PADNALL & PADNALL

[2014] FamCA 724

FAMILY COURT OF AUSTRALIA

PADNALL & PADNALL [2014] FamCA 724

FAMILY LAW – PROPERTY – Interim Orders – Interim distribution of property – where wife seeks to access mortgage redraw facility secured over the former matrimonial home – husband seeks an equal distribution of funds from mortgage redraw facility – wife opposes husband’s application – wife appears unrepresented – where wife seeks to use funds to obtain legal representation – where husband requires interim distribution of funds to secure ongoing legal representation – consideration of just and equitable – orders made for the interim distribution of funds to be held in each party’s respective solicitor’s trust accounts.

Family Law Act 1975 (Cth) ss 79, 80

Stanford & Stanford (2012) 247 CLR 108
Strahan & Strahan(interim property) (2009) 42 Fam LR 203

APPLICANT: Mr Padnall

RESPONDENT: Ms Padnall

FILE NUMBER: ADC 1244 of 2012

DATE DELIVERED: 4 September 2014

PLACE DELIVERED: Adelaide

PLACE HEARD: Adelaide

JUDGMENT OF: Berman J

HEARING DATE: 2 September 2014

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Holland

SOLICITOR FOR THE APPLICANT: Barnes Brinsley Shaw

COUNSEL FOR THE RESPONDENT: Litigant in Person

SOLICITOR FOR THE RESPONDENT:

Orders

1. That the husband and wife do all things necessary and sign all documents as may be required to enable the parties to draw down on the mortgage redraw facility with the Westpac Bank secured over the title of the former matrimonial home situate at D Street, Suburb E in the following manner:-

   (a)To the trust account of BBS Lawyers for and on behalf of the husband the sum of FORTY FIVE THOUSAND DOLLARS ($45,000) PROVIDED THAT the said sum shall only be used only for the purpose of the husband’s legal fees, costs and disbursements and not otherwise;

   (b)Upon the wife instructing solicitors and the filing by those solicitors of a Notice of Address for Service, the sum of FIFTY THOUSAND DOLLARS ($50,000) payable to their trust account for and on behalf of the wife PROVIDED THAT the said sum shall only be used for the payment of the wife’s legal fees, costs and disbursements and not otherwise;

   (c)The sum of SIX THOUSAND ONE HUNDRED AND NINETY ONE DOLLARS ($6,191) to the wife NOTING that it is to be used to discharge the wife’s Visa Credit Card liability.

2. That the Response of the wife filed 10 April 2014 and the Application in a Case filed 6 May 2014 are dismissed.

3. Further consideration of the proceedings is adjourned to 9.15am on 12 September 2014.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Padnall & Padnall 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 ADELAIDE

FILE NUMBER: ADC 1244 of 2012

Mr Padnall

Applicant

And

Ms Padnall

Respondent

REASONS FOR JUDGMENT

INTRODUCTION 

1. By her Response to an Application in a Case filed 7 February 2014, the respondent wife (“the wife”) sought interim orders in terms of paragraphs 3, 4, 5, 6 and 7 of her Response filed 10 April 2014.  The applicant husband (“the husband”) sought orders in terms of his Application in a Case filed 6 May 2014.  Specifically, the orders that he seeks are now confined to paragraphs 1.1 and 1.2 of that Application.

2. The interim proceedings came before me on 12 June 2014.  On that occasion the husband was represented by counsel and the wife’s previous solicitor appeared but sought and was granted leave to withdraw.  Thereafter, the wife has been a self-represented litigant.

3. Because of the position that the wife then found herself in, I considered it appropriate to adjourn the proceedings until 14 July 2014 for mention.

4. On that occasion, I did not hear argument but gave each of the parties liberty to file a further affidavit and adjourned further consideration for argument to 22 August 2014.

5. On that occasion, the wife sought leave to tender an affidavit which had been prepared pursuant to my earlier order, but obviously not filed within the time as allowed.

6. The matter was held to enable the husband’s counsel to consider the proposed affidavit of the wife and to take instructions from the husband as to his attitude to the wife’s belated document.

7. Ultimately, counsel submitted that whilst the affidavit was clearly relevant and it was a document germane to the interim proceedings and responsive to the orders sought by the wife, if it was to be relied upon then the husband would need to have an opportunity to digest the considerable detail contained and if so advised to answer the allegations made by the wife.

