Malinda and Malinda

[2010] FamCA 603

FAMILY COURT OF AUSTRALIA

MALINDA & MALINDA [2010] FamCA 603

FAMILY LAW – PROPERTY – Interim distribution of property – Husband concedes jurisdiction and entitlement of the wife but not to the extent sought by the wife – Requirements to make an order fulfilled – Husband desires to satisfy order by transfer of property – Transfer opposed by the wife seeking cash – Order for the payment of cash – Question of recovery of sum is a matter for enforcement not for the substantive hearing – Husband requests matter be listed for final hearing – Wife opposes on the basis that discovery issue still proceeding

Family Law Act 1975 (Cth)

Aon Risk Services Australia Limited v Australian National University [2009] HCA 27
Bing and Bing (2007) FLC 93-318
Ruane and Bachmann-Ruane [2010] FamCA 514
Strahan and Strahan [2009] FamCAFC 166

APPLICANT: Ms Malinda

RESPONDENT: Mr Malinda

FILE NUMBER: MLC 12965 of 2007

DATE DELIVERED: 20 July 2010

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: THE HONOURABLE JUSTICE CRONIN

HEARING DATE: 12 JULY 2010

REPRESENTATION

COUNSEL FOR THE APPLICANT: MR NORTH SC WITH MR WOOD

SOLICITOR FOR THE APPLICANT: CAROLINE COUNSEL FAMILY LAWYERS

COUNSEL FOR THE RESPONDENT: MR THOMPSON

SOLICITOR FOR THE RESPONDENT: SAXBYS LAWYERS PTY LTD

Orders

1. That the applications of the parties seeking final orders are listed for mention at 9.00am on Wednesday 8 September 2010 for determination as to whether or not the matter is ready for trial.

2. That Mr A Malinda (“the Trustee”) as trustee for the Malinda Family Settlement (“the Settlement”) be joined as a party to the proceedings.

3. That on or before 6 August 2010 the wife file and serve an amended application for final orders on:

   (a)      the husband; and

   (b)      the Trustee.

4. That on or before 20 August 2010 the husband file and serve any amended response upon which he intends to rely.

5. That on or before 27 August 2010 the Trustee file and serve any response upon which he intends to rely.

6. That on or before 21 July 2010 the wife cause a copy of these orders to be served on the Trustee.

7. That by way of interim distribution of property, the husband pay to the wife’s solicitors the sum of $2.5 million as follows:

   (a)      the sum of $500,000 by 4.00pm on 30 July 2010; and

   (b)      the sum of $2 million by 4.00pm on 20 September 2010.

8. That the time for asking questions in writing of the single expert, Mr W be extended to 4.00pm on 30 July 2010.

9. That on or before 30 July 2010 the wife be at liberty to file and serve a request for answers to specific questions and 21 days thereafter the husband file and serve answers to those questions that are not the subject of objection.

IT IS NOTED that publication of this judgment under the pseudonym Malinda & Malinda is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLC 12965  of 2007

MS MALINDA

Applicant

And

MR MALINDA

Respondent

REASONS FOR JUDGMENT

1. Ms Malinda (“the wife”) seeks an interim distribution of property from Mr Malinda (“the husband”).  Whilst agreeing in part, the husband seeks an order that the substantive property proceedings be finally set down for trial to bring to an end, their unresolved financial relationship.

2. The wife’s concern is that she does not have access to sufficient information to have the matter finally determined.  She opposes the case being set down.

3. The husband’s concern is that if a final hearing is not set, the wife will “continue the same repetitious line of enquiry” (see paragraph 21 of the affidavit of the husband filed 8 July 2010). 

4. The parties have been separated since 2002 and proceedings have been alive for 2½ years.  Because each side complains about the other and the lines of inquiry on both sides are continuing, the case is not ready for a final hearing.

