Moroni & Moroni
[2014] FamCA 664
•20 August 2014
FAMILY COURT OF AUSTRALIA
| MORONI & MORONI | [2014] FamCA 664 |
| FAMILY LAW – PROPERTY – where an order for interim property settlement is sought by the wife – whether it is appropriate to exercise courts power on an interim basis – where the husband contends the whole of the current assets of the parties are offset by unsecured liabilities to the husband’s father and associated entities – where the husband submits contributions towards the parties assets by his family make it unsafe to make any interim distribution to the wife - where it is found that it is appropriate and otherwise in the interests of justice to make interim property settlement in favour of wife – where the husband sought to sell the matrimonial home to repatriate debts – where the husband has not established that it is proper to make an order for the sale of the matrimonial home at this time. FAMILY LAW – FUTURE INTERIM COSTS – where there is no level playing field between the parties – where the husband is funded by his father and his families’ companies – interim costs order not made – where the wife alternatively seeks a dollar for dollar order - where it is found to be just for a dollar for dollar order to be made. FAMILY LAW – INTERIM CHILD SUPPORT – where the wife seeks a child support departure order for periodic and non-periodic payments of child support - where it is found to be appropriate on an interim basis that non-periodic payments for the children’s school fees and health fund costs be paid out of the parties joint bank accounts – where the court determined that the expenses claimed by the wife are reasonable – where the court determined that the wife does not have any significant earning capacity – where it is found that when the payment of the husband’s debts are prioritised he has sufficient income to make the child support payments to the wife – where the court determined that it is just and equitable to make an order for child support departure. FAMILY LAW – INTERIM SPOUSAL MAINTENANCE – where the wife is unable to adequately support herself – whether the husband has capacity to pay spousal maintenance – where the court did not accept the husband’s assertions about his income and earning capacity – where the court determined the husband has capacity to pay to the wife interim spousal maintenance |
| Family Law Act 1975 (Cth) Child Support (Assessment) Act 1989 (Cth) |
| Bevan and Bevan (1995) FLC 92-600 Biltoff and Biltoff (1995) FLC 93-614 Farnell and Farnell (1996) FLC 92-681 G & T (2004) FLC 93-176 Harris and Harris (1993) FLC 92-378 Iphostrou & Iphostrou and Ors [2011] Fam CA 20 In the Marriage of J U and T Poletti (1990) 15 FamLR 794 Oates and Crest (2008) FLC 93-365 Stanford and Stanford (2012) 247 CLR 108 Strahan and Strahan (2011) FLC 93-466 Redman and Redman (1987) FLC 91-805 Williamson and Williamson (1978) FLC 90-505 |
| APPLICANT: | Mr Moroni |
| RESPONDENT: | Ms Moroni |
| FILE NUMBER: | SYC | 7444 | of | 2012 |
| DATE DELIVERED: | 20 August 2014 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Watts J |
| HEARING DATE: | 6 November 2013; 7 May 2014; 4 August 2014 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Millar |
| SOLICITOR FOR THE APPLICANT: | Barkus Doolan Family Lawyers |
| COUNSEL FOR THE RESPONDENT: | Ms Clifford |
| SOLICITOR FOR THE RESPONDENT: | Watts McCray |
Orders
Within 28 days of the day of these orders by way of partial property settlement order, the parties do all things and sign all necessary documents to enable the release of the sum of $100,000 to the wife from the parties’ joint Commonwealth Bank Term Deposit account number … for payment upon the direction of the wife.
Within seven (7) days after any future payment by or on behalf of the husband of any money in payment of accounts rendered by his solicitors including in relation to expenses associated with the preparation of his case, the husband pay or cause to be paid the same sum of money to the solicitors for the wife.
Within 24 hours after the payment by or on behalf of the husband of any money referred to in paragraph 2 of these orders, the husband cause to be given to the wife’s solicitors, a memorandum stating the amount or amounts so paid to the solicitors.
All money paid to the solicitors for the husband including on his behalf arising out of paragraph 2 of these orders shall be held in trust by the solicitors for the husband and not applied in payment until such time as the same amount has been paid by or on behalf of the husband to the solicitors for the wife.
In the event that the payment referred to in paragraph 2 is not made within seven (7) days thereafter, the husband is to direct his solicitors to pay 50 per cent of whatever is received (as referred to in order 4) and held by them in trust, to the solicitors for the wife.
The amounts paid pursuant to these orders to the solicitors for the wife are to be applied by them in payment of the costs and disbursements incurred by the wife in the conduct of these proceedings.
The question of how payments to the wife under orders 1, 3 or 5 are to be treated at the final hearing shall be matters for determination by the trial judge.
Pursuant to Rule 15.2 Family Law Rules 2004 (“Family Law Rules”), Ms I, J Accounting be appointed as the single joint expert for the purposes of valuing the husband’s interest in:
8.1.Moroni Investments
8.2.Moroni Pty Ltd
8.3.M Pty Ltd
8.4.B Trust
8.5.C Trust
8.6.The D Trust
8.7.The E Trust
8.8.The F Trust; and
8.9.The husband’s member balance in G Pty Ltd as trustee for the H Retirement Fund.
