McCloy and McCloy and Anor

[2017] FamCA 868

FAMILY COURT OF AUSTRALIA

MCCLOY & MCCLOY AND ANOR [2017] FamCA 868

FAMILY LAW – SPOUSAL MAINTENANCE – Where the wife was not employed for the entirety of the marriage and has no formal qualifications – Where the wife has no opportunity to return to gainful employment – Where the final property orders did not make provision for spousal maintenance –  Where the wife would suffer hardship if she is not granted leave to make her application for spouse maintenance – Where until June 2017 the husband was earning approximately $3,200 gross per week and since then earns approximately $600 gross per week – Ordered the husband pay the wife spouse maintenance a lump sum of $24,948 for the period February 2017 to June 2017 and thereafter the sum of $600 per week

Family Law Act 1975 (Cth) ss 75, 79

Bevan & Bevan [2013] FamCAFC 116
Stanford & Stanford (2012) 247 CLR 108

APPLICANT: Ms McCloy

RESPONDENT: Mr McCloy

INTERVENER:	Ms Bennett
FILE NUMBER:	NCC	1050	of	2013

DATE DELIVERED: 2 November 2017

PLACE DELIVERED: Melbourne

PLACE HEARD: Newcastle

JUDGMENT OF: Cleary J

HEARING DATE: 7 February 2017

REPRESENTATION

COUNSEL FOR THE APPLICANT:	Mr Levick
SOLICITOR FOR THE APPLICANT:	O’Hearn Lawyers

COUNSEL FOR THE RESPONDENT: Not applicable

SOLICITOR FOR THE RESPONDENT:	Hunter Family Law Centre
THE INTERVENER:	Ms Bennett

Orders

1. That the Applicant wife have leave pursuant to 44(3) of the Family Law Act 1975 (Cth) to institute proceedings for spousal maintenance.

2. That the Respondent husband pay to the Applicant wife spouse maintenance in the lump sum of $24,948 ($1,386 per week for the period 7 February 2017 to 12 June 2017) and thereafter pending further order $600 per week, commencing 13 June 2017 and is to pay each week to an account nominated by the wife for that purpose, pending further order.

3. That the Respondent husband pay to the Applicant wife the sum of $8,500 within seven (7) business days of the date of this order (being the amounts ordered to be paid by the husband to the line of credit account pursuant to the orders of this Court dated 21 December 2016 together with interest at the rate of 5.4 per cent (being the interest rate currently charged by E Bank to the line of credit account number 780946172) from the day after each of the ordered payments was due.

4. Order 3 is an order to which s 77A of the Family Law Act 1975 (Cth) applies and the whole of the payment is attributable to the provision of maintenance to the wife.

5. This matter is adjourned to 9.30 am on Tuesday 12 December 2017 for case management.

Note: The form of the order is subject to the entry of the order in the Court’s records.

IT IS NOTED that publication of this judgment by this Court under the pseudonym McCloy & McCloy has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).

FAMILY COURT OF AUSTRALIA AT NEWCASTLE

FILE NUMBER: NCC1050/2013

Ms McCloy

Applicant

And

Mr McCloy

Respondent

And

Ms Bennett
Intervener

REASONS FOR JUDGMENT

Introduction

1. This is an interim application for spouse maintenance brought by Ms McCloy (56) whom I will refer to as “the wife”, although the parties are divorced and the husband remarried in 2015.

2. The orders sought by the wife are contained in an Initiating Application filed 18 January 2017.

3. By his Response filed 6 February 2017 Mr McCloy (61), “the husband”, opposes the application and asks that it be dismissed.

4. The husband is now an undischarged bankrupt. There is evidence that the Official Trustee was advised of the application of the wife for spouse maintenance and chose not to be heard.[1]

   [1] Exhibit 2

The Intervener

1. The intervener is the mother of the wife. She appeared by her case guardian as she had in the substantive proceedings in 2014, settled by consent orders.

