Monfort & Bade - [2018] FamCAFC 163

FAMILY COURT OF AUSTRALIA

MONFORT & BADE

[2018] FamCAFC 163

FAMILY LAW – APPEAL – PROPERTY – Just and equitable – Treatment of credit card debt – Whether the primary judge erred by ordering that the husband’s credit card debt be paid from the net assets available for division – Where the debt was reasonably incurred for the benefit of both parties and the husband did not have the means to reduce it – No error demonstrated.

FAMILY LAW – APPEAL – SPOUSAL MAINTENANCE – Whether the primary judge erred by dismissing the wife’s application for lump sum spousal maintenance – Where the wife’s financial position was in a state of flux – Where the husband did not have the capacity to pay spousal maintenance – No error demonstrated – Appeal dismissed.

Family Law Act 1975 (Cth)

Bondelmonte v Bondelmonte (2016) 259 CLR 662; [2017] HCA 8
House v The King (1936) 55 CLR 499; [1936] HCA 40
Semperton v Semperton (2012) 47 Fam LR 626; [2012] FamCAFC 132

APPELLANT:

Ms Monfort

RESPONDENT:

Mr Bade

FILE NUMBER:

BRC

4638

2014

APPEAL NUMBER:

NOA

2017

DATE DELIVERED:

24 August 2018

PLACE DELIVERED:

Sydney

PLACE HEARD:

Brisbane

JUDGMENT OF:

Ryan, Aldridge & Kent JJ

HEARING DATE:

2 August 2018

LOWER COURT JURISDICTION:

Federal Circuit Court of Australia

LOWER COURT JUDGMENT DATE:

13 October 2017

LOWER COURT MNC:

[2017] FCCA 1673

REPRESENTATION

COUNSEL FOR THE APPELLANT:

Mr Galloway

SOLICITOR FOR THE APPELLANT:

Dixie Anne Middleton & Associates

COUNSEL FOR THE RESPONDENT:

Mr Galea solicitor

SOLICITOR FOR THE RESPONDENT:

Porter Galea Lawyers

Orders

The wife’s Application in an Appeal filed on 25 June 2018 to adduce further evidence is dismissed.
The wife’s Application in an Appeal filed on 6 July 2018 to file a Further Amended Notice of Appeal is granted.
The appeal 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 Monfort & Bade 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).

THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT BRISBANE

Appeal Number: NOA 54 of 2017
File Number: BRC 4638 of 2014

Ms Monfort

Appellant

And

Mr Bade

Respondent

REASONS FOR JUDGMENT

Introduction

Ms Monfort (“the wife”) appeals from property and spousal maintenance orders made by Judge Willis in proceedings between her and Mr Bade (“the husband”).
The orders effected a division of the parties’ property so that the wife received 75 per cent and the husband 25 per cent. The primary judge crafted the orders so as to permit the wife to retain a property known as Property B. This was an outcome that both parties regarded as desirable but one the husband considered to be difficult to achieve because of the financial exigencies faced by them.
The retention of this property by the wife necessarily posed some difficulties as it, along with the parties’ other property known as Property A, was significantly burdened with debt.
The wife therefore had to assume the burden of the mortgage on Property B. Property A was to be sold and after discharge of the costs of sale and mortgage, the proceeds were to be used to discharge the husband’s credit card debt ($92,000), the wife’s credit card debt ($7,000) and a capital gains tax liability on a third property which had already been sold ($24,663). The balance was to be paid to the husband as part of his 25 per cent share of the property.
The wife was obliged to pay the husband an adjusting sum calculated pursuant to a formula set out in the orders, which took into account the sale price of Property A. The primary judge estimated that the wife would have to pay the husband the balance of $79,362 minus the proceeds of that sale (at [156]).
The husband was to retain his superannuation benefits. He was also in receipt of a T Superannuation Scheme pension (“T pension”) which was in the payment phase and could not be converted to a lump sum. A splitting order was made so that the wife was to receive 75 per cent of each payment.
The wife’s application for spousal maintenance was dismissed.

