MacDougal & Benson (No. 2)
[2013] FamCA 631
•23 August 2013
FAMILY COURT OF AUSTRALIA
| MACDOUGAL & BENSON (NO. 2) | [2013] FamCA 631 |
| FAMILY LAW – SPOUSAL MAINTENANCE – CHILD SUPPORT – Urgent spousal maintenance and urgent child support – Parties seek orders for distribution of trust funds on a priority of debt and urgency arrangement – Orders for maintenance but not litigation funding made. |
| Child Support (Assessment) Act 1989 (Cth) Family Law Act 1975 (Cth) |
| Redman and Redman (1987) FLC 91-805 Williamson and Williamson (1978) FLC 90-575 |
| APPLICANT: | Mr MacDougal |
| RESPONDENT: | Ms Benson |
| INDEPENDENT CHILDREN’S LAWYER: |
| FILE NUMBER: | MLC | 1674 | of | 2013 |
| DATE DELIVERED: | 23 August 2013 |
| PLACE DELIVERED: | Melbourne |
| PLACE HEARD: | Melbourne |
| JUDGMENT OF: | Cronin J |
| HEARING DATE: | 8 August 2013 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Dr Ingleby |
| SOLICITOR FOR THE APPLICANT: | Forte Family Lawyers |
| COUNSEL FOR THE RESPONDENT: | Mr St John |
| SOLICITOR FOR THE RESPONDENT: | Lennon Mazzeo Lawyers |
| COUNSEL FOR THE INDEPENDENT CHILDREN’S LAWYER: | Ms Dowler |
| SOLICITOR FOR THE INDEPENDENT CHILDREN’S LAWYER: | Victoria Legal Aid |
Orders
That out of the trust funds held on behalf of the parties (said to be $456,000) the following be paid:
(a)$3360 being six weeks at the rate of $560 per week for urgent spousal maintenance;
(b)The payment of the rates and utilities currently outstanding totalling $2500;
(c)The sum of $30,000 to the wife to purchase a motor vehicle;
(d)The sum of $30,000 to the husband to purchase a motor vehicle;
(e)The sum of $25,000 towards the Westpac Bank debts encumbering the Suburb H property; and
(f) The husband’s credit card debt limited to the extent of $67,000.
That in addition to releasing the wife from the undertaking given to the Court on 8 March 2013, paragraphs 1 and 2 of the minutes of consent orders annexed to the said order are discharged as of this date and not retrospectively.
That to the extent that the wife seeks spousal maintenance on a periodic basis, the amended application for such orders shall be listed in the Senior Registrar’s list of cases providing the amended application in a case is filed by no later than 4.00pm on 18 September 2013.
That in addition to the sums paid out as earlier indicated, the following be also paid:
(a)$650 to Ms N for therapeutic counselling;
(b)$1000 to be retained by Forte Family Lawyers for further therapeutic counselling;
(c)$5000 to be paid to Dr A to prepare psychiatric assessments of both the husband and the wife.
That the applications for interim orders are otherwise dismissed.
IT IS CERTIFIED:
That pursuant to Order 19.50 of the Family Law Rules 2004 it was reasonable to engage counsel to attend.
To the extent that it is necessary to say so, the application of the wife under s 139 of the Child Support (Assessment) Act 1989 is dismissed.
IT IS NOTED that publication of this judgment by this Court under the pseudonym MacDougal & Benson (No. 2) has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| FAMILY COURT OF AUSTRALIA AT MELBOURNE |
FILE NUMBER: MLC 1674 of 2013
| Mr MacDougal |
Applicant
And
| Ms Benson |
Respondent
REASONS FOR JUDGMENT
In the Judicial Duty List, Mr MacDougal (“the husband”) and Ms Benson (“the wife”) litigated about interim financial issues in a case in which:
· There are real properties owned by them which are the subject of mortgage stress with unpaid mortgagees pressing for payment;
· There are debts mounting including for the parties’ children’s private schools where the fees are unpaid;
· Each party is the recipient of Commonwealth unemployment benefits; and
· The family dog had to be handed over to a charity because the family could not feed it.
Despite those problems, each party resolutely argued about their view of the litigious issues in circumstances where each of their respective legal fees has already exceeded $100,000.
The case only began in early 2013. The parenting issue which was also listed in the Duty List was compromised on the basis that the families obtained professional assistance external to the Court.