2. The working capital for the parties’ business was provided by a line of credit from the X Bank. The line of credit is secured on the title of the properties at 1 and 2 B Street, Suburb C.

3. That property is owned as to one half by the husband and wife jointly and to one half by the wife’s mother. On that basis the wife’s mother intervened in the proceedings.

4. The wife and her mother live side by side in the property.

History of marriage

1. The parties separated on 29 October 2011 after 31 years of marriage. The parties were divorced and the decree became final on 7 September 2013.

2. More than 12 months having passed since the divorce took effect, leave of the Court pursuant to s 44(3) of the Family Law Act 1975 (“the Act”) is required.

Short History of events post separation

1. On 19 June 2013 the wife filed an Initiating Application in this Court for adjustment of interests in matrimonial property and also spouse maintenance.[2]  The husband filed a timely Response.

   [2] Order 13 of Initiating Application of the wife filed 19/06/2013

2014 Orders

1. On 7 August 2014 final orders were made by consent (“the 2014 orders”). The orders relating to interests in property are detailed and complex. There was no order made for spouse maintenance. Outstanding applications were dismissed.

2. Consideration of the operation of the 2014 orders is necessary to properly consider the leave issue.

3. There was a modest superannuation split of approximately $15,000 in favour of the wife from the fund of the husband.[3]

   [3] Order 1.3 of Orders dated 7/08/2014

4. A key provision was an order for sale of the business known as “Company D” which had been conducted by the husband throughout the course of the marriage.[4]

   [4] Order 1.5 of Orders dated 7/08/2014

5. Both parties were directors of two relevant companies which owned and ran the business. It was uncontroversial that the wife was the subsidiary director. She has some involvement in the running of the business in the early years. The extent of her involvement is controversial.[5]

   [5] Affidavit of the wife filed 25/08/2016, par 111-113

6. The business was to be listed for sale for six months at not less than $800,000 plus stock for six months. There was then provision for lowering of price and ultimately, if no sale could be achieved after 18 months, a closing of the business within a further six month period culminating in a closing down sale.

7. Had the matter unfolded in that way, with no sale, the business should have been closed by 8 August 2016. There were provisions for payment of debt and winding up of companies in that event.[6]

   [6] Orders 1.6 and 1.7 of Orders dated 7/08/2014

8. Pending sale or an agreed terminating event:

   -the parties were to operate the business and cause the corporate entities to do certain things:[7]

   keep the wife advised of business decisions

   pay certain insurances

   pay the husband a wage of $1346 per week

   pay the wife $550 per week for 16 weeks

   -pay half the home building insurance on the former family home.  [The wife lived in the home. A line of credit from the X Bank is secured on the property].

   -the husband was restrained in certain ways relating to wages and credit facilities.[8]

   [7] Order 1.8 of Orders dated 7/08/2014

   [8] Order 1.10 of Orders dated 7/08/2014

9. Provision was made for the wife to lease the home and receive the income if she chose.[9]

   [9] Order 1.9 of Orders dated 7/08/2014

10. There was provision for the parties to equally bear unpaid debts in the event of a shortfall from sale.[10]

    [10] Order 1.17 of Orders dated 7/08/2014, subject to 1.15 and 1.16

11. There was provision for the wife to buy out the interest of the husband in the home,[11] or otherwise for the home to be sold.[12]

    [12] Orders 1.22-1.25 of Orders dated 7/08/2014

12. There was an indemnity by the husband and the wife for the intervener in respect of monies lent.[13]

    [13] Order 1.21 of Orders dated 7/08/2014

13. There were other orders.

Business not sold

1. The sale with the consequential payment of liabilities and payments to each of the parties did not take place within six months or at all. The outcome in fact was that there was no sale but neither was there a closing down of the business within the two year period provided for in the orders.

2. Two years passed from the date of 2014 orders without application to any Court by either party.

3. The parties are at odds over the reasons why there was no sale but financial events have overtaken the enforcement contest.