Pursuant to Rule 15.2 Family Law Rules, K Valuers be appointed as the single joint expert for the purposes of valuing the properties situate at and known as:
9.1.L Street, N Valley
9.2.1 O Street, Suburb O
9.3.2 O Street, Suburb O; and
9.4.P Street and Q Street, Suburb R.
The wife’s solicitors shall prepare the proposed initial joint instructions letter to the single expert witnesses and submit those to the husband’s solicitor (which shall not be any earlier than one calendar month after the date of these orders).
Within 14 days of the date of the correspondence providing the proposed instructions letter to the husband’s solicitor, the husband’s solicitor shall advise the wife’s solicitor of any requested additions and amendments to be made to those instructing letters.
The instructing letters shall be finalised by the solicitors, signed and sent to the single expert witnesses within a further 14 days of the time referred to in order 11.
The parties shall do all acts and things and sign all consents in the time periods requested of him/her to facilitate the instructing of and the completion of the work of the single expert witnesses.
The parties do all things to arrange for reasonable fees and expenses incurred by the single expert witnesses to be paid from the joint account of the parties with the Commonwealth Bank.
Pending further order, the husband pay to the wife by way of periodic child support for the children, S born … 1996; T born … 1998; U born … 2000 and V born … 2008 (“the children”) the sum of $1,000 per week, being an amount of $250 per week per child, to be paid to the wife on a monthly basis in advance, the first payment to be made within seven (7) days of the date of these orders and thereafter to be made no later than the seventh (7th) day of each calendar month, payments to be made monthly in advance.
Pending further order, the parties do all things and sign all necessary documents to cause the following payments to be made from the joint fund at the Commonwealth Bank:
16.1.100 percent of each child’s W School fees, levies and education related costs and expenses, including but not limited to any compulsory school fees, tuition fees, levies and other compulsory parent contributions;
16.2.100 percent of each of the child’s medical, dental, orthodontic and optical costs including but not limited to:
16.2.1.Maintaining the children in private health insurance cover with Australian Unity at no lower than the level of private hospital and out of hospital insurance as is currently in place and all “gap” payments.
Pending further order, the husband pay to the wife by way of spousal maintenance, a sum of $400 per week, the first payment within seven (7) days.
All other interim applications are dismissed.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Moroni & Moroni has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 Poynton.
| FAMILY COURT OF AUSTRALIA AT SYDNEY |
FILE NUMBER: SYC 7444 of 2012
| Mr Moroni |
Applicant
And
| Ms Moroni |
Respondent
REASONS FOR JUDGMENT
INTRODUCTION
The wife seeks the husband pay to her an amount of money by way of interim property alteration or alternatively, interim costs, or alternatively a “dollar for dollar” order. Her purpose is to help fund her legal fees and to pay forensic experts to look at the value of entities and real estate.
The wife also seeks orders for interim spousal maintenance and a child support departure order.
The husband sought that certain payments be made to third parties out of the joint deposit account with the Commonwealth Bank. He sought the sale of two motor vehicles with the net funds to be used to pay school fees. In his affidavit filed 17 April 2014 at [25] the husband seems to have withdrawn his application for the sale of the two motor vehicles. The husband seeks an immediate sale of the matrimonial home, principally so he can pay back debt he says he owes his father and his families’ companies and to pay outstanding tax.
The husband, his father and the husband’s family and the entities they are involved in, hold the purse strings. The husband and his father operate a number of companies.
The wife has been substantially out of the work force during the marriage, raising the parties’ four children who ranged at the date of hearing between the ages of 5 and 16 years of age.
As at the date of the initial interim hearing, the husband had paid $146,630.50 to his lawyers in respect of legal costs and the wife has paid $48,056.62 to her lawyers. These are unlikely to be the current figures. The husband’s affidavit of 17 April 2014 (at [72]) says that there was an exhibit which was a cost notice provided by his lawyers as at 17 April 2014. That document was not annexed to the affidavit and has not been provided to the court.
It seems clear that the husband’s father and/or the husband’s families’ companies have funded the husband’s litigation to date. The wife has borrowed her funds from her mother to pay her costs to date. In her affidavit filed 10 May 2013 the wife indicates that her mother is retired and has only limited personal funds from which she can draw to assist the wife. Those funds are contained in the wife’s mother’s term deposit and are her retirement savings.
DOCUMENTS RELIED UPON
The documents initially relied upon by the parties are set out in Schedule 1.
The husband filed a further amended response on 17 April 2014. In that response he seeks that additional amounts be released to him from the parties’ joint cash investment to pay various third party debts. He also sought that in respect of his application to sell the matrimonial home, the net proceeds be used to also pay particular additional third party debts (detailed below). On 7 May 2014 when this application came before the court, the husband indicated that he intended to serve notice on the Australian Tax Office (“ATO”) and the children’s school, but on 4 August 2014 there was no indication that that had happened.