5. Rule 1.04 of the Family Law Rules 2004 provides that the main purpose of the rules is to ensure that each case is resolved in a just and timely manner at a cost to the parties and the court that is reasonable in the circumstances of the case. The court is expected to apply the rules to promote that main purpose and also actively manage each case. It is expected that will be done by the early identification of the issues in dispute and the setting of realistic timetables. Part of the management process is monitoring and controlling the progress of each case.

6. In its report in 2000, Managing Justice: A review of the federal civil justice system, the Australian Law Reform Commission said: "Over the last ten years Australian courts have become more active in monitoring and managing the conduct and progress of cases before them, from the time a matter is lodged to finalisation".

7. Management of cases is now an accepted practice within courts in Australia because of the problems of delay and cost in the litigation process (see Aon Risk Services Australia Limited v Australian National University [2009] HCA 27). I would add to that the continuing problem in this Court of reduced judicial resources and increasing demands of litigants in complex cases.

8. I propose to give the parties an opportunity to sort out the unresolved issues and I will review the case in eight weeks time.

9. From the wife’s perspective, in addition to the desire to presently share in the fruits of this long marriage, she wishes to join her brother-in-law who is the trustee of the Malinda Family Settlement because she says there is a potential $5 million asset or resource about which there is considerable dispute.  The joinder of the husband’s brother is not disputed by the husband.  He too has issues about whether the trust deed of the Malinda Family Settlement accurately reflects his 1997 intention to create a trust for the benefit of the children of the marriage.  There is a looming dispute about the interests of those children in that trust.

10. From the husband’s perspective, there is no argument about the wife being entitled to some of the assets under his control but he wishes to argue about the wife’s entitlement even to the known assets because of his significant contributions (as he sees them) before cohabitation began and after separation.

11. There being no consensus on the setting down issue, I will examine the matter again in September to see whether the Court’s resources are going to be efficiently used.

12. I turn then to the partial distribution of property.  Before doing so, the following brief synopsis will suffice for these reasons.

13. The wife is 55 years of age and employed on a part-time basis working 22 hours per week as a receptionist.  The husband is 60 years of age.  He is self-employed in a repairs business.

14. The wife asserted that the parties were “together for eight years prior to commencing cohabitation” but the husband disputes that.  The married in 1982 and separated in April 2002.  On any view their relationship was a long one. 

15. There are four adult children of the marriage all of whom are financially independent.

16. From reading the material of each party, it is apparent that the husband intends to run an argument about his contribution subsequent to the separation of the parties by his management of the parties’ assets.  The wife’s material would tend to suggest she is running an argument about her parenting role subsequent to separation as well.

17. The proceedings began on 29 November 2007 when the wife issued her application for property settlement under s 79 of the Family Law Act 1975 (Cth) (“the Act”).

18. In his response filed 29 February 2008, the husband sought undefined orders.  No document I was able to find in the Court file would suggest exactly how he would suggest the matter should be resolved.

19. In her affidavit, the wife complained about having been hampered by a lack of information and financial disclosure by the husband.  She deposed to the fact that there have been eight hearings and subpoenae issued to a number of people and organisations.

20. In this application which was filed on 25 June 2010, the wife sought the following orders:

    (a)that by way of interim distribution of property, the husband pay to the wife $2 million within 30 days;

    (b)within 30 days, the husband pay $500 by way of provision for past and anticipated legal costs and disbursements;

    (c)that Mr A Malinda as trustee of the Malinda Family Settlement be joined as a party to the proceedings;

    (d)that the wife amend her application for final orders;

    (e)that the trustee of the Malinda Family Settlement be restrained from selling, encumbering or otherwise dealing with any property of the settlement;

    (f)that the husband pay the wife’s costs.

21. No response was filed by the husband but he opposed any order under which the wife received at this stage, more than $2 million.  His position was that the wife by interim settlement could have the following:

    (a)      $500,000 within 14 days;

    (b)a transfer to her of the property which was the former matrimonial home unencumbered for $760,000;

    (c)her motor vehicle worth $20,000;

    (d)Lot 4 S Street which is vacant land worth $230,000;

    (e)Lot 5 S Street (which is a factory) worth $475,000 and for which there is rental paid of $3033 per calendar month;

    (f)the contents of the home worth between $10-15,000.