It goes without saying that in a Judicial Duty List, the hearing must, of necessity, be truncated. Each party relied upon a variety of affidavits and their counsel’s oral submissions. In respect of the former, whilst the onus of proof lies with the person seeking the orders and the standard of proof is the balance of probabilities, the reality is that contentious facts cannot be determined without the evidence being properly tested. I compliment each counsel for their succinct submissions bearing in mind the limitations.
The husband was the applicant and the wife the respondent. Whilst there was a variety of applications, the parties defined and confined the issues to the following:
(a)Should the real property at Suburb H be sold and the proceeds applied to bank debt reduction for an apparently inactive company controlled by the parties?
(b)Should trust funds of $456,000 be applied, from the husband’s perspective, towards:
· Credit card debts of about $67,000;
· Payment out of a Mercedes car lease in the name of another company controlled by the parties for about $17,500;
· Payment out of a Range Rover lease in the name of a different company again controlled by the parties for about $28,400;
· Payment out of two Westpac Bank loans which are in arrears and encumbering the Suburb H property (in part) totalling about $25,000;
· Payment out of a company overdraft of about $2000;
· Payment out of rates and utilities on a property of the parties totalling about $2500;
· Funding $250,000 for the husband’s litigation in these proceedings;
· Enabling the husband to buy a car for about $30,000; and
· The repayment of a debt of the husband of $74,000 lent to him to be advanced towards legal costs;
(c)Should the same trust funds be applied, from the wife’s perspective, towards:
· A lump sum of $30,000 to meet her living expenses;
· Enabling the wife to buy a car for $40,000;
· The wife’s litigation funding of $200,000; and
· The payment of the Westpac Bank debt and various house utilities;
(d)Should there be orders under s 139 of the Child Support (Assessment) Act 1989 (Cth) in the following terms:
· “$40,000 to be applied at the rate of $230 per week for each of the three children”;
· $7300 to meet “non-school fees and costs of the children”;
· $5430 to meet the children’s schooling for 2013 and towards the books for Term 1 in 2014; and
· About $19,000 towards the children’s private school fees;
(e)Should a variety of orders made in March 2013 be discharged on the basis that they were inappropriately made and in any event, are now incapable of being fulfilled.
The affidavit material relied upon was that filed by the husband on 5 August 2013 and a financial statement of the same date. The wife relied upon affidavits filed on 22 April 2013, 19 July 2013 and 8 August 2013 and a financial statement filed 8 August 2013.
It is useful to simplify the background by stating the following. The parties began living together about 1996 to 1997. The wife is now 43 and the husband 42. Both are unemployed but the wife asserts that the husband has the capacity for gainful employment notwithstanding he has been unemployed since February 2012 and, according to his evidence, unsuccessfully applying for jobs. There are three children aged 14, 12 and 7 who live with the wife. The wife is also dependent upon Centrelink benefits and receives no financial support from the husband. From the husband’s perspective, he points to the wife’s unilateral action in disposing of a large sum of money and says that it is now not reasonable for her to be arguing that she is entitled to, or justified in seeking, urgent spousal maintenance. The wife observed that the husband was silent on the issue of the financial support of the children in any event.
Although the parties saw the financial situation differently, there is not very much difference in the values each was using for the interest each or either of them has in property. Although the wife complained that caution should be used about the asset values because they were estimates, and that as capital gains tax liability remained unknown because the tax returns had not been done for about three years, the figures are the best that the Court has.
The home in which the wife lives with the children and which she desires to keep is said to be worth $1.4 million. There are also two investment properties valued at about $600,000 and $300,000 respectively. The wife asserted that these were uninhabited and not producing rental yet the husband indicated a desire to retain one of them in the ultimate property settlement. However, the husband who was living with his mother, has no apparent or obvious capacity to service the current Westpac Bank mortgage.
One of the properties is the one that the wife wants sold but its encumbrance is such that the predicted sale price would not cover the debt on all of the properties which I have presumed have cross-collateralised mortgages. Whilst the wife submitted that a sale would reduce debt and make the repayments more feasible, the evidence before me would suggest that other than by a use of capital funds from the $456,000, that is unlikely.
