Merrill and Burt (No 3)

[2017] FamCA 399

FAMILY COURT OF AUSTRALIA

MERRILL & BURT (NO 3) [2017] FamCA 399

FAMILY LAW – PROPERTY – Interim orders – Where de facto wife seeks an interim distribution of property – Where distribution of property relates to the payment of the child’s school fees – Where the parties are in agreeance that this is a joint expense – Where it is appropriate to grant the application – application granted.

FAMILY LAW – PROPERTY – Interim orders – Where de facto wife seeks an interim distribution of monies – Where distribution would be a cash payment to de facto wife for living expenses – Where de facto wife ultimately pursues a Stanford argument – Consideration of where the court derives its power to grant the interim application sought by the de facto wife – Where it is not just and equitable to grant the order sought by the de facto wife – no distribution for de facto wife’s living expenses.

Family Law Act 1975 (Cth) ss 80(1)(h), 90SM, 117

Harris & Harris (1993) FLC 92-378
Strahan & Strahan (2011) FLC 93-466

APPLICANT: Ms Merrill

RESPONDENT: Mr Burt

FILE NUMBER: MLC 9912 of 2013

DATE DELIVERED: 8 June 2017

PLACE DELIVERED: Adelaide

PLACE HEARD: Adelaide

JUDGMENT OF: Berman J

HEARING DATE: 2 May 2017

REPRESENTATION

COUNSEL FOR THE APPLICANT: Ms Fisken

SOLICITOR FOR THE APPLICANT: II Lawyers

COUNSEL FOR THE RESPONDENT: Mr Jones QC with Mr Hall

SOLICITOR FOR THE RESPONDENT: Mr G and Associates

Orders

UPON NOTING that the order made 1 May 2017 for the de facto wife to pay interim spousal maintenance to the respondent de facto husband is to be paid from the money remaining in the trust account of the de facto wife’s solicitors:-

1. That the de facto wife do all things necessary to cause the sum of THIRTY TWO THOUSAND FIVE HUNDRED DOLLARS ($32,500) to be withdrawn from funds held in her solicitors trust account to be paid to V School in discharge of the outstanding sum for tuition fees and other expenses relating to 2016 academic year.

2. That the Response filed 17 February 2017 is dismissed.

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 Merrill & Burt (No 3) 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 ADELAIDE

FILE NUMBER: MLC 9912  of 2013

Ms Merrill

Applicant

And

Mr Burt

Respondent

REASONS FOR JUDGMENT

INTRODUCTION 

1. By judgment delivered 1 May 2017, orders were made that the applicant de facto wife pay interim spousal maintenance to the respondent de facto husband.  The source from which the spousal maintenance payments are to be made is from the balance of the proceeds of sale of 5 M Street, Suburb D (“Suburb D property”) currently held in the de facto wife’s solicitors trust account.

2. I rely upon the reasons given in that judgment and note that I did not consider that the de facto husband’s application for interim spousal maintenance and the de facto wife’s response were so interdependent that they should be heard together. 

3. I heard submissions in respect of the response on 2 May 2017.  Judgment was reserved and I now deliver reasons.

4. The parameter of the hearing was confined to paragraph 15 of the de facto wife’s response.  Paragraphs 1 to 14 were not pursued.  The orders sought by the de facto wife are as follows:-

   [15]That within 14 days of orders being made, the funds held by the de facto wife’s solicitor on trust for the de facto wife totalling approximately $271,927 be applied in the following manner and priority:

   15.1firstly, the sum of $45,000 to HH Solicitors;

   15.2secondly, the sum of $11,550 to GG Lawyers;

   15.3thirdly, the sum of $30,000 to the de facto wife;

   15.4fourthly, the sum of $32,500 to V School; and

   15.5the balance, being approximately $152,877 to II Lawyers.

5. As set out at paragraph 60 of my earlier judgment, the balance of the proceeds of sale of the Suburb D property stood at $227,470.  I determined that it was reasonable to bring to account the potential for tax assessment in respect of O Pty Ltd in the sum of $161,653.  It was noted that the de facto husband had received the sum of $10,000 on 17 March 2017 leaving an approximate balance of $55,817 from which must be deducted the total of the spousal maintenance order of $16,980. 

6. It is assumed that the de facto husband has been receiving the spousal maintenance amount as ordered at the rate of $1,024 per week from the monies held in the de facto wife’s solicitors trust account.

7. Accordingly, the notional balance remaining is approximately $38,837.

8. By reference to the orders sought by the de facto wife, payments in respect of paragraphs 15.1 (HH Solicitors), 15.2 (payments to GG Lawyers) and 15.5 (payment to II Lawyers) were not pressed.

