Osferatu & Osferatu
[2012] FamCA 408
•31 May 2012
FAMILY COURT OF AUSTRALIA
| OSFERATU & OSFERATU | [2012] FamCA 408 |
| FAMILY LAW – PROPERTY – interim – whether it was appropriate and in the interests of justice to make an interim property order – whether the orders sought were conservatively within the range of outcomes the wife might receive. FAMILY LAW – SPOUSAL MAINTENANCE – interim. FAMILY LAW – CHILD SUPPORT – interim. |
| Family Law Act 1975 (Cth) Child Support (Assessment) Act 1989 (Cth) |
| Strahan and Strahan (2011) FLC 93-466 Gyselman & Gyselman (1992) FLC 92-279, 79,065 |
| APPLICANT: | Ms Osferatu |
| RESPONDENT: | Mr Osferatu |
| FILE NUMBER: | SYC | 2318 | of | 2011 |
| DATE DELIVERED: | 31 May 2012 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Watts J |
| HEARING DATE: | 20 December 2011 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Sansom |
| SOLICITOR FOR THE APPLICANT: | Watts McCray |
| COUNSEL FOR THE RESPONDENT: | Mr Kearney |
| SOLICITOR FOR THE RESPONDENT: | Barkus Doolan Kelly |
Orders
The husband pay to the wife or as she directs, the amount of $4,300,000 by way of clear unencumbered funds by the following times:
1.1.$1,434,000 within 60 days of the date of these orders;
1.2.$1,434,000 within 120 days of the date of these orders;
1.3.$1,432,000 within 180 days of the date of these orders.
The husband shall pay by way of spousal maintenance to the wife, or as she may direct in writing, the following amounts:
2.1.Until the first payment referred to in order 1.1, the sum of $2,500 per week;
2.2.Until the second payment referred to in order 1.2, the sum of $1,918 per week;
2.3.Until the third payment referred to in order 1.3, the sum of $1,336 per week;
2.4.And thereafter $754 per week
with the first payment to be made within 7 days, and thereafter monthly in advance.
The husband shall pay by way of interim spousal maintenance the following expenses as and when they fall due:
3.1.Motor vehicle registration, leasing, insurances and servicing costs for the Range Rover motor vehicle driven by the wife.
3.2.Outgoings for the property at B Street, Sydney Suburb 3 (“former matrimonial home”), including electricity; council and water rates; home, contents and building insurances; alarm monitoring and gardening.
By way of departure from any administrative assessment of child support for the children, the husband pay to the wife, or as nominated by her in writing:
4.1.The sum of $6,500 per child, per month, for children S and E, with the first payment to be made within 7 days and thereafter monthly in advance.
4.2.The sum of $650 per month for the child, S, to be applied towards tutoring of S, and in the event that S no longer receives tutoring, such payment shall cease.
The husband pay by way of non periodic child support:
5.1.All tuition fees and expenses for the child B listed on all tax invoices issued by School 1 to the parties;
5.2.All tuition fees and expenses for S and E as listed on all tax invoices issued by School 2 to the parties;
5.3.All medical expenses for the children, B, S and E, including health insurance premiums, gap medical expenses, orthodontic and dental fees, and, for the purposes of this order, any accounts for any dental or orthodontic expenses are to be directed to the husband and he shall attend to the claim of all health insurance rebates and the payment of the gap then remaining.
The child support payable by the husband pursuant to the orders 4 and 5:
6.1.Is to be credited against the husband’s liability under any administrative assessment of child support payable by the husband to the wife pending further order; and
6.2.Is to count for 100 per cent of the annual rate of child support payable by the husband under any administrative assessment of child support payable by the husband to the wife pending further order.
The wife is restrained from selling, encumbering or dealing with her interest in the properties known as property R and property Y.
Leave is granted to relist this matter for directions for a preliminary hearing as to whether or not the financial agreement, being annexure A to the husband’s affidavit sworn 15 April 2011, is binding or is to be set aside.
In the event the husband still desires to do so, on or before 28 June 2012 the wife shall permit attendance by the husband and employees of G Company at the former matrimonial home for the purpose of directing and supervising remedial work to be undertaken by G Company, provided that:
9.1.the husband provides the wife with not less than 72 hours prior notice by email of such attendance;
9.2.the husband attends at all times with each of:
9.2.1.the employees of G Company; and
9.2.2.any such person as the wife may nominate who shall be permitted to videotape the husband whilst at the property.
and the wife shall ensure she is not in attendance at the property on such occasions.
It is noted on an interim basis, and without prejudice or admission, there is no issue that the wife will continue to reside in the former matrimonial home.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Osferatu & Osferatu has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| FAMILY COURT OF AUSTRALIA AT SYDNEY |
FILE NUMBER: SYC 2318 of 2011
| Ms Osferatu |
Applicant
And
| Mr Osferatu |
Respondent
REASONS FOR JUDGMENT
INTRODUCTION
These are proceedings in relation to:
1.1.interim property adjustment;
1.2.interim spousal maintenance;
1.3.interim child support;
1.4.whether or not the husband be able to attend the former matrimonial home for a particular purpose; and
1.5.whether or not there be a separate hearing in respect of whether or not a financial agreement is binding or should be set aside.
The husband and wife are currently aged 55 and 39 respectively. They commenced cohabitation in 1999 and separated in February 2011, after 12 years of cohabitation. The children S and B were born in June 2000 and are aged 11 years. The child E was born in June 2006 and is aged 5 years. There is an issue in respect of her paternity.