The Appeal

At the outset of the hearing of the appeal we dealt with the wife’s application to adduce evidence in the appeal. The contention was that, after judgment, the parties had entered into a concluded agreement to vary the primary judge’s orders. After some discussion it became clear that, in fact, there had been no concluded agreement, despite the parties having come close to agreeing. Responsibly, then, the application was withdrawn. It will be dismissed.
The wife’s application to file a Further Amended Notice of Appeal was granted without opposition.
After some further discussion, counsel for the wife indicated that there were but two issues he wished to agitate on the appeal, namely:
·the primary judge erred in determining that her orders to give effect to the 75/25 division were just and equitable; and
·the primary judge erred in dismissing the wife’s application for spousal maintenance.
As these points may be seen to be encompassed by Grounds 3 and 4 of the Further Amended Notice of Appeal respectively, counsel for the wife abandoned the remaining grounds. Ground 3 in turn picked up aspects of Grounds 1 and 2 notwithstanding the abandonment.

The property available for division

At the time of the hearing, the parties owned two properties: Property B and Property A. Each was heavily mortgaged. A third property had already been sold to reduce their debt.
The wife has lived in Property B since about May 2013. Due to a significant health issue, she ceased work in 2012 and she has not worked since. In December 2015, she qualified for a disability support pension.
Property A was rented until the husband moved to live there at some time prior to the hearing. The third property had also been let until it was sold. The wife received half of the rent from those properties at the times they had been let.
The mortgages on all three properties were met from the husband’s income and his share of the rent. The primary judge found that this placed the husband under significant financial pressure and that he had been on the brink of bankruptcy.
At the time of the hearing, Property B had a value of $840,000 and was encumbered by a mortgage in the sum of $355,735. Property A had a value of $590,000 and a mortgage of $396,753 (at [101]).
The other significant asset was the husband’s interest in a superannuation fund which had been valued at $75,000.
It was common ground that the husband’s T pension was in payment phase and could not be converted to a lump sum. Consistent with authority, at [101] the primary judge adopted a two pool approach to the pension and it was treated in a separate asset pool which took into account its discrete characteristics (see Semperton v Semperton (2012) 47 Fam LR 626).

Did the primary judge err in determining that her orders to give effect to the 75/25 division were just and equitable?