On 4 August 2014 the husband, wife and the companies associated with the husband’s family indicated that they intended to involve themselves in mediation and sought an adjournment for two months to enable that to take place. The husband and wife nonetheless indicated that they sought an outcome in relation to the interim applications that had been argued.
BACKGROUND
The husband has worked in the family businesses for about 22 years. He became a director of G Pty Ltd in 1993 (the husband is one of his parents’ two children and the only son). He is a qualified professional.
The husband asserts that he sold his interest in G Pty Ltd to his father on 26 June 2013. The proceeds were (largely/almost entirely) repatriated back to his father and entities which he controls. The wife was not told about this sale until after the sale and distribution of the proceeds had happened.
On the face of it the parties now have:
13.1.A joint interest in the matrimonial home of about $730,000 (husband’s estimate) or $820,000 (wife’s estimate);
13.2.A joint invested fund in the Commonwealth Bank of $540,000, being the proceeds of the sale of a property the parties owned;
13.3.Some motor vehicles;
13.4.The husband’s superannuation of $181,000.
The husband asserts that there is an amount of $1,231,042.00 owed to his father, particularised as follows:
Loan from M P/L $711,113
Loans from husband’s father $341,920
Joint loan from G Pty Ltd $60,000
Joint loan from G Pty Ltd $118,009
Total of above: $1,231,042.00
The husband’s affidavit filed 17 April 2014 details proceedings taken by the husband’s father against the husband in the Supreme Court of New South Wales. On 4 August 2014, Moroni Pty Ltd, G Pty Ltd, M Pty Ltd and the husband’s father were granted leave to become parties to these proceedings. I noted on that day that their lawyer informed the court that in the proceedings in the Supreme Court between entities associated with the husband’s father and the husband, judgment was entered against the husband on an undefended basis. The court was further informed that those proceedings will be discontinued and the issues in relation to the respective rights and entitlements of the husband’s father and the husband’s father’s companies will be dealt with in these proceedings. The husband’s father and the husband’s families’ companies were not a party to these proceedings at the time that the interim applications were argued.
The husband in his further amended response sought additional payments to third parties. The husband says that he currently owes $65,323.89 to the Australian Tax Office as a result of income earned during the financial year ended 30 June 2013. The exhibit referred to in [36] of the husband’s affidavit filed 17 April 2014 was not provided to the court. The husband also says he owes monies to his accountant, needs money for an operation to his knee, and owes back rent to M Pty Ltd. He concedes that M Pty Ltd have not evicted him from his property due to him being employed by the family business and his father’s reluctance to do so. He asserts however that he has a belief that his father will not continue to allow the rental arrears to accrue and that it is only a matter of time before his father and M Pty Ltd have no choice but to evict him. I have no indication from the husband’s father or M Pty Ltd as to whether the husband’s accommodation is at risk. The husband says that he fears bankruptcy at the hands of a creditor but there does not seem to be any current imminent threat.
THE HUSBAND’S CONTENTIONS
Overall, it is the husband’s case that unsecured creditors must be paid prior to the parties dividing assets and that if that approach is taken, the parties have no assets apart from the husband’s superannuation (which is protected) after 18 years of marriage. The husband says that, given that that is the outcome he believes will be found at final hearing, it would neither be just and appropriate nor safe and conservative (as required by the Full Court in Strahan and Strahan (2011) FLC 93-466), to dip into the money at bank to help the wife fund her case against him.
The husband also submits it would not be just to prejudice third party debtors (principally the husband’s father and family entities) by making an order for costs from the money in the bank. It was submitted that procedural fairness would need to be given to creditors before any such step was taken. Originally it was implicitly submitted that although the husband’s father had sworn a substantial affidavit in the husband’s case which dealt, amongst other things, with the June 2013 sale of shares, he had no notice as to what was happening in these proceedings. The husband’s father and the husband’s families’ companies are now parties to these proceedings.
Finally, the husband submitted that a “dollar for dollar” order which was aimed at giving the wife’s solicitors the same funds as received by the husband’s lawyers from time to time, or evenly distributing between the husband and wife money which the husband’s lawyers received from third parties (the most probable source being the husband’s father), could not be made because there was no power to make such an order, and if there was power, it would be an inappropriate exercise of discretion to do so.
The husband also opposes the wife’s application for forensic experts to examine and value the entities and the real estate. The husband says that it would be a waste of money to do so in circumstances where what he submits the wife should do is get a preliminary less expensive opinion on the material that the husband had so far presented about whether or not further inquiry was warranted.
The husband sought an immediate sale of the matrimonial home in which the wife and the four children reside so that unsecured debts could be discharged.
INTERIM PROPERTY
Approach to an application for an interim property order
The Full Court in Strahan revisited the principles applicable to applications for interim property orders. An interim property decision involves two steps.
