which the husband deposed to paying. E also pays 60 per cent of the husband’s gas and electricity expenses in addition to those expenses which the husband deposed to paying. Thus E pays a further $150 per week towards the husband’s expenses.
It was not possible to discern, from the husband’s Financial Statement, what benefits he actually received from E.
The amount that the husband receives, in income or paid on his behalf, from E is not less than $3,656 per week, net of tax, or $190,112 per annum.
THE AVAILABLE PROPERTY
The parties were directed to prepare and lodge a joint balance sheet setting out their respective contentions as to the nature and value of the matrimonial property. The balance sheet contained numerous assertions in relation to “Add Backs”. In circumstances where, on either version, the parties have no net assets and substantial debt, they agreed to abandon any argument in relation to add backs. The balance sheet which sets out their respective assertions as to their assets and their liabilities is set out below:
ASSETS
Wife Ref. Ownership Description Wife’s Value $ Husband’s Value $ 1 OFT No. 1 (see Note 1) Property located at P Road, Q Town – SOLD Nil $1,660,000
Sold by NAB as MIP2 Husband (see Note 2) Law firm – O Legal Pty Limited Nil Nil
Not applicable3 Husband (see Note 3) Admin company – E Pty Limited (CommInsure) $697,180 $102,817 3a Husband (see Note AA) European motor vehicle 3– QLD Rego … $148,600 $148,600 3b Husband (see Note AB) European motor vehicle 4 – QLD Rego … $27,050 $27,050 4 E (see Note 4) European motor vehicle 2 – NSW Rego … $91,300 Nil
Not applicable
sold E owned4a Husband (see Note 4) European motor vehicle 5 – NSW Rego … $180,000 Nil
Not applicable
E owned4b Husband (see Note 4) Law firm – Titan Legal Pty Limited Est
$500,000Nil Total $1,644,130 $1,938,467 LIABILITIES
Wife Ref. Ownership Description Wife’s Value $ Husband’s Value $ 21 OFT No. 1
(see Note 21)Mortgage deficit of property located at P Road, Q Town – SOLD $1,834,786 $3,494,786 22 Husband (see Note 2) Creditors of law firm – O Legal Pty Ltd Nil Not applicable 23 Husband (see Note 23) European motor vehicle 6– SOLD $49,000 $49,000
Husband owned (Net owe to Finance Co)24 F Legal (see Note 24) European motor vehicle 5– Repaired after write off and finance company paid Nil Not applicable
Owned by E
$024a E (see note 24a) European White GL 4WD Vehicle – QLD Rego 685TGD Unknown Unknown 24b E (see note 24b) European motor vehicle 4– QLD Rego … Unknown Unknown 25 E (see Note 25) Japanese Ute Repossessed Nil $0
Not Applicable
E owned25a Husband (see Note 25a) European E500 SOLD Nil $0 25b E (see Note 25b) European C63 $62,395 $0
Not applicable
Owned by E26 Husband (see Note 26) Credit Cards $81,626 E$95,000 26a Wife (see Note 26a) Credit Cards $50,000 $50,000 27 Husband (see Note 27) Hatchback – Repossessed $7,500 E$7,500
(Net Owing to Finance Company)28 Husband (see Note 28) Z Schools $165,384 E$165,384 29 Husband (see Note 29) Other liabilities see Husband’s financial statement “Item 54” $13,797 $370,000 30 OFT 1 (See Note 30) Operating expenses holiday rentals Est
$2,000$12,000 30a OFT1/POS (see Note 30a) Trade Creditors Est
$60,000$60,100 30b Husband (see Note 30b) Family Law Costs Est
$110,000E$110,00 30c Husband (see Note 30c) L&E Court Legal costs (Prosecutor’s Costs) E$350,000 E$300,000 30d Husband (see Note 30d) Creditors of law firm – Titan Legal Pty Ltd Est $20,000 Nil Total Liabilities $2,806,488 $4,713,7770 Net Equity (Loss) Position ($1,162,358) ($2,414,311)
As can readily be seen from the joint balance sheet, the wife contends that the parties have property to the value of $1,644,130. She contends that the liabilities of the parties are $2,806,488. On her case the parties have net negative assets of ($1,162,358).
On the husband’s case, the parties have property of $1,938,467, but that includes the property at Q Town which has been sold. If that property is removed from the balance sheet, on the husband’s case the property pool is $278,467. He contends that the liabilities are $4,713,770, resulting in a net negative assets position of ($2,414,311).
The disputed items on the balance sheet will be dealt with referring to the numbers used in that document.
ASSETS
Item 1 – Q Town property
The property has been sold. It will be removed from the balance sheet.
Item 3 – E Pty Limited (“E”)
The husband is a director of E and owns 33.3 per cent of the shares.
The parties were unable to co-operate to secure a single expert to value E and on 3 December 2014, when the matter was set down for hearing, orders were made for the filing of valuations by adversarial experts by 26 February 2015, for a conference of experts and for a report setting out the areas of agreement and disagreement to be filed by 16 April 2015.
The husband has filed, and seeks to rely upon, a valuation by Mr AA dated 30 April 2015. The wife has filed no valuation but did not oppose the tender of the valuation of Mr AA or seek to cross examine him.
The wife contends that, although the husband is the legal owner of 33.3 per cent of the shares in E, the company should be regarded as his alter ego as he is the only person who benefits from the operations of the company.
The husband was on notice of the wife’s contention and the instructions to the valuer were to consider that issue.
The two other named shareholders did not give evidence in the husband’s case.
The husband was unable to point to any benefit that had been received by either of the other shareholders as a result of their shareholding.
E pays expenses on behalf of the husband, provides and maintains cars for him, pays rent and utilities for him and pays him approximately $8,000 per month.
The husband is the only signatory to E’s bank account.
The husband was unable to provide any document of E which was signed by either of the other shareholders.
Neither of the other shareholders is a director.
There was no evidence that any of the other shareholders has a shareholder loan account.
As between the husband and the wife, I am satisfied that E should be treated as the alter ego of the husband.
Mr AA values the shares at $308,452.
However that is not the end of the matter.
The 2014 draft financial statements of E were attached to the valuation.
In that financial year, the income of E was $270,979 of which $229,549 was referrable to the CommInsure payment. $41,430 was earned from consulting. The husband gave evidence that the CommInsure payments were suspended in about August or September 2014. Those payments have not been resumed.
Presumably, then, the only income at the present time of E is from consulting.
However, E manages to pay to or on behalf of the husband some $190,000 per annum. The husband gave evidence that E is able to maintain those payments because it has been able to borrow money. E has no assets which could be offered as security for any loan. At the conclusion of his cross examination, the husband was invited to provide documentary evidence of the asserted loans to E. When the hearing resumed the next day the husband said, from the bar table, that the records were held by his accountant whose office is located in the city but that he had not been able to contact the accountant. Thus there is no evidence of the source of the operating funds which are available to E.
Similarly, at the conclusion of his cross examination, the husband was invited to put before the Court documentary evidence of the source of the funds in the draft 2014 Financial Statements referred to a Note 7 as “Loans – Other” in the sum of $185,588.76. Again those records were said to be in the possession of his accountant and were not produced.
The husband and E seem to have a capacity to borrow money which is not explained having regard to his lack of ability to give any security, his lack of ability to pay any interest or repayment of a loan from income and his most uncertain financial future.
