Massey and Massey and Anor

[2007] FamCA 756

FAMILY COURT OF AUSTRALIA

MASSEY & MASSEY AND ANOR [2007] FamCA 756

FAMILY LAW - PROPERTY - CHILD SUPPORT - Parties insufficiently prepared for trial - Orders and directions

Family Law Act 1975 (Cth)

APPLICANT: MRS MASSEY

RESPONDENT: MR MASSEY

INTERVENOR: THE AUSTRALIAN TAXATION OFFICE

FILE NUMBER: MLF 2141 of 2005

DATE DELIVERED: 27 JULY 2007

PLACE DELIVERED: MELBOURNE

JUDGMENT OF: YOUNG J

HEARING DATE: 24 JULY 2007

REPRESENTATION

COUNSEL FOR THE APPLICANT: MR WOOD

SOLICITOR FOR THE APPLICANT: GARDEN & GREEN

COUNSEL FOR THE RESPONDENT: MS SMALLWOOD

SOLICITOR FOR THE RESPONDENT: PEARSONS SCHETZER & ASSOCIATES

COUNSEL FOR THE INTERVENOR: MR THOMPSON

SOLICITOR FOR THE INTERVENOR: ATO LEGAL SERVICE BRANCH

ORDERS

1. THAT on or before Monday 27 August 2007 the wife make, file and serve:

   §  an amended application for final orders, inclusive of leave as required for any child support departure order;

   §  an updated trial affidavit;

   §  an updated Form 13 statement of financial circumstances.

2. THAT on or before Monday 10 September 2007 the husband make, file and serve:

   §  an amended response for final orders;

   §  an updated trial affidavit; and

   §  an updated Form 13 statement of financial circumstances.

3. THAT the husband complete preparation of and lodge his 2007 personal taxation return, and all required and outstanding BAS quarterly statements and any other taxation or financial returns of and related to the […] enterprise conducted by him at S within twenty-one (21) days.

4. THAT there be mutual and informal discovery and inspection within 21 days as between the parties of all farming, corporate and financial documents with liberty being reserved to each of them to apply to the Court for any affidavit of documents or other orders that may be then required.

5. THAT each of the husband and wife ensure that their trial affidavit covers all evidence to be adduced by them as to:

   §  the current market value of real property;

   §  the potential sale costs of real property;

   §  the potential capital gains tax that might be assessed on the sale of real property;

   §  the available tax losses to offset any capital gains;

   §  the value of the wheat and barley crops now planted;

   §  the then arrears of child support, if any;

   §  the costs of realisation of plant and equipment, if required.

6. THAT on or before Monday 27 August 2007 an affidavit be prepared as to the updated evidence of the single expert valuer, Mr B.

7. THAT on or before Wednesday 10 October 2007 the intervenor make, file and serve an updated affidavit as to the total debt then said to be owing by the husband.

8. THAT an updated outline of argument and a summary statement of the net assets and liabilities of the parties and submissions on law are to be filed and served on or before Friday 5 October 2007.

9. THAT the extempore reasons for judgment be transcribed, be placed upon the Court file and be made available to all parties.

10. THAT all extant applications are adjourned as a primary defended matter for a three (3) day hearing to be fixed on Monday 15 October 2007 before a Judge to be appointed by the Registry.

11. THAT an update letter in compliance with Rule 19.04 of the Family Law Rules 2004 are to be filed by the solicitors for each of the husband and wife on or prior to Friday 12 October 2007.

12. THAT the costs of the intervenor of 23 and 24 July 2007 be reserved.

IT IS ORDERED BY CONSENT IT IS FURTHER ORDERED

1. THAT the costs of each of the husband and wife of the hearing of 23 and 24 July 2007 be reserved.

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLF 2141  of 2005

MR MASSEY

Applicant

And

MRS MASSEY

Respondent

And

THE AUSTRALIAN TAXATION OFFICE

Intervenor:

REASONS FOR JUDGMENT

1. The matter of Massey was before me for a three-day defended hearing on property and child support departure issues. 

2. Mr Wood of counsel is for the applicant wife, Ms Smallwood of counsel for the respondent husband, and Mr Thompson was briefed to represent the interests of the intervenor, the Australian Taxation Office.