22. It will be seen that those figures approximate $2 million.

23. The wife filed her affidavit on 25 June 2010 together with a financial statement on the same day. Before turning to the relevant parts of that affidavit, it is timely to remind all litigants that Rule 5.09 of the Family Law Rules 2004 permits a party to rely on as evidence in chief at the hearing of an interim application, one affidavit and one affidavit by each witness if the evidence to be given by that witness is relevant and cannot be given by a party. Rule 9.06 provides that a respondent is in the same position in terms of affidavit material. Importantly, Rule 15.06 says:

    An affidavit filed with an application may be relied on in evidence only for the purpose of the application for which it was filed.

24. It is not appropriate for parties to commence affidavit material in an interlocutory (let alone a final hearing) saying that they rely on all previous affidavit material filed.  In this case, I have not read the affidavits previously filed in the numerous hearings to which I have referred.

25. In her affidavit, the wife set out the history and the matters upon which she relied to establish the orders she sought.  It is not necessary for me to examine the jurisdictional issue in any detail because the husband conceded the jurisdictional issue by making his offer of approximately $2 million to which I have referred.  However, it is important to note that the jurisdiction is not unlimited.

26. In Ruane and Bachmann-Ruane [2010] FamCA 514 I said:

    26.In Strahan and Strahan [2009] FamCAFC 166, the Full Court (Boland, Thackray and O’Ryan JJ) made a number of observations about courts making orders for partial property settlement and distribution of funds for litigation funding. Boland and O’Ryan JJ observed, as a variety of authorities had before, there is only one exercise of the power under s 79 but that the power can be exercised by a succession of orders until it is exhausted. That occurs when there remained no property about which orders could any longer be made (see also Gabel v Yardley (2008) 40 Fam LR 66). Their Honours observed that the approach in relation to an application for interim property settlement using the provisions of s 79 of the Act , had two distinct aspects. Their Honours accepted a submission put to them that as follows:

    The first consideration is the adjectival or procedural step and the second consideration is the substantive step. The first step requires consideration as to whether the jurisdiction will be entertained. The second step arises if the jurisdiction is entertained and requires consideration of the factors which are relevant to the exercise of power under s 79 to make an order.

    27.The two steps mentioned were discussed in the three issues raised in Harris and Harris (1993) FLC 92-378 where it was said:

    (1)The exercise of the power should be confined to cases where the circumstances presented at that time are compelling. As a generality, the interests of the parties and the Court are better served by there being one final hearing of s.79 proceedings. However, circumstances may arise before there can be a final hearing which dictate that some part of the property of the parties should be the subject of orders. A common example is where both parties agree to the disposal of some assets pending the trial. However, we do not consider that it is confined to cases where the parties consent. Urgent situations may arise where it is necessary to exercise this power if injustice is to be avoided. Examples include cases where it is necessary to do so to avoid an asset being eroded or lost in the intervening period, and cases (beyond the maintenance power) where an order in favour of one party is necessary to preserve or obtain a home for or is otherwise necessary for the welfare of the children.

    …

    (2)It is an exercise of the s.79 power. Consequently it must be performed within those parameters. Since it is not the final hearing the Judge is unlikely to have the final findings, but the exercise must fall within that general framework and the material available at that time.

    (3)Of necessity it is likely to be a somewhat imprecise exercise.  Consequently, it must be exercised conservatively and the Judge must be satisfied that the remaining property will be adequate to meet the legitimate expectations of both parties at the final hearing, or that the order which is contemplated is capable of being reversed or adjusted if it is subsequently considered necessary to do so.

    28.O’Ryan and Boland JJ went on to say that the first step was to resolve whether to exercise the power before a final hearing. Then, if it was appropriate to do so, the second step involved the exercise of that power.