The first step
First, it must be established that s 80(1)(h) of the Family Law Act 1975 (Cth) (“the Act”) is enlivened to allow an interim property settlement under s 79 of the Act. The test for this is not confined to ‘compelling circumstances’. The Court in Strahan revisited the earlier well known statement made in Harris and Harris (1993) FLC 92-378 where the Full Court had said:
The exercise of the power should be confined to cases where the circumstances presented at that time are compelling. As a generality, the interests of the parties and the Court are better served by there being one final hearing of s 79 proceedings. However, circumstances may arise before there can be a final hearing which dictate that some part of the property of the parties should be the subject of orders. A common example is where both parties agree to the disposal of some assets pending the trial. However, we do not consider that it is confined to cases where the parties consent. Urgent situations may arise where it is necessary to exercise this power if injustice is to be avoided. Examples include cases where it is necessary to do so to avoid an asset being eroded or lost in the intervening period, and cases (beyond the maintenance power) where an order in favour of one party is necessary to preserve or obtain a home for or is otherwise necessary for the welfare of the children.
In Strahan, the Full Court said:
[132] In relation to the first stage, 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.
…
[139] We also emphasise that in order to establish an appropriate case for an interim property settlement order more is required than the mere fact that upon a final hearing the applicant would receive the property being sought (or an amount in excess of the funds being sought) from the other party.
As explained by the Full Court, s 80(1)(h) of the Act is a wide enabling provision for interim property decisions, and there is no reason to limit it, by requiring a finding of ‘compelling circumstances’. All that is required before the power to make an interim property order is exercised, is an assessment of whether it would be “appropriate” to make an interim order, with the “over arching consideration” being the interests of justice. There may need to be evidence of the likely cost of litigation, but only if that is the reason or part of the reason that is propounded as to why it is appropriate that the order be made.
Considerations about making an interim property order in “the interests of justice”
The notion of a “level playing field” is one which almost axiomatically is in the interests of justice and an important matter to consider when deciding whether it would be appropriate to make an interim property order.
In In the Marriage of J U and T Poletti (1990) 15 FamLR 794, Ellis, Strauss and Butler JJ quoted Ngyh J with approval at [796]:
…It is rather, as it certainly was in Wilson and Wilson [(1989) 13 Fam LR 205], a situation where one party to the marriage controls almost exclusively what might be described as the patrimony of the parties and has control of the bulk of the assets and funds of the parties, where an order may be made to ensure that the other party, who does not have the fortune of controlling those funds, at least has an equal or near equal opportunity to present his or her case...
The second step
As was discussed in Harris and confirmed in Strahan, the second step in making an interim property order is to have regard to the usual matters in a s 79 order (ss 79(2) and s 79(4)). A detailed inquiry is not required, but there must be some assessment of s 79 factors. Given it is an imprecise exercise, the interim property order has to be “conservative” so that the final outcome of property settlement will not be compromised by the interim property order. Either the remaining property needs to be sufficient to meet the legitimate expectations of both parties at the final hearing, or the order that is contemplated needs to be capable of being reversed or adjusted if it is subsequently considered necessary to do so.
Being a preliminary property order, the wife may choose to spend the money however she wishes unless terms and conditions are imposed pursuant to s 80(1)(i) of the Act.
In Harris, the Full Court said:
As a generality, the interests of the parties and the Court are better served by there being one final hearing of sec 79 proceedings.
In Strahan, the Full Court said in exercising the wide and unfettered discretion conferred by s 79 and s 80(1)(h) of the Act:
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.
Counsel for the husband argued that it was not either just or appropriate nor safe and conservative to make an interim property order. I have no difficulty in finding that it would be appropriate. The wife does not have the financial resources that the husband apparently has available to him, particularly in relation to funding this litigation. The real question is whether or not, in adopting a conservative approach, it is safe to make an interim property order in the wife’s favour. The husband has foreshadowed that at trial he will assert:
32.1.That the whole of the current assets held by the parties are offset by unsecured liabilities that the husband owes his father. He argues that after Stanford & Stanford (2012) 247 CLR 108, the first step is to establish the legal and beneficial interest in assets, and although counsel for the husband said Stanford did not make it plain, that was a reference to net assets after unsecured debts owed to third parties were taken into account. If that is so, it was argued that there are no assets left from which the wife would obtain any alteration of property. The husband argued that it is therefore not permissible on an interim basis taking a conservative approach, to make any interim allocation to the wife from the cash in the bank.
32.2.One difficulty with the argument of the husband is that the unencumbered matrimonial home and the funds held by the parties with the Commonwealth Bank are jointly owned. That is, the wife currently holds one half of the legal and equitable interests in those assets. The husband points to debts which are substantially debts in his own name allegedly owed to his father or the husband’s families’ companies. The contest at the hearing (if the husband is accepted on his current untested assertions) will be whether or not unsecured third parties have a claim against the wife’s current legal and equitable interests in the two major assets. Adopting a conservative approach, it is unlikely that the wife will walk away with nothing from interests that are currently in her name at a value between approximately $635,000 and $685,000.