3. The parties have previously resolved children and parenting issues and, in approximately June of this year, the matter was before Mushin J and he listed this property matter for a three-day hearing commencing, Monday, 23 July. 

4. For the reasons that will become starkly apparent this matter was in no way, shape or form ready to proceed.  The evidence, in my opinion, was largely, if not wholly incomplete.  There has been no attention given to detail and preparation over the past few months and the current pool of assets and liabilities does not have regard to very real and particular events and financial consequences. 

5. On behalf of the wife her outline of argument and related court documents was filed immediately prior to trial.  Her application, as it stood, was that amended document filed 3 January 2007 and that in itself raises a very particular child support jurisdictional issue as a result of the operation of amending legislation effective from 1 January 2007.  In any event, in her outline of argument she further identified the orders sought which effectively was a division of the property of the parties on a 60 per cent-40 per cent division in her favour.  On the Monday morning a draft of proposed orders was filed and now as I am dictating these extempore reasons for judgment on the Tuesday morning,  a further updated document has been placed before the court as to her proposed orders and it is this document which I have now had marked exhibit “W1”.

6. The jurisdictional issue in relation to child support has not been cured by the proposed further orders. The simple reality is that the Commonwealth legislation, commencing 1 January 2007, requires the Court to grant leave to amend an administrative assessment that is more than 18 months old. The matters to be considered are set forth in section 112(4) of the Child Support Assessment Act.  The wife's amended application bringing the child support orders, by way of departure was filed on 3 January 2007, that is, two days after the commencement of the new legislation.  What the wife must do, if she seeks departure from those appropriate administrative assessments going back to the financial year 2004, is to obtain leave of the court and then to prove the case appropriately.  I will require the wife to file a further and better amended application that correctly identifies both the procedure, the leave required and the orders sought as to all child support departure issues. 

7. As to the principal issue before the court, that is a property settlement, both the husband and wife have filed an outline of argument which identifies an asset pool of approximately $2 million.  I understand that there are certain additional add-backs, legal costs, personal items, livestock and the like that differ from each of the documents.  What is of significance is that all of the real property comprising at the home at S, and otherwise land is agreed in current market value as at earlier this year.  There are significant liabilities.  They total approximately $1,460,000 and they are continuing to increase through default interest and other charges. 

8. The intervenor is the Australian Taxation Office who have a judgment debt against the husband.  Pursuant to documents now before me the total sum owing is now $702,775 and that is continuing to accrue interest at a penalty rate.  The Australian Taxation Office has rightly intervened and seeks payment in full of the debt. 

9. When the case was opened before me Mr Wood, on behalf of the wife, proposed that the properties, comprising the farm be sold, liabilities including the Australian Taxation Office be paid, and ultimately the net balance be then determined and be divided as sought between the parties.  What that approach did not contemplate was first, as to the costs of sale of the various farming allotments and secondly, as to any capital gains tax that might be assessed as against the vendor. 

10. As it transpired and, not by way of evidence before the court, the husband had capital losses which may or may not be available to offset the capital gain on the sale of the farming properties.  The capital losses, and from the bar table only, were indicated to the court to be approximately $170,000 as at the financial year ended 2006, but now increasing as at 30 June 2007 to a sum in excess of $430,000.  That tax return is not as yet filed.  As such it may be that, if acceptable, there are sufficient losses to offset any gain that might be imposed on the profits made on the sale or disposition of one or all of the farming properties.  I make no finding, nor comment further in that regard.

11. What I emphasise is that this information, as to the current tax circumstances, came by telephone calls made during the day to the husband's accountant and thereafter with a letter prepared and faxed by that gentleman to the husband's counsel.  None of these matters were in evidence, nor had they previously been disclosed to counsel for the intervenor nor, as I understand it fully, to counsel for the wife. 

12. Of more concern is that there were ongoing farming activities and developments post the adjournment by Mushin J.  What I understand is the husband has now sown 700 acres of wheat of and 2,800 acres of barley.  The cost to sow those crops was $70,000 and he earned those moneys from non-farming income.  The husband's estimate was that the crops could bring, upon harvesting in December, no less than $300,000 and up to $450,000 in total sales.  That matter was committed to a short affidavit on the second day of the hearing, but with an understanding between counsel, I have not facilitated that affidavit being filed though it was sworn and has been served on all parties.  The court has not retained a copy of that four-page affidavit on the basis that a larger, more relevant and more up‑to‑date document will be filed at a later date.

