McNaulty & McNaulty (No 4)
[2024] FedCFamC1F 302
•8 May 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
McNaulty & McNaulty (No 4) [2024] FedCFamC1F 302
File number(s): BRC 14443 of 2022 Judgment of: JARRETT J Date of judgment: 8 May 2024 Catchwords: FAMILY LAW – PROPERTY – Application for partial property settlement – Where respondent has no source of income or capital to meet expenses – Where quantum of partial property settlement sought by respondent is far less than amount applicant admits she is entitled to – Partial property settlement granted Legislation: Family Law Act 1975 (Cth) ss 75(2), 79, 80(1)(h) Cases cited: Isles & Nelissen (2022) FLC 94–092
Strahan v Strahan (2009) 42 Fam LR 203
Division: Division 1 First Instance Number of paragraphs: 33 Date of hearing: 1 May 2024 Place: Brisbane Counsel for the Applicant: Mr Sorensen Solicitor for the Applicant: Peter J Sheehy Solicitor Solicitor for the Respondent: Litigant in person ORDERS
BRC 14443 of 2022 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MR MCNAULTY
Applicant
AND: MS MCNAULTY
Respondent
ORDER MADE BY:
JARRETT J
DATE OF ORDER:
8 MAY 2024
THE COURT ORDERS THAT:
1.The parties give all necessary instructions and sign all necessary documents to forthwith cause a payment of $250,000 to the respondent or at her direction, from the funds currently held in trust by O Lawyers, such sum to be characterised as partial property settlement to the credit of the respondent.
2.By no later than 4.00pm on 4 June, 2024 the applicant file and serve any amended initiating application upon which he intends to rely at the final hearing of the within proceedings.
3.In the event that the applicant files an amended initiating application in accordance with the preceding order and seeks the setting aside or other order or declaration in respect of the agreement dated June, 2022 between he and the respondent (being the agreement which is MSM-02 to the affidavit of the respondent filed on 21 March, 2024), the applicant shall, at the same time as filing his amended initiating application, file and serve upon the respondent a statement of claim setting out the material facts upon which his claim for relief relies.
4.The application in a proceeding filed by the respondent on 21 March, 2024 is otherwise dismissed.
Note: The form of the order is subject to the entry in the Court’s records.
[Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Part XIVB of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish an account of proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under a pseudonym has been approved pursuant to subsection 114Q(2) of the Family Law Act 1975 (Cth).]
REASONS FOR JUDGMENT
JARRETT J:
The competing applications for final relief between these parties are listed for final hearing before me for five days commencing on 5 August, 2024. Although the proceedings originally included claims for parenting orders, the parenting orders applications were resolved by consent orders made on 11 March, 2024. What remains are the parties’ cross-applications for property adjustment.
These reasons relate to an application in a proceeding filed by the respondent on 22 March, 2024. By that application she seeks an order for partial property settlement and the enforcement of a binding financial agreement made between she and the applicant in June, 2022. The application is opposed by the applicant.
Some background is necessary to put the current application in context.
By his amended initiating application filed on 19 December, 2022 the applicant seeks the following property adjustment orders:
10.That pursuant to Section 79 of the Family Law Act 1975 the property of the parties or either of them be divided 65% to the Applicant and 35% to the Respondent.
Whilst that prayer for relief might engage the jurisdiction of the court, it says nothing about the orders for property adjustment that might be made to give effect to that aspirational claim.
Relevantly, by her amended response to final orders filed on 28 April, 2023 the respondent seeks the following:
27.That as and by way of property settlement, an account be taken of the assets, liabilities and financial resources of the parties and as and by way of property settlement pursuant to section 79 of the Family Law Act 1975 (Cth), the net property of the parties be adjusted on the following basis:
(a) 65% to the Respondent Wife; and
(b) 35% to the Applicant Husband, subject to paragraph 34 below.
…
34.That from the Husband’s property settlement entitlement, pursuant to paragraph 27(b) above, the Husband pay or cause to be paid to the Wife the cash adjustment owing to the Wife pursuant to the Binding Financial Agreement, plus interest.
The respondent seeks a range of orders, properly described as property adjustment orders, to give effect to her aspirations as set out in paragraph 27 of the amended response.
Relevantly, by her application in a proceeding filed on 22 March, 2024 the respondent seeks the following orders:
2.That pending further Order of this Honourable Court, urgent release of funds in the amount of $250,000 from those held in trust be allocated as a partial property settlement to [Ms McNaulty].
3.That this Honourable Court enforces the Binding Financial Agreement/ 90C Agreement dated June 2022 between the husband [Mr McNaulty] and [Ms McNaulty].