Essentially, this challenge focuses on the primary judge’s orders as to the payment of the husband’s credit card debt (Order 12(c)). The effect of the order requiring that this debt be paid from the proceeds of the sale of Property A is that the net assets available for division between the parties are reduced by that amount. In effect, therefore, the wife is bearing 75 per cent of that debt. She submits that a more equitable order would be that the debt be paid by the parties but in different proportions. The wife suggested that the husband should bear the majority of it, such as three quarters.
In her Amended Summary of Argument the wife submitted:
12.Furthermore, the order, which it is conceded provides to the Wife 75% of the parties’ net property, has the effect, as it is presently constructed (with the credit card debt to come “off the top”) has therefore, that debt being paid by the Wife in inverse proportion to the overall provisions of the property settlement. In other words the Wife is subsidising the Husband’s credit card liability unjustly. Further, this means of calculation does not permit a proper division of assets to occur as the learned trial Judge intended.
(As per the original)
The result of this submission, if accepted, would see the husband’s credit card debt being treated differently to all of the other matrimonial debts of the parties, including the wife’s own credit card debt.
Further, this submission, if accepted, would have the effect that unless changes were made to the other orders to balance out the increase in the funds to be received by the wife, the wife would be receiving more than the 75 per cent/25 per cent division. That division was an outcome for which she contended and against which no appeal was taken.
It is useful to interpolate that the wife actually contended for an outcome that saw her receive all, or nearly all, of the parties’ assets, including the husband’s superannuation and pension. She proposed that she receive 80 per cent of the property pool, and a splitting order of 100 per cent of the husband’s T pension as spousal maintenance so as to not affect her receipt of the disability support pension.
In answer to the question as to why should this debt be treated differently to the other debts of the parties and why the order made was unfair, counsel for the wife submitted that the husband used the credit card as he pleased and that while he had the means to reduce it, he did not do so. In effect, therefore, the submission is that the primary judge erred by not finding that the husband had preferred to maintain the credit card debt by spending his income on other things.
In order to understand her Honour’s reasons, to which we shall turn shortly, it is useful to refer to the evidence which was before the Court and to the submissions made at the hearing.
The wife’s evidence was that as at 2 July 2012 (which was the day she contended the parties separated) the husband’s credit card debts were in the sum of $59,733.50 (at [85]). On 1 April 2014 (the date of separation contended for by the husband) the debt had increased to $112,524.35.
The primary judge did not determine the date of separation because that issue could only be relevant to issues of the quantum of the husband’s credit card debt and she considered that her findings on that debt were not influenced by the date of separation. Her Honour’s reasons make plain that she considered the husband had reasonably incurred the debts as they stood in 2014 because “[o]verwhelmingly the husband’s income has kept the parties afloat financially since 2012” (at [46]). At [59], the primary judge noted that the husband
struggled financially to keep up with the mortgage repayments on [the parties’ three properties] and the expenses relating to these properties along with payment of their credit cards, his own cost of living and trying to pay spousal maintenance and other outgoings.
These findings have not been challenged.
The wife called in aid an analysis of the husband’s income for the years ending 30 June 2014 and 30 June 2015 prepared by an accountant. It demonstrates the husband’s “available cash after net property income and taxation” was $64,395 and $74,512 respectively. Thus, she submitted that the husband had preferred to fund his lifestyle rather than reduce the debt. In particular, the wife submitted that in doing so, the husband had been able to pay his lawyers $25,000 in priority to making payments to reduce the credit card liabilities.
In response, the husband asserted that the accountant’s analysis failed to take into account the payments that had been made with respect to the credit card debts themselves. His unchallenged evidence was that in the 2013-2014 financial year he made payments of $51,822.92 and in 2014-2015 payments of $45,028.
This led her Honour to conclude:
86.Mr Galea submitted that in the forensic report of [M Accountants] the available cash after net property income and taxation reported in that year (30/6/14) was $64,395.00. The total payments off the credit card in that year were $51,822.92. By subtracting one from the other the difference represented the money that the husband had left over to spend on himself or for whatever else throughout the year, was $12,573.00. I accept that this figure of $12,573.00 does not represent any wanton or reckless spending on his part, nor does it illustrate that he has been secreting money away. The husband’s position is that he used these funds for paying expenses incurred in his day to day existence including feeding himself and ordinary expenses after payment of their joint debts. The same exercise can be applied to the next year, being 2015. The figure of $75,512.00, taking away the total credit card payments for that year of $45,028.00, leaves a discretionary amount of $30,484.00 over the year. Again this is not an amount which suggests reckless spending or wastage.
(Footnotes omitted)
We find this analysis to be compelling. Counsel for the wife could not point to any error in it. It follows that the husband did not have the means readily to reduce this debt further during that period.
It is correct that the husband paid $25,000 to his lawyers. The wife, however, had also made payments to her lawyers. The primary judge said:
89.The husband has directed his income to debt reduction and as well as that he has his own expenses associated with his cost of living. As seen in the [M Accountants] figures, his cost of living as explained by Mr Galea is well within conservative expenditure. Funds used to pay back the credit cards in part derived from the husband’s receipt of a portion of [T] pension (a portion of $458.00 with the wife receiving similar), as submitted by Mr Baston. The husband’s salary however was approximately $240,000.00. The husband has earned significantly more from his personal exertion. I do not consider therefore that the husband’s legal fees of $25,000.00 over 5 years ought to be added back into the pool. The wife has also retained half of the rent, and significant payouts. None of those amounts were directed to debt reduction. The husband has paid down the credit cards and maintained all of their significant joint debt for years.
90.I am aware that the figures as explained by Mr Galea show that the husband has spent about $25,000.00 on legal fees, with a total owing of around $42,000.00. The wife has spent $98,000.00 to $100,000.00 in the same time on her legal fees.
91.The husband is not seeking to include the wife’s payouts in the property pool. He accepts that the wife has spent considerable money on legal fees. Even when the husband was unemployed and facing possible bankruptcy, apart from the wife paying one mortgage repayment on [Property B], the husband has managed to juggle finances to keep up with payments on [Property A] and the significant credit card debts. There was a moratorium on the [Property B] mortgage repayments for a period of six months organised by the wife, Overall, given the husband’s financial contributions, which have continued well beyond separation whether it is 2012 and 2014, and the husband continues to pay joint debts as at the date of the final submissions I do not consider that there is scope to sustain an argument that the husband’s legal fees ought to be added back.
(Footnotes omitted)
Again, the wife did not assert that there was any error in these paragraphs.
It follows that the primary judge’s findings that the debt was reasonably incurred for the benefit of both parties and was not unreasonably maintained by directing income to other expenses remain unimpeached. There is therefore no basis for suggesting that this matrimonial debt should be treated differently to the other debts of the parties or that the primary judge’s treatment of it was unfair.
We therefore do not see any error in her Honour’s approach. It remains only to add that the formulation of orders to give effect to the property division is an exercise of discretion. Error in the exercise of that discretion is not demonstrated by indicating that different orders were available and could have been made; error must be shown in the manner identified in House v The King (1936) 55 CLR 499 at 504 – 505 and Bondelmonte v Bondelmonte (2016) 259 CLR 662 at [31].
No such error has been identified and this ground fails.