I am not satisfied that the husband has made a full disclosure in relation to the financial position of E but the state of the evidence does not enable me to place any higher value on the entity than that assessed by Mr AA.
Items 3(a) and (b)
The husband denies ownership of those vehicles although they are driven by him. There is no evidence to support the wife’s assertion that he owns them. They will be removed from the balance sheet.
Item 4(a) – European C63
There is no evidence to support the wife’s assertion that the husband owns this vehicle which the husband says was owned by E and has been sold. The item will be removed from the balance sheet.
Item 4(b) - Titan Legal Pty Limited
The estimate of value of $500,000 is based on the wife’s estimate and is not supported by any evidence. The husband says that the law firm does not trade. The item will be removed from the balance sheet.
The only ascertainable asset of the parties is the husband’s interest in E which will be included in the balance sheet at $308,452.
LIABILITIES
The liabilities set out in the balance sheet, with the exception of the wife’s credit cards and the school fees, are solely the liabilities of the husband. The wife has signed no guarantees and is not personally liable for any of them.
In relation to the school fees, the husband has voluntarily assumed that liability.
Each of the parties has substantial credit card debts. At the commencement of the hearing it was made clear that, unless those debts were referrable to expenditure during the marriage, I did not propose to take them into account. No such evidence was forthcoming.
Because the liabilities manifestly exceed the assets of the parties, it is necessary only to list those major debts which are largely agreed. Some were the subject of evidence rather than being found on the balance sheet.
The husband has the following liabilities:
Mortgage deficit owed to NAB $1,834,786
The National Australia Bank (“NAB”) has commenced proceedings to recover the amount outstanding after the sale of the mortgaged property. The husband intends to defend those proceedings. If he is unsuccessful, then the amount will be increased by interest and costs.
School fees $165,384
The husband has an agreement with the school to pay some money each term. There is no document evidencing that agreement. In 2015, the husband has paid a total of $7,500. By way of security, the husband has offered a charge against his Term Life Insurance policy and agreed that if, at the time of his death, fees remain outstanding, they will be paid from the proceeds of the policy together with a 20 per cent interest component.
Owed to Finance Company after sale of European GL500 $49,000
This liability is agreed.
Owed to Finance Company after repossession of Kia Hatchback $7,500
This liability is agreed.
Owed to GE Finance for 55 European CHP $187,000
This liability was personally guaranteed by the husband.
Claimed by Pioneer Credit in Statement of Claim $14,655
This debt was guaranteed by the husband.
Costs incurred in Land and Environment Court proceedings $150,000
This liability is agreed.
TOTAL $2,408,325
In addition to those debts listed above for which I am satisfied that the husband is liable, he claims to be liable for debts totalling $729,259 which are set out in a table attached to his Financial Statement sworn 28 August 2012. On their face, some of those debts appear to be debts of F Legal. There is no evidence upon which it could be determined whether the husband has any personal liability for some or any of them. In the circumstances, it is not necessary to determine this issue.
POTENTIAL LIABILITIES
The evidence establishes that the husband is potentially liable for significant further amounts.
Prosecution’s Costs in Land and Environment Court proceedings $350,000
The husband has pleaded guilty to one charge and not guilty in relation to three additional charges. The wife in the balance sheet deposes to having been told that the costs sought by the prosecution will be $350,000. The husband’s estimate in the balance sheet is $300,000 although he points out that the quantum will depend on whether the assessment is on a party and party or indemnity basis.
Potential fine by the Land and Environment Court $1,200,000
The husband gave evidence that the maximum fine that can be imposed against him is $1,200,000. No doubt the ultimate amount will depend upon whether he is convicted of all four charges. The wife anticipates fines of $2,140,000.
Potential owed to CommInsure $809,132
CommInsure claims this sum in re-imbursement. The husband intends to defend the claim. If he is unsuccessful, costs will likely follow the event.
CHILD SUPPORT DEPARTURE APPLICATION
I propose to determine the Child Support departure application first, in order to make findings about what remaining income might be available to the husband to satisfy any order for enforcement of spousal maintenance.
The husband is currently assessed to pay $62 per week by way of child support.
That assessment is based on his 2011 taxation return where, on his evidence, he disclosed income of between $50,000 and $60,000. The wife asserts that the disclosed income was $20,000. Neither the relevant tax return nor the assessment was in evidence.
The wife applies for a departure order.
The grounds for a departure order are set out in s 117(2) of the Child Support (Assessment) Act 1989 (Cth) (“Child Support Act”). Section 117 is set out in full below.
Matters as to which court must be satisfied before making order
Court may make departure order
(1) Where:(a) application is made to a court having jurisdiction under this Act for an order under this Division in relation to a child in the special circumstances of the case; and
(b) the court is satisfied:(i) that one or more of the grounds for departure mentioned in subsection (2) exists or exist; and
(ii) that it would be:(A) just and equitable as regards the child, the carer entitled to child support and the liable parent; and
(B) otherwise proper;to make a particular order under this Division;
the court may make the order.
Grounds for departure order
(2) For the purposes of subparagraph (1)(b)(i), the grounds for departure are as follows:(a) that, in the special circumstances of the case, the capacity of either parent to provide financial support for the child is significantly reduced because of:
(i) the duty of the parent to maintain any other child or another person; or
(ii) special needs of any other child or another person that the parent has a duty to maintain; or
(iii) commitments of the parent necessary to enable the parent to support:(A) himself or herself; or
(B) any other child or another person that the parent has a duty to maintain; or(iv) high costs involved in enabling a parent to spend time with, or communicate with, any other child or another person that the parent has a duty to maintain;
(aa) that, in the special circumstances of the case, the capacity of either parent to provide financial support for the child is significantly reduced because of the responsibility of the parent to maintain a resident child of the parent (see subsection (10));
(b) that, in the special circumstances of the case, the costs of maintaining the child are significantly affected:(i) because of high costs involved in enabling a parent to spend time with, or communicate with, the child; or
(ia) because of special needs of the child; or
(ib) because of high child care costs in relation to the child; or
(ii) because the child is being cared for, educated or trained in the manner that was expected by his or her parents;(c) that, in the special circumstances of the case, application in relation to the child of the provisions of this Act relating to administrative assessment of child support would result in an unjust and inequitable determination of the level of financial support to be provided by the liable parent for the child:
(i) because of the income, earning capacity, property and financial resources of the child; or
(ia) because of the income, property and financial resources of either parent; or
(ib) because of the earning capacity of either parent; or
(ii) because of any payments, and any transfer or settlement of property, made or to be made (whether under this Act, the Family Law Act 1975 or otherwise) by the liable parent to the child, to the carer entitled to child support or to any other person for the benefit of the child.High costs involved in enabling parent to care for a child
(2B) A parent’s costs involved in enabling the parent to care for a child can only be high for the purposes of subparagraph (2)(a)(iv) or (2)(b)(i) if the costs that have been or will be incurred, during a child support period, total more than 5% of the amount worked out by:(a) dividing the parent’s adjusted taxable income for the period by 365; and
(b) multiplying the quotient by the number of days in the period.(2C) If a parent has at least regular care of a child, then the only costs that can be taken into account for the purposes of subsection (2B) are costs related to travel to enable the parent to spend time with, or communicate with, the child.