32.3.The husband further argues that even if the unsecured debts are not taken into account, applying principles in cases such as Biltoff and Biltoff (1995) FLC 93-614, the husband can point to monies provided by his mother and father and family entities as a massive contribution towards the assets which the wife currently holds jointly with the husband. It is asserted that the contribution findings in favour of the husband would be so substantial as to make it unsafe to make any distribution to the wife from the matrimonial pool. That argument, to some extent, seems to elevate the weight of financial contributions over those made by both parties throughout the 18 years of marriage, particularly the wife’s contributions to the welfare of the family and the husband’s contribution to the businesses which are claiming unsecured debts. It also seems to pay little regard to what may be a substantial adjustment in the wife’s favour arising from the disparity of their financial positions, if arguments in relation to financial contributions on behalf of the husband are accepted. At least on a prima facie basis, the position of the husband moving forward in the family enterprises leads to a significant disparity in earning capacity between the husband and wife for the future.
There is yet to be a full forensic examination as to what exactly happened in June 2013 when the husband divested himself of his shares in a family company in which he had worked for about 22 years. It is probable there will also need to be (in the context of any submissions relying upon authorities such as Biltoff) some analysis as to the history of the husband’s father’s demands for payment and how they might be related in time to the breakdown of the marriage of the parties.
The wife has sought an order for interim financial relief on the basis that an amount of $150,000 is released to her from the parties’ joint Commonwealth Bank term deposit. Adopting a conservative approach, I find that it is appropriate and otherwise in the interests of justice to release to the wife the sum of $100,000.
FUTURE INTERIM COSTS
The wife will have a capacity to use amounts she has received by way of interim property order for the payment of her legal fees. She has indicated in her application that there are other items in respect of which she will need to spend money.
If the litigation continues and the husband, as he has up until now, is funded by his father or his families’ companies, I find there is no level playing field. In those circumstances the wife made an application for a lump sum costs order or alternatively a “dollar for dollar” order.
Given the decision I made in relation to an interim property order, I conclude that an interim costs order should not be made.
However looking forward, it is appropriate to consider whether or not it is just to make a “dollar for dollar” order.
Dollar for Dollar order
As indicated, counsel for the husband submitted that there was no power to make a “dollar for dollar” order as sought by the wife. I do not agree. For current purposes, it is sufficient to say that power can be found in s 117(2) of the Act.
In Farnell and Farnell (1996) FLC 92-681, Kay J said:
In the Marriage of Gould, (Appeal EA 37 of 1994, judgment of 29 June 1994), the Full Court coram Fogarty, Kay and Graham JJ[1], overturned an order of the trial Judge wherein her Honour had ordered that pending trial, for every dollar that the husband had spent on his lawyers, he should provide the wife with a similar amount for costs. The trial Judge had ought to make that order to create what she saw as ''a level playing field''. The Full Court disallowed the orders on the basis that the wife had adequate finances to provide for her own costs by reason of a substantial recent inheritance. In the course of my reasons for judgment I said this:
“I wish to make comment on ... the general philosophical views expressed by her Honour about endeavouring to achieve a level playing field by providing the wife with a dollar for dollar basis for costs. Whilst I agree with his Honour's [Fogarty J's] observations that this may not be an appropriate approach to these cases, I would also like to make reference to an article from the Chicago Daily Law Bulletin of 20 April 1992 which indicated that wives in these circumstances often have to spend much more than dollar for dollar to achieve a level playing field, particularly, and I quote - this is in reference to a survey of the American Bar Association Family Law Section:
‘Most of the lawyers agree that women will face higher legal bills in a divorce. Accordingly to 91% of those surveyed women splitting from their husbands will have to pay more for discovery. Husbands traditionally have had full control over the family finances and economic information. This means the wife's attorney must often engage in discovery to gain equal knowledge about assets and income. The lawyer has an obligation to undertake discovery to find out if there are assets in just the husband's name, or if the wife has no knowledge of them.’”
[1] The published report incorrectly states the constitution of this Full Court which was actually Fogarty, Kay and Renaud JJ.
In Iphostrou & Iphostrou and Ors [2011] Fam CA 20, Cronin J quoted with approval, a reported decision of O’Reilly J in G & T (2004) FLC 93-176. In that decision, Her Honour referred to her previous unreported decision of McL & McL (30 January 2003) in which Her Honour said:
110. Section 117(2) provides that if the Court is of opinion that there are circumstances that justify it in doing so the Court may subject to subsection (2A) and the applicable Rules of Court make such order as to costs including by way of interlocutory order as the Court considers just. In my view, that provision provides sufficient power to make the “dollar for dollar” order subject to consideration of the matters in subsection (2A). That provision requires the Court to have regard to the financial circumstances of each of the parties to the proceedings, and certain other matters which are not relevant in this case.
