Pearson & Coli

[2019] FamCA 220

FAMILY COURT OF AUSTRALIA

Pearson & Coli

[2019] FamCA 220

FAMILY LAW – PRACTICE AND PROCEDURE – Registrar – Review of decision - where leave has been granted to the wife to apply out of time for review of final property orders made by consent by a registrar of the Family Court – where orders found to be uncertain and incapable of being enforced – where wife no longer consents – orders set aside.

FAMILY LAW – PROPERTY – Interim orders – partial property settlement – where the wife seeks partial property settlement of $400,000 to fund litigation – where both parties have substantial assets and the husband earns substantially more than the wife – where it is just and equitable to make orders for partial property settlement and there is sufficient scope for that order – application granted.

Family Law Act 1975 (Cth)

Bing & Bing (2007) FLC 93-318

Strahan & Strahan (Interim property orders) (2009) FamCAFC 166

APPLICANT:

Ms Pearson

RESPONDENT:

Mr Coli

FILE NUMBER:

DGC

1112

of

2014

DATE DELIVERED:

19 February 2019

PLACE DELIVERED:

Melbourne

PLACE HEARD:

Melbourne

JUDGMENT OF:

Macmillan J

HEARING DATE:

19 December 2018

REPRESENTATION

COUNSEL FOR THE APPLICANT:

Mr Dunlop

SOLICITOR FOR THE APPLICANT:

Australian Family Lawyers

COUNSEL FOR THE RESPONDENT:

Mr Nehmy

SOLICiTOR FOR THE RESPONDENT:

Berger Kordos Lawyers

Orders

(1)      The orders of the Registrar made 26 May 2014 by consent of the parties are hereby set aside.

(2) On or before 4.00 pm on 22 April 2019 the husband pay to the wife the sum of $400,000 (“the payment”) and for the purposes of any future final orders made pursuant to s 79 of the Family Law Act 1975 (Cth) the whole of the payment shall be considered an asset of the wife and attributed to her adjustment overall.

(3)      In the event that the wife’s application for property settlement is dismissed and there is no further adjustment of the parties’ legal and equitable interests in property in the wife’s favour beyond her entitlements pursuant to the final orders made by consent on 26 May 2014 (now set aside) the wife repay the whole of the payment to the husband within 60 days of judgment and final orders being made (“the repayment”).

(4)      In default of repayment, the wife do all acts and things and sign all necessary documents to sell the real property located at and known as SS Street, Suburb TT (“the Suburb TT property”) and the proceeds of sale be applied in the following manner and priority:

(a)      To pay all costs, commissions and expenses of the sale;

(b)      To discharge any mortgage or encumbrance affecting the property;

(c)      So much of the repayment as is then outstanding to the husband; and

(d)      The balance then remaining to the wife.

(5)      The husband and wife pay the fees and costs of the valuations as ordered on 4 December 2018 in equal proportions as and when requested.

(6)      The wife’s Application in a Case filed 16 November 2018 be otherwise dismissed and removed from the list of cases awaiting hearing.

Note: The form of the order is subject to the entry of the order in the Court’s records.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Pearson & Coli has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).Family Court of Australia at Melbourne

FILE NUMBER: DGC 1112 of 2014

Ms Pearson

Applicant

And

Mr Coli

Respondent

REASONS FOR JUDGMENT  

1.        The parties having consented to various orders sought by the wife in her Application in a Case filed 16 November 2018, paragraph 5 of that application was listed for hearing before me in the Judicial Duty List on 19 December 2018. The wife sought an order pursuant to paragraph 5 of that application that within 30 days the husband pay her solicitors $400,000, such monies to be held by them on trust for the wife and to be applied to her ongoing legal expenses. The wife filed an affidavit in support of that application, as did her solicitor. The husband opposed the wife’s application and on 3 December 2018 filed an affidavit in response to the wife’s evidence. The wife filed a further affidavit on 13 December 2018.  Both the husband and the wife filed written submissions in support of their cases.

Background

2.        The parties in this case commenced cohabitation in 1995 and were married in 2007. They separated in April 2014.  There are two children of the marriage who live primarily with the wife. The wife works part time and is otherwise engaged in home duties.

3.        The husband works full time as a health professional.

4.        The genesis of these proceedings was the final property orders made by consent by a registrar of this Court on 26 May 2014. On 23 December 2015, the wife filed an application in the Federal Circuit Court of Australia seeking to set aside those orders. That application was transferred to this Court. On 8 June 2016 the wife filed an Amended Initiating Application in which she sought in the alternative leave out of time to review the orders made by the Registrar.