High child care costs
(3A) The ground for departure mentioned in subparagraph (2)(b)(ib) is taken not to exist unless:(a) the costs are incurred by a parent or a non‑parent carer; and
(b) the child is younger than 12 at the start of the child support period.(3B) Child care costs for a parent can only be high for the purposes of subparagraph (2)(b)(ib) if, during a child support period, they total more than 5% of the amount worked out by:
(a) dividing the parent’s adjusted taxable income for the period by 365; and
(b) multiplying the quotient by the number of days in the period.(3C) Child care costs for a non‑parent carer can only be high for the purposes of subparagraph (2)(b)(ib) if, during a child support period, they total at least 25% of the costs of the child for that period.
Matters to consider for purposes of subparagraph (1)(b)(ii)
(4) In determining whether it would be just and equitable as regards the child, the carer entitled to child support and the liable parent to make a particular order under this Division, the court must have regard to:(a) the nature of the duty of a parent to maintain a child (as stated in section 3); and
(b) the proper needs of the child; and
(c) the income, earning capacity, property and financial resources of the child; and
(d) the income, property and financial resources of each parent who is a party to the proceeding; and
(da) the earning capacity of each parent who is a party to the proceeding; and
(e) the commitments of each parent who is a party to the proceeding that are necessary to enable the parent to support:(i) himself or herself; or
(ii) any other child or another person that the person has a duty to maintain; and(f) the direct and indirect costs incurred by the carer entitled to child support in providing care for the child; and
(g) any hardship that would be caused:(i) to:
(A) the child; or
(B) the carer entitled to child support;by the making of, or the refusal to make, the order; and
(ii) to:(A) the liable parent; or
(B) any other child or another person that the liable parent has a duty to support;by the making of, or the refusal to make, the order; and
(iii) to any resident child of the parent (see subsection (10)) by the making of, or the refusal to make, the order.(5) In determining whether it would be otherwise proper to make a particular order under this Division, the court must have regard to:
(a) the nature of the duty of a parent to maintain a child (as stated in section 3) and, in particular, the fact that it is the parents of a child themselves who have the primary duty to maintain the child; and
(b) the effect that the making of the order would have on:(i) any entitlement of the child, or the carer entitled to child support, to an income tested pension, allowance or benefit; or
(ii) the rate of any income tested pension, allowance or benefit payable to the child or the carer entitled to child support.Proper needs of the child
(6) In having regard to the proper needs of the child, the court must have regard to:(a) the manner in which the child is being, and in which the parents expected the child to be, cared for, educated or trained; and
(b) any special needs of the child.Income, earning capacity, property and financial resources
(7) In having regard to the income, earning capacity, property and financial resources of the child, the court must:(a) have regard to the capacity of the child to earn or derive income, including any assets of, under the control of, or held for the benefit of, the child that do not produce, but are capable of producing, income; and
(b) disregard:(i) the income, earning capacity, property and financial resources of any person who does not have a duty to maintain the child, or who has such a duty but is not a party to the proceeding, unless, in the special circumstances of the case, the court considers that it is appropriate to have regard to them; and
(ii) any entitlement of the child or the carer entitled to child support to an income tested pension, allowance or benefit.(7A) In having regard to the income, property and financial resources of a parent of the child, the court must:
(a) have regard to the capacity of the parent to derive income, including any assets of, under the control of, or held for the benefit of, the parent that do not produce, but are capable of producing, income; and
(b) disregard:(i) the income, earning capacity, property and financial resources of any person who does not have a duty to maintain the child, or who has such a duty but is not a party to the proceeding, unless, in the special circumstances of the case, the court considers that it is appropriate to have regard to them; and
(ii) any entitlement of the child or the carer entitled to child support to an income tested pension, allowance or benefit.(7B) In having regard to the earning capacity of a parent of the child, the court may determine that the parent’s earning capacity is greater than is reflected in his or her income for the purposes of this Act only if the court is satisfied that:
(a) one or more of the following applies:
(i) the parent does not work despite ample opportunity to do so;
(ii) the parent has reduced the number of hours per week of his or her employment or other work below the normal number of hours per week that constitutes full‑time work for the occupation or industry in which the parent is employed or otherwise engaged;
(iii) the parent has changed his or her occupation, industry or working pattern; and(b) the parent’s decision not to work, to reduce the number of hours, or to change his or her occupation, industry or working pattern, is not justified on the basis of:
(i) the parent’s caring responsibilities; or
(ii) the parent’s state of health; and(c) the parent has not demonstrated that it was not a major purpose of that decision to affect the administrative assessment of child support in relation to the child.
Direct and indirect costs in providing care
(8) In having regard to the direct and indirect costs incurred by the carer entitled to child support in providing care for the child, the court must have regard to the income and earning capacity foregone by the carer entitled to child support in providing that care.
Subsections not to limit consideration of other matters
(9) Subsections (4) to (8) (inclusive) do not limit other matters to which the court may have regard. …
THE OBJECTS OF THE CHILD SUPPORT SCHEME
The objects of the Child Support Act are set out in s 4, which is reproduced below:
Objects of Act
(1) The principal object of this Act is to ensure that children receive a proper level of financial support from their parents.
(2) Particular objects of this Act include ensuring:
(a) that the level of financial support to be provided by parents for their children is determined according to their capacity to provide financial support and, in particular, that parents with a like capacity to provide financial support for their children should provide like amounts of financial support; and
(b) that the level of financial support to be provided by parents for their children should be determined in accordance with the costs of the children; and
(c) that persons who provide ongoing daily care for children should be able to have the level of financial support to be provided for the children readily determined without the need to resort to court proceedings; and
(d) that children share in changes in the standard of living of both their parents, whether or not they are living with both or either of them; and
(e) that Australia is in a position to give effect to its obligations under international agreements or arrangements relating to maintenance obligations arising from family relationship, parentage or marriage.
(3) It is the intention of the Parliament that this Act should be construed, to the greatest extent consistent with the attainment of its objects:
(a) to permit parents to make private arrangements for the financial support of their children; and
(b) to limit interferences with the privacy of persons.
Any consideration of an application for a Child Support departure order must be made under the overarching direction of the objects of the legislation.
DOES A GROUND FOR DEPARTURE EXIST?
The wife relies on s 117(2)(c) and specifically s 117(2)(c)(ia) of the Child Support Act.
The meaning of the words “in the special circumstances of the case” was definitively dealt with in the decision of the Full Court in Gyselman and Gyselman (1992) FLC 92-279. :Their Honours said, at 79,065:
Section 117(2) sets out the grounds for departure from administrative assessment. Each of those grounds is prefaced by the words, ``in the special circumstances of the case''. Whilst it is not possible to define with precision the meaning of that term, as a generality it is intended to emphasize that the facts of the case must establish something which is special or out of the ordinary. That is, the intention of the Legislature is that the Court will not interfere with the administrative formula result in the ordinary run of cases. In Savery's case (p. 77,897), Kay J, adopting the view in Philippe and Philippe (1978) FLC ¶90-433 at p. 77,202 in a different context, said that ``special circumstances'' were ``facts peculiar to the particular case which set it apart from other cases''. The approach to the interpretation and application of the particular grounds in s 117(2) must be guided by that qualification.