Counsel for the husband initially submitted that the way the wife had drawn the “dollar for dollar” application made it problematic for the husband to be able to comply with it. During discussion with counsel for the husband, it was indicated that the wording of the order might need to be different from that as originally proposed by the wife, but I am satisfied that the wife’s intention was clear enough. I do not accept the submission by counsel for the husband that an order of this nature could not work. For example, an order in the form made by Cronin J in Iphostrou & Iphostrou and Ors gives the husband an option of paying a similar amount to the wife’s solicitors as is paid from time to time to his own solicitors by himself or a third party, but if he does not, then the effect of the order would be to require the husband to direct his solicitors to pay 50 percent of whatever is received by them to the solicitors for the wife.
As indicated, as at the last notification to the court, the husband has paid legal costs to date in the sum of $146,630.50; the wife has paid legal costs to date in the sum of $48,056.62.
The starting point under s 117(1) of the Act is that each party pays their own costs. I accept that looking forward the wife cannot make any payment.
If a dollar for dollar order is to be made, it must be just to do so (s 117(2)) after consideration of the matters referred to in s 117(2A). The most important consideration is the respective financial circumstances of each of the parties.
There can be no doubt the husband is in a far stronger position as a result of:
46.1.His earning capacity;
46.2.His “resources”. The husband uses the word “resources” on his cost memorandum to describe the source of funds for legal fees paid to date. At paragraph 111 of the husband’s affidavit filed 23 July 2013 he says:
....I do not have funds readily available to enable me to meet my legal expenses. Rather, I have had to borrow funds from my father and the business to date to meet my legal expenses to date. I will need to continue to do so in so far as my father and the businesses are willing to continue to borrow funds to me.
Neither party is in receipt of legal aid. No complaint is raised by the wife in relation to the conduct of the proceedings. The husband argues that the wife should take what information he has given her to date and examine it before proceeding further. I do not accept that the husband should be able, in that way, to dictate to the wife how she prepares her case. The arrangement between the husband and his father, prima facie, bears further inquiry.
Having regard to the history of the payments of the costs of the husband’s involvement in this litigation and the disparity between what the husband has spent and what the wife has been able to spend, I find that it is just, moving forward, for a “dollar for dollar” order to be made.
FUNDING EXPERTS
I do not accept the submission by the husband that funds should not be expended to value assets and that no order should be made until the wife exhausts preliminary enquiries based on material provided to her so far.
There was no argument about the appropriateness of those experts who had been suggested by the wife. There was no argument about the order in respect of letters of instruction. The downward valuation of Suburb O and Suburb R properties warrants enquiry.
Given the husband’s protestations that he does not have the ready funds to pay for expert witnesses, in the short term, payments can be made from the joint cash deposit in the bank.
INTERIM CHILD SUPPORT
The wife seeks a child support departure order to the effect that the husband pay to the wife, by way of periodic child support for the four children of the marriage, a sum totalling $1,205 per week, being the sum of $301.25 per child per week. In addition, the wife seeks an order that the husband pay or cause to be paid by way of non-periodic child support, 100 percent of each child’s W School fees and 100 percent of the child’s medical, dental, orthodontic and optical costs.
The husband proposes that school fees and medical, dental, orthodontic and optical costs be paid out of the parties’ joint cash at bank and he otherwise opposes any variation in the child support assessment which at the date of hearing was $594 per week.
On an interim basis, it is appropriate that non-periodic payments for the children are paid out of the parties’ joint fund at the Commonwealth Bank. However, that arrangement will need to be revisited at the final hearing.
The husband’s resistance to paying an increase in periodic child support is firstly on the basis that the wife has not established any special circumstance, secondly on the basis that she has not established need, and thirdly on the basis that he does not have the capacity to pay any increase.
The wife’s application relies upon s 116(1)(b) Child Support (Assessment) Act 1989 (Cth) (“ the CS(A) Act”). I am satisfied that it would be in the interests of both parties for the court to consider whether a departure order should be made. The wife relies upon s 117(2)(c) of the CS(A) Act. I am satisfied that there are special circumstances arising out of the complex financial factual matrix which the husband, the husband’s father and the husband’s families’ companies present in this case, and the reorganisation of the husband’s interest in and remuneration by the husband’s families’ companies. Using a broad brush approach at this interim stage, there are serious questions to be asked about the income earning capacity and financial resources of the husband.
When considering matters pursuant to s 117(4), I have regard to the duty that both parties have to maintain the children.