8. I determined that I would receive the wife’s affidavit (filed 22 August 2014) but also granted the husband’s application for a short adjournment.

9. The parties agreed that the only matters that would be left for argument was paragraph 6 of the wife’s Response filed 10 April 2014, but as amended by reference to paragraph 15.2.1 of her affidavit filed 22 August 2014 and paragraph 1.1 and 1.2 of the husband’s Application in a Case filed 6 May 2014.

10. The balance of the interim proceedings (save for order 1 of the husband’s Application in a Case filed 7 February 2014 which is still extant) can be dismissed.

11. There is some history to the order that the wife seeks namely, that on 11 April 2014 she did not press paragraph 6 of the said Response, but rather instructed her counsel to resile from those orders.  At that point her formal position was that she did not press her own application, but strongly opposed any orders sought by the husband for access to interim funds.

12. The wife’s position has changed in that she now seeks to access $109,000 from the mortgage redraw facility secured with the Westpac Bank over the title of the property situate at D Street, Suburb E (“the former matrimonial home”).  She previously opposed the accessing of the redraw facility on the basis that she was concerned how any interest and other payments would be made.  Apparently, the wife has satisfied herself that a regular monthly amount will be drawn down on the redraw facility to a sum not dissimilar to the previous mortgage payment.

13. The mechanics of such a proposal are presumably now well understood arising out of orders made by me on 6 May 2014 and 6 June 2014 which provided for the parties to access the mortgage facility to the sum of $12,000 for the purpose of the payment of a disbursement to F Accountants to enable the single expert to complete the valuation report of the husband’s interest in his business.

14. The wife’s position has therefore changed.  However, she still opposes any interim payment being made to the husband.

DOCUMENTS RELIED UPON

1. The wife relies upon the following documents:-

   ·Response to Application in a Case filed 10 April 2014

   ·Affidavit of wife filed 22 August 2014

1. The husband relies upon the following documents:-

   ·Application in a Case filed 6 May 2014

   ·Affidavit of husband filed 6 May 2014

   ·Affidavit of husband filed 28 August 2014

BACKGROUND

1. The husband was born in 1974 and is 39 years of age.  The wife was born in 1974 and is also 39 years of age.  The husband is a qualified tradesman and currently owns and operates a tradesman business.  The wife is not currently employed.

2. The parties commenced cohabitation in about 1992, were married in 1999 and separated in early 2012 after a period of cohabitation spanning 20 years.

3. There are three children of the relationship namely A born in 2001, B born in 2004 and C born in 2010.  The children currently reside with the wife. 

4. The substantive proceedings have been listed for final hearing as a primary listing on 1 December 2014.  The substantive proceedings involve parenting issues and property proceedings pursuant to Part VIII of the Family Law Act 1975 (Cth) (“the Act”).

5. Whilst the extant interim proceedings deal with property issues only, the parenting issues are the subject of high conflict between the parties and it is important that all issues are resolved at the earliest opportunity.

6. During the course of the marriage, the husband operated his tradesman business via K Pty Ltd as trustee for the K Padnall Family Trust.

7. By order, F Accountants undertook a valuation of the husband’s interest in his business and determined that as at 30 June 2012 that the valuation methodology should be based upon maintainable earnings of $177,282.

8. By affidavit dated 16 December 2013, the husband admitted that he had not made full and frank disclosure about a restructuring of his business.  Specifically he did not disclose the incorporation of a company called B Investments Pty Ltd (incorporated on 5 July 2012) and the use of P Pty Ltd but not in its previous capacity as a trustee.

9. The husband says that the non-disclosure was an oversight and the reason for the incorporation of the new trading entities arises because of an employee restructuring to assist in Workcover SA negotiations, but also in the commercial relationship that the husband has with his principal customer namely, Company G.

10. The circumstances surrounding the actions of the husband and whether the admitted non-disclosure is nonetheless benign in its effect is a matter for trial.  It did however have the unfortunate consequences of requiring this matter which had been previously listed for trial to be the subject of an adjournment and that then required an update valuation report by F Accountants.

11. That report is still to be published and distributed.

12. An unfortunate consequence of the non-disclosure is that it has heightened the wife’s mistrust of the husband.

13. An unintended consequence of the delay in the finalisation of the valuation report is that it creates an uncertainty as to the extent of the pool of assets that remain for consideration.