As has been explained earlier in these reasons, the husband has an income of not less than $190,112 of which some, if not all, is net of tax. The administrative assessment is based on either an income of $20,000 according to the wife or an income of $50,000 to $60,000 according to the husband.
The disparity between the husband’s income as I have found it and the income upon which the assessment was based is stark.
I consider that the disparity between the income upon which the assessment was based and the income as I have found it to be would, taken alone, constitute special circumstances.
I am satisfied that the administrative assessment results in an unjust and inequitable level of financial support for the children because of the husband’s income.
IS IT JUST AND EQUITABLE AND OTHERWISE PROPER TO MAKE AN ORDER?
The children are cared for by both parents on an equal time arrangement. Both have a responsibility to maintain the children.
The wife, in her Financial Statement sworn 5 May 2015, at Part N, sets out the children’s expenses. She was not cross examined in relation to those expenses. She claims that the children’s proper needs require $2,172 per week. That claim includes the education expenses of $1,307 which the parties have agreed are to be paid by the husband. If education expenses are deducted, the expenses claimed are $865 per week.
The wife claims that food for the children costs $320 per week. The document was sworn at a time when the wife’s application was that the children live with her. I accept that the weekly amount is reasonable but, in circumstances where the children will live with the wife every second week, I propose to halve that amount. I find that the wife’s costs of caring for the children are $705 per week.
I have made findings about the income and earning capacity of each of the parties earlier in these reasons. The husband does not assert that the wife has the capacity to earn an income that is comparable to his. It is likely that she will earn income from exertion but not at the level that the husband enjoys.
The financial position and income of Mr X is, pursuant to the legislation, to be disregarded.
The husband, in his Financial Statement sworn 5 May 2015, claims the costs of the children in his care to be $1,822 per week. That claim includes their education expenses of $1,162 per week which he does not, in fact, pay. In the four full months of 2015 he has paid $7,500 or about $469 per week. The children’s costs in the husband’s care will be assessed at $1,129 per week.
The husband has the use of three European vehicles. He lives in a home for which he and E pay rent of $1,800 per week. The wife, in her affidavit sworn 20 October 2010 describes the house as having five bedrooms, master wing, an indoor heated swimming pool, library, study, scullery, formal and informal dining and lounge rooms located on 20 acres. There is no evidence which establishes that he needs accommodation at that level. By contrast the wife pays rent of $340 per week.
The husband’s claimed expenses for his own support are a modest $440 per week.
I am conscious that the husband has undertaken the responsibility for payment for the private school fees for the children. The consent orders made on 7 May 2015 provide for all three children to continue at their schools and therefore that is the decision of both of the parents.
The wife asks the Court to make a modest order for the support of the children in the sum of $200 per week in total.
The husband has the capacity to pay that amount.
It is just and equitable and otherwise proper that the husband, because of his superior earning capacity, should pay $200 per week in total (being $66.66 per child per week) towards the support of the children in the wife’s care.
Once a valid application for departure has been made, the Court is able to consider departure from the administrative assessment provisions for such time into the future as it considers appropriate having regard to the individual circumstances of the case (Best & Best (1993) FLC 92-418 (“Best & Best”), Dwyer & McGuire (1993) FLC 92-420). As their Honours stated in Best & Best, this “avoids the highly undesirable position that the parties have to reapply each twelve months notwithstanding that the relevant circumstances which originally attracted s.117 remain the same.” It is not possible to predict the financial future for these parties. I propose to make the orders for an indefinite period.
THE ENFORCEMENT PROCEEDINGS – SPOUSAL MAINTENANCE AND INTERIM PROPERTY SETTLEMENT
On 7 September 2012 Ryan J made orders by way of partial property settlement requiring the husband to pay the wife $100,000. The husband paid $25,000 in accordance with the Orders.
On about 27 November 2012 the husband paid the wife an amount of $13,509 of which $10,000 was a reimbursement for legal fees which had already been paid by the wife. I propose to treat that sum of $10,000 as having been paid in accordance with the Orders of 7 September 2012.
Thus the amount which remains outstanding pursuant to those Orders is $65,000. The wife seeks to enforce those Orders and seeks payment of the amount outstanding.
At the time when the interim property settlement orders were made, the evidence before the Court suggested that the parties had substantial equity in their property and that there would be, in due course, orders to divide that equity between them.
At the time when the matter now comes before the Court for consideration it is apparent that the parties have no property and indeed the husband is left with substantial debt.
As the Full Court explained in Strahan and Strahan (2011) FLC 93-466, when the Court finally determines proceedings for property settlement in which an interim order has been made, the earlier orders can be varied or reversed.
In the circumstances where there is no property to divide between the parties it is appropriate that the order for interim property settlement be vacated to the extent that it has not been paid.
The enforcement proceedings – spousal maintenance
The husband disputes the wife’s calculation of arrears in relation to the maintenance order. He submits that certain payments made by him to, or on behalf of the wife, should be counted against his liability for maintenance. The wife does not dispute that the money was received but does not agree that those sums should be taken into account as spousal maintenance.
Enforcement of an order for spousal maintenance is governed by the provisions of s 105 of the Family Law Act 1975 (Cth) (“the Act”), which is set out below:
FAMILY LAW ACT 1975 - SECT 105
Enforcement generally
(1) Subject to this Part, to the regulations and to the applicable Rules of Court, all decrees made under this Act may be enforced by any court having jurisdiction under this Act.
Note: For example, the Federal Circuit Court of Australia can enforce decrees made by the Family Court of Australia.
(2) Except as prescribed, a court shall not entertain a proceeding under this Act for the enforcement of a decree made by another court unless the decree is registered in the first-mentioned court in accordance with the regulations.
(2A) Subsection (2) does not prevent a court from making an order under paragraph 90KA(c) or 90UN(c).
(3) Where a person bound by a decree made under this Act has died, the decree may, by leave of:
(a) the court by which it was made; or
(b) any court in which the decree has been registered in accordance with the regulations (whether the decree was registered before or after the death of the person);
and on such terms and conditions as the court considers appropriate, be enforced, in respect of liabilities that arose under the decree before the death of that person, against the estate of that person.
It is clear from the use of the word “may” in ss (1) that enforcement is discretionary.
The general powers of the Court in an application for enforcement are set out in s 80 of the Act:
FAMILY LAW ACT 1975 - SECT 80
General powers of court
(1) The court, in exercising its powers under this Part, may do any or all of the following:
(a) order payment of a lump sum, whether in one amount or by instalments;
(b) order payment of a weekly, monthly, yearly or other periodic sum;
(ba) order that a specified transfer or settlement of property be made by way of maintenance for a party to a marriage;
(c) order that payment of any sum ordered to be paid be wholly or partly secured in such manner as the court directs;
(d) order that any necessary deed or instrument be executed and that such documents of title be produced or such other things be done as are necessary to enable an order to be carried out effectively or to provide security for the due performance of an order;
(e) appoint or remove trustees;
(f) order that payments be made direct to a party to the marriage, to a trustee to be appointed or into court or to a public authority for the benefit of a party to the marriage;
(h) make a permanent order, an order pending the disposal of proceedings or an order for a fixed term or for a life or during joint lives or until further order;
(i) impose terms and conditions;
(j) make an order by consent;
(k) make any other order (whether or not of the same nature as those mentioned in the preceding paragraphs of this section), which it thinks it is necessary to make to do justice; and
(l) subject to this Act and the applicable Rules of Court, make an order under this Part at any time before or after the making of a decree under another Part.