9. The focus was upon 15.3; the sum of $30,000 to the de facto wife and 15.4 being the sum of $32,500 to V College in relation to the attendance by the child JJ for the 2016 academic year.  The invoice provided as evidence for the outstanding amount is annexure “NMM6” to the de facto wife’s Affidavit filed 17 February 2017.

10. It is not controversial that there are fees outstanding for the child’s attendance at V College, nor that the account is in the name of the de facto husband.

11. Clearly, the account is outstanding and both parties agree that it is a joint liability of the relationship pertaining to one of their children.

12. The de facto wife contends in the substantive proceedings that the Court should not make an order with respect to the properties of the parties unless it is just and equitable to do so.  She argues that no order should be made with the effect that each of the parties retain their interests in property free from claim by the other.

13. The de facto husband argues that it is just and equitable for an order altering the interests of the parties in property to be made, but that in the circumstances of this case any interests in property held by the de facto wife should be transferred to the de facto husband, in particular the balance of the proceeds held in the de facto wife’s solicitors trust account.

HISTORY OF DISTRIBUTIONS

1. From the net proceeds of sale of the Suburb D property the following is a summary of the manner in which the net proceeds have been disbursed:-

   19 October 2015

   (1)Order 2.3 - $200,000 to the de facto husband’s solicitors trust account with such payment to be characterised at trial.

   (2)Order 2.4 - $100,000 to the de facto husband for his use absolutely with such payment to be characterised at trial.

   (3)Order 2.5 - $300,000 to the de facto wife for her use absolutely with such payment to be characterised at trial.

   (4)Order 2.6 – balance to be transferred to the de facto wife’s solicitors trust account for payment of tax debt payable by the de facto wife or any company or other entity in which she has an interest upon assessment being issued by the ATO.

   8 February 2016

   (5)Order 2.1 -$175,000 to the de facto husband’s solicitors trust account with such payment to be characterised at trial.

   (6)Order 2.2 - $175,000 to the de facto wife’s solicitors trust account with such payment to be characterised at trial.

   (7)Order 2.3 – the balance to the de facto wife’s solicitors trust account for the payment of tax debts payable by the de facto wife for any company or entity in which she has an interest as assessed by the ATO or as otherwise ordered.

   28 February 2017

   (8)Order 8 – in accordance with order 2.3 the de facto wife’s solicitors be permitted to pay the costs of the valuation of the real property and personal property from funds held in the solicitors trust account in the sum of $15,000.

   17 March 2017

   (9)Order that the de facto husband be paid $10,000 from monies held in the de facto wife’s solicitors trust account.

   1 May 2017

   (10)That the de facto wife’s obligation to pay interim spousal maintenance to the de facto husband in the sum of $1,024 per week up to a total of $17,408 be withdrawn from monies held in the de facto wife’s solicitors trust account.

2. It is notable that none of the monies distributed to the parties from the net proceeds of the Suburb D property have been characterised in term of the head of power other than the order for interim spousal maintenance made 1 May 2017.

3. The focus is in respect of the sum of $30,000 sought by the de facto wife as set out in paragraph 15.3 of response.

4. The affidavit filed in support of the application is of limited assistance in respect of the basis of the application for $30,000 to be paid to the de facto wife.  Paragraph 46(d) refers to the sum sought as being necessary “to meet my usual living expenses”.

5. The orders sought by the de facto wife have not been categorised by her as either interim or partial settlement of property, spousal maintenance or under the costs power pursuant to s 117 of the Family Law Act 1975 (as amended) (Cth) (“the Act”).

SHOULD THE ORDER BE MADE BY WAY OF PARTIAL OR INTERIM PROPERTY SETTLEMENT?

1. The de facto wife does not seek to categorise the payment.

2. The Full Court in Strahan & Strahan (2011) FLC 93-466 considered the principles that should now apply in relation to applications for interim property settlement.

3. Section 80(1)(h) of the Act is to be used to allow an interim property settlement under s 90SM.

4. The test is not now confined to circumstances which are “compelling”: Strahan (supra).

5. In Strahan (supra) the Full Court said:-

   [132]In relation to the first stage, in our view, when considering whether to exercise the power under section 79 and 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 unfetted discretion conferred by the power to make such an order, regard should be had to the fact that the usual order pursuant to section 79 is a once and for all order made after a final hearing.

6. Whilst the Full Court considered that all that was required before the power to make an interim property order was exercised is an assessment of whether it would be “appropriate” to make an order, statements by the Full Court in Harris & Harris (1993) FLC 92-378 at 79,930 and Strahan (supra) considered there should be as few interim property applications pursuant to s 79 (or s 90SM) as possible.

7. It is to be noted that the evidence has closed and a timetable has been set for the filing of written submissions with an adjourned date to hear final oral submissions.