14. Following the draw-down of the mortgage facility to satisfy the order made on 6 May 2014, the redraw limit is $114,999 as at July 2014. This figure is not controversial.

15. On the basis that there has not been any agreed position or instruction to the bank to convert the underlying mortgage liability from principal and interest to interest only, the wife says that the monthly payments taken by the bank are in the sum of $1,337.  This will obviously continue to reduce the redraw limit and if ongoing, will see the redraw limit extinguished.

16. On the basis of those figures, the wife now seeks $109,000 to pay the following:-

    ·Adelaide Family Law  $45.233

    ·Tax debt  $17,627         

    ·Visa Card  $  6,191

    ·Anticipated counsel fees                 $20,000

    ·Interest on the mortgage                  $10,000

    TOTAL  $99,051

17. The wife will then have $10,000 to supplement her Centrelink benefit.

18. The wife is confident that providing the trial occurs as listed in December 2014, there will be sufficient to ensure that the redraw facility is not extinguished prior to the proceedings being resolved.

19. During the course of the proceedings the wife acknowledged that it is not her intention to seek orders that the house form part of her settlement. Accordingly, she will be consenting to an order that would see the former matrimonial home sold on terms as may be agreed between the parties. It was her position that she would prefer the sale to occur at the conclusion of the trial and in any event at the end of the year in order to create the least disruption for the children taking into account the academic year.

20. For his part, the husband does not seek to retain the former matrimonial home and it would therefore seem inevitable that it will be sold providing the parties are able to reach a reasonable agreement as to the terms and conditions of sale.

21. Notwithstanding that at separation the parties had saved the sum of $87,000, the wife has spent the entirety of the term deposit in the payment of legal fees of $40,000 and then a further $45,000 on living expenses including the costs of maintaining the former matrimonial home, expenses in relation to the children and the general exigencies of life.

22. At this stage the husband does not necessarily accept that the expenditure by the wife of those monies will play no part in the future proceedings, nor have any impact.

23. The wife says that she is now in the invidious position of having no financial resource from which to meet her various expenses and those of the children but importantly, she is not able to secure legal representation from her previous solicitors unless the account outstanding is discharged in full, or substantially so.

24. The wife does not consider that she has the ability or the emotional stability to be able to conduct the proceedings as a self-represented litigant and in particular, she is purportedly distressed at the concept that she might have to cross-examine the husband.  In short, it is her preference to have legal representation but she is not able to do so in the current circumstances.

25. I accept that the wife’s case would be assisted if she was represented.  I am not convinced that her only option is to reinstate instructions to her previous solicitor which she says would necessitate the payment of her outstanding account.  Given that the wife concedes (and is prepared to consent) that the former matrimonial home needs to be sold inevitably at the conclusion of the proceedings, the wife will be left with a sufficient cash sum to be able to discharge her outstanding liabilities.

26. The wife will have the option of negotiating a satisfactory interim resolution with her previous solicitors, or alternatively she will be able to instruct different solicitors.

27. In any event, the husband does not oppose the wife receiving funds to assist in her representation.  He does however seek a similar accommodation.  If the wife is successful in the entirety of her application, there would be insufficient funds for the husband.

28. For his part, the husband says that he incurred legal fees of $86,407 to his previous solicitors Belperio Clark Lawyers of which there is currently the sum of about $7,155 outstanding.

29. As at 27 August 2014, the outstanding legal fees to BBS Lawyers is in the sum of $36,156.  Those fees do not include counsel fees for attendances on 22 August 2014 and 2 September 2014.

30. In his affidavit at paragraph 7.1 (c) the husband says:-

    BBS Lawyers have extended me credit to finalise the current application.  Thereafter they are not prepared to act for me without their total bill being paid and money in trust for trial.

31. It is the husband’s position that he has no other source from which funds can be obtained to pay his solicitors.  To the extent that from time to time there is a credit balance in his various business accounts, the husband says that those monies are required for the day to day operation of the business and to ensure that employee wages and other obligations are able to be met.  The wife is suspicious of the husband’s claims.

32. The husband also accepts that following separation he withdrew $50,000 from the mortgage to repay his parents, previous solicitors, current solicitors and an extensive Visa Card liability.