Enforcement Application - Wife as Trustee for Sale

1. On 25 August 2016 the wife applied to the Court to be appointed as Trustee for Sale of the business. In the affidavit in support of the application the wife disclosed that her only income was a Centrelink Carer payment.[14]

   [14] Affidavit of the wife filed 25/08/2016, par 3

29 September 2016

1. On 29 September 2016 the application came before the Court. The application was opposed by the husband through his solicitor. The husband himself was in hospital undergoing chemotherapy. The husband had been diagnosed with acute leukaemia in 2010. He returned to full time work in the business after 18 months. He relapsed in 2014.

2. The application was listed for 21 November 2016.

3. On 17 November 2016 the husband filed a Response to the Application in a Case together with an affidavit. He opposed the application and sought dismissal of it.

4. The husband referred to the business continuing to be operated by him whilst still being listed for sale. He was opposed to the wife becoming involved in the business and significantly to the closing down of the business [as provided for, failing agreement otherwise, by the 2014 orders].

21 November 2016

1. On 21 November 2106 the matter came back for hearing. The parties negotiated all that day to no effect. The application was stood over to 21 December 2016 for short hearing [two hours].

2. On 5 December 2016 the husband moved to place Mr McCloy Proprietary Limited (“the company”) into voluntary administration.

3. On 12 December 2016 the wife filed an Amended Application in a Case seeking a raft of orders arising from the changed circumstances, namely the appointment of administrators. She filed an affidavit in support.

4. On 14 December 2016 both parties attended a meeting of creditors.

5. On 16 December 2016 the husband filed an Amended Response to an Application in a Case opposing the application of the wife [to become trustee for sale] and seeking dismissal. He also applied for the administrator to be joined as a party.

6. The husband filed an affidavit in support.

21 December 2016

1. On 21 December 2016 the matter came back before the Court.

2. The wife did not accept there being a proper basis for the husband to take the course of putting his company into administration. There had been no suggestion of that course needing to be taken in the affidavit of the husband sworn less than three weeks prior. Quite the reverse, the husband had taken on additional roles in the business, in anticipation of its expected sale at a lower price.

3. The husband had ceased work. His insurance schedule was tendered into evidence.[15]  Again there had been no indication of an inability to work in the November 2016 affidavit of the husband.

   [15] Exhibit 1

4. On that day, 21 December 2016, there was an oral application made by the wife for urgent spousal maintenance pursuant to s 77 of the Act.

5. Orders were made on that day as follows for the reasons given at that time:

   1.Wife to file an Application for Spouse Maintenance and supporting material.

   2.Husband to file any Response.

   3.Spouse Maintenance Application listed 7 February 2017.

   4.Husband be and is restrained from withdrawing any funds from the X Bank line of credit account no. X except that payments made by AMEX into the line of credit account will be transferred as required by the administrator into the new account established by her.

   5.Husband to pay to the line of credit account the sum of $4,250 per month with the first payment to be made on or before 30 December 2016 and four weeks thereafter in anticipation of the January payment which will be due at or close to the end of that month.

6. On 30 December 2016 an appeal by the husband was lodged in respect of Order 5.

7. On 13 January 2017 an Application in a Case seeking a Stay of Order 5 was filed by the husband supported by an affidavit. It was made returnable on 7 February 2017.

8. On 18 January 2017 the wife filed an Initiating Application, as directed,[16] with supporting affidavit and Financial Statement. The orders sought were for spousal maintenance on an interim and final basis.

   [16] Orders dated 21/12/2016

7 February 2017 Hearing - Spouse Maintenance

1. On 7 February 2017 the Stay Application was withdrawn, the Appeal having been withdrawn. The spouse maintenance application of the wife proceeded.

2. By this date the husband had been receiving income protection payments of $3,216 gross per week since November 2016[17]. These payments related to the husband’s illness and inability to work. The fact that the husband was receiving income protection insurance payments had not been communicated to the wife. The information was revealed in the affidavit in support of the Stay Application.