The considerations in relation to final parenting and property issues are likely to be complex.
The husband at paragraph 19 of his summary of argument, says:
Whilst clearly in issue, the husband’s evidence is that the net worth of the parties (including associated entities) presently approximates $88 million.
The property pool is estimated by the wife to be $200 million.
For the purposes of the current application, the wife was prepared to accept the husband’s assessment. She made the point, however, that she has not yet been in a position to adequately explore the husband’s financial position.
APPLICATIONS
At the commencement of his submissions, counsel for the wife indicated that the husband had paid to the wife $700,000 pursuant to an order made on 29 August 2011. The wife’s application to be paid a lump sum of $5 million had accordingly been satisfied to the extent of $700,000 and the balance sought by the wife in round figures was $4.3 million.
The wife seeks:
8.1.an interim property settlement of $4.3 million;
8.2.exclusive occupation of the former matrimonial home at Sydney Suburb 3 (this is not opposed);
8.3.interim spousal maintenance in the sum of $4,515 per week;
8.4.child support in the sum of $33,631 per month; and
8.5.in addition to periodic child support, the wife seeks that the husband pay the full amount of school fees, uniforms, textbooks, extra curricular activities and excursions for the children.
The husband agreed to the wife having exclusive occupation of the former matrimonial home. He also agreed to pay all tuition fees and school expenses for the children.
The husband opposes any further partial property settlements in favour of the wife.
The husband seeks that he pay:
11.1.spousal maintenance of $2000 per week;
11.2.child support in the amount of $6,666 per month;
11.3.in addition to periodic child support, $650 per month for tutoring for S.
In addition, the husband made an application in the terms of Exhibit 5:
1.That on or before 28 February 2012 the wife shall permit attendance by the husband and employees of [G Company] at the [former matrimonial home] for the purpose of directing and supervising remedial work to be undertaken by [G Company], provided that:
1.1the husband provides the wife with not less than 72 hours prior notice by email of such attendance;
1.2such attendance occurs not before 21 January 2012;
1.3the husband attends at all times with each of:
1.3.1employees of [G Company]; and
1.3.2such person as the wife may nominate who shall be permitted to videotape the husband whilst at the property.
and the wife shall ensure she is not in attendance at the property on such occasions.
The husband also seeks that the issue in relation to whether or not the financial agreement entered into between the parties is binding or should be set aside be determined as a discrete issue prior to the final hearing.
DOCUMENTS RELIED UPON
The wife relies upon the following:
14.1.Amended Application in a Case filed 17 August 2011;
14.2.Response to Amended Initiating Application filed 4 May 2011;
14.3.Affidavit of the Wife filed 1 August 2011;
14.4.Affidavit of the Wife filed 4 May 2011;
14.5.Financial statement filed 20 June 2011;
14.6.Financial Statement filed 5 December 2011.
The husband relies upon the following:
15.1.Amended Initiating Application filed 28 April 2011
15.2.Response to an Application in a Case filed 4 November 2011
15.3.Financial Statement filed 15 April 2011
15.4.Affidavit of the Husband filed 19 December 2011
15.5.Affidavit of the Husband filed 4 November 2011
15.6.Affidavit of Ms M filed 4 November 2011
SHORT HISTORY
The husband was born in1956. He is now 55 years of age.
The wife was born in 1972. She is now 39 years of age.
The parties commenced cohabitation in 1999. It is unclear whether this was in May or later in the year.
In some of the material, the parties asserted they married in February 2000, however the marriage certificate produced by the husband and the recital in the financial agreement says they were married in January 2000.
The parties’ children, B and S, were born in June 2000 and are aged 11 years.
The child E Osferatu was born in June 2006 and is 5 years of age. E’s paternity has been the subject of some controversy.
The parties seem to have entered into a Financial Agreement. The wife now seeks to set aside this agreement. The copy of the agreement which is before me is undated except for “2009”.
The husband says separation under one roof began on or about 3 January 2011, and cohabitation ceased on 6 February 2011.
In February 2011 the parties formulated a parenting plan which provided for the three children to live with each party on a week-about basis in the former matrimonial home.
On 6 May 2011 interim parenting orders were made by Rose J. These orders appointed an independent expert, Dr W, and organised the children’s time with each parent being:
25.1.S living with the wife and spending two afternoons each week with the husband;
25.2.B living with the husband and spending two afternoons each week and one weekend a fortnight with the wife; and
25.3.E living with the wife and spending two afternoons each week and one weekend a fortnight with the husband.
These were designed to “optimise the time the children are together to coincide with tutoring arrangements and to increase the time [B] spends with the wife and [S] spends with the husband.”
Prior to the orders of 29 August 2011, and on a voluntary basis, the husband had paid to the wife amounts totalling $85,000 which were applied to her legal costs and disbursements.
The Application in a Case of the wife to which these proceedings relate was filed 1 August 2011.
On 29 August 2011, consent orders were made that the husband pay $265,000 to the wife, as well as paying $435,135.94 to the wife for fees relating to the litigation. The husband was also to pay the wife’s monthly credit card balance in full, pay all tuition and school related expenses for the children, and pay the wife the amounts of $2,000 (representing voluntary child support and money to meet the expenses for the house staff at the former matrimonial home) and $1,533 (voluntary spousal maintenance) on a weekly basis.