13. The reason, of course, for the sowing of the crop was that rains fell over past months and that was identified by the husband who deposed in that document to the fact that nine inches of rain had fallen in the period up to and prior to planing of the crop and with further spring rain he anticipates even a greater yield from his crop and therefore more income. 

14. I identify, because of the submissions made to me during the process of understanding if and when this case is ready to proceed, that there will be a real issue as to whether the husband will receive income from the crops to which it will be said the wife has made no contribution to such income, or whether it really in effect capital by way of a return to the farm after so many years of failed investments and failed crops for which the wife in the past has, it is said, contributed.  Again, I make no findings, but highlight what is likely to be an ongoing issue.  

15. One of the real concerns that I have is that it is said the crops depend on further rains in spring and also for there to be no prevailing frosts.  I do not have a crystal ball.  I do not know what will happen over the next six to eight weeks and whether this crop will be a financial bonanza to the parties, only time will tell and therefore the approach for the court is to list this matter on a date that the listings manager can provide to the court, but in October 2007 so at least there will be some understanding and certainty of the then state of the crop and its likely success. 

16. Aside from the evidence of the husband which is not purported to be prepared and placed before the court as to his farming activities over the past few months, there is also the circumstance that the independent single expert valuer, B and L, have given an updated letter to practitioners, presumably yesterday, that the value of the land with the crops sown would be greater than that formerly provided to as bare land.  That perhaps is simply commonsense.  In any event, the true value of the land and its appeal to any and all adjoining land owners may well depend upon the success and the growth of the wheat and barley. 

17. On the confident prediction, but not evidence of that valuer, it may well be that there is up to $500,000 in value of these crops and as such that would be a significant sum of money available to these parties, however the court might determine the apportionment to be and leaving aside the issue of whether it is income or capital.

18. The approach of the wife and her counsel, as I indicated, was effectively to sell all of the property, to deal with whatever costs of sale may arise or potential taxation income on the capital gain, if and when it is assessed, but presumably by leaving it to the husband to pay his purported creditors. 

19. The husband's position is diametrically opposed.  He seeks to retain all land.  Now that the rains and presumably the good times may have returned, he wishes to continue his lifetime occupation of farming and plant crops on a seasonal basis and derive substantial income therefore to pay off debts, including child support and the Australian Taxation Office. 

20. It is proper to acknowledge that the husband's case has always been to retain land and not to engage in a sale of any of the properties comprising the whole of the farm.  Whether that is realistic in the circumstances, whether it puts off the inevitable or whether it is wholly unfair and unjust to the wife or to the intervenor, are matters that will need careful consideration.

21. I have read the documents and it is clear that the conduct of the parties is a very real issue in this case and there are specific allegations made against the husband, his behaviour, his language and certain actions.  I am advised as a matter of fact that he currently has a suspended custodial sentence on differing charges and there are proceedings now listed in a local Magistrates Court to be heard on 5 October of this year.  I make no judgment upon the commencement date of those proceedings or on their outcome.  They are a matter which may significantly affect this case, the operation of the farm, the cropping of wheat and barley in December and generally all issues of prepayment of debt.  Provided that Magistrates case remains listed and is heard and determined in early October, that may not be an issue come mid-October when there is an option to list this matter for three days in a defended list as a primary fixture. 

22. It will be incumbent upon the husband and particularly his solicitors to keep the wife's and intervenor’s solicitors involved as to all aspects of those criminal proceedings and particularly the hearing date. 

23. The intervenor seeks the immediate sale of properties as are sufficient to discharge the debt of $702,000 approximately and continuing to increase. Significantly Mr Thompson has foreshadowed that a payment in instalments is not acceptable to the intervenor and has indicated that there may be legal argument to support a submission that this court does not have jurisdiction in its property and financial powers and under its general powers in section 80 of the Family Law Act 1975 to impose such instalment plans upon an intervenor, such as in this case the Australian Taxation Office.  Again, I make no finding.  I have invited Mr Thompson to ensure that his subsequent outline of argument does deal particularly and sufficiently with any submission on this issue and all relevant legal cases. 

24. I have not delved into the particular facts of this case.  The parties cohabited and were married for some 11 years or thereabouts and are now divorced.  There are two children whose ages are 13 and 9.  They live with the mother who has relocated from the rural community of S to her current residence in Melbourne.