   [17] Exhibit 4

3. It was forcefully submitted[18] on behalf of the wife that leave should be granted and spouse maintenance ordered where the wife had received none of the anticipated financial benefits of the sale or closing of the business and was now in a parlous financial position.

   [18] Oral submissions and written submissions dated 7/02/2017 with supplementary submissions by leave dated 8/02/2017

4. On behalf of the husband it was submitted that the wife had known that the business might not be sold, that it was in contemplation that it would simply be closed with debts outstanding.

5. I accept that is an inference properly drawn from the 2014 orders.

6. However what was not contemplated was that after the two year period provided for in the orders, the husband would continue to run the business, pursue sale, resist “interference” by the wife and then unilaterally apply for appointment of administrators.

Relisting 10 Feb 2017

1. On 10 February 2017 the matter was relisted on the Court’s own motion. I had reference to the 2013 Initiating Application in appraising the matter.

2. There had been no reference in submissions to the possible implications of the application for spouse maintenance made by the wife in her initial application. That application was dismissed when the 2014 orders were made by consent.

3. The characterisation of payments of $550 per week to the wife for a fixed period, pursuant to the 2014 orders, also required clarification.

4. Further submissions were invited.

5. Further written submissions were received on behalf of the wife.[19]

   [19] Supplementary submissions on behalf of  the wife dated 20/02/2017

6. The husband chose to file a further affidavit on 17 February 2017. Although sworn as an affidavit it was in fact a set of submissions rather than fresh evidence.

7. In that document the husband characterised the weekly payments for 16 weeks (provided for in the 2014 orders) as spouse maintenance paid by him to the wife. Further, that this was a continuation of informal arrangements for support paid by him to the wife post separation.

8. This analysis was disputed, in my view, correctly. The payments were part of a pattern of expenses authorised by both parties to be paid through the operating corporate entities to each of them and third parties during part of the two year period post the 2014 orders.

9. However I take into account the acknowledgement of the husband that he provided financial support for the wife after separation.

10. In any event, it is clear that there was no operative spouse maintenance order made in the 2014 orders.

11. I accept the submission that the issue of spouse maintenance does not end simply because the financial relationship between the parties has been finalised by property orders.

12. On 12 September 2017 the matter was listed on the application of the parties, no doubt concerned about the time which had passed.

13. Each of the parties filed a further affidavit.[20]

    [20] Affidavit of the wife filed 8/09/2017 and Affidavit of the husband filed 11/09/2017

14. Unfortunately the complexity of this matter has revealed itself gradually and continuously through all of the applications, affidavits and other documents referred to in these reasons which is reflected in the regrettable delay in delivering judgment.

The Evidence

1. The documents relied on in respect of the application were as follows: 

   The applicant wife

   (a)Initiating Application filed 16/06/2013 (substantive proceedings);

   (b)Initiating Application filed 18/01/2017 (spouse maintenance);

   (c)Application in a Case filed 25/08/2016;

   (d)Amended Application in a Case filed 12/12/2016

   (e)Financial Statement of the wife filed 18/01/2017;

   (f)Affidavit of the wife filed 25/08/2016;

   (g)Affidavit of the wife filed 12/12/2016;

   (h)Affidavit of the wife filed 18/01/2017;

   (i)Affidavit of the wife filed 3/02/2017;

   (j)Affidavit of the wife filed 8/9/2017;

   (k)Written submissions filed 7/02/2017;

   (l)Supplementary written submissions filed 8/02/2017;

   The respondent husband

   (m)Response filed 6/02/2017;

   (n)Response to an Application in a Case filed 17/11/2016;

   (o)Amended Response to an Application in a Case filed 16/12/2016;

   (p)Application in a Case filed 13/01/2017;

   (q)Financial Statement of the husband filed 6/02/2017;

   (r)Affidavit of the husband filed

   (s)Affidavit of the husband filed 16/12/2016;

   (t)Affidavit of the husband filed 13/01/2017;

   (u)Affidavit of the husband filed 6/02/2017;

   (v)Affidavit of the husband (submissions) filed 17/02/2017;

   (w)Affidavit of the husband filed 11/09/2017.