The wife has asserted what the needs of the children are, and the husband challenges those assertions. In the wife’s financial statement, the wife calculates the needs of the children in the sum of $1,458 per week. Counsel for the wife concedes that two of the items for the children in item 60 of her financial statement relate to non-periodic payments, namely, education expenses, including fees and levies ($231) and medical, dental and optical ($40). The figures quoted do not take into account any accommodation expenses relating to the children apart from rates. The children are living in the former matrimonial home. The wife consequently claimed the children’s needs were about $1,200 per week. Counsel for the husband focused upon the item in the children’s expenses, “children’s activities”, at $382 per week. In relation to that claim, the wife says that she is currently paying monies for two of the children for swimming lessons; that she has suspended one of the children’s gym membership and cancelled her singing lessons, and that she has been unable to meet the costs of driving lessons and singing workshops. She also asserts the boys have been unable to participate in music lessons as at the date of the swearing of that financial statement. The wife asserts that the figure of $382 per week is commensurate with the amount that was being paid on the children’s extracurricular activities when the parties were living together.
I take into account that the wife may not spend the entire amount she has received by way of interim property on legal fees.
The husband submits that an order should not be made for increase in child support because the wife is not exercising her earning capacity and that her quest to obtain some part time employment has not been sufficiently energetic or focused. Again, this is a matter to be reviewed at the final hearing but I do not accept at this interim stage that the wife has any significant earning capacity, particularly taking into account her responsibilities in relation to the children.
Doing the best I can, I find that it was reasonable for the wife to claim (exclusive of education expenses, and medical, dental and optical expenses) an amount of $1,000 per week by way of child support for the children.
The husband asserts he does not have the capacity to meet that payment. The husband’s financial statement indicates that his salary or wages before tax is somewhere between $2,400 per week and $4,079 per week. He provides in his financial statement an explanation at note 9 as to why there is that range in his income. The husband’s explanation is that his position in the business is such that his income varies depending on how many hours he works in the business. The husband asserts that he gets paid for overtime and that the higher figure of $4,000 per week was for the 2012 financial year where he received more overtime than he received during the 2013 financial year.
The husband in his financial statement asserts that his expenses are between $8,646 per week and $9,270 per week (the difference being a difference in income tax depending upon the base amount of his salary). The tax claim by the husband on his ordinary earnings is $693 (if his income is $2,472 per week) or $1,317 (if his income is $4,151 per week). Significant parts of the husband’s expenditure (items 21, 23, 29) are payments the husband says he makes to his father or family companies ($692 + $2,593 + $1,095 = $4,380 per week).
In addition to tax on wages, the husband is claiming an additional liability to the Australian Tax Office in relation to the 2012, 2013 and 2014 tax years of an amount totalling $1,381 per week. At [31]-[32] of his affidavit filed 23 July 2013, the husband says that when the wife did not agree to use the funds in the joint term deposit to meet the husbands payment of $19,315 to the ATO, he approached the ATO and was able to get the ATO to agree to a payment plan whereby he would pay $1,000 per month for 20 months. Note 9b to his financial statement filed 31 October 2013 breaks down the husband’s payment of $1,381 per week to the ATO:
64.1.2012 income tax arrangement with ATO –the balance owing at 30 October 2013 after repayments was $13,000 / 52 weeks = $250 per week (that is the $1,000 per month referred to above).
64.2.2013 estimated income tax payable $54, 789 / 52 weeks = $1,054 per week
64.3.2014 instalment activity statements for 4 quarters = $4,000 / 52 weeks = $77 per week
The husband also has the 100 percent use of a European motor vehicle as an emolument of his employment.
Counsel for the wife makes the point that if the husband’s financial statement was taken on face value, the husband would not have the ability to make the payments for his own discretionary expenditure that he asserts that he pays. Counsel for the wife highlighted during submissions the husband’s lifestyle expenditures through his credit cards.
When the payment of the husband’s debts (and in particular the amount of $4,380 each week said to be owed to his father and related entities) are prioritised, he has sufficient income to pay child support.
Although the wife’s needs for child support can be provided out of the husband’s current income, I also find that on an untested basis there is sufficient material to raise concerns about the husband’s exercise of his earning capacity. I find that the husband’s earning capacity is greater than what is disclosed upon his financial statement. The pattern in which the husband now works has been changed by himself in an arrangement that he has entered into with his father and I am satisfied that the requirements of s 117(7B)(a)(iii) of the CS(A) Act are satisfied. I find that that change was not justified as a result of the husband’s caring responsibilities or his state of health and he has not demonstrated in this interim hearing that the major purpose of the changed arrangements did not have as a major purpose, minimising payments that he would have to make to the wife.
It is just and equitable that the husband make a payment from his wages for child support in priority to meeting any commitment that he has to his father and it is realistic to conclude that it is unlikely the husband’s father would take legal proceedings to require the husband to vacate the Suburb O property pending a determination of these proceedings.
I am unable on an interim basis to accept the husband’s assertion that he does not have the ability to pay the wife’s need for child support.
I find that the wife would suffer hardship, as would the children, if there was a refusal to make a departure order. The husband does not suffer any counter-balancing hardship.
No other matter pursuant to s 117(4) of the CS(A) Act is of any weight.
I have regard to the nature of the parent’s duty to maintain the children and I find that it is otherwise proper to make a departure order in the amount of $1,000 per week.