(2) The making of an order of a kind referred to in paragraph (1)(ba), or of any other order under this Part, in relation to the maintenance of a party to a marriage does not prevent a court from making a subsequent order in relation to the maintenance of the party.
(3) The applicable Rules of Court may make provision with respect to the making of orders under this Part in relation to the maintenance of parties to marriages (whether as to their form or otherwise) for the purpose of facilitating their enforcement and the collection of maintenance payable under them.
(4) If a bankruptcy trustee is a party to a proceeding before the court, the court may make an order under paragraph (1)(d) directed to the bankrupt.
(5) If the trustee of a personal insolvency agreement is a party to a proceeding before the court, the court may make an order under paragraph (1)(d) directed to the debtor subject to the agreement.
(6) Subsections (4) and (5) do not limit paragraph (1)(d).
Again it is clear from the use of the word “may” that there is a general discretion to make orders.
Enforcement is not automatic. In order to determine whether it is, in all of the circumstances, just and equitable to enforce the order for maintenance it is necessary to look at the recent history of the matter.
A convenient starting point is 2009. At that time the husband was a solicitor in private practice. The practice, known as “F Legal”, operated under a complicated corporate structure. For present purposes, however, it is necessary only to understand that the husband’s service company, E, contracted the husband’s services to F Legal. F Legal was the vehicle which generated the income which supported the family. E had taken out, with CommInsure, an income protection policy to protect the husband’s earning capacity.
In July 2009 the husband suffered a brain aneurysm.
After the husband’s aneurysm, E made a claim on the income protection policy and at some time thereafter (the evidence does not establish a precise date) CommInsure commenced to pay E $16,000 per month.
The wife was the practice manager of F Legal.
In a Statutory Declaration dated 22 August 2014 the wife stated:
…I have an intricate knowledge of the business practices of [F Legal]. As the wife of [the husband], during this time, I also have specific knowledge of [the husband’s] work practices from July 2009 until May 2012. Not only was I engaged/employed in the business as the Business Manager but while he was on claim [the husband] wanted me to be his eyes and ears in the business on a daily basis and we would have many conversations about many aspects of the business.
Thus it must have been clear to the wife that the husband was receiving the benefit of the CommInsure income protection.
The husband and the wife separated in May 2012 and the wife’s association with F Legal was terminated.
On 28 May 2012 the wife was removed as Director and Secretary of E.
On 20 June 2012 Orders were made that the children of the marriage live with the husband. The Orders provided that the wife could spend time with the children in the former matrimonial home but only under supervision.
In cross-examination the wife conceded that she was incensed by the making of those Orders.
It is the husband’s case that, as a result of the orders and the wife’s displeasure, she embarked upon a systematic course of action to destroy him financially. The wife denies that allegation.
The wife’s explanation for the actions which are detailed below is that she was afraid that she might have some personal liability for the financial obligations of E or F Legal. The wife had not signed any document in connection with the CommInsure policy and was not a shareholder in E or in F Legal. She was unable to explain how she could be personally liable. I do not accept her explanation.
On 25 May 2012 the wife sent a text message to Mr CC. In cross-examination the wife conceded that she was aware that Mr CC was a client of F Legal who had provided a considerable source of revenue for the firm. The message read:
[Mr CC], remember the laborious text messages and emails from [the husband] about our family matter? Here’s one from the recent past sent to you:
“1. Going to jail from L&E proceedings … really?? this will make case law in Australia lol;”…
(Omitted)
He has changed his plea to guilty. And there are DPP charges to come as a result. There’s new case law coming out lol! Just ridiculous. How can he be a man or a parent when he’s incarcerated?
You, just like [the husband], rope us all in – myself and my sister will dispose of you as quickly as you have disposed of us. It’s just about timing. You are a fraud, just like him.
The client replied:
[Wife], I have met you just once or twice and could not recall today what you even look like. I have not seen or heard from [the husband] for many months. What is this about and why are you now threatening me? Dispose of me? Your sister? Timing? I am sorry you and Your (sic) husband had a bad falling out and I recall it was in regard to you defrauding the ATO by issuing false invoices on my letterhead. Please tell me as to why you think I am even interested in your relationship with [the husband].
On 1 June 2012 the wife sent an email to Mr BB at CommInsure. The email enclosed a document prepared by the wife addressed to Mr BB relating to the husband’s “IP claim” and read:
Dear [Mr BB],
Further to our meeting last week, I advise that I am willing to be an informant for CommInsure on the following basis:
1. Informant’s Fee:
a. CommInsure will make a one-off payment to an account nominated by [the wife] in the sum of $60,000.00. This will be payable on or before Monday 4 June 2012; and
b. CommInsure will make a second one-off payment to an account nominated by [the wife] being the sum of 20% of the IP claim value (the IP claim value being $15,000.00 per month plus CPI and other increases up to the age of 65 of the Claimant.) This will be payable within seven (7) days from the date of the IP claim being refused/terminated by CommInsure (if this occurs).
2. Informant’s Services:
a. Information – [the wife] will provide the names of employees, clients and other third parties who can verify the information provided;
b. Documents – [the wife] will provide copies of emails, text messages and other documents which verify the information provided;
c. Sources of information – [the wife] will identify phone numbers, email address and the presence and location of relevant records which verify the information provided; and
d. Statement – [the wife] will attest to the information provided in the written statement.
3. Informant’s Protection:
a. CommInsure will indemnify [the wife] against any form of prosecution;
b. CommInsure will provide to [the wife] a Deed of Settlement / Release outlining the above terms; and
c. CommInsure will keep [the wife’s] services, fees and details strictly confidential.
The wife then provided a mobile phone number and requested Mr BB to contact her to discuss the matter.
In cross-examination the wife conceded that she anticipated the possibility of receiving in excess of $500,000 if CommInsure agreed to her terms.
On 20 June 2012 Consent Orders were made in relation to both parenting and financial proceedings which contained the following notation:
8. The Respondent requests that the wife not contact clients or other stakeholders of the Respondent or [F Legal] Pty Limited.
On 4 July 2012 a letter was written by the solicitors then acting for the husband to the solicitors then acting for the wife. The letter reads:
We refer to the orders of 20 June 2012 particularly Notation 8 which provides:- “The Respondent requests that the wife not contact client’s or other stakeholders of the Respondent or [F Legal] Pty Limited.
We are instructed that in clear breach of that Notation your client has contacted the following people/entities:-
1. [Mr S] agent for CommInsure, our client’s long term friend and insurance broker has been contacted by your client. We understand your client has demanded money and has indicated she has been contacted by CommInsure and that she intends to make a number of baseless allegations to the CommInsure which will result in significant financial hardship to our client and his children because the insurance benefit will be adversely affected. Clearly this is not going to assist your client and our client takes significant issue with this. Our client intends to ensure to the relevant authorities
2. [Mr DD], the financier in the matter of [EE], being a civil litigation matter in which our clients firm acts. As your client is well aware [EE] is one of the firm’s biggest client’s;
The letter then referred to a number of other individuals whom, it was alleged, the wife had contacted including a barrister who had been regularly briefed by F Legal.