The payment by the husband of the amount $435,135.94 was for each of:
29.1.the wife’s prior legal representatives - $165,407.94;
29.2.the wife’s accountant - $19,728; and
29.3.the wife’s current legal representatives - $250,000 – on account of anticipated fees.
The child B presently resides with the husband (who solely provides for his financial support) and the children S and E reside with the wife.
THE LAW TO BE APPLIED
Approach to an application for an interim property order
The Full Court in Strahan and Strahan (2011) FLC 93-466 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) Family Law Act 1975 (Cth) (“FLA”) was enlivened to allow an interim property settlement under s 79 FLA. The test for this was 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) FLA 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...
One method sometimes adopted is to provide a disadvantaged spouse with a “dollar for dollar” order. That is, an order that the advantaged spouse has to pay the disadvantaged spouse one dollar for each dollar the advantaged spouse pays his or her own lawyer.
The implementation of such an order is not as clean cut as the interim property order sought in this case and there is more ambiguity about which power is being exercised and what evidence is needed. There has been previous discussion in cases as to whether or not an application of this nature relies upon s 79 and s 80(1)(h) or s 74 or s 117 FLA.
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.
Putting the sexist language to one side, nearly twenty years later the position of a former spouse, now in highly conflicted litigation, who has not played a significant role in controlling the finances of the parties, has not much changed.
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 section 79 order (ss 79(2) and 79(4) FLA). A detailed inquiry is not required, but there must be some assessment of section 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.
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) FLA:
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.
A corollary of these statements made by the Full Court in both Harris and in Strahan is the proposition that as a generality, the interests of the parties and the court are better served by there being as few interim property applications under s 79 as possible.
Interim spousal maintenance
Section 72 FLA 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) FLA. 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 FLA).
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; 216 FLR 469).
INTERIM PROPERTY
Is the order sought by the wife appropriate?
During submissions, counsel for the wife referred in general terms to the authorities which say that the court, if possible, should create an equal level playing field. I accept that the playing field, in this case, is not equal. Based upon all the documents I have been asked to read, I infer the husband has a superior knowledge of the overall financial circumstances of the parties, given that he controls most of them. The husband has control over the vast majority of the parties’ wealth.
I accept the submission by counsel for the wife that it is appropriate for the court to attempt to create a level playing field as early as possible in the litigation. This has the advantage of creating an environment in which an earlier settlement might be possible. More generally, it avoids the ability of the person in the superior financial position to enter into a “drip feed” style of negotiation (although I do not find that the husband has involved himself in such a process to date).
Very little remains of the funds the wife has already received.
I ordered an exchange of cost memorandums. They have been updated. Exhibit 1 is an estimate of the wife’s costs, the high end of the range being $1.12 million. Exhibit 4 is an estimate of the husband’s costs which indicate an estimation of $1.932 million.
Both cost memos estimate that the final hearing will take between 15 to 20 days. That concession arising from the husband’s cost memo (exhibit 4) together with the fact that counsel for the husband did not cavil with that submission by counsel for the wife, means that I would accept that this is a complex parenting and property matter. It is a matter that has the potential, given its limited life to date, to be a long protracted and expensive set of proceedings between the parties.
Given what was in the husband’s memorandum of costs, it was reasonable for counsel for the wife during the course of submissions, to amend the wife’s estimates from $1.12 million in her costs memo, to a more general estimate of $2 – $2.5 million. Given the costs anticipated by the husband, who has a superior knowledge of the financial circumstances of the parties, I am prepared to accept counsel for the wife’s revised estimate that it will cost more for the party in a weaker position in respect of financial knowledge to ensure an equal playing field in relation to the future of the litigation.
The husband submits that the court ought not properly make an interim property order for $4.3 million (or any further order at all) having regard to the absence of any circumstance that would make this an appropriate case for the entry of such an order. Counsel for the husband submitted that the word “appropriate” in Strahan meant that the wife had to justify why she wanted funds at this time. I have accepted the wife might need between $2-$2.5 million to comfortably ensure that she would cover her costs of litigation in this complex parenting and property case. Counsel for the wife submitted that the wife wanted the balance so that she had funds under her control so she could deploy those funds in a way she desired. Counsel for the wife referred to these funds as assisting the wife in relation to “to her general position in life”. The effect of the submission by counsel for the wife is that it is appropriate in these types of cases of considerable wealth, in the interim, to give one party financial freedom from the other. Counsel for the husband heavily emphasised in submissions that in his view the word “appropriate” meant that the wife needed to define the purpose for which she sought the funds. Whilst that might be necessary in some and perhaps even the majority of cases, in the circumstances of this case, her stated desire to have money for her “general position in life” is a sufficiently defined purpose. In my view, in the circumstances of this case, the wife has to do little more than simply say that she desires to have that level of liquid security. The circumstances of the case being that it would leave the husband with the control of assets with a net value of at least $83 million.
Counsel for the wife asserted that the word “appropriate” also denotes proportionality. The wife seeks $4.3 million out of the fund of $88 million. Counsel for the wife submits that in the circumstances of this case, that cannot be said to be inappropriate. That in my view however is more an argument to be raised under the second limb of Strahan, not the first. The word “appropriate” relates to whether or not it is appropriate, at the time the interim property application is made, to agree to consider the exercise of the discretion to make an interim property order. The amount of any order then has to be judged on a conservative basis within the overall framework of s 79 considerations.