Spouse Maintenance

1. The orders sought by the wife are as follows:

   1.That pursuant to s 44(3) of the Act the wife have leave to institute the proceedings.

   2.That the respondent husband pay to the applicant wife spousal maintenance in the sum of $1,386 per week and is to pay the first payment no later than seven days from the date of this order.

   3.That the husband be and is restrained from withdrawing any funds from the X Bank line of credit account no. …72.

   4.a.      That the respondent husband pay to the applicant wife the sum of $8,500 within two (2) business days of the date of this order (being the amounts ordered to be paid by the husband to the line of credit account pursuant to the orders of this Court dated 21 December 2016 together with interest at the rate of 5.4 per cent (being the interest rate currently charged by E Bank to the line of credit account number …72) from the day after each of the ordered payments was due.

   b.Order 4 is an order to which s 77A of the Act applies and the whole of the payment is attributable to the provision of maintenance to the wife.

   5.a.      A declaration that any entitlement of the wife and husband to lodge a joint Proof of Debt in the administration or liquidation of Mr McCloy Proprietary Limited in relation to the X Bank line of credit account number …72 be solely vested in the wife, and the husband’s entitlement to receive any dividend arising from lodgement of such Proof of Debt is accordingly assigned to the wife.

   b.Order 5 is an order to which s 77A of the Act applies, and the whole of the value of the assignment of the husband’s entitlement to receive any dividend, accordingly, is attributable to the provision of maintenance to the wife.

   6.That the husband pay the wife’s costs of and incidental to this application.

Leave

1. In her Initiating Application of 19 June 2013 the wife had sought spouse maintenance in the sum of $600 per week. It is submitted on behalf of the wife and I have accepted that no final order for spouse maintenance was made.

1. Included in those orders was, not unusually, that all outstanding applications were otherwise dismissed.

2. There was a provision[21] which was that the company that either Company D Proprietary Limited or Mr McCloy Proprietary Limited would pay “a weekly sum of $550 to the wife for 16 consecutive weeks with the first payment to be made within seven days of orders being made.”  That payment was in the context of the husband and the wife both in their personal capacity and as directors of the two stated companies were to take steps which are fully set out in Order 1.8. There was also provision for direction to the companies to pay the husband a wage of $1,346 per week if he was working full time.

   [21] Order 1.8.7.4 of Orders dated 7/08/2014

3. Clearly then the wife is obliged to seek leave and relevantly s 44(3) of the Act says this:

   Where …

   (a)       a divorce order has taken effect; …

   proceedings of a kind defined as a matrimonial cause shall not be instituted, except by leave of the Court in which the proceedings are to be instituted, or with the consent of both of the parties to the marriage, after the expiration of 12 months after,

   the date on which the divorce order took effect.

   The Court should not grant leave unless it is satisfied that hardship would be caused to a party if leave were not granted or in the case of proceedings in relation to the maintenance of a party to the marriage that at the end of the period within which the proceedings could have been instituted without the leave of the Court, the circumstances of the applicant was such that the applicant would have been unable to support himself or herself without an income tested pension allowance or benefit.

4. In this case the parties’ divorce became final on 7 September 2013.

5. In circumstances where the property orders made by consent have failed to produce any of the outcomes contemplated by the parties, I consider it is the case that the wife will suffer hardship if she is not granted leave to make her application for spouse maintenance.

6. I accept that the wife relied upon the property orders made between the parties and that the husband placed the business into administration and then liquidation. The wife has lost the opportunity to see the business, valued at $800,000 at the time of the consent orders, being sold for the best price or even finalised by closing down.

7. The husband’s current wife through her company has now acquired the business and its liabilities. The husband is now employed in that business by his wife’s company. He discloses an income of about $600 per week.[22]

   [22] Affidavit of the husband filed 11/09/2017, Annexure B

8. The wife and the intervener are exposed to the risk of the mortgagee (X Bank) exercising its rights under the security of the Suburb C property in which case the wife and the intervener would lose their home.

