Malone and Malone and Ors

[2016] FamCA 432

FAMILY COURT OF AUSTRALIA

MALONE & MALONE AND ORS [2016] FamCA 432

FAMILY LAW – PROPERTY – interim orders – where the wife seeks orders for the sale of property in addition to interests and funds to be transferred – where the application is opposed by the husband and second and third respondent – where the dispute is a matter of evidence and determination and therefore cannot be dealt with on an interim hearing – where the wife’s application is dismissed – where it is ordered that a single expert be appointed to value the said property.

FAMILY LAW – SPOUSAL MAINTENANCE – interim orders – where the wife seeks an increase in spousal maintenance – where the order is opposed by the husband – where the Court finds that the husband does not have the capacity to pay spousal maintenance in the sum sought by the wife – where the wife’s application is dismissed.

Family Law Act 1975 (Cth) s 72, 75, 79
Family Law Rules 2004 (Cth) r 1.04, 15.45

APPLICANT: Ms Malone

1st RESPONDENT: Mr Malone

2nd RESPONDENT: B Trust

3rd RESPONDENT: Mr C Malone

FILE NUMBER: SYC 6592 of 2014

DATE DELIVERED: 2 June 2016

PLACE DELIVERED: Adelaide

PLACE HEARD: Sydney

JUDGMENT OF: Berman J

HEARING DATE: 6 May 2016

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Campton SC

SOLICITOR FOR THE APPLICANT: Mills Oakley Lawyers

COUNSEL FOR THE 1ST RESPONDENT: Mr Miller

SOLICITOR FOR THE 1ST RESPONDENT: Pearson Emerson Meyer Family Lawyers

COUNSEL FOR THE 2ND RESPONDENT: Mr Richardson SC

SOLICITOR FOR THE 2ND RESPONDENT: Barkus Doolan Solicitors

COUNSEL FOR THE 3RD RESPONDENT: Mr Richardson SC

SOLICITOR FOR THE 3RD RESPONDENT: Barkus Doolan Solicitors

Orders

1. That pursuant to Rule 15.45 of the Family Law Rules 2004 (Cth) the husband and wife shall jointly instruct a licensed real estate valuer as they may agree, but in default of agreement to be nominated by the president of the Real Estate Institute of New South Wales to prepare a valuation report as to the current market value of the real property situate at D Street, E Town, New South Wales being all of the land comprised in folio identifier … (“the E Town property”).

2. That the costs of the valuation as provided for in order 1 be shared equally between the parties but with the husband to pay the cost of same at first instance and the wife to reimburse the husband her half share of same within 120 days of the request for payment.

3. That further consideration of paragraphs 1, 2, 3, 4 and 6 of the wife’s application be adjourned for further consideration pending the publication of the valuation report in respect of the E Town property and the further written submissions by each of the parties as provided for herein.

4. If so advised the wife is to file and serve written submissions limited to four (4) pages within fourteen (14) days of receiving the valuation report.

5. That the husband, second and third respondents do file and serve written submissions in reply to those of the wife limited to four (4) pages within fourteen (14) days of receiving the wife’s submissions.

6. That paragraphs 8, 9, 10 and 12 of the said application be dismissed.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Malone & Malone and Ors 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

FILE NUMBER: SYC 6592  of 2014

Ms Malone

Applicant

And

Mr Malone
First Respondent

And

B Trust 

Second Respondent

And

Mr C Malone
Third Respondent

REASONS FOR JUDGMENT

INTRODUCTION

1. By Further Amended Initiating Application filed 1 September 2016, Ms Malone (“the wife”) seeks orders for property settlement.

2. It is important to the wife’s case that she seeks orders to set aside a deed of variation and change of appointors in relation to B Trust (“B”) between A Pty Ltd (“A”), Mr Malone (“the husband”) and Mr C (“the third respondent”) made on about 27 November 2014.  If successful, the husband would be reinstated as the appointor of B, remove A as trustee and appoint himself or his nominee in that capacity.

