Pettifer and Pettifer & Ors

[2019] FamCA 565

FAMILY COURT OF AUSTRALIA

PETTIFER & PETTIFER AND ORS [2019] FamCA 565

FAMILY LAW – PROPERTY – Sale of real property by agreement – interests of third parties – debt creation to minimise or reduce value of assets divisible between the husband and wife or novel financial accommodation likely to be a matter for trial – interim property settlement adjourned.

FAMILY LAW – SPOUSAL MAINTENANCE – urgent interim spousal maintenance where family had been significantly supported by the husband’s father and related entities – urgent order made for wife to receive most of husband’s income and all of the carer’s allowance attributable to one special needs child.

Child Support (Assessment) Act 1989 (Cth)
Family Law Act 1975 (Cth)
Family Law Rules 2004 (Cth)

Reynolds & Reynolds [1984] FamCA 67

APPLICANT: Mr Pettifer

1^st RESPONDENT: Ms Pettifer

2^nd RESPONDENT: Mr B Pettifer

3^rd RESPONDENT: C Pty Ltd

FILE NUMBER: MLC 2372 of 2019

DATE DELIVERED: 3 April 2019

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: Bennett J

HEARING DATE: 3 April 2019

REPRESENTATION

COUNSEL FOR THE APPLICANT: Ms Smallwood

SOLICITOR FOR THE APPLICANT: Tisher Liner FC Law

COUNSEL FOR THE 1^ST RESPONDENT: Ms Stoikovska SC

SOLICITOR FOR THE 1^ST RESPONDENT: Kennedy Partners

COUNSEL FOR THE 2^ND AND 3^RD RESPONDENT: Mr Tatarka

SOLICITOR FOR THE 2^ND AND 3^RD RESPONDENT: Taussig Cherrie Fildes

Orders

1. Mr B Pettifer be and is hereby added as a party to these proceedings and henceforth be referred to as the second respondent.

2. That C Pty Ltd be and is hereby added as a party to these proceedings and henceforth be referred to as the third respondent.

3. That within 7 days the Respondent Wife do all acts and things and sign all such documents as may be required to list the former matrimonial home at H Street, Suburb J, Victoria ("the Suburb J property'') on the market for private sale, on such terms and conditions may be agreed between the parties or failing agreement, in accordance with the recommendations of the selling agent.

4. That E Company be appointed as the exclusive selling agent.

5. That the parties do all acts and things as may be necessary to abide all reasonable recommendations of the selling agent as to the presentation, preparation and marketing of the Suburb J property for sale.

6. Upon settlement of the sale, the proceeds be applied as follows:-

   (a)       first, to pay the costs, commission and expenses of sale;

   (b)       secondly, to discharge the registered mortgage in favour of D Company and any other encumbrance affecting the Suburb J property;

   (c)       thirdly, to pay the balance to the Husband's lawyers, Tisher Liner FC Law, to hold same on trust for the parties jointly pending the final determination or resolution of their property matters or unless earlier released by agreement between the parties or by order of this Honourable Court.

7. By not later than 22 April 2019 the second and third respondents file and serve contentions of fact and law upon which they rely in these proceedings.

8. The parties do all acts and things as may be necessary to cause a redirection of any carers payment to which the First Respondent wife is entitled to the wife

9. The Applicant husband pay to the wife urgent interim spousal maintenance and urgent child support in the sum of $1,000 per week and to facilitate such payment, the husband and the Second Respondent do all acts and things necessary to ensure that $1,000 of the monies which are due to the husband on account of the salary for himself and the salary for the wife each week is paid into an account nominated by the wife (of which the husband has details).

10. By way of further or other urgent interim spousal maintenance and child support, the husband pay and cause to be paid health insurance subscriptions at the current rate for himself, the wife and for the children of the marriage.

11. In the event that the wife is not provided with a motor vehicle (fully maintained) by the husband’s employer, the husband do all acts and things necessary to ensure that the wife has the unfettered use of any motor vehicle assigned to him by his employer for his personal use.

12. If the husband makes any payment to or on account of his legal costs in these proceedings to his solicitors, his solicitors forthwith cause to be paid to the solicitors on the record for the wife in the amount equivalent of fifty per cent of any payments received from or on behalf of the husband for legal costs and disbursements and any such monies received by the wife’s solicitors pursuant to this paragraph of this Order be deemed to be by way of partial property settlement in the hands of the wife.