The $456,000 is sought by both parties for the variety of purposes earlier described. It will be seen that the largest claims upon those funds are the two lawyers but with a combined pursuit of $450,000, commonsense dictates that that is impracticable. Indeed, senior counsel for the wife acknowledged, contrary to his instructor’s interest, the payment of the solicitors was impracticable. In circumstances where the children were not able to be supported other than on the taxpayer’s purse, it would be hard to disagree with the wife’s counsel. Where one of the children rides public transport without a ticket, the wife cannot drive the children because she has no car and the family dog has to be given away, there is something dramatically wrong. As I ironically observed, the parties notionally are millionaires.
The circumstances leading to the March 2013 proceedings need careful examination. Most of the facts are contentious, cannot be tested and I am not in a position to make findings as to exactly what occurred.
On 8 March 2013 with both parties represented before Dessau J, orders by consent were made. The literal reading of those orders indicates that the wife gave an undertaking to the Court that she would not deal with the proceeds of the sale of a property, further draw down on a mortgage and otherwise, would act as if injuncted in relation to various financial transactions. On the basis of that undertaking, the wife was ordered to pay credit card payments and then, from the house sale proceeds, pay loans, school fees and utilities.
The significance of the March order is that subsequently, the wife said she was pressured into agreeing to its terms but importantly, told her solicitor and counsel (and I hasten to say not those now acting for her) that the money from which all of these payments were to be made pursuant to the order and undertaking, had already been disposed of before that very day. Of course, that gives rise to an assertion that the solicitor and counsel deliberately misled the Court. That issue has much heat in it and will no doubt test the creditability of a number of people at trial. Suffice to say however, the immediate issues are whether the wife should be released from her undertaking and the orders discharged.
It is difficult for me to see any other alternative than to discharge the orders. It was common ground that the only immediately available cash is the $456,000. This issue highlights the problem of what each party is seeking to do with the limited funds. There will be ample opportunity for the husband to test the credit of the wife about the movement of funds after separation but for the moment, the orders are not only not being carried out, they are a nonsense. I hasten to add that there is nothing I could see in the orders detailing what power was being exercised by the Court at the time the order was made. In any event, I am satisfied that there is sufficient evidence of a change of circumstances for both parties since March 2013, to justify a re-examination of the orders. I find there is no basis for such an order now. It must therefore be discharged as must the undertaking which supported the relevant paragraphs.
On the husband’s version of the facts, there is about $2 million to “go around”. On the wife’s version, there is about $1.4 million but that largely depends on a capital gains tax liability. Whilst the latter was not acknowledged by the husband, I can safely conclude that even though these figures are only estimates, there is at least $1.4 million to “go around”.
Senior counsel for the wife submitted that his client would argue a greater contribution had been made by her and the wife living in penury with three children not being supported by child support payments.
Although senior counsel for the wife submitted that the evidence of all of this was found “in the affidavits”, it seems largely to have been set out in the documents she relied upon. The first of those affidavits filed in April 2013 was prepared for the wife by the lawyer said to have been responsible some weeks earlier for misleading the Court. In that affidavit, the wife deposed to having a greater initial asset base than the husband and that a significant amount of money went into one of the investment properties mentioned earlier. In addition, the wife deposed to having received $50,000 from her parents in 1999 which was used towards the other of the two investment properties. All of that is a long time ago but it must still be seen as a contribution, assessed and given weight.
Clearly, there are other contributions including that of the wife after separation in both physically and financially supporting the children. The husband’s evidence was about the wife using money after separation. He referred to significant amounts paid out by her which now seemed to have been put back under the husband’s solicitor’s control. Each of the parties has also had access to $50,000 as an interim distribution of property. The husband referred to the parties’ overall indebtedness and loss of his car through repossession. He currently lives on $252.70 per week and in his mother’s home. He was able to borrow $74,000 from his mother for legal expenses but to do that, his mother had borrowed against the security of her home. The husband’s evidence is that that money needs to be returned as soon as practicable.
The power to make the injunctive orders compelling parties to distribute funds for debt satisfaction purposes lies in s 114 of the Family Law Act 1975 (Cth). It provides that in proceedings for an order in circumstances arising out of the marital relationship, the Court may grant such order as it considers proper with respect to the matter to which the proceedings relate including an injunction in relation to the property of a party to the marriage. The power of the Court to make orders was not in dispute.