“Appropriate” also on the submission of the husband raises the question as to whether or not what is being sought by the wife in this case would fundamentally damage the structure of an ongoing business operation. In circumstances where one party asks for too many golden eggs at the risk of killing the goose, it may not be appropriate to make an interim order as sought even if that interim order was a conservative one in the framework of s 79 considerations. In this case I will find that no such circumstance exists. Again, this consideration is usually more about a consideration raised under the second limb of Strahan and the adoption of a conservative approach. Depending on the overall value of the pool, killing the goose is usually a reckless thing to do and usually will have a deleterious effect on what might be able to be done by way of final alteration of property interests.
The husband submits that the wife could take a smaller amount for her costs and return to court later if the litigation becomes protracted. The fact that all of the wife’s litigation expenses will not be spent at the one time is in my view in the circumstances of this case, beside the point. Multiple interim applications for alteration of property should be avoided if possible and any application for interim property should, if possible, be dealt with in one set of interim proceedings. That is not to say that it may not be appropriate as I will find it is in this case, to order that the lump sum be paid by instalments.
The husband argues that an order is not appropriate because of the other assets that the wife controls. Counsel for the husband pointed out that the wife already controls $7 million of the parties’ assets:
The property “R” $2,250,000
Interest in the Y property 3,000,000
Jewellery – estimated 1,000,000
Payments per orders of 29 August 2011:
- to/for lawyers and accountants 435,136
- for wife 265,000
50% fees of I.C.L. and Dr W 23,500
Other payments by wife to her legal costs 85,000
$7,058,636
The husband submitted that the above illustrates both:
61.1.the substantial assets presently at the wife’s disposal;
61.2.the assets available for realisation by the wife in the event that she would seek to do so;
61.3.the assets, particularly in the form of property R, available to the wife for the purpose of generating income and/or raising finance against;
should the wife wish to do so.
The husband submits that whilst it has not been necessary for the wife to have recourse to any assets in her control and it is submitted that it will not be necessary on the husband’s proposal, the wife has such option available to her should she desire, including by way of:
62.1.the R property, whether by renting the property, raising finance against it or selling the property;
62.2.access to the jewellery of substantial value in her possession and which was, at least in part, purchased as potential ‘stock in trade’ for the wife’s pursuit of a jewellery business; and
62.3.access to the ‘capital’ funds already provided pursuant to the orders of 29 August 2011.
Counsel for the husband made it very clear that the wife could deal property R, including its sale, without any prejudice to any claim that she might wish to make asserting the financial agreement should be set aside.
Property R is still registered in the name of A Pty Ltd.
It is an agreed fact however that the wife holds a registrable transfer.
The husband argues the wife could rent out property R. He estimates the rental value to be $575 per week. Counsel for the wife submitted the wife’s parents ordinarily live there, but have been living in the former matrimonial home while the wife’s father receives treatment for cancer. I accept that the wife’s parents ordinarily live at property R and that the wife’s father is undergoing treatment for cancer at the time of the hearing. The sale of property R would mean that they would lose their current accommodation. I find it is not necessary or appropriate to require the wife to sell or encumber property R in the short term.
The wife only owns 70.59 per cent of the Y property and the other owners are the husband’s mother and the husband’s sister. There was no evidence from the husband that the wife could easily use that property or her interest in that property to provide liquid funds for herself.
It is not appropriate to require the wife to raise finance against either property. She has little capacity to do so and very little capacity to repay any loan.
The husband estimates that the wife has $1 million worth of jewellery. So far as I am aware, that assertion has yet to be tested. In the circumstances of this case however it would be premature to require the wife to dispose of jewellery in order to either fund her litigation or provide her with funds that she might otherwise wish to use for other purposes.
In the circumstances of this case I consider it appropriate and in the interests of justice to make an interim property order if the second limb of Strahan is satisfied.
What is the wife’s conservative s 79 claim?
The wife deposes the parties commenced cohabitation in May 1999, and cohabitated for 11 years and 9 months, separating on 6 February 2011. The husband asserts cohabitation commenced in late 1999 and the parties separated on 3 January 2011, a cohabitation period of approximately 11 years.
There is also a significant dispute between the parties as to the level of assets that the husband brought into the marriage.
Counsel for the wife pointed to the husband’s financial statement sworn in different proceedings shortly before the parties commenced cohabitation. In that financial statement, the husband had a net wealth of approximately $7.5 million.
The husband contends that in the period between swearing that financial statement and the commencement of cohabitation, he increased his net wealth to $30 million. This was primarily as a result of the termination of his employment at X Group, which was finalised on 3 November 1999.
There is a significant factual dispute between the parties as to the role the wife played in the marriage. In the material the wife files, she outlines in a very detailed fashion the contributions she says she made jointly with the husband in relation to the development of the investment business or businesses over a significant period of time. This evidence is yet to be tested.
In his Amended Initiating Application, the husband is seeking the wife receive only 10 per cent of the total asset pool in final property orders. The wife is seeking 50 per cent of the net assets. Counsel for the wife submitted that 30 – 40 per cent would be in a cautious range for the final division of assets to the wife, and hence it would follow on the wife’s case that $5 million in a pool of $88 million is a very conservative order.
Whilst it is usual in the context of interim property proceedings to look to the application made by the party in the strongest position to set the parameters for the court’s consideration of what a “cautious approach” might be, it is not necessarily the case that one needs to be bound by that. Counsel for the husband submitted that the wife would receive a 10 percent adjustment after a consideration of both contribution and s 75(2) factors.