13. There be liberty to the parties to apply generally.

14. The annexures to the affidavit of Mr B Pettifer, the Second Respondent, be marked exhibit ‘BP 1’ and remain on the court file.

15. The interim applications of the husband and the wife be and are otherwise dismissed.

16. This matter be placed in the list of cases awaiting allocation to a judicial docket for final hearing NOTING the parties have already had a mediation in December 2018 with the Honourable Mr Young QC and propose to have a further dispute resolution conference prior to the matter proceeding to final hearing.

17. In the event that difficulties arise in relation to discovery the parties have liberty to contact my Associate to have the matter relisted before me in the event that I am reasonable available

18. The case assessment conference scheduled for the 20 May 2019 be and is hereby vacated.

AND IT IS NOTED

A.The payments of $1,000 per week (inclusive of the wife’s own income) are deemed to include any amount for which the husband is liable for child support during the currency of this Order, pending any further order of the court.

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 Pettifer & Pettifer and Ors 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: MLC 2372 of 2019

MR PETTIFER

Applicant

And

MS PETTIFER

Respondent

REASONS FOR JUDGMENT

REVISED EX-TEMPORE

1. This matter comes before me in the judicial duty list.  It is the first return date of the husband’s application in a case filed on 26 March 2019 and responded to by the wife on 3 April 2019.  The husband and the wife are not the only parties to the proceedings.  I have uncontroversially acceded to an application by the husband’s father, Mr B Pettifer, to be a second named respondent to the proceedings and for an entity under his sole control, being C Pty Ltd, to be a third named respondent.

2. Very briefly, the husband is 38 years old.  He is employed by his father’s company.  He gets a modest cash salary of approximately $45,000 per annum, and his wife is allocated a further cash salary of $20,000 per annum from that entity.  The modest income of the husband and the wife has been, by community standards, an extremely comfortable and privileged life.

3. Some other payments of which the parties have had the benefit are detailed by the husband in his affidavit in support of the application, and I quote from paragraph 9: 

   “I earn a salary package of approximately $165,700 comprising approximately $65,700 in wages and superannuation, plus I receive the benefit of the use of two fully paid motor vehicles for [Ms Pettifer] and I (including payment of registration, insurance, maintenance and running costs) and the provision of IT equipment and services (such as iPads and computers for my family), the total additional value of which amounts to approximately $100,000 per annum.  I also received additional benefits as a result of being employed in my father’s business, such as meal allowance (valued at approximately $10,000 per annum), professional memberships, travel costs for [Ms Pettifer], me and our children (valued at no less than $30,000 per annum) and flexible leave arrangements (without having to utilise my statutory annual leave entitlements). 

4. The mother is not employed outside the home and has not been since the birth of the eldest child of the marriage.

5. There are two children of the marriage.  They are X, who is seven years old, and Y, who is five years old.  X is in grade 2 at F School, Suburb G, and Y is a kindergartner at F School.  It is an expensive fee-paying school.  The matter was conducted today on the basis that the paternal grandfather intends to continue to pay expenses for the children’s attendance at that school, including other reasonable education expenses, uniforms and the like.  That includes the cost of a teacher’s aid engaged by the school to support X’s attendance at that school.

6. The application that comes before the Court was for sale of the former matrimonial home in which the parties still reside.  That was resolved by agreement.

7. They commenced to live together in another property in 2002, and they were married in 2009. They separated on 15 May 2018 but have continued to live in the former matrimonial home at H Street, Suburb J since separation.  The husband brings his application because he says that he and the wife can no longer afford to pay a mortgage which encumbers the former matrimonial home and is owned by D Company (mortgagee).  The former matrimonial home has an estimated value of approximately five and a half million dollars, and the amount owing pursuant to the D Company mortgage liability is some

RECORDED : NOT TRANSCRIBED

$3.6 million in round figures.  The parties have something less than $2 million equity in the property.  However, there is an interest claimed by the paternal grandfather and confirmed by the husband.

1. In very short compass, it is the husband’s case and also the case of the grandfather that in 2008, some 12 or so months before the husband and wife married but after they had been living together for about six or six and a half years, the husband entered into a loan agreement.  Pursuant to the agreement the grandfather would advance moneys to the husband by way of accommodation costs and day-to-day expenses including quite mundane expenses such as pharmacy bills, rates, the electricity, orthopaedic expenses, and those moneys would be repayable to the paternal grandfather on the happening of an insolvency event.  I have looked at the accounts.  They make for interesting reading.  Particularly as on the husband’s case, each purchase at the chemist potentially reduced the wife’s “equity” in the family home.