    29.      Thackray J in a separate judgment said:

    In my view, the two step approach advocated by senior counsel for the Wife aptly encapsulates the way the Court should approach an application for interim property settlement. The Court must first identify circumstances that make it appropriate to give consideration to exercising its power to make an interim order. It is at this stage that the Court has regard to the policy consideration that it is generally in the interest of the parties and the Court for there to be only one exercise of the s 79 power. However, once the Court has determined that the interests of justice require it to exercise the power, the conditions on which the power is to be exercised are governed only by the obligation to make an order that is “appropriate” and to ensure that the proposed order is “just and equitable” by reference to the matters set out in s 79(4).

    30.As for the “compelling circumstances” referred to in Harris (supra), the Full Court observed that the exercise of discretion to make an interim property settlement order should be based not upon a “compelling” basis but on whether or not it was a proper case in all the circumstances for such an order to be made. A proper case simply means that the court is required to do what is just.

    31.A relevant statement about what were appropriate circumstances to make interim orders is found in Blueseas Investments Pty Ltd v Mitchell (1999) FLC 92-856 where the Full Court said (at para 54):

    a “highly relevant matter that distinguishes litigation under the Family Law Act from ordinary civil litigation … is the fact that very often the wealth of the parties is controlled by one rather than both of them.” It cannot be the case that a party who has an irresistible claim to a substantial share of the property of the parties should be held out of that property while the matter is litigated, left to rely upon applications for exclusive occupation of the matrimonial home or spousal maintenance alone, particularly where the parties are asset rich but have relatively modest incomes (such as the present case). Nor could it be appropriate that a party should be denied the ability to liquidate assets when there are real needs for those resources, such as to meet debts which may result in the party being pursued by creditors, or the need for the party to make payments for the benefit of the children, or to take advantage of other financial opportunities (for example the superannuation contribution cases).

    32.In Strahan, Boland and O’Ryan JJ noted that a distribution which enabled the payment of legal costs may be one such situation in which justice required an order. Their Honours noted that as an interim distribution of property was an exercise of power under s 79, there had to be evidence that would satisfy the relevant criteria in that section. One such consideration in determining whether the order was just and equitable was the capacity to claw back the sum on a final hearing. It is clearly a relevant factor to consider whether a distribution which is unashamedly used to pay legal fees and also to enable a party to live on comfortably can be clawed back from other assets or adjustments. That will usually be so, as it is here, because the distribution once made, will have permanently gone.

    33.Neither party disputed that the power being exercised was under s. 79 of the Act.

27. The matters referred to in that decision apply here. 

28. In his affidavit (paragraph 14-15) the husband relied upon a schedule in which he described the summary of net assets and financial resources as totally $11.88 million but that is subject to some qualifications as set out in the affidavit.

29. It is important to note that the Malinda Family Settlement is disputed by the husband.  Also disputed is the issue of some loan accounts.

30. The wife pointed to the balance sheet of the Malinda Family Trust as at 31 December 2008.  She attached that to her affidavit in the form of a report from the single expert witness who had valued the various entities.  The balance sheet showed that the cash resources of the trust under the control of the husband amounted to $3.2 million as at 31 December 2008.  Although that is 18 months ago, it was not suggested by the husband that those amounts no longer existed. 

31. I raised the subject of how those funds could be released because they were property of a trust.  However as senior counsel for the wife pointed out, the same balance sheet showed “beneficiary loans” of $3.969 million and the note thereto in those financial statements shows the husband as having an entitlement to that sum of $3.085 million.  The husband said through his affidavit and in his counsel’s submission that he needed to clarify that liability of the trust.  The document upon which the wife relied was prepared by the husband’s accountant Mr P.  It is of significant value because it is attached to the report of the single expert witness dated 23 October 2009.  If that problem had not been clarified by now, I see no reason at least at this stage, to rely upon the balance sheet.  At worst, there may be some tax consequences if the documents prepared by the accountant are not right.

32. Accordingly, there are two positions to be resolved.  The wife seeks $2.5 million and the husband is prepared to offer just under $2 million.  The distinction between those two positions however is hidden by the fact that the wife wanted the sum in cash and the husband wanted to pay in a variety of assets.