5.        On 8 May 2018 I made orders granting the wife leave to apply out of time for a review of the Registrar’s orders and on 8 June 2018 the wife filed an Application in a Case seeking a review of those final orders made by the Registrar.  A review of a registrar’s orders is a hearing de novo. What that means is that the matter begins afresh, with the Court exercising the discretion previously exercised by the registrar. In this case the Registrar was exercising his discretion to make final orders by consent. In so far as the proceedings are to be dealt with afresh, the wife no longer consents.

Legal Principles 

6. The principles the Court must apply when determining whether it should make an order for partial property settlement are well settled. Although it is generally preferable for there to be one final hearing of an application for property settlement, it is also the case that the Court can exercise its power pursuant to s 79 of the Family Law Act 1975 (Cth) by making more than one order (Gabel & Yardley [2008] FamCAFC 162 per Bryant CJ and Coleman J).

7.        The Full Court in Strahan & Strahan (Interim property orders) (2009) FamCAFC 166 (“Strahan”) considering the exercise of the power pursuant to s 79 said at paragraph 132 as follows:

[132] … 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.

8.        The Full Court in Strahan also went on to say at paragraph 137 as follows:

[137] Once a court proceeds to exercise the power in s 79 of the Act, being in the substantive phase, a court is required to undertake consideration of the matters in s 79(4) including by reference to s 79(4)(e) the matters in s 75(2) so far as they are relevant. However consideration of such matters may be brief and if it is established that “it seems likely to the Court that … the applicant … will be likely receive by way of property settlement a sum sufficient to cover the advance, that would seem to be sufficient to enable the order sought to be made”: Zschokke; Polletti and Polletti per Nygh J and Wenz v Archer. As senior counsel for the Wife submitted, “provided scope can be found within the assets of the parties for an order of the size sought … then that should be the end of the matter”. In other words, in such circumstances the applicant would only be receiving what he or she was entitled to receive when the power was exhausted.

9.        Counsel for the husband also referred me to the decision of Medlow & Medlow [2016] FamCAFC 34 in which the Full Court (May, Ryan and Aldridge JJ), reiterating the decision in Strahan, said at [86] as follows:

[86] The onus is upon the husband to establish that there were sufficient assets available for the interim distribution and that the effect of any interim order was capable of being reversed as part of the final hearing or at least would not defeat the wife’s property claims. The onus was not on the wife to adduce such evidence. 

Discussion

10.      Although, as submitted by counsel for the husband, the final property orders remain in force until the Court makes orders setting them aside. In circumstances where, in granting the wife leave out of time to seek a review of the orders I found that the orders were uncertain and incapable of being enforced, it is inevitable that those orders will be set aside whatever the ultimate outcome of the matter. In these circumstances, counsel for both the husband and the wife agreed that those orders should be set aside and I propose to make that order.  

11.      Counsel for the husband submitted that it is his client’s case that the wife’s application for a review of the Registrar’s decision should be dismissed on the basis that the orders made by the Registrar were just and equitable and, in circumstances where both parties have moved on with their lives having regard to those orders, it would not be just and equitable to make orders further adjusting the parties’ interests in property by way of final orders let alone by way of a partial property settlement. He did however concede that the Court would need to make proper orders reflecting the terms of that earlier agreement and his submissions go to the substance of the orders, not their wording or efficacy. I reiterate, having regard to counsel for the husband’s submission that both parties have moved on with their financial lives in accordance with the terms of those orders, this is a hearing de novo and the Court is not bound by those orders and the discretion must be exercised anew.

12.      Counsel for the husband also submitted that the wife’s application must fail in circumstances where on her own evidence:

a)        The wife has net assets of $4,546,919;

b)        The wife owns four properties, three of which are unencumbered;

c)        Even on her own figures, the wife’s income exceeds her expenses by $977 per week;

d)        The wife has the capacity to borrow to meet any litigation expenses and adduces no evidence as to any efforts she has made to do so;

e)        The wife has drastically reduced her cash at bank over the past 14 months and has not provided an adequate explanation as to why this has occurred;

f)        The wife is owed $145,000 by Mr UU and could call in the loan;

g)        The wife is currently paying more than the minimum mortgage repayments, reducing her mortgage balance between November 2017 and October 2018 from $848,000 to $787,626;

h)        That the legal costs the wife requires the monies for are excessive; and

i)        That if the wife elects not to borrow to meet her legal fees she can apply her surplus income towards her legal costs. 