RECORDED : NOT TRANSCRIBED

1. The term of the loan is not specified but is to conclude on, inter alia, the happening of an insolvency event.  The insolvency events are described by the paternal grandfather, by reference to the loan agreement itself, as meaning anything which reasonably indicates that there is a significant risk that such a person is or will become unable to pay its debts as and when they fall due.  This includes each of the following, and there are various specific instances such as a meeting of a person’s creditors being called or held, a step being taken to make a person bankrupt, an application being presented or an order being made for sequestration of a person’s estate, a step taken to wind the person up, a step being taken to have a receiver, manager, administrator, controller, liquidator or like person installed, a person entering into any type of agreement, composition or arrangement with or assignment for the benefit of creditors and a person ceasing or threatening to cease to carry on its main business.  In this case, the husband and the paternal grandfather characterise the breakdown of the marriage and the wife’s consequent refusal to acknowledge the loan agreement, which is dated 15 June 2008, as an insolvency event.  The husband accepts the paternal grandfather’s contention.  I note, however, that in the insolvency events listed, there is nothing about the institution of matrimonial proceedings or a repudiation by an unrelated third party of the original loan agreement.

RECORDED : NOT TRANSCRIBED

1. It is pointed out to me that in paragraph 6.3 of exhibit marked “…”, being the loan agreement between the Applicant and 2^nd Respondent [Mr B Pettifer] dated 15 June 2008, a default event is defined as various matters including:

   “(d) there is a material adverse change in the lender’s opinion in the financial condition of the borrower or

   (e) any litigation or administrative or other proceedings initiated or threatened against the borrower or the borrower’s assets where the amount involved is or could reasonably be expected to be in excess of $100,000.”

   I’m not entirely sure how either of those provisions apply.  The former matrimonial home is an asset standing in the name of the wife, not the husband.  How does the paternal grandfather now assess a material adverse change in his son’s financial position?  The husband does not own the home.

2. On the evidence:-

   ·the husband has never had the wherewithal to meet the sort of expenses which his father was funding for the family from the loan account fund, either as to quantum or as to the nature of such expenses which, on my brief observation, include essential and  non-essential expenses. 

   ·the wife had no knowledge of the loan agreement dated 15 June 2008- the loan agreement upon which the paternal grandfather and the husband now rely.  The most that it is said on behalf of the paternal grandfather and the husband is that the wife knew that their lifestyle was being financed by the paternal grandfather.

3. The husband, the grandfather and the grandfather’s entity claim that some $3.7 million is owing to the paternal grandfather and/or his entities pursuant to the loan agreement dated 15 June 2008.  That is, $1.68 million owing to the paternal grandfather and $2.03 million owing to C Pty Ltd which means that the parties are in a deficient asset position because it is the husband’s case that all of those moneys are now due and payable to the paternal grandfather and that would necessary exhaust any equity in the former matrimonial home.  The husband and wife would not be the first family to come before the Court having had their lifestyle financed by the generosity of parents only for one party to assert that the largesse was, in fact, a loan.  No doubt an issue at trial will be whether the husband’s debt to his father will reduce the value of assets to be divided between the husband and the wife or will be considered the sole responsibility of the husband pursuant to s 90AE of the Act.

4. The immediately significant circumstance in this case though, is the moneys owing on mortgage to D Company.  The mortgage instalments are some $11,000 per calendar month, and whilst they have been paid by the paternal grandfather’s financial accommodation of the husband up until now, both the husband and the paternal grandfather say that no further payments will be made directly to the mortgagee or the parties.  However, D Company will continue to require the instalments be paid.  Whereas the wife owns the former matrimonial home, it’s the paternal grandfather and the husband (and the wife) who are guarantors of the indebtedness.  Accordingly the creditworthiness of all three persons may well be impacted by the payments falling into arrears.

5. The husband in his application sought a raft of orders, being paragraphs 1 to 7 of the Application in a Case.  I have largely made those orders in terms agreed save that he withdrew his application for an order in the terms of paragraph 6 which required him to pay the rates and outgoings and mortgage instalments on the D Company mortgage.  He said he was going to do that by reference to using funds which it appears belong to the children of the marriage and which are in the vicinity of about $139,000.