The respondent relied upon two affidavits in support of her application, one filed on 21 March, 2024 and the other filed on 26 April, 2024. The respondent read and relied upon an affidavit of his solicitor, the operative part of which says:
2. The husband opposes the Application in a Proceeding filed by [Ms McNaulty] on 21 March 2024 on a number of grounds including that:
(a)the wife’s material in so far as it is admissible does not meet the evidentiary threshold requirement for the exercise of the court’s discretion pursuant to sections 79 and 80(1)(h) of the Family Law Act 1975 to make a further partial property settlement; and,
(b) It is otherwise misconceived and conflates issues to be determined at trial.
Despite the reference to “the wife’s material in so far as it is admissible”, no objection was taken to any part of the respondent’s affidavits. Evidence which might be inadmissible is admissible until excluded by objection: Isles & Nelissen (2022) FLC 94–092 at [98].
The applicant did not, by his evidence, challenge any of the factual matters sworn to by the respondent.
Partial property settlement
In Strahan v Strahan (2009) 42 Fam LR 203 at [131], Boland and O’Ryan JJ agreed that there is a two-stage approach to applications for partial property settlement: first, the procedural or adjectival step (that is to say, whether the Court should exercise its discretion to entertain or embark on hearing and determining an interim property settlement application), and secondly, the substantive step (the nature of the order, if any, once it has been determined it is appropriate to hear and determine the application).
In relation to the first step, it was said at [132]:
… In our view, when considering whether to exercise the power under s 79 and s 80(1)(h) of the Act to make an interim property order the ‘overarching consideration’ is the interests of justice. It is not necessary to establish compelling circumstances.
All that is required is that in the circumstances it is appropriate to exercise the power. In exercising the wide and unfettered discretion conferred by the power to make such an order, regard should be had to the fact that the usual order pursuant to s 79 is a once and for all order made after a final hearing.
At [135] their Honours said of the second step that:
Once a court proceeds to exercise the power in s 79 of the Act, being in the substantive phase, a court is required to undertake consideration of the matters in s 79(4) including by reference to s 79(4)(e) the matters in s 75(2) so far as they are relevant. However, consideration of such matters may be brief and if it is established that ‘it seems likely to the court that … the applicant … will be likely to receive by way of property settlement a sum sufficient to cover the advance, that would seem to be sufficient to enable the order sought to be made’: Zschokke; Polletti and Polletti per Nygh J and Wenz v Archer. As senior counsel for the Wife submitted, ‘provided scope can be found within the assets of the parties for an order of the size sought … then that should be the end of the matter’. In other words, in such circumstances the applicant would only be receiving what he or she was entitled to receive when the power was exhausted.
The respondent seeks $250,000 by way of partial property. She explains why in her first affidavit:
8. I require urgent funds to be released from those held in trust in the amount of $250,000 to be classified as a partial property settlement. These funds will be used to cover the costs of the return flights for my children from Sydney Australia to USA for my upcoming spend time with my two children in the June/July school holidays. Additionally funds will be used for children’s bedding and furniture in preparation for their arrival, for the purchase of a vehicle and for legal representation for my upcoming trial with a direction hearing set for 17/04/24.
The respondent’s evidence is that she is currently unemployed and she is not legally able to work in the United States of America where she presently lives, until she obtains a “green card”. She receives no spousal support from the applicant or any government assistance.
Currently the sum of $1,370,578 is held in a solicitor’s trust account to the parties’ credit. The evidence on the application before me does not identify the source of these funds, although they are seemingly held on account for both parties.
In her affidavit, the respondent refers to an opinion of the value of the parties’ interests in the “[McNaulty] Group” prepared by Z Accountants and filed as part of an affidavit on 27 January, 2024. According to that opinion the value of the parties’ interests in the “[McNaulty] Group” is $10,263,330.
The respondent swears, and the applicant does not seem to contend to the contrary through sworn evidence, that the applicant controls all of the parties’ assets.
Accordingly, on the evidence, I am satisfied that the respondent has no source of income and no capital that she can access to assist her to meet the expenses to which she says a partial property settlement will be applied. The applicant did not identify any source of income or capital available to the respondent from which she might meet those expenses.
Conversely, the applicant has the control of all of the parties’ assets. The respondent swears that the applicant “has previously deposed that his weekly expenses are $6872 and that he draws a wage of $10,000 per week from the company [S Pty Ltd]”. Although the respondent does not identify where it is that the applicant previously deposed to those matters, the applicant did not put them in dispute and I accept the respondent’s evidence about those matters. The respondent also deposes that:
(a)by reason of documents disclosed by the applicant in the proceedings she can see that between December, 2022 and May, 2023 the applicant has accessed “joint matrimonial funds” exceeding $2,740,000;
(b)he has recently purchased a home in New South Wales for $4,000,000;
(c)he has loaned more than $1,779,000 to third parties and has taken $2,279,855.60 in directors loans from S Pty Ltd.