13.      In her application and her affidavit in support of that application, the wife referred to the monies she is seeking being held by her solicitor and applied to meet her ongoing legal expenses. The wife also referred to her need for litigation funding. This seems to have set the hares running, with both parties focusing, overly so in my view, on the wife’s legal fees and whether those anticipated legal fees were reasonable. Whether the wife’s income exceeds her expenditure giving her the capacity to meet her legal fees either by way of income or borrowing is also not the test. The fact that it is the husband’s case that his expenses exceed his income is similarly in my view not necessarily determinative.

14.      That being said, as counsel for the wife submitted, these are not spousal maintenance proceedings and the wife has not completed Part N of her Financial Statement and in those circumstances it is reasonable to infer that the wife’s expenditure may well exceed her income. Although the husband also has not completed Part N of his Financial Statement, he did estimate that his other expenditure was approximately $1,000 per week. In so far as the husband’s evidence is that his expenses exceed his income by approximately $5,100 per week, that appears to be referable to a significant extent to the mortgage repayments and rates he is paying for the real properties he owns.

15.      Significantly, given the husband’s complaint that the wife has been paying more than the minimum required mortgage repayments thereby reducing her mortgage by approximately $60,000 in the last 12 months, he deposed that he has mortgage repayments of $11,700 per week. According to his Financial Statement filed 5 November 2018 he pays $22,000 per month in rent and mortgage repayments. There is no explanation for this apparent inconsistency. More importantly his criticism of the wife may not bear scrutiny in circumstances where it is his case that he has spent almost $18.5 million, including mortgage repayments of $5.5 million, discharged mortgages of approximately $3 million, and spent approximately $4.5 million on building developments since the orders were made. Until the evidence is tested there is no way of knowing whether these were the minimum required repayments however I note that it is the husband’s case that these are significant contributions for which he should be given credit.

16.      This is an interim hearing and I cannot make findings however even on the husband’s figures he has assets of some $23.5 million, superannuation entitlements of approximately $3 million, and liabilities of $16.7 million. This would leave him with net assets of $6.7 million plus superannuation, a total of $9.8 million. Counsel for the wife also referred me to the following matters with regard to making an assessment of whether there is scope within the assets to make the order the wife seeks:

a)        That the asset pool is based upon the real property and does not include the husband’s practices and any other business interests he may have; and

b)        That the husband’s liabilities include tax liabilities of $1 million for the last financial year and $1.75 million for previous years and, although the husband says he is using his credit card and deferring his tax to meet his mortgage repayments and other liabilities, whether he is doing this in order to build up his asset position will in due course need to be tested, as will whether these are liabilities that should be taken into account as between the husband and the wife. 

17.      The husband also says that he is using his credit cards to pay his legal fees and in his Financial Statement filed 5 November 2018 says that he is making credit card repayments of $5,000 per week. Although he says he has a credit card debt of $50,000, there is no way of knowing how much of this relates to his legal fees.

18.      According to the wife’s Financial Statement she owns four real properties which have a total value of approximately $5,325,000 with a home loan account of $787,626. One of these properties is the home in which she lives with the children.  Although the wife owns these properties, she does not have an income of anything like the husband’s income of $50,000 per week and unlike the husband relies upon the rental income she receives to support herself and the children.

19.      I am satisfied that there is scope in the assets to make the order the wife seeks. I do not accept, as submitted by counsel for the husband, that the Court must be satisfied that there are sufficient “funds” available to meet the order the wife seeks or that the husband should not be required to sell a property so as to comply with the order. In Bing & Bing (2007) FLC 93-318 the Full Court of this Court stated that the husband’s asserted inability to raise a capital sum to make the payment to the wife was a matter relevant to any subsequent enforcement order rather than as to whether it was appropriate to make the order in the first place. I am also satisfied that, in circumstances where the wife is prepared to consent to an order in effect securing the payment, any orders I make can be reversed and that, even if the husband is correct and the wife does not receive any further entitlements, he will not be prejudiced by the order she seeks.

20.      In all of the circumstances I propose to accede to the wife’s application however I propose to allow the husband 60 days in which to make the payment the wife seeks, allowing him the opportunity to arrange his affairs so as to make the payment.

I certify that the preceding twenty (20) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Macmillan delivered on 19 February 2019.

Associate: 

Date:  19 February 2019