RECORDED : NOT TRANSCRIBED

1. The wife sought a suite of orders different from her response to the Application in a Case.  I mark those documents Exhibit “…”, and direct that they remain on the Court file.  She seeks urgent interim maintenance of $500 a week for herself, for urgent interim child support, on the basis that she warrants that an application for an assessment has been made.  She seeks private health insurance for herself, the continued use of the car, and that the husband pay all outgoings in respect of the property.  That does not exhaust the relief sought by her.

2. In practical terms, the husband says he has no money.

   RECORDED : NOT TRANSCRIBED

3. The husband’s position is that he ought pay nil to the wife for her support, or for the support of the children.

   RECORDED : NOT TRANSCRIBED

4. Whereas he will pay the mother nothing for the support of the children, he does say that, as and when an administrative assessment of child support is issued, he would abide by that.

5. In practical terms, the husband has $1149 of income paid into his account each week.  That represents the after-tax income that he derives from his employment, at $45,000 per annum, and $20,000 attributable to the wife.

6. Each of the husband and the wife drive a car currently provided as a term of the husband’s employment.  The husband has Vehicle 1; the wife has Vehicle 2.  Counsel for the paternal grandfather has informed the Court that in June 2019, the lease of the mother’s Vehicle 2 vehicle is due to expire.  In past years, upon expiration of the lease of the car made available to the wife through the husband’s employment, the wife has handed that car back and been provided with a new car also subject to a lease.  The paternal grandfather says that that will not occur; he is not inclined to facilitate the provision of another car to the wife in June 2019.

7. The wife makes an oral application, and I give her leave to do so, that, in the event that she ceases to be provided with a car through the husband’s employment, that the husband do all acts and things necessary to cause and permit the wife to have the unfettered use of any car provided to him in the course of his employment.  Ms Smallwood maintains that the husband’s position is that he ought to be provided with two cars; it is implicit that he will pursue the provision of two cars as a term of his employment.  Therefore, if the wife ends up driving the car attributable to him, he will be pursuing the use of a car for himself.

8. I am assured by Ms Smallwood that the husband will not let the medical insurance lapse for the children.  I will take judicial notice of the fact that most medical funds will cover the wife in any medical insurance cover at no extra cost, that is, there is no economic benefit to the husband of removing the wife from the family medical insurance.  So I would trust that not be done.

9. The wife seeks $500 per week as urgent interim spousal maintenance. Urgent interim maintenance applications are considered under s 77 of the Family Law Act 1975 (Cth). Section 77 states that an urgent order for spousal maintenance may be made if:

   “…it appears to the court that the party is in immediate need of financial assistance, but it is not practicable in the circumstances to determine immediately what order, if any, should be made, the court may order the payment, pending the disposal of the proceedings, of such periodic sum or other sums as the court considers reasonable.”

10. Such applications are also considered under s 139 of the Child Support (Assessment) Act 1989 (Cth). I may make such orders as an application has been made to the Registrar for administrative assessment and if I am of the opinion that “the child is in urgent need of financial assistance”. Such payments may be ordered to be made by way of periodic or other amounts as considered appropriate.

1. I make orders urgently, without being able to make any specific findings of fact.  There is a steady consistent history of financial support by the paternal grandfather of the family constituting the husband, wife and two children.

2. The husband maintains that he does not have the means, and he has no means and ability over and above what he derives as an income from his employment.  That is a position which, on an urgent interim basis, I am not comfortable to accept. 

3. The husband has had the significant generosity of his father for many years now, in circumstances where, on my limited knowledge of the matter, it did not appear that the husband had any realistic ability to repay the moneys which were being advanced for the benefit of his family, on terms and conditions which were, incidentally, not known to the wife.  I am satisfied, in the circumstances of this case, that the husband will continue to be the beneficiary of generosity by his father.  And if he is not, the husband will have to make do on borrowings, or in such other ways.

4. Of course, it is not uncommon in this jurisdiction that parties structure their financial positions to appear in a certain way in order to advance their prospects of success in their case for final orders.  Indebtedness to related third parties regularly appears for the first time in family law proceedings.  Parties in financial proceedings frequently come to court attempting to convince the Court that the net pool of assets is either larger or smaller than it is ultimately found to be.  Likewise, not all entitlements received by parties are necessarily underpinned by a legal entitlement but the benefits are no less real.  Here, the grandfather has no apparent on-going legal obligation to fund the husband’s household in the manner he has arranged for it to be funded to date.  However, looking at the matter through the prism of urgent interim maintenance, my expectation is that the husband will be able to call on the generosity of his father in to the immediate future as he has done in the past. It would be naïve of me to think otherwise. If I am wrong, then the situation may be adjusted.  It is, after all, an urgent interim spousal maintenance case, not interim spousal maintenance or ongoing maintenance.