3. In addition the wife seeks to set aside a mortgage provided by the husband in favour of B in the sum of $1,211,858 secured over real estate situate at D Street, E Town, New South Wales (“the E Town property”) together with a further mortgage secured over the E Town property in the sum of $128,400 in favour of the third respondent.  The importance of the co-lateral orders sought by the wife is to enhance the pool of property available to adjust between the parties.

4. By Amended Response filed 27 November 2014, the husband seeks to dismiss the wife’s Further Amended Initiating Application and by way of orders for settlement of property, seeks that each of the parties be entitled to the exclusion of the other to retain all other real and personal property and superannuation entitlement in their separate ownership, possession or control save as to modest bank account balances which are to be divided equally between the parties.

5. By implication, the husband seeks to dismiss the wife’s order, in particular as it relates to B, A, the third respondent and the setting aside of the liabilities secured over the E Town property.

6. By Amended Response filed 27 January 2016, B  (“the second respondent”) and Mr C Malone (“the third respondent”) seek the return of a German motor vehicle that remains in the possession of the wife pursuant to orders 4 and 8 of the orders made 17 December 2014.  The second and third respondents also seek the dismissal of the orders sought by the wife against them, but if unsuccessful and an order is made setting aside or determining that the mortgages granted by the husband to the second and third respondent secured over the E Town property are invalid, then there be a declaration of indebtedness by the husband, firstly in the sum of $1,211,858 in favour of the second respondent and then, the sum of $128,400 in favour of the third respondent.

7. Finally, the second and third respondents seek a declaration that the husband holds the whole of his interest in the E Town property upon a resulting trust in favour of the second respondent as to 90 per cent and the third respondent as to 10 per cent.

8. On 17 December 2014, Watts J made orders by consent joining the second and third respondents to the proceedings.

9. Pending further determination of orders 1, 5 and 6 of the wife’s final orders sought setting aside the deed of variation of appointment and the mortgages in favour of the second and third respondents, orders were made that have the effect of preserving the property in dispute pending final hearing.

10. It was also ordered that until further order that the husband shall pay by way of spousal maintenance the sum of $608 per fortnight and the wife’s health insurance premiums.  A flagging order was also put in place in respect of the husband’s entitlement with H Super.

11. Watts J found that the s 106B application was a matter of contention between the parties and accordingly should be heard at the final hearing.

12. His Honour summarised the gravamen of the proceedings as follows:-

    [6]Putting that issue to one side, I accept, on the evidence that has been filed, that what counsel for the husband says is essentially correct.  If the whole of the purchase monies for the [E Town] property are found to be debts fully repayable by the husband to the third respondent, then the property pool remaining would be of a minor nature involving some cars, household items, the two pensions held by the husband and a small debt owed by the third respondent to the parties, which was monies that they provided to him some years ago to provide capital for his ventures.  The case would then be a competition between the third respondent, as a creditor, or the third respondent and the trust as a creditor, and the wife, claiming something out of the value of the property in which the husband lives.

13. The wife considers that her current circumstances are poor.  She alleges financial hardship and whilst she has returned to the workforce her income is modest and not such that enables her to cover all of her expenditure.

14. She says that she does not have a source of funds or property available to meet both her personal, but in particular, her legal expenses.

15. She considers that her husband appears presently able to fund the litigation possibly with the assistance of the third respondent.

16. In addition, her health is poor.

17. Accordingly, by Amended Application in a Case filed 15 April 2016, the wife seeks orders for the sale of the E Town property acknowledging that the disputed loans in favour of the second and third respondents are to be acknowledged by monies sufficient to cover the amounts outstanding to be placed into a controlled monies account established by the wife’s solicitors.

18. In addition, she seeks that the husband assign to her his interest in a debt of $75,000 due to the husband by the third respondent.

19. The wife also seeks a payment by the second respondent to her in the sum of $351,910 and $574,464 being an alleged credit loan account entitlement in the financial statements of the second respondent.