33. In Bing and Bing (2007) FLC 93-318 the Full Court referred to this problem in relation to the enforcement of a Barro order and said:

    23.…If it is apparent that one of the parties controls a vast pool of assets (irrespective of whether those assets are readily capable of liquidation) then the Court has a broad enough discretion to enable an order to be made for the provision of funds by the holder of those assets to enable the other party to continue on with litigation.  As the Court said in Zschokke and Zschokke (1996) FLC 92-693 at 83,215:

    …where property settlement proceedings under s 79 are pending, the Court may pursuant to the provisions of s 80(1)(h) (and independently of the power in s 117(2) to make a costs order) require the party who controls most of the assets of the parties to provide the other party with funds to conduct his or her case, with the provision of such funds then being a matter to be taken into account in the final settlement of property between the parties.

    …

    27.Finally it has been asserted that the husband was and remains unable to raise the capital sum sought by the wife.  This is a matter which may become relevant if and when the husband defaults in the order and an enforcement application is brought.  However, the question of enforcement of the order remains a separate question from the propriety of granting the order in the first place.

1. What then is the appropriate sum?

2. The husband says that the “net position” is $11.8 million but with some qualifications.  The wife says that the husband is identifying the pool at $9-10 million.  This is a long marriage with four children.  The husband says he brought in $1 million.  There is no evidence about that however he says that he intends to argue that there has been a springboard effect by virtue of the fact that he contributed the business at the time that cohabitation commenced.  On any view, $2.5 million as sought by the wife of a conservative pool of $9 million is 28 per cent of the total.  The husband is prepared to concede approximately $2 million so the difference between their respective positions is slightly more than one half of one percent. 

3. As was set out in Strahan (supra) each of the four steps has to be followed and the last of those four steps is to be satisfied that the outcome to be ordered is just and equitable.  It seems to me that the distinction between the parties’ positions is modest and that it is probable that with the sum involved, even if the wife was to get less than 28.6 per cent, some of that money could be clawed back.  The difficulty I have is that the husband has not set out with any precision what he says the wife is entitled to.

4. In my view it is just and equitable for the wife to share in the entitlement of the 20 year relationship and it seems that without any further indication, the sum of $2.5 million is not unreasonable. 

5. The husband offered to pay $500,000 in cash in 14 days.  The balance of the cash seems to be sitting in the trust and under the husband’s control.  It may mean that he needs longer than 14 days to get access to those funds and senior counsel for the wife suggested that 60 days was appropriate.  That too seems to me to be reasonable.  If however the husband established that there is a plausible reason why he cannot get access to those funds and otherwise wishes to sell property, he can make the necessary application for an extension of time to avoid the obvious enforcement application which would otherwise follow. 

6. In the circumstances, it is appropriate to make orders in the terms sought by the wife.

7. Senior counsel for the wife indicated that he did not intend to pursue the orders in relation to injunctions against the trustee having regard to the requirements of the provision of natural justice to the recently joined party.  That issue can be taken up on the return date in September.

8. During the course of submissions, counsel for the husband raised the subject of the impasse between the parties concerning questioning of single expert witness Mr W.  I propose to make orders in respect of the parties having time to file specific questions.  Those times can be altered by agreement between the parties.  It was sought by the husband that he have an opportunity to speak to Mr W but at this stage, I see no reason why the rules should not be followed rigidly.  In so far as the husband’s complaint continues to be that the wife will not join with him in a meeting, he will have to serve questions on Mr W as provided by the orders I propose to make.  All parties should include the other in any correspondence delivered to Mr W.  Each party has indicated (vaguely) of having access to a “shadow expert” but I indicate clearly that I will not give open orders for them to rely upon an adversarial witness without a formal application being so made.

9. At the conclusion of the hearing, I asked each party what they wanted me to do in relation to any costs that might arise out of the orders I propose to make and each agreed that those costs should be reserved and that I should certify for counsel including senior counsel and I propose to do so accordingly.

I certify that the preceding Forty Two (42) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin

Associate: 

Date:  20 July 2010