9. The wife has been out of the workforce for the whole of the years of the marriage and has no formal qualifications. She is occupied as a carer for her mother who is the intervener. The wife herself has no capacity to meet the monthly interest on the line of credit of about $4,000 per month. That payment is debited to the line of credit secured on the Suburb C property.

10. In considering any hardship for the husband: The husband continued to operate the business; he has been in receipt of income protection payments pursuant to relevant insurance policy equating to $167,000 per annum until June 2017, the premiums for that policy were funded by payments from the business; the husband has remarried; the husband’s wife is in employment and her company now employs him. The husband’s wife is employed.

11. The balance of hardship clearly favours the wife and leave will therefore be granted.

Maintenance

1. In considering a maintenance application the Court must consider s 72 of the Act:

   (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 liability under subsection (1) of a bankrupt party to a marriage to maintain the other party may be satisfied, in whole or in part, by way of the transfer of vested bankruptcy property in relation to the bankrupt party if the court makes an order under this Part for the transfer.

1. This section imposes an obligation on spouses for mutual support. The main purpose of spousal maintenance is to make provision for future needs.

2. The parties in their final property orders did not make provision for spousal maintenance in contemplation that the sale of the business would extinguish debt and perhaps provide a capital sum. Importantly, it would leave the family home unencumbered. None of these rights have flowed.

3. The wife is now aged 56. She has not been in paid employment since she married and has no reasonable expectation of being able to apply for gainful employment. She is unable to adequately support herself.

4. The question then becomes whether the husband has the capacity to pay spouse maintenance.

5. The husband asserts that he received his last payment of income protection on 12 June 2017. That is supported by a letter dated 31 August 2017 from F Finance confirming that the reason for the cessation of the income protection benefit was the husband’s return to work.[23] The inference is that the husband is well enough to work.

   [23] Affidavit of the husband filed 11/09/2017, Annexure A 

6. The husband is now employed by G Pty Ltd, a company of which the husband’s current wife Ms H is the sole director and shareholder. He has a wage of $600 per week. On untested evidence in an interim proceeding it is not possible to understand the basis for that figure for income apparently agreed on between the husband and his wife’s company.

7. I take into account that this wage is about $600 per week after tax and superannuation.

8. This is significantly less than the approximately $3,200 per week which the husband was being paid from his income protection insurance.

9. It is difficult to be clear in the continuously evolving financial position of these parties exactly what the net asset position is but in the circumstances of the husband choosing to return to employment and at that level, I consider that he does have the capacity to contribute to the wife’s maintenance.

10. There are other considerations.

11. On behalf of the wife it is submitted that although the husband has become bankrupt that did not affect his payment of income insurance of $3,216; there is an allegation that the husband overstated his tax liability and that in fact the husband’s net income was closer to $2,200 per week.

12. The Financial Statement which was relied on by the husband[24] reveals an excess of income over expenditure of $791.26. The husband claimed at that time rent to his now wife of $220 per week, ongoing life insurance premiums of $224.28, hire purchase costs of a 4WD motor vehicle of $268.17 and personal expenses per week of $250 for food, $60 for clothing and shoes, $50 for entertainment and hobbies, all of which I take into account as expenses which do not have priority, at least at the stated level or at all, over the obligation of the husband to provide for his wife who has no income and is being financially assisted by her family.

    [24] Financial Statement of the husband filed 6/02/2017

13. Accordingly, I consider that the husband has the capacity to meet an order for spouse maintenance in the sum claimed, commencing from date of hearing on 7 February 2017 in the sum of $1,386 per week for the period 7 February 2017 to 12 June 2017 and thereafter the sum of $600 per week.

14. Orders are made accordingly.

I certify that the preceding ninety-five (95) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cleary delivered on 2 November 2017.

Associate:

Date:  2 November 2017

[11] Order 1.19 of Orders dated 7/08/2014