I pause there to note that there is some ambiguity in the arguments presented by the husband. Although counsel for the husband refers to a percentage (10 per cent), he also in written submissions relies upon statements made by Guest J as to circumstances where percentages are said to be unrealistic and meaningless.
Guest J, when sitting as a member of the Full Court in P v P [2002] FamCA 1006 made some observations which the husband submits are of particular relevance to the present situation. In criticising the trial judge’s assessment of the wife’s contributions at 5 percent, His Honour said:
….it is not, in my view appropriate, in the particular circumstances to assess the wife’s contribution pursuant to s 79(4)(a) to (c) of the Act to the whole of the asset pool in percentage terms. In the result, such an exercise is unrealistic and meaningless. There was no evidence that it had any effect or impact upon the pool of assets. A percentage division is a useful technique in determining contributions to a pool of property which has grown over the course of a marriage. Where the pool has remained approximately the same and one party’s initial contribution so manifestly outweighs the other’s, as in these proceedings, it is misleading to consider a percentage division of the final pool.
…. on any analysis, the result of her 5 per cent assessment in favour of the wife does not sit satisfactorily with the evidence. The Court must carefully safeguard against utilising the provisions of s 79 of the Act as a “… source of social engineering or as a means of evening up the financial positions of the parties to a marriage”. See Kennon v Kennon (1997) FLC 92-757 at p. 84,303. It is not the purpose of the relevant provisions of the Act to “… equalize the financial strengths of the parties”, per Wilson J in Mallet v Mallet (1984) 156 CLR 605 at 638 when addressing his attention to the object of s 75(2) of the Act. In my view, his Honour’s comment draws no less force from the provisions of s 79(4)(a) to (c) of the Act. Unless there is a readily understandable pathway to a conclusion, any criticism that a trial Judge may have engaged in “… an unbounded exercise in distributive justice” (per Gleeson CJ and McCelland J [sic] in equity in Evans v Marmont (1997) DFLC [sic] 95-184 at p. 77,610) is open to a critical, and perhaps, sceptical observer.
It is to be recalled that the mandatory prescription of the Act is to evaluate contributions pursuant to s 79(4) and there “… is an obligation on the trial Judge not only to identify the relevant contributions but also to assess them” (emphasis added) per Ellis, Baker and O’Ryan JJ in Pierce v Pierce (1999) FLC 92-844 at p. 85,881.
…. In making this observation, I do not detract from the force of the proposition that it is “… neither practical nor desirable to approach cases in such a pseudo-mathematical way” (Clauson v Clauson (supra) at p. 81,909 - 10; G v G (1984) FLC 91-582 at p. 79,697 per Nygh J). There are cases however, and this is one, where for the reasons stated, the expression of an award in percentage terms may bring about an unjust and inequitable result, and in so doing offend the very mandate expressed in s 79(2) of the Act.
I am not, in the context of this interim hearing, prepared to conclusively say that the husband’s arguments based upon Guest J’s comments in P v P are totally without merit. However, there is in these current proceedings a cohabitation and marriage exceeding eleven years with children and in those circumstances the wife has a reasonable argument that a percentage adjustment of the overall assets is not meaningless.
Counsel for the wife referred to the husband’s high level of business acumen and income earning capacity in the context of a medium length marriage. I accept the wife is likely to receive a significant adjustment pursuant to s 79(4)(d)–(g) matters (depending upon what assessment is made as to her entitlement to assets based on contribution findings). The two matters weighing heavily in the wife’s favour in s 79(4)(d)–(g) matters would be:
81.1.The disparity in actual assets between the parties following a distribution of assets based on what contributions both parties made towards the acquisition, improvement and conservation of the assets, particularly on the husband’s case.
81.2.The husband’s future business acumen and his proven track record to be able to generate very significant income as a result of that acumen would also seem to weigh heavily in the wife’s favour.
The outcome of the parenting proceedings is not yet known.
If in fact the wife does have $6.25 million worth of assets as asserted by the husband under her control and the wife is seeking a further $4.3 million (having received $700,000), she would then be in receipt of a total asset pool on an interim basis of $11.25 million. That represents 13.6 percent of $88 million.
I find that an order for $4.3 million would be conservative in the circumstances of this case for two different reasons:
84.1.As indicated above, the court is not necessarily restrained by the boundaries set out in the application to the court of the party in the dominant financial position (although in many cases concessions in that application will mean that consideration of what might be “conservative” do not trouble the court). In this case, the husband has set his application as to what the wife should receive at 10 percent. The wife is asking for 13.6 percent by way of an interim property adjustment. On the material that has been filed to date, it cannot be said that that application by the wife is outside a conservative range.
84.2.If I am wrong about that, then the wife has agreed not to dispose of or further encumber the R and Y Sydney properties (and I will make an order to that effect). This creates the ability of the court at the final hearing to make a readjustment in the husband’s favour if it does in fact transpire that his 10 percent assertion was correct.
Can the husband pay $4.3 million?
The question remains as to whether or not the husband could comply with an order to pay $4.3 million. The husband submits that notwithstanding the significant wealth of the parties, there is an absence of readily available liquid assets to meet the order sought by the wife. In particular:
85.1.the ‘cash’ presently held by the Osferatu Group (“the Group”) is committed to the significant debts payable in the first six months of the 2012 year;
85.2.the vast majority of the publicly listed shares held within the Group are held in respect of superannuation entitlements;
85.3.whilst substantial real property holdings of the Group are listed for sale, the difficulties in realising such assets are evident from the husband’s material and notorious.