33. Not dissimilar to the wife, the husband’s position is that without an advance of funds he will be unrepresented at the hearing.

34. The wife sets out her opposition to the orders sought by the husband at paragraph 16 of her affidavit filed 22 August 2014.

35. The short summary is that there is not a “level playing field” between the parties.  The husband has retained the benefit of his business and receives an income and is able to continue what is alleged by the wife to be a comfortable lifestyle.

36. She alleges that the husband has been able to pay previous legal fees and incur substantial personal expenditure in circumstances where she is not able to easily reconcile the expenditure with the income stream.

37. Moreover, the inability of the wife to pay out some of her more pressing liabilities ie her credit card, causes her heightened distress.

38. To a large degree, the opposition of the wife is founded upon her irreconcilable mistrust of the husband and his financial dealings.

39. It remained an issue for trial as to whether the wife’s mistrust is properly founded.

RELEVANT LEGAL PRINCIPLES

1. The submissions of counsel for the husband focussed upon a consideration of the judgment in Strahan & Strahan(interim property) (2009) 42 Fam LR 203. In particular, the husband seeks orders by way of interim or partial property settlement pursuant to Section 79 and 80 (1) (h) of the Act.

2. At paragraph 101, Boland and O’Ryan JJ said:-

   Section 79 of the Act confers a power to make an order for property settlement. The approach to the determination of an application pursuant to Section 79 is well established by authorities. Section 79 (2) provides that an order shall not be made, under the Section, unless the Court is satisfied in all the circumstances, that it is just and equitable to make the order. The Court is required, in considering what order, if any, it should make, to take into account the respective contributions of the parties referred to in paragraphs (a), (b) and (c) of Section 79 (4); the effect of any proposed order upon the earning capacity of the parties; and matters referred to in Section 75 (2), so far as they are relevant; any other order made under the Act affecting a party or a child; and any child support under the Child Support (Assessment) Act 1989 (Cth). There is a preferred approach to the determination of such an application which involves four inter-related steps which we need not repeat in these reasons…

3. It is also understood that there should be one exercise under the power of Section 79 of the Act. Whilst this is the preferable approach, without the requirement that the basis for the order sought is “compelling”, if appropriate the “power may be exercised by a succession of orders until the power…is exhausted”.

4. The Court identified two stages to the hearing of an interim property settlement application pursuant to Section 80 (1) (h) namely:-

   The first step is to resolve whether to exercise the power before a final hearing and if it is resolved to do so then the second step involves the exercise of that power.

5. As to the circumstances when the power will be exercised before a final hearing, Boland and O’Ryan JJ found that in relation to the first stage:-

   The overarching consideration is the interests of justice. It is not necessary to establish compelling circumstances. All that is required is that in the circumstances it is appropriate to exercise the power. In exercising the wide and unfetted discretion conferred by the power to make such an order, regard should be had to the fact that the usual order pursuant to Section 79 is a once and for all order made after a final hearing.

6. Accordingly, the following matters may be relevant to a determination of whether the first stage of the test has been satisfied:-

   (1)Can the applicant meet the costs of their own legal fees;

   (2)The extent of any legal costs. It is not a requirement that if the costs are not paid or secured the continued legal representative of a party will be in jeopardy;

   (3)The financial position of the parties and their respective financial strength.

7. Their Honours held:-

   It is appropriate for the Court to give consideration to whether the claim for costs “genuine” – ie. that a party is not bringing an interim application on a pretext.  However, once the Court is satisfied that the claim is genuine, it should not “take a narrow view of the costs budget”.

8. In terms of whether to make an order once the first step has been satisfied, regard must be had to the provisions of Section 79 noting the truncated nature of the proceedings. An important consideration is whether if a party has received an overpayment, is the pool sufficient to enable an adjustment to be made at trial.

PROPERTY OF THE PARTIES

1. Unfortunately, the parties do not agree on the pool of assets available for division.  It is self-evident that until the F Accountants valuation is completed, there remains substantial uncertainty as to the value of the husband’s interest and the effect that it would have on the property pool.

1. It is also germane at this stage to note that the wife seeks an adjustment of property of 70/30 per cent in her favour, whereas the husband concedes 60/40 per cent.