25. I did touch upon the earlier issue of child support and the alleged arrears thereof.  That application needs be correct, but in any event I observe from the husband's draft affidavit, which is not to be retained on file, his acknowledgment that the current child support assessment debt is no less than $8849 as at 29 June 2007.  I again make no finding, though do comment that the off-farm income is such to enable the $70,000 to be raised to plant the crops, could now no doubt be continued to ensure that child support is fairly and properly paid, notwithstanding all other issues and arguments and the retrospective departure orders as may one day be sought.  There is no reason for the children to be financially disadvantaged and that will be yet another matter in this case.

26. I identify that there is also to be an issue about the value of livestock, either sold or at what value they were disposed of.  There will also be issues as to the costs of realisation of plant and equipment which has an agreed value of $410,000, but part of which is proposed to be sold. 

27. The issues that I have in this case arose at the very commencement of the case when I asked counsel what had been considered and where was the evidence as to the costs of realisation of sale and of capital gains tax.  Thereafter and in somewhat a protracted fashion what became known to the court was the planting of the two substantial wheat and barley crops, the expected income therefrom and generally the farming activities of the husband over the past several months.  All of that could, indeed absolutely should, have been documented and in evidence to the parties, including the intervenor and the court in the lead up to this proceeding.  Likewise the Form 13 financial statements of both the husband and wife do not reflect current circumstances. 

28. I have been advised from the bar table by counsel for the husband that her client has now filed all taxation returns, presumably and for the farming business, up until 30 June 2006 and has prepared and is soon to file the 2007 financial return.  There is some issue as to what quarterly statements have been prepared and filed, but again my understanding of the comments that fell from the bar table were that the last three quarterly (BAS) statements for the September, December and March year have been completed and are ready for filing.  Hopefully that is the case.  It is fundamentally important in this case that all of the records are up to date, and that both parties and the intervenor have a true and accurate understanding of the financial circumstances of the other and of their level of compliance. 

29. The tragedy in this case is that the parties have spent a fortune on legal fees and that will continue.  The current state of preparation and evidence in this case would not permit me to determine a just and equitable, and also a proper order.  The evidence must be updated, completed and be accurate and I propose to require time lines to be adhered to and there really needs to be a flow of information between respective solicitors as to financial issues, particularly in relation to the farm and the crops. 

30. Underlying all of this case is a total lack of trust between the husband and wife that Mr Wood has emphasised to me on a number of occasions.  I do not propose to further comment and I make no finding on those issues.  The last decade has been somewhat traumatic for this couple and financially they have gone from secure, reasonable circumstances, in part because of the drought and in part because of the conflict they have with one another and the separation within the marriage, to circumstances where there is now perhaps no more than $700,000 or thereabouts as an available asset pool with a mountain of debt having first to be discharged to arrive at that net pool.

31. From what has been said from the bar table, it may be that the pool will increase, it may be there is upside in valuations of real property and the crops, but that is so much of the uncertainty of this case that has to be better prepared when presented to the court.

32. I do propose to adjourn the hearing.  I do not understand in reality that is actively opposed by counsel for each of the husband and the wife, though I do know and it has been said that they would prefer to proceed and give the evidence and respond to evidence as they go.  Time does not permit.  It is Tuesday after 1 pm.  The matter was to conclude on Wednesday.  On any view I see this as a three-day case, subject to whatever interesting and no doubt relevant legal issues that may arise. 

1. Again, to highlight, the tragedy is that the husband and wife cannot talk between themselves, cannot develop a plan of a financial nature where they each may be better off and cannot negotiate and properly deal with creditors and, in particular, the Australian Taxation Office. 

2. For those brief reasons I will be adjourning this matter to 15 October 2007 as a primary matter in the defended list before a judge unknown to me.  I am not disqualifying myself from hearing the matter, I am simply and clearly highlighting that I have heard no evidence, the case has not been opened and I am in no way part-heard.

3. For those reasons I propose to make the following orders.

I certify that the preceding paragraphs are
a true copy of the reasons for judgment herein
of The Honourable Justice Young

………………………………………………………..
Associate: 
Date: 31 July 2007

IT IS NOTED that this judgment for all publication and reporting purposes be referred to as MASSEY & MASSEY