20. Finally, the wife seeks an increase in spouse maintenance to the sum of $912 per fortnight, representing a significant increase over the current spousal maintenance order of $608 per fortnight.

21. The husband and the second and third respondents oppose the orders sought by the wife.

BACKGROUND

1. The wife was born in 1952 and is 63 years of age.  The husband was born on in 1953 and is also 63 years of age.  The second respondent is B and the third respondent is the eldest child of the three surviving children of the parties.

2. The parties married in 1979 and separated in either May or October 2012.   A divorce order became final on 26 September 2015.

3. The wife enrolled in a degree course in 1997.  In 1999 the husband left the public service with a redundancy payment and an entitlement to a modest pension.

4. From 1998 to 2001 the wife was employed by the public service.  In late 2001the husband was employed by the public service.  At about the same time, the wife graduated with a Bachelors degree and in 2002 commenced her professional.

5. In 2008 the husband accepted a redundancy and retired.  He has not been in employment since that date.  He received an entitlement to a second pension.

6. In 2005 the third respondent requested that the parties consider loaning him some money for a business venture.  Ultimately, the parties were able to provide a total sum of $150,000.

7. The husband says that there was a rate of interest agreed at 20 per cent which was paid on a periodic basis.

8. The sum of $75,000 has been repaid to the wife, with the remaining $75,000 still outstanding to the husband.

9. The third respondent also proposed to the parties that they be involved in a family trust that he intended to settle to be used as a vehicle for his investments.  The husband accepted his appointment as appointor of the trust and the parties became  beneficiaries of B.

10. It is not controversial that over time distributions were made in favour of the parties.  The contention is whether the distributions have been received by the parties, or whether, as the wife contends, there is a significant credit loan account entitlement in her favour. 

11. Following the sale of the parties former matrimonial home at Suburb I in 2009, they moved into rental accommodation at J Street, Suburb K (“the Suburb K property”).  The third respondent apparently paid the parties rent and further money to the wife for her personal expenses.  There is some uncertainty by the wife as to the basis upon which the third respondent paid the parties expenses.

12. In February 2012, the wife alleges that the third respondent proposed giving the parties $2,000,000 to buy a house.  The husband was aware of the E Town property and was keen to purchase it.  The wife wanted a property in Sydney. 

13. Ultimately, the E Town property was purchased in mid-2012 for $1,400,000 registered in the husband’s name.

14. Following the separation and by October 2012, the wife accepted that for the time she would remain in the rental accommodation.  The husband paid $1,165 per fortnight by way of informal financial support for her.

15. In May 2013, the third respondent advised the wife that he would no longer pay the rent on the Suburb K property and after some negotiation between the parties, and following proceedings in the Consumer Trade and Tenancy Tribunal, the wife moved into rental accommodation in Suburb F with the third respondent responsible for the rental payments up to 11 March 2016.

DISTRIBUTIONS FROM B

1. At paragraphs 8 and 9 of the Amended Application in a Case, the wife seeks orders that the second respondent pay to her the sum of $351,910 and pay into a controlled monies account the additional sum of $574,464.

2. The proposed orders arise from the wife’s contention that the financial statements for the second respondent record trust distributions to the parties of in excess of $877,000.  She says that the third respondent had been reluctant to provide the financial statements, but eventually did so annexed to his affidavit of 9 June 2015.

3. On 1 September 2015, the wife made a call for the second respondent to pay the recorded distributions and asserted that the monies that were owing had not been paid to her and specifically that she has no knowledge of or executed any documents which would have the effect of assigning any of her entitlement in B to any person or entity or to otherwise “set off” her entitlement in the trust in respect of money that the third respondent says he paid to the parties.

4. The wife accepts that significant sums were paid by the third respondent, but she contends that those monies were made by way of gift or gratitude for the parties assisting the third respondent with the original loan.  The third respondent counters the wife’s proposition and states that at all times the wife was well aware that the corpus of B was his money and not the subject of any contribution by the husband or the wife.