The letter concludes:
Our client is also understandably concerned that your client will attempt to contact the firm’s Russian Federation client [named] in an attempt to maliciously cause financial damage [to] our client’s business. Please advise your client that should the firm lose any clients as a result of her actions not only will he hold her personally responsible but the value of the business will clearly diminish the asset pool.
We put your client on notice this behaviour is entirely unacceptable and will not be tolerated to any degree by our client. Should your client continue to act in clear breach of the Orders of 20 June 2012 we are instructed to immediately re-list this matter and seek indemnity costs against your client.
On 4 July 2012 the wife made a complaint to the Law Society about the husband.
On 16 July 2012 CommInsure contacted the wife by email. The email reads:
[The wife],
Following our last meeting on Monday 9 July 2012, I confirmed CommInsure has a policy of no payments for information or evidence from witnesses.
However, you advised that you would still like to provide a Statutory Declaration outlining your knowledge of the insured’s activities.
Attached is a stat dec format with some suggested areas of interest to CommInsure to assist you if you want to pursue this avenue.
Thanks,
[Mr BB]
The precedent statutory declaration suggested that the wife should:
In detail describe the operations of the insured’s legal firm including any organisational structure (names and roles) for pre disability dates and post disability dates, if possible.
In detail describe your roles within the legal firm, if possible.
In detail describe the billing/invoicing and accounting processes in the legal firm, if possible.
In detail describe the illnesses of the insured and your evidence relating to his capacity and activity in the business pre and post disability, if possible.
On 7 August 2012 the wife sent a text message to a mutual acquaintance saying:
Insurance company will give me $500,000 for a statement – I can at least get a house
On 12 August 2012 the wife sent a text message to a mutual acquaintance which read in part:
I am going to stop proceedings. [The husband] can keep them [referring to the children]. But I’m going to bring him down. I’m giving CommInsure my statement today and I’m on the phone to the NAB and the ATO tomorrow morning. I blame [the husband] and he will suffer if it’s the last thing I do.
On 7 December 2012 at 9.26 pm an email was sent to Mr CC from an email address. The email address on the email is an unknown address. The wife in cross-examination denied that she had set up that email address but said that her partner Mr X had done so. She agreed that the email address, carrying as it does, the implication that the Australian Taxation Office is “coming” would have been alarming for clients of the firm.
The email is unsigned. The email said to Mr CC:
Some of the things you may need to know.
1. [F Legal] is insolvent and going into liquidation in mid-January (copy of correspondence confirming same can be provided) at which time the Centrepoint [FF Town] bill will become one of the many creditors as part of the insolvency proceedings;
2. The Law Society are investigating [the husband] for numerous issues and disbarred him from practising as a solicitor (copies of correspondence from Law Society can be provided);
3. [The husband’s] total permanent disability claim/payments from CommInsure ($16,000 per month) preclude [the husband] from practising as a solicitor as he his cognitively impaired and not capable nor insured as a solicitor to carry out legal tasks (copies of monthly claims since January 2009 can be provided along with his psychological report saying his is totally impaired and cannot practise as a solicitor). The good news is that [F Legal] have a $2MM professional indemnity policy which can be claimed upon until [F Legal] go into liquidation (in about 4 weeks time);
4. The ATO GST debacle in which you were paid a lump sum for the GST is attributed by way of a written confession from [the husband] – [the husband] instructed me to make the GST submissions and tried to get out of it with your help (again, documents can be provided);
5. [The husband] is a total psychopath. Even with court orders in place as to rent, maintenance, time with the children – he will not comply with any family court orders. He wants me destroyed from his jealous rage. I have equal time with children as per court orders, but he has no pride and will not help me survive so that I can care for the children. Even the $600 per week he is ordered to pay is too much, he won’t pay it and keeps my children away from me. Two of them from my previous marriage (my 2 older girls) are living with him in a Sydney apartment and both diagnosed with major depression – both taking anti-psychotic drugs to help them to sleep as a result of being kept away from my (sic) by [the husband] by way of police AVO’s and his constant ravings;
6. [The husband] has been charged by the Land and Environment Court for Class 5 Criminal Charges on 2 counts – being the arrogant person his (sic) is and not getting a DA from council before moving a mountain on the property, he is going to jail. It has been a 12 month proceeding which has finally eventuated (a copy of the charges can be provided);
7. [The husband] has defrauded the tax office and the last 4 years by double-claiming GST. His accountants [named] are well aware of this and in a meeting with them, me and [the husband] present, they decided not to inform the tax office hoping that they wouldn’t find out. But it’s all in the accounts;
8. [The husband] lost [three named matters] and every other case he has had in court recently – because of his own incompetence. He now has bills on the [F Legal] table that he doesn’t want to pay aka the insolvency plans for January 2012. He offered [named matter] ([Mr DD] the financier) in writing prior to the judgment that F Legal would conduct the appeal at no cost if they were to lose – they lost and the appeal will cost millions which [F Legal] cannot carry – poor [named].;
Paragraphs 9 and 10 deal with personal matters.
Paragraph 11 reads:
11. Court orders require that [the wife] cannot contact any clients, friends, associates of [the husband] or [F Legal] or OFT as of 16 July 2012, therefore [the wife] cannot contact you directly. Please respond by email should you wish and I will pass any important information on to [the wife].
Clearly the email was either sent by the wife or on her behalf with information provided by her.
Mr CC responded:
Thanks for email and all very enlightening. You have not signed the email. Would be good if I knew who was talking with me
and the reply from unknown email address was:
A person who cares about [the wife]. I have what you need if you choose.
Mr CC replied:
Thanks and thank [the wife] and of course I wish her the best but not good manners if I don’t know who I am talking with.
and at 10.59 pm unknown email address replied to Mr CC:
I am disappointed [Mr CC]. You stand to lose (sic) large sums of money. I heard you were a business man of integrity.
I do apologise for the bad manners. Everything I say to you will be used in court by [the husband] when you send it to him so manners could nobly be forgiven in this case. Unfortunately this is an epic legal battle with a fight over nothing (as [the wife] sees it she just wants her children – [the husband] claims massive wealth to all except in family court - he is just a poor dirt farmer and says he should have the children because he is unemployed, but there is no money at the end of it all and he is a maniac, incapable of caring for the children as he hires others to care for them – and owes enormous sums of money to tradies, landlords, gardeners, earthmovers – most people in the Highlands and barristers, telcos, service providers in the city. It is vicious, horrible guerrilla tactics and a not necessary (sic), just hurts [the wife)]and the children. Which means that I cannot say much more. [The wife] and T (the wife’s sister) like you. I do know that [the wife] has a lot of information/documents she can give you if required. She would like to talk with you in return about business opportunities.
On 11 December 2012 Mr CC responded to the unknown email address with the following message:
Dear [Mr X] (and [the wife])
I have re-read your email and I have deep concerns that you are threatening me here.
The email address, the implication that I stand to lose a lot of money if I don’t somehow deal with you refusing to disclose your identity etc.
I do not like your email, and I do not like being threatened.
And you say I have to do a property deal?
And you suggest I am not a man of integrity!
You guys have to be kidding.
I am copying [the husband] into this email and will forward to him the previous emails as well.
Please do not contact me again.