Did the primary judge err in dismissing the wife’s application for spousal maintenance?

Under this ground, counsel for the wife submitted that in dismissing her application for spousal maintenance the primary judge impermissibly took into account sums that had been previously received by the wife as a factor which “disentitled” her to receive such payments.
Counsel referred in particular to the following paragraphs of her Honour’s reasons:
116.On 14 September 2016 I made an Order that the wife’s application in a case filed on 4 August 2016 and the husband’s response seeking to suspend the spousal maintenance made on 9 November 2015 be consolidated and heard at the final hearing of the matter which was then listed for 27 October 2016.
…
119.After separation, in September 2014, the wife received a total and permanent disability insurance payout for her psychiatric condition in the sum of $52,201.69. Some of that was spent on living expenses, $10,000.00 on the lawyers involved in the TPD claim, $12,000.00 on legal fees for the family law dispute and another $23,000.00 on a different family lawyer and other costs as set out in the wife’s affidavit. Apart from the lawyers handling the payout, other legal fees on family law matters of around $35,000.00 were spent by the wife on what amounts to her own legal expenses. All of the funds were spent by May 2016.
120.In May 2016 the wife received another payout being an insurance payout from the [T] Superannuation … for total and permanent disability for her psychiatric condition. In total that was $111,247.82. $40,000.00 was paid to the lawyers acting for the wife in her TPD claim. The wife has then however paid around another $45,232.50 on further family law legal advice from various law firms, which included repaying a third party $22,000.00 plus interest of $1,760.00 for a loan given to the wife to obtain family law advice. The balance of the funds were spent on the cost of living for the wife including $443.00 on a rates payment on Property B. All of those funds were expended at the date of trial.
(Footnotes omitted)
These paragraphs form part of the discussion of the parties’ contributions to their property and the welfare of the family and are part of a chronology of dealings with their property. These paragraphs have no direct connection to spousal maintenance or the primary judge’s consideration of it.
We note the conclusion to that section appears at [124] and is that the parties had contributed equally to their property and the welfare of the family up to the time of the hearing. Again, that was a position contended for by the wife and not challenged on appeal.
Her Honour commenced the discussion of spousal maintenance as follows:
Wife’s need for spousal maintenance – threshold finding
176.The wife has the onus of establishing a need for spousal maintenance. This is to be considered in the context of her having received 75% of the property available for distribution, pursuant to the Orders made.
177.As can be seen by the wife’s own evidence, she has received and used significant lump sums for her own living expenses post separation and also spent considerable sums on paying her own legal fees to a variety of legal advisors. Had those funds used differently, the wife would have had considerably more funds still available for her own support. She has received 75% of the property available for distribution pursuant to the Orders I have made.
178.Her financial situation is in a position of flux. The wife may or may not be successful in achieving a loan to finance the Property B mortgage and other liabilities which must be extinguished if the husband is to receive his 25%. The wife has a current diagnosis to deal with however the long term consequences are unknown. The wife is seeking to take on debt to secure the home she particularly wishes to secure albeit it alone is worth more than her percentage entitlement. The wife is choosing to place herself in debt to do so. The wife also received and retains after payment of the legal fees associated with her contesting the will, $82,500.00. This was received post separation. The wife submits that she will have no more than about $32,000 remaining after paying other debts.
179.In the property settlement, the wife has received the bulk of the assets at 75%. The wife has opted to take on more debt to secure Property B and is proposing securing finance to do so. She is aware that a cash adjustment must also be paid to the husband. It means however the husband will be left paying the joint debts for a further period of at least 120 days whilst the wife seeks finance approval and that he is left paying the credit card monthly accounts and whatever he can towards the mortgages until settlement of Property B either way and whilst Property A is also sold. After 120 days, if the wife cannot secure finance, Property B will be sold. The mortgage will still have to be paid and the husband has still to secure and pay his own accommodation. The credit card debt alone standing in the husband’s name is for a significant sum of $92,000.00. On the evidence before me, I am not satisfied that the wife has satisfied the initial threshold of demonstrating a need for spousal maintenance.
(Emphasis added)