The applicant did not direct me to any factual material that demonstrated that the respondent’s evidence was inaccurate.
Having regard to these matters, I am satisfied that in the circumstances it is appropriate to exercise the power available to make an order for partial property settlement. Notwithstanding that the usual order pursuant to s 79 is a once and for all order made after a final hearing, I consider the circumstances of this case enliven the power to consider a partial property settlement order.
The evidence before me establishes that the parties have assets worth at least $11,633,908. The respondent does not seem to suggest there are any liabilities and the applicant did not seek to put before me what he contended comprises the parties’ assets and liabilities.
Having regard to the relief sought by the applicant in his amended initiating application, the respondent will be entitled to at least $4,071,867.80.
Other orders for partial property settlement have been made in favour of the respondent in these proceedings. There appears to be two orders that provide for a total of $230,000 to be paid to the respondent by way of partial property settlement (12 June, and 22 September, 2023). Further, by two additional orders (made on 22 February and 15 March, 2023) the respondent received a total of $440,000, such sum to be characterised by the trial judge. Thus, the respondent has received a total of $670,000.
The amount sought by her is far less than her entitlement as contended for by the applicant, even taking into account the amounts already received by her. Any order for partial property settlement in the sum sought by the respondent might easily be accounted for when final property adjustment orders are made.
It is appropriate in the circumstances to order that from the monies presently resident in the O Lawyers trust account, the sum of $250,000 be paid to the respondent by way of partial property settlement.
Enforcement of the binding financial agreement
The respondent swears that the parties entered into a binding financial agreement on 2 June, 2022. The agreement deals with one aspect only of the parties’ property, namely some real property described as “the [Town F] property”. By the terms of the agreement, the applicant became entitled to the Town F property and the entities associated with it in return for a payment by him to the respondent of $1,595,000. The respondent agreed to divest himself of her office holdings and interests in the entities associated with the Town F property. Her evidence is that she did all that is required of her under the agreement but the applicant has not paid to her $1,595,000 or any money for the purposes of the agreement.
In answer to her claim, the applicant’s counsel informed me that the applicant had applied to set aside the “binding financial agreement”. However, there is no application before the court for that relief. At best there are some statements by the applicant to the effect that he will apply to the court to have the agreement set aside. But despite those statements he has never done so. I was taken to a statement made by the applicant in an affidavit filed in 2023 but I have looked for other statements by him as well. The best I can find are as follows:
(a)the applicant’s affidavit of 19 December, 2022 at paragraph 44:
44. The agreement contained in the Financial Agreement of 6th June, 2022 is not capable of being performed by me due to the above circumstances, and I seek to have it set aside due to the impracticability of it being able to be performed.
(b)the applicant’s affidavit of 27 April, 2023 at paragraph 78:
78. I have sought an Order that the Financial Agreement we signed whereby I was to acquire the Respondent’s interest in the [Town F] Project, be set aside, due to a subsequent independent valuation obtained by the proposed lender, indicated the loan to value ration with the vacant land as security, did not support the loan amount proposed.
(c)the applicant’s affidavit of 10 May, 2023 at paragraph 18:
18. On 6th June, 2022, after negotiations between the Respondent and I through our respective lawyers, we signed a Financial Agreement dated 6th June, 2022 which in effect, sought to quarantine one property, being the [Town F] property, between us from any property settlement and that ownership of it be transferred to me in the interim. A true copy of the Financial Agreement is attached to the Amended Initiating Application (Family Law) of mine filed 19th December, 2022. In my affidavit filed the same day I seek to have the agreement set aside due to the impracticability of it being able to be performed.
The most fulsome explanation of the basis upon which the applicant says that the binding financial agreement should be set aside is found in paragraphs 78–89 of his affidavit filed on 27 April, 2023. But the detail to which he swears there does not mount a persuasive case for the setting aside of the agreement. At best it demonstrates that the applicant was overly optimistic in his assessment of the worth of the Town F property. He points to nothing done by the respondent said to have engendered that false assessment.
Although the applicant’s case to have the binding financial agreement set aside appears, at this stage, to be particularly weak, I do not consider that it is appropriate to make the order sought by the respondent at this stage. That is primarily so because it is clear that the applicant considers that he has applied to have the agreement set aside. He should be given the opportunity to regularise that position, although it will be necessary for him to immediately identify the basis of his case in that regard. I have made directions for that purpose that are in addition to any other trial directions I have made.
I make the orders and directions set out at the commencement of these reasons.
I certify that the preceding thirty-three (33) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Jarrett. Associate:
Dated: 8 May 2024
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