On the evening of 7 December 2012 the wife electronically gained access to the trust account of F Legal and removed $35,000 from the trust account. The transaction was discovered by the husband early on the morning of 8 December 2012 and after a series of text messages between him and the wife, she transferred $20,000 of that amount back to the trust account. The matter was reported by the husband to the Law Society. The wife has retained the $15,000.
The husband ceased making spouse maintenance payments after the wife withdrew funds from the trust account.
On 19 February 2013 the husband delivered the children to school. The wife was present in the carpark and approached the husband and the children after they got out of the vehicle. The husband delivered the children to their classrooms and returned to his vehicle to find that his briefcase and two plastic tubs were missing from the motor vehicle.
The wife denies that she was responsible for removing the items from the husband’s car. Amongst the items removed were client documents and business records of F Legal. The husband gave evidence that the whole of the records of E were amongst the items removed from the car. Tendered in the wife’s case, from documents apparently in her possession, was the original signed minute of the meeting of E which removed the wife as Director and Secretary of that company. It is more probable than not that it was the wife who removed the documents from the husband’s car.
On 19 March 2013 F Legal was placed in voluntary liquidation.
On 30 May 2013 the husband resumed payments of spouse maintenance in the sum of $500 per week and continued to make payments of $500 from time to time until 21 July 2014.
On 10 January 2014 the wife executed a statutory declaration setting out evidence that she was prepared to give on behalf of CommInsure about the day-to-day activities of F Legal and the husband’s involvement.
In July 2014 CommInsure notified the husband that the payments under the income protection policy were suspended.
On 22 August 2014 the wife executed a further statutory declaration setting out the evidence she was prepared to give on behalf of CommInsure.
On 8 September 2014 CommInsure wrote to the husband attaching a series of documents evidencing, it said, the fact that the husband had been engaged in substantial professional work since at least February 2010 despite representations made by him to the contrary.
On 3 December 2014 a further letter was written by CommInsure to the husband making a demand for payment within 14 days of the sum of $809,133 and notifying that the policy was cancelled.
On 19 March 2015 CommInsure provided information to the police. The information recorded in the documents produced by the police states, inter alia, that the wife supplied a statement to CommInsure suggesting that the husband had been defrauding CommInsure. The record notes:
[The wife] has also supplied her computer to CommInsure who recovered deleted invoices and business records pertaining to [the husband’s] affairs…. CommInsure provided the police with two folders containing numerous statements made by the wife.
The matter has been allocated for investigation. At this stage the outcome of the investigation is unknown.
On 4 December 2012 the husband became aware that GG Shire Council was attempting to serve him with documents relating to proceedings in the Land and Environment Court alleging four breaches of the Environmental Planning and Assessment Act NSW (1979) and of the GG Local Environmental Plan 2010. At this time the husband was not aware that the wife had provided statements and other material for the assistance of the prosecution.
In a judgment handed down on 21 March 2014 in relation to an interlocutory application the presiding Judge said, “[the wife’s] evidence, taken at its highest, provided compelling evidence of [the husband’s] guilt.”
The husband pleaded guilty to one charge and defended three further charges. Judgment was reserved in those proceedings on 16 September 2014. The wife gave evidence in the proceedings on behalf of the prosecution. The transcript of the proceedings shows that it was explained to the wife that she was not a compellable witness and had no obligation to give evidence in the proceedings if she did not wish to. She acknowledged that she understood that she was not a compellable witness but said that she wished to give evidence.
On 15 April 2015 the wife wrote to the Chief Judge of the Land and Environment Court asking when judgment was likely to be delivered. It is anticipated that judgment will be delivered by Friday, 31 July 2015. The husband gave evidence that the maximum fine which is able to be imposed in the proceedings is $1,200,000.
If the husband is unsuccessful in the proceedings, it must be assumed that costs will follow the event.
That the wife continues to be willing to assist CommInsure is made clear from the documents produced by Mr BB. On 20 April 2015, the wife sent an email to Mr BB which read:
Dear [Mr BB],
Find attached application and affidavit I have filed with the family court seeking that the final hearing be vacated.
I need to serve these documents on [the husband] no later than this Thursday.
I am giving you the opportunity to see the attached before he does so that if it interferes with CommInsure’s investigation, you can be prepared.
The wife attached her application to adjourn the final hearing and her affidavit in support of that application. In the affidavit the wife deposes to a number of face to face and telephone meetings with Mr BB and a telephone call on 1 April 2015 in which Mr BB told the wife that he could no longer discuss the matter with her.
The wife, in the affidavit sworn 17 April 2015, deposes:
On 7 August 2014 during my last face to face discussion with [Mr BB], he told me that:
(a) he had been in contact with the NSW Fraud Squad in Sydney and NSW Police in R Town in relation to the Husband’s fraudulent activities;
(b) there is a possibility that I will be charged with “accessory to commit fraud” on the basis that I was aware of the Husband’s activities, and that it is highly likely that the Husband will be charged with “fraud”; and
(c) that my co-operation with CommInsure by providing them with evidence would be mitigating circumstances for me if the matter were to come before the criminal court.
On 12 August 2014, a representative of CommInsure collected the Macintosh computer from my home in HH Town for the purpose of forensic investigation by CommInsure. The computer was returned to me several weeks later....
I expect that the Husband will soon be charged with fraud by the NSW Police which could result in a custodial sentence.
I do not accept the husband’s assertion that it was the wife’s actions in contacting clients that caused F Legal to fail, although her actions might have been a contributing factor.
The liquidator, in the Notice of Meeting of Creditors of F Legal dated 28 October 2013, stated that the company had experienced fluctuating trading revenue over the past five years and noted that turnover had decreased from $3.94 million in the 2011 financial year to $1.93 million in the 2012 financial year. The company had incurred losses in the 2012 and 2010 financial years.
In the 2012 financial year the company incurred losses of $575,678.
The running balance account indicated that the company owed approximately $312,000 in respect of unremitted GST and PAYG tax.
The liquidator formed the opinion that the company had operated for several years prior to the liquidation with a deficiency of working capital.
He concluded:
In the light of the foregoing it appears as though the Company may have been trading whilst insolvent from at least July 2012.
In relation to the proceedings in the Land and Environment Court, the wife’s evidence was clearly significant as is made clear from the passage of the judgement that is set out earlier in these reasons. The wife was not a compellable witness but chose to give evidence against the husband.
Both the husband and the wife agree that the husband will have to pay his own legal costs in relation to those proceedings as well as significant costs of the prosecution. If a substantial fine is imposed, the evidence of the wife will have been a contributing factor.
If it is the case that the husband took steps to defraud CommInsure, then it is clear that the wife, before the parties separated, joined with him in those steps.
Her Statutory Declarations and her affidavit sworn 17 April 2015 set out the things that she did.
The wife made an application for spousal maintenance which relied heavily on the income the husband was receiving from CommInsure.
On her own case, the wife withheld from the Court the information that she knew the husband’s main source of income was fraudulently obtained.
Having received the benefit of the spousal maintenance order, she took steps to ensure that the CommInsure payments did not continue.
On none of the numerous occasions when the matter was before the Court on interim applications did the wife disclose to the Court her belief that the CommInsure payments had been obtained by fraud or her involvement in that fraud.