Page 117 of the annexures to the husband’s affidavit sets out the properties that are for sale. There are 17 of them. Counsel for the wife made the point that it appeared from the material filed by the husband, that these 17 properties represented about a third of the properties under management. They were also apparently vacant at the moment and not generating income. Counsel for the wife indicated that he was not in a position to make a submission that the husband had set about to artificially create a situation where a third of the properties were not producing income.
The husband’s estimate of the income being forgone while the properties are on the market is in the sum of $2,410,400 per annum (see page 115 of the husband’s affidavit filed 4 November 2011). If the husband achieves the asking price, the net proceeds would be about $8.3 million. I asked counsel for the husband what the husband intended to do with the proceeds and I was told the husband intended to repatriate debt (reduction of the $50 million facility with the ANZ). Counsel for the wife made the point that there is no evidence that the ANZ are calling for the repatriation of debt at this current time. Looking at that document, although the amount entitled “Note Held As Security… $11.10 [million]” relates to one property (D Street). The bank debt relating to the balance of the properties is $4.27 million. In addition there are properties worth $6.23 million that could be marketed “depending on court orders and its success in selling the properties that have already been earmarked for sale”. The amount available upon the marketing of those properties would be $6.23 million with bank debt of $2.85 million. Again, one of those properties at C Street appears to be cross collateralised against other borrowings.
Counsel for the husband made a general reference to security ratios without specifically addressing me as to the effect of those ratios on the proposed sales. Paragraph 21 of the husband’s affidavit filed 4 November 2011 provides some information about the husband’s relationship with the ANZ Bank. Nothing in that paragraph would indicate that my reading of page 117 of the husband’s affidavit, as discussed with counsel during submissions, is inaccurate. This interim hearing has proceeded on the basis of the husband’s current estimates as to the net value of asset holdings. I infer that part of the husband’s overall business acumen is his ability to deal with issues of financing. The wife for example does not seek in this hearing to second guess the husband’s decision to forego $2.4 million worth of income per annum from properties whilst the husband markets them for sale.
Conclusion in relation to interim property
I find that the husband can pay by way of interim property adjustment the sum of $4.3 million from the proceeds of sale of property and/or refinancing. I shall ease the burden on the husband by staggering payments in three instalments over 180 days. I find it is appropriate and in the interests of justice to make an order in those terms.
INTERIM SPOUSAL MAINTENANCE AND CHILD SUPPORT
Both counsel approached the matter in a fairly global way in terms of issues of spousal maintenance and child support, rolling them up altogether, although when I pressed counsel for the husband, he made it clear that the husband required reasons which addressed the three stepped approach referred to in Gyselman & Gyselman (1992) FLC 92-279, 79,065.
The wife seeks payments of:
Per week
Per month
Per year
Spouse maintenance
$ 4,515
$ 19,565
$ 234,780
Child support – periodic
7,761
33,631
403,572
Child support – non periodic
1,231
5,333
63,996
$ 13,507
$ 58,529
$ 702,348
The husband concedes payment of:
Per week
Per month
Per year
Spouse maintenance
$ 2,000
$ 8,667
$ 104,000
Car and house expenses (est)
1,635
7,085
85,020
Child support – periodic
1,538
6,666
79,992
Child support – non periodic
1,231
5,333
63,996
Child support – tutoring as req’d
150
650
7,800
$ 6,554
$ 28,401
$ 340,808
in addition to meeting the costs of his own support and accommodation and that of the child B.
The wife proposes that she be paid $4,515 by way of spousal maintenance per week. The husband proposes that he pays $2,000 per week plus outgoings in respect of expenses that the wife would otherwise be responsible for in the sum of $1,635 per week. The parties are $880 per week apart.
The husband submits that a cursory examination of Part N to the wife’s financial statement evidences excessive claims for expenditure, including by way of non exhaustive example the following claims for expenditure:
94.1.food of $1,807 per week (including $1,205 per week on the two children);
94.2.house repairs of $1,103 per week (on a house upon which renovations were completed in December 2009);
94.3.children’s activities of $1,941 per week (again noting the ages of the children)
94.4.cleaning of $1,800 week.
Counsel for the husband submits there are clearly other aspects of Part N which ought not be included or ought be adjusted, for example:
95.1.the claim for education expenses ($1,350 per week) which, on the common position, are to be paid by the husband;
95.2.that portion of the expenses which relate to B, who is residing with the husband. Whilst the wife appears to contend some adjustment has been to recognise this fact, the effect of that adjustment is not evident from the material;
95.3.the claims in respect of the various outgoings for the properties and vehicles of which it is evidence the wife has no personal knowledge. It is submitted that the evidence of the husband ought be preferred in this regard, it being the husband who has been historically responsible for such payments;
95.4.the claim for some $1,800 per week for full time domestic assistance.
Interim spousal maintenance
As indicated above, any proposed interim property order must be taken into account when interim spousal maintenance is considered (see Bevan). Counsel for the wife conceded that if the wife notionally received $2.5 million for the purpose of giving her financial freedom, then a notional adjustment at 5 percent would be appropriate as a calculation as to the interest that could be earned upon that lump sum. That calculation is $125,000 per annum gross interest. Tax would be payable on that interest. Using the simple calculator on the Australian Taxation Office website, the tax calculated is $34,200, so that the net income I notionally attribute to the wife from the interest will be in the sum of $90,800 ($1,746 per week) once the full capital sum is paid by the husband. As indicated above, the payment of $4.3 million by the husband to the wife will take place by way of three payments over time. That will mean that payments of spousal maintenance should incrementally reduce at a rate of $582 per week ($582 x 3 = $1,746) upon each payment of capital.