INTERIM SPOUSAL MAINTENANCE
Section 72 of the Act requires a party to a marriage to maintain the other party, to the extent that they are reasonably able to do so, if, and only if, that other party is unable to support herself or himself adequately because of certain reasons and having regard to factors set out in s 75(2) of the Act. If the applicant establishes a need and it is shown that the respondent has a capacity to pay, then the court may make such order as it considers proper for the provision of maintenance (s 74).
In interim proceedings, the Full Court in Redman and Redman (1987) FLC 91-805 endorsed a statement made by Fogarty J in Williamson and Williamson (1978) FLC 90-505 as follows:
Another consequence is that on an application for interim maintenance, the court conducts ‘not as final or exhaustive a hearing as would be the case if one were hearing the matter finally’ ... the evidence need not be so extensive and the findings not so precise.
So, upon an application for interim maintenance, an approach can be taken with a broader brush.
Any proposed interim property order must be taken into account when interim spousal maintenance is considered (see Bevan and Bevan (1995) FLC 92-600 and Oates and Crest (2008) FLC 93-365). The monies that the wife will receive by way of interim property settlement have been primarily earmarked for legal expenses, together with some other need for expenditure.
The wife in her financial statement sets out her need for personal living expenses in the approximate sum of $400 per week. There was no suggestion that those expenses were not appropriately claimed. The only income that the wife discloses is an amount of about $200 per week being the interest currently earned upon the term deposit at the Commonwealth Bank. That interest is rolled over and neither party can access those funds without the other’s consent. I therefore find that the wife’s needs are in the order of $400 per week.
I have already discussed the wife’s and the husband’s income and earning capacity in the context of the wife’s application for a child support departure order.
The husband says that recent arrangements between him and his father in February 2013, which have dramatically reduced his income and/or his commitment to repay a debt to his father, mean he has no capacity to make any payment to the wife of a periodic nature.
On an interim basis, I have not accepted the husband’s assertions about his income and earning capacity. Taking into account the history of the husband’s dealings with his father, the fact that the husband refers to his father as a “resource” on the cost memo, and the February 2013 reduction in wages, using a broad brush approach I find that the husband has capacity to pay $400 per week to the wife by way of interim spousal maintenance.
SALE OF THE MATRIMONIAL HOME
The husband seeks an order for the sale of the matrimonial home.
The husband says the sale of the matrimonial home is necessary to repatriate his debts which are almost entirely owed to his father and entities which his family control. The husband asserts that while the property remains unsold, the net value of the pool is being significant diminished by the accumulation of interest to his father and his families’ companies. The husband does not say where the wife and the four children will live after the matrimonial home is sold. Given that it is the husband’s assertion that the whole of the net proceeds of the sale of the matrimonial home should be paid towards the repatriation of the unsecured debt to his father and his families’ companies, there would be no funds available after the sale of the matrimonial home for the re-accommodation of the wife and children.
The husband’s father and the families’ companies are now parties to these proceedings. The lawyer for the husband’s father and the husband’s father’s companies has indicated that proceedings that have been taken in the Supreme Court will be discontinued. Outstanding debts that the parties owe the husband’s father and the husband’s families will be dealt with in the context of these proceedings, including any claims for accumulated interest and any controversies about how Division 7A loans are to be dealt with.
The substantive proceedings have been adjourned to enable all parties to involve themselves in mediation. It may be that the matter will resolve on an overall basis. If it is not, then the substantive proceedings will proceed to a final hearing as soon as is possible.
The husband has not established that it is proper to make an order for the sale of the matrimonial home at this time and his application will accordingly be dismissed.
NO PAYMENT TO THE HUSBAND’S CREDITORS AT THIS TIME
The husband has not established that it is appropriate that any third party creditor be paid from the joint deposit in the bank, other than for valuation expenses, school fees and in relation to the children’s health (as already discussed).
I certify that the preceding eighty-seven (87) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Watts delivered on 20 August 2014
Associate:
Date: 20.8.14
SCHEDULE 1
Documents relied upon by applicant wife
Amended Application in a Case filed by Wife on 31 October 2013
Amended Response to an Application in a Case filed by Husband 31 October 2013
Affidavit of Ms Moroni filed 10 May 2013
Affidavit of Ms X filed 30 July 2013
Affidavit of Mr Y filed 31 July 2013
Financial Statement filed 30 October 2013
Affidavit of Ms Moroni filed 4 November 2013
Documents relied upon by respondent husband
The interim orders sought by the husband are set out in his Amended Response to an Application in a Case filed 31 October 2013.
Affidavit of Mr Moroni filed 23 July 2013.
Affidavit of Mr E ("E") Moroni filed 23 July 2013.
Affidavit of Ms Z filed 23 July 2013.
Financial Statement of Mr Moroni filed 23 July 2013
Financial Statement of Mr AA Moroni filed 31 October 2013
Affidavit of Mr Moroni filed 31 October 2013.
8