Here, I am satisfied that the injunctions pursued by both parties arise out of the circumstances of their marriage and relate to their property. Whether the orders pursued are proper to make is a different issue. The propriety of an order depends upon the exercise of subjective discretion. Discretion must be exercised according to law. The law guides that discretion and here, the issue is about protecting the parties’ legal and equitable interests because they cannot agree on a priority arrangement of debt reduction. Absent some orders in relation to debt reduction, there is a very real probability that the parties will lose the assets to the creditors.
In respect of the Suburb H property, an immediate sale serves no purpose. The husband wants to retain that property as well as the other investment property. How he would do that bearing in mind the mortgages, no income and no capital payment from the wife, remains a mystery.
To the extent that the husband was relying on a payment from the wife, whilst there is controversial argument about money lent to another company, unpaid tax and family money disputes, it was not at all clear how the wife could keep the former matrimonial home absent paying the husband some money. Thus, no useful purpose would be served trying to reduce debt when the ultimate reduced debt could not be serviced in any event. In addition, I consider it is just that the husband have an opportunity to retain the investment properties if the wife desires to retain the home. I will not therefore order a sale of any of the investment properties.
It may be, and I would expect it is only a question of time, the Westpac Bank will pursue recovery. The Bank currently has an extant demand for payment against one of the parties’ companies and for which each has provided a guarantee. The reality is therefore that insolvency law may solve the parties’ dilemma. In my view, it would not be proper to make an order for sale.
Should the trust funds be used to stave off the insolvency action? While senior counsel for the wife argued that payment out of funds should be governed by a priorities consideration which would put the wife’s personal needs and those of the children first, I think the payment to the mortgagee may give the parties a short breathing space to try and sort out their affairs. It may already be too late but in any event, there is no prejudice to either party if the cash in the trust account is swapped for increased equity in the investment properties. On the basis that I find it is proper to do so, I propose therefore to order that the trust funds be used to satisfy the extant Westpac Bank debt but (unless the parties otherwise agree) only to the extent of $25,000. Although the evidence is a little unclear, I think I can infer that the credit card debt of $67,000 is connected in some way to those same Westpac Bank debts. Based on the evidence of the husband, that sum should also be paid.
The husband also sought payments out of the trust fund for leases on two cars. There is considerable contention about how they were sold and whether they were deliberately damaged prior to the sale thereby reducing the potential value. Importantly, the leases appear to be the responsibility of companies rather than the parties directly. The extent of the parties’ personal liability remains unclear. I could not find it was proper for those debts to be paid from the trust funds absent knowing what the balance sheets of those entities indicated and what guarantees have been given by the parties. I refuse that proposed distribution.
The impecuniosities of the parties has extended to the non-payment of rates and utilities on the home. Those are personal expenses and they should be paid. There is no reason for them not to be a joint responsibility having regard to the joint use by the parties and their consequent legal liabilities. Those payments will be ordered to be made.
It is abundantly clear that the wife needs a car for the transport of the children. The husband also has no mode of transport. Whilst each might justify their needs, the reality is that the acquisition of a car each, absent some philosophical argument about priorities, reduces the assets in the form of the trust funds but increases those assets in the form of those cars. I see no reason why that priority argument should not have a role to play in respect of the values. Each party can therefore have $30,000 to acquire a motor car.
Although the husband sought repayment of the funds lent to him for legal costs, he borrowed it on the basis that it was to be repaid. The difficulty is that to pay that out of the trust funds would possibly mean that the wife’s capital was being used to fund the husband’s costs. I am not at all clear that I understand what the husband’s entitlement would be and therefore it would not be appropriate nor just, where there is still justification for the payment of other sums on the priority argument. The husband’s mother will just have to wait.
I do not propose to deal with the injunctive lump sum request until after I determine the maintenance and child support issues.