If the husband is charged as a result of the dealings with CommInsure, the evidence that the wife has already provided will be a significant factor.
Similarly, the evidence of the wife will be a significant factor in any civil proceedings between the husband and CommInsure.
Either or both of the criminal or civil proceedings now contemplated by or on the instigation of CommInsure will, if successful, detrimentally effect the husband’s financial position. He may be deprived of his liberty and his right to practise his profession.
It is doubtful that any order for spousal maintenance would have been made if the Court had been made aware by the wife that it was her case that the CommInsure payments were being fraudulently received.
In all of those circumstances, it is not appropriate to exercise the discretion to enforce the orders in favour of the wife.
Because of the decision I have made in relation to enforcement, it is not necessary to determine the dispute as to the amount of the arrears.
husband’s application for a discharge of the spousal maintenance order
In response to the wife’s application for the enforcement, the husband sought that the maintenance order be discharged so far as it has not been complied with.
The relevant provisions of s 83 are reproduced below:
Modification of spousal maintenance orders
(1) If there is in force an order (whether made before or after the commencement of this Act) with respect to the maintenance of a party to a marriage:
(a) made by the court; or
(b) made by another court and registered in the first-mentioned court in accordance with the applicable Rules of Court;
the court may, subject to section 111AA:
(c) discharge the order if there is any just cause for so doing;
(d) suspend its operation wholly or in part and either until further order or until a fixed time or the happening of some future event;
(e) revive wholly or in part an order suspended under paragraph (d); or
(f) subject to subsection (2), vary the order so as to increase or decrease any amount ordered to be paid or in any other manner.
(1A) The court's jurisdiction under subsection (1) may be exercised:
(a) in any case--in proceedings with respect to the maintenance of a party to the marriage; or
(b) if there is a bankrupt party to the marriage--on the application of the bankruptcy trustee; or
(c) if a party to the marriage is a debtor subject to a personal insolvency agreement--on the application of the trustee of the agreement.
(2) The court shall not make an order increasing or decreasing an amount ordered to be paid by an order unless it is satisfied:
(a) that, since the order was made or last varied:
(i) the circumstances of a person for whose benefit the order was made have so changed (including the person entering into a stable and continuing de facto relationship);
(ii) the circumstances of the person liable to make payments under the order have so changed; or
(iii) in the case of an order that operates in favour of, or is binding on, a legal personal representative--the circumstances of the estate are such;
as to justify its so doing;
(b) that, since the order was made, or last varied, the cost of living has changed to such an extent as to justify its so doing;
(ba) in a case where the order was made by consent--that the amount ordered to be paid is not proper or adequate;
(c) that material facts were withheld from the court that made the order or from a court that varied the order or material evidence previously given before such a court was false.
(3) Subsection (2) does not prevent the court from making an order varying an order made before the date of commencement of this Act if the first-mentioned order is made for the purpose of giving effect to this Part.
(4) In satisfying itself for the purposes of paragraph (2)(b), the court shall have regard to any changes that have occurred in the Consumer Price Index published by the Australian Statistician.
(5) The court shall not, in considering the variation of an order, have regard to a change in the cost of living unless at least 12 months have elapsed since the order was made or was last varied having regard to a change in the cost of living.
(5A) In satisfying itself for the purposes of paragraph (2)(ba), the court shall have regard to any payments, and any transfer or settlement of property, previously made by a party to the marriage, or by the bankruptcy trustee of a party to the marriage, to:
(a) the other party; or
(b) any other person for the benefit of the other party.
6) An order decreasing the amount of a periodic sum payable under an order or discharging an order may be expressed to be retrospective to such date as the court considers appropriate.
(6A) Where, as provided by subsection (6), an order decreasing the amount of a periodic sum payable under an order is expressed to be retrospective to a specified date, any moneys paid under the second-mentioned order since the specified date, being moneys that would not have been required to be paid under the second-mentioned order as varied by the first-mentioned order, may be recovered in a court having jurisdiction under this Act.
(6B) Where, as provided by subsection (6), an order discharging an order is expressed to be retrospective to a specified date, any moneys paid under the second-mentioned order since the specified date may be recovered in a court having jurisdiction under this Act.
(7) For the purposes of this section, the court shall have regard to the provisions of sections 72 and 75.
(8) The discharge of an order does not affect the recovery of arrears due under the order at the time as at which the discharge takes effect.
Section 83(1)(c) of the Act provides that the Court may discharge a spousal maintenance order which is in force “if there is any just cause for so doing”.
In Lutzke and Lutzke (1979) FLC 90-714 his Honour Lindenmayer J said at 78,832 in relation to the term “just cause”:
…the Act is silent as to what may constitute “just cause” for the discharge of an order. In my opinion, however, the words “just cause” are not used in any broad general sense, nor are they intended to import any abstract notions of justice, “palm tree” or otherwise, into the determination of applications for discharge. In my opinion those words must be interpreted in the context of the Act as a whole, and in particular with regard to the other specific provisions of the Act which relate to maintenance. Thus a “cause” for the discharge of an existing maintenance order will be a “just cause” only if, having regard to the other provisions of the Act, particularly those relating to maintenance, it can be said that it is “right” or “proper” that the order should be discharged. If there were any room for doubt that this is the correct approach, in my opinion that doubt is removed by sec. 83(7)…
Section 83(7) provides that the Court must also have regard to the provisions of s 72 (relating to the right of a spouse to maintenance) and s 75 (which specifies the matters to be taken into consideration in relation to spousal maintenance).
Section 72(1) of the Act provides:
Right of spouse to maintenance
(1) A party to a marriage is liable to maintain the other party, to the extent that the first-mentioned party is reasonably able to do so, if, and only if, that other party is unable to support herself or himself adequately whether:
(a) by reason of having the care and control of a child of the marriage who has not attained the age of 18 years;
(b) by reason of age or physical or mental incapacity for appropriate gainful employment; or
(c) for any other adequate reason;
having regard to any relevant matter referred to in subsection 75(2).
The wife is 39 years old and the husband is 56 years old. As stated earlier in these reasons, the wife is an intelligent woman with a demonstrated ability to obtain employment and earn an income. There is no evidence of any health problems which are likely to impact upon her ability to obtain work.
Pursuant to the Consent Orders made on the first day of the final hearing, both parties will have equal care of the children. Pursuant to the orders to be made in these proceedings, the husband will be required to pay to child support of $66.66 per child per week and will also be required to pay child support arrears of $6,000.
With regard to the matters to be taken into account pursuant to s 75, I refer to my findings regarding the absence of any property to be divided between the parties; the substantial liabilities of the husband; his precarious financial situation given the possibility of CommInsure being successful against the husband in criminal and/or civil proceedings; the real possibility of the husband being subject to a substantial fine and a costs order in respect of the Land and Environment Court proceedings and the withholding of material evidence from the Court at the time of the making of the Orders for spousal maintenance.
I give particular weight to the provisions of s 83(2)(a)(ii) and s 83(2)(c).The order for spousal maintenance will be discharged as at the date to which it stands paid.
I certify that the preceding two hundred and twenty one (221) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Rees delivered on 25 May 2015.
Associate:
Date: 25 May 2015
Key Legal Topics
Areas of Law
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Family Law
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Statutory Interpretation
Legal Concepts
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Consent
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Remedies
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