8. The considerations are made more complex by the gravamen of the de facto wife’s case namely, that by reference to s 90SM(3) of the Act the Court should find that it is not just and equitable to make an order altering the property interests of the parties.

9. If that contention is found to have merit then no order would be made in favour of the de facto husband.  Taking the argument to its logical conclusion, there would be no impediment to the de facto wife or prejudice to the de facto husband of an order being made allowing the de facto wife to utilise what would be her own property without claim or interest of the de facto husband. 

10. The de facto husband opposes the de facto wife’s substantive position and argues that whilst it is just and equitable to make an order for property settlement, the effect of the orders he seeks would be that the entirety of the property now remaining, in particular the legal and equitable interests of the de facto wife in property held by her, would be transferred to the de facto husband.

11. On his case, if an order was made allowing the de facto wife to receive the sum of $30,000, then this would represent a substantial prejudice to him in circumstances where the de facto wife intends to utilise any monies received on living expenses and on that basis it could not be clawed back.

12. A further difficulty arises as to whether there is power to make an order for interim property settlement in circumstances where, by her own application, the de facto wife does not consider that it would be just and equitable to do so.

13. Previous orders have been made without characterisation as to the head of power that should apply.

14. The distinction is that earlier orders have been made by consent.  The de facto husband opposes the current order being sought by the de facto wife.

15. The Court is therefore required to consider whether it is just and equitable to make the order sought by the de facto wife if it is an order under s 90SM of the Act.

16. It is conceptually difficult to consider how an interim order can be made that still requires the Court to apply the provisions of s 90SM in circumstances where the de facto wife argues that in terms of the substantive orders sought by the de facto husband it is not just and equitable to alter her interests in property.

17. Whilst it may be argued that the Court has statutory power to make such an order with the implication that it is open to make a separate finding as to whether it is just and equitable to make an order as a distinct consideration confined to each application, such a proposition is not easily adopted where the basis of the interim application is not likely to be different when the Court considers the substantive orders.  The evidence is closed and all that is to occur are the final submissions to be made on behalf of the parties.

18. In the absence of consent, I consider that there is likely to be significantly prejudicial to the de facto husband if the interim proceedings are determined where the resolution of the substantive proceedings is imminent.

19. A consideration of the construct of the orders sought in the response suggests that paragraph 15 is predicated on other orders being made (which have now been abandoned) and suggests that it was not intended to be a stand-alone order but was predicated upon the de facto wife having the ability as director of KK Pty Ltd to encumber the L Street property for the purposes of obtaining finance in the sum of $500,000.

20. I do not propose to order that by way of interim or partial property the de facto wife should receive $30,000 from monies held in her solicitors trust account.

SHOULD THE ORDER TO BE MADE PURSUANT TO THE SPOUSAL MAINTENANCE POWER?

1. The de facto wife seeks the money to cover the shortfall in her living expenses.  To some extent, what she seeks is not dissimilar to the basis upon which the de facto husband sought spousal maintenance.

2. The difficulty is that the application was clearly not directed to spousal maintenance and there is little or no evidence contained in the affidavit (or indeed elsewhere) that would easily enable the Court to consider money to be received by the de facto wife by way of an order for spousal maintenance.  Different considerations apply and I am not satisfied that such an order should be made at this stage.

SHOULD THE ORDER BE MADE PURSUANT TO THE COSTS POWER?

1. In relation to the purpose for which the de facto wife seeks the lump sum of $30,000, there is no suggestion that it is to be by way of the payment of legal fees either past or anticipated into the future.  There is no evidence that would assist the Court in making such a determination and I decline to do so.

CONCLUSION

1. The following issues arise:-

   (1)What is the appropriate Head of Power under the Act if the order as sought by the de facto wife is to be made?

   (2)If it is an order by way of interim or partial settlement of property, does a determination that it is just and equitable to alter the interests of the parties fundamentally predetermine the de facto wife’s substantive order, namely that it is not just and equitable to consider orders for property settlement?

   (3)If it is permissible to make an interim order notwithstanding the potential inconsistency with the de facto wife’s substantive orders, is it appropriate to do so where the evidence is closed?

   (4)Should an order be made in circumstances where on the de facto wife’s case she will retain the property without distribution to the de facto husband, but on his case all of the interests in property currently held by the de facto wife will be transferred to him?  Any money provided to the de facto wife now would not be able to be “clawed back”.

2. In the absence of the Court being able to properly consider whether the order sought by the de facto wife could be made pursuant to either the maintenance or the costs power, I decline to make the order as sought by the de facto wife save as to the payment of the school fees to V College.

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

I certify that the preceding forty-four(44) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Berman delivered on 8 June 2017

Associate:

Date:  8 June 2017