5. Moreover, he denies that the parties have any beneficiary loan account and that any distributions to which the parties or each of them were entitled, were paid.  Specifically he says that on no occasion when funds were advanced was there any understanding that monies paid were a gift.  Moreover, the parties signed their taxation returns and acknowledged that money had been received.  Any tax payable was paid by the third respondent.  The issue is joined by the parties.  The wife asserts a beneficial entitlement, whereas the husband and the third respondent consider that all distributions were paid and received.

6. The dispute is therefore a matter of evidence and determination.  It is not an issue that can be dealt with on an interim hearing.

7. A further difficulty is that the asset pool is modest and may almost entirely be represented by the E Town property.  As recognised by Watts J in his judgment, there is a live issue as to whether the mortgages in respect of the property should be set aside and/or the underlying loans to the second and third respondent extinguished.

8. If the contention of second and third respondents is made out, then the net equity in the E Town property may represent virtually all of the property made available for settlement and distribution between the parties.

9. There is an issue as to the value of the E Town property.

10. It may be the case that there is insufficient equity to consider any payment to the wife in respect of paragraph 8 of the application in circumstances where if the wife is wrong in her contention, any monies so paid could not be restored to the second respondent.

11. I decline to make orders in terms of paragraphs 8 and 9 of the wife’s application.

INTERIM SPOUSAL MAINTENANCE

1. Section 72(1) of the Family Law Act 1975 (Cth) (“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).

2. The wife seeks a variation to order 6.1 of orders made 17 December 2014 such that the spousal maintenance paid to the wife currently in the sum of $608 per fortnight should increase to $912 per fortnight.  There is no variation sought to order 6.2 namely, that the husband continues to pay the wife’s health insurance premiums.

3. By his Response filed 4 May 2016, the husband does not seek to set aside the order of 17 December 2014, but rather, to resist any increase by way of variation thereto.  Accordingly, the husband does not challenge the wife’s entitlement to spousal maintenance.

4. The wife is employed as a legal practitioner and the extent of her current employment is now about one calendar year.

5. It appears that the catalyst for the application to vary spousal maintenance arises from the cessation of rental payments by the third respondent.  The wife says that her total weekly income of $1,054 (which includes spousal maintenance paid by the husband of $304) is insufficient to meet her expenses.

6. She has little if any savings.  She has outstanding legal fees of $91,800 and it is estimated that a further $90,000 will be required in order to conclude the proceedings.

7. She is finding work difficult and she sets out significant issues in respect of her health at paragraph 117 of her affidavit.

8. Apart from physical difficulties she suffers from depression and anxiety and there is a significant medication regime with a substantial cost.

9. She considers that at her age there is significant uncertainty as to the likely longevity of her employment.

10. The wife filed a financial statement on 25 January 2016.  Other than a reduction in monies held in various bank accounts now to the sum of $9,000, little else has changed.

11. Accordingly and including the continued payment by the husband, the total Part D income is $1,054.  The Part G personal expenditure items are modest and total $123.

12. The focus is therefore on the Part N expenses totalling $1,393.

13. I am not assisted as to any attempt to verify or sustain the expenditure other than by reference to note 60 of the financial statement which refers to hairdressing and toiletries being expenditure that had been historically incurred.

14. For his part, the husband challenges the amount the wife spends on food, medical expenses, hairdressing and toiletries and tailoring.  Accordingly, I propose to do the best that I can and I make the following adjustments:-

Household supplies	$50.00
Medical, dental, optical	$100.00
Hairdressing and toiletries	$100.00
Other necessary commitments	$120.00
Total	$270.00

1. I therefore propose to reduce the Part N Expenses from $1,393 to $1,023.

2. The total of the Part G expenses at $123 and Part N expenses at $1,023 is $1,146.

3. To some extent there is a level of irrelevancy about the exercise noting that the expenditure of the wife does not include a rental component.