The husband relies on an affidavit of Ms M which is said to be based on 2010 data and other unstated assumptions. It annualises the family’s expenses at $531,639.
Counsel for the husband criticised how Part N of the wife’s financial statement had been prepared. It was prepared by an accountant based on averaging and the accountant’s calculations are put in issue by both Ms M and by the husband. I was invited to accept Ms M’s and the husband’s evidence over the analysis made by the wife’s accountant simply on the basis they had better personal knowledge about these matters than the wife’s accountant. In the context of this interim hearing I am unable to prefer one body of evidence over the other.
Counsel for the wife conceded that there may need to be some paring required of the claims made by the wife and conceded there was $108,000 difference between Ms M’s analysis and what is claimed by the wife. Counsel for the wife invited me to treat the $638,000 in total sought (for spousal maintenance and periodic child support) by the wife as an outer figure and for me to make some deductions. The difference is more than $108,000 because non periodic child support payments are not taken into account and Ms M’s figures contain the husband’s and B’s costs.
Counsel for the wife points out that in his affidavit of 4 November at paragraph 10, the husband sets out a table in relation to his estimate of expenses. That table totals $960,000. The table includes legal fees and outgoings on the former matrimonial home. Counsel for the wife submits that when those adjustments are made, the husband’s figure for his expenditure is $571,000.
What I do take from the husband’s table is that it is clear that he has a luxurious lifestyle. This is consistent with how the parties lived while married. Depending on capacity to pay, s 75(2)(g) FLA requires me, where the parties have separated, to take into account a standard of living that in all the circumstances is reasonable.
Counsel for the wife also pointed to the fact that prior to the separation, a salary had been paid to the wife in the sum of $120,000 (apparently as a device to limit the expenditure of funds by the wife) but that had ceased on 30 September 2010 according to the evidence filed by the husband to keep payroll tax under the statutory threshold.
I find that an appropriate assessment of the wife’s needs, using a broad brush, is in the sum of $2,500 per week as long as the husband pays the other outgoings. That sum will reduce incrementally as the husband makes payment to the wife by way of the lump sum interim property order.
The income asserted by the husband at paragraph 113 of his affidavit is $846,000 per annum. The husband’s present expenses including those for the wife and children and households, total some $18,466 per week.
Counsel for the husband inferred that the parties’ income is not enough to sustain a weekly payment in any amount more than his application. Counsel for the wife argued that it was inappropriate to differentiate between income and capital when the asset base is so large. The husband says, for the reasons advanced in relation to the partial property settlement claim, he is unable to do so readily from capital. I have already said I do not accept the husband does not have access to capital and an ability to refinance.
Counsel for the wife made the point that certainly in the context of interim proceedings and adopting a broad brush approach, looking at the husband as a PAYG taxpayer is almost a fallacious argument. The parties in this marriage did not simply rely upon ordinary income to maintain their lifestyle. They moved assets around; they did deals. This is not the type of circumstance where income and capital are to be treated as completely disparate concepts. One should not lose sight of the fact that there is $88 million of assets to be adjusted in this case.
I accept the submission by counsel for the wife that in cases of high net value, such as this one, it is unrealistic to simply look to sources of income as a basis to pay periodic support. The parties, in this case, have generated wealth as a result of deals that have been done and the buying and selling of significant pieces of real estate is a trading activity. The conversion of capital into cash is therefore something that is done in the ordinary course. The parties have used capital to live on in the past and there is no reason why in the short term, some of the significant capital in this case cannot be used in order to create a more comfortable arrangement for the party who does not have control of the majority of the wealth.
I find that on the totality of the material before me, the husband could well reorganise his financial affairs so as to make the payments that I intend to order both by way of lump sum and by way of periodic payments. I do not need or intend to make detailed findings setting out precisely where the income and capital will come from but the assets on page 117 of his affidavit filed 4 November 2011 would be good place to start.
APPLICATION FOR DEPARTURE FROM CHILD SUPPORT ASSESSMENT
The wife has care of two of the children (S and E) while the son, B, lives with the husband. No issue relating to E’s parentage was raised in this context by the husband who conceded in his application that a departure order should be made in relation to E.
The Court may make an order for departure from an administrative assessment of child support in the special circumstances of the case if the liable parent or carer entitled to child support is a party to an application pending in the Court and the Court is satisfied that it would be in the interest of the liable parent and the carer entitled to child support for the Court to consider whether orders should be made in relation to the child based on the special circumstances of the case (Child Support (Assessment) Act 1989 (Cth) s 116(1)(b)).
In Gyselman the Full Court identified that a trial judge must follow the clearly established three‑step process outlined in s 117 of the Child Support (Assessment) Act 1989 (Cth) – that is, assess whether in the special circumstances of the case a ground of departure has been established; assess whether it is “just and equitable” to make the proposed order; and assess whether it is “otherwise proper” to make the order. The Full Court also considered what constituted “special circumstances”, stating:
a)Whilst it is not possible to define with precision the meaning of [special circumstances], as a generality it is intended to emphasise that the facts of the case must establish something which is special or out of the ordinary.