I have already set out the claims of the wife and it was submitted that those payments could be drawn down using the maintenance power. The husband’s position was the wife had taken “hundreds of thousands of dollars” and he had been put to enormous trouble to protect the asset base. The wife’s conduct was described by the husband’s counsel as a “scorched earth policy”. For her part, the wife’s senior counsel observed that she was living in penury without income or money to provide for the children and that on the evidence, she had an entitlement to urgent spousal maintenance. The distinction between a maintenance order under s 74 and that pursued under s 77 lies in the procedure to be followed. Under s 74, an applicant is expected to provide evidence to satisfy the threshold and capacity tests. The respondent clearly must be given an opportunity to test that evidence. Section 80(1)(h) provides for a comprehensive hearing even though the life of the spousal maintenance order might be limited. In the case of an urgent or immediate need for maintenance, the Court is not expected to do more than conduct a summary hearing without the evidence being tested. The Court needs to be satisfied that the applicant should meet the threshold test and also whether the respondent has the capacity. In this particular case, the evidence is unclear but as it is not tested, I can draw inferences from the facts that are obvious. As the Full Court said in Williamson and Williamson (1978) FLC 90-575, the decision has to be made on a pragmatic basis. In Redman and Redman (1987) FLC 91-805, the Full Court said that the order was intended to be limited in time and as such, different considerations applied. Anything that needed to be undone could be so later without the strict requirements of a variation under s 83 being fulfilled.
Thus, doing the best I can, it would seem that the wife satisfies the threshold of being unable to support herself without maintenance and the husband does not have the capacity to pay. However, there is a fund of capital sitting in a trust fund which could clearly be adjusted later on and that should be the source of the support of the wife. The husband did not seek spousal maintenance for himself.
Urgent spousal maintenance orders are intended to meet the daily needs of the applicant and for a specified period. As such, it would not be appropriate for me to make an order for a lump sum in the way the wife sought. It is not intended to cover all of the expenses described in the expenses column of the financial statement. Those expenses cover such things as holidays and capital repairs which are obviously averaged out over the year. By the same consideration however, it is not appropriate that the assessment be done on a “food voucher” standard because each party lives a different standard of life.
Notwithstanding the wife’s current dramatic circumstances, this situation has gone on for months. The parties have significant assets albeit that they are under stress. The wife chose to deal with significant sums of money and it is not my task in these proceedings to look at the propriety of those actions. Suffice to say, the children are in private schools, mortgages remain unpaid and tax details are scant. Therefore, the circumstances are in many ways of the wife’s own choosing. This case does not easily fit within the normal category of urgent spousal maintenance. In my view however, until such time as the Court can look at the matter in some greater detail, I propose to look at the financial statement and make a subjective assessment as to the needs of the wife. That is also a vexed question where there is no child support assessment yet in place on which basis, I can be satisfied that all of the responsibilities of supporting these children will fall upon the wife.
Doing the best I can, I assess the wife’s urgent need at $560 per week of which, the large portion relates to the support by her of the children. I propose that that sum be paid for a period of six weeks and in a capital sum on the assumption that the Court will re-examine the matter at that time in the Senior Registrar’s list and to the extent that any child support assessment is completed, it will then be operative.
I then turn to the child support assessment issue. Section 139 of the Child Support (Assessment) Act 1989 (Cth) provides that where an application has been lodged for an administrative assessment and the Court is of opinion that the child is in urgent need of financial assistance, the Court may make the order for the payment of a periodic or such other amount as the Court considers appropriate. There is evidence that the wife has lodged an application for an assessment and as been given a registration number but no assessment has been made. On the evidence, I infer that the assessment will be difficult because there are no recent taxation returns lodged and the parties’ financial affairs appear complicated by the use of corporate structures. The question however is whether or not the children are in urgent need of financial assistance. It was the wife’s position that a lump sum should be ordered and that that be then drawn down upon on a weekly basis. In my view, that sort of order is inappropriate because s 139 provides that any order the Court makes ceases to have effect if the decision of the Registrar becomes final. I have no idea at this stage when that decision will be made if it is made at all. Having regard to the fact that I have made an allowance in the capital payment to the wife for spousal maintenance because she has the primary responsibility for the care of the children financially at this stage, I could not find that the children are in need of urgent financial assistance. If it becomes apparent that the Registrar of Child Support has difficulty making a determination because of all of the matters just mentioned, a further application can be made by the wife. At this stage therefore, I propose to dismiss the application for child support under s 139 of that legislation.
It goes without saying that for the reasons outlined, I reject that it is appropriate or proper to make orders for the payment of the outstanding car leases, the company overdraft of $2000, the litigation funding claims of either party, the outstanding private school fees for the children or setting aside any funds for 2014.
I certify that the preceding Thirty Six (36) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin delivered on 23 August 2013.
Associate:
Date: 23 August 2013
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