4. As at the date of the financial statement, the wife says that the payments have ceased and her rent is now $975 per week.  Whilst there may be some force in the husband’s argument that cheaper rental accommodation is available still within the area, even between $450 to $730 per week would see the wife’s expenses increase to $1,596 per week as against a current total income (including spouse maintenance) of $1,054, or a shortfall of $540 bringing to account the most modest accommodation as promoted by the husband.

5. The focus is therefore upon the financial circumstances of the husband.

1. He is in retirement and his income is based upon interest on the remaining $75,000 owing by his son, rent and his pension entitlements.  The total Part D income is $1,156.

2. The Part G expenses are modest, with the most significant expenditure item being the current payment of $304 a week to the wife.

3. It is noted that the husband does not pay mortgage payments or rent in respect of his accommodation.

4. By reference to his Part N expenses, it is difficult to find other than they are modest.

5. Simply put, the total expenditure of the husband exceeds his income by $27.

6. I do not consider that the husband has the ability to pay spousal maintenance in the sum as sought by the wife.

7. Accordingly, I propose to dismiss the wife’s application for a variation of spousal maintenance.

THE SALE OF THE E TOWN PROPERTY

1. The focus of the proceeding are drawn inexorably to the status of the E Town property, its value and the extent to which the alleged loans in favour of the second and third respondents should be recognised.

2. If the loans are properly enforceable then at the currently asserted value of the property, it would be a barren exercise.

3. It was strongly argued by counsel for the husband and the second and third respondents, that without some better understanding of the value of E Town there would be little purpose in exceeding to the wife’s application and having the property sold.

4. In summary, the husband would wish to retain the E Town property and it may be that he is only able to do so with the acquiescence and good grace of the third respondent.  That however is his entitlement.

5. The purpose for the wife seeking the sale of the property is that she should thereafter receive the balance of monies remaining following the costs of sale and the payment into a controlled monies account of the separate sums of $1,211,858 being the claim of the second respondent and $128,400 being a claim of the third respondent.

6. It is argued that unless there is some evidence which would suggest there will be a surplus, there is no point to the sale. Indeed, it may even be the case that there is insufficient property of the parties to warrant a consideration under s 79 of the Act.

7. A further consequence would be that the sale of the property would likely necessitate the husband having to rind alternate accommodation, there may be a rental charge incurred by him and given his financial circumstances, he may thereafter have an inability to meet even the current spousal maintenance provision.

8. I consider there is merit in the argument that more is needed before the Court can property consider any order for the sale of E Town and the assignment to the wife of the husband’s interest in the deb of $75,000 due to the husband by the third respondent. 

9. I am also aware that a significant period of time may well elapse before this matter reaches a final hearing.  At present, the wife is significantly in arrears in respect of her legal fees and even were that not to be an issue for her, it is difficult to see how she will find the sum of $90,000 being her anticipated future legal fees to see the matter concluded.

10. For his part, the husband seems to have come to an arrangement with the third respondent for funds to be provided to meet his ongoing legal fees.  It is the husband’s position however that any monies provided by the third respondent are by way of loan and the E Town property should be considered as security.

11. It seems to me that the matter is not able to go forward without there being some better understanding as to the value of the E Town property.

12. I am not able to decide the balance of the wife’s application without evidence of value, nor do I think it is proper to simply dismiss the wife’s application.

13. In all the circumstances, I propose to make an order pursuant to rule 15.45 of the Family Law Rules 2004 (Cth) requiring the appointment of a single expert witness to provide evidence of the value of the E Town property.

14. In doing so, I bring to account the provisions of rule 15.45(2), in particular rule 1.04 which seeks 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, that the evidence of value of the E Town property was necessary and that its value is an issue in dispute.

15. Following the provision of the valuation report, I propose that any further submissions be in writing.

16. I make orders as appear at the commencement of these reasons.

I certify that the preceding eighty nine (89) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Berman delivered on 2 June 2016.

Associate: 

Date:  2 June 2016