The grounds of departure are outlined in s 117(2) of the Child Support (Assessment) Act 1989 (Cth). In the circumstances of this case, the relevant ground is found at s 117(2)(c)(ia) of the Child Support (Assessment) Act 1989 (Cth).
The parties are a far greater distance apart in relation to periodic child support than they are in respect of spousal maintenance. The wife seeks a periodic child support payment in the sum of $7,761 per week and the husband concedes a periodic child support payment in the sum of $1,538 per week. The parties are approximately $6,200 per week apart. The wife’s financial statement of 5 December 2011 asserts that the wife’s expenses in relation to the children are in fact $8,692 per week. Counsel for the husband highlighted various amounts claimed by the wife that seem excessive (even taking into account a very luxurious lifestyle). Some of the items can be removed as the husband is going to be ordered to be responsible for payment of those accounts as they fall due. Taking a broad brush approach, I find that it is just and equitable and otherwise proper to order the husband to pay periodic child support in the sum of $3,000 per week in total which is the equivalent of $6,500 per child per month.
The parties adopt similar positions in respect of non periodic child support but are seeking orders in slightly different terms. I will make an order as sought by the husband.
THE DISPUTED BINDING FINANCIAL AGREEMENT
Apart from the material that each party sought that I read as listed in their respective case outline documents, I was also referred to an affidavit of the husband filed 15 April 2011 which annexed at annexure A a copy of a financial agreement that the parties had entered into. The financial agreement is in fact undated apart from the year “2009”. A “certificate for the purposes of s 90G(1)(b) FLA” signed by Mr Taussig annexed to the agreement indicates that he gave the wife advice on 21 December 2009. The similar certificate by Mr John de Mestre indicating he gave advice to the husband is dated 4 May 2010.
The agreement is relatively short in its compass and is in the following terms:
1.Provided that there are sufficient assets to satisfy any amount to which the wife becomes entitled either pursuant to an agreement with the husband or any order of the Family Court for property settlement or spousal maintenance and without limiting in any way the claim the wife may have the wife hereby agrees that the husband will retain as part of any financial settlement between the parties the property at [B Street, Sydney Suburb 3].
2.Subject to paragraph 1 hereof, the wife makes no claim on [the former matrimonial home], the wife may reside in [the former matrimonial home], if the parties separate, for up to 6 months, or such other time as the parties agree.
3.On signing of this agreement the husband will as an initial property settlement cause to hold in trust for the wife an unencumbered interest in the property known as [V] being a property of 42 acres [in the Southern Highlands]. The wife may register a caveat on [V]. If the parties separate the husband will forthwith cause [property R] to be transferred into the wife’s name.
As I have already said, counsel for the husband made it clear in final submissions that any use the wife made of the property R, whether by selling it or mortgaging it or otherwise, would be without prejudice to any claim that she might make in respect of the validity or enforceability of the financial agreement.
The wife seeks to say the financial agreement is not binding. The effect of the agreement if held to be binding, would be to place $18 - $20 million worth of assets comprising the former matrimonial home (which is the property in which the wife currently resides pursuant to an exclusive occupancy order that I made on 20 December) into the hands of the husband. The wife’s application is, in part, that she receive the former matrimonial home as part of an adjustment of property. The husband says that, apart from any argument about the financial agreement, the wife will not be able to take the former matrimonial home because she will not get that level of adjustment in her favour at the final property settlement.
Counsel for the husband submitted that the question of whether or not the financial agreement is a binding one should be dealt with as a discrete issue.
Although the issue as to the validity of the financial agreement seems to be a matter that solely goes to considerations that will have to be considered at the fourth stage of the s 79 hearing, the issue surrounding whether or not the financial agreement is a binding one might best be argued as a discrete preliminary issue. I will give the parties liberty to apply for directions to allow that to happen.
HUSBAND’S ATTENDANCE AT THE FORMER MATRIMONIAL HOME
The terms of the further order which the husband sought as set out in exhibit 5 has been recorded above.
The wife objects to the husband attending the former matrimonial home. She proposes that Mr H attend on behalf of the husband. The husband does not agree to that course. The wife relies upon an email from the husband to Mr H dated 1 August 2011, nominating Mr H effectively as the husband’s agent to oversee work at the former matrimonial home and to collect a kayak from the property. The wife proposes Mr H carry out that supervisory role. Mr H was the person who was the project manager through the construction of the former matrimonial home. The wife submits that he is an appropriately qualified person and rejects the husband’s assertion that he is partisan. At the centre of the dispute is the style of drainage holes to be installed in new sliding tracks. There seemed to be an issue as to whether that work could be done offsite. The wife submits that even if the work was done on site there is no need for the husband to be personally present when the work takes place.
The husband says that Mr H was solely nominated for the purposes of collecting a file and no more. Secondly, the husband says that since that time Mr H has fallen into dispute with the husband in a range of matters and has become a witness in the wife’s case (including as to parenting, financial dealings and the husband’s conduct).
At the current time, whilst the binding financial agreement remains on foot, the husband has the right of ultimate ownership and occupation of the former matrimonial home (the husband has in the interim agreed to allow the wife to remain there pending the ultimate determination of the proceedings).
I conclude the husband should have access, if he still desires, to the former matrimonial home for the stated purpose upon the terms he suggests and I will accordingly make an order to that effect.
I certify that the preceding one hundred and twenty-five (125) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Watts delivered on 31 May 2012.
Associate:
Date: 31.5.2012
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