5. I have discussed with the parties the bickie barrel concept in Reynold’s case [1984] FamCA 67. The husband and grandfather made no concessions but today is unlikely to be the last time that the topic of debt creation is raised or questions arise about the creation of an unsecured loan which is not disclosed to the wife until it is sought to be satisfied from real property for which she owns legal title.

6. The former matrimonial home will now be sold, as has been agreed between the husband and the wife.  For the avoidance of doubt, I have given consideration to the order sought by the wife, that no person related to the husband, which necessarily includes anyone related to the paternal grandfather, should be permitted to bid, buy the property at the auction, or subsequently live in the property.  I do not see that there is any basis for that order.  If the husband becomes entitled as an owner of the property once it is sold, it will be interesting to see how he does it, but I do not see that I am in a position, nor do I have the jurisdiction, to control the second respondent’s or the third respondent’s use of their own money.  So I specifically decline to make the order sought by the wife in that respect.

7. There is an issue in relation to interim property settlement.  The wife sought $50,000 from the proceeds of sale of the house.  When the former matrimonial home is sold, a deposit might be released prior to settlement of the sale.  In my view, the parties, which now include the paternal grandfather, should receive that deposit, although it will be invested in an interest-bearing trust account.  I would expect that there will then be applications for an interim disbursement of funds.  As it stands, the paternal grandfather claims all of those funds for himself and/or the third named respondent.  The husband will likely agree and the wife will seek the funds for herself.

8. The solicitors for the husband and the wife, it would appear, have not complied with their obligations, under the Family Law Rules 2004 (Cth), to make a written notice available to their clients of the amount of costs already incurred by them, the amount of costs which will be incurred by them in the future, and what has been paid.

9. The picture that I have obtained is that the wife owes some $50,000 to her current lawyers, who are Kennedy Family Lawyers, and owes another unspecified amount to her previous solicitors, who were G Lawyers.  The husband has had but the one set of solicitors, and they have billed him approximately $65,000 to date, estimating their costs to an interim stage at some $100,000.  The husband has paid $11,000, and did so in December 2018, it is said, by drawing on his personal savings.  Neither the husband nor the wife have moneys at their disposal with which to pay costs.  There is an ability to borrow on credit cards.

10. The wife makes an application for a dollar-for-dollar order, so that if the husband manages to pay his own legal costs, he pays hers at the same time.  Ms Smallwood makes the very cogent argument that that represents a payment to the wife of moneys by way of part property settlement, which she may well not stand to get if the paternal grandfather succeeds in his claim pursuant to the loan agreements to himself and the third named respondent.

11. I address this matter as an urgent interim matter.  In the circumstances of the case, I cannot be certain about anything, except that I am certain that it would be inequitable for the husband to have lawyers in this matter, funded somehow but for the wife not to do so.  It may mean that if I see the husband and wife again, they are both self-represented, but there should be some parity between them.

12. I am satisfied that the husband has, apart from having been the recipient of the generosity, in one sense of his father – I say “in one sense” because there is, of course, the loan agreement – the husband obviously has other resources available to him, as detailed in his own affidavit.  He has also had no apparent difficulty in meeting his expenses, which are estimated, in his financial statement, as including living expenses of $2000 a week, without drawing on the credit facilities to which I have referred.  I have not gone down the path of finding out in whose name the credit cards are at this point.

13. The orders that I make I hope will instil some reasonable behaviour in the parties.  At the moment, their arrangements in relation to the children are, on both accounts, harmonious.  That seems to me to be a situation which may not endure if the parties continue down the road that they have come in terms of their financial and commercial interests, and it would be a great pity for the children if that were the case.

14. This Order is a temporary fix.  I strongly suggest that the parties, including the paternal grandfather, give consideration to where these proceedings are going and the impact on their relationship with one another into the future.

I certify that the preceding thirty-eight (38) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Bennett delivered on 3 April 2019.

Associate: 

Date:  20 August 2019