Counsel for the wife pointed to the emphasised words and submitted that these indicated that the primary judge had indeed taken the earlier payments into account as a disentitling factor.
We do not agree. Correctly, in our opinion, the primary judge was commencing her discussion of the wife’s need for maintenance with a consideration of the property held by the wife. As the subsequent paragraphs make clear, the wife’s financial position was in a state of flux. It very much depended upon what she wished to do, and could do, with Property B and whether refinancing was indeed a viable option. The possibilities for retaining that property had been reduced as a result of the earlier payments received by the wife and by her spending of them.
In short, her Honour found the financial position of the wife could not yet be identified notwithstanding she had cash in hand and the opportunity to retain a significant item of property (in terms of the parties’ assets), albeit one that was heavily mortgaged. The finding by the primary judge that she was not satisfied that the wife had established a need for spousal maintenance was open on the evidence, if not the only finding then available. If the wife could not refinance Property B it would have to be sold, leaving the wife with a significant capital sum which could be invested or used to purchase a new home, or possibly both. If refinancing was possible, the wife’s financial position would very much depend upon the terms of the advance to her.
Although not strictly necessary given the findings as to the wife’s needs, the primary judge also considered the husband’s ability to pay maintenance. Her Honour said:
180.Moreover, the evidence before me, I am not satisfied that the husband has had the capacity to pay the existing spousal maintenance Order. I do not consider he had the financial capacity at the trial nor will he have financial capacity to satisfy such an Order whilst this property division remains incomplete. The wife has been very much focused on her own financial position however their joint financial position has been extremely fragile.
181.The husband’s income is now one half of his previous earnings of $240,000.00 per annum at the time he agreed to pay $250.00 per week. He is to receive 25% of the property pool. I am satisfied that he could not afford the $250.00 sought by the wife at the time of trial. I am satisfied that the husband did not have the capacity to pay once he lost his contract in July 2016. There is still much water to go under the bridge before either of the wife’s or the husband’s long term financial position settles. The husband may remarry and have more financial obligations on trying to secure his own financial stability and future. The wife’s current diagnosis may affect her future needs. These things are all unknown at this point.
182.The husband is younger, and in the work force, however, he has received a minor share of the property, he has to rehouse himself and have funds for his own living costs. He will not have a property. I have had regard to the financial obligations the husband has had post separation and his extremely tight financial position in the context of the husband paying significant funds to keep their property portfolio afloat in the years post separation and which continues whilst properties are waiting to be sold. This is particularly so in relation to Property B which the wife asks for an opportunity to retain as part of the final property division. I am satisfied that the husband will likely be under extreme financial pressure for some time ahead. Overall, even if the wife had demonstrated a need for spousal maintenance (which she has not) not, I am not satisfied that the husband has the capacity to pay spousal maintenance on the evidence before me.
Counsel for the wife did not address these findings other than to say the finding that the husband lacked the requisite capacity was not based upon proper reasoning. However, given the unchallenged finding that, as a result of the orders, the husband “will likely be under extreme financial pressure for some time ahead” we can see no error in her Honour’s reasons. Indeed, her Honour was doing no more than saying that the wife’s financial position in the short term was entirely unclear and that the husband’s was likely to be difficult. Those findings, in our opinion, accord with the evidence.
The wife also submitted that the primary judge should not have ordered the sale and division of Property A, but should have instead transferred it to the husband, and that the wife should then have received all of the husband’s superannuation. This, it was said, would maximise the wife’s cash position and improve her chances of retaining Property B.
The aim of the proceedings was to divide the parties’ property according to principle. If that could be done in a manner that permitted the wife to retain Property B, as indeed the primary judge intended to do, that would be entirely proper. It would, however, not be proper to structure orders designed solely to ensure the wife retained the property at the expense of a principled response to the needs and interests of both parties.
We also reiterate our earlier comment as to the discretionary nature of framing orders.
No error has been demonstrated.

Conclusion

It follows that the appeal will be dismissed.

Costs

There will be no order as to costs because generously, in the circumstances, the husband declined to seek one in the event the appeal was unsuccessful.

I certify that the preceding fifty-three (53) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court (Ryan, Aldridge & Kent JJ) delivered on 24 August 2018.

Legal associate:

Date: 24 August 2018