2. The husband’s counsel tendered a balance sheet which was of assistance in gaining an overview of the assets of the parties.

3. He concedes that for the purposes of the argument I should take a generous view of the asset pool consistent with the wife’s case and at the conclusion thereof and by the simple application of the property orders that the wife seeks, I should be satisfied that there is unlikely to be any overpayment to the husband and any monies that are paid can be easily readjusted.

4. Accordingly, the asset pool as promoted by the husband is as follows:-

Former matrimonial home	500,000
Furniture and effects	7,000
Caravan in joint names	40,000
Landcruiser [motor vehicle] (sold)	12,000
Husband’s interest in [P Pty Ltd] and [B Investments Pty Ltd	177,282
TOTAL	$736,282
Liabilities
Tax Debt	17,627
Visa Card	6,191
Outstanding school fees	9,817
TOTAL	$33,635
NET BALANCE	$702,643

1. At 30 per cent, the husband would be entitled to $210,794 and taking into account the business at $177,282, there is clearly sufficient asset to readjust the sum that the husband seeks.

2. The wife makes the point that whatever the value of the business is it might not be able to be easily realised.  That is an argument that also resonates in terms of value and at this stage the best that can be done is to be satisfied that the husband would retain sufficient assets to enable a readjustment to occur if that was deemed necessary.

3. The wife also alleges that there may well be other property that should be brought back to account.  In particular, she considers that the husband is in possession of a Ford motor vehicle, a boat and a trailer which may well be property of the husband.  The husband at this stage denies that allegation, but if the wife is right then of course that further enhances the pool.

SECTION 79 (2) REQUIREMENT

1. The exercise of the power under Section 79 is dependent upon a determination that it is just and equitable to adjust the interests of the parties in property.

2. The parties have been together for almost 20 years.  In Stanford & Stanford (2012) 247 CLR 108 the majority held at paragraph 42:-

   The husband and wife are no longer living in a marital relationship…there is not and will not thereafter be the common use of property by the husband and the wife.  No less importantly, the express and implicit assumptions that underpinned the existing property arrangements have been brought to an end by the voluntary severance of the mutuality of the marital relationship.

3. And at paragraph 37 the following is stated:-

   …whether it is just and equitable to make a property settlement order by identifying, according to ordinary common law and equitable principles, the existing legal and equitable interests of the parties in the property…and whether, having regard to those interests the Court is satisfied that it is just and equitable to make a property settlement order.

4. I find that in all the circumstances and taking into account the position of the parties themselves namely, that some of their common property is to be sold and their interests resident therein significantly affected, it is just and equitable to alter the existing property rights of the parties.

EXTENT OF THE ADJUSTMENT

1. Taking into account the available funds on the redraw facility and on the basis that each party will be substantially successful in respect of their separate applications, I need to have some regard for the application of the sum as sought by each of the parties.

2. I am concerned to ensure that the wife is able to secure legal representation and that the funds provided to her are used for this purpose.  I am also favourably disposed to the urgency of the wife’s financial position arising out of her pressing credit card liability.

3. There is uncertainty as to future fees likely to be incurred by the wife, but doing the best I can I propose to allow her $50,000 for the purpose of litigation funding and a further sum of $6,191 to extinguish her Visa Credit Card debt.  The total sum to the wife will be $56,191.

4. The husband seeks $50,000 and it is clear on his case that the entirety of those monies if ordered will be used for his legal fees.

5. I am concerned however that the aggregate of that sum together with the amount that I propose to adjust in favour of the wife, may well bring the redraw facility perilously close to its limit.

6. I am also mindful of the husband’s separate resource arising out of the operation of his business, the income that he is able to generate and the ability that he has to manage his cash flow to his potential advantage.

7. In all the circumstances, his resources are more robust of the wife.

8. I propose therefore to order a distribution to the husband of $45,000.

CONCLUSION

1. Accordingly, I propose to make orders that will require the parties to do all things necessary to cause sufficient money to be withdrawn from the Westpac mortgage redraw facility in the total sum of $101,191 such that the sum of $45,000 will be placed into the trust account of the husband’s solicitors, with a similar order binding the wife save and except for the amount as may be required to discharge the Visa Credit Card liability.

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

I certify that the preceding eighty five (85) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Berman delivered on 4 September 2014.

Associate